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| NEVADA                                                        | 20-5936198                        |
|---------------------------------------------------------------|-----------------------------------|
|                                                          |                              |
| (State or other jurisdiction of incorporation ororganization) | (IRS Employer Identification No.) |

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| Table of Contents                                                                                   |   |   |
|-----------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                |   |   |
| Financial Statements                                                                                |   |   |
|                                                                                                |   |   |
| Consolidated Balance Sheets                                                                         |   | F-1    |
| Consolidated Statements of Operations                                                               |   | F-2    |
| Consolidated Statements of Stockholders’ Equity                                               |   | F-3    |
| Consolidated Statements of Cash Flows                                                               |   | F-4    |
|                                                                                                |   |   |
| Condensed Notes to Consolidated Financial Statements                                                |   | F-5    |
| Organization and Summary of Significant Accounting Policies                                         |   | F-5    |
| Going Concern Assumption                                                                            |   | F-7    |
| Intangible Assets                                                                                   |   | F-8    |
| Contractual Obligations                                                                             |   | F-8    |
| Employee Stock Plan                                                                                 |   | F-10   |
| Discontinued Operations                                                                             |   | F-12   |
| Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations |   | F-13   |
| Item 3 Quantitative and Qualitative Disclosures About Market Risk                                   |   | F-15   |
| Item 4T Controls and Procedures                                                                     |   | F-15   |
| Item 6 Exhibits                                                                                     |   | F-17   |
| Signatures                                                                                          |   | F-18   |

----

Consolidated Balance Sheets

|                                                           |   |        |       |   |         |   |
|----------------------------------------------------------------|--------|-------------|------------|--------|--------------|--------|
|                                                           |   | June 30,    |       |   | December 31, |   |
|                                                           |   | 2009        |       |   | 2008         |   |
|                                                           |   | (Unaudited) |       |   |         |   |
|                                                           |   |        |       |   |         |   |
| ASSETS                                                         |   |        |       |   |         |   |
|                                                           |   |        |       |   |         |   |
| CURRENT ASSETS                                                 |   |        |       |   |         |   |
|                                                           |   |        |       |   |         |   |
| Cash and cash equivalents                                      |   | $           | -          |   |         | $      | - |   |
| Accounts receivables                                           |   |        | -          |   |         |   | - |   |
| Inventory                                                      |   |        | -          |   |         |   | - |   |
| Prepaid Expenses                                               |   |        | -          |   |         |   | - |   |
|                                                           |   |        |       |   |         |   |   |   |
| Total Current Assets                                           |   |        | -          |   |         |   | - |   |
|                                                           |   |        |       |   |         |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT, NET                             |   |        | 328,013    |   |         |   | 328,013 |   |
|                                                           |   |        |       |   |         |   |   |   |
| OTHER ASSETS                                                   |   |        |       |   |         |   |   |   |
|                                                           |   |        |       |   |         |   |   |   |
| Intangible assets, net                                         |   |        | 61,394     |   |         |   | 61,576 |   |
| Property, Plant and Equipment                                  |   |        | -          |   |         |   | - |   |
| Deferred tax asset, net                                        |   |        | -          |   |         |   | - |   |
|                                                           |   |        |       |   |         |   |   |   |
| Total Other Assets                                             |   |        | 61,394     |   |         |   | 61,576 |   |
|                                                           |   |        |       |   |         |   |   |   |
| ASSETS FROM DISCONTINUED OPERATIONS, NET                       |   |        | -          |   |         |   | 1,633,930 |   |
|                                                           |   |        |       |   |         |   |   |   |
| TOTAL ASSETS                                                   |   | $           | 389,407    |   |         | $      | 2,023,519 |   |
|                                                           |   |        |       |   |         |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)           |   |        |       |   |         |   |   |   |
|                                                           |   |        |       |   |         |   |   |   |
| CURRENT LIABILITIES                                            |   |        |       |   |         |   |   |   |
|                                                           |   |        |       |   |         |   |   |   |
| Accounts payable and accrued liabilities                       |   | $           | 366,556    |   |         | $      | 346,196 |   |
| Accounts payable to related parties                            |   |        | 40,000     |   |         |   | - |   |
|                                                           |   |        |       |   |         |   |   |   |
| Total Current Liabilities                                      |   |        | 406,556    |   |         |   | 346,196 |   |
|                                                           |   |        |       |   |         |   |   |   |
| TOTAL LIABILITIES                                              |   |        | 406,556    |   |         |   | 346,196 |   |
|                                                           |   |        |       |   |         |   |   |   |
| STOCKHOLDERS’ EQUITY (DEFICIT)                           |   |        |       |   |         |   |   |   |
|                                                           |   |        |       |   |         |   |   |   |
| Preferred stock - 1,000,000 authorized, $0.001 par value;      |   |        |       |   |         |   |   |   |
| 42,013 and 42,013 issued and outstanding, respectively         |   |        | 42         |   |         |   | 42 |   |
| Common stock - 74,000,000 authorized, $0.001 par value;        |   |        |       |   |         |   |   |   |
| 29,468,159 and 51,968,159 issued and outstanding, respectively |   |        | 29,468     |   |         |   | 51,968 |   |
| Treasury Stock                                                 |   |        | -          |   |         |   | - |   |
| Additional paid-in capital                                     |   |        | 2,238,215  |   |         |   | 2,149,515 |   |
| Accumulated deficit                                            |   |        | (2,284,874 | )      |         |   | (524,202 | ) |
|                                                           |   |        |       |   |         |   |   |   |
| Total Stockholders’ Equity (Deficit)                     |   |        | (17,149    | )      |         |   | 1,677,323 |   |
|                                                           |   |        |       |   |         |   |   |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)     |   | $           | 389,407    |   |         | $      | 2,023,519 |   |

----

| UTEC, INC.                                         |   |
|----------------------------------------------------|--------|
| Consolidated Statements of Operations              |   |
| (Unaudited)                                        |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   | For the Three MonthsEnded |   |   | For the Six MonthsEnded |   |
|                                               |   | June 30, |   |   | June 30, |   |
|                                               |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| REVENUES                                           |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| COST OF SALES                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| GROSS MARGIN                                       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General and administrative                         |   |   | 39,596 |   |   |   | 19,823 |   |   |   | 84,828 |   |   |   | 62,407 |   |
| Selling expense                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Research and development                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Operating Expenses                           |   |   | 39,596 |   |   |   | 19,823 |   |   |   | 84,828 |   |   |   | 62,407 |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME (LOSS) FROM OPERATIONS                      |   |   | (39,596 | ) |   |   | (19,823 | ) |   |   | (84,828 | ) |   |   | (62,407 | ) |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME AND (EXPENSE)                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LOSS BEFORE TAXES                                  |   |   | (39,596 | ) |   |   | (19,823 | ) |   |   | (84,828 | ) |   |   | (62,407 | ) |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for income taxes                         |   |   | (86,700 | ) |   |   | - |   |   |   | (170,800 | ) |   |   | - |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS FROM CONTINUING OPERATIONS                |   |   | (126,296 | ) |   |   | (19,823 | ) |   |   | (255,628 | ) |   |   | (62,407 | ) |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from discontinued operations         |   |   | (33,950 | ) |   |   | (139,355 | ) |   |   | 225,698 |   |   |   | (33,492 | ) |
| Loss on disposal of discontinued operations        |   |   | (1,730,742 | ) |   |   | - |   |   |   | (1,730,742 | ) |   |   | - |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total loss from discontinued operations, net       |   |   | (1,764,692 | ) |   |   | (139,355 | ) |   |   | (1,505,044 | ) |   |   | (33,492 | ) |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS                                           |   | $ | (1,890,988 | ) |   | $ | (159,178 | ) |   | $ | (1,760,672 | ) |   | $ | (95,899 | ) |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC LOSS PER SHARE FROM CONTINUING OPERATIONS    |   | $ | (0.01 | ) |   | $ | (0.00 | ) |   | $ | (0.01 | ) |   | $ | (0.00 | ) |
| BASIC LOSS PER SHARE FROM DISCONTINUED OPERATIONS  |   | $ | (0.04 | ) |   | $ | (0.00 | ) |   | $ | (0.03 | ) |   | $ | (0.00 | ) |
| TOTAL BASIC LOSS PER SHARE                         |   | $ | (0.05 | ) |   | $ | (0.00 | ) |   | $ | (0.04 | ) |   | $ | (0.00 | ) |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |   |   | 40,718,159 |   |   |   | 51,968,159 |   |   |   | 44,468,159 |   |   |   | 52,826,939 |   |

----

Consolidated Statements of Stockholders’ Equity (Deficit)

|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
|----------------------------------------------------------------------------|--------|-----------------|--------|--------|--------------|--------|--------|---------|--------|--------|-------------|--------|--------|------------|---------|--------|---------|--------|-----------|--------|--------|--------|------------|--------|--------|--------|------------|--------|
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   | Additional |    |   |    |   |      |   |   |
|                                                                       |   | Preferred Stock |   |   | Common Stock |   |   | Paid-In |   |   | Accumulated |   |   |       |    |
|                                                                       |   | Shares          |   |   | Amount       |   |   | Shares  |   |   | Amount      |   |   | Capital    |    |   | Deficit |   |      | Total  |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Balance, December 31, 2006                                                 |   |            | 22,013 |   |         | $      | 22     |    |   |   | 25,917,159  |   |   | $          | 25,917  |   |    | $      | -         |   |   | $      | (33,951    | )      |   | $      | (8,012     | )      |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Common stock issued for acquisition at $0.08 per share                     |   |            | -      |   |         |   | -      |    |   |   | 22,500,000  |   |   |       | 22,500  |   |    |   | 1,879,439 |   |   |   | -          |   |   |   | 1,901,939  |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Common shares issued for finders fee at $0.001 per share                   |   |            | -      |   |         |   | -      |    |   |   | 2,525,000   |   |   |       | 2,525   |   |    |   | -         |   |   |   | -          |   |   |   | 2,525      |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Preferred shares issued for acquisition at $0.001 per share                |   |            | 20,000 |   |         |   | 20     |    |   |   | -           |   |   |       | -       |   |    |   | -         |   |   |   | -          |   |   |   | 20         |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Common stock issued pursuant to employment stock grants at $0.06 per share |   |            | -      |   |         |   | -      |    |   |   | 1,914,000   |   |   |       | 1,914   |   |    |   | 105,487   |   |   |   | -          |   |   |   | 107,401    |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Common shares issued for intangible assets at $0.08 per share              |   |            | -      |   |         |   | -      |    |   |   | 850,000     |   |   |       | 850     |   |    |   | 70,750    |   |   |   | -          |   |   |   | 71,600     |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Common shares issued for services at $0.45 per share                       |   |            | -      |   |         |   | -      |    |   |   | 50,000      |   |   |       | 50      |   |    |   | 22,450    |   |   |   | -          |   |   |   | 22,500     |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Capital contribution by shareholder                                        |   |            | -      |   |         |   | -      |    |   |   | -           |   |   |       | -       |   |    |   | 38,250    |   |   |   | -          |   |   |   | 38,250     |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Net loss for the year ended December 31, 2007                         |   |            | -      |   |         |   | -      |    |   |   | -           |   |   |       | -       |   |    |   | -         |   |   |   | (285,341   | )      |   |   | (285,341   | )      |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Balance, December 31, 2007                                                 |   |            | 42,013 |   |         | $      | 42     |    |   |   | 53,756,159  |   |   | $          | 53,756  |   |    | $      | 2,116,376 |   |   | $      | (319,292   | )      |   | $      | 1,850,882  |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Cancelled share issued pursuant to employee stock grants                   |   |            | -      |   |         |   | -      |    |   |   | (1,898,000  | )      |   |       | (1,898  | )      |    |   | (105,485  | )      |   |   | -          |   |   |   | (107,383   | )      |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Common stock issued for cash at $0.38 per share                            |   |            | -      |   |         |   | -      |    |   |   | 110,000     |   |   |       | 110     |   |    |   | 41,874    |   |   |   | -          |   |   |   | 41,984     |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Option expense pursuant to employee option plan                            |   |            | -      |   |         |   | -      |    |   |   | -           |   |   |       | -       |   |    |   | 96,750    |   |   |   | -          |   |   |   | 96,750     |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Net loss for the year ended December 31, 2008                              |   |            | -      |   |         |   | -      |    |   |   | -           |   |   |       | -       |   |    |   | -         |   |   |   | (204,910   | )      |   |   | (204,910   | )      |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Balance, December 31, 2008                                                 |   |            | 42,013 |   |         |   | 42     |    |   |   | 51,968,159  |   |   |       | 51,968  |   |    |   | 2,149,515 |   |   |   | (524,202   | )      |   |   | 1,677,323  |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Option expense pursuant to employee option plan (unaudited)                |   |            | -      |   |         |   | -      |    |   |   | -           |   |   |       | -       |   |    |   | 66,200    |   |   |   | -          |   |   |   | 66,200     |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Operational segment sold in exchange for common stock (unaudited)          |   |            | -      |   |         |   | -      |    |   |   | (22,500,000 | )      |   |       | (22,500 | )      |    |   | 22,500    |   |   |   | -          |   |   |   | -          |   |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Net loss for the six months ended June 30, 2009 (unaudited)                |   |            | -      |   |         |   | -      |    |   |   | -           |   |   |       | -       |   |    |   | -         |   |   |   | (1,760,672 | )      |   |   | (1,760,672 | )      |
|                                                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |    |   |    |   |      |   |   |   |       |   |   |   |       |   |
| Balance, June 30, 2009 (unaudited)                                         |   |            | 42,013 |   |         | $      | 42     |    |   |   | 29,468,159  |   |   | $          | 29,468  |   |    | $      | 2,238,215 |   |   | $      | (2,284,874 | )      |   | $      | (17,149    | )      |

----

| UTEC, INC.                                            |   |
|-------------------------------------------------------|--------|
| Consolidated Statements of Cash Flows                 |   |
| (Unaudited)                                           |   |
|                                                  |   |   |   |   |   |   |
|                                                  |   |   |   |   |   |   |
|                                                  |   | For the Six Months Ended |   |
|                                                  |   | June 30, |   |
|                                                  |   | 2009 |   |   | 2008 |   |
| OPERATING ACTIVITIES                                  |   |   |   |   |   |   |
|                                                  |   |   |   |   |   |   |
| Net loss                                              |   | $ | (1,760,672 | ) |   | $ | (95,899 | ) |
| Adjustments to Reconcile Net Loss to Net              |   |   |   |   |   |   |   |   |
| Cash Used by Operating Activities:                    |   |   |   |   |   |   |   |   |
| Depreciation                                          |   |   | - |   |   |   | - |   |
| Amortization of intangibles                           |   |   | 10,356 |   |   |   | - |   |
| Employee option grants issued                         |   |   | 66,200 |   |   |   | - |   |
| Employee stock grants issued                          |   |   | - |   |   |   | - |   |
| Employee stock grants canceled                        |   |   | - |   |   |   | (33,151 | ) |
| Deferred tax benefit                                  |   |   | - |   |   |   | - |   |
| Loss from discontinued operations                     |   |   | 1,623,756 |   |   |   | (32,794 | ) |
| Changes in operating assets and liabilities:          |   |   |   |   |   |   |   |   |
| Accounts receivable                                   |   |   | - |   |   |   | - |   |
| Inventories                                           |   |   | - |   |   |   | - |   |
| Prepaid expenses                                      |   |   | - |   |   |   | - |   |
| Accounts payable to related parties                   |   |   | 40,000 |   |   |   | - |   |
| Accounts payable and accrued liabilities              |   |   | 20,360 |   |   |   | 161,844 |   |
|                                                  |   |   |   |   |   |   |   |   |
| Net Cash Used in Operating Activities                 |   |   | - |   |   |   | - |   |
|                                                  |   |   |   |   |   |   |   |   |
| INVESTING ACTIVITIES                                  |   |   | - |   |   |   | - |   |
|                                                  |   |   |   |   |   |   |   |   |
| Purchase of fixed assets/asset construction           |   |   | - |   |   |   | - |   |
| Disposal of fixed assets/asset construction           |   |   | - |   |   |   | - |   |
| Purchase of intangible assets                         |   |   | - |   |   |   | - |   |
| Disposal of intangible assets                         |   |   | - |   |   |   | - |   |
| Asset construction in progress                        |   |   | - |   |   |   | - |   |
| Cash in UTEC Corporation when contributed to UTEC Inc |   |   | - |   |   |   | - |   |
|                                                  |   |   |   |   |   |   |   |   |
| Net Cash Used in Investing Activities                 |   |   |   |   |   |   |   |   |
|                                                  |   |   |   |   |   |   |   |   |
| FINANCING ACTIVITIES                                  |   |   |   |   |   |   |   |   |
|                                                  |   |   |   |   |   |   |   |   |
| Proceeds from line-of-credit from related party       |   |   | - |   |   |   | - |   |
| Repayment on line-of-credit to related party          |   |   | - |   |   |   | - |   |
| Proceeds from sale of preferred stock                 |   |   | - |   |   |   | - |   |
| Proceeds from common stock                            |   |   | - |   |   |   | - |   |
|                                                  |   |   |   |   |   |   |   |   |
| Net Cash Provided by Financing Activities             |   |   | - |   |   |   | - |   |
|                                                  |   |   |   |   |   |   |   |   |
| NET DECREASE IN CASH                                  |   |   | - |   |   |   | - |   |
| CASH AT BEGINNING OF PERIOD                           |   |   | - |   |   |   | - |   |
|                                                  |   |   |   |   |   |   |   |   |
| CASH AT END OF PERIOD                                 |   | $ | - |   |   | $ | - |   |
|                                                  |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION     |   |   |   |   |   |   |   |   |
|                                                  |   |   |   |   |   |   |   |   |
| CASH PAID FOR:                                        |   |   |   |   |   |   |   |   |
| Income taxes paid                                     |   | $ | - |   |   | $ | - |   |
| Interest paid                                         |   |   | - |   |   |   | - |   |
|                                                  |   |   |   |   |   |   |   |   |
| NON CASH FINANCING ACTIVITIES                         |   |   |   |   |   |   |   |   |
| None                                                  |   |   |   |   |   |   |   |   |

----

Condensed Notes to Consolidated Financial Statements

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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NOTE 2:  GOING CONCERN ASSUMPTION

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NOTE 3:  INTANGIBLE ASSETS

|   |                     |   |        |    |   |   |   |
|--------|--------------------------|--------|-------------|---------|--------|--------|--------|
|   |                     |   | 2009        |    |   | 2008   |   |
|   |                     |   | (unaudited) |    |   |   |   |
|   |                     |   |        |    |   |   |   |
|   | Patent rights            |   | $           | 71,750  |   |   | $      | 71,750 |   |
|   | Accumulated amortization |   |        | (10,356 | )      |   |   | (10,174 | ) |
|   |                     |   | $           | 61,394  |   |   | $      | 61,576 |   |

| 2009   |   |   | $4,200      |
|--------|--------|--------|-------------|
|   |   |   |        |
| 2010   |   |   |  4,200 |
|   |   |   |        |
| 2011   |   |   | 4,200       |
|   |   |   |        |
| 2012   |   |   | 4,200       |
|   |   |   |        |
| 2013   |   |   | 4,200       |

NOTE 4:  CONTRACTUAL OBLIGATIONS

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NOTE 5:  EMPLOYEE STOCK PLAN

|                           |  FYE 2008 |
|--------------------------------|----------------|
|  Expected volatility      |  71.44%   |
|  Expected dividends       |  0.00     |
|  Expected term (in years) |  3.5      |
|  Risk-free rate           |  2.67%    |

----

|    Non-vested Options |   |   Options (000) |        |   | Weighted AverageGrant-Date FairValue |   |
|--------------------------------------|--------|---------------------------|-------------|--------|--------------------------------------|--------|
|  Non-vested at January 1, 2009  |   |                      |  1,914 |   |                                 | $      | 0.236 |   |
| Granted                              |   |                      | 0           |   |                                 |   | 0.0 |   |
| Vested                               |   |                      | 1,914       |   |                                 |   | 0.236 |   |
| Forfeited                            |   |                      | 0           |   |                                 |   | 0.00 |   |
| Non-vested at June 30, 2009          |   |                      | 0           |   |                                 | $      | 0.00 |   |

|                           |  FYE 2009 |
|--------------------------------|----------------|
|  Expected volatility      |  71.44%   |
|  Expected dividends       |  0.00     |
|  Expected term (in years) |  5.00     |
|  Risk-free rate           |  2.11%    |

----

|                                |   |   |          |   |   |                                  |
|-------------------------------------|--------|--------|---------------|--------|--------|---------------------------------------|
| Non-vested Options                  |   |   | Options (000) |   |   | Weighted-AverageGrant-Date Fair Value |   |
|  Non-vested at January 1, 2009 |   |   |  0       |   |   | $                                     | 0.236 |   |
|  Granted                       |   |   |  5,650   |   |   |                                  |  0.006 |   |
|  Vested                        |   |   |  5,650   |   |   |                                  |  0.006 |   |
|  Forfeited                     |   |   |  0       |   |   |                                  |  0.000 |   |
|  Non-vested at June 30, 2009   |   |   |  0       |   |   | $                                     | 0.000 |   |

NOTE 6:  DISCONTINUED OPERATIONS

|                        |   |                             |       |   |                             |   |     |                                 |   |   |                                 |   |
|-----------------------------|--------|----------------------------------|------------|--------|----------------------------------|--------|----------|--------------------------------------|--------|--------|--------------------------------------|--------|
|                        |   | Three Months Ended June 30, 2009 |       |   | Three Months Ended June 30, 2008 |   |     | Six  Months Ended June 30, 2009 |   |   | Six  Months Ended June 30, 2008 |   |
| Income                      |   | $                                | -0-        |   |                             | $      | 298,898  |                                 |   | $      | 1,039,595                            |   |   | $ | 1,067,066 |   |
| Cost of Goods Sold          |   |                             | -0-        |   |                             |   | 4,746    |                                 |   |   | 353,544                              |   |   |   | 273,782 |   |
| Operating expenses          |   |                             | 33,950     |   |                             |   | 433,507  |                                 |   |   | 460,353                              |   |   |   | 826,776 |   |
| Net Operating Income (Loss) |   |                             | (33,950    | )      |                             |   | (139,355 | )                                    |   |   | 225,698                              |   |   |   | (33,492 | ) |
| Loss on disposal of assets  |   |                             | (1,730,742 | )      |                             |   | -0-      |                                 |   |   | (1,730,742                           | )      |   |   | -0- |   |
| Tax benefit at 34%          |   |                             | -0-        |   |                             |   | -0-      |                                 |   |   | -0-                                  |   |   |   | -0- |   |
| Net loss                    |   | $                                | (1,753,687 | )      |                             | $      | (139,355 | )                                    |   | $      | (1,505,044                           | )      |   | $ | (33,492 | ) |

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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|                        |   |                             |       |   |                             |   |     |                                 |   |   |                                 |   |
|-----------------------------|--------|----------------------------------|------------|--------|----------------------------------|--------|----------|--------------------------------------|--------|--------|--------------------------------------|--------|
|                        |   | Three Months Ended June 30, 2009 |       |   | Three Months Ended June 30, 2008 |   |     | Six  Months Ended June 30, 2009 |   |   | Six  Months Ended June 30, 2008 |   |
| Income                      |   | $                                | -0-        |   |                             | $      | 298,898  |                                 |   | $      | 1,039,595                            |   |   | $ | 1,067,066 |   |
| Cost of Goods Sold          |   |                             | -0-        |   |                             |   | 4,746    |                                 |   |   | 353,544                              |   |   |   | 273,782 |   |
| Operating expenses          |   |                             | 33,950     |   |                             |   | 433,507  |                                 |   |   | 460,353                              |   |   |   | 826,776 |   |
| Net Operating Income (Loss) |   |                             | (33,950    | )      |                             |   | (139,355 | )                                    |   |   | 225,698                              |   |   |   | (33,492 | ) |
| Loss on disposal of assets  |   |                             | (1,730,742 | )      |                             |   | -0-      |                                 |   |   | (1,730,742                           | )      |   |   | -0- |   |
| Tax benefit at 34%          |   |                             | -0-        |   |                             |   | -0-      |                                 |   |   | -0-                                  |   |   |   | -0- |   |
| Net loss                    |   | $                                | (1,753,687 | )      |                             | $      | (139,355 | )                                    |   | $      | (1,505,044                           | )      |   | $ | (33,492 | ) |

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Item 4T. Controls and Procedures

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| -      | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;                                                                                                                                                                                                              |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                       |
| -      | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
|   |                                                                                                                                                                                                                                                                                                                                                                       |
| -      | 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.                                                                                                                                                         |

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Item 6. Exhibits

|  Exhibit No. |  Document                              |  Location |
|-------------------|---------------------------------------------|----------------|
|  31     |  Rule 13a-41(a)/15d-14(a) Certificates |  Included |
|  32     |  Section 1350 Certifications           |  Included |

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SIGNATURES