United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-K/A
                               (AMENDEMENT N0. 1)

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                      For the Year Ended December 31, 2006

                           Commission File No. 0-23512

                                 Biocoral, Inc.
               (Exact name of issuer as specified in its charter)

                Delaware                                33-0601504
     (State or other jurisdiction of       (I.R.S. Employer Identification No.)
     incorporation or organization)

 38 rue Anatole France, 92594 Levallois     011-3314-757-9843            N/A
           Perret Cedex France             (Issuer's telephone       (Zip Code)
(Address of Issuer's principal executive    number, including
                offices)                       area code)

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                          Common Stock, $.001 par value
                                (Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers, in response to Item
405 of Regulation S-K, is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large Accelerated Filer [ ]  Accelerated Filer [X]  Non-Accelerated Filer [ ]

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

<PAGE>

The issuer's revenues for the year ended December 31, 2006 were $408,200.

The aggregate market value of the registrant's voting and non-voting common
equity held by non-affiliates as of July 31, 2007 was approximately
$317,906,848.

The number of outstanding shares of the registrant's common stock as of July 31,
2007 was 11,353,816.

Documents Incorporated by Reference: None.

<PAGE>

                                EXPLANATORY NOTE

This Amendment on Form 10-K/A (Amendment No. 1) to our Annual Report on Form
10-K for the fiscal year ended December 31, 2006, as filed with the Securities
and Exchange Commission on March 30, 2007, is being filed in order to add the
gain or loss on the embedded derivative associated with the conversion option
embedded in the convertible notes which should have be reflected in our 2005 and
2004 financial statements as well as the correction of the presentation of the
capitalization of intangibles assets pursuant to comments from the staff of the
Securities and Exchange Commission (the "Staff"). As a result, the following
sections have also been amended:

      -     The section entitled "Table of Contents",

      -     The section entitled "Item 1A. Risk Factors" "Additional paragraph
            has been added as first paragraphed to this section",

      -     The section entitled "Item 1A. Risk Factors" under the caption "To
            date, we have generated only limited revenues from sales of our
            products and have an accumulated deficit",

      -     The section entitled "Item 1B. Staff Comments",

      -     The section entitled "Item 6. Selected Financial Data" under the
            caption "For the Fiscal Years Ending 2006, 2005 and 2004",

      -     The section entitled "Item 7. Management's Discussion and Analysis
            of Financial Condition and Results of Operation" under the caption
            "Result of Operations" under the subcaption "Fiscal Year 2006 vs.
            2005" and "Fiscal Year 2005 vs. 2004",

      -     The section entitled "Item 7. Management's Discussion and Analysis
            of Financial Condition and Results of Operations under the caption
            "Financial Condition, Liquidity and Capital Resources" under the
            subcaption "Fiscal Year 2006 vs. 2005" and "Fiscal Year 2005 vs.
            2004",

      -     The section entitled "Item 8. Financial Statement and Supplementary
            Data" under caption "Financial Statements" under the subcaption
            "Consolidated Balance Sheets as of December 31, 2006, 2005 and 2004,

      -     The section entitled "Item 8. Financial Statement and Supplementary
            Data" under caption "Financial Statements" under the subcaption
            "Consolidated Statements of Operations for the years ended December
            31, 2006, 2005 and 2004",

      -     The section entitled "Item 8. Financial Statement and Supplementary
            Data" under caption "Financial Statements" under the subcaption
            "Consolidated Statements of Changes in Stockholders' Deficiency and
            Comprehensive loss for the years ended December 31, 2006, 2005 and
            2004",

      -     The section entitled "Item 8. Financial Statement and Supplementary
            Data" under caption "Financial Statements" under the subcaption
            "Consolidated Statements of Cash Flows for the years ended December
            31, 2006, 2005 and 2004",

      -     The section entitled "Item 8. Financial Statement and Supplementary
            Data" under caption "Note to Consolidated Financial Statement" under
            the subcaption "Note 2 - Liquidity",

      -     The section entitled "Item 8. Financial Statement and Supplementary
            Data" under caption "Note to Consolidated Financial Statement" under
            the subcaption "Note 3 - Summary of Significant Accounting Policies
            under the subcaption "(J) Intangibles Assets",

      -     The section entitled "Item 8. Financial Statement and Supplementary
            Data" under caption "Note to Consolidated Financial Statement" under
            the subcaption "Note 8 - Long-Term Debt",

      -     The section entitled "Item 8. Financial Statement and Supplementary
            Data" under caption "Note to Consolidated Financial Statement" under
            the subcaption "Note 14 - Selected Quarterly Financial Data -
            (Unaudited)" now becomes Note 15 and has been restated,

      -     The section entitled "Item 8. Financial Statement and Supplementary
            Data" under caption "Note to Consolidated Financial Statement" under
            the subcaption "Note 14 - Selected Quarterly Financial Data -
            (Unaudited)" is now named "Restated Financial Statements",

      -     The section entititled "Item 9A Controls and Procedures",

      -     The section entitled "Item 14. Principal Accountant Fees and
            Services" under caption "Audit Fee for 2006",

      -     The section entitled "Item 15. Exhibits and Reports on Form 8-K".

We included to this Amendment on Form 10-K/A: (1) the new management's report on
internal control over financial reporting (2) the new report of independent
registered public accounting on internal control over financial reporting, and
(3) the new report of our independent certified public accountant, and (4) new
certifications of our principal executive officer and principal financial and
accounting officer, as Exhibits 31 and 32.

Except for the changes noted above, there are no other changes contained in this
amended report to our Annual Report on Form 10-K filed with the Commission on
March 30, 2007.

<PAGE>

                             TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                         Page
<S>        <C>                                                                                        <C>
PART I
Item 1.    Description of Business.................................................................    1
Item 1A.   Risk Factors............................................................................    8
Item 1B.   Unresolved Staff Comments...............................................................   11
Item 2.    Description of Property.................................................................   12
Item 3.    Legal Proceedings.......................................................................   12
Item 4.    Submission of Matters to a Vote of Security Holders.....................................   12

PART II
Item 5.    Market for Common Equity and Related Stockholder Matters................................   12
Item 6.    Selected Financial Data.................................................................   13
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations...   13
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk..............................   17
Item 8.    Financial Statements and Supplementary Data.............................................   F-1 - F-25
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....   18
Item 9A.   Controls and Procedures.................................................................   18
Item 9B.   Other Information.......................................................................   19

PART III

Item 10    Directors, Executive Officers, Promoters and Control Persons............................   20
Item 11.   Executive Compensation..................................................................   21
Item 12.   Security Ownership of Certain Beneficial Owners and Management..........................   22
Item 13.   Certain Relationships and Related Transactions..........................................   23
Item 14    Principal Accountant Fees and Services..................................................   23
Item 15.   Exhibits and Reports on Form 8-K........................................................   24
</TABLE>

                         ------------------------------

      This Registration Statement contains trademarks, service marks and
registered marks of other companies, as indicated. Trademarks identified by (R)
and (TM) are registered trademarks or trademarks are the properties of their
respective owners.

                         ------------------------------
           PRELIMINARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

      This Registration Statement contains forward-looking statements that
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. Specific forward-looking statements contained in this Registration
Statement include, but are not limited to, our (i) belief that our trading
platform is uniquely positioned to become a preferred platform of many varying
markets worldwide; (ii) belief that our trading system and processes will
withstand competition and regulatory changes; (iii) expectations for marketing
and sales opportunities in diverse markets; (iv) belief that we may require more
capital; (v) belief that alternative sources of financing are available if
required; and (vi) anticipation that we will not pay a cash dividend on our
common stock in the near future. These statements are only predictions and
involve known and unknown risks, uncertainties, and other factors, including the
risks in Item 1A. Risk Factors, which may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

      While these forward-looking statements, and any assumptions upon which
they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein. Except as required by applicable
law, including the securities laws of the United States, we do not intend to
update any of the forward-looking statements to conform these statements to
actual results.

<PAGE>

PART I

Item 1. Description of Business

Background

Biocoral, Inc., a Delaware corporation, is an international biomaterials
"tissue-engineering" company specializing in the research, development and
commercialization of patented high biotechnologies and biomaterials in the
health care area. Through our subsidiaries, Biocoral, Inc. researches, develops,
manufactures and commercializes bone graft substitutes and other high technology
patented biomaterials in a number of countries outside the United States. We
entered the biomaterials field in 1995 by agreeing to acquire Inoteb, SA, a
French corporation from 10 individuals "the founders", all French nationals. The
shares and bonds of Inoteb acquired in 1995 represented, at such time, 51.5% of
the capital stock of Inoteb. We increased our ownership percentage through
several additional investments in Inoteb common stock to 67% in 1997 and to 100%
in 1998.

Our representative offices are located at 38 rue Anatole France, Levallois
Perret Cedex, France consisting of approximately 2000 square feet of office
space.

Biocoral(R)

Biocoral(R) our primary product, is a natural coral "carbonate Calcium" derived
bone graft substitute and is used by surgeons and practitioners because of its
biocompatibility, resorbability, osseo conduction and safety. Certain chemical,
physical and structural characteristics of coral are very similar to that of
human bone tissue. Biocoral(R) is derived from three particular species of coral
naturally present in abundance. Biocoral(R) is primarily (more than 98%)
comprised of calcium carbonate. Porous and resorbable, Biocoral(R) is prepared
in microgranules as well as in engineered shapes according to specific
indication. Due to its similarity to bone tissue, Biocoral(R) is compatible,
resorbed by the body as new bone growth invades the Biocoral(R) and is replaced
by neoformed invasion. It is highly porous with numerous interconnected channels
which allow a total migration to the center of the implant free of contamination
risk. Because Biocoral(R) is resorbed, it can be combined with antimicrobials,
anticancer agents or other pharmaceuticals for slow release into bone tissue,
resulting in an advantage over autologous bone grafts. Since 2000 we have worked
with an accredited European university research group on purification of our raw
material, coral, in order to produce a natural solely mineral product. After a
long-term collaboration we have finally developed a method for purification of
our raw material coral which will allow us to offer Biocoral(R) as a natural
solely mineral bone substitute. We have filed a patent with an international
extension for this method of purification and the final product issued using
this method. This purification method will allow to us to offer what we believe
will be the only natural solely mineral bone substitute.

The principal current alternative to Biocoral(R) is the utilization of
autologous (from the patient's own body) bone grafts. The use of autologous bone
grafts requires the patient to undergo one or more additional surgeries to
harvest the bone graft material. This is not always feasible due to the
condition of the patient or other contraindications, and must be shaped in a
separate procedure to fit the graft area.

According to our French subsidiary, Biocoral(R) has been used in more than
approximately 500,000 patients, principally in Western Europe and Korea.
Biocoral(R) was originally patented in France in 1979, in the United States in
1982, and in Japan in 1989. Our French subsidiary acquired the patent rights to
Biocoral(R) from ANVAR/CNRS, (l'ANVAR)" National Agency for Valorization of
Research" and (CNRS) "French National Center for Scientific Research", both
French governmental agencies. Through our subsidiaries, we have developed twelve
additional patent titles for various applications and uses of our products,
including among others osteoporosis remediation, autologous glue and combination
with growth factor, among others. Through these twelve additional patent title
applications in various countries in Europe, Switzerland, Canada, Japan,
Australia, and the United States. We own approximately 166 patents which have
thus far been granted by various countries by their official government patent
office, including most European Community countries, Canada, Australia, and
Japan and in the United States by the US Department of Commerce Patent and
Trademark Office. In addition, we own approximately 53 patents applications
pending around the world.

We believe that our method for purification of our natural coral will reinforce
our technologies and the uses of our product in the various indications over
which we own patents.

Using proprietary manufacturing processes, our chief product, Biocoral(R), is a
resorbable biomaterial derived from Natural Carbonate Calcium in the metastable
crystalline aragonite form in a natural condition that is ocean-generated coral.
It is used as bone graft substitutes and has certain characteristics (including
chemical composition, porosity, mineral content and bioactive properties) that
permit its safe, contamination-free use. Its similarity to human bone
facilitates its replacement by newly-formed bone. Substantially all of our
revenue has been derived from sales of the

                                        1

<PAGE>

first generation of our products. The second generation of products and their
application after long years of research and development and success of several
clinical applications now are ready for marketing. Our product application in
the treatment of bone disease associated with natural bone demineralization, for
example, such as in cases of osteoporosis fractures and their prevention, is
based on technology that is protected by strong patents which have thus far been
granted by various countries by their official government patent office,
including most European Community countries, Canada, Australia, Japan and in the
United States by the US Department of Commerce Patent and Trademark office.

We have not yet begun to seek FDA approval for sale of our products in the
United States but are preparing the documentation required for our product
homologation application in the United States. We have identified the
requirements for this application and approached a US medical supply distributor
in order to access the US market. An accredited scientific team in the US has
conducted human clinical studies with a five-year follow up to confirm bone
reconstruction in oral application. This study confirmed the stability of the
successful result and management believes that this study will facilitate FDA
approval for our product used in this indication when we file for FDA approval.
We anticipate submitting this application during 2007. Canadian approval of
Biocoral(R) has been renewed in 2004 by the Canadian Health Care Authority
"Sante Canada," and our products are already commercialized in the European
Community and Asia. During 2005, we entered into a distribution agreement with a
Canadian medical supply company in order to access the Canadian market.

Clinical Applications

Biocoral(R) has been used in various clinical applications. Current uses include
the following: (a) orthopedic surgery uses include spinal surgery, tibial
(shinbone) osteotomies, hip fractures, trephine (skull) hole replacement,
fracture repair and filling of bone cavities particularly in bone fractures due
to osteoporosis; (b) maxillocraniofacial surgery and plastic surgery uses
include reconstructive and cosmetic surgery; (c) oral surgery uses include
filling of bone defects due to loss of teeth or periodontal disease.

We are preparing new clinical human trials for autologous fibrin glue in
different indications which we expect to begin during 2008. We believe that the
results of these clinical trials may allow us to extend the market for our
innovative products for use in other indications. However, there can be no
assurance that we will be able to extend the market for our products.

Osteoporosis, "A Bone Disease Associated with Natural Bone Demineralization",
Patented Application

We have developed from 1994 and since successfully experimented with the
application of our product Biocoral(R) for the treatment and prevention of
osteoporotic or low bone mass fracture. We developed and patented this
application in most countries around the world which covers the use of our
product and any other product based on the use of calcium salts.

Osteoporosis and its bone complications including hip fractures have been are
and will be in the future a public health problem for the major economies for
the world. Because of the increased life expectancy of the population, each
family had, has or will have a grandparent or close relative, fall victim to
what the public health authorities do not hesitate to call as an epidemic.

Osteoporosis is a bone disease due to natural bone demineralization in which
bone density decreases combined with increased bone brittleness and porosity
that causes the bones to become thin and weak. It occurs mostly in women after
menopause. That's because the female hormone oestrogen helps women maintain bone
strength. As oestrogen levels decline, bone is lost. Osteoporosis can also occur
in men. Other risk factors include: delayed puberty, poor calcium intake,
smoking, excess alcohol consumption or from medications such as glucocorticoids.

As bones weaken, they are more likely to break (fracture). Hip, wrist and spine
bones are at the greatest risk of breaking. The breaks in spine bones are known
as vertebral compression fractures, or VCFs. Left untreated, they may lead to
kyphosis, commonly referred to as "dowager's hump."

Some statistics

According to the International Osteoporosis Foundation (www.osteofound.org), 40%
of all middle-aged women (8 out of 20) and 15% of middle-aged men (3 out of 20)
in Europe will suffer one or more osteoporotic fractures during their remaining
lifetime. In fact, someone in Europe has a fracture every 30 seconds as a result
of osteoporosis. Furthermore, they estimate that the number of osteoporosis
patients will double over the next 50 years with the projected increase in the
aging population and as a result of lifestyle factors. However, despite the fact
that the incidence of osteoporotic fractures is growing, the problem is
under-recognized with only one in two osteoporotic spinal fractures being
diagnosed.

                                        2

<PAGE>

The clinical trials conducted by our subsidiaries over the past eleven years
have demonstrated the feasibility of this treatment to reduce the consequences
of fractures caused by osteoporosis and to avoid the occurrence of fracture as
well. We are developing several variants of our Biocoral(R) technology aimed at
treatment of bone disease due to natural bone demineralization (such as
osteoporosis), and Treatment and Prevention of Osteoporotic Fracture.
Biocoral(R) offers a superior method of preventing and repair of bone fractures
due to osteoporosis. It has the ability to help the skeletal system, reinforcing
it where it is weak and fragile. Biocoral(R) can serve both to heal bones that
are already fractured and to prevent bone fractures from occurring. Phase II
clinical trials in Europe demonstrated the efficacy of Biocoral(R) for local
osteoporosis treatment in rebuilding bone, particularly in combination with
osteodensimatic screening.

In 2000, we began Phase III multi-center clinical trials of our product,
"Biocoral(R)", for the treatment of hip fractures due to osteoporosis, in 14
clinics (Military and Civilian) in Europe. The study has been covering 123
elderly persons suffering from hip fractures associated with natural bone
demineralization and principally originating from Osteoporotic fractures. The
study was monitored by an independent organization in France called Biomatech
located in city of Lyon which has been chosen directly by the French government
agency " National Agency for Valorization of Research" (l'ANVAR).

Following the presentation of the prospective report in March 11, 2006 to the
representatives of the participating hospital and clinic centres for review and
comments, the additional analysis have been conducted by Biomatech which confirm
the prospective report.

On January 5, 2007, we received the final report produced by independent
monitoring and an independently directed investigation. The final report
confirms the therapeutic benefit of our product Biocoral(R) in the treatment of
such fractures which will permit better patient recovery, allowing patients
faster mobility and return to a healthy state with a very low risk of
refracture. The Company believes that the study is a unique and first in the
world covering this area.

We are also working on the prevention of osteoporotic fractures and believe that
for the first time, patients who already have osteoporosis or had already
suffered from osteoprootic fracture will be able to be treated before either
refracture or the occurrence of fractures in other locations. Our product in
this application is intended to permit the regeneration of newly formed bone in
the area which is susceptible to osteoporosis and has a low bone mass. The
initial human clinical study has demonstrated and confirmed the result of
regeneration of newly formed bone in the bone mass area.

We own, through our wholly-owned subsidiary, various patents in the application
of treatment of bone disease due to natural bone demineralization (such as
osteoporosis) and "Treatment and Prevention of Osteoporotic Fractures." Our
technology underlying this application is protected by strong patent
applications in many countries around the world where patent applications were
filed. Our patent applications in this application have thus far been filed and
granted by the official government patent offices of various countries,
including 17 European Community countries, Japan, Australia, and in the United
States by the US Department of Commerce Patent and Trademark Office. Our patent
application in Canada was granted during 2005. Our patent covering technologies
in this application in addition to protecting use of our Biocoral(R) product,
also covers any other product based on calcium salts. Most of the bone
substitutes in the market are based on calcium salts such as hydraoxapatite
(phosphate of calcium).

Autologous Fibrin Glue

We have developed a medical device and a method for preparation of autologous
fibrin glue which management believes is the world's first fully autologous
fibrin glue. In 1993, our scientists began working on the development of this
medical device and method for preparation of autologous fibrin glue. This
autologous fibrin glue is prepared using the patient's own blood, in a closed
system, thereby eliminating the risk of viral transmission, immunological
problems and the risk of blood-borne disease transmission such as, for example,
HIV and hepatitis. In contrast, all fibrin glues currently on the market
(whether autologous or homologous) require foreign protein such as thrombin or
antifibrinolitic.

Surgical glue represents a fast growing segment of the biotech industry.
Clinical trials have been done especially for skin replacement and skin grafts
eliminating the need for protein based skin grafts. Following the successful
result of the phase III human clinical trail for specific indications, the
product file has been approved by the appropriate French authorities Agence
Francaise de Securite Sanitaires des Produits de Sante (AFSSAPS) the French
equivalent of the Food and Drug Administration. On September 14, 2000, AFSSAPS
granted to a blood bank the authorization to prepare, use and distribute the new
autologous fibrin glue that was developed by us. Before we can commence
commercialization of the autologous fibrin glue, AFSSAPS requires that the
French blood bank known as

                                        3

<PAGE>

Etablissement Francaise du Sang ("EFS"), the exclusive operator of blood
transfusions in France, prepare a report following up on the progress of the
first fifty (50) patients treated with the autologous fibrin glue.

We have been coordinating the program to prepare the report with EFS and the
blood bank of the French Army in Clamart, known as CTSA. The inclusion of
patients began in April of 2002. Shortly thereafter, we were required to suspend
the trial after testing of nine preparations in which a technical problem with
the testing materials was observed. Three of these nine preparations were
successful and have been used by surgeons on patients with successful results.
Other preparations could not be used by surgeons. However, the discovery of this
problem with the materials will help us to ensure that the final product is safe
for patients.

The investigation and correction of the technical problem has provided us with
additional information on how to properly prepare and use the final product. On
the basis of this information, we believe that the complication which was
discovered during the trial was due to the quality of material used by the
manufacturer in the production of the medical device and not with the autologous
fibrin glue itself. The medical device we developed is manufactured by a third
party pharmaceutical group.

We have concluded our investigation of this problem and have determined that we
must replace the manufacturer and the preparation materials used in order to
restart the clinical trails required by AFSSAPS. We have not resumed clinical
trials as we have not yet reached an agreement with a new manufacturer. We are
in negotiations with several accredited medical device manufacturers which
specialize in the type of blood bags needed for our medical device. We cannot
give any specific date for resumption of clinical trails. We cannot assure that
we will be able to complete our clinical trails successfully. We anticipate
resuming the inclusion of patients and preparation as soon as we can replace the
manufacturer. However, we may be unable to replace the manufacturer and in fact
the patient inclusion. Failure to successfully complete these trails could
prevent us from obtaining authorization to market this product and could
negatively affect our financial condition.

Our technology underlying this application is protected by strong patent titles
owned by our wholly-owned subsidiary in many countries around the world where
patents applications were filed. Thus far, most of these have been granted and
issued by the official government patent offices in the countries where they
were filed, including most European Community countries, Switzerland, Canada,
Japan, Australia, and in the United States by the US Department of Commerce
Patent and Trademark Office.

During 2005, we also entered into a collaboration agreement with TERUMO EUROPE
N.V, a European Subsidiary of TERUMO CORPORATION a Japanese company which is
active in healthcare area in order to conduct a test protocol to insure the
feasibility of producing Thrombin from Therapeutic plasma in contact with our
product, "Biocoral(R)".

The test protocol has been conducted by both companies during 2005. The report
of the study made by TERUMO EUROPE N.V. and countersigned by the company
confirmed such feasibility of our Technology.

In addition, at the same time, we entered into a letter of intent "letter of
Intent" with TERUMO EUROPE N.V., pursuant to which TERUMO intends to obtain the
right to manufacture and market medical devices covered by our patents and by
the results of the laboratory test (including any future improvement patents
covering this technology) of which Biocoral, Inc. is or will be the owner. By
the same letter of Intent, Biocoral, Inc. commits itself to negotiate a possible
cooperation agreement regarding the "Thrombin preparation from Therapeutic
Plasma and Biocoral(R) with TERUMO on an exclusive basis. These exclusive
negotiations took place for a period of three (3) months. The company declined
to extend the exclusivity period in order to be free to pursue any better
proposal for development of its technology relative to which we have received
indications of interest.

Composite Biocoral and Growth Factor

For more than 17 years, studies have been undertaken to demonstrate that it is
possible to accelerate the bone repair process by combining growth factors with
a support matrix such as Biocoral(R). Some scientific research has shown that
Biocoral(R), as a biomaterial, represents a useful support for growth factors.
European clinical trials conducted over the past six years have had positive
results confirming the acceleration of the bone repair process. Our technology
underlying this application is protected by strong patents owned by our
wholly-owned subsidiary in many countries around the world where patents
applications were filed. Our patent applications in this application have thus
far been granted in every country where filed by their official government
patent offices, including 17 European Community countries, Canada, Japan,
Australia, and in the United States by the US Department of Commerce Patent and
Trademark Office.

                                        4

<PAGE>

Raw Materials and Manufacturing

The primary raw material used by us to manufacture Biocoral(R), is natural
coral. The coral used in our products is presently sourced from New Caledonia,
but is also found in abundance in wide areas of the Indian and Pacific Oceans.
We believe that our existing inventory of coral, together with coral sources
immediately available to us, are sufficient to meet our present and future
needs. To date, coral prices have been stable but no assurance can be had that
they will not rise. We are, however, unaware of any factors which are likely to
have a material adverse effect on our ability to obtain coral at a competitive
price.

For the past six years, the Company has collaborated with accredited scientists
as well as with a special laboratory located at one of most prestigious European
universities to develop a method of purification of its raw material "coral," in
order to remove the trace amounts (between 0.016 to 0.026% depending upon the
type of coral used) of amino acids which were present, without any change in
chemical and crystalline structure of the coral. As a result of these efforts,
the small percentage of amino acid can now be removed from our raw material. The
purification of raw materials permits us to improve their performance and to
offer what we believe to be the only natural solely mineral bone substitute
product in the world. We also filed a patent for this purification method
including the final product issued from it. The patent will protect our main
product for an additional 20 years from the initial date when the patent was
filed. The patent was filed in France in 2003, with PCT extension in December
2004. Our new technology of purification of our natural coral will allow us to
offer what we believe will be the only natural solely mineral bone substitute.

Biocoral(R) received the authorization to be marketed in the European countries
"EC label" on December 30, 1996. Since, this authorization has been renewed
several times and it is into force currently.

The Company's manufacturing facility, located in Saint-Gonnery in France,
complied with ISO 9002 norms and has been ISO 9002 rated since August 1995. On
October 25, 1996, the manufacturing facility was granted, in addition to the ISO
9002 certification, European Norms 46002 certification for the quality assurance
system set up in the manufacturing process of Biocoral(R), and, on December 30,
1996, the Biocoral(R) received the authorization to be marketed in the European
countries "EC label". The authorization of which was renewed in 2001 and
recently in December 2006. The EC certificate is current and valid until
December 2010. During October 2004, the manufacturing facility was audited by
TUV Rheinland France and its certifications have been renewed for an additional
five years until 2009 and the facility was classified as ISO 13485:00
certification. The Company also obtained the extension of its certification to
ISO 13485 (1996) which allows the Company to continue offering its products in
CANADA. In December 2005, the Company was audited by TUV Rheinland France for an
annual audit and extension of its certification from ISO 13485:00 and ISO 13485
(1996) certification to ISO 13485: 2003 which we successfully obtained.
Additionally, we are audited once a year by TUV Rheinland France to maintain our
certifications. The certification ISO 13485: 2003 is current.

We believe this facility is adequate to service our present and medium-term
future needs.

Competition

Our Biocoral(R) product competes with (i) natural bone obtained from autograft
procedures and allograft sources; and (ii) two other synthetic bone products,
one marketed in the United States by Interpore International, Inc. a
publicly-held company with significantly greater resources and distribution
capabilities than ours, and another that was approved by the FDA in May 1993.

In May 1993, a second bone graft substitute was approved by the FDA. This
product consists of hydroxyapatite -calcium phosphate and bovine collagen, which
must be mixed with the patient's own bone marrow. We believe that this
three-part system is more difficult to use due to the mixing process and has
inferior mechanical qualities. It also requires efrigeration, has a shorter
shelf life and raises the risks of adverse reaction in patients allergic to
bovine collagen, and poses risk of infection. In addition, many countries have
prohibited the commercialization of product utilizing bovine collagen as a base.

In October of 1998, Interpore introduced resorbable Pro Osteon(TM). Pro
Osteon(TM) is harvested from marine coral xoskeletons that are hydrothermally
converted to hydroxyapatite, the natural mineral composition of bone. Pro
Osteon(TM)'s interconnected porous structure closely resembles the porosity of
human cancellous or cortical bone. When placed in contact with viable bone, the
implant provides a strong, natural foundation for new bone ingrowth and offers

                                        5

<PAGE>

structural support during the healing process. Upon healing, the composite of
bone and Pro Osteon is comparable in strength to the surrounding bone.

Effective June 22, 2004, Interpore closed its merger with Biomet, Inc. pursuant
to which Biomet acquired all of the outstanding shares of Interpore stock for
cash at $14,50 per share with a 29% premium for a total amount of $259 million.

Autograft and allograft bone have been used for graft material for a much longer
period of time than Biocoral(R) and similar materials, and in order to increase
our future sales of Biocoral(R), we will have to demonstrate to the medical
community the surgical and patient advantages, safety, efficacy, cost
effectiveness and clinical results of Biocoral(R). Most of our competitors have
substantially greater resources, larger market share and greater research and
development capabilities than ours and may, therefore, be expected to compete
aggressively and successfully in the markets for our products.

We believe that Biocoral(R) provides an attractive alternative to autograft and
allograft bone graft materials. In an autograft procedure, bone material is
first harvested from another part of the patient's skeleton and then, in a
second procedure, grafted to the site of the bone deficit. The harvesting
procedure increases operating time and expense, and can lead to complications
such as infection, excessive blood loss, chronic pain and deformity. When an
autograft is not feasible or desirable, allograft bone, typically obtained from
a cadaver, can be used. In order to maintain mechanical and biological
properties, some allograft bone is not sufficiently secure to avoid all risks of
disease transmission. Therefore, unlike Biocoral(R), which is a sterile and
biocompatible material, allograft bone carries the risks of implant rejection
and the transmission of infectious agents such as hepatitis and HIV. The use of
Biocoral(R) entails none of these risks and provides clinical results comparable
to those of autograft material in suitable condition for use.

Biocoral(R) was originally patented in France in 1979, in the United States in
1982, and in Japan in 1989. Our French subsidiary acquired the patent rights to
Biocoral(R) from ANVAR/CNRS, the French National Center for Scientific Research,
a French governmental agency. Through our subsidiaries, we have developed an
additional ten titles of patents for various applications and uses of our
products, such as osteoporosis remediation, autologous glue, combination with
growth factor, among others. Through these ten titles patent applications in
various countries we own approximately 166 patents which have thus far been
granted by various countries by their official government patent office,
including most European Community countries, Canada, Australia, Japan and in the
United States by the US Department of Commerce Patent and Trademark Office. In
addition, we own approximately 53 patents applications pending around the world.

Homologous fibrin sealant is biologically prepared from large plasma pools, with
the addition of other biologicals such as thrombin and anti fibrinolytics
products necessary for their activation. Even after a safety process has been
implemented, there can be residual unexpected viral transmission or
immunological problems. Safer autologous fibrin glue can be prepared by
different processes, but are not standardized and need other biologicals such as
thrombin and antifibrinolytics.

The new autologous fibrin glue prepared by our innovative medical device is
standardized and truly safe due to the use of calcium as an activator, without
the addition of any other biologicals such as thrombin or antifibrinolytics. In
addition, the composition remains constant in terms of components and
properties.

Our technology underlying this application is protected by strong patent titles
in many countries around the world where patent applications were filed. Thus
far, most of these have been granted and issued by the official government
patent offices in the countries where they were filed, including most European
Community countries, Switzerland, Canada, Japan, Australia, and in the United
States by the US Patent and Trademark Office.

One of our patent titles covers technology called "method for preparation of
biological adhesive enriched with platelet factors and application". Our patent
applications in this application have thus far been filed and granted by the
official government patent offices of various countries, including France and 15
European Community countries, Japan, and in the United States by the US
Department of Commerce Patent and Trademark Office. However, our patent
application covering this technology in Japan, after being granted in October
1999, received written opposition from Thermogensis Corp of California in June
2000. We were required to defend the patent against this opposition. The
Japanese Patent Office rejected the opposition in May 2003, and the patent was
reaffirmed.

                                        6

<PAGE>

We have been able to compete in Europe against producers that also sell products
in the United States. Despite their significantly greater resources, management
believes that it will, once our products have been approved by the FDA, be able
to be competitive with such companies because of the quality of our products.
See "Business -- Government Regulation." Biocoral(R) has been used in European
dental applications for approximately more than 20 years. These multiple uses,
together with the scientific results of our in vivo use and clinical trials have
demonstrated the efficacy of using Biocoral(R) for bone regeneration in dental
applications. We compete with many businesses in the production and distribution
of biomaterials for filling bone cavities before rehabilitation of partially and
totally edentulous patients. These businesses compete primarily on the basis of
product performance and price, as well as customer loyalty and service.
Biocoral(R) also competes with bone grafts and bone graft substitutes. Companies
selling competitive products sometimes also sell dental implants, so bundling
these products is often a strategy. All of these businesses compete primarily on
the basis of product performance and price, as well as on customer loyalty and
service.

Management believes that our products are superior to our competitors' products.
We have identified the requirements for this application and approached a US
medical supply distributor in order to access the US market. An accredited
scientific team in the US has conducted human clinical studies with a 5 year
follow up to confirm bone reconstruction in oral application. This study
confirmed the stability of the successful result and management believes that
this study will facilitate FDA approval for our product used in this indication
when we file for FDA approval. We have begun to make arrangements for the
commencement of clinical trials for certain of our products with a long term/
medium term view toward FDA approval thereof. In the interim, we will focus on
increasing our European and other sales of our products and entering into joint
ventures with key strategic partners for distribution of our products, research
and development and the like. No assurance can be given that any such
arrangements will be reached or that they will be profitable.

We believe that in certain cases, some of our competitors may be infringing on
our patents. We are exploring various options for enforcing these patents where
necessary. Bio Holdings, our wholly-owned subsidiary and the owner of all of our
patents, has sent warnings to these possible infringers in France, England and
Germany. The Company is considering pursuing legal action against these possible
infringers in United States and other countries in Europe.

Governmental Regulation

Biocoral(R) although marketed since the end of the 1980's, was the first bone
substitute registered in France with TIPS (Tarifs Interministeriels des
Prestation Sanitaires). Nevertheless within the framework of its registration,
Biocoral(R) has been received approving opinion of Microbiological Committee of
Health on July 05, 1995 referenced under the number 9600201B01.

Biocoral(R) received the authorization to be marketed in the European countries
"EC label" on December 30, 1996. Since, this authorization has been renewed
several times and it is current.

Biocoral(R) has been approved for marketing in Europe, Korea, South Africa,
Canada, Australia and many other countries in the world. Biocoral(R) has been
approved for reimbursement in France by French National Health Authority
(Securite Sociale) and is listed on the "Liste des Produits et Prestations
Remboursables" (LPPR) reimbursement by French National Health Authority. Our
products are subject to significant government regulation in the United States
and other countries. To test clinically, and to produce and mass market products
for human diagnostic and therapeutic use in the United States, we must comply
with mandatory procedures and safety standards established by the Food and Drug
Administration ("FDA") and comparable state and foreign regulatory agencies.
Typically, such standards require that products be approved by the government
agency as safe and effective for their intended use before being marketed for
human applications.

There are two principal methods by which we may obtain FDA approval to market
regulated products in the United States. One method is to seek FDA approval
under the 510(k) procedure. Section 510(k) of the Food, Drug and Cosmetic Act
requires those device manufactures who must register to notify the FDA, at least
90 days in advance, of their intent to market a medical device. This is known as
Premarket Notification - also called PMN or 510(k). It allows the FDA to
determine whether the device is equivalent to a device already placed into one
of the three classification categories. Thus, "new" devices (not in commercial
distribution prior to May 28, 1976) that have not been classified can be
properly identified. Specially, medical device manufacturers are required to
submit a premarket notification if they intend to introduce a device into
commercial distribution for the first time or reintroduce a device that will be
significantly changed or modified to the extent that its safety or effectiveness
could be affected. Such change or modification could relate to the design,
material, chemical composition, energy source, manufacturing process, or

                                        7

<PAGE>

intended use.

In the past, we have had discussions with the FDA, which indicated that
Biocoral(R) may be classified as a Class 3 Medical Device in the United States
and may be considered equivalent to Pro Osteon(TM) (Pro Osteon) which is a bone
graft substitute, already registered by the FDA. See "Competition." We believe
that the 510(k) procedure should apply to Biocoral(R). If the 510(k) procedure
were applied to Biocoral(R), an FDA audit would not be necessary before the
homologation could be granted. To the best of our knowledge, the FDA can require
an audit at any time.

An accredited scientific team in the US has conducted human clinical studies
with a five-year follow-up to confirm bone reconstruction in oral application.
This study confirmed the stability of the successful result and management
believes that this study will facilitate FDA approval of our product used in
this indication when we file for such approval.

The alternative method is to obtain premarket approval ("PMA") from the FDA.
Under the PMA procedure, the applicant must obtain an Investigational Device
Exemption (IDE) before beginning the substantial clinical testing required to
determine the safety, efficacy and potential hazards of the products. The review
period under the PMA procedure may last for several years. The FDA also imposes
requirements on manufacturers and sellers of products under its jurisdiction,
such as labeling, manufacturing practices, record keeping and reporting.
Obtaining such approvals in the US could take some time and involve substantial
expenditures. No clinical testing on humans may be undertaken in the United
States without first obtaining an IDE from the FDA.

Employees

Except for our wholly-owned French subsidiary, we currently have no employees
other than our officers and directors who devote as much time as they believe
necessary to conduct our business and maintain our operations. French
subsidiaries currently have nine employees all of whom are full time. In
addition, we engage the services of various scientific and research consulting
teams under consulting contracts, working on research and development projects
in different laboratories and hospitals in France and other countries.

Subsidiaries

The company conducts its operation in Europe via several subsidiaries, including
its French and UK subsidiaries and others.

Bio Holdings International Limited

Bio Holdings International Limited is one of the company's wholly-owned
subsidiaries which was formed to hold and manage the principal patents of the
company. We own all of Bio Holdings's outstanding shares, and cover all of Bio
Holdings's expenses:

      -     deposits and files all patents and follows up with the patent
            counsels and patent offices in each country where the patents are
            filed;

      -     extends filing territory and works to protect our patents; and

      -     looks after and maintains patents.

Item 1A. Risk Factors

      AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IN
ADDITION TO THE OTHER INFORMATION IN THIS AMENDED ANNUAL REPORT ON FORM 10-K/A
AND IN OUR OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING
OUR SUBSEQUENT REPORTS ON FORMS 10-Q AND 8-K, YOU SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS BEFORE DECIDING TO INVEST IN SHARES OF OUR COMMON STOCK
OR TO MAINTAIN OR INCREASE YOUR INVESTMENT IN SHARES OF OUR COMMON STOCK. THE
RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WE FACE.
ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE
CURRENTLY DEEM IMMATERIAL MAY ALSO AFFECT OUR BUSINESS, FINANCIAL CONDITION AND
OPERATING RESULTS. IF ANY OF THE FOLLOWING RISKS, OR ANY OTHER RISKS NOT
DESCRIBED BELOW, ACTUALLY OCCUR, IT IS LIKELY THAT OUR BUSINESS, FINANCIAL

                                        8

<PAGE>

CONDITION AND OPERATING RESULTS COULD BE SERIOUSLY HARMED. AS A RESULT, THE
TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU COULD LOSE PART OR ALL
OF YOUR INVESTMENT.

      To date, we have generated only limited revenues from sales of our
products and have an accumulated deficit.

      Until 2005, more than two-thirds of our business was in research and
development with an emphasis on developing our technology in order to produce
marketable products. We have completed most of our research program and are now
ready to begin commercialization and marketing of our products. However, to
date, we have generated only limited revenues and have had to raise capital from
investors through debt and equity offerings in order to sustain our research and
development efforts. For the fiscal year ended December 31, 2006, we had net
sales of approximately $408,200 an accumulated deficit of $21,050,976.

      We can provide no assurance of the successful and timely marketability of
our products.

      Products using our technology are in the late stages of research and
development. Further testing will be required to determine their commercial
viability. Our success will depend on our ability to make out products
commercially competitive products on a timely basis. The pre-marketing schedules
for our products may be affected by a variety of factors, including
difficulties, proprietary technology of others, and changes in governmental
regulation, many of which will not be within our control. Any delay in the
pre-marketing, introduction or marketing of our products could result either in
such products being marketed at a time when their cost and performance
characteristics would not be competitive in the marketplace or in the shortening
of their commercial lives. In light of the long-term nature of our projects, the
unproven technology involved and the other factors, there can be no assurance
that we will be able to market our products successfully.

      We must comply with significant government regulations.

      The manufacture, pre-marketing and marketing of biotechnologies and
biomaterials for use in health care are subject to regulation, primarily by the
FDA in the United States and by comparable authorities in other countries. These
national agencies and other federal, state, local and foreign entities regulate,
among other things, research and development activities (including testing in
animals and in humans) and the testing, manufacturing, handling, labeling,
storage, record keeping, approval, advertising and promotion of the products
that we are developing. Noncompliance with applicable requirements can result in
various adverse consequences, including, delay in approving or refusal to
approve product licenses or other applications, suspension or termination of
clinical investigations, revocation of approvals previously granted, fines,
criminal prosecution, recall or seizure of products, injunctions against
shipping products and total or partial suspension of production and/or refusal
to allow a company to enter into governmental supply contracts.

      We rely upon patents to protect our technology. We may be unable to
protect our intellectual property rights.

      Our ability to compete effectively will depend on our ability to maintain
the proprietary nature of our technologies, including Biocoral(R) and its use in
different applications. Through twelve patent title applications we own
approximately 166 patents which have thus far been granted by various countries
by their official government patent office, including most European Community
countries, Canada, Australia, Japan and in the United States by the US
Department of Commerce Patent and Trademark Office. In addition, we own
approximately 53 patents applications pending around the world. We depend upon
confidentiality agreements with our officers, employees and contracting
counterparties to maintain the proprietary nature of the technology. These
measures may not afford us sufficient or complete protection, and others may
independently develop technology similar to ours, otherwise avoid the
confidentiality agreements, violate our patents or produce patents that would
materially and adversely affect our business, prospects, financial condition,
and results of operations. Such competitive events, technologies and patents may
limit our ability to raise funds, prevent other companies from collaborating
with us, and in certain cases prevent us from further developing our technology
due to third party patent blocking right.

                                        9

<PAGE>

      We rely upon third parties for the manufacturing and distribution of some
of our products.

      We manufacture our main product, Biocoral(R), through our wholly-owned
manufacturing subsidiary. However, for manufacture of our medical device, which
allows the preparation of our autologous glue, once the product is ready for
marketing, we rely on third party manufacturers. Our reliance on third parties
for the manufacture of our products creates a dependency that could severely
disrupt our research and development, our clinical testing, and ultimately our
sales and marketing efforts if the source of such supply proves to be unreliable
or unavailable. If the contracted manufacturing source is unreliable or
unavailable, we may not be able to manufacture or market our products.

      If we are unable to establish or manage strategic collaborations in the
future, our revenue and product development may be limited.

      Our strategy includes substantial reliance upon strategic collaborations
for development, marketing and commercialization of our products. Establishing
strategic collaborations is difficult and time-consuming. Our discussion with
potential collaborators may not lead to the establishment of collaborations on
favorable terms, if at all. If we successfully establish new collaborations,
these relationships may not result in the successful development or
commercialization of our product candidates or the generation of sales revenue.
To the extent that we enter into co-promotion or other collaborative
arrangements, our product revenues are likely to be lower than if we directly
marketed and sold any products that we may develop.

      If we enter into manufacturing and marketing collaborations, our success
will in part depend on the performance of our collaborators. We will not
directly control the amount or timing of resources devoted by our collaborators
to activities related to our product candidates. Our corporate collaborators may
not commit sufficient resources to our pre-marketing and manufacturing programs
or the commercialization, marketing or distribution of our products. If any
collaborator fails to commit sufficient resources, our pre-marketing and
marketing programs related to this collaboration could be delayed or terminated.
Also, our collaborators may pursue other existing or development-stage products
or alternative technologies in preference to those being developed in
collaboration with us. Finally, if we fail to observe our obligations in our
agreements with them, our collaborators may have the right to terminate those
agreements.

      We may incur substantial liabilities from any product liability claims if
our insurance coverage for those claims is inadequate.

      We currently have product liability insurance which we believe adequately
covers potential liability which may arise from our products. However, we cannot
be certain that our insurance will be adequate to cover every claim we may face.
We may face an inherent risk of product liability exposure related to the sale
and use of our products. An individual may bring a liability claim against us if
one of the products causes, or merely appears to have caused, an injury. If we
cannot successfully defend ourselves against the product liability claim, we
will incur substantial liabilities. Regardless of merit or eventual outcome,
liability claims may result in decreased demand for our product candidates,
injury to our reputation, withdrawal of clinical trial participants, costs of
related litigation, substantial monetary awards to patients or other claimants,
loss of revenues, the inability to commercialize product candidates, and
increased difficulty in raising required additional funds in the private and
public capital markets.

      We depend upon our senior management and key consultants and their loss or
unavailability could put us at a competitive disadvantage.

      We depend upon the efforts and abilities of our senior executive, Nasser
Nassiri, and other members of our management team and scientific advisors. The
loss or unavailability of the services of any of these individuals for any
significant period of time could have a material adverse effect on our business,
prospects, financial condition and results of operations. We have not obtained,
do not own, nor are we the beneficiary of, key-person life insurance. See
"Management--Employment Agreements".

      The biotechnology and biomaterials industries are characterized by a high
degree of competition. We may be unable to compete with more substantial
enterprises.

                                       10

<PAGE>

      The biotechnology and biomaterials industries are characterized by a high
degree of competition. Competition in the biomaterials industry is based
significantly on scientific and technological factors. These factors include the
availability of patent and other protection for technology and products, the
ability to commercialize technological developments and the ability to obtain
governmental approval for testing, manufacturing and marketing. We compete with
specialized biotechnology firms in the United States, Europe, Japan and
elsewhere, as well as pharmaceutical companies that are applying biotechnology
to their operations. Our ability to compete successfully with other companies in
the pharmaceutical field will also depend to a considerable degree on our
ability to raise capital to fund the development and marketing of our products.

      We are aware of certain competitors who are attempting to utilize our
technology and produce products similar to or competitive with ours. Our
technologies are protected by strong patents in many countries around the world.
Accordingly, we believe we can successfully challenge any misappropriation of
our technology by our competitors.

      Our competition will be determined in part by the potential applications
for which our products are developed and ultimately approved by regulatory
authorities. Additionally, the timing of market introduction of some of our
potential products or of competitors' products may be an important competitive
factor. Accordingly, the relative speed with which we can develop products,
complete pre-clinical testing, clinical trials and approval processes and supply
commercial quantities to market are expected to be important competitive
factors. We expect that competition among products approved for sale will be
based on various factors, including product efficacy, safety, reliability,
availability, price and patent position. (See "Item 1. Description of Business
-- Competition.")

      We may incur increased costs as a result of recently enacted and proposed
changes in laws and regulations relating to corporate governance matters.

      Recently enacted and proposed changes in the laws and regulations
affecting public companies, including the provisions of the Sarbanes-Oxley Act
of 2002 and rules adopted or proposed by the SEC and, will result in increased
costs to us as we evaluate the implications of these laws and regulations and
respond to their requirements. These laws and regulations could make it more
difficult or more costly for us to obtain certain types of insurance, including
director and officer liability insurance, and we may be forced to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the
same or similar coverage. The impact of these events could also make it more
difficult for us to attract and retain qualified persons to serve on our Board
of Directors, our board committees or as executive officers. We are continuously
evaluating and monitoring developments with respect to these laws and
regulations and cannot predict or estimate the amount or timing of additional
costs we may incur to respond to their requirements.

      A limited public trading market may cause volatility in the price of our
common stock and may cause it to be illiquid.

      Our common stock is quoted on the OTC Bulletin Board under the symbol
BCRA. The quotation of our common stock on the OTC Bulletin Board does not
assure that a meaningful, consistent and liquid trading market currently exists,
and, in fact, in recent years the market for our stock has experienced extreme
price fluctuations and traded in low volume. The illiquidity of our common stock
could make it difficult for a stockholder to sell or otherwise dispose of
shares.

      We do not intend to pay dividends.

      We do not expect to pay any cash dividends in the foreseeable future.

Item 1B. Staff Comments.

As part of a review by the staff of the Securities and Exchange Commission (the
"Staff") of our Annual Report on Form 10-K/A for the year ended December 31,
2005, we have received and responded to comments from the Staff. As of the date
of the filing of this amended Annual Report under Form 10-K/A the Staff comments
have been resolved and these pertained primarily to our method of accounting for
intangible assets and long term debt. The company believes that the adjustments
that resulted from this review did not have a material effect on its financial
statements.

                                       11

<PAGE>

Item 2. Description of Property.

Our French subsidiary currently leases its principal executive offices from an
unrelated third party for an aggregate annual rent of approximately $58,400
(approximately 46,000 euros).

We previously leased our manufacturing facility in Saint Gonnery in the west of
France until the year 2001. We now own the property which includes a reception
area, laboratory-chemistry and bacteriology area, workshop maintenance area,
stock F area, stock SM area, laboratory-prothes area, stock 1 area, room
dresses, radio operator area, raw material area, a local conditioning and
control, drying and washing area, management and accountancy area.

Item 3. Legal Proceedings.

None.

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

None.

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

At December 31, 2006 there were 11,353,817 shares of our common stock issued and
outstanding. Our common stock trades on the OTC Bulletin Board. The following
table sets forth information regarding the high and low closing price per share
for our common stock on the OTC Bulletin Board as reported by yahoo.com(TM).
Such prices do not necessarily reflect actual transactions and do not include
retail mark-ups, mark-downs or commissions.

Quarter Ended                                                    High       Low
-------------                                                   ------    ------
December 31, 2006                                                51.25     39.40
September 30, 2006                                               47.00     30.00
June 30, 2006                                                    30.00     14.00
March 31, 2006                                                   26.00     19.00

December 31, 2005                                               $22.50    $12.00
September 30, 2005                                              $24.00    $24.00
June 30, 2005                                                   $20.00    $ 3.00
March 31, 2005                                                  $55.00    $13.00

December 31, 2004                                               $15.50    $10.05
September 30, 2004                                              $20.00    $ 7.00
June 30, 2004                                                   $35.00    $20.00
March 31, 2004                                                  $95.00    $40.00

Holders

As of December 31, 2006, there were approximately 400 holders of record of the
shares of our common stock including several European financial and portfolio
institutions.

Dividends

We have paid no cash dividends on our equity securities to date and do not
anticipate the payment of cash dividends on our equity securities in the near
future. We paid a dividend of one share of our common stock for each three
shares owned on December 18, 1995 and paid, in December 1996, another stock
dividend of one share for each three shares owned as of November 6, 1996.


                                       12

<PAGE>

Recent Sales of Unregistered Securities

During January 2005, the Company received $300,000 in connection with the
subscription of the 7% Notes sold on December 2004. During September 2005, the
Company sold to an accredited investor an additional $200,000 of the 7% Notes.
(See Note 8.)

In December 2006, the Company issue, the new 7% non-convertible promissory notes
payable (the "7% Non-Convertible Promissory Notes") in the aggregate principal
amount of $2,700,000. (See Note 8 (D).)

During 2006 the Company received $400,000. Pursuant to an agreement dated
December 20, 2006 with all of the note holders, the total of outstanding 7%
convertible promissory notes payable and 6% convertible promissory note payable
together with the $400,000 received during 2006 in the total aggregate principal
amount of $2,700,000 were converted to 7% non-convertible promissory notes
payable.

All Notes as described above were sold to "accredited investors" only in a
private placement intended to be exempt from registration pursuant to the
provisions of Regulation D of the Securities Act of 1933.

We believe that the sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act of 1933, as amended, or Regulation D promulgated thereunder. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof and appropriate legends were affixed
to the instruments representing such securities issued in such transactions. All
recipients either received adequate information about us or had adequate access,
through their relationships with us, to such information.

Item 6. Selected Financial Data

<TABLE>
<CAPTION>
                                                  Fiscal Year ended December 31,
                             ------------------------------------------------------------------------
                                 2006            2005          2004            2003          2002
                             ------------   ------------   ------------   ------------   ------------
<S>                          <C>            <C>            <C>            <C>            <C>
   Net sales                 $    408,205   $    316,200   $    351,600   $    361,900   $    350,300
   Operating loss                 269,741        723,874        562,199        449,297        555,782
   Net income (loss)           (1,473,425)      (997,758)       198,216       (319,176)    (1,137,740)
   Net income (loss) per
     common share            $      (0.13)  $      (0.09)  $       0.02   $      (0.03)  $      (0.34)
   Weighted average            11,353,817     11,353,816     11,299,267     11,297,573      3,324,813
     common shares              shares         shares         shares         shares         shares
     outstanding

Balance Sheet Data:
   Total assets              $  1,324,618   $  1,075,810   $    950,308   $    812,676   $  1,565,023
   Total liabilities            4,686,785      3,345,364      2,230,290      2,929,724      3,308,448
   Stockholders deficiency      3,362,167      2,269,554      1,279,982      2,117,048      1,743,425
</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion and analysis should be read in conjunction with our
consolidated financial statements and notes included in the financial statement
contained elsewhere in this amended annual report.

            Summary of Significant Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these consolidated financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues, and expenses, and related disclosures
of contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to accounts receivable, property and
equipment, stock based compensation and contingencies. We base our estimates on
historical

                                       13

<PAGE>

experience and on various assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions. The assumptions and bases for
estimates used in preparing our consolidated financial statements are set forth
as significant accounting policies in Note 3 of the notes to the consolidated
financial statements included in this amended annual report and are summarized
below:

Intangible Assets. Intangible assets consist primarily of developed technology
and patents (developed and purchased), trademarks, trade names and customer
relationships. Intangible assets with an indefinite life, including certain
trademarks and trade names, are not amortized. The useful life of indefinite
life intangible assets is assessed annually to determine whether events and
circumstances continue to support an indefinite life. Amortization is computed
using the straight-line method over the estimated period of benefit. The
valuation of these intangible assets is based upon estimates as to the current
value of each patent and the period of benefit and such estimates are subject to
fluctuations. The value of a particular patent could fluctuate based upon
factors, such as competing technology or the creation of new applications, which
are not accounted for in making, but could affect, the estimates used.

Allowance for Doubtful Accounts. We estimate uncollectibility of trade accounts
receivable by analyzing historical bad debts, customer concentrations, customer
creditworthiness and current economic trends when evaluating the adequacy of the
allowance for doubtful accounts. We consider these factors to be the best
available indicators of the likelihood of collection of trade accounts
receivable. However, they are subject to uncertainty, and collectibility cannot
be precisely determined.

Investment in Limited Partnership. We own an investment in a limited
partnership, which is accounted for under the equity method of accounting. Under
this method, the initial investment is recorded at cost. Subsequently, the
investment is increased or decreased for our pro-rata share of the partnership's
income and losses. No ready trading market exists for this partnership interest
by which we can determine with any certainty its value. Moreover, because it is
initially valued at cost, which in turn is based upon negotiations between us
and the limited partnership, this initial valuation may or may not reflect the
value which an independent third party would assign to the partnership interest.
This investment is illiquid, and, should we determine to liquidate it, we may be
unable to do so at a price that equals or approximates the valuation reflected
on our balance sheet.

Results of Operations

As discussed below, our operations are conducted outside the United States of
America, and as such, our functional currency is the Euro and not the US Dollar.
In order to comply with accounting principles generally accepted in the United
States of America, our financial statements, as well as the following discussion
regarding our results of operations are in terms of U.S. dollars. Accordingly,
part of the variance in revenues and expenses discussed below may partially
differ as a result of the fluctuating exchange rates in addition to the other
factors discussed.

Fiscal 2006 vs. 2005

Net sales, which are solely attributable to our wholly owned European
subsidiaries, totaled approximately $408,200 for the year ended December 31,
2006, an increase of approximately $92,000 (or approximately 29%) from
approximately $316,200 for the year ended December 31, 2005. This increase is
partially attributable to an increase in sales of products in the
maxillocraniofacial surgery area in France and the dental market area in export.

Cost of sales was approximately $121,200 for the year ended December 31, 2006, a
decrease of approximately $101,200 (or approximately 54%) from approximately
$222,400 for the year ended December 31, 2005. The main factor contributing to
this decrease was an increase in costs attributable to reengineering old
inventory to allow it to be sold at current selling prices.

Operating expenses were approximately $556,700 during the year ended December
31, 2006, a decrease of approximately $261,000 (approximately 32%) from
approximately $817,700 for the year ended December 31, 2005. This decrease was
primarily due to a decrease in the company's research and development activities
and consulting and professional fee and in general and administrative expenses.

                                       14

<PAGE>

Consulting and professional fees during the year ended December 31, 2006 were
approximately $222,000, a decrease of $100,000 (or approximately 31%) compared
to approximately $322,000 during the year ended December 31, 2005. This decrease
is attributable to a decrease in the fees needed during 2005 for the development
of next generation of products. Finally there were additional professional fees
associated with the compliance for the Sarbanes-Oxley Act of 2002.

Other income (net of expenses) totaled approximately $(1,203,700) of expense for
the year ended December 31, 2006 as compared to approximately $(273,900) of
expense for the year ended December 31, 2005. This increase was primarily due to
the sale of all of the available for sale securities and we realized a loss of
approximately $433,500 and the increase in the loss on the embedded derivative
in our long term debt that was called in December of approximately $582,400.

As a result of the above, our net loss for the year ended December 31, 2006
totaled approximately $1,473,400 or $.13 per share compared to a net loss of
approximately $997,800 or $.09 per share for the year ended December 31, 2005.

These losses per share were based on weighted average common shares outstanding
of 11,353,817 & 11,353,816 for the years ended December 31, 2006 and 2005
respectively.

Fiscal 2005 vs. 2004

Net sales, which are solely attributable to our wholly owned European
subsidiaries, totaled approximately $316,200 for the year ended December 31,
2005, a decrease of approximately $35,400 (or approximately 10%) from
approximately $351,600 for the year ended December 31, 2004. This decrease is
partially attributable in particular to a decrease in sales of products in the
maxillocraniofacial surgery area in France and decrease in orders from our
distributor during 2005 which was due to the internal reconstruction of their
organization.

Cost of sales was approximately $222,400 for the year ended December 31, 2005,
an increase of approximately $50,300 (or approximately 29.3%) from approximately
$172,100 for the year ended December 31, 2004. The main factor contributing to
this increase was an increase in some of the company's fixed charges that were
attributed to cost of sales.

As discussed above in reference to net sales and cost of sales, all of our sales
are made outside the United States and as such, we primarily account for
earnings and costs in euros. In order to comply with GAAP, our financial
statements as well as the following discussion are in terms of U.S. dollars.
Accordingly, the expenses discussed below may partially differ as a result of
fluctuating exchange rates in addition to the other factors discussed.

Operating expenses were approximately $817,600 during the year ended December
31, 2005, an increase of approximately $75,900 (approximately 10%) from
approximately $741,700 for the year ended December 31, 2004. This increase was
primarily due to an increase in the company's consulting and professional fees
during 2005.

Consulting and professional fees during the year ended December 31, 2005 were
approximately 322,000, an increase of $213,200 (or approximately 196%) compared
to approximately $108,800 during the year ended December 31, 2004. Most of these
fees are incurred in Europe, and as such, a portion of the increase resulted
from exchange rate fluctuations and part of increase was attributable to
consulting fees associated with the development of the next generation of
products. Finally there were additional professional fees associated with the
compliance for the Sarbanes-Oxley Act of 2002.

Other income (net of expenses) totaled approximately $(273,900) of expense for
the year ended December 31, 2005 as compared to approximately $760,400 of income
for the year ended December 31, 2004. This increase was primarily due to the
restatement due to the gain in the fair value of the embedded derivative
contained in our convertible notes and the fact that there was no forgiveness
income in 2005 ($297,800 in 2004) and there was no accrual of approximately
$54,000 for estimated litigation.

As a result of the above, our net loss for the year ended December 31, 2005
totaled approximately $997,800 or $.09 per share compared to a net income of
approximately $198,200 or $.02 per share for the year ended December 31, 2004.

These losses per share were based on weighted average common shares outstanding
of 11,353,816 & 11,299,267 for the years ended December 31, 2005 and 2004
respectively.

                                       15

<PAGE>

Financial Condition, Liquidity and Capital Resources

Fiscal 2006 vs. 2005

As shown in the accompanying amended consolidated financial statements, we had
net losses of approximately $1,473,000 and $997,800 in 2006 and 2005,
respectively. Management believes that it is likely that we will continue to
incur net losses through at least 2007. We had a working capital deficiency of
approximately $495,200 and $418,000 at December 31, 2006 and 2005 respectively.
We also had a stockholders' deficiency of approximately $3,362,200 and
$2,270,000 at December 31, 2006 and 2005, respectively.

We had a negative cash flow from operating activities of approximately $212,000
and $366,200 at December 31, 2006 and 2005 respectively. We also had cash
provided by financing activities of $400,000 and $500,000 at December 31, 2006
and 2005 respectively. Our net loss of approximately $1,473,000 and $997,800
increased our accumulated deficit to approximately $21,051,000 and $19,578,000
at December 31, 2006 and 2005 respectively.

During 2006, we received $400,000 of additional funds which were converted to 7%
non-convertible notes payable on December 31, 2006. In addition, during 2006,
the Company received proceeds of approximately $210,000 from the sale of
marketable securities. Accordingly, management believes that we will have
sufficient liquid resources to operate through at least December 31, 2007.

Fiscal 2005 vs. 2004

As shown in the accompanying consolidated financial statements, we had net a
loss of approximately $977,800 and a net income of approximately $198,200 in
2005 and 2004, respectively. The net loss in 2005 and the net income in 2004
included a nonrecurring income item relating to forgiveness of debt of
approximately $297,800 and the gain or loss on the embedded derivative included
in our convertible 7% notes. We had a working capital deficiency of
approximately $418,000 and $38,400 at December 31, 2005 and 2004 respectively.
We also had a stockholders' deficiency of approximately $2,270,000 and
$1,280,000 at December 31, 2005 and 2004, respectively.

We had a negative cash flow from operating activities of approximately $366,200
and $467,500 at December 31, 2005 and 2004 respectively. We also had cash
provided by financing activities of $500,000 and $670,000 at December 31, 2005
and 2004 respectively. Our 2005 net loss of approximately $997,800 and our 2004
net income $198,200 increased our accumulated deficit in 2005 to approximately
$19,578,000 and decreased our accumulated deficit in 2004 to $18,580,000.

During 2005, we sold $500,000 of 7% convertible promissory notes. We also owned
marketable securities which were classified as available-for-sale and consisted
of equity securities with an aggregate fair value of approximately $193,800 and
a cost totaling approximately $646,000 at December 31, 2005. The net unrealized
holding loss was approximately $452,200 for the year ended December 31, 2005
which increased accumulated other comprehensive loss, a component of total
stockholders' deficiency to approximately $603,400 as of December 31, 2005.

                           Forward-Looking Statements

In this amended annual report, we include some forward-looking statements that
involve substantial risks and uncertainties and other factors that may cause our
operational and financial activity and results to differ from those expressed or
implied by these forward-looking statements. In many cases, you can identify
these statements by forward-looking words such as "may," "expect," "anticipate,"
"believe," "estimate," "plan," "intend" and "continue," or similar words. You
should read statements that contain these words carefully because they discuss
our future expectations, contain projections of our future results of operations
or of our financial condition, or state other "forward-looking" information.
Statements relating to restarting of clinical trials for certain of its products
or receiving certain revenues or proceeds constitute forward-looking statements
under the federal securities laws. Such statements are subject to certain risks
and uncertainties that could cause the actual timing of such revenues, clinical
trials or other events to differ materially from those projected.

You should not place undue reliance on these forward-looking statements. The
section captioned "Management's Discussion and Analysis of Financial Condition
and Plan of Operations," as well as any cautionary language in this

                                       16

<PAGE>

amended annual report, provide examples of risks, uncertainties and events that
may cause our actual results to differ materially from our expectations.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.

We do not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Because of the risks and uncertainties, the forward-looking
events and circumstances discussed in this amended annual report might not
occur.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

      In the normal course of business, operations of the Company are exposed to
fluctuations in interest rates and foreign currencies. These fluctuations can
vary the cost of financing, investment yields and operations of the Company.

The Company does not have any investments that would be classified as trading
securities under generally accepted accounting principles.

The Company's foreign currency risk exposure results from fluctuating currency
exchange rates, primarily the U.S. dollar against the European currencies. The
Company faces transactional currency exposures that arise when its foreign
subsidiaries (or the Company itself) enter into transactions, generally on an
intercompany basis, denominated in currencies other than their local currency.
The Company also faces currency exposure that arises from translating the
results of its global operations to the U.S. dollar at exchange rates that have
fluctuated from the beginning of the period. The Company has not used financial
derivatives to hedge against fluctuations in currency exchange rates. Based on
the Company's overall exposure for foreign currency at December 31, 2006, a
hypothetical 10 percent change in foreign currency rates would not have a
material impact on the Company's balance sheet, net sales, net income or cash
flows over a one-year period.

We conduct much of our business operations (and incur substantially all of our
operating costs other than professional and consulting fees) through our
European subsidiaries in Euros and, as such, are exposed to risk resulting from
the fluctuation of exchange rates between the Euro and the US Dollar. We do not
engage in any hedging or other transactions for the purpose of minimizing this
risk.

Marketable Securities

      A portion of our Euro/Dollar exchange rate exposure arises from our
investment in marketable securities. We classify our investments in marketable
securities as available for sale, and those that we intend to hold for more than
one year as non-current. Unrealized holding gains and losses are reported as a
separate component of stockholders' deficiency, as part of accumulated other
comprehensive income (loss), until realized.

The cost and fair market value of marketable securities available-for-sale held
as of December 31:

                      December 31, 2006   December 31, 2005   December 31, 2004
                      -----------------   -----------------   -----------------
     Cost                   $ --              $ 646,057           $ 646,057
     Fair Value             $ --              $ 193,783           $ 247,811

In December, 2006 the company sold all available for sale securities and
recorded an actual loss of approximately $433,000.

                                       17

<PAGE>

Item 8. Financial Statements and Supplementary Data

Biocoral, Inc. and Subsidiaries Index to Consolidated Financial Statements and
Schedule.

Financial Statements:

<TABLE>
<S>                                                                                                          <C>
Management's Report on Internal Control over Financial Reporting                                             F-2
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting         F-3
Report of Independent Registered Public Accounting Firm                                                      F-4
Consolidated Balance Sheets as of December 31, 2006, 2005 and 2004 (Restated)                                F-5
Consolidated Statements of Operation for the years ended December 31, 2006, 2005 and 2004 (Restated)         F-6
Consolidated Statements of Changes in Stockholders' Deficiency and Comprehensive loss for the years ended
   December 31, 2006, 2005 and 2004 (Restated)                                                               F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004 (Restated)        F-8
Note to Consolidated Financial Statements (Restated)                                                         F-9 - F-25
</TABLE>

                                       F-1

<PAGE>

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company. Internal control over
financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under
the Securities Exchange Act of 1934, as a process designed by, or under the
supervision of, our principal executive and principal financial officers and
effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:

      o     Pertain to the maintenance of records that in reasonable detail
            accurately and fairly reflect the transactions and dispositions of
            our assets;

      o     Provide reasonable assurance that transactions are recorded as
            necessary to permit preparation of financial statements in
            accordance with generally accepted accounting principles, and that
            receipts and expenditures of the Company are being made only in
            accordance with authorizations of our management and directors; and

      o     Provide reasonable assurance regarding prevention or timely
            detection of unauthorized acquisition, use or disposition of the
            Company's assets that could have a material effect on the financial
            statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

      Management assessed the effectiveness of the Company's internal control
over financial reporting as of December 31, 2006. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in this Internal
Control-Integrated Framework.

      Based of our assessment, we have concluded that the company did not
maintain effective internal control over financial reporting as of December 31,
2006, based on criteria established in "Internal Control - Integrated Framework"
issued by the COSO.

Moore & Associates Chrtd., our independent registered public accounting firm,
has issued an audit report, included in page F-3, on our assessment of our
internal control over financial reporting.

                                       F-2

<PAGE>

           Report of Independent Registered Public Accounting Firm on
                    Internal Control Over Financial Reporting

The Board of Directors and Stockholders of Biocoral, Inc

      We have audited management's assessment, included in the accompanying
Management's Report on Internal Control over Financial Reporting that Biocoral,
Inc. maintained effective internal control over financial reporting as of
December 31, 2006, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Biocoral, Inc.'s management is responsible for
maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the company's internal control over financial
reporting based on our audit.

      We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

      A company's internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

      A material weakness is defined by the Public Company Accounting Oversight
Board's Audit Standard No. 2 as being a significant deficiency, or combination
of significant deficiencies, that results in more than a remote likelihood that
a material misstatement of the annual or interim financial statements will not
be prevented or detected.

      Management has identified and included in its assessment the following
material weakness as of December 31, 2006: its methodologies relating to (a) its
accounting for our previous correction of an error related to the capitalization
of patent costs, and (b) its method for accounting for the recording of the fair
value of the embedded derivative attached to our convertible debt.

      This material weakness resulted in restatement of the Company's previously
issued financial statements for the years ended December 31, 2006, 2005 and
2004. The aforementioned material weakness was considered in determining the
nature, timing, and extent of audit tests applied in our audit of the 2006
consolidated financial statements.

      Also, in our opinion, management's assessment that Biocoral, Inc., did not
maintain effective internal control over financial reporting as of December 31,
2006, is fairly stated, in all material respects, based on criteria established
in Internal Control -- Integrated Framework issued by COSO. Furthermore, in our
opinion, because of the effect of the material weakness described above on the
achievement of the objectives of the control criteria, Biocoral, Inc., did not
maintain effective internal control over financial reporting as of December 31,
2006, based on criteria established in Internal Control -- Integrated Framework
issued by COSO.

      We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheets of Biocoral, Inc. as December 31, 2006, 2005 and 2004 (restated), and the
related consolidated statements of income, cash flows and shareholders' equity
for each of the three years in the period ended December 31, 2006 (restated) and
our report dated September 7, 2007, expressed an unqualified opinion thereon.

/s/ Moore & Associates, Chartered
Moore & Associates, Chartered

September 7, 2007
Las Vegas, Nevada

                                       F-3

<PAGE>

   Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Biocoral, Inc.:

We have audited the accompanying consolidated balance sheets of Biocoral, Inc.
and subsidiaries as of December 31, 2006, 2005 and 2004 (restated), and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 2006
(restated). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the restated consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Biocoral, Inc. and subsidiaries at December 31, 2006, 2005 and 2004 (restated),
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 2006 (restated) in conformity
with U.S. generally accepted accounting principles.

As described in Notes 14 to the financial statements, the Company has restated
its financial statements for each of the three years in the period ended
December 31, 2006 as its previous correction of an errors related to the
capitalization of the patent costs was not properly presented and to record the
fair value of the embedded derivative attached to its convertible debt.

We have also audited in accordance with standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Biocoral Inc.'s
internal control over financial reporting as of December 31, 2006 based on
criteria established in Internal Control -- Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and in our
opinion, because of the effect of the material weakness described in our report
dated September 7, 2007 on the achievement of the objectives of the control
criteria, Biocoral, Inc., did not maintain effective internal control over
financial reporting as of December 31, 2006, based on criteria established in
Internal Control -- Integrated Framework issued by COSO.

/s/ Moore & Associates, Chartered
Moore & Associates, Chartered

September 7, 2007
Las Vegas, Nevada

                                       F-4

<PAGE>

                         BIOCORAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (RESTATED)

<TABLE>
<CAPTION>
                                                                           December 31,    December 31,    December 31,
                                                                              2006            2005            2004
                                                                          -------------   -------------   -------------
<S>                                                                       <C>             <C>             <C>
                                ASSETS
Current Assets
   Cash                                                                   $     287,773   $     127,211   $     129,508
   Investments in marketable securities                                              --         193,783         247,811
   Accounts receivable, net of allowance for doubtful accounts
     $0 for 2006, $2,300 for 2005, $2,700 for 2004                              175,900         136,076          53,276
   Inventories                                                                  244,675         125,100         156,500
   Prepaid expenses and other current assets                                     27,744          22,507          37,507
                                                                          -------------   -------------   -------------

     Total Current Assets                                                       736,092         604,677         624,602

Property and equipment, net                                                      25,279          31,300          21,500
Restricted cash held in escrow                                                   11,049          11,049          11,049
Investment in limited partnership                                                 4,162          10,444          20,209
Intangible assets, net                                                          527,879         405,707         257,628
Other assets                                                                     20,157          12,633          15,320
                                                                          -------------   -------------   -------------

         Total Assets                                                     $   1,324,618   $   1,075,810   $     950,308
                                                                          =============   =============   =============

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current  Liabilities
   Accounts payable                                                       $     726,555   $     713,123   $     568,747
   Current portion of due to officer                                            190,937         158,935          85,258
   Accrued interest payable                                                     313,762         150,701           8,951
   Current portion of long-term debt                                                 --             --               --
                                                                          -------------   -------------   -------------
      Total Current Liabilities                                               1,231,254       1,022,759         662,956

Due to Officer, net of current portion                                          750,000         600,000         412,500
Fair value of embedded derivative                                                    --         416,419         114,484
Long-term debt - net of embedded derivative                                   2,700,000       1,301,186         991,150
Deferred employee benefits                                                        5,531           5,000          49,200
                                                                          -------------   -------------   -------------

      Total Liabilities                                                       4,686,785       3,345,364       2,230,290
                                                                          -------------   -------------   -------------

Commitments and contingencies

Stockholders' Deficiency
   Preferred stock; par value $.001 per share; 1,000,000 shares
      authorized; none issued                                                        --              --              --
   Common Stock; $.001 par value; 100,000,000 shares authorized;
      11,353,817 shares issued and outstanding as of December 31, 2006,
      11,353,816 shares issued and outstanding as of December 31, 2005,
      11,353,819 shares issued and outstanding as of December 31, 2004,          11,354          11,354          11,354
   Additional paid-in capital                                                17,900,090      17,900,090      17,900,090
   Accumulated other comprehensive loss                                        (222,635)       (603,447)       (611,633)
   Accumulated deficiency                                                   (21,050,976)    (19,577,551)    (18,579,793)
                                                                          -------------   -------------   -------------

      Total Stockholders' Deficiency                                         (3,362,167)     (2,269,554)     (1,279,982)
                                                                          -------------   -------------   -------------

         Total Liabilities and Stockholders' Deficiency                   $   1,324,618   $   1,075,810   $     950,308
                                                                          =============   =============   =============
</TABLE>

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

                                       F-5

<PAGE>

                         BIOCORAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (RESTATED)

<TABLE>
<CAPTION>
                                                                                    Years ended December 31,
                                                                              2006          2005          2004
                                                                          ------------   ----------   ------------
<S>                                                                       <C>            <C>          <C>
Net sales                                                                 $    408,205   $  316,200   $    351,600
Cost of sales                                                                  121,244      222,400        172,100
                                                                          ------------   ----------   ------------

   Gross Profit                                                                286,961       93,800        179,500
                                                                          ------------   ----------   ------------
Operating Expenses
   Research and development                                                     49,892      114,200        245,590
   Consulting and professional fees                                            222,075      321,995        108,783
   Depreciation and amortization                                                52,454       40,469         12,284
   General and administrative                                                  232,281      341,010        375,042
                                                                          ------------   ----------   ------------

      Total Operating Expenses                                                 556,702      817,674        741,699
                                                                          ------------   ----------   ------------

   Loss From Operations                                                       (269,741)    (723,874)      (562,199)
                                                                          ------------   ----------   ------------
Other Income (Expense)
   Interest, net                                                              (186,645)    (152,826)      (162,175)
   Equity in loss of partnership                                                (6,282)      (9,765)       (15,000)
   Realized loss on sale of marketable securities                             (433,446)          --             --
   Gain (loss) on embedded derivatives                                        (582,395)    (111,971)       694,366
   Dividend income                                                               3,878        1,728             --
   Foregivenss of debt                                                              --           --        297,800
   Litigation contingency loss                                                      --      (16,050)       (54,576)
   Other                                                                         1,206       15,000             --
                                                                          ------------   ----------   ------------

      Total Other Income (Expense)                                          (1,203,684)    (273,884)       760,415
                                                                          ------------   ----------   ------------

Net (Loss) Income                                                           (1,473,425)    (997,758)       198,216

Other Comprehensive Income (Loss)
   Foreign translation gain (loss)                                             (71,463)      62,214         36,374
   Unrealized gain (loss) on marketable securities                             452,275      (54,028)        39,622
                                                                          ------------   ----------   ------------
Comprehensive (Loss) Income                                               $ (1,092,613)  $ (989,572)  $    274,212
                                                                          ============   ==========   ============
Net (loss) income per share

      Basic                                                               $      (0.13)  $    (0.09)  $       0.02
                                                                          ============   ==========   ============
      Diluted

Weighted average number of shares outstanding

      Basic                                                                 11,353,817   11,353,816     11,299,267
                                                                          ============   ==========   ============
      Diluted
</TABLE>

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

                                       F-6

<PAGE>

                          BIOCORAL, INC. AND SUBSIDIARY
               CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
                       DEFICIENCY AND COMPREHENSIVE LOSS
                  YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
                                   (RESTATED)

<TABLE>
<CAPTION>
                                                                          Accumulated
                                      Common Stock                           Other                        Total
                                  --------------------    Additional     Comprehensive   Accumulated   Stockholders'  Comprehensive
                                    Shares     Amount   Paid-in Capital      Loss         Deficiency    Deficiency        Loss
                                  ----------  --------  ---------------  -------------  -------------  -------------  -------------
<S>                               <C>         <C>       <C>              <C>            <C>            <C>             <C>
Balance, January 1, 2004          11,297,573   $11,298    $17,337,292      $(687,629)    $(18,778,009)  $(2,117,048)   $  (373,623)

Net loss                                                                                      198,216       198,216        198,216

Other comprehensive gain -
   increase in market value of
   marketable securities                  --        --             --         39,622               --        39,622         39,622

Other comprehensive gain
   - foreign currency translation         --        --             --         36,374               --        36,374         36,374
                                  ----------   -------    -----------      ---------     ------------   -----------    -----------

Total comprehensive income                --        --             --         75,996          198,216    (1,842,836)       274,212
Conversion of convertible
   debentures                         56,246        56        562,798             --               --       562,854             --
                                  ----------   -------    -----------      ---------     ------------   -----------    -----------

Balance, December 31, 2004        11,353,819    11,354     17,900,090       (611,633)     (18,579,793)   (1,279,982)       274,212
                                                                                                                       ===========

Foreign currency translation
   gain                                                                       62,214                         62,214         62,214

Other comprehensive gain -
   increase in market value of
   marketable securities                                                     (54,028)                       (54,028)       (54,028)
Other                                     (3)       --             --             --               --            --             --

Net loss                                  --        --             --             --         (997,758)     (997,758)      (997,758)
                                  ----------   -------    -----------      ---------     ------------   -----------    -----------

Balance, December 31, 2005        11,353,816    11,354     17,900,090       (603,447)     (19,577,551)   (2,269,554)      (989,572)
                                                                                                                       ===========

Other comprehensive loss
   - foreign currency translation         --        --             --        (71,463)              --       (71,463)       (71,463)

Other comprehensive gain
   - increase in market value of
   marketable securities and
   adjustment for securities sold         --        --             --        452,275               --       452,275        452,275

Other                                      1        --             --             --               --            --             --

Net loss                                  --        --             --             --       (1,473,425)   (1,473,425)    (1,473,425)
                                  ----------   -------    -----------      ---------     ------------   -----------    -----------

Balance, 12/31/06                 11,353,817   $11,354    $17,900,090      $(222,635)    $(21,050,976)  $(3,362,167)   $(1,092,613)
                                  ==========   =======    ===========      =========     ============   ===========    ===========
</TABLE>

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

                                       F-7

<PAGE>

                         BIOCORAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (RESTATED)

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                                       --------------------------------------
                                                                           2006          2005         2004
                                                                       ------------   ----------   ----------
<S>                                                                    <C>            <C>          <C>
Cash flows from operating activities
   Net loss                                                            $ (1,473,425)  $ (997,758)  $  198,216
   Adjustments to reconcile net loss to net cash used in
      operating activities
         Depreciation and amortization                                       52,454       40,469       12,284
         Equity in loss of partnership                                        6,282        9,765       15,000
         Forgiveness of debt                                                     --           --     (297,800)
         Provision for doubtful accounts                                     (2,300)        (400)         800
         Realized loss on sale of marketable securities                     433,446           --           --
         Gain (loss) on embedded derivatives                                582,395      111,971     (694,366)
   Change in operating assets and liabilities
      Accounts receivable                                                   (37,524)     (82,400)      83,124
      Inventories                                                          (119,575)      31,400       27,100
      Prepaid expenses and other current assets                              (5,237)      15,000      (36,307)
      Other assets                                                           (7,524)       2,687       (2,820)
      Accounts payable and accrued interest payable                         176,493      286,126       95,081
      Current portion of due to officer                                      32,002       73,677     (283,742)
      Due to officer                                                        150,000      187,500      412,500
      Deferred employee benefits                                                531      (44,200)       3,500
                                                                       ------------   ----------   ----------

Net cash provided by (used in) operating activities                        (211,982)    (366,163)    (467,430)
                                                                       ------------   ----------   ----------
Cash flows from investing activities
   Purchase of property and equipment                                       (15,312)          --           --
   Capitalization of intangible assets                                     (153,292)    (176,848)    (152,472)
   Proceeds from sale of marketable securities                              212,611           --           --
                                                                       ------------   ----------   ----------
Net cash provided by (used in) investing activities                          44,007     (176,848)    (152,472)
                                                                       ------------   ----------   ----------

Cash flows from financing activities
   Principal payments on long-term debt                                          --           --      (41,000)
   Proceeds from long-tem debt                                              400,000      500,000      670,000
                                                                       ------------   ----------   ----------

Net cash provided by (used in) financing activities                         400,000      500,000      629,000

Effects of changes in exchange rates on cash                                (71,463)      40,714       31,921
                                                                       ------------   ----------   ----------

Net increase (decrease) in cash                                             160,562       (2,297)      41,019
                                                                       ------------   ----------   ----------

Cash, beginning of period                                                   127,211      129,508       88,489
                                                                       ------------   ----------   ----------

Cash, end of period                                                    $    287,773   $  127,211   $  129,508
                                                                       ============   ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                           2006          2005         2004
                                                                       ------------   ----------   ----------
<S>                                                                    <C>            <C>          <C>
Supplemental Statements of Cash Flows Information
         Conversion of Interest and advances to common stock
         Conversion of 7% notes to common stock                        $         --   $       --   $  462,854
                                                                       ============   ==========   ==========
                                                                       $         --   $       --   $  100,000
                                                                       ============   ==========   ==========
</TABLE>

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

                                       F-8

<PAGE>

Note 1 - Description of Business

      Biocoral,  Inc.  ("Biocoral") was incorporated under the laws of the State
      of Delaware on May 4, 1992.  Biocoral is a holding  company that  conducts
      its operations primarily through its wholly-owned  European  subsidiaries.
      Biocoral,   Inc.,   together  with  its   subsidiaries   are  referred  to
      collectively  herein as the  "Company."

      The Company's  operations are in several  business  segments which consist
      primarily  of research and  development,  manufacturing  and  marketing of
      patented high technology biomaterials, bone substitute materials made from
      coral and other orthopedic,  oral and maxillo-facial  products,  including
      products marketed under the trade name of Biocoral.  Most of the Company's
      operations are conducted from Europe. The Company has obtained  regulatory
      approvals to market its  products  throughout  Europe,  Canada and certain
      other  countries.  The Company owns various patents for its products which
      have been  registered  and issued in the  United  States,  Canada,  Japan,
      Australia and various countries  throughout Europe.  However,  the Company
      has not applied for the regulatory approvals needed to market its products
      in the United States.

Note 2 - Liquidity

      The Company had net losses of  approximately  $1,473,400  and  $998,000 in
      2006 and 2005,  respectively and a net income of approximately  198,000 in
      2004. The net income in 2004 includes a nonrecurring  income item relating
      to forgiveness of debt of  approximately  $297,800 (See Note 8(A)) and the
      gain on the  embedded  derivative  included in our  convertible  7% notes.
      Management  believes  that it is likely that the Company will  continue to
      incur net losses through at least 2007. The Company had a working  capital
      deficiency of approximately $495,200,  $418,100 and $38,400 for 2006, 2005
      and 2004, respectively. The Company also had a stockholders' deficiency of
      approximately $3,362,200,  $2,269,554 and $1,279,982 at December 31, 2006,
      2005 and 2004,  respectively.  During  January  and  September  2005,  the
      Company received approximately $500,000 relating to the issuance of the 7%
      convertible  promissory  notes  payable  (See Notes 8(C) and (D)).  During
      2006, the Company received $400,000 additional funds. These funds together
      with the previously  held 6% convertible  notes payable and 7% convertible
      promissory  note  payable,  were  converted  to 7%  non-convertible  notes
      payable on December  31,  2006.  (See Notes 8(A),  (C),  (D) and (E)).  In
      addition,  during 2006,  the Company  received  proceeds of  approximately
      $210,000 from the sale of marketable securities.  Management believes that
      these funds will provide  sufficient  working  capital to operate  through
      2007.

Note 3 - Summary of Significant Accounting Policies

      (A) Basis of Presentation

      The accompanying consolidated financial statements are presented in United
      States dollars under accounting principles generally accepted in the
      United States of America.

      (B) Principles of Consolidation

      The accompanying consolidated financial statements include all of the
      accounts of Biocoral, Inc. and its wholly-owned subsidiaries as of and for
      the period ended December 31, 2006, 2005 and 2004. Cabestan, Inc., 3H
      "Healthcare and High Biotechnology Innovation, Inc." and Immo
      Distribution, Ltd., are not operating subsidiaries. All material
      intercompany balances and transactions have been eliminated in
      consolidation.

      (C) Cash and Cash Equivalents

      The Company considers cash on hand, cash in banks, certificates of
      deposit, time deposits and other short term securities with maturities of
      three months or less when purchased as cash and cash equivalents. There
      were no cash equivalents held by the Company at December 31, 2006, 2005
      and 2004.

                                       F-9

<PAGE>

Note 3 - Summary of Significant Accounting Policies - continued

      (D) Concentration of Credit Risk

      Concentrations of credit risk with respect to trade accounts receivable
      are limited due to the large number of customers and their dispersion
      across geographic areas around the world. However, all trade accounts
      receivable are concentrated in the health care sector. The Company does
      not currently see a concentrated credit risk associated with these
      receivables, even though repayment is dependent upon the financial
      stability of this industry and the respective country's national
      economies.

      (E) Allowance for Doubtful Accounts

      The Company estimates uncollectibility of trade accounts receivable by
      analyzing historical bad debts, customer concentrations, customer credit
      worthiness and current economic trends when evaluating the adequacy of the
      allowance for doubtful accounts.

      (F) Investments in Marketable Securities

      The Company invested in European common stocks. Available-for-sale
      securities are carried at fair market value, with unrealized gains and
      losses, net of tax, reported as a separate component of stockholders'
      deficiency. In determining realized gains and losses, the cost of the
      securities sold is based upon the specific identification method. The
      Company reviewed each marketable security to determine whether a decline
      in fair market value in other than temporary. If the decline is deemed
      other than temporary, the cost basis of the individual security is written
      down to the fair value as a new cost basis and the amount written down is
      included in operations as a realized loss.

      (G) Inventories

      Inventories are stated at the lower of cost or market, determined on the
      first-in, first-out ("FIFO") method.

      (H) Property and Equipment

      Property and equipment are recorded at cost less accumulated depreciation
      and amortization. Depreciation and amortization are computed using the
      straight-line method over the estimated useful lives of the assets.
      Estimated useful lives are 25 years for building and building
      improvements, two to twelve years for equipment and furnishings and one
      year for computer software. Normal maintenance and repairs of property and
      equipment are expensed as incurred, while renewals, betterments and major
      repairs that materially extend the useful live of the property and
      equipment are capitalized.

      (I) Investment in Limited Partnership

      The Company owns a 9.3% interest in Bensenville Associates Ltd., a limited
      partnership, which is accounted for under the equity method of accounting.
      Under this method, the initial investment is recorded at cost.
      Subsequently, the investment is increased or decreased for the Company's
      pro-rata share of the partnership's income and losses. The Company's share
      of the loss in the partnership for the years ended December 31, 2006, 2005
      and 2004 was approximately $6,300, $9,800 and $15,000, respectively, and
      the book value of the investment at December 31, 2006, 2005 and 2004 was
      $4,162, $10,444, and $20,209, respectively.

                                      F-10

<PAGE>

Note 3 - Summary of Significant Accounting Policies - continued

      (J) Intangible Assets

      Intangible assets consist of legal fees paid to various patent attorneys
      related to world-wide patent applications or litigation on existing
      patents. The patent costs are amortized over the shorter of the life of
      the patent or the estimated useful life of the technology which is 10
      years using the straight line method.

      Amortization of the intangible assets for the next five years is as
      follows:

              2007       $ 42,928

              2008       $ 42,928

              2009       $ 42,928

              2010       $ 42,928

              2011       $ 42,928

      There after        $313,239

      The components of intangible assets and costs capitalized in 2006, 2005
      and 2004 are as follows:

                                                2006         2005        2004
                                              ---------   ---------   ---------
         Beginning Intangible Assets          $ 454,273   $ 277,425   $ 119,682
         Add: Capitalized Costs                 163,024     176,848     157,743
         Less: Accumulated Amortization          89,418      48,566      19,797
                                              ---------   ---------   ---------
         Net Intangible Assets                $ 527,879   $ 405,707   $ 257,628
                                              =========   =========   =========

      (K) Impairment of Long-Lived Assets

      In accordance with Statement of Financial Accounting Standards ("SFAS")
      No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets",
      the Company reviews long-lived assets for impairment whenever
      circumstances and situations change such that there is an indication that
      the carrying amounts may not be recovered. In such circumstances, the
      Company will estimate the future cash flows expected to result from the
      use of the asset and its eventual disposition. Future cash flows are the
      future cash inflows expected to be generated by an asset less the future
      outflows expected to be necessary to obtain those inflows. If the sum of
      the expected future cash flows (undiscounted and without interest charges)
      is less than the carrying amount of the asset, the Company will recognize
      an impairment loss to adjust to the fair value of the asset. Management
      believes that there are no impaired long-lived assets at December 31,
      2006, 2005 and 2004.

      (L) Income Taxes

      The Company accounts for deferred taxes in accordance with SFAS No. 109
      "Accounting for Income Taxes." Under this method, deferred tax assets and
      liabilities are determined based on differences between financial
      reporting and tax basis of assets and liabilities. Deferred tax assets and
      liabilities are measured using enacted tax rates and laws that will be in
      effect when the differences are expected to reverse. Valuation allowances
      are established when necessary to reduce deferred tax assets to the amount
      expected to be realized.

                                      F-11

<PAGE>

Note 3 - Summary of Significant Accounting Policies - continued

      (M) Revenue Recognition

      Sales are recognized when the earnings process is complete and
      collectibility is reasonably assured, which is usually when the goods are
      shipped to customers. Amounts billed related to shipping and handling are
      included in revenue.

      (N) Shipping and Handling Costs

      Shipping and handling costs are included in cost of sales in accordance
      with guidance established by the Emerging Issues Task Force, issue No.
      00-10, "Accounting for Shipping and Handling Costs." During 2006, 2005 and
      2004, there were no material shipping and handling costs.

      (O) Research and Development

      The Company expenses all research and development costs as incurred.

      (P) Stock Based Compensation

      Effective January 1, 2003 the Company adopted SFAS No. 148, "Accounting
      for Stock-Based Compensation-Transition and Disclosure" ("SFAS 148"). SFAS
      148 amends SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS
      123"), and provides alternative methods of transition for a voluntary
      change to the fair value based method of accounting for stock-based
      employee compensation. In addition, SFAS 148 amends the disclosure
      requirements of SFAS 123 to require more prominent and more frequent
      disclosures in financial statements of the effects of stock-based
      compensation. The interim disclosure requirements of SFAS 148 are
      effective for interim periods beginning after December 15, 2002. The
      Company's stock-based compensation related to employees and non-employee
      directors is recognized using the intrinsic value method in accordance
      with Accounting Principles Board Opinion No. 25, "Accounting for Stock
      Issued to Employees," and thus there is no compensation expense for
      options granted with exercise prices equal to the fair value of the
      Company's common stock on the date of the grant. With respect to stock
      based compensation granted to non employees, the Company records an
      expense equal to the fair value of the option on the measurement date,
      which is either the earlier of the date at which a commitment for
      performance is reached or the date at which the service is complete.

      (Q) Computation of Net Loss per Share

      The Company presents basic loss per share and, if applicable, diluted
      earnings per share pursuant to the provisions of SFAS No. 128, "Earnings
      per Share" ("SFAS 128").

      Under SFAS 128 basic net loss per share is computed by dividing the net
      loss for the year by the weighted average number of shares outstanding
      during the year. Diluted net earnings per share is computed by dividing
      the net earnings for the year by the weighted average number of common
      share and common share equivalents outstanding during the year. Common
      stock equivalents would arise from the exercise of stock options. For the
      year ended December 31, 2006 and 2005, none were issued. For the year
      ended December 31, 2004, the Company cancelled options granted June 30,
      1999 for purchasing the total of 34,270 shares and granted the new options
      for purchasing the total of 200,000 shares. Diluted net loss has not been
      disclosed for the years ended December 31, 2006, 2005 and 2004 as the
      effect is anti-dilutive.

      (R) Foreign Currency Translation and Transactions

      Assets and liabilities of the foreign subsidiaries are translated at
      current exchange rates and related revenues and expenses are translated at
      average exchange rates in effect during the year. Resulting translation
      adjustments, if material, are recorded as accumulated other comprehensive
      loss which is a separate component of stockholders' deficit.

                                      F-12

<PAGE>

Note 3 - Summary of Significant Accounting Policies - continued

      The change in cumulative translation adjustments during the years ended
      December 31, 2006, 2005 and 2004 was as follows:

<TABLE>
<CAPTION>
                                                       2006         2005         2004
                                                    ----------   ----------   ----------
<S>                                                 <C>          <C>          <C>
Beginning accumulated translation adjustments       $ (151,172)  $ (213,386)  $ (249,760)
Translation adjustments for the period then ended      (71,463)      62,214       36,374
                                                    ----------   ----------   ----------
Ending accumulated translation adjustments          $ (222,635)  $ (151,172)  $ (213,386)
                                                    ==========   ==========   ==========
</TABLE>

      (S) Comprehensive Loss

      The foreign currency translation gains (losses) resulting from the
      translation of the financial statements of the Company's subsidiaries
      expressed in Euros to United States dollars are reported as accumulated
      other comprehensive income (loss) in the consolidated statement of changes
      in stockholders' deficiency and comprehensive loss.

      The unrealized gains and losses, net of tax, resulting from the valuation
      of available-for sale securities at their fair market value at year end
      are reported as other comprehensive income (loss) in consolidated
      statement of changes in stockholders' deficiency and comprehensive loss.

      The change in accumulated unrealized loss on investments in marketable
      securities during the year ended December 31, 2006, 2005 and 2004 was as
      follows:

<TABLE>
<CAPTION>
                                                       2006         2005         2004
                                                    ----------   ----------   ----------
<S>                                                 <C>          <C>          <C>
Beginning accumulated unrealized loss on
   marketable securities                            $ (452,274)  $ (398,246)  $ (437,868)
Unrealized gain (loss) arising during the year         452,274      (54,028)      39,622
Reclassification adjustment gain                            --           --           --
                                                    ----------   ----------   ----------
Ending accumulated unrealized loss on
   marketable securities                            $        0   $ (452,274)  $ (398,246)
                                                    ==========   ==========   ==========
</TABLE>

      (T) Fair Value of Financial Instruments

      The Financial Accounting Standards Board ("FASB") issued SFAS No. 107,
      "Disclosure about Fair Value of Financial Instruments", which requires
      disclosure of fair value information about financial instruments when it
      is practicable to estimate that value. The carrying amounts of financial
      instruments, including cash, accounts receivable, accounts payable and
      accrued interest payable approximate fair value at December 31, 2006, 2005
      and 2004, due to the relatively short maturity of the instruments. The
      investment in limited partnership is recorded using the equity method and
      it is not practical to estimate the fair value of this investment without
      incurring excessive cost, as this investment is not publicly traded.
      Long-term debt approximates fair value based upon based upon debt terms
      available for entities under similar terms.

      In September 2006, the FASB issued SFAS No. 157, "Fair Value
      Measurements," ("FAS 157"). FAS 157 defines fair value, establishes a
      framework for measuring fair value and expands disclosures about fair
      value measurements. The adoption of FAS 157 is effective January 1, 2008.
      The Company has not yet determined what the effect will be, if any, on
      their financial statements.

      (U) Use of Estimates

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

                                      F-13

<PAGE>

Note 3 - Summary of Significant Accounting Policies - continued

      (V) Recent Accounting Pronouncements

      In November 2004, the FASB issued SFAS No. 151 "Amendment of ARB No. 43,
      Chapter 4, Inventory Pricing". This statement clarifies the accounting for
      abnormal amounts of idle facility expense, freight, handling costs, and
      wasted material (spoilage). The statement requires that those items be
      recognized as current-period charges regardless of whether they meet the
      criterion of "so abnormal". In addition, this statement requires that
      allocation of fixed production overheads to the costs of conversion be
      based on the normal capacity of the production facilities. The provisions
      of this statement shall be effective for inventory costs incurred during
      fiscal years beginning after June 15, 2005. Earlier application is
      permitted for inventory costs incurred during fiscal years beginning after
      the date this Statement is issued. The provisions of this Statement shall
      be applied prospectively. Management believes this statement will not have
      a material impact on the Company's consolidated financial statements.

      In May 2005, FASB issued SFAS No. 154, "Accounting Changes and Error
      Corrections - a Replacement of APB Opinion No. 20 (Accounting Changes) and
      FASB No. 3 (Reporting Accounting Changes in Interim Financial
      Statements)," that changes requirements for the accounting for and
      reporting of a change in accounting principle. This Statement requires
      retrospective application to prior periods' financial statements of
      changes in accounting principle unless it is impracticable to determine
      either the period-specific effects or the cumulative effect of the change.
      When it is impracticable to determine the period-specific effects of an
      accounting change on one or more individual prior periods presented, this
      Statement requires that the new accounting principle be applied to the
      balances of assets and liabilities as of the beginning of the earliest
      period for which retrospective application is practicable and that a
      corresponding adjustment is made to the opening balance of retained
      earnings (or other appropriate components of equity or net assets in the
      statement of financial position) for that period rather than being
      reported in an income statement. When it is impracticable to determine the
      cumulative effect of applying a change in accounting principle to all
      prior periods, this Statement requires that the new accounting principle
      be applied as if it were adopted prospectively from the earliest date
      practicable. Statement 154 is effective for accounting changes and error
      corrections made in fiscal years beginning after December 15, 2005
      (calendar year 2006).

      In July 2006, the FASB issued Interpretation No. 48, "Accounting for
      Uncertainty in Income Taxes - An Interpretation of FASB Statement 109,"
      ("FIN 48"). FIN 48 prescribes a comprehensive model as to how a company
      should recognize, measure, present and disclose in its financial
      statements uncertain tax positions that the company has taken or expects
      to take on a tax return. The adoption of FIN 48 is effective January 1,
      2007. The Company has not yet determined what the effect will be, if any,
      on their financial statements.

      In September 2006, the Financial Accounting Standards Board ("FASB")
      issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension
      and Other Postretirement Plans, an amendment of FASB Statements No. 87,
      88, 106 and 132(R)," ("FAS 158"). Among other things, FAS 158 requires
      companies to prospectively recognize a net liability or asset and to
      report the funded status of their defined benefit pension and other
      postretirement benefit plans on their balance sheets, with an offsetting
      adjustment to accumulated other comprehensive income; such recognition
      will not affect the Company's statement of income. The adoption of FAS 158
      is effective for the year ending December 31, 2006. The Company has not
      yet determined what the effect will be, if any, on their financial
      statements.

      Management does not believe that any other recently issued, but not yet
      effective accounting pronouncements, if adopted, would have a material
      effect on the accompanying consolidated financial statements.

      (W) Reclassifications

      Certain reclassifications have been made to the 2005 financial statements
      to conform to the 2006 presentation.

                                      F-14

<PAGE>

Note 4 - Investments in Marketable Securities

      During 2006, 2005 and 2004, the Company classified its investments in
      marketable securities as available for sale, and those that intend to hold
      for more than one year as non-current. Unrealized holding gains and losses
      are reported as a separate component of stockholders' deficiency as part
      of accumulated other comprehensive income (loss) until realized. The
      following is a reconciliation of original cost to fair market value for
      securities held as of December 31:

<TABLE>
<CAPTION>
                                                   2006       2005         2004
                                                ---------  ----------   ----------
<S>                                             <C>        <C>          <C>
Investments in marketable securities, at cost    $     --  $ 646,057    $ 646,057
Unrealized loss                                  $     --   (452,274)    (398,246)
Investment in marketable securities at fair
   market value                                  $     --    193,783      247,811
Less current portion                             $     --   (193,783)    (247,811)
                                                 --------  ---------    ---------
Non-current portion                              $     --  $      --    $      --
                                                 ========  =========    =========
</TABLE>

      In December, 2006 the company sold all available for sale securities and
      recorded an actual loss of approximately $433,000.

Note 5- Inventories

      Inventories consist of the following at December 31:

<TABLE>
<CAPTION>
                                                   2006       2005         2004
                                                ---------  ----------   ----------
<S>                                             <C>        <C>          <C>
Raw materials                                    $ 27,100   $ 18,300     $ 23,300
Work in process                                    54,700     36,000       48,300
Finished goods                                    162,900     70,800       85,000
                                                 --------   --------     --------

                                                 $244,700   $125,100     $156,600
                                                 ========   ========     ========
</TABLE>

Note 6 - Property and Equipment

      Property and equipment consists of the following at December 31:

<TABLE>
<CAPTION>
                                                   2006       2005         2004
                                                ---------  ----------   ----------
<S>                                             <C>        <C>          <C>
Land                                             $ 12,160   $ 12,160     $ 12,160
Buildings and improvements                        185,000    185,000      185,000
Equipment and furnishings                         223,340    223,340      202,400
                                                  420,500    420,500      399,000
Less accumulated depreciation and
   amortization                                   395,220    389,200      377,500
                                                 --------   --------     --------
                                                 $ 25,280   $ 31,300     $ 21,500
                                                 ========   ========     ========
</TABLE>

Note 7 - Intangible Assets

      Intangible assets consist of the following at December 31:

<TABLE>
<CAPTION>
                                                   2006       2005         2004
                                                ---------  ----------   ----------
<S>                                             <C>        <C>          <C>
Intangible assets                                $617,297   $454,273     $277,425
Less: Accumulated amortization                     89,418     48,566       19,797
                                                 --------   --------     --------

Intangible assets, net                           $527,829   $405,707     $257,628
                                                 ========   ========     ========
</TABLE>


                                      F-15

<PAGE>

Note 8 - Long-Term Debt

      Long-term debt consists of the following at December 31:

                                          2006          2005           2004
                                      -----------   -----------    -----------
    6% convertible promissory
       notes payable (A)              $        --   $   700,000    $   700,000
    ANVAR advances (B)                         --            --             --
    7% convertible promissory
       notes payable (C)                       --     1,600,000      1,100,000
    7% non-convertible
       promissory notes payable (D)     2,700,000            --             --
                                               --     2,300,000      1,800,000
    Less embedded derivative                   --      (998,814)      (808,850)
                                      -----------   -----------    -----------
                                      $ 2,700,000   $ 1,301,186    $   991,150
                                      ===========   ===========    ===========

(A)   On March 25, 2002 the holders of the 6% convertible promissory notes
      payable (the "6% Notes") agreed to extend the due date from December 31,
      2002 to December 31, 2004 and on March 1, 2004 agreed to extend the due
      date to December 31, 2006. On January 23rd, 2006, the note holders agreed
      to extend the due date from December 31, 2006 to December 31, 2008. The 6%
      Notes were convertible at any time, at a rate of $.045, at the holder's
      option, subject to Company approval. The 6% Notes were not affected by the
      reverse stock split on December 23, 2002. Interest on the 6% Notes is
      payable annually, at the Company's option, either in cash or common stock
      of the Company. The Company sold the 6% Notes in the aggregate principal
      amount of $3,000,000 to "accredited investors" during year 2000 through a
      private placement intended to be exempt from registration pursuant to the
      provisions of Regulation D of the Securities Act of 1933. A portion of the
      proceeds, $1,000,000, had been held in an escrow account pending the
      Company's issuance of all of the required regulatory documents and the
      listing of the Company's common stock for trading on The NASDAQ Stock
      Market. On June 26, 2003, the money held in the escrow account was
      returned to the note holders. Since the $1,000,000 proceeds were never
      used by the Company, but always maintained in the escrow account, the
      Company wrote off the prior years' accrued interest of $179,836 and the
      accrued issuance costs of $80,000 associated with these 6% Notes resulting
      in a benefit of $259,836, which was recorded as forgiveness of debt in the
      consolidated statements of operations.

      On December 20, 2004, the Company approved requests from certain holders
      of 6% Notes for the conversion of approximately $336,000 of interest into
      shares of the Company's common stock. As a result of the conversion, the
      Company charged approximately $336,000 to accrued interest for the year
      then ended December 31, 2004 based on the beneficial conversion feature of
      these 6% notes. The conversion took place at the rate of $10 per share
      using a conversion rate utilizing the average closing price of the
      Company's common stock for the 20 trading days immediately preceding the
      conversion.

      Pursuant to an agreement dated December 20, 2006 with each of the note
      holders, all of these 6% convertible promissory notes payable were
      converted to 7% non-convertible promissory notes payable. (See Note 8(D)).

(B)   These non interest bearing advances represent funds provided to one of
      Company's European Subsidiaries by ANVAR, an agency of the French
      government that finances or subsidizes certain "credible" research and
      development projects. If the research does not result in a commercially
      feasible product and certain other conditions are met, the subsidiary will
      not have to pay some or all of the advances.


                                      F-16

<PAGE>

Note 8 - Long-Term Debt - continued

      During the third quarter of 2004, notes of $297,800 were written off by
      ANVAR under the terms of their research and development agreement upon the
      determination that certain research will not result in a commercially
      feasible product.

(C)   The Company 7% convertible promissory notes payable (the "7% Notes") are
      due December 31, 2006. The holder or holders of 7% Notes (subject to
      Company approval and consent) may at any time, convert the principal
      amount of the 7% Notes into shares of the Corporation's common stock
      ranking pari passu at the conversion ratio shall be obtained by utilizing
      the average closing sale price of such shares in the over-the-counter
      market for the 20 trading days immediately preceding.

      The Company may, at any time, prepay in whole or in part the principal
      amount, plus accrued interest to the date of prepayment, of all
      outstanding 7% Notes, upon 30 days' written notice by certified or
      registered mail to the registered owners of all outstanding 7% Notes. Such
      payment shall be made either in cash or in shares of the Company's common
      stock in the Company's sole discretion at the conversion ratio which shall
      be obtained by utilizing the average closing sale price of such shares in
      the over-the-counter market for the 20 trading days immediately preceding.

      During December 2003 through February 2004, the Company sold 7% Notes in
      the aggregate principal amount of $850,000 to "accredited investors"
      through a private placement intended to be exempt from registration
      pursuant to the provisions of Regulation D of the Securities Act of 1933.
      At December 31, 2003 the Company had received approximately $560,000, of
      which approximately $135,000 was received as stockholder advances during
      2002 and approximately $425,000 during 2003, and approximately an
      additional $290,000 during February 2004.

      From February to July 2004, the Company sold an additional $350,000 under
      the new subscription for $350,000 of 7% convertible promissory notes
      payable (the "7% Notes"). In further, during December 2004, the Company
      sold to an accredited investor an additional 7% Notes in the aggregate
      principal amount of $300,000. The Company will pay a 7% commission on
      $650,000, which was sold during 2004.

      A conversion took place on December 2004 for $100,000 note at the rate of
      $10 per share using a conversion rate utilizing the average closing price
      of the Company's common stock for the 20 trading days immediately
      preceding the conversion.

      During January 2005 the Company received $300,000 in connection with the
      subscription of the 7% Notes sold on December 2004. During September 2005,
      the Company sold to an accredited investor an additional $200,000 of the
      7% Notes. The Company will pay a 7% commission on $200.000, which was sold
      in September 2005. At December 31, 2005 the Company had outstanding a
      total of $1,600,000 relating to the 7% Notes.

      On February 10, 2006 the holders of the 7% Notes agreed to extend the due
      date from December 31, 2006 to December 31, 2008.

      Pursuant to an agreement dated December 20, 2006 with all of the note
      holders, all of these 7% convertible promissory notes payable were
      converted to 7% non-convertible promissory notes payable. (See Note 8(D)).

(D)   The 7% notes described above contained a feature that permitted the
      Company to pay the note with either cash or unregistered shares of the
      Company's common stock. In the case of payment in shares of common stock,
      the conversion of debt to equity was to be determined using the average of
      the twenty previous days stock price in the over-the counter (OTC) market.
      That feature constitutes an embedded derivative that is substantially
      equivalent to a "put" option. Such a derivative is required to be
      accounted for at fair value on the balance sheet, with changes in fair
      value included in earnings.

      The Company has valued the embedded derivative portion of the 7% notes
      (which is not designated as a hedge) using a fair value calculation that
      takes into account the stock price at each reporting date; the historic
      volatility of the stock price in the OTC market; and the remaining terms
      and interest rates of the notes (Black-Scholes method).


                                      F-17

<PAGE>

Note 8 - Long-Term Debt - continued

      The following table summarizes the components of long-term debt based on
      this accounting treatment:

<TABLE>
<CAPTION>
                                                  2006          2005          2004
                                              -----------   -----------   -----------
<S>                                           <C>           <C>           <C>
   6% convertible promissory  notes payable   $   700,000    $  700,000    $  700,000
                                              -----------    ----------    ----------

7% convertible promissory notes payable:
   Intrinsic value portion                        813,548       601,186       291,150
   Fair value portion                           1,321,195       416,419       114,484
                                              -----------    ----------    ----------
                                                2,134,743     1,017,605       405,634
                                              -----------    ----------    ----------

   Total                                        2,834,743     1,717,605     1,105,634
                                              -----------    ----------    ----------

   Conversion to non-convertible notes         (2,834,743)           --            --

   7% non-convertible promissory notes
      payable                                   2,700,000            --            --
                                              -----------    ----------    ----------

   Total                                      $ 2,700,000    $1,717,605    $1,105,634
                                              ===========    ==========    ==========
</TABLE>

      The unrealized gain or (loss) attributable to changes in the fair value
      portion occurred as follows:

<TABLE>
<S>                                             <C>           <C>            <C>
   Quarter ended March 31                       $   3,897     $ (71,981)     $437,643
   Quarter ended June 30                         (245,542)        5,332       111,179
   Quarter ended September 30                    (436,519)     (106,639)      173,844
   Quarter ended December 31                      (38,975)       61,318       (28,300)
                                                ---------     ---------      --------

   Total annual unrealized gain (loss)           (717,138)     (111,971)      694,366

   Cumulative unrealized gain (loss)             (134,743)      582,395       694,366
                                                ---------     ---------      --------

Net unrealized and realized gain (loss)
   Included in earnings                         $(582,395)    $(111,971)     $694,366
                                                =========     =========      ========
</TABLE>

      The cumulative unrealized loss of $134,743 was written off on December 31,
      2006 upon conversion of the 6% and 7% convertible notes to 7%
      non-convertible notes.

(E)   The Company issue, the new 7% non-convertible promissory notes payable
      (the "7% Non-Convertible Promissory Notes") in the aggregate principal
      amount of $2,700,000 to "accredited investors" in December 2006 through a
      private placement intended to be exempt from registration pursuant to the
      provisions of Regulation D of the Securities Act of 1933.

      The Company's 7% Non-Convertible Promissory Notes are due on December 31,
      2009. The Company may at any time at it sole option, prepay in whole or in
      part the principal amount without


                                      F-18

<PAGE>

Note 8 - Long-Term Debt - continued

      penalty,  plus  accrued  interest  to  the  date  of  prepayment,  of  all
      outstanding 7%  Non-Convertible  Promissory  Notes,  upon 30 days' written
      notice by certified or registered mail to the registered holder or holders
      of all outstanding 7% Non-Convertible  Promissory Notes. Such notice shall
      be mailed to Note holders at their address last appearing on the Company's
      books.  All payments  related to the 7%  Non-Convertible  Promissory Notes
      shall be made to holder or holders in United States funds.

      During  December  2006,  the  Company  converted  all of the  existing  6%
      convertible  promissory notes payable and 7% convertible  promissory notes
      payable  together  with the  $400,000  received  during  2006 in the total
      aggregate principal amount of $2,700,000 to 7% Non-Convertible  Promissory
      Notes.

      The total aggregate maturities of long-term debt at December 31, 2006 are
      as follows:

                December 31,
                    2007                                             0,00
                    2008                                             0,00
                    2009                                      $ 2,700,000
                                                              -----------

                                                              $ 2,700,000
                                                              ===========

Note 9 - Income Taxes

      At December 31, 2006, the Company had net operating loss carry forwards of
      approximately $12,256,000 available to reduce future Federal taxable
      income, which, if not used, will expire at various dates through December
      31, 2025. These net operating loss carry forwards create a deferred tax
      asset of approximately $4,290,000. There are no other material differences
      between amounts used for financial reporting purposes and tax reporting
      purposes. Since it is more likely than not that the Company will not
      realize a benefit from these net operating loss carry forwards a 100%
      valuation allowance has been recorded to reduce the deferred tax asset to
      its net realizable value.

      One of the Company's European wholly owned subsidiaries has a net
      operating loss of approximately $5,000,000 at December 31, 2004 under
      French tax regulations. Prior to January 1, 2004 these net operating
      losses could be carried forward five years to offset future taxable
      income. After January 1, 2004, these net operating loss carry forwards can
      be carried forward indefinitely to offset future taxable income. This net
      operating loss creates a deferred tax asset of approximately $1,700,000.
      There are no other material differences between amounts used for financial
      reporting purposes and tax reporting purposes. Since it is more likely
      than not that the subsidiary will not realize a benefit from these net
      operating losses carry forwards a 100% valuation allowance has been
      recorded to reduce the deferred tax asset to its net realizable value.

      Income taxes differ from the statutory rate due to the following at
      December 31:

                                             2006         2005         2004
                                          ----------   ----------   ----------
Income tax benefit at 35%                 $ (311,000)  $ (310,000)  $ (221,000)
Utilization of net operating loss
   carry forward                             311,000      310,000      221,000
                                          ----------   ----------   ----------

                                          $       --   $       --   $       --
                                          ==========   ==========   ==========

Note 10 - Stock Option Plan

      In December 21, 2004, the Company  decided to cancel all option  contracts
      and  reissue  new  contracts.  A summary  of the  Company's  stock  option
      activity is as follows for the years ended  December  31,  2006,  2005 and
      2004:


                                      F-19

<PAGE>

Note 10 - Stock Option Plan - continued

                                                      Common Stock
                                              ----------------------------
                                                          Weighted average
                                                 Shares    Exercise Price
                                              ---------   ----------------
          Outstanding, December 31, 2003         34,270         89.88
          Cancelled                             (34,270)
          Granted                               200,000         10.00
          Exercised
          Outstanding, December 31, 2004        200,000        $10.00
          Granted                                    --
          Exercised                                  --
          Outstanding, December 31, 2005        200,000        $10.00
          Granted                                    --
          Exercised                                  --
          Outstanding, December 31, 2006        200,000        $10.00

      The fair value of the option grant is estimated on the date of grant using
      the Black-Scholes option-pricing model. A summary of the Company's stock
      options outstanding is as follows:

                            Options Outstanding            Options Exercisable
                  -------------------------------------   ----------------------
                                 Weighted-
                                  Average     Weighted-                Weighted-
                                 Remaining     Average                  Average
                    Number      Contractual   Exercise      Number     Exercise
Exercise Prices   Outstanding      Life         Price     Exercisable    Price
---------------   -----------   -----------   ---------   -----------  ---------
    $ 10.00         200,000        3.00        $ 10.00      200,000     $ 10.00

Note 11 - Segment and Geographic Information

      Information about the Company's assets and its operations in different
      geographic locations at December 31, 2006, 2005 and 2004 is shown below
      pursuant to the provisions of SFAS No. 131, "Disclosures about Segments of
      an Enterprise and Related Information."

      The following shows information about the Company's foreign operations at
      December 31, 2006, 2005 and 2004:

                                        2006          2005         2004
                                     -----------   -----------   ---------
          Net Sales:
          France                     $   182,800   $   152,000   $ 171,000
          Other European countries       139,500       113,900     108,200
          Others                          85,905        50,300      72,300
                                     -----------   -----------   ---------

                                     $   408,205   $   316,200   $ 351,500
                                     ===========   ===========   =========
          Total Assets:
          United States              $   905,418   $   714,610   $ 668,208
          France                         419,200       361,200     282,100
                                     -----------   -----------   ---------

                                     $ 1,324,618   $ 1,075,810   $ 950,308
                                     ===========   ===========   =========

Note 12 - Related Party

      The Company has a consulting agreement with its Chairman and President in
      which he earns $150,000 annually. The agreement expired in August 2005 and
      was renewed for an additional three years in September 2005. At December
      31, 2006, 2005 and 2004 the Company owed this


                                      F-20

<PAGE>

Note 12 - Related Party - continued

      individual an aggregate of $940,937, $758,935 and $497,758, respectively,
      of which $750,000, $600,000 and $412,500, respectively relate to the
      consulting agreement, the balance of $189,117, $157,115 and $83,438,
      respectively relate to un-reimbursed travel expenses and $1,820 relate to
      start-up costs. In the year ended December 31, 2006, to help the Company's
      cash position, the president has deferred receipt of any cash compensation
      for 2006 pursuant to his consulting agreement.

Note 13 - Commitments and Contingencies

      The Company rents certain office space under an operating lease expiring
      on April 30, 2004, with an automatic renewal of three years. The lease has
      been renewed for the three years ending April 30, 2007. This agreement is
      transferable and can be cancelled with six months notice. The company is
      currently in negotiations with the landlord for an extension of one to
      three years at the same rental amounts. Rent expenses were for the years
      ended December 31, 2006 approximately $58,400* and for the year ended
      December 31, 2005 approximately $58,000* and for the year ended December
      31, 2004 approximately $55,200*.

      At December 31, 2006, total minimum rentals under noncancellable operating
      leases with an initial or remaining term lease term of one year or more
      are as follows:

                       Year Ending
                       December 31:
                       ------------
                           2007                    17,333
                                                 --------
                                                 $ 17,333
                                                 ========

      * The Euro to Dollar conversions are based upon an average conversion rate
      of $1.27 to (euro)1.00 for 2006, $1.26 to (euro)1.00 for 2005 and $ 1.20
      to (euro)1.00 for 2004. This is an average estimated over the periods
      indicated and is subject to fluctuation during such periods.

Note 14- Restated Financial Statements

      The Company historically categorized its convertible debt as liabilities.
      Upon further review of FAS 133, it was determined that the convertible
      debt contains an embedded derivative that needs to be separately stated
      and adjusted periodically for its fair market value. The restatements
      related to the embedded derivatives have changed the amounts presented in
      the Company's statements of operations and balance sheets for the periods
      presented (See Note 8 (D) for a summary of the effect on the statements).
      In addition the Company has determined that its previous correction of an
      error related to the capitalization of patent costs in the amount of
      $152,472 was not properly presented. The capitalized patent costs of
      $152,472 were incurred in 2004 and related to consulting and professional
      fees paid to various patent attorneys related to world-wide patent
      applications or litigation on existing patents. The Company previously
      separately stated (in the statement of operations) a separate line item
      for recapitalization of patent costs below loss from operations. This
      activity should have been presented together with the other activity in
      2004 for consulting and professional fees and not presented on a separate
      financial statement line item. The Company has also restated its financial
      statements for the years ended December 31, 2006, 2005 and 2004 to record
      the fair value of the embedded derivative attached to the convertible
      debt.


                                      F-21

<PAGE>

Note 14- Restated Financial Statements - continued

         A summary of the effects of the restatement for each of the fiscal
years ended December 31, are as follows:

<TABLE>
<CAPTION>
                                      2006                 2005                2004
<S>                           <C>                 <C>                 <C>

Balance Sheet:

Long Term Debt                $      2,700,000    $      2,300,000    $      1,800,000

As restated                   $      2,700,000    $      1,301,186    $        991,150

Difference                    $             --    $        998,814    $        808,850

Fair Value of Embedded

Derivatives                   $             --    $             --    $             --

As Restated                   $             --    $        416,419    $        991,150

Difference                    $             --    $        416,419    $        991,150

Stockholders' Deficiency      $     (3,362,167)   $     (2,851,949)   $     (1,974,348)

As restated                   $     (3,362,167)   $     (2,269,554)   $     (1,279,982)

Difference                    $             --    $        582,395    $        694,366

Statement of Operations:

Consulting and Professional   $             --    $             --    $        261,255

As Restated                   $             --    $             --    $        108,783

Difference                    $             --    $             --    $       (152,472)

Gain (Loss) on Embedded

Derivatives                   $             --    $             --    $             --

As Restated                   $       (582,395)   $       (111,971)   $        694,366

Difference                    $       (582,395)   $       (111,971)   $        694,366

Net (Loss) Income             $       (891,030)   $       (885,787)   $       (496,150)

As restated                   $     (1,473,425)   $       (997,758)   $        198,216

Difference                    $       (582,395)   $       (111,971)   $       (694,366)

Income (loss) per share       $           (.08)   $           (.08)   $           (.04)

As restated                   $           (.13)   $           (.09)   $            .02

Difference                    $           (.05)   $           (.01)   $            .06
</TABLE>

                                      F-22
<PAGE>



      A summary of the effects of the restatement for each of the fiscal
      quarters are as follows:
<TABLE>
<CAPTION>
                                      Three Months Ended   Three Months Ended   Three Months Ended   Three Months Ended
                                        March 31, 2006       June 30, 2006      September 30, 2006    December 31, 2006
                                      ------------------   ------------------   ------------------   ------------------
<S>                                        <C>               <C>                   <C>                <C>
Statement Of Operations
Gain/Loss on Embedded
Derivatives                                          --                    --                   --                   --

As restated                                $      3,897      $       (245,542)     $      (436,519)   $          95,768

Difference                                        3,897              (245,542)            (436,519)              95,768

Income (Loss) per share                    $      (0.02)     $          (0.02)     $         (0.02)   $           (0.02)

As restated                                $      (0.02)     $          (0.04)     $         (0.05)   $           (0.02)

Difference                                 $        --       $          (0.02)     $         (0.03)   $              --

Balance Sheet
Long Term Debt - Net of
Embedded Derivatives                          2,450,000             2,625,600            2,630,700            2,700,000

As Restated                                   1,838,399             2,424,692            2,765,443            2,700,000

Difference                                      611,601               200,908             (134,743)                  --
Fair Value of Embedded
Derivatives                                          --                    --                   --                   --

As Restated                                     831,276               244,983              (95,368)                  --

Difference                                      831,276               244,983              (95,368)                  --

Stockholders' Deficiency                     (3,009,986)           (3,217,624)          (3,352,766)          (3,362,167)

As Restated                                  (2,423,693)           (2,876,873)          (3,448,534)          (3,362,167)

Difference                                 $    586,293      $        340,751      $       (95,768)                  --
</TABLE>


      A summary of the effects of the restatement for each of the fiscal
      quarters are as follows:

<TABLE>
<CAPTION>
                                      Three Months Ended   Three Months Ended   Three Months Ended   Three Months Ended
                                        March 31, 2005       June 30, 2005      September 30, 2005    December 31, 2005
                                      ------------------   ------------------   ------------------   ------------------
<S>                                       <C>                <C>                   <C>                <C>
Statement Of Operations
Gain/Loss on Embedded
Derivatives                                          --                    --                   --                   --

As restated                               $     (71,981)     $          5,332      $      (106,639)   $          61,318

Difference                                      (71,981)                5,332             (106,639)              61,318

Income (Loss) per share                   $       (0.02)     $          (0.02)     $         (0.02)   $           (0.02)

As restated                               $       (0.02)     $          (0.02)     $         (0.03)   $           (0.02)

Difference                                $          --      $             --      $         (0.01)   $              --

Balance Sheet
Long Term Debt - Net of
Embedded Derivatives                          2,100,000             2,100,000            2,300,000            2,300,000

As Restated                                   1,188,040             1,188,040            1,301,186            1,301,186

Difference                                      911,960               911,960              998,814              998,814
Fair Value of Embedded
Derivatives                                          --                    --                   --                   --

As Restated                                     456,400               461,740              355,101              416,419

Difference                                      456,400               461,740              355,101              416,419

Stockholders' Deficiency                     (2,268,492)           (2,436,883)          (2,725,580)          (2,851,949)

As Restated                                  (1,646,107)           (1,809,166)          (2,204,502)          (2,269,553)

Difference                                $     622,385      $        627,717      $       521,078    $         582,396
</TABLE>


<TABLE>
<CAPTION>
                                      Three Months Ended   Three Months Ended   Three Months Ended   Three Months Ended
                                        March 31, 2004       June 30, 2004      September 30, 2004    December 31, 2004
                                      ------------------   ------------------   ------------------   ------------------
<S>                                   <C>                    <C>                   <C>               <C>
Statement Of Operations
Gain/Loss on Embedded
Derivatives                                          --                    --                   --                   --

As restated                           $         437,643      $        111,179      $       173,844    $         (28,300)

Difference                                      437,643               111,179              173,844              (28,300)

Restated Capitalization of
Intangible Assets                                38,118                38,118               38,118               38,118

Consulting and Professional                      81,400                57,934               64,518               57,403

As restated                                      43,282                19,816               26,400               19,285

Difference                                      (38,118)              (38,118)             (38,118)             (38,118)

As restated                                          --                    --                   --                   --

Difference                                       38,118                38,118               38,118               38,118

Income (Loss) per share               $           (0.02)     $          (0.02)     $         (0.02)   $           (0.02)

As restated                           $            0.02      $          (0.01)     $          0.03    $           (0.02)

Difference                            $            0.04      $           0.01      $          0.05    $              --

Balance Sheet
Long Term Debt - Net of
Embedded Derivatives                          1,879,800             1,878,300            1,930,000            1,800,000

As Restated                                   1,070,950             1,069,450            1,121,150              991,150

Difference                                      808,850               808,850              808,850              808,850
Fair Value of Embedded
Derivatives                                          --                    --                   --                   --

As Restated                                     371,207               260,028               86,184              114,484

Difference                                      371,207               260,028               86,184              114,484

Stockholders' Deficiency                     (2,292,835)           (2,549,123)          (2,504,328)          (1,974,348)

As Restated                                  (1,817,074)           (1,924,065)          (1,667,308)          (1,279,982)

Difference                            $        (475,761)     $       (625,058)     $      (837,020)   $        (694,366)
</TABLE>

                                      F-23
<PAGE>

Note 15 - Selected Quarterly Financial Data - (Unaudited) (Restated)

      The results of operations by quarter for the years ended December 31, 2006
      and 2005 have been restated and are presented below (See note 14)
      (unaudited):

<TABLE>
<CAPTION>
                                      Three Months     Three Months      Three Months        Three Months
                                         Ended            Ended             Ended                Ended
                                     March 31, 2006   June 30, 2006   September 30, 2006   December 31, 2006
                                     --------------   -------------   ------------------   -----------------
<S>                                  <C>              <C>             <C>                  <C>
Net sales                            $       70,900   $      91,800   $           88,800   $         156,705

Cost of sales                                47,800          64,200               75,100             (65,856)

   Gross Profit                              23,100          27,600               13,700             222,561
                                     --------------   -------------   ------------------   -----------------

      Total Operating Expenses              165,910         149,491              145,236              96,065
                                     --------------   -------------   ------------------   -----------------

   Loss From Operations                    (142,810)       (121,891)            (131,536)            126,496
                                     --------------   -------------   ------------------   -----------------

      Total Other Income (Expense)          (47,711)       (296,070)            (480,634)           (379,269)
                                     --------------   -------------   ------------------   -----------------

Net (Loss) Income                          (190,521)       (417,961)            (612,170)           (252,773)

Other Comprehensive Income (Loss):

   Foreign translation gain (loss)           27,517          (9,184)               1,223             (91,019)
   Unrealized gain on marketable
      securities                              8,765         (25,935)              39,286             430,159
                                     --------------   -------------   ------------------   -----------------

Comprehensive (Loss) Income          $     (154,239)  $    (453,080)  $         (571,661)  $          86,367
                                     ==============   =============   ==================   =================
</TABLE>

<TABLE>
<CAPTION>
                                      Three Months    Three Months       Three Months        Three Months
                                         Ended            Ended             Ended                Ended
                                     March 31, 2005   June 30, 2005   September 30, 2005   December 31, 2005
                                     --------------   -------------   ------------------   -----------------
<S>                                  <C>              <C>             <C>                  <C>
Net sales                            $       77,000   $      85,400   $           75,100   $          78,700

Cost of sales                                49,500          63,600               46,400              62,900

   Gross Profit                              27,500          21,800               28,700              15,800
                                     --------------   -------------   ------------------   -----------------

      Total Operating Expenses              200,633         169,873              152,042             295,126
                                     --------------   -------------   ------------------   -----------------

   Loss From Operations                    (173,133)       (148,073)            (123,342)           (279,326)
                                     --------------   -------------   ------------------   -----------------

      Total Other Income (Expense)         (108,731)        (11,208)            (185,348)             31,404
                                     --------------   -------------   ------------------   -----------------

Net (Loss) Income                          (281,864)       (159,281)            (308,690)           (247,922)

Other Comprehensive Income (Loss):

   Foreign translation gain (loss)          107,583           7,308             (102,496)             49,819

   Unrealized gain on marketable
      securities                            (39,372)        (11,086)              15,850             (19,420)
                                     --------------   -------------   ------------------   -----------------

Comprehensive (Loss) Income          $     (213,653)  $    (163,059)  $         (395,336)  $        (217,523)
                                     ==============   =============   ==================   =================
</TABLE>

                                      F-24

<PAGE>

Note 15 - Selected Quarterly Financial Data - (Unaudited) (Restated) - continued

<TABLE>
<CAPTION>
                                      Three Months    Three Months       Three Months        Three Months
                                         Ended           Ended              Ended                Ended
                                     March 31, 2004   June 30, 2004   September 30, 2004   December 31, 2004
                                     --------------   -------------   ------------------   -----------------
<S>                                  <C>              <C>             <C>                  <C>
Net sales                            $      106,900   $      96,200   $           45,400   $         103,100

Cost of sales                                72,300          38,500               21,400              39,900

   Gross Profit                              34,600          57,700               24,000              63,200
                                     --------------   -------------   ------------------   -----------------

      Total Operating Expenses              188,271         247,179              112,872             193,377
                                     --------------   -------------   ------------------   -----------------

   Loss From Operations                    (153,671)       (189,479)             (88,872)           (130,177)
                                     --------------   -------------   ------------------   -----------------

      Total Other Income (Expense)          413,767          69,204              422,045            (144,601)
                                     --------------   -------------   ------------------   -----------------

Net (Loss) Income                           260,096        (120,275)             333,173            (274,778)

Other Comprehensive Income (Loss):

   Foreign translation gain (loss)           32,015          (1,541)               5,623                 277
   Unrealized gain (loss) on
      marketable securities                   7,836            (148)             (29,539)             61,473
                                     --------------   -------------   ------------------   -----------------

Comprehensive (Loss) Income          $      299,947   $    (121,964)  $          309,257   $        (213,028)
                                     ==============   =============   ==================   =================
</TABLE>

                                      F-25

<PAGE>

9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

There were no disagreements with accountants on accounting and financial
disclosure. For discussion regarding changes of our independent accountants,
please see our Annual Report on Form 10-KSB for the year ended December 31, 2003
and 2004 and our previously filed Form 8-K.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. We conducted an evaluation
under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer of the effectiveness of
the design and operation of our disclosure controls and procedures. The term
"disclosure controls and procedures," as defined in Rules 13a-15(e) and
15d-15(e) under the Securities and Exchange Act of 1934, as amended ("Exchange
Act"), means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by the company in the reports
it files or submits 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. Disclosure controls and procedures also include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the company's
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate, to allow timely
decisions regarding required disclosure. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded as of December 31, 2006
that our disclosure controls and procedures were not effective at the reasonable
assurance level due to the material weaknesses discussed immediately below.

      A material weakness is defined by the Public Company Accounting Oversight
Board's Audit Standard No. 2 as being a significant deficiency, or combination
of significant deficiencies, that results in more than a remote likelihood that
a material misstatement of the financial statements would not be prevented or
detected. A significant deficiency is a control deficiency, or combination of
control deficiencies, that adversely affects the company's ability to initiate,
authorize, record, process, or report external financial data reliably in
accordance with generally accepted accounting principles such that there is more
than a remote likelihood that a misstatement of the company's annual or interim
financial statements that is more than inconsequential will not be prevented or
detected.

      Management has identified the following material weaknesses which caused
management to conclude that, as of December 31, 2006, our disclosure controls
and procedures were not effective at the reasonable assurance level:

      During July of 2007, in conjunction with the review and comments received
from the staff of the Securities and Exchange Commission (the "Staff") on our
2005 form 10K/A, management reviewed during July of 2007, our methodologies
relating to (a) our accounting for our previous correction of an error related
to the capitalization of patent costs, and (b) our method for accounting for the
recording of the fair value of the embedded derivative attached to our
convertible debt. As a result of this review, management concluded, during July
of 2007, that our accounting methodologies were not in accordance with generally
accepted accounting principles and that our consolidated financial statements
for the years ended December 31, 2006, 2005, 2004 and first quarterly period in
the year ended December 31, 2007, had been misstated. Based upon this
conclusion, our Company decided, on July 20, 2007, to restate our consolidated
financial statements as of and for the years ended December 31, 2006, 2005, 2004
and for the first quarterly period in the year ended December 31, 2007, to
reflect the corrections in our accounting methodologies.

      Management evaluated, during July of 2007 and as of December 31, 2006,
the impact of this restatement on our assessment of our disclosure controls and
procedures and concluded, in the third quarter of 2007 and as of December 31,
2006, that the control deficiency that resulted in the incorrect accounting
methodologies pertaining to (a) our accounting for our previous correction of an
error related to the capitalization of the patent costs, and (b) our method for
accounting for the recording of the fair value of the embedded derivative
attached to our convertible debt, represented a material weakness.

REMEDIATION OF MATERIAL WEAKNESSES

      To remediate the material weaknesses in our disclosure controls and
procedures identified above, we have done the following subsequent to December
31, 2006, in the periods specified below, which correspond to the two material
weaknesses identified above:

                                       18

<PAGE>

      1. We have revised and corrected our accounting for embedded derivatives
in our convertible debt as well as financial statements presentation for the
restatement of intangible assets.

      We historically categorized our convertible debt as liabilities. Upon
further review of FAS 133, it was determined that the convertible debt contains
an embedded derivative that needs to be separately stated and adjusted
periodically for its fair market value. The restatements related to the embedded
derivatives will change the amounts presented in our statements of operations
and balance sheets for the periods set forth above. In addition we have
determined pursuant Financial Accounting Standards Board Statement No. 154 that
its previous correction of an error related to the capitalization of patent
costs was not properly presented. We previously separately stated in the
statements of the operations a separate line item for recapitalization of patent
costs which should have been reported as a prior period adjustment by restating
the prior period financial statements.

      We began using this new methodology for the year ended December 31, 2006
and all periods included in this report now reflect this change. In addition,
this methodology applies to all periods subsequent to December 31, 2006.

      In addition, the management retained a professional who has the
appropriate background and experience in our industry as well as with publicly
treaded companies, to counsel the company's Chief Executive Officer on the
proper implementation of generally accepted accounting principles.

      Management believes that the remediation described in item 1 immediately
above has remediated the corresponding material weakness also described above.
Management is unable, however, to estimate our capital or other expenditures
associated with this remediation.

      2. Management believes that the procedures we implemented in connection
with the restatement of our financial statements, and the circumstances
surrounding the restatement, have led to improved and expedited financial
reporting processes which we expect will better enable us to timely file our
periodic reports. We intend, in 2007, to implement enhancements to our financial
reporting processes, including increased training of our finance and accounting
staff regarding financial reporting requirements and the evaluation and further
implementation of automated procedures within our MIS financial reporting
system.

      In addition, as noted above, we have retained a professional with many
years of experience in our industry as well as with publicly traded companies;
we also retained additional professional accounting consultants to assist us in
preparing our financial statements and to advise us regarding certain accounting
matters.

      Management expects that the remediation described in item 2 above will
remediate the corresponding material weakness also described above by December
31, 2007. Management is unable, however, to estimate our capital or other
expenditures associated with this remediation.

(b) Changes in Internal Control. The change noted above, is the only change
during our most recently completed fiscal year that has materially affected or
is reasonably likely to materially affect, our internal control over financial
reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

(c) Management's Report on Internal Control over Financial Reporting. Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations
adopted pursuant thereto, the Company included a report of management's
assessment of the effectiveness of its internal control over financial reporting
as of December 31, 2006 as part of this amended report. The Company's
independent registered public accounting firm also attested to, and reported on,
management's assessment of the effectiveness of internal control over financial
reporting as of December 31, 2006. Management's report and the independent
registered public accounting firm's attestation report are included in Item 8
hereof, of this report and are incorporated herein by reference.

Item 9B. Other Information.

None.


                                       19

<PAGE>

                                    PART III

Item 10. Directors, Executive Officers, Promoters and Control Persons

Directors and Executive Officers

The following persons are our executive officers and directors:

Name                      Age            Positions with our Company
--------------         ---------         --------------------------------------
Nasser Nassiri            43             President, Chief Executive Officer and
                                         Chairman of the Board
Yuhko Grossman            42             Secretary, Treasurer and Director
Jean Darondel             64             Director

Mr. Nasser Nassiri has been the President, Chief Executive Officer and Chairman
of the Board of our company since 1997. Mr. Nassiri is a Europe-based financier.
Since 1990, he has been a private investor and financial advisor to several
European financial and portfolio institutions, as well as group investment
companies and pharmaceutical businesses in the Middle East. From 1983 to 1987,
Mr. Nassiri was a director of Prak Management, a privately-held Middle
East-based oil and gas holding company.

Ms. Yuhko Grossman is our Secretary, Treasurer and a director. Ms. Grossman is
currently a director of Ono Trading Company of Canada Ltd., a large wholesale
company dealing in industrial safety equipment, and a director of Ono Import
Export Company Ltd., an international trading company. Previously, Ms. Grossman
spent over ten years working with the largest retail pharmaceutical chain in
Canada, where her responsibilities included the restructuring and implementation
of new management and information systems following corporate buy-outs. Ms.
Grossman holds degrees from Simon Fraser University in Modern European History,
Political Science and Physics.

Dr. Jean Dardonel is a member of our board of directors. Dr. Jean Darondel was
co-founder of Inoteb and was its President General until March 18, 2003. He is
an active member of different scientific pilotage committees programs. Dr.
Darondel is known for his research in the field of veterinary medicine and
business development in the medical/pharmaceutical fields.

Board of Directors

All of our directors serve until the next annual meeting of stockholders or
until their successors are duly elected and qualified. All of our officers serve
at the discretion of the board of directors. There are no family relationships
among the directors and executive officers.

Scientific Advisory Board

We also have a scientific advisory board to aid us in the strategic development
of our products. The following are the members of the scientific advisory board:

Dr. Yves Cirotteau is an orthopedic and traumatologic surgeon. Dr. Yves
Cirotteau is Medical Scientific Director of our French subsidiary. He is a
member of the SOFCOT (French Orthopaedic and Traumatologic Society), Hip and
Knee Society and AAAS (American Association for Advancement of Science). Dr.
Cirotteau is the principal inventor of Biocoral(R) applications in curative and
preventive treatments of osteoporotic fractures and is involved in its
development.

Professor L'Hocine Yahia is a full professor at the mechanical department of
engineering of the polytechnic school of Montreal (l'Ecole Polytechnique de
Montreal) where he is in charge of research group of biomechanics and
biomaterials (Groupe de recherche en biomecanique et biomateriaux "GRBB"). He is
also the professor associated with the hospital complex with Montreal (Centre
Hospitalier de Montreal "CHUM"). Professor Yahia has a distinguished track
record in tissue engineering and advanced biomaterials "Intelligent Materials,
Polymers and Ceramics".

Prof. Jean-Pierre Ouhayoun is a doctor of dental surgery and Professor and
ex-Chairman of the Department of Periodontology at the University Of Paris
School Of Dentistry. He is also Chief of the dental clinic at Garanciere Hotel
Dieu, and is in charge of the research unit at the Orthopedic Research
Laboratory in Paris specializing in bone regeneration.

                                       20

<PAGE>

Dr. Alberto Jussman is a specialist in post-menopausal medicine and the
prevention of osteoporosis and is a consultant to the Laboratoires pour la
Pharmacie et les Devices Medical and teaches at the CHU Bichat-Claude Bernard in
Paris.

Dr. Jean Darondel, a director of our company, is also a member of the scientific
advisory board.

Mr. Roland Schmitthauesler is currently part of the National Center of Blood
Transfusion in France. He is the former Chief of the Laboratory of the Plasma
Unit at the CRTS in Strasburg. Mr. Roland Schmitthauesler has been associated
with the development of Biocoral's autologous glue since 1991.

Dr. Genevieve Guillemin is a scientist and director of CNRS (French National
Center of Scientific Research). Dr. Guillemin co-filed the original 1979 patent
for Biocoral(R) and still participates in the development of Biocoral(R).

Prof. Yann Le Petitcorps is a professor at the University of Bordeaux where he
holds a chair in material sciences and heads a research group focused on
engineering and material science which, among other areas, includes metallic and
ceramic structural biomaterials. Prof. Le Petitcorps received his PhD in
material science from the University of Bordeaux in 1985 and, in 2003, received
the Prize of Metallurgy from the French Academy of Science. Prof. Le Petitcorp
supervises a laboratory belonging to the French National Center for Scientific
Research, and conducts research in the field of materials for structural or
biomaterial applications in collaboration with several industrial (dental and
orthopaedic) companies.

Limitation on Liability of Directors

As permitted by Delaware law, our certificate of incorporation includes a
provision which provides that a director shall not be personally liable to us or
our stockholders for monetary damages for a breach of fiduciary duty as a
director, except (i) for any breach of the director's duty of loyalty to us or
our stockholders, (ii) under Section 174 of the General Corporation Law of the
State of Delaware, which prohibits the unlawful payment of dividends or the
unlawful repurchase or redemption of stock, or (iii) for any transaction from
which the director derives an improper personal benefit. This provision is
intended to afford directors protection against and to limit their potential
liability for, monetary damages resulting from suits alleging a breach of duty
of care by a director. As a consequence of this provision, our stockholders will
be unable to recover monetary damages against directors for action taken by them
which may constitute negligence or gross negligence in performance of their
duties unless such conduct falls within one of the foregoing exceptions. The
provision, however, does not alter the applicable standards governing a
director's fiduciary duty and does not eliminate or limit our right, or the
right of any stockholder, to obtain an injunction or any other type of
non-monetary relief in the event of a breach of fiduciary duty. We believe this
provision will assist in securing and retaining qualified persons to serve as
directors.

Compliance With Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors and executive officers, and persons who own more than ten percent of a
registered class of our Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
our Common Stock. Officers, directors and ten-percent stockholders are required
by SEC regulations to furnish us with copies of all Section 16(a) forms they
file. During the fiscal year ended December 31, 2006, no such reports were
submitted to us for review and, based upon this, to our knowledge, all Section
16(a) filing requirements applicable to our officers and directors have been
complied.

Code of Ethics

We have not yet adopted a code of ethics for our company because our management
team currently consists of only three individuals, each of whom is a director
and two of whom are executive officers. Because our management team is small, we
have determined that a formal code is unnecessary at this time.

Item 11. Executive Compensation

Presently, none of our executive officers receive any salary. However, on
September 1, 1997, we entered into a Consulting Agreement with Nasser Nassiri,
our Chairman, pursuant to which Mr. Nassiri serves as our Chairman. The
Agreement, which was for a three year term, provided for base compensation of
$150,000 per annum, reimbursement of certain expenses and for a payment of two
years' compensation thereunder in the event of a change in control of the
Company. The agreement was renewed, on the same terms, in 2000 for two years
until August 30, 2002 and has been renewed during 2002 for an additional three
years until August 2005 and has been renewed in August 2005 for an additional
three year until August 2008. In the year ended December 31, 2006, to help the
Company's cash position, the president has deferred receipt of any cash
compensation for 2006 pursuant to his consulting agreement.

                                       21

<PAGE>

Stock Option Plan

On May 4, 1992, we adopted a stock option plan which originally authorized the
granting of options to purchase up to 2,000,000 shares of common stock. On April
16, 2001, this was increased to 20,000,000 shares.

As of December 21, 2004, we cancelled all of the outstanding options and
replaced them with options having substantially similar terms and conditions,
but with an exercise price of $10.00 per share, in the following amounts:

                Nasser Nassiri                 100,000
                Jean Darondel                   50,000
                Yuhko Grossman                  50,000

Aggregate Option Exercises and Fiscal Year-End Option Values

The following table lists the number of securities underlying unexercised
options at December 31, 2006.

<TABLE>
<CAPTION>
                                                          NUMBER OF
                                                          SECURITIES        VALUE OF
                                                          UNDERLYING       UNEXERCISED
                                                         UNEXERCISED       IN-THE-MONEY
                                                           OPTIONS         OPTIONS AT
                             SHARES                       AT FY-END         FY-END
                            ACQUIRED        VALUE        EXERCISABLE/     EXERCISABLE/
          NAME             ON EXERCISE     REALIZED     UNEXERCISABLE     UNEXERCISABLE
-----------------------    -----------     --------     -------------     -------------
<S>                        <C>             <C>          <C>               <C>
Nasser Nassiri ........        --             --          100,000/--       4,400,000/--
Jean Darondel .........        --             --           50,000/--       2,200,000/--
Yuhko Grossman ........        --             --           50,000/--       2,200,000/--
</TABLE>

Director Compensation

Our directors do not receive compensation for their services as directors, but
are reimbursed for travel and all reasonable out-of-pocket expenses incurred in
connection with each board meeting attended or other company services.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information known to us with respect to
the beneficial ownership of our common stock as of March 20, 2007 by:

      o     all persons who are beneficial owners of five percent (5%) or more
            of our common stock;

      o     each of our directors;

      o     each of our named executive officers; and

      o     all current directors and executive officers as a group.

Except as otherwise indicated, and subject to applicable community property
laws, the persons named in the table below have sole voting and investment power
with respect to all shares of common stock held by them. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of common stock subject to
options held by that person that are currently exercisable or exercisable within
60 days of March 20, 2007 are deemed outstanding. Such shares, however, are not
deemed outstanding for the purpose of computing the percentage ownership of any
other person.

                                       22

<PAGE>

<TABLE>
<CAPTION>
                                                                    AMOUNT AND NATURE
                                                                      OF BENEFICIAL
                                                                     OWNERSHIP AS OF        PERCENT OF
NAME AND ADDRESS OF BENEFICIAL                                           March 20,          SHARES IN
OUTSTANDING OWNER                              TITLE OF CLASS              2007              CLASS(5)
--------------------------------------------   --------------       -----------------       ----------
<S>                                            <C>                  <C>                     <C>
Jean Darondel .............................     Common Stock             50,000(1)              *
   38 rue Anatole France,
   92594 Levallois Perret Cedex, France

Yuhko Grossman ............................     Common Stock             50,000(2)              *
   38 rue Anatole France,
   92594 Levallois Perret Cedex, France

Nasser Nassiri ............................     Common Stock            100,000(3)              *
   38 rue Anatole France,
   92594 Levallois Perret Cedex, France

All officers and directors as a group .....     Common Stock            200,000(4)              *
</TABLE>

*- Indicates less than 1%

(1) Includes for Mr. Darondel options to purchase 50,000 shares of common stock,
which are exercisable at $10 per share.

(2) Includes for Ms. Grossman, options to purchase 50,000 shares of common
stock, which are exercisable at $10 per share.

(3) Includes for Mr. Nassiri, options to purchase 100,000 shares of common
stock, which are exercisable at $10 per share.

(4) The issuance of options to the officers and directors were not approved by
our shareholders.

(5) Based upon 11,353,817 shares of common stock outstanding.

       Securities Authorized for Issuance Under Equity Compensation Plans

Other than those listed on the table above, we do not have any equity securities
outstanding or authorized for issuance pursuant to any equity compensation
plans.

Item 13. Certain Relationships and Related Transactions

None.

Item 14. Principal Accountant Fees and Services.

Audit Fees for 2006

Our principal accountant for 2006 is Moore & Associates, Chartered., for
services rendered in connection with the audit of our 2006 consolidated
financial statements, as of the date of this report, we have paid them $12,500.

We paid Moore & Associates, Chartered. approximately $7,500 for services in
connection with the review of our unaudited consolidated financial statements
for filing with our Quarterly Reports on Form 10-Q of March 31, 2006, June 30,
2006 and September 30, 2006.

The auditor of our French subsidiaries for 2006 was Consultaudit. For services
rendered in connection with the audit of our French subsidiaries' 2006 financial
statements, we have not been billed for the fees for this audit.

                                       23

<PAGE>

For services rendered in connection with the review of our French subsidiaries
unaudited financial statements for period ended March 31, 2006, June 30, 2006
and September 30, 2006, Consultaudit has billed us 5,100 Euros (or approximately
$6,500*), which has not yet been paid.

Audit Fees for 2005

Our principal accountant for 2005 is Moore & Associates, Chartered. For services
rendered in connection with the audit of our 2005 consolidated financial
statements, we have paid them $12,500.

The auditor of our French subsidiaries for 2005 was Consultaudit. For services
rendered in connection with the audit of our French subsidiaries' 2005 financial
statements, we have paid them approximately 11,100 euros or approximately
$14,013*).

Audit Fees for 2004

Our principal accountant for 2004 was Shelley International CPA. For services
rendered in connection with the audit of our 2004 consolidated financial
statements and review of the first, second and third quarters of 2005, we paid
Shelley International CPA $23,000. However, our current auditor, Moore &
Associates, chartered, whose report covers our consolidated financial statements
for the fiscal years end December 31, 2006 and 2005, has reaudited these
consolidated financial statements for 2004 which are included in its report for
2006, which is filed herewith.

The auditor of our French subsidiary for 2004 was Consultaudit. For services
rendered in connection with the audit of our French subsidiary's 2004 financial
statements, we paid Consultaudit 10,839.80 Euros (or approximately $13,000*).

* The Euro to Dollar conversions are based upon an average conversion rate of
$1.27 to (euro)1.00 for 2006, $1.26 to (euro)1.00 for 2005 and $ 1.20 to
(euro)1.00 for 2004. This is an average estimated over the periods indicated and
is subject to fluctuation during such periods.

Item 15. Exhibits and Reports on Form 8-K.

(a) Unless otherwise indicated, the following is a list of exhibits filed as a
part of this amended annual report:

<TABLE>
<CAPTION>
Exhibit Number   Description of Document
--------------   -------------------------------------------------------------------------------------------
<S>              <C>
3.1              Certificate of Incorporation, as amended(1)(2)
3.2              By-laws (1)
3.3              Certificate of Amendment to Certificate of Incorporation(4)
3.4              Certificate of Amendment to Certificate of Incorporation(4)
4.1              Form of Company's 3 year 7% Convertible Redeemable Debenture due December 31, 2006(4)
4.2              Form of Option Agreement(3)(4)
4.3              Form of Company's 3 Year 7 Percent Non-Convertible Promissory Note Due December 31, 2009(5)
31               Certification of Nasser Nassiri pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32               Certification of Nasser Nassiri pursuant to Rule 13(a)
</TABLE>

(1) Incorporated by reference to Exhibit 3.1 to the Company's Form 10-SB
Registration Statement filed with the Commission on February 25, 1994, as
amended.

(2) Incorporated by reference from Amendment No.1 to the Company's Form 10-SB
filed with the Commission on April 18, 1994.

(3) Incorporated by reference to the Company's Annual Report on Form 10-KSB
filed April 17, 1998.

(4) Incorporated by reference to Exhibit 4.2 to the Company's Annual Report on
Form 10-KSB/A filed May 19, 2005.

(5) Incorporated by reference to Exhibit 4.3 to the Company's Annual Report on
Form 10-K filed March 30, 2007.

                                       24

<PAGE>

During the fourth quarter of 2006, we filed no current reports on Form 8-K.

On July 24, 2007, we filed Form 8-K; in connection with Item 4.02 Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or Completed
Interim Review.

                                       25

<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this amended report to be signed on our behalf by
the undersigned, thereunto duly authorized, on September 7, 2007.

                                          BIOCORAL, INC

                                          By: /s/ Nasser Nassiri
                                              ------------------
                                              Nasser Nassiri
                                              President, Chief Executive Officer
                                              and Principal Accounting Officer

In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated.

<TABLE>
<CAPTION>
Signature                       Title                                      Date
-----------------------------   ----------------------------------------   ----------------------------
<S>                             <C>                                        <C>
/s/ Nasser Nassiri              President, Chief Executive Officer         September 7, 2007
------------------              and Chairman of the Board of Directors
    Nasser Nassiri              (Principal Executive Officer and
                                Principal Accounting Officer)

/s/ Yuhko Grossman              Secretary, Treasurer and Director          September 7, 2007
------------------
    Yuhko Grossman

/s/ Jean Darondel               Director                                   September 7, 2007
-----------------
    Jean Darondel
</TABLE>

                                       26