UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

  [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
                                      1934

                    For the fiscal year ended March 31, 2005

 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
                                     OF 1934

               For the transition period from _______ to ________

                        Commission File Number: 000-15654
                        ---------------------------------

                            CYGENE LABORATORIES, INC.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

           Delaware                                              22-2789408
-------------------------------                              -------------------
(State or other jurisdiction of                                 (IRS Employer
incorporation or organization)                               Identification No.)

                  7786 Wiles Road, Coral Springs, Florida 33067
               ---------------------------------------------------
               (Address of principal executive offices) (Zip code)

                                 (954) 741-7077
                           ---------------------------
                           (Issuer's telephone number)

         Securities registered under Section 12(b) of the Exchange Act:

                                      None

Securities Registered Pursuant to Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 par value
                         ------------------------------
                                (Title of class)

Check whether the Issuer (1) 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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

State issuer's revenues for its most recent fiscal year. $0

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.). $10,273,254 as of May 19, 2006.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 50,654,337 shares of common stock
were outstanding as of May 19, 2006.

Transitional Small Business Disclosure Form (Check one):  Yes [ ]; No [X]

<PAGE>
                                                                            PAGE
                                                                            ----
PART I

Item 1.  Description of Business..............................................2
Item 2.  Properties...........................................................6
Item 3.  Legal Proceedings....................................................6
Item 4.  Submission of Matters to A Vote of Security Holders..................7

PART II

Item 5.  Market For Common Equity and Related Stockholder Matters.............7
Item 6.  Management's Discussion and Analysis.................................9
Item 7.  Financial Statements.................................................16
Item 8.  Changes In and Disagreements With Accountants On
         Accounting and Financial Disclosure..................................17
Item 8a. Controls and Procedures..............................................17

PART III

Item 9.  Directors and Executive Officers.....................................17
Item 10. Executive Compensation...............................................19
Item 11. Security Ownership of Certain Beneficial Owners and Management.......20
Item 12. Certain Relationships and Related Transactions.......................21

PART IV

Item 13. Exhibits, Financial Statement Schedules, and
         Reports on Form 8-K..................................................22
Item 14. Principal Accounting Fees and Services...............................23


                                       1
<PAGE>

ITEM 1. DESCRIPTION OF BUSINESS

OUR BUSINESS AND HISTORY

We are a biotechnology company based in Coral Springs, Florida. We were
incorporated in Delaware on December 22, 1986, as Transpirator Technologies,
Inc. (TTI) to engage in the development of respiratory therapy products. On
September 30, 2003, as described below, we merged with CyGene, Inc. The merger
was accounted for as a reverse merger with CyGene, Inc. being treated as the
acquirer, and we changed our name to CyGene Laboratories, Inc. CyGene, Inc. was
incorporated in 1995 to develop and commercialize a next generation DNA
diagnostic technology called TPA or Target Protection Assay. The assets of
CyGene, Inc. consist primarily of numerous U.S. and foreign patents. We had a
net loss of $3,697,127 for our fiscal year ended March 31, 2005, and a net loss
of $3,196,583 for our fiscal year March 31, 2004. Our accumulated deficit as of
March 31, 2005 was $22,185,189. As of May 19, 2006, in our first quarter of
2007, we have generated $130,178 in revenue from the sale of our products and
services. This represents the first revenue recognition in our 10-year history.

Through our operating subsidiary, CyGene, Inc., we have built a platform for the
discovery, development and future commercialization of DNA/RNA technologies
which we believe will allow us to create significant value. We have continued
the development of proprietary DNA and RNA testing systems for screening,
monitoring and diagnosis of human, veterinary and plant disease. Our efforts to
develop and improve our diagnostics have resulted in the discovery of two
independent platform drug technologies that have the potential to significantly
increase the value of our company.

We currently hold six patents and we have 23 additional technologies and
technology processes patents pending. The technologies have commercial potential
not only in the predictive genomics sector, but in the diagnostics field. Two
platform based technologies also have potential as highly efficient
therapeutics.

                                       2
<PAGE>

We have been focused in the short term with developing commercial opportunities
in the area of predictive genomics. We have developed and filed for patents on a
business model that allows us to offer inexpensive yet accurate genetic tests to
the public on an anonymous basis which are linked to a web-based "American
Registry of DNA"(TM). This offers consumers access to a variety of DNA-based
tests and analysis. While individualized genetic characterization represents a
relatively short term opportunity that we plan to pursue through a variety of
distribution channels, we also intend to continue to develop related diagnostic
and therapeutic applications. We have developed a fully integrated, automated
approach to in-vitro diagnostics. This approach allows for the search of any
form of target in any sample size, whether DNA, RNA, cellular, chemical or
soluble protein. We believe that this approach has considerable commercial
significance, with application at blood banks, clinical laboratories and large
medical centers. For example, these applications can give blood banks the
ability to mass screen for specific pathogens such as the West Nile Virus,
Hepatitis and HIV.

We are focusing our initial development efforts in therapeutic applications on a
product intended for the containment of possible bacterial, viral and chemical
terrorism attacks. Our Strategic Target Elimination (STE) system is an
antibody-based technology, coupled with a unique delivery platform that is
designed to rapidly and safely clear microbiological, viral and chemical agents
from blood. In addition, STE has the potential to act as a pseudo-vaccine,
conferring protection to an individual for approximately 60 days.

THE MERGER OF TRANSPIRATOR TECHNOLOGIES, INC. AND CYGENE, INC.

On September 30, 2003, CyGene Inc. merged with TTI. The merger was accounted for
as a recapitalization. Prior to the merger, TTI was an inactive public company
with a March 31 year end. Prior the merger, CyGene Inc. was a private company in
the development stage since 1995 and had conducted extensive activities over
that time period developing its DNA based technologies and had offices, staff
and intellectual property. The merger was accomplished by TTI forming a new
wholly owned subsidiary, New Transpirator Inc. (NTI), TTI then issued
approximately 31,000,000 shares of TTI to the shareholders of CyGene Inc. in
exchanges for 100% of the shares of CyGene Inc., except for approximately
140,000 shares of stock which were redeemed for approximately $10,000. Prior to
the merger, CyGene, Inc. had two classes of common stock issued, class A
non-voting and class B voting shares. Both classes of common shares were valued
equally with the voting rights being the only distinction. Simultaneously, NTI
and CyGene merged and the Common B stockholders of CyGene Inc. (previous private
company) exchanged 100% of their B shares for an equal number of Common A. The
par value of the Common A stock of CyGene was then adjusted to reflect the par
value of the Common stock of TTI. After the merger TTI changed its name to
CyGene Laboratories, Inc., NTI changed its name to CyGene Inc. The terms of the
merger resulted in TTI issuing additional shares to the stockholders of CyGene
in the approximate amount of 31,000,000 shares with the previous stockholders of
TTI retaining approximately 5,530,000 shares so that after the merger, TTI
shareholders owned approximately 15% of the combined entity. The acquisition was
accounted for utilizing purchase accounting rules and as a reverse merger with
CyGene, Inc. being treated as the acquirer. In addition, TTI loaned CyGene, Inc.
$100,000 as part of the merger through a convertible note becoming payable on
August 1, 2008.

TTI had certain intellectual property that was subject to royalty agreements
which was distributed together with related liabilities to the prior
stockholders of TTI prior to the merger.

The financial statements presented are the historical financial statements of
CyGene Laboratories (formerly CyGene, Inc.) with the merger being reflected in
the equity section for the year ended March 31, 2004 as a distribution of
approximately 5,530,000 shares of stock at the value of the net book value of
the remaining assets less liabilities, to the shareholders of TTI.

BUSINESS STRATEGY

Our strategy is to become a leading next generation biotechnology company. We
believe our patented technologies have promise in the discovery, development and
utilization of existing and novel diagnostics as well as genetic profiling using
synthetic DNA, signal amplification strategies and automation. We are developing
therapeutics based on synthetic DNA and novel approaches that utilize and
enhance the natural immune system for the rapid clearance of pathogens from
blood.

Our activities are primarily based on four technologies, all of which are
carried out through our subsidiary, CyGene, Inc.:

     o Our STE technology has the potential of becoming an inexpensive, rapid
     and safe treatment and immunization method for many hard-to-treat diseases,
     and we believe it has unique characteristics for post-chemical and
     post-biological-attack control and containment phases.

     o STE relies on the highly evolved natural immune system the human body has
     developed throughout its evolution to effectively fight off disease. This
     system is comprised of two well-understood components, the humeral immune
     system and the cellular immune system, and utilizes both of these systems
     to effect blood-borne pathologic target inactivation and clearance. The
     humeral immune system is responsible for producing antibodies to any
     foreign organism entering the body. Once an intruder is perceived, be it
     either of chemical or biological origin, the immune system will produce


                                       3
<PAGE>

     antibodies to that entity, which will capture and bind the pathologic
     target to a cell for clearance out of the body. This process generally
     suffices to maintain health and ward off common diseases.

In the event of a chemical or biological attack, where relatively high
concentrations of deadly and toxic agents are involved, or as with certain
diseases, the immune system is either very slow to, or does not, respond. In
such cases, our STE process has the potential to take a huge load off of the
immune system by supplying prefabricated monoclonal antibodies needed to
naturally fight the disease. These antibodies are configured as pairs, whereby
one antibody is specific to the target and is bound to the second antibody,
which is specific to a red blood cell receptor, other than the CR1 receptor.
Once delivered, the antibody pair attaches and populates the circulating red
blood cells and begins picking up targeted pathogens or toxins. The body can
then focus its efforts to the clearing of the organism rather than having to
fight on all fronts at the same time, an effort that becomes futile when dealing
with these types of exposure or disease. STE is a platform technology that can
be configured to address multiple pathogens through multiple clearance
mechanisms both individually and simultaneously.

     o Our diagnostic technologies are based on our proprietary Haystack
     Processing(TM) ("HP") methods of analysis. HP requires that a sample size
     be analyzed, not based on the size limitations imposed by existing
     technologies, but rather by what actual size is required to achieve the
     most accurate and reliable results. Thus, the search for early forms of
     cancer or infectious diseases requires the analysis of a test tube or two
     of blood rather than the conventional or standard drop of blood that is
     usually analyzed today. We also accomplish HP by way of novel methods of
     analyzing large sample sizes for low target numbers and by way of signal
     amplification techniques that allow one isolated target to appear as many.
     We believe some of the signal amplification methods we have under
     development could potentially achieve up to a 40,000:1 boost in the
     detectability of the target.

     o We believe many human diagnostic, animal husbandry, agricultural and
     quality control applications will benefit by implementing HP techniques by
     either producing increased accuracy or by reducing cost, or with a
     combination of the two. We have obtained 5 patents for our HP
     methodologies. We are developing applications which could have such diverse
     implications as the protection of the blood supply from the West Nile Virus
     and other potential contaminants, to developing new or novel detection
     methods to safeguard the food and water supply from contamination.

     o Our research and development efforts geared towards accomplishing
     molecular HP, hence more accurate DNA/RNA analysis, have resulted in the
     development of what we believe are unique and chemically modified synthetic
     DNA probes.

Our probes have several distinct properties that make them ideally suited for
two forms of gene therapy, Antisense and RNAi. The more conventional form of
gene therapy that may be accomplished by these probes is called Antisense. Many
human diseases result from the abnormal production of specific proteins.
Antisense therapeutics strives to block the production, not just the effects, of
these proteins.

Proteins are complex molecules that are essential to the physical development,
and physiological function, of virtually all known forms of life. The
information that controls the amount and timing of protein production within
biological cells is encoded in the DNA located in the nucleus of each cell. This
mechanism of controlling the production of disease causing proteins has great
promise in the potential for controlling (and thereby the potential for
treating) many diseases. Recent and scientific advances now allow a new approach
to gene therapy through interfering with RNA or RNAi. Messenger RNA (mRNA) is
the product of genes containing the information for the manufacture of proteins
coded for by the gene.

Interfering or destroying the targeted mRNA stops improper protein synthesis and
any disease progression by the protein is halted. The synthetic probes we have
developed inherently have properties that may make them excellent candidates for
both RNAi and Antisense. The human body, and in particular the bloodstream, is a
very difficult environment for the effective functioning of synthetic DNA probe
based therapies. The immune system, enzymes and variable physiological
conditions such as pH and salt concentrations degrade or disassociate the drugs
from their targets. We believe that our reverse polarity "hairpin" probes
incorporating modified bases are well suited to survive the harsh conditions
present in the human body.

     o Our genetic characterization is based on conventional, as well as cutting
     edge third party technologies, that have been automated on our AGENDA(TM)
     robotic platform. Genetic profiling or predictive genomics involves the
     analysis of genes in search for a sequence variation that has clinically or
     otherwise been determined to be relevant as a determinant or predisposing
     factor for traits, disease or identification. Genetic profiling has been
     found to be of importance in forensics, in determining predispositions to
     diseases, and analyzing individual drug and nutrient metabolism. Our method
     of determining sequence variation requires two independent reactions to
     confirm the result (two levels of specificity), thus we achieve a very high
     accuracy of results. Results from the gene characterization, combined with
     our know-how and expertise in the field of DNA analysis, allow for highly
     accurate genetic profiling.

                                       4
<PAGE>

Our plans call for securing marketing and sales partners with established
distribution networks to successfully launch our products. Our current business
model provides for the retail sale of our products by distributors at relatively
low or no inventory cost and yields a relatively high return to the
distributors.

Since CyGene, Inc. began operations in October 1995, it has been involved
primarily in research and development. Our research and development expenditure
for our fiscal year ending March 31, 2005 was $456,193 compared to $233,699 in
2004. To date, in its first quarter of 2007 CyGene, Inc. has had $130,180 in
revenue from operations, and only limited interest income and debt forgiveness.

COMPETITION

The biotechnology industry is highly competitive and characterized by rapid and
significant technological change. We face, and will continue to face, intense
competition from organizations such as pharmaceutical and biotechnology
companies, as well as academic and research institutions and government
agencies. Some of these organizations are pursuing products based on
technologies similar to our technologies. Other of these organizations have
developed and are marketing products, or are pursuing other technological
approaches designed to produce products, that are competitive with our product
candidates in the therapeutic, diagnostic and genetic profiling areas.

Many of our competitors are substantially larger than we are and have greater
capital resources, research and development staffs and facilities than we have.
In addition, many of our competitors are more experienced than we are in
diagnostic test development, drug discovery, development and commercialization,
obtaining regulatory approvals and drug or diagnostic product manufacturing and
marketing.

We anticipate that the competition with our products and technologies will be
based on, among other things, product efficacy, safety, reliability,
availability, price, patent position and effective marketing. The timing of
market introduction of our products and competitive products will also affect
competition among products. We also expect the relative speed with which we can
develop products, complete the clinical trials and approval processes and supply
commercial quantities of the products to the market to be an important
competitive factor. Our competitive position will also depend upon our ability
to attract and retain qualified personnel, to obtain patent protection or
otherwise develop proprietary products or processes and to secure sufficient
capital resources for the period between technological conception and commercial
sales.

Our competitors include: EluSys Therapeutics, Inc., Roche Diagnostics, Bayer
Diagnostics, Abbott Labs, Genelex, DNA Direct, Clinical Data, Inc., Sciona,
Inc., Idera Pharmaceuticals, Inc., Avigen Inc, Isis Pharmaceuticals, Inc. and
Geron Corp.

REGULATION

Predictive genomics or genetic profiling tests for identification,
predispositions or specific traits are currently not regulated by the Food and
Drug Administration (FDA). FDA is currently drafting guidelines that will allow
it to increase its regulation of genetic testing. Although the current
environment provides CyGene the opportunity to offer commercialized genetic
profiling without specific FDA approvals, it is probable that the FDA will begin
to regulate this industry in the near future. We are preparing to comply with
anticipated FDA regulatory requirements. To our knowledge, the States of New
York, Rode Island and New Jersey have mandated that no form of genetic tests may
be sold directly to consumers in the state and require that physicians order the
genetic tests and receive the test results. New York State also mandates that
persons tested provide written consent to have genetic tests performed. We are
negotiating terms with a laboratory test reseller that has the ability to comply
with the regulatory requirements that would allow us to sell our predictive
genomic tests into the states of New York, Rode Island and New Jersey and we do
not intend to sell directly into those territories until such agreement has been
finalized.

Our HP diagnostic tests will require FDA pre-market regulatory approvals only if
we sell them as test kits to other laboratories to perform the analysis at their
facilities, otherwise our HP diagnostic tests may be performed at our laboratory
under the "homebrew" exemption, as long as we are registered and certified under
the Federal Clinical Laboratory Improvement Amendments of 1988 (CLIA) and
certain state required certifications such as are required for laboratories
operating in the states of Florida.

Our therapeutic technologies will require FDA regulatory approvals as drugs;
however, it is possible that under certain circumstances, our STE drug may be
allowed accelerated approval due to its potential application to contain acts of
bio-terrorism.

INTELLECTUAL PROPERTY

Our success depends in part on our ability to obtain and maintain proprietary
protection for our product candidates, technology and know-how, to operate
without infringing the proprietary rights of others and to prevent others from
infringing our proprietary rights. Our policy is to seek to protect our


                                       5
<PAGE>

proprietary position by, among other methods, filing U.S. and foreign patent
applications related to our proprietary technology, inventions, improvements and
business models that are important to the development of our business. We also
rely on trade secrets, know-how, continuing technological innovation and
in-licensing opportunities to develop and maintain our proprietary position. We
also rely upon unpatented trade secrets and improvements, unpatented know-how
and continuing technological innovation to develop and maintain our competitive
position. We generally protect this information with reasonable security
measures.

As of May 19,2006, we held five U.S. patents, one Canadian patent and 24 patent
applications and corresponding worldwide patents and patent applications for our
technology and processes. The earliest of these issued patents expires in 2019.
We also have nine registered U.S. trademarks and 16 foreign trademarks.

The patent positions of companies like ours are generally uncertain and involve
complex legal and factual questions. Our ability to maintain and solidify our
proprietary position for our technology will depend on our success in obtaining
effective claims and enforcing those claims once granted. We do not know whether
any of our patent applications will result in the issuance of any patents. Our
issued patents and those that may issue in the future, may be challenged,
invalidated or circumvented, and the rights granted thereunder may not provide
us proprietary protection or competitive advantages against competitors with
similar technology. Furthermore, our competitors may independently develop
similar technologies or duplicate any technology developed by us. Because of the
extensive time required for development, testing and regulatory review of a
potential product, it is possible that, before any of our products can be
commercialized, any related patent may expire or remain in force for only a
short period following commercialization, thus reducing any advantage of the
patent, which could adversely affect our ability to protect future developments
and, consequently, our operating results and financial position.

Because patent applications in the United States and many foreign jurisdictions
are typically not published until 18 months after filing, or in some cases not
at all, and because publications of discoveries in the scientific literature
often lag behind actual discoveries, we cannot be certain that we were the first
to make the inventions claimed in each of our issued patents or pending patent
applications, or that we were the first to file for protection of the inventions
set forth in these patent applications.

Litigation may be necessary to defend against or assert claims of infringement,
to enforce patents issued to us, to protect trade secrets or know-how owned by
us, or to determine the scope and validity of the proprietary rights of others.
In addition, the U.S. Patent and Trademark Office may declare interference
proceedings to determine the priority of inventions with respect to our patent
applications or reexamination or reissue proceedings to determine if the scope
of a patent should be narrowed. Litigation or any of these other proceedings
could result in substantial costs to and diversion of effort by us, and could
have a material adverse effect on our business, financial condition and results
of operations. These efforts by us may not be successful.

For a list of our patents and other published filings please visit our website
at www.cygenelabs.com.

EMPLOYEES

As of May 19, 2006, we employ seven full-time employees, and six part-time
employees. Of our 13 employees, three are associated with our executive office,
two are associated with our operations, and the remainder are associated with
research and development activities in-house and at off-site laboratories.

ITEM 2. DESCRIPTION OF PROPERTY

We currently lease approximately 3,779 square feet of commercial office space in
Coral Springs, Florida, which encompasses our executive and administrative
offices and our laboratory operating activities. We expanded these facilities on
January 1st, 2006 and signed a one year lease agreement. Our lease expires on
December 31, 2006, and we pay rent at a rate of $5,742 per month. We have the
option to renew this lease for an additional year at a 5% increase in rent.

Management expects that in the normal course of business, this lease will be
renewed or replaced by another lease.

ITEM 3. LEGAL PROCEEDINGS

We are not aware of any legal proceedings against us.

On April 27, 2006, we filed suit for fraud and negligence against Douglas
Stratton in Broward County Circuit Court. Mr. Stratton was the attorney
representing CyGene, Inc.'s founder, Elliott Ramberg, and his wife. The suit
alleges that Mr. Stratton intentionally and negligently made false
representations to our previous auditors in connection with our 2004 audit. We
allege that, as a result of these false representations, we incurred increased
accounting and legal fees and other damages as a result of (a) the delay of the
completion of our audit, (b) the resulting de-listing of our common stock from
the over-the-counter market, (c) the resulting delay of our proposed financing,
(d) additional discounts we were required to offer as inducement to investors to
fund the our business as a non-reporting company, and (e) the resulting delay of
the launch of four products due to the lack of timely funding. The suit has only
recently been filed, and the defendant has not responded to the complaint.
Although we believe our allegations are meritorious, there is no assurance that
we will ultimately recover the damages we have alleged.

                                       6
<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

OUR COMMON STOCK

The principal market for our common stock is the Pink Sheets, where our common
stock trades under the symbol "CYGE.PK." The prices below are based on high and
low reported sales prices. The quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.

                                             HIGH                LOW
                                             ----                ---
FISCAL YEAR ENDING MARCH 31, 2006

First Quarter (4/1/05 to 6/30/05)            $0.90              $0.36
Second Quarter (7/1/05 to 9/30/05)           $0.90              $0.70
Third Quarter (10/1/05 to 12/31/05)          $0.80              $0.60
Fourth Quarter (1/2/06 to 3/31/06)           $0.55              $0.40

FISCAL YEAR ENDING MARCH 31, 2005
First Quarter (4/1/04 to 6/30/04)            $1.05              $0.80
Second Quarter (7/1/04 to 9/30/04)           $1.60              $0.45
Third Quarter (10/1/04 to 12/31/04)          $1.01              $0.51
Fourth Quarter (1/2/05 to 3/31/05)           $0.90              $0.35

FISCAL YEAR ENDING MARCH 31, 2004
First Quarter (4/1/03 to 6/30/03)            $0.25              $0.03
Second Quarter (7/1/03 to 9/30/03)           $0.79              $0.13
Third Quarter (10/1/03 to 12/31/03)          $1.10              $0.60
Fourth Quarter (1/2/04 to 3/31/04)           $1.10              $0.75

FISCAL YEAR ENDED MARCH 31, 2003
First Quarter (4/1/02 to 6/30/02)            $0.00              $0.00
Second Quarter (7/1/02 to 9/30/02)           $0.03              $0.00
Third Quarter (10/1/02 to 12/31/02)          $0.03              $0.01
Fourth Quarter (1/2/03 to 3/31/03)           $0.10              $0.01

STOCKHOLDERS

As of May 19, 2006, there were approximately 665 holders of record of our common
stock.

DIVIDENDS

We have not declared nor paid any cash dividends on our common stock for our
last two fiscal years nor in any subsequent period. We currently anticipate that
we will retain all of our future earnings for use in the expansion and operation
of our business, thus we do not anticipate paying any cash dividends on our
common stock in the foreseeable future.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
<TABLE>
<CAPTION>
------------------------------- ---------------------------- ---------------------------- ----------------------------
Plan Category                   Number of securities to be   Weighted-average exercise    Number of securities
                                issued upon exercise of      price of outstanding         remaining available for
                                outstanding options,         options, warrants and        future issuance under
                                warrants and rights          rights                       equity compensation plans
                                                                                          (excluding securities
                                                                                          reflected in column (a))
                                (a)                          (b)                          (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                                      <C>                            <C>                         <C>
Equity compensation plans                2,687,500                      $1.08                       812,500
approved by security holders
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not            2,200,000(1)                   $0.55
approved by security holders
------------------------------- ---------------------------- ---------------------------- ----------------------------
Total                                    4,887,500
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

(1) Securities were issued pursuant to individual compensation arrangements in
    lieu of compensation or as consideration for continued services to the
    company despite account payment delinquencies. The material terms of the
    warrants vary, however the warrants are all fully vested, their exercise
    period ranges between 3 to 5 years and they have exercise prices ranging
    between $0.40 and $0.75 per share.

                                       7
<PAGE>

PURCHASES OF EQUITY SECURITIES

During the fiscal year ended March 31, 2005, we did not purchase any outstanding
shares of our common stock, nor did any person or entity purchase any of our
outstanding equity securities on our behalf.

RECENT SALES OF UNREGISTERED SECURITIES

During the fiscal year ended March 31, 2005, we made the following sales of
unregistered securities which were exempt from registration under the Securities
Act of 1933 (the "Act") as foreign offerings under Regulation S under the Act or
as nonpublic offerings under Section 4(2) of the Act and Rule 506 thereunder as
private sales of unregistered securities.
<TABLE>
<CAPTION>
TYPE OF SALE                        DATE RANGE              PRICE                 AMOUNT RECEIVED         SHARES ISSUED
------------                        ----------              -----                 ---------------         -------------
<S>                              <C>                    <C>                             <C>                   <C>
Private Placement
under Regulation S (1)            4-5-04 to 8-16-04     $0.33 to $0.50                  $541,400              1,439,048
Private Placement (2)                  7-23-04              $0.40                       $190,000              4,750,000
Conversion of existing
Convertible Notes (3)            8-30-04 to 12-31-04      $0.07143                       $43,985                624,340
Fees for services                 4-1-04 to 3-31-05     $0.40 to $0.97                  $223,858                240,950
Issuance of Stock to Directors        12-31-04              $0.75                          N/A                   60,000
</TABLE>
----------
(1) We raised $541,400 from the sale of shares of common stock to investors
    outside of the United States pursuant to Regulation S at varying market
    prices per share, based on a 60% discount from the offering price on the
    date of the investment. A 10% cash finders/referral fee was paid was paid to
    Atlantic International Capital on $507,400 of the proceeds of the Reg. S
    offering. $34,000 we received from an accredited foreign investor under the
    same terms as the remaining Regulation S investors.
(2) We raised $190,000 in a private placement to accredited investors from the
    sale of units consisting of one share of common stock and one stock purchase
    warrant at $0.40 per unit. The warrants are exercisable at $0.40 for a
    period of two years. In January of 2006 the board of directors authorized a
    three year extension of these warrants.
(3) Between May 27, 2003 and July 9, 2003 we made a private sale of convertible
    notes to our existing shareholders and employees. We raised $86,700 on this
    offering, converted $48,000 owed in directorship fees to two of our outside
    directors and converted $59,000 in accrued employee salary into these notes.
    The notes bear interest at 4.5% and became payable at the end of 2004. The
    remaining outstanding notes have been extended through December 31, 2006.

Subsequent to the end of our fiscal year 2005, we made the following sales of
unregistered securities which were exempt from registration under the Securities
Act of 1933 (the "Act") as nonpublic offerings under Section 4(2) of the Act and
Rule 506 thereunder.
<TABLE>
<CAPTION>
TYPE OF SALE                        DATE RANGE          AVERAGE PRICE             AMOUNT RECEIVED         SHARES ISSUED
------------                        ----------          -------------             ---------------         -------------
<S>                               <C>                   <C>                          <C>                     <C>
Private Placement (1)             1st Quarter 2006          $0.0843                   $66,600                  790,036
Private Placement (2)             2nd Quarter 2006           $0.11                    $90,000                  818,182
Private Placement of
Convertible Notes (2)             2nd Quarter 2006           $0.22                   $315,000                    -0-
Private Placement (3)             3rd Quarter 2006           $0.20                   $465,500                2,327,500
Private Placement (4)             4th Quarter 2006           $0.20                   $545,000                2,725,000
Convertible Notes (5)                 10-7-05              $0.07143                   $16,515                  231,200
Fees for services (6)             4-1-05 to 5-19-05     $0.25 to $0.50               $336,879                  883,518
Issuance of Stock to Directors        12-31-05              $0.60                       N/A                     60,000
</TABLE>
----------
(1) In the quarter ended June 30, 2005, we raised $66,600 from the sale of
    shares of common stock to accredited investors at an average price of
    $0.0843 per share.
(2) In the quarter ended September 30, 2005, we raised $90,000 from the sale of
    shares of common stock to accredited investors at an average price of $0.11
    per share. In the same period, we issued $365,000 in convertible notes that
    are secured by a security interest in all of our intellectual properties.
    The notes become due in July 2006, bear interest at 15% per annum and are
    convertible into common stock at $0.22 per share. The investors in the notes
    were also issued warrants to purchase four shares of common stock for every
    dollar loaned to the Company. These warrants have a term of four years and
    are exercisable at $0.50 per share. The Company received $315,000 in cash
    from investors from the sale of these notes and warrants and a $50,000 note
    due to Transpirator LLC bearing interest at 4% per annum and maturing on the
    closing of a $1 million anticipated bridge financing through Burnham Hill
    Partners was exchanged on the same terms as the cash investors received.
    Transpirator LLC is owned in part by Messrs. Signorelli and Romano, who
    until April 25, 2006, were directors of our Company.

                                       8
<PAGE>

(3) In the quarter ended December 31, 2005, we raised $465,500 in a private
    placement to accredited investors from the sale of units consisting of one
    share of common stock and one stock purchase warrant at $0.20 per unit. The
    warrants are exercisable at $0.50 for a period of three years.
(4) In the quarter ended March 31, 2006, we raised $285,000 under the same
    private placement to accredited investors as in the prior period. In a
    subsequent private sale to four accredited investors we also raised an
    additional $260,000 from the sale of units consisting of one share of common
    stock and two stock purchase warrants at $0.20 per unit. The warrants are
    exercisable at $0.50 for a period of three years.
(5) See note (3) under RECENT SALES OF UNREGISTERED SECURITIES
(6) From April 1, 2005 through May 19,2006 we converted trade debt and issued
    common restricted shares of our stock for services. These payments included
    200,000 shares to our prior auditors, Eisner LLC as $90,000 payment in
    settlement of our outstanding invoices with them. This settlement included
    our agreement to pay Eisner LLC an additional future payments of $50,000 in
    cash. We also converted $96,520 into 386,080 shares that was owed to one of
    our European consultants at $0.25 per share. We paid other consultants
    100,000 shares for equipment and software development at $0.50 per share. We
    also paid a consultant $19,359.50 in 77,438 shares at $0.25.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion of our financial condition and results of operations
and cash flows should be read together with our financial statements and related
notes provided in Item 7 below. The following discussion (as well as statements
in Item 1 above and elsewhere) contains forward-looking statements within the
meaning of the Private Securities Litigation Act of 1995 that involve risks and
uncertainties. Specifically, the forward-looking statements relate to our
strategy described in Item 1 including the possibility of entering into
strategic partnerships, alliances, and collaborations, our prospects for our
technologies and intellectual property including the boost in detectability in
the signal amplification methods under development, our plans and expectations
regarding commercialization and marketing efforts, our ability to create and
market products and services based on our technologies, the anticipated need,
desirability, and demand for our technologies and any products or services based
on such technologies, our need to raise additional capital from external
sources, our ability to generate cash to internally fund some of our working
capital needs, industry and regulatory trends, future advertising, public
relations, and marketing costs and expenditures as well as the prospect of a
positive return on investment from such costs and expenditures by their
generation of revenue, future research and development, the amount of funds
needed over the next 12 months, our future liquidity, anticipated employment
levels for 2006 and 2007, and our anticipated capital assets expenditures.
Additionally, words such as "anticipates," "expects," "believes," "plans,"
"could," "may," and similar words and phrases identify forward-looking
statements.

Some or all of the results anticipated by these forward-looking statements may
not occur. Forward-looking statements involve known and unknown risks and
uncertainties, including but not limited to, trends in the biotechnology,
healthcare, and pharmaceutical sectors of the economy; competitive pressures and
technological developments from domestic and foreign genetic research and
development organizations, which may affect the nature and potential viability
of our business strategy; private or public sector demand for products and
services similar to what we plan to commercialize; unpredictable or unforeseen
changes in the state of the art in genetic analysis, sequencing, testing, and
therapy; the risk of altered or increased governmental regulation relating to
genetics, genetic analysis, drugs, pharmaceuticals, and medical devices, as well
as currently unregulated, or minimally regulated, substances and processes, and
their impact on our costs and expenses, and on our potential commercialization
of our technologies; altered or increased regulation impacting the cost or our
ability to store, handle, ship and control substances and materials; our ability
to attract and retain qualified and competent scientific and management
personnel; the availability, costs and terms of financing, including the risk of
rising interest rates and its potential impact on our future cost of capital and
the future market price of our common stock. Additionally, see the discussion
contained in "Risk Factors". We disclaim any intention or obligation to publicly
announce the results of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires estimates and assumptions that affect the reported amounts of assets
and liabilities, revenues and expenses and related disclosures of contingent
assets and liabilities in the consolidated financial statements and accompanying
notes. The Securities and Exchange Commission (SEC) has defined a company's
critical accounting policies as the ones that are most important to the
portrayal of the company's financial condition and results of operations, and
which require the company to make its most difficult and subjective judgments,
often as a result of the need to make estimates of matters that are inherently
uncertain. We believe that our estimates and assumptions are reasonable under
the circumstances; however, actual results may vary from these estimates and
assumptions. We have identified the following critical accounting policies that
affect the more significant judgments and estimates used in the preparation of
our consolidated financial statements. For a further discussion of our
significant and critical accounting policies, please see Item 7 - "Financial
Statements" Note 1.

REVENUE RECOGNITION

We expect, once we commence marketing and sales activities, to recognize revenue
from sales of our testing services and other products when goods are shipped and
title or risk of loss resides with the end customer.

RESEARCH, DEVELOPMENT AND RELATED ENGINEERING COSTS

Research, development, and related engineering, costs are expensed as incurred.

LITIGATION

We may periodically become involved in litigation and regulatory proceedings
incidental to the normal conduct of business, and we expect that we may be
involved in such litigation and regulatory proceedings from time to time. It is
our policy to regularly review any such litigation and regulatory proceedings
for possible adverse outcomes, and provide estimates for the possible liability
to us from such adverse outcomes, as appropriate under the circumstances.

                                       9
<PAGE>

OVERVIEW

Fiscal 2005 saw a fundamental change in the financial reporting nature of the
company. Highlights were:

     o    We have determined that our prior financial statements should have
          been presented on the basis that we were a development stage
          enterprise. This necessitated an audit of CyGene, Inc. from its
          inception in 1995, has delayed our filing of this Report and affected
          our ability to raise additional capital as described below under
          "Liquidity and Capital Resources."

     o    Under generally accepted accounting principles, the financial
          statements and other financial information contained in this report
          are those of CyGene, Inc.

     o    CyGene, Inc. did not generate any revenue for the period ending March
          31, 2004 and has concentrated its efforts on taking steps to be able
          to commercialize its products. It has been severely hampered by the
          lack of working capital. For the first quarter of our fiscal year 2007
          CyGene, Inc. recorded revenue from the sale of its products and
          services

OUR CONSOLIDATED RESULTS OF OPERATIONS

We recognized no revenue in the fiscal years ended March 31, 2005 and 2004, but
incurred substantial costs related to our operations as a development stage
company. Total operating expenses for the fiscal years ended March 31, 2005 and
2004 were $3,316,148 and $3,045,068 respectively. The major components of these
expenses are detailed and discussed below:
<TABLE>
<CAPTION>
                                        FISCAL YEAR           FISCAL YEAR
                                            ENDED                 ENDED
                                       MARCH 31, 2005         MARCH 31, 2004      CHANGE (1)       % CHANGE
                                       --------------         --------------      ----------       --------
<S>                                        <C>                  <C>                <C>              <C>
Compensation and related
taxes and benefits                          $575,429            $896,331           $(320,902         -35.8%

Consulting and professional fees           1,422,821             958,154             464,667          48.5%

Research and development                     456,193             233,699             154,909          95.2%

Patent Expense                                73,870             434,803            (360,933)       -488.6%

Advertising and public relations             157,150             224.506             (67,356)        -30.0%

Interest                                     380,416             164,235             216,181         131.6%
</TABLE>
----------
(1) Change in total dollars from period to period.

The decrease in compensation and related taxes and benefits primarily relate to
the issuance of common stock to our chief executive officer in our fiscal year
ending March 31, 2004, in lieu of cash compensation. Beneficial conversion
charges on the non-cash compensation and option expenses taken in fiscal 2004
were due to Mr. Munzer's conversion of one and one half years of deferred
compensation into common stock in July of 2003. Our employment level remained
constant between fiscal years 2004 and 2005; headcount additions for fiscal year
2006 have increased and are anticipated to further increase.

Consulting and professional fees include the costs of legal, consulting,
accounting and auditing services provided to us. The bulk of these expenses
relate to accounting and consulting fees incurred as we required substantial
external assistance by consulting firms in constructing and compiling our
records to undertake and complete the two recent from inception audits, as well
as the legal fees, audit fees and other costs of being a reporting company.
While we are unable to estimate future costs of this nature with any degree of
certainty, we believe that future audits will be limited to a one-year period
when the Company transitions from development stage to operating status. We also
intend to retain a limited number of skilled employees to reduce the need for
extensive assistance from outside law firms, consultants and accounting
professionals.

Research and development costs relate to product development efforts, such as
has been conducted on optimizing the methods for the genetic profiling services
and automating them on our robotic platform as well as the software algorithm
development for our knowledgebase reporting system. The costs in fiscal year
2005 reflect product related software and reagent development for our predictive
genomics products. In the future, we expect to incur increased R&D expenditures
as we roll out new predictive genomic products and release the second generation
knowledgebase that reports our anonymous results. We also anticipate funding
further work on our HP diagnostic applications and STE technologies.

                                       10
<PAGE>

Patent expenses relate to patent generation, formation, application and
maintenance, as well as costs incurred to protect, enhance or dissolve our
interest in any such patent instrument. The fees paid in 2005 reflect
management's focus on converting our substantial investments in our patent
portfolio into commercially marketable products. These expenses primarily
represent services received from specialized law firms during fiscal year 2005,
and management expects the level of these expenses to increase over the coming
periods due to increased maintenance costs and the protection of new
intellectual properties. The dramatic decrease from fiscal year 2004 to 2005 is
attributable to the conversion of two payables to two of our patent law firms.
At the merger on September 30, 2003 our current intellectual property law firm
was owed $527,683 and we owed our prior intellectual property law firm
$381,134.. To settle such debt, at the closing of the merger in the second
quarter of 2004, we paid our current law firm $75,000 in cash and the law firm
converted $263,527 of its debt into our equity at the rate of one share of Class
A Common Stock for every $0.75 of such debt, which resulted in 351,369 common
shares being issued. We issued this firm a new note for the balance owed of
$189,156, which became payable six months following the closing of the merger.
This note is currently in default. To settle our debt with our prior patent
attorneys, at the closing of the merger, we paid $20,000 in cash and that firm
converted $361,134 into equity also at the rate of one share for every $0.75 of
such debt which resulted in 481,512 shares common stock being issued.

In the future, we expect that we that we will incur increased advertising and
public relations expenditures in connection with our efforts to create
promotional materials, ranging from brochures, trade show collateral materials,
and broadcast media to internet based applications, for formally presenting our
corporate and research and development history, significant partners, and our
management and operations, to potential customers, partners and investors. These
efforts were begun in late fiscal 2003 and were significantly increased during
the course of fiscal year 2004 however, due to the extraordinary drain on our
capital and personnel resources due to our two from inception audits these
expenditures were reduced during 2005, resulting in a decrease in these costs
compared to the prior year period. As we expect to continue our efforts to
introduce our technologies into the commercial market, we anticipate these types
of marketing and public relations costs will increase in the future periods.

Interest expense was $380,416 and $164,235 for the fiscal years ended March 31,
2005 and 2004, respectively. The increase for our fiscal year 2005 is
attributable to the increased level of debt financings.

Rent expense was $125,265 and $43,507 for the fiscal years ended March 31, 2005
and 2004, respectively. The increase for our fiscal year 2005 is attributable to
rent and deposits paid on a new facility that we were unable to build out and
occupy in early 2005 when our inability to file compliant financial statements
cost us our OTC:BB listing and an anticipated $5 million financing. We have also
recorded a $149,235 contingent liability for the breach of the lease agreement.
Management believes that this contingent liability will not come to bear because
the landlord of this property did not actively seek to lease the space after our
abandonment, but rather chose to attempt to sell the property.

LIQUIDITY AND CAPITAL RESOURCES

From inception, we have largely relied on financing from outside parties to fund
operations. We believe as a result of our working capital deficits and the
uncertainty related to the timing of our planned commercialization of our
technologies into viable and marketable products and services, we will be
required to obtain additional external capital funding. We believe such
additional capital is necessary to fund our operating expenses, to make capital
expenditures, to service our debt, and to execute anticipated marketing and
research and development plans. We believe that if we cannot obtain additional
funding, the commercialization of our products may not provide the Company with
adequate revenues to continue operations and meet its obligations. As of March
31, 2005, we had a working capital deficit of $2,976,701 and cash on hand was
$95,617. As of May 19, 2006, our cash balances were approximately $223,000.

During the fiscal year ended March 31, 2005, we raised $671,107 from private
placements of our common stock and received $676,400 in debt financing from
outside parties. The description and terms of these sales are described in Part
II, Item 5 of this filing. During the year, we employed these resources to fund
operating activities, acquire $70,059 in property and equipment, and repay
$1,000 in notes payable. Additionally, we converted $43,985 of accrued interest
and notes payable into common stock at $0.07143 per share.

Subsequent to the end of the fiscal year, in the quarter ended June 30, 2005, we
raised $66,600 from the sale of shares of common stock to accredited investors
at an average price of $0.0843 per share. In the quarter ended September 30,
2005, we raised $90,000 from the sale of shares of common stock to accredited
investors at an average price of $0.11 per share. In the same period, we issued
$365,000 in convertible notes that are secured by a security interest in all of
our intellectual properties. The notes become due in July 2006, bear interest at
15% per annum and are convertible into common stock at $0.22 per share. The
investors in the notes were also issued warrants to purchase four shares of
common stock for every dollar loaned to the Company. These warrants have a term
of four years and are exercisable at $0.50 per share. In the quarter ended
December 31, 2005, we raised $465,500 in a private placement to accredited
investors from the sale of units consisting of one share of common stock and one
stock purchase warrant at $0.20 per unit. The warrants are exercisable at $0.50
for a period of three years. In the quarter ended March 31, 2006, we raised
$285,000 under the same private placement to accredited investors as in the
prior period. In a subsequent private sale to four accredited investors we also
raised an additional $260,000 from the sale of units consisting of one share of
common stock and two stock purchase warrants at $0.20 per unit. The warrants are
exercisable at $0.50 for a period of three years.

We intend to commence a private offering to raise $1 million after the filing of
this annual report with the SEC. The proceeds of this offering would allow us to
repay the notes payable that are becoming due and continue to fund our
operations through the end of our third quarter ending 2007. We intend to
continue to seek additional financing until such time as our revenues exceed our
expenditures. There are no assurances that we will be able to complete these
offerings of our common stock in July 2006.

We anticipate that an additional $3 million may be required to meet our
operating requirements during the next 12 months ending our first quarter 2008,
although there can be no assurances that this amount will be available or


                                       11
<PAGE>

sufficient. Alternately, we may be able to sustain ourselves and meet our
current obligations from the sale of our products. Management believes that with
an infusion of $1 million in capital and the successful launch of our predictive
genomics product line that is now beginning to generate sales, significant
revenues can be achieved with the infrastructure we have in place at this time.
A considerable amount of our current and short term obligations are structured
as convertible debt. Management believes that some, if not all, of these
obligations could be satisfied through their conversion into our common stock as
provided for in the original notes payable issued by the Company. We are able to
offer repayment to force the conversion of such notes and intend to use the
proceeds of our next offering to do so. Management further believes, that if the
Company is able to formalize distribution agreements with large product
distributors, the revenues from such agreements may result in the ability of the
Company to continue operations without any further significant capital infusions
beyond the planned $1 million offering. With the filing of this Form 10-KSB the
Company has completed a ten-year inception audit. The completion of this audit
has distracted management and cost the company significant expenses please see
Item 14 Audit Fees. The company is continuing to work on completing and filing
its subsequent reports on Form 10-QSB for the subsequent three quarters.
Management believes that by the company completing this audit and the subsequent
reports on Form 10-QSB, it will be able to focus its resources on operations and
revenue generation.

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. Additionally, unless we raise
at least $1,000,000 or generate the equivalent in gross profit from the sale of
our products, we will not be able to remain operational over the next 6 months
even if we scale back our operations. There can be no assurances that we will be
successful in raising any funds in the contemplated offering of our securities
or that our revenues will be sufficient to sustain operations. Any significant
shortfall may result in the further delay, scaling back or elimination of some
or all of our research and development activities and other operations planned
or currently underway.

If we raise at least $3,000,000 from other sources, we believe, based on our
current expectations and plans, that sufficient capital will be available to
fund our cash requirements through the end of our first quarter of fiscal year
2008. Actual cash requirements may depend on many factors, including
particularly the scope and pace of product sales and marketing, research and
development efforts and the level of success in entering into strategic
alliances. Additionally, we are seeking to hire employees and retain consultants
by compensating them in part with grants of common stock, stock options and
warrants. To the extent that the market price of our common stock remains low
and liquidity is limited, we believe we may encounter difficulty in employing
and retaining skilled individuals and outside consultants.

We also expect to generate additional funds by providing genetic profiling
services that will be sold through retail distributors and directly to the
public. We have realized our first revenues in our ten year history from the
sale of these products in our first quarter 2007. As of May 19, 2006 we have
received approximately $130,178 in revenue from these sales. We also expect to
continue to seek external funds from collaborations with other biotechnology
companies and with pharmaceutical companies, and potentially from other debt,
equity and lease financings. We anticipate the key factors affecting our future
sources of internal and external funding to be:

     o    the success of regaining our OTC:BB listing by becoming current in our
          financial filing requirements with the SEC,

     o    the success of our commercialization, marketing, and sales of our
          genetic profiling services;

     o    the success of our clinical and preclinical development programs;

     o    the receptivity of the capital markets to financings by biotechnology
          companies; and

     o    our ability to enter into strategic partnerships and alliances with
          biotechnology and pharmaceutical companies and the success of such
          relationships.

RISK FACTORS

The following factors affect our business and the industry in which it operates.
The risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known or those that we
currently consider immaterial may also have an adverse effect on our business.
If any of the matters discussed in the following risk factors were to occur, our
business, financial condition, results of operations, revenues or prospects
could be materially adversely affected.

GOING CONCERN OPINION.

Our independent accountants have indicated in their report on our financial
statements that there is substantial doubt about our ability to continue as a
going concern. If we cannot raise the necessary capital or generate the revenues
to permit us to pay our liabilities and our ongoing operating costs, we will not
be able to launch our business and be required to cease operations.

WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE LIMITED REVENUE FROM COMMERCIALIZED
PRODUCTS.

We are in the development stage and have completed development of a product
line. We have begun commercialization of our predictive genomic products however
other technologies we are developing may require significant additional capital.
Our viability, profitability and growth will depend upon successful
commercialization of products and technologies resulting from our research and
product development activities. Further, as a development stage company, we have
a limited operating history upon which an evaluation of our prospects can be
made. Such prospects must be considered in light of the risks, expenses and
difficulties frequently encountered in the shift from development to
commercialization of new products based on innovative technology. See
"Management's Discussion & Analysis" and Consolidated Financial Statements.

                                       12
<PAGE>

BECAUSE THE PRODUCTS THAT WE HAVE DEVELOPED ARE BASED ON NEW TECHNOLOGIES, THE
MARKET MAY NOT BE RECEPTIVE TO THESE PRODUCTS UPON THEIR INTRODUCTION.

The commercial success of any of our products will depend upon their acceptance
by consumers as useful, cost-effective and safe. Many of the products that we
are developing are based upon technologies that are relatively new. As a result,
it may be more difficult for us to achieve market acceptance of our products.
Our efforts to educate the consumer on these potentially unique approaches may
require greater resources than would be typically required for products based on
conventional technologies.

BECAUSE WE HAVE LIMITED MANUFACTURING EXPERIENCE, WE ARE DEPENDENT ON
THIRD-PARTY MANUFACTURERS TO MANUFACTURE PRODUCT COMPONENTS FOR US AND IF WE
CANNOT RELY ON THIRD-PARTY MANUFACTURERS, WE WILL BE REQUIRED TO INCUR
SIGNIFICANT COSTS AND DEVOTE SIGNIFICANT EFFORTS TO ESTABLISH OUR OWN
MANUFACTURING FACILITIES AND CAPABILITIES.

We have limited raw material manufacturing experience and rely on third party
manufacturers to supply us with reagents, laboratory disposables, consumables
and printing materials. We currently rely upon third parties to produce these
materials for various components of our products and expect to continue to do so
in the future. We may have difficulty finding manufacturers for our products
with adequate capacity for our needs. If we are unable to arrange for third
party manufacturing of our products on a timely basis, or to do so on
commercially reasonable terms, we may have to manufacture these items and
components ourselves.

WE HAVE NO EXPERIENCE SELLING, MARKETING OR DISTRIBUTING PRODUCTS AND NO
INTERNAL CAPABILITY TO DO SO.

We will face competition with respect to commercial sales, marketing and
distribution. These are areas in which we have no experience. To market any of
our products directly, we would need to develop a marketing and sales force with
technical expertise and with supporting distribution capability. In particular,
we would need to recruit a large number of experienced marketing and sales
personnel. Alternatively, we could engage a pharmaceutical or other healthcare
company with an existing distribution system and direct sales force to assist
us. However, to the extent we enter into such arrangements, we would be
dependent on the efforts of third parties for our sales. If we are unable to
establish sales and distribution capabilities, whether internally or in reliance
on third parties, our business would suffer materially.

OUR PLANNED COMMERCIALIZATION AND MARKETING EFFORTS MAY NOT BE EFFECTIVE.

We believe we have the opportunity to become a market leader in genetic
profiling. However, to do so, we believe we must make significant investments in
marketing our technologies and our planned products and services. At present,
the market for genetic profiling services is relatively small. Thus, greater
consumer and user awareness must be achieved and we believe this must be done
through increased marketing efforts. Our prospective clients must be educated as
to the value of our technologies and services and the knowledge they can
deliver. Larger and better-financed competitors may be alerted to the market
opportunity, thus losing our potential to acquire a leadership position in the
market and significant share of any potential revenues.

IF A NATURAL OR MAN-MADE DISASTER STRIKES OUR FACILITIES, IT COULD DELAY
DELIVERY OF OUR PRODUCTS AND SERVICES AND ADVERSELY AFFECT OUR COMMERCIAL SALES.

We are developing our products in our facility located in Coral Springs,
Florida. We also perform all of our diagnostic services in our laboratory in the
same location in Coral Springs, Florida. The facility and the equipment we use
for our products and diagnostic testing would be costly to replace and could
require substantial lead time to repair or replace. Our facility may be harmed
by natural or man-made disasters, including, without limitation, tornados,
hurricanes, floods, fires and power outages, and in the event they are affected
by a disaster, our development and commercialization efforts would be delayed.
Although we possess insurance for damage to our property and the disruption of
our business from casualties, this insurance may not be sufficient to cover all
of our potential losses and may not continue to be available to us on acceptable
terms, or at all.

OUR INDUSTRY IS HIGHLY COMPETITIVE.

The biotechnology industry is highly competitive and characterized by rapid and
significant technological change. We expect to face intense competition from
organizations such as pharmaceutical, healthcare and biotechnology firms, as
well as academic and research institutions, and governmental agencies and
institutions. Some of these organizations and institutions are pursuing
technologies, as well as products and services, similar to our technologies.
Other organizations have developed and are marketing products or services, or
are pursuing other technological approaches which could produce products and
services that are competitive with our technologies in the diagnostic and
genetic profiling areas.

In addition, many participants in the biotechnology industry are substantially
larger than we are, and have greater capital resources, larger and more skilled
research and development staffs, and larger or better facilities than us. In
addition, many potential competitors are more experienced than we are in
diagnostic test development, and in the regulatory process, and in diagnostic
product manufacturing and marketing.

We anticipate that once we commence our commercialization and marketing efforts,
competition will be based on, among other things, product efficacy, safety,
reliability, availability, price, performance, accuracy, patent position, and
effective marketing. We believe that any future competitive position will also
depend on the ability to attract and retain additional qualified personnel, to
obtain patent or other intellectual property protection, or otherwise develop
proprietary products or processes, and to secure sufficient capital resources
for the period between technological conception, development and ultimately
commercial sales.

                                       13
<PAGE>

OUR ABILITY TO ATTRACT, COMPENSATE, AND RETAIN KEY PERSONNEL IS CRITICAL TO
OUR SUCCESS.

We believe our success will be highly dependent on the retention of principal
members of our current technical and management staff, including Mr. Martin
Munzer, our Chief Executive Officer. We believe the loss of Mr. Munzer's
services would be detrimental to our company. Furthermore, we anticipate that
future growth, if any, will require hiring a significant number of additional
qualified technical and management personnel including a Chief Financial
Officer. Accordingly, the recruiting and retaining of such personnel in the
future will be critical to our success. There is intense competition from other
companies, and research and academic institutions, for qualified scientific and
management personnel in our industry. If we are not able to attract and retain,
on acceptable terms, the qualified personnel necessary to become competitive in
our industry, we may not be able to sustain our current operations or grow in
the future.

THE BIOTECHNOLOGY INDUSTRY IS SUBJECT TO INCREASED REGULATORY UNCERTAINTY DUE TO
THE RAPIDLY CHANGING NATURE OF THE STATE OF THE ART, SCIENTIFIC ADVANCES AND
DISCOVERIES, AND AS NEW TECHNOLOGIES ARE DEVELOPED.

We expect that many of the products and services that we are in the process of
developing will require additional research and development, and may require
regulatory approval prior to any commercial sales. This process is lengthy,
often taking a number of years, and requires sometimes meticulous attention from
experienced personnel in furthering our objectives. Our company has only limited
experience in filing and prosecuting the applications necessary to gain
regulatory approvals. Moreover, the products and services that result from
research and development programs will likely be based on new technologies and
new diagnostic and therapeutic approaches that have not been extensively tested
in humans. As a result, we may experience a longer regulatory process in
connection with any product or service that we develop based on these new
technologies or new diagnostic and therapeutic approaches.

ALTHOUGH WE ARE NOT CURRENTLY SUBJECT TO COMPREHENSIVE FDA REQUIREMENTS, THE FDA
REGULATIONS MAY CHANGE OR BE INTERPRETED TO REQUIRE THAT OUR PRODUCTS
REGULATIONS COMPLY WITH FDA REGULATIONS , WHICH ARE COSTLY AND TIME CONSUMING TO
COMPLY WITH; IF WE FAIL TO COMPLY WITH THESE REQUIREMENTS, WE COULD BE SUBJECT
TO ADVERSE CONSEQUENCES AND PENALTIES.

The testing, manufacturing, labeling, advertising, promotion, export and
marketing of our products may become subject to extensive regulation by
governmental authorities in Europe, the United States and elsewhere throughout
the world. In general, submission of materials requesting permission to conduct
clinical trials may not result in authorization by the FDA or any equivalent
foreign regulatory agency to commence clinical trials. Further, permission to
continue ongoing trials may be withdrawn by the FDA or other regulatory agency
at any time after initiation, based on new information available after the
initial authorization to commence clinical trials. In addition, submission of an
application for marketing approval to the relevant regulatory agency following
completion of clinical trials may not result in the regulatory agency approving
the application if applicable regulatory criteria are not satisfied, and may
result in the regulatory agency requiring additional testing or information.

Any regulatory approval of a product may contain limitations on the indicated
uses for which the product may be marketed or requirements for costly
post-marketing testing and surveillance to monitor the safety or efficacy of the
product. Any product for which we obtain marketing approval, along with the
facilities at which the product is manufactured, any post-approval clinical data
and any advertising and promotional activities for the product will be subject
to continual review and periodic inspections by the FDA and other regulatory
agencies.

Both before and after approval is obtained, violations of regulatory
requirements may result in:

     o    the regulatory agency's delay in approving, or refusal to approve, an
          application for approval of a product; o restrictions on such products
          or the manufacturing of such products;

     o    withdrawal of the products from the market;

     o    warning letters;

     o    voluntary or mandatory recall;

     o    fines;

     o    suspension or withdrawal of regulatory approvals;

     o    product seizure;

     o    refusal to permit the import or export of our products;

     o    injunctions or the imposition of civil penalties; and

     o    criminal penalties.

                                       14
<PAGE>

IF WE FAIL TO RAISE SUFFICIENT CAPITAL IN PRIVATE PLACEMENTS, WE MAY NOT BE ABLE
TO REMAIN OPERATIONAL.

If we do not receive sufficient funds from the offering of our shares in private
placements, debt financings or from the sale of our products, we may not be able
to remain in business

WE MAY NOT BE ABLE TO RAISE ADDITIONAL NEEDED CAPITAL OR FINANCING.

As a development stage company, we have funded our expenditures with externally
acquired capital since our inception. We expect to continue to incur operating
losses in future periods, and cannot be certain whether or when we will become
profitable, if ever, because of the significant uncertainties with respect to
our ability to successfully market our genetic profiling products (and related
services) and from any potential strategic partnerships and alliances. Until
such time as we have operations which generate sufficient cash flows to fund
operations, we will continue to rely on capital from equity and debt sources,
vendor financing and equipment leasing.

OUR PATENTS, AND THOSE OF OTHER BIOTECHNOLOGY AND RELATED COMPANIES, ARE
GENERALLY UNCERTAIN AND INVOLVE COMPLEX LEGAL, SCIENTIFIC AND FACTUAL QUESTIONS.

We believe that the ability to develop and commercialize diagnostic products and
other technologies will depend in significant part on our ability to:

     o    obtain patents;

     o    obtain licenses to the proprietary rights of others on commercially
          reasonable terms;

     o    operate without infringing upon the proprietary rights of others;

     o    prevent others from infringing on our proprietary rights; and

     o    protect trade secrets.

Our existing patents, and those that may be issued in the future, or those
licensed to us, may be challenged, invalidated, or circumvented, and the rights
granted thereunder may not provide us with proprietary protection or competitive
advantages against competitors with similar technology. Furthermore, our
competitors may independently develop similar technologies or duplicate any
technology developed by us.

We may not have rights under some patents or patent applications related to our
technologies. Third parties may own or control these patents and patent
applications in the United States and abroad. Therefore, in some cases, we may
choose to seek, or be required to seek, licenses under third party patents
issued in the United States and abroad or those that might issue from United
States or abroad. In such event, we may be required to pay license fees or
royalties or both to the licensor. If licenses are not available to us on
acceptable terms, we may not be able to develop, manufacture, or sell or import
products and services utilizing the technology.

WE MAY FACE RISKS RELATED TO INTELLECTUAL PROPERTY LITIGATION.

There has been substantial litigation and other proceedings regarding patent and
other intellectual property rights in the biotechnology industry. From time to
time, we may become a party to various types of patent litigation or other
proceedings regarding intellectual property rights. The cost to us of any patent
litigation or other proceeding, including these interferences, even if resolved
in our favor, could be substantial. Our future competitors may be able to
sustain the cost of such litigation or proceedings more effectively because of
their substantially greater financial resources. If any patent litigation or
other proceeding is resolved adversely, we may be enjoined from developing,
manufacturing, or selling products and services based on the technology and,
furthermore, may be held liable for significant damages. We may not be able to
obtain any required license on commercially acceptable terms or at all.

Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect on our
ability to compete in the marketplace. Patent litigation and other proceedings
may also absorb significant management time.

OUR INTELLECTUAL PROPERTY IS SUBJECT TO LIENS AND COULD BE LOST IN FORECLOSURE .

Our intellectual property is subject to a first priority secured loan in the
amount of $211,040 held by Equine Diagnostics LLC bearing interests at the rate
of Citibank prime rate. The loan becomes due on December 31, 2006 or on default
of the second lien position. A second priority secured loan in the amount of
$365,000 exists that is held by Transpirator LLC and certain other investors
bearing interest at 15% per annum and due on July 7, 2006. The first security
lien is convertible into our common stock at 1-1/4% of total diluted company
stock for every $100,000 debt. The second position lien is convertible into our
common stock at $0.22 per share, respectively. We may not be able to offer
repayment of these loans when they become due, and there is no assurance that we
will be able to extend or replay these loans or persuade the holders to convert
them into common stock. If we cannot extend or repay these loans when they
become due or induce the holders to convert them into common stock, we would
default and potentially lose all our intellectual properties upon foreclosure.



                                       15
<PAGE>

FOR OUR GENETIC PROFILING SERVICE PRODUCTS AND OTHER PRODUCTS IN DEVELOPMENT, WE
WILL FACE COMPETITION WITH RESPECT TO BRAND NAME(S), COMMERCIAL SALES, MARKETING
AND DISTRIBUTION.

These are areas in which our personnel have limited experience. To market
products directly, we will need to develop a marketing and sales force with
technical expertise and with supporting distribution capability. Alternatively,
we may seek to engage retail distributors, or pharmaceutical or other healthcare
companies, with existing distribution systems and direct sales forces to assist
us. There can be no assurance that we will successfully establish effective
brand names, sales and distribution capabilities or gain market acceptance for
our products. To the extent we enter co-promotion or other licensing
arrangements, any revenues we receive will depend on the efforts of third
parties and there can be no assurance that such efforts will succeed.

If in the future our management elects to perform sales, marketing and
distribution functions for such types of products internally, we would face a
number of additional risks, including the need to recruit a large number of
additional experienced marketing and sales personnel.

WE HAVE NO LIABILITY INSURANCE WHICH MEANS ANY LOSSES MAY HAVE A MATERIAL
ADVERSE IMPACT UPON US.

Because of our lack of working capital, we have no liability insurance of any
kind. In the event of a claim against us, we would be required to pay for the
costs of any defense and any adverse verdicts. Because of our financial
condition, we would be materially and adversely affected by any liability claim.

WE MAY NOT BE ABLE TO ADEQUATELY INSURE AGAINST THE RISK OF PRODUCT LIABILITY
CLAIMS.

Once we commercialize our technologies and commencing selling or licensing them,
we may be exposed to the risk of product liability claims, and therefore we plan
to seek to mitigate these risks, to the extent possible, through acquiring
appropriate product liability insurance. This insurance would be subject to
deductibles and coverage limitations, and we may not be able to obtain or
maintain adequate protection against potential liabilities subject to changes in
premiums, deductibles and coverage options. If we are unable to obtain insurance
at an acceptable cost or otherwise protect against potential product liability
claims, we could be exposed to significant liabilities, which may materially and
adversely affect our business and financial position. These liabilities could
prevent or interfere with our commercialization efforts.

RISKS RELATED TO OUR COMMON STOCK

WE MAY ISSUE COMMON OR PREFERRED STOCK WITHOUT THE APPROVAL OF OUR STOCKHOLDERS
WITH FEATURES WHICH COULD MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US
AND COULD DEPRESS OUR STOCK PRICE.

In the future, our board of directors may issue one or more series of common or
preferred stock that has more than one vote per share without a vote of our
stockholders. This could permit our board of directors to issue preferred stock
to investors who support our management and increase control of our business by
management. Additionally, issuance of super voting common or preferred stock
could block an acquisition, even if an acquisition is in the best interest of
the stockholders. This could cause the market price of our common stock to drop
significantly.

BECAUSE OUR COMMON STOCK IS NOT LISTED ON A STOCK EXCHANGE OR NASDAQ, INVESTORS
MAY BE UNABLE TO RESELL THEIR SHARES.

Since our common stock only trades on pink sheets and has extremely limited
trading volume, your ability to sell your common stock may be severely
restricted. Even if we are able to have our common stock again quoted on the
Over-the-Counter Bulletin Board, that trading market is also illiquid.
Accordingly, investors must be able to hold their investment for an indefinite
period and to bear the financial risk of losing their entire investment.

THE PRICE OF THE COMMON STOCK MAY BE HIGHLY VOLATILE, AND INVESTORS MAY NOT BE
ABLE TO SELL THE COMMON STOCK AT OR ABOVE MARKET PRICES.

The market price for our common stock may be highly volatile. As long as the
future market for the common stock is limited, investors who purchase the common
stock may only be able to sell their shares, if at all, at a loss.

WE ARE SUBJECT TO THE "PENNY STOCK" RULES WHICH ADVERSELY EFFECT THE LIQUIDITY
OF OUR COMMON STOCK.

The SEC has adopted regulations which generally define "penny stock" to be an
equity security that has a market price of less than $5.00 per share, subject to
specific exemptions. Presently, the market price of our common stock is
substantially less than $5.00 per share and therefore is designated as a "penny
stock" according to SEC rules. This designation requires any broker-dealer
selling these securities to disclose certain information concerning the
transaction, obtain a written agreement from the purchaser and determine that
the purchaser is reasonably suitable to purchase the securities. These rules
limit the ability of broker-dealers to solicit purchases of our common stock and
therefore reduce the liquidity of the public market for our shares.

ITEM 7. FINANCIAL STATEMENTS.

                            CYGENE LABORATORIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                        CONSOLIDATED FINANCIAL STATEMENTS
                          AS OF MARCH 31, 2005 AND 2004

SEE F PAGES AT THE END OF THIS REPORT WHICH ARE INCORPORATED HEREIN BY REFERENCE

                                       16
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE, WHICH ARE INCORPORATED HEREIN BY REFERENCE.

As we previously reported in our Form 8-K filed on August 9, 2005, we dismissed
Eisner LLP as our principal auditors and as reported in our Form 8-K on
September 7, 2005, we reengaged Brimmer, Burek & Keelan LLP as our principal
auditors. The decision to change principal accountants was approved by the Board
of Directors. We had not consulted with Brimmer, Burek & Keelan LLP on any
matter during fiscal year 2005 or after their prior dismissal as our principal
accountant on April 29, 2004.

Brimmer, Burek & Keelan LLP's reports on our consolidated financial statements
for the fiscal years ended March 31, 2002 and 2003 did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
audit scope, or accounting principles, except that Brimmer, Burek & Keelan LLP's
report was modified by the inclusion of an explanatory paragraph addressing the
ability of the company to continue as a going concern. During fiscal 2003 and
2002, there have been no disagreements with Brimmer, Burek & Keelan, LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which, if not resolved to the satisfaction of
Brimmer, Burek & Keelan LLP, would have caused it to make reference to the
subject matter in connection with its reports on our consolidated financial
statements for such years, nor have there been any reportable events as listed
in Item 304(a)(1)(v) of Regulation S-B. However, because our prior financial
statements were not presented on the basis that CyGene is in the development
stage, we have included the effects of reporting on a development stage basis in
the financial statements included in this Form 10KSB for the periods ending
March 31, 2005, 2004 and from inception through March 31, 2005. In addition, the
financial statements for March 31, 2005 and 2004 and from inception to March 31,
2005 reflect certain gifts of shares by officers of the company to vendors and
employees for the benefit of the company in the approximate amount of $1,900,000
which were not previously reflected in CyGene's financial statements.

ITEM 8A. CONTROLS AND PROCEDURES

We carried out an evaluation required by Rule 13a-15(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") under the supervision and with the
participation of management, including Mr. Martin Munzer, who serves as our
chief executive officer and chief financial officer, of the effectiveness of the
design and operation of our "disclosure controls and procedures" as of the end
of the period covered by this Report.

Disclosure controls and procedures are designed with the objective of ensuring
that (i) information required to be disclosed in an issuer's reports filed under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC rules and forms and (ii) information is accumulated
and communicated to management, including our chief executive officer and chief
financial officer, as appropriate to allow timely decisions regarding required
disclosures.

The evaluation of our disclosure controls and procedures included a review of
our objectives and processes and effect on the information generated for use in
this Report. This type of evaluation will be done quarterly so that the
conclusions concerning the effectiveness of these controls can be reported in
our periodic reports filed with the SEC. We intend to maintain these controls as
processes that may be appropriately modified as circumstances warrant.

Based on our chief executive officer and chief financial officer's evaluation,
he has concluded that our disclosure controls and procedures are effective in
alerting him in a timely manner to material information relating to the company
that is required to be included in our periodic reports filed with the SEC as of
the filing of this Report. There were no changes in our internal control over
financial reporting that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. However, a control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Management necessarily
applied its judgment in assessing the benefits of controls relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the company have been detected. The design of any
system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions,
regardless of how remote. Because of the inherent limitations in a control
system, misstatements due to error or fraud may occur and may not be detected.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

         NAME                 AGE                  POSITION
         ----                 ---                  --------

Martin Munzer                 53       Chairman of the Board, CEO, and CFO
Peter J. Laurence             62       Vice President of Business Development
Stanley Satz                  62       Member of the Board of Directors

                                       17
<PAGE>

Martin M. Munzer has been our CEO, CFO, and Chairman of the Board of Directors
since September 30, 2003, the date of our merger. From 1999 to the present, he
was and is the CEO and CFO of CyGene, Inc. He joined CyGene in August 1997 as
Vice President.

On January 20, 2006, Peter J. Laurence joined our Company as Vice President of
Business Development. Mr. Laurence has more than thirty years of strategic
planning, marketing, product development and sales experience in the
manufacturing, retail, direct sales banking and technology industries.
Highlights include the establishment of new business as well as strategic
planning and venture development consulting with a variety of large and small,
private and public companies including General Electric Corp, eFunds
Corporation, Lowes and Visioneering Inc. Mr. Laurence joined eFunds Corporation
on April 23rd, 2001, as a Divisional Vice President Retail Sales and was with
eFunds through November 29, 2002. He has since been self employed doing business
as Pete Laurence Enterprises, Inc. Initially, Mr. Laurence will be responsible
for establishing a variety of distribution channels as well as strategic
planning for future product and service delivery systems.

Stanley Satz has been one of our directors since September 30, 2003, the date of
our merger. From 1995 to present, he was and is President and Chief Scientific
Officer of BioNucleonics, Inc., a privately held corporation in Miami, Florida.
He has 20 years of experience in product development, including diagnostic and
therapeutic radiopharmaceuticals, and led the development and GMP production of
Strontium Chloride Sr-89, Injection, a therapeutic for treatment of cancer bone
pain, approved by the FDA in 2003. This background has given him extensive
experience in active pharmaceutical ingredient and materials characterization,
and drug validation and discovery, moving drug candidates through to FDA
approval including implementation of advanced engineering automation for medical
device development and production. He graduated from the University of Miami
with a B.S. in Engineering and BBA. After obtaining an MPA from Florida Atlantic
University, he received his Ph.D. from the University of Ljubljana, Yugoslavia.

Previous experience with the SBIR program and the Advanced Technology Program of
NIST led to multiple matters, including collaborations with Cardinal Health and
the Boeing Radiation Effects Laboratory. He has also received grants from NATO,
the U.S. Department of Energy, the United States Industry Coalition and the
State of Florida. Satz has 8 awarded U.S. patents that include
radiopharmaceutical, radioimmuno therapeutic and radioactive medical devices,
and 6 pending patents. A former Adjunct Professor in the Department of
Continuing Education of the University of Miami, he is Chairman of the
Scientific Advisory Board at Florida Atlantic University, Boca Raton, FL, and
serves on the Advisory Board of Florida International University's School of
Engineering. He is also on the Board of Directors of Washington D.C. based
non-profit United States Industry Coalition.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934

Section 16(a) of the Exchange Act requires our directors and executive officers,
and persons who own more than 10% of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
Officers, directors and greater than 10% stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely upon a review of Forms 3, 4 and 5 filed with the SEC, and
except for the filings listed in the table below, none of the officers,
directors or greater than 10% stockholders of the company were delinquent in any
necessary filings under Section 16(a).
<TABLE>
<CAPTION>
NAME                       FORM       DATE OF EVENT                   EXPLANATION
----                       ----       -------------                   -----------
<S>                         <C>       <C>                      <C>
Stanley Satz                4         January 5, 2004          Filed late on June 15, 2004 reporting as a single transaction
</TABLE>

AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has an audit committee, but does not have a nominating
committee or compensation committee or any committees performing similar
functions. Our plenary board presently performs similar functions as those
commonly understood to be within the purview and competence of such committees
generally. Our audit committee is comprised of Stanley Satz and Martin Munzer.
Neither of Mr. Satz or Mr. Munzer has advised us that he is an audit committee
financial expert within the meaning of the SEC's rules. We do not carry any
Directors and Officers insurance due to the high cost of such coverage and our
lack of resources. Thus we are unable to attract additional directors to serve
on our Board and various committees.

In the future, the board of directors intends to establish compensation and
nominating committees and to adopt such other corporate governance measurers and
policies as it believes are appropriate or necessary.

Although we do not currently have a formal process or policy for stockholders or
others to send communications to the board of directors, we believe that the
establishment of a formal process or policy is an important corporate governance
step and we intend to implement such a process as soon as practicable.
Presently, the board of directors welcomes communications from stockholders,
employees, and others, whether on a confidential, anonymous, or disclosed basis.

NOMINATING COMMITTEE

We currently do not have any policy with regard to our consideration of any
nominees or candidates for membership on our board of directors recommended by
our security holders. We believe that the establishment of such a policy is
within the purview of a nominating committee and would be included in a charter
for such committee when and if established. Similarly, we do not have any
specific qualifications for membership on a nominating committee or for a
nominee or candidate for membership on our board of directors at this time,
although we expect that any future nominating committee may implement such
policies Currently, we do not pay a fee to any third party to identify or
evaluate or assist in identifying or evaluating potential nominees to the board
of directors. To our knowledge, the company has not received any requests from
any security holder recommending any nominees or candidates to its board of
directors.

                                       18
<PAGE>

CODE OF ETHICS

We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. Our code of ethics was
filed with the SEC as an exhibit to our Form 10-KSB. A copy of our code of
ethics may also be obtained by any person without charge by sending a written
request addressed to: CyGene Laboratories, Inc., 7786 Wiles Road, Coral Springs,
Florida 33067.

ITEM 10. EXECUTIVE COMPENSATION

The following table provides summary information for each of the last three
fiscal years about all plan and non-plan compensation awarded to, earned by, or
paid to certain persons who served as our executive officers during the most
recent fiscal year ended March 31, 2005, or who earned more than $100,000 in
salary and bonus.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                        ANNUAL COMPENSATION         LONG-TERM COMPENSATION
                                 -------------------------------    --------------------------
NAME AND                                                            RESTRICTED    SECURITIES
PRINCIPAL           FISCAL                                          STOCK         UNDERLYING         LTIP         ALL OTHER
POSITION            YEAR         SALARY          BONUS     OTHER    AWARDS        OPTIONS/SARS       PAYOUTS     COMPENSATION
---------           ------       ------          -----     -----    ----------    ------------       -------     ------------
<S>                 <C>          <C>
Martin Munzer,      2005         $214,708(1)
President and CEO   2004         $109,370(2)                                          --                           $375,000(2)
                    2003           $5,462(3)                                          --
</TABLE>
----------
(1) Mr. Munzer's contractual annual salary for the fiscal year ended March 31,
    2005 was $250,000. A balance of $35,292 remains unpaid and has been accrued.

(2) On July 9, 2003 the Company issued to Mr. Munzer 5,250,000 shares of common
    stock valued at $.07143 per share ($375,000) as payment of salary accrued in
    2004, 2003 and 2002. $62,500 of the accrual applies to fiscal year 2004.
    $244,538 of the accrual applies to fiscal year 2003 and the remaining
    $67,962 were due from his fiscal year 2002 salary deferral. An additional
    unpaid balance of $29,999 was forgiven by Mr. Munzer. Mr. Munzer received
    $109,370 in cash during the period of July 9, 2003 through March 31, 2004.
    $66,899 of his contractual salary remained unpaid as of March 31, 2004 and
    has been accrued.

(3) Mr. Munzer's contractual salary for the year ended March 31, 2003, was
    $250,000, $5,462 of which was paid during the year (see (2) above).

OPTION GRANTS IN CURRENT FISCAL YEAR

The following table sets forth information regarding the grant of stock options
to the named executive officers during the fiscal year ended March 31, 2005.

                       OPTIONS/GRANTS IN FISCAL YEAR 2005
<TABLE>
<CAPTION>
                                                                PERCENT OF TOTAL
                                   NUMBER OF SECURITIES           OPTIONS/SARS
                                  UNDERLYING OPTIONS/SARS     GRANTED TO EMPLOYEES    EXERCISE OR BASE PRICE
             NAME                       GRANTED (#)              IN FISCAL YEAR               ($/SH)           EXPIRATION DATE
             ----                 -----------------------     --------------------    ----------------------   ---------------
<S>                                      <C>                          <C>                      <C>                 <C>
Walter Witoshkin                         437,500                      100%                     $1.01               06-01-07
</TABLE>

DIRECTOR COMPENSATION

On January 5, 2004, we adopted the Amended and Restated 2004 Stock Plan (the
"Amended Plan") which provides for automatic grants of 100,000 shares of common
stock to directors who are not employees or 10% stockholders. The grants occur
upon adoption of the Amended Plan and upon election or appointment. Upon
adoption, we issued 100,000 shares of restricted common stock to each of Raymond
J. Romano, Stanley Satz and John J. Signorelli. For each of these grants, 20,000
of such shares vested upon issuance, with the remaining 80,000 shares vesting in
increments of 20,000 on each December 31 thereafter until fully vested, subject
to continued service as directors.

In addition, on January 5, 2004, in recognition of Messrs. Romano and
Signorelli's efforts in business development for us, we granted each of them as
compensation for such services 100,000 stock options with an exercise price of
$0.25 per share, exercisable for a period of five years. These stock options
were fully vested upon grant.

EXECUTIVE EMPLOYMENT AGREEMENTS AND TERMINATION/CHANGE-IN-CONTROL ARRANGEMENTS

CyGene, Inc. has a seven year employment agreement with Martin Munzer which was
entered into on April 13, 1999 and automatically renewed on its anniversary on
April 13, 2006. The agreement provides for a base salary of $250,000 per year


                                       19
<PAGE>

plus a performance bonus of 5% of net income with a cap of $750,000 for the
first $100,000,000 in sales. If sales exceed $100 million the $750,000 bonus
again applies for each additional $100 million in sales. He is entitled to
standard company health insurance benefits and has use of a company car. The
agreement does not provide for any additional automatic renewals. In the event
that Mr. Munzer voluntarily terminates his employment or the board of directors
terminates Mr. Munzer for materially neglecting his duties, committing fraud and
dishonesty, or indictment for a felony, Mr. Munzer would be entitled to 12
months salary and benefits as severance pay. If the indictment does not result
in a conviction, Mr. Munzer would be entitled to severance pay of salary and
benefits which would have been paid for the period of time remaining under the
term of the agreement.

January 20, 2006 Mr. Peter J. Laurence joined us as Vice President of Business
Development. He is accruing a base salary of $100,000 on a quarterly basis and
shall be paid, net of payroll taxes, once we have either received $1 million in
debt or equity financing or once we have achieved quarterly annualized revenues
of $1 million based on the most recent quarterly report. Upon execution of his
agreement, Mr. Laurence was issued a signing bonus of 5-year warrants for the
purchase of 650,000 shares of the common stock of our company, at an exercise
price of $0.50 per share In addition, Mr. Laurence shall be entitled to a bonus
of 2% of gross profit achieved through the sales of our products [gross profit
is defined to be total revenue from sales minus the aggregate cost of product
packaging and processing]. Such bonus shall be calculated at the end of each
fiscal quarter and be paid in cash. In the event that we close one or more
financing transactions whereby we raise capital through the issuance or sale of
securities or through loans (or a combination thereof), which in the aggregate
provides funds to us, of at least $2,500,000, his annual salary shall be
increased to $240,000 per year effective for the balance of the term of his
agreement. Said increase in base salary shall also take effect in the event that
we derive annualized gross revenues in any quarter in excess of $1,500,000 and,
in both cases, shall begin with the first quarter following the quarter where
the qualifying revenues were booked, or in which the loans or other funding were
received.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
<TABLE>
<CAPTION>
------------------------------- ---------------------------- ---------------------------- ----------------------------
PLAN CATEGORY                   NUMBER OF SECURITIES TO BE   WEIGHTED-AVERAGE EXERCISE    NUMBER OF SECURITIES
                                ISSUED UPON EXERCISE OF      PRICE OF OUTSTANDING         REMAINING AVAILABLE FOR
                                OUTSTANDING OPTIONS,         OPTIONS, WARRANTS AND        FUTURE ISSUANCE UNDER
                                WARRANTS AND RIGHTS          RIGHTS                       EQUITY COMPENSATION PLANS
                                                                                          (EXCLUDING SECURITIES
                                                                                          REFLECTED IN COLUMN (A))*

                                (A)                          (B)                          (C)
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                                      <C>                            <C>                         <C>
Equity compensation plans                2,687,500                      $1.08                       812,500
approved by security holders
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not            2,200,000(1)                   $0.55
approved by security holders**
------------------------------- ---------------------------- ---------------------------- ----------------------------
Total                                    4,887,500                      $0.84                       812,500
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
(1) Securities were issued pursuant to individual compensation arrangements in
    lieu of compensation or as consideration for continued services to the
    company despite account payment delinquencies. The material terms of the
    warrants vary, however the warrants are all fully vested, their exercise
    period ranges between 3 to 5 years and they have exercise prices ranging
    between $0.40 and $0.75 per share.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

The following table sets forth, as of May 19, 2006, certain information with
respect to our equity securities owned of record or beneficially by (i) each
executive officer and director; (ii) each person who owns beneficially more than
5% of each class of our outstanding equity securities; and (iii) all directors
and executive officers as a group.

                                               AMOUNT AND NATURE
                       NAME AND ADDRESS          OF BENEFICIAL       PERCENT
TITLE OF CLASS     OF BENEFICIAL OWNER (1)         OWNERSHIP        OF CLASS (1)
--------------     -----------------------     ------------------   ------------

Common Stock          Martin Munzer              8,599,109(2)         13.38%
                      7786 Wiles Road
                      Coral Springs, FL 33067

Common Stock          Stanley Satz                 100,000                *
                      9372 Harding Avenue
                      Surfside, FL 07004

Common Stock          Peter J. Laurence          7,305,000(3)         11.37%
                      8419 E. Cortez Street
                      Scottsdale, AZ  85323

Common Stock          Elliot Ramberg             3,316,931(4)          5.16%
                      1310 NW 64th Ave
                      Hollywood, FL  33024
All executive                                                         24.75%
officers and
directors as a group

                                       20
<PAGE>

----------
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under
    the Exchange Act and unless otherwise indicated, and represents securities
    for which the beneficial owner has sole voting investment power or has the
    power to acquire such beneficial ownership within 60 days.

(2) These shares are held Mr. Munzer and his wife as tenants by the entireties.
    It includes 750,000 shares issuable upon the exercise of stock options.

(3) This represents 2,977,500 shares owned plus 4,327,500 shares issuable upon
    the exercise of warrants.

(4) Includes 1,221,366 shares of common stock owned by his wife Carol Ramberg,
    of which he is presumed to be the beneficial owner and 400,000 shares
    issuable upon the exercise of stock options. We are relying on our stock
    transfer records and information supplied by Mr. Ramberg. We do not know if
    Mr. or Mrs. Ramberg beneficially own any additional shares.

 *  Less than 1%

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Transpirator LLC (TTI LLC) was formed prior to the merger of CyGene, Inc. and
Transpirator Technologies, Inc. (TTI) in September of 2003 for the purpose of
acquiring all the assets and liabilities of TTI. The assets consisted primarily
of a revenue generating royalty from a licensed patent and the liabilities
consisted of legal and accounting costs. TTI shareholders received 15% of our
equity in our merger. TTI LLC is managed by Mr. Raymond J. Romano, who until
April 25, 2006 was a member of our Board of Directors. Both he and Mr. John
Signorelli, who also resigned from our Board on the same date, own a significant
interest in TTI LLC.

Messrs. Signorelli, Romano and TTI LLC made the following investments and loans
into the company:

On July 31, 2003, TTI made a $100,000 loan to CyGene, Inc. It was structured as
a convertible 5-year note, bearing 5% interest and convertible into our stock at
$0.50 per share.

On September 12, 2003, Mr. Romano purchased through an affiliate, RKL
Associates, in a private transaction 133,333 shares of our common stock for
$20,000 ($0.15 per share).

On September 12, 2003, Mr. Signorelli purchased in a private transaction 33,333
shares of our common stock for $7,500 ($0.225 per share).

On September 25, 2003, Mr. Romano purchased through RKL Associates in a private
transaction 44,444 shares of our common stock for $10,000 ($0.225 per share).

On December 31, of 2003, 2004 and 2005, Messrs. Signorelli and Romano were each
granted 20,000 shares of common stock for each year of service on our Board of
Directors.

On January 5, 2004, Messrs. Signorelli and Romano were each granted options to
purchase 100,000 shares of common stock with 10-year expiration and a exercise
price of $0.25 per share.

On January 12, 2004 Mr. Romano purchased through an affiliate, M&R Associates,
in a private transaction 44,444 shares of common stock for $10,000 ($0.225 per
share).

On February 23, 2004, Mr. Romano purchased through M&R Associates in a private
transaction 44,444 shares of common stock for $10,000 ($0.225 per share).

On July 16, 2004, we borrowed $50,000 from TTI LLC to use as a deposit for our
new facility. The loan, bearing interest at a rate of 4% per annum, was payable
from the receipt of a proposed bridge loan financing. As additional
consideration, we issued to TTI LLC a two year warrant to purchase 50,000 shares
of our common stock at $.40 per share. The note was exchanged into a convertible
secured note bearing 15% interest in July 2005 as described in item 5. The notes
become due in July 2006 and are convertible into common stock at $0.22 per
share. TTI LLC was also issued 200,000 warrants to purchase four shares of
common stock. These warrants have a term of four years and are exercisable at
$0.50 per share.

On January 13, 2005, we issued a note bearing 10% interest to TTI LLC in the
amount of $50,000 it is convertible at $0.70 per share. As additional
consideration, we issued a three-year warrant to purchase 20,000 shares of our
common stock at $.80 per share.

On February 14, 2005, we borrowed $15,000 and issued 6,000 warrants on the same
terms and conditions as the loan made in January 2005.

On February 22, 2005, we borrowed $35,000 and issued 14,000 warrants on the same
terms and conditions as the loan made in January.

On July 11, 2005, TTI LLC purchased in a private transaction 452,381 shares of
our common stock for $50,000 ($0.11 per share).



                                       21
<PAGE>

On October 18, 2005 TTI LLC purchased in a private transaction 250,000 units
consisting of one share of our common stock and one warrant for $50,000. The
warrants have a 3-year exercise period and an exercise price of $0.50 per share.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBIT INDEX

EXHIBIT
NUMBER    DESCRIPTION
-------   -----------

2.1       Agreement and Plan of Merger - Incorporated by reference to Exhibit
          2.1 of company's 8-K/A filed October 10, 2003

2.2       Amendment to Merger Agreement

3.1       Articles of Incorporation of CyGene Laboratories, Inc.

3.2       By-laws of CyGene Laboratories, Inc.

4.1       Sample form of material Warrant

10.1      CyGene, Inc. Employment Agreement with Martin Munzer - Incorporated by
          reference to Exhibit 10.1 of company's 10-KSB filed September 17, 2004

10.2      Lease - Incorporated by reference to Exhibit 10.2 of company's 10-KSB
          filed September 17, 2004

10.3      2004 Amended Stock Option Plan- Incorporated by reference to Exhibit
          10.3 of company's 10-KSB filed September 17, 2004

10.4      Consulting agreement with Dr. Fred McCall-Perez - Incorporated by
          reference to Exhibit 10.4 of company's 10-KSB filed September 17, 2004

10.5      Consulting agreement with Dr. Barry Dvorchik - Incorporated by
          reference to Exhibit 10.5 of company's 10-KSB filed September 17, 2004

10.6      CyGene Laboratories, Inc. Employment agreement with Peter J. Laurence

10.7      Amended Operating Lease

10.8      Sample form of note pertaining to the liens on our intellectual
          property

10.9      Sample form of warrant pertaining to the liens on our intellectual
          property

10.10     Sample form of security agreement pertaining to the liens on our
          intellectual property

10-11     Consulting agreement with Valeo Partners

10-12     Consulting agreement with DX Innovations, Inc.

14        Code of Ethics - Incorporated by reference to Exhibit 99.1 of
          company's 10-KSB filed September 17, 2004

16        Letter on change of certifying accountant(1)- Incorporated by
          reference to Exhibit 16.1 of company's 8-K/A filed August 19, 2005

21        Subsidiaries - Incorporated by reference to Exhibit 21 of company's
          10-KSB filed September 17, 2004

31        CEO and CFO certification required under Section 302 of the
          Sarbanes-Oxley Act of 2002

32        CEO and CFO certification required under Section 906 of the
          Sarbanes-Oxley Act of 2002

99.1      Ethical Guidelines - Incorporated by reference to Exhibit 99.1 of
          company's 10-KSB filed September 17, 2004
----------
(1) Incorporated by reference to Exhibit 16.1 of company's 8-K/A filed August
    19, 2005

                                       22
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

The aggregate fees billed for professional services rendered by our principal
independent accountants for the audit of our annual financial statements
included in our Form 10-KSB for the year ended March 31, 2005 were $214,052 as
compared to $130,253 for the year ended March 31, 2004. Eisner LLP was our
registered public accounting firm for fiscal 2004 while Brimmer, Burek & Keelan
LLP was our independent accountant for fiscal 2002 and 2003.

Brimmer, Burek & Keelan LLP was reengaged to audit March 31, 2005 and 2004
through inception and has billed approximately $150,576 for those services after
March 31, 2005 and through April 1, 2006.

AUDIT-RELATED FEES

We incurred $0 in audit related fees during the fiscal years ended March 31,
2005 and 2004.

TAX FEES

Our principal independent accountants billed us $0 for tax services for the
years ended March 31, 2005 and March 31, 2004.

ALL OTHER FEES

Our principal independent accountants did not perform any other services for us
during the fiscal years ended March 31, 2005 or 2004.

We have not adopted audit committee pre-approval policies and procedures.

                                       23
<PAGE>
                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this ___ day of May 2006.

                              CYGENE LABORATORIES, INC.

                              By: /s/ Martin Munzer
                                  -----------------
                              Martin Munzer, Chief Executive 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 and on the dates indicated. SIGNATURES TITLE DATE ----- ----

/s/ Martin Munzer      Chairman of the Board of Directors Chief     May __, 2006
-----------------      Executive Officer, and Chief Financial
Martin Munzer          Officer


/s/ Stanley Satz       Director                                     May __, 2006
----------------
Stanley Satz

                                       24

<PAGE>
                            CYGENE LABORATORIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)


                        CONTENTS

PAGE      F-1   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PAGE      F-2   CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2005 AND 2004

PAGE      F-3   CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
                MARCH 31, 2005 AND 2004 AND PERIOD FROM OCTOBER 25, 1995
               (INCEPTION) THROUGH MARCH 31, 2005

PAGES     F-4   CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                FOR THE PERIOD FROM OCTOBER 25, 1995 (INCEPTION) THROUGH
                MARCH 31, 2005

PAGE      F-7   CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
                MARCH 31, 2005 AND 2004 AND PERIOD FROM OCTOBER 25, 1995
                (INCEPTION) THROUGH MARCH 31, 2005

PAGES     F-8   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                i


<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of CyGene Laboratories Inc.
(a development stage company)

We have audited the accompanying consolidated balance sheet of CyGene
Laboratories, Inc. and subsidiaries (the "Company") as of March 31, 2005 and
2004, the related consolidated statements of operations and cash flows for the
years then ended and the related consolidated statement of changes in
stockholders' deficit for the period from October 25, 1995 (inception) through
March 31, 2005. 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 audit.

We conducted our audit in accordance with the Standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of the internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CyGene Laboratories,
Inc. and subsidiaries as of March 31, 2005 and 2004, and the results of their
operations and their cash flows for the years then ended and the changes in
stockholders' deficit for the period from October 25, 1995 (inception) through
March 31, 2005, in conformity with accounting principles generally accepted in
the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company had a net loss of $3,697,127 for
the year ended March 31, 2005, and had a working capital deficiency of
$2,976,701 and a stockholders' deficit of $2,976,042 as of March 31, 2005. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The accompanying financial statements have been prepared on the
basis that the Company will continue as a going concern, which assumes the
realization of assets and satisfaction of liabilities in the normal course of
business, and does not include any adjustments that may result from the outcome
of this uncertainty.

Brimmer, Burek & Keelan, LLP

Tampa, Florida
May 25, 2006

                                       F-1



<PAGE>


                            CYGENE LABORATORIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS
                                    MARCH 31


<TABLE>
<CAPTION>
                                                                            2005              2004
                                                                        ------------      ------------
<S>                                                                     <C>               <C>
ASSETS

CURRENT ASSETS
Cash                                                                    $     95,617      $    145,839
Accounts receivable                                                              254             1,137
Other current assets, net                                                    247,260           139,204
                                                                        ------------      ------------
           Total Current Assets                                              343,131           286,180

PROPERTY AND EQUIPMENT, NET                                                   24,276            32,084

Other assets, net                                                             87,722           214,685
                                                                        ------------      ------------
TOTAL ASSETS                                                            $    455,129      $    532,949
                                                                        ============      ============

LIABILITIES AND STOCKHOLDERS DEFICIT

CURRENT LIABILITIES
Accounts payable                                                        $  1,205,545      $    593,093
Accrued salary and related benefits                                          675,297           517,105
Other accrued expenses                                                       213,828            29,934
Contingent lease liability                                                   149,235                --
Debt in default                                                              501,681            22,500
Notes payable and convertible debentures (current portion), net              574,246           486,257
                                                                        ------------      ------------

           Total Current Liabilities                                       3,319,832         1,648,889
                                                                        ------------      ------------
LONG-TERM DEBT

Notes payable and convertible debentures (non-current portion), net          111,339           154,592
                                                                        ------------      ------------
           Total Long Term Debt                                              111,339           154,592
                                                                        ------------      ------------
TOTAL LIABILITIES                                                          3,431,171         1,803,481
                                                                        ------------      ------------

Contingency                                                                       --                --

STOCKHOLDERS' EQUITY (DEFICIT)

Class A common stock, $.001 par value, 95,000,000 shares
authorized, 42,910,340 and 40,068,648 shares issued and outstanding           42,910            40,069
Class B common stock, $.001 par value, 10,000,000 shares
authorized, none issued and outstanding                                           --                --
Additional paid-in capital                                                19,171,904        17,224,161
Deferred compensation                                                             --           (46,114)
Deficit accumulated during development stage                             (22,185,189)      (18,488,062)
Other comprehensive loss                                                      (5,667)             (586)
                                                                        ------------      ------------
           Total Stockholders' Deficit                                    (2,976,042)       (1,270,532)
                                                                        ------------      ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                             $    455,129      $    532,949
                                                                        ============      ============
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                       F-2


<PAGE>


                            CYGENE LABORATORIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
      YEARS ENDED MARCH 31, 2005 AND 2004 AND PERIOD FROM OCTOBER 25, 1995
                       (INCEPTION) THROUGH MARCH 31, 2005

<TABLE>
<CAPTION>
                                                     Year Ended       Year Ended     Inception through
                                                     March 31,         March 31,         March 31,
                                                       2005              2004              2005
                                                   ------------      ------------      ------------
<S>                                                <C>               <C>               <C>
OPERATING EXPENSES
Research and development                           $    456,193      $    233,699      $  3,623,484
General and administrative                            2,859,955         2,811,369        17,825,473
                                                   ------------      ------------      ------------
Total Operating Expenses                              3,316,148         3,045,068        21,448,957
                                                   ------------      ------------      ------------
LOSS FROM OPERATIONS                                 (3,316,148)       (3,045,068)      (21,448,957)
                                                   ------------      ------------      ------------
OTHER INCOME (EXPENSE)
Other income (expense)                                     (563)           12,720           604,570
Interest expense                                       (380,416)         (164,235)       (1,340,802)
                                                   ------------      ------------      ------------
Total Other Income (Expense)                           (380,979)         (151,515)         (736,232)
                                                   ------------      ------------      ------------
NET LOSS                                             (3,697,127)       (3,196,583)      (22,185,189)
                                                   ------------      ------------      ------------
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation
adjustment                                               (5,081)           (1,648)           (5,667)
                                                   ------------      ------------      ------------
TOTAL COMPREHENSIVE (LOSS)                         $ (3,702,208)     $ (3,198,231)     $(22,190,856)
                                                   ============      ============      ============
Net loss per common share:
Basic and fully diluted loss per share             $       (.09)     $       (.11)               --
                                                   ============      ============      ============
Weighted average number of common shares:
Basic and fully diluted                              42,002,484        30,167,732
                                                   ============      ============      ============
</TABLE>

        See accompanying notes to the consolidated financial statements

                                       F-3

<PAGE>


                            CYGENE LABORATORIES, INC.
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
              FOR THE PERIOD FROM INCEPTION THROUGH MARCH 31, 2005
<TABLE>
<CAPTION>
                                                                                                        Additional
                                                   Class A Common Stock        Class B Common Stock       Paid-In
                                                   Shares        Amount       Shares          Amount       Capital
                                                -----------    ----------    ----------    ----------    ----------
<S>                                             <C>            <C>           <C>           <C>           <C>
Balance at March 31, 1995                                --    $       --            --    $       --    $       --

Common stock issued to founders                   2,958,633         2,959       268,967           269         4,841
Net loss                                                 --            --            --            --            --
                                                -----------    ----------    ----------    ----------    ----------
Balance at March 31, 1996                         2,958,633         2,959       268,967           269         4,841

Common stock issued for cash                        665,482           665        60,499            60       150,521
Common stock issued for services                     31,167            31         2,833             3        36,216
Net loss                                                 --            --            --            --            --
                                                -----------    ----------    ----------    ----------    ----------
Balance at March 31, 1997                         3,655,282    $    3,655       332,299           332       191,578

Common stock issued for cash                        387,231           387        35,203            35        91,033
Common stock issued for services                    308,000           308        28,000            28        77,714
Common stock issued for compensation              5,610,000         5,610       510,000           510     1,267,380
Net loss                                                 --            --            --            --            --
                                                -----------    ----------    ----------    ----------    ----------
Balance at March 31, 1998                         9,960,513         9,960       905,502           905     1,627,705

Common stock issued for cash                      3,338,463         3,338       303,497           303       574,626
Common stock issued for services                     44,000            44         4,000             4         9,952
Common shares issued by officers to employees
  for compensation                                       --            --            --            --       473,444
Net loss                                                 --            --            --            --            --
                                                -----------    ----------    ----------    ----------    ----------
Balance at March 31, 1999                        13,342,976        13,342     1,212,999         1,212     2,685,727

Common stock issued for cash                        851,382           852        19,217            20     3,448,578
Common stock issued upon conversion of debt          96,158            96            --            --        20,694
Common stock issued for services                     77,912            78           492             1       364,167
Options issued for Compensation                          --            --            --            --        83,500
Warrants issued in private placement of debt             --            --            --            --        35,995
Net loss                                                 --            --            --            --            --
                                                -----------    ----------    ----------    ----------    ----------
Balance at March 31, 2000                        14,368,428    $   14,368     1,232,708    $    1,233    $6,638,661
</TABLE>
<TABLE>
<CAPTION>

                                                                  Other                      Total
                                                 Accumulated  Comprehensive   Deferred    Stockholders
                                                   Deficit    Income (loss) Compensation     Deficit
                                                -----------    ----------    ----------    ----------
<S>                                             <C>            <C>          <C>            <C>
Balance at March 31, 1995                       $        --    $       --   $         --   $       --

Common stock issued to founders                          --            --             --        8,069
Net loss                                               (398)           --             --         (398)
                                                -----------    ----------    ----------    ----------

Balance at March 31, 1996                       $      (398)           --             --   $    7,671

Common stock issued for cash                             --            --             --      151,246
Common stock issued for services                         --            --             --       36,250
Net loss                                           (153,983)           --             --     (153,983)
                                                -----------    ----------    ----------    ----------
Balance at March 31, 1997                       $  (154,381)           --             --   $   41,184

Common stock issued for cash                             --            --             --       91,455
Common stock issued for services                         --            --             --       78,050
Common stock issued for compensation                     --            --             --    1,273,500
Net loss                                         (1,863,727)           --             --   (1,863,727)
                                                -----------    ----------    ----------    ----------
Balance at March 31, 1998                        (2,018,108)           --             --     (379,538)

Common stock issued for cash                             --            --             --      578,267
Common stock issued for services                         --            --             --       10,000
Common shares issued by officers to employees
for compensation                                         --            --             --      473,444
Net loss                                         (1,388,311)           --             --   (1,388,311)
                                                -----------    ----------    ----------    ----------






Balance at March 31, 1999                        (3,406,419)           --             --     (706,138)

Common stock issued for cash                             --            --             --    3,449,450
Common stock issued upon conversion of debt              --            --                      20,790
Common stock issued for services                         --            --             --      364,246
Options issued for Compensation                          --            --             --       83,500
Warrants issued in private placement of debt             --            --             --       35,995
Net loss                                         (2,387,986)           --             --   (2,387,986)
                                                -----------    ----------    ----------    ----------
Balance at March 31, 2000                       $(5,794,405)   $       --   $         --   $  859,857
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       F-4


<PAGE>


                            CYGENE LABORATORIES, INC.
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
        FOR THE PERIOD FROM INCEPTION THROUGH MARCH 31, 2005 (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                Additional
                                                       Class A Common Stock         Class B Common Stock         Paid-In
                                                      Shares         Amount         Shares        Amount         Capital
                                                   -----------    -----------    -----------    -----------    -----------
<S>                                                <C>            <C>            <C>            <C>            <C>
Common stock issued for cash                           102,000    $       102             --    $        --    $   509,899
Common stock issued for services                        46,750             47             --             --        233,703
Common stock issued for conversion of debt             358,970            359             --             --         77,865
Options issued for services                                 --             --             --             --        183,500
Warrants issued in private placement of debt                --             --             --             --         33,042
Common shares issued by officers to employees
for compensation                                            --             --             --             --         65,625
Net loss                                                    --             --             --             --             --
                                                  ------------    -----------    -----------    -----------    -----------
Balance at March 31, 2001                           14,876,148    $    14,876      1,232,708          1,233      7,742,295

Common stock issued for conversion of debt              74,800             74             --             --         74,725
Common stock issued for services                       126,000            126             --             --        125,874
Common stock issued for conversion of accrued
salary and compensation                              1,881,167          1,881             --             --      1,879,286
Common stock issued for sale of equipment               10,000             10             --             --          9,990
Options issued for compensation                             --             --             --             --         75,000
Warrants issued in private placement of debt                --             --             --             --         78,530
Common shares issued by officers to creditors               --             --             --             --        267,800
Common shares issued by officers to consultants             --             --             --             --         50,000
Common shares issued by officers to employees
for compensation                                            --             --             --             --         27,500
Net loss                                                    --             --             --             --             --
Other comprehensive loss - foreign currency
translation                                                 --             --             --             --             --
                                                  ------------    -----------    -----------    -----------    -----------
Balance at March 31, 2002                           16,968,115         16,967      1,232,708          1,233     10,331,000

Common stock issued for cash                           457,700            458             --             --        228,392
Common stock issued for purchase of equipment          200,000            200             --             --         99,800
Common stock issued for services                       120,000            120             --             --         31,325
Common stock issued for conversion of debt              99,755            100             --             --         99,653
Warrants issued for services                                --             --             --             --         38,338
Common shares issued by officers to employees
for compensation                                            --             --             --             --        873,615
Common shares issued by officers to consultants             --             --             --             --        265,971
Common shares issued by officers to creditors               --             --             --             --          3,473
Net loss                                                    --             --             --             --             --
Other comprehensive income - foreign
currency translation                                        --             --             --             --             --
                                                  ------------    -----------    -----------    -----------    -----------
Balance at March 31, 2003                           17,845,570    $    17,845      1,232,708    $     1,233    $11,971,567
</TABLE>

<TABLE>
<CAPTION>

                                                                     Other                        Total
                                                   Accumulated   Comprehensive     Deferred    Stockholders
                                                     Deficit     Income (loss)   Compensation     Deficit
                                                  ------------    -----------    -----------    -----------
<S>                                               <C>             <C>            <C>            <C>
Common stock issued for cash                      $         --    $        --    $        --    $   510,001
Common stock issued for services                            --             --             --        233,750
Common stock issued for conversion of debt                  --             --             --         78,224
Options issued for services                                 --             --             --        183,500
Warrants issued in private placement of debt                --             --             --         33,042
Common shares issued by officers to employees
for compensation                                            --             --             --         65,625
Net loss                                            (3,237,286)            --             --     (3,237,286)
                                                  ------------    -----------    -----------    -----------

Balance at March 31, 2001                           (9,031,691)            --             --     (1,273,287)

Common stock issued for conversion of debt                  --             --             --         74,799
Common stock issued for services                            --             --             --        126,000
Common stock issued for conversion of accrued
salary and compensation                                     --             --             --      1,881,167
Common stock issued for sale of equipment                   --             --             --         10,000
Options issued for services                                 --             --                            --
Options issued for compensation                             --             --             --         75,000
Warrants issued In private placement of debt                --             --             --         78,530
Common shares issued by officers to creditors               --             --             --        267,800
Common shares issued by officers to consultants             --             --             --         50,000
Common shares issued by officers to employees
for compensation                                            --             --             --         27,500
Net loss                                            (4,065,473)            --             --     (4,065,473)
Other comprehensive loss - foreign currency
translation                                                 --         (2,408)            --         (2,408)
                                                  ------------    -----------    -----------    -----------
Balance at March 31, 2002                         $(13,097,164)    $   (2,408)   $        --    $(2,750,372)

Common stock issued for cash                                --             --             --        228,850
Common stock issued for purchase of equipment               --             --             --        100,000
Common stock issued for services                            --             --             --         31,445
Common stock issued for conversion of debt                  --             --             --         99,753
Warrants issued for services                                --             --             --         38,338
Common shares issued by officers to employees
for compensation                                            --             --             --        873,615
Consulting expense related to shares issued by
officers to consultants                                     --             --             --        265,971
Common shares issued by officers to creditors               --             --             --          3,473
Net loss                                            (2,194,315)            --             --     (2,194,315)
Other comprehensive income - foreign
currency translation                                        --          3,470             --          3,470
                                                  ------------    -----------    -----------    -----------

Balance at March 31, 2003                         $(15,291,479)    $    1,062    $        --    $(3,299,772)
</TABLE>

               See accompanying notes to the financial statements

                                       F-5


<PAGE>


                            CYGENE LABORATORIES, INC.
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
        FOR THE PERIOD FROM INCEPTION THROUGH MARCH 31, 2005 (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                      Additional
                                                      Class A Common Stock              Class B Common Stock           Paid-In
                                                    Shares           Amount           Shares           Amount          Capital
                                                 ------------     ------------     ------------     ------------     ------------
<S>                                                 <C>           <C>              <C>              <C>              <C>
Common stock issued for cash                        5,081,131     $      5,081               --     $         --     $  1,151,792
Common stock issued for services                    1,337,639            1,338               --               --          219,615
Common stock issued for conversion of accrued
salaries and compensation                           5,596,150            5,596          325,847              326          856,776
Common stock issued for conversion of debt          3,259,962            3,260               --               --        2,232,314
Options issued to board members                            --               --               --               --          116,000
Warrants issued for services                               --               --               --               --          350,600
Debt discount                                              --               --               --               --          340,903
Exchange of class B shares to class A shares
per merger agreement                                1,558,555            1,559       (1,558,555)          (1,559)              --
Shares place in escrow as a result of merger         (140,359)            (140)              --               --           (9,876)
Cygene shares issued to TTI stockholders            5,530,000            5,530               --               --           (5,530)
Amortization of deferred costs                             --               --               --               --               --
Net loss                                                   --               --               --               --               --
Other comprehensive loss - foreign
currency translation                                       --               --               --               --               --
                                                 ------------     ------------     ------------     ------------     ------------
Balance at March 31, 2004                          40,068,648           40,069               --               --       17,224,161

Common stock issued for cash                        1,937,870            1,937               --               --          687,393
Common stock issued for services                      224,998              225               --               --          217,233
Common stock issued to board members                   60,000               60               --               --           44,940
Common stock issued for debt conversions              618,824              619               --               --           41,081
Debt discount                                              --               --               --               --          345,344
Options issued for compensation                            --               --               --               --           37,500
Warrants issued for services                               --               --               --               --          574,252
Other comprehensive income                                 --               --               --               --               --
Amortization of deferred costs                             --               --               --               --               --
Net loss                                                   --               --               --               --               --
                                                 ------------     ------------     ------------     ------------     ------------
Balance at March 31, 2005                          42,910,340     $     42,910               --     $         --     $ 19,171,904
</TABLE>
<TABLE>
<CAPTION>

                                                                      Other                            Total
                                                 Accumulated      Comprehensive      Deferred       Stockholders
                                                   Deficit        Income (loss)    Compensation       Deficit
                                                 ------------     ------------     ------------     ------------
<S>                                              <C>              <C>              <C>              <C>
Common stock issued for cash                     $         --     $         --     $         --     $  1,156,873
Common stock issued for services                           --               --               --          220,953
Common stock issued for conversion of accrued
salaries and compensation at $.15 per share                --               --               --          862,698
Common stock issued for conversion of debt                 --               --               --        2,235,574
Options issued to board members                            --               --               --          116,000
Warrants issued for services                               --               --           (2,764)         347,836
Debt discount                                              --               --               --          340,903
Exchange of class B shares to class A shares
per merger agreement                                       --               --               --               --
Shares placed in escrow as a result of merger              --               --               --          (10,016)
Cygene shares issued to TTI stockholders                   --               --               --               --
Amortization of deferred costs                             --               --          (43,350)         (43,350)
Net loss                                           (3,196,583)              --               --       (3,196,583)
Other comprehensive loss - foreign
Currency translation                                       --           (1,648)              --           (1,648)
                                                 ------------     ------------     ------------     ------------
Balance at March 31, 2004                         (18,488,062)            (586)         (46,114)      (1,270,532)

Common stock issued for cash--                             --               --               --          689,330
Common stock issued for services                           --               --               --          217,458
Common stock issued to board members                       --               --               --           45,000
Common stock issued for debt conversions                   --               --               --           41,700
Debt discount                                              --               --               --          345,344
Options issued for compensation                            --               --               --           37,500
Warrants issued for services                               --               --               --          574,252
Other comprehensive income                                 --           (5,081)              --          (5,081)
Amortization of deferred costs                             --               --           46,114           46,114
Net loss                                           (3,697,127)              --               --       (3,697,127)
                                                 ------------     ------------     ------------     ------------
Balance at March 31, 2005                        $(22,185,189)    $     (5,667)    $         --     $ (2,976,042)
                                                 ============     ============     ============     ============

</TABLE>
               See accompanying notes to the financial statements

                                       F-6


<PAGE>


                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
      YEARS ENDED MARCH 31, 2005 AND 2004 AND PERIOD FROM OCTOBER 25, 1995
                       (INCEPTION) THROUGH MARCH 31, 2005

<TABLE>
<CAPTION>
                                                                                                               Inception
                                                                            YEAR ENDED       YEAR ENDED         through
                                                                            March 31,         March 31,         March 31,
                                                                               2005             2004             2005
                                                                           ------------     ------------     ------------
<S>                                                                        <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                   $ (3,697,127)    $ (3,196,583)    $(22,185,189)
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Depreciation                                                                     72,436           79,693          617,950
Common stock, warrants and options issued in payment of expenses                796,408        1,306,975        4,219,014
Loss (gain) on disposal of property and equipment                                 2,429               --          473,158
Common stock issued by officers for compensation                                     --               --        1,440,184
Common stock issued by officers for services                                         --               --          265,971
Common stock issued by officers for finance costs                                    --               --          271,273
Gain on settlements of certain notes payable                                         --           (9,654)          (9,654)
Loss on other legal settlements                                                      --               --          212,000
Amortization of discount                                                        164,598               --          164,598
Amortization of deferred costs                                                  141,204          121,614          262,818
Changes in operating assets and liabilities:,
Accounts receivable                                                                 882            1,858             (244)
Other assets                                                                     (2,558)          42,518           26,204
Accounts payable and accrued expenses                                         1,123,878          669,752        6,124,821
                                                                           ------------     ------------     ------------
Net Cash Used In Operating Activities                                        (1,397,850)        (983,827)      (8,117,096)
                                                                           ------------     ------------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                              (70,059)         (24,828)      (1,127,195)
Proceeds from disposals of property and equipment                                 3,000               --          156,808
                                                                           ------------     ------------     ------------
Net Cash Used In Investing Activities                                           (67,059)         (24,828)        (970,387)
                                                                           ------------     ------------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock for cash                                               689,830        1,156,873        7,199,619
Borrowings on notes payable                                                     726,000          202,700        2,443,770
Payments on notes payable                                                        (1,000)        (207,966)        (460,289)
                                                                           ------------     ------------     ------------
Net Cash Provided By Financing Activities                                     1,414,830        1,151,607        9,183,100
                                                                           ------------     ------------     ------------
NET INCREASE  (DECREASE) IN CASH DURING THE PERIOD                              (50,079)         142,952           95,617

CASH - BEGINNING OF PERIOD                                                      145,696            2,887               --
                                                                           ------------     ------------     ------------
CASH - END OF PERIOD                                                       $     95,617     $    145,839     $     95,617
                                                                           ============     ============     ============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest                                                     $      1,793     $      1,632     $     23,045
                                                                           ============     ============     ============
Cash paid for taxes                                                        $         --     $         --     $         --
                                                                           ============     ============     ============
</TABLE>

               See accompanying notes to the financial statements.

                                       F-7


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES

CyGene Laboratories, Inc., (the "Company" or "CyGene"), was incorporated on
October 25, 1995 (date of Inception) as a Florida corporation for the purpose of
developing next generation DNA/RNA technologies. On April 13, 1999, CyGene
became a Delaware corporation under a merger agreement with CyGene, Inc., a
Delaware corporation. The merger was not intended to and did not effect any
change in the business, property, management or ownership of the Company. Since
1995, the Company has been developing proprietary and automated DNA and RNA
testing systems for screening, monitoring and diagnosis of human, veterinary and
plant diseases. CyGene's primary development focus is in commercializing a line
of genetic profiling panels that allow the identification of certain genetic
predispositions to specific human traits and of potential future disease
conditions.

Merger

On September 30, 2003, CyGene Inc. merged with Transpirator Technologies Inc.
The accounting for the merger was treated as a recapitalization. Prior to the
merger, Transpirator Technologies, Inc. (TTI) was an inactive public company
with a March 31 year end. Prior the merger, CyGene Inc. (CyGene) was a private
company in the development stage since 1995 and had conducted extensive
activities over that time period developing their DNA protocols and has offices,
staff and intellectual property. The merger was accomplished by TTI forming a
new wholly owned subsidiary, New Transpirator Inc., (NTI) which then issued
approximately 31,000,000 shares of TTI to the shareholders of CyGene Inc. in
exchanges for 100% of the shares of CyGene Inc. except for approximately 104,000
shares of stock which were redeemed for approximately $10,000. Simultaneously,
NTI and CyGene merged and the Common B stockholders of CyGene Inc. (previous
private company) exchanged 100% of their B shares for Common A. The par value of
the Common A stock of CyGene was then adjusted to reflect the par value of the
Common stock of TTI. After the merger TTI changed its name to CyGene
Laboratories Inc., NTI changed its name to CyGene Inc. The terms of the merger
resulted in TTI issuing additional shares to the stockholders of CyGene in the
approximate amount of 31,000,000 shares with the previous stockholders of TTI
retaining approximately 5,530,000 shares so that after the merger, TTI
shareholders owned approximately 15% of the combined entity. The acquisition was
accounted for utilizing purchase accounting rules and as a reverse merger with
CyGene being treated as the acquirer. In addition, TTI loaned CyGene $100,000 as
part of the merger that was a convertible note.

TTI had certain intellectual property that was subject to royalty agreements
which was distributed together with related liabilities to the prior
stockholders of TTI prior to the merger.

The financial statements presented are the historical financial statements of
CyGene Laboratories (formerly CyGene, Inc.) with the merger being reflected in
the equity section for the year ended March 31, 2004 as a distribution of
approximately 5,530,000 shares of stock at the value of the net book value of
the remaining assets less liabilities, to the shareholders of TTI.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company incurred a net loss of
$3,697,127 for the year ended March 31, 2005, and has a working capital deficit,
a capital deficiency and accumulated deficit of $2,976,701, $2,976,042 and
$22,185,189, respectively. The Company has been dependent upon borrowings
through private placements of convertible and non-convertible debt and sale of
its common stock to finance its business operations.

These conditions raise substantial doubt about the Company's ability to continue
as a going concern. The Company intends to obtain funding to continue its
operations, however, there can be no assurance that any financing will be
available or if available that it will be on terms acceptable to the Company.
The accompanying financial statements have been prepared on the basis that the
Company will continue as a going concern, which assumes the realization of
assets and satisfaction of liabilities in the normal course of business, and do
not include any adjustments that may result from the outcome of this
uncertainty.

Development Stage Reporting - The Company has operated as a development stage
enterprise by devoting substantially all of its efforts and resources to
financial planning, raising capital, research and development, and developing
markets for its products. Accordingly, the financial statements have been
prepared in accordance with the accounting and reporting principles prescribed
by Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and
Reporting by Development Stage Enterprises," issued by the Financial Accounting
Standards Board.

Consolidation - The accompanying consolidated financial statements include the
accounts of the Company and all of its wholly owned subsidiaries. All
significant inter-company balances have been eliminated.

Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make reasonable estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities and the reported amounts of revenues and expenses at the date of
the financial statements and for the periods they include. Actual results may
differ from these estimates.

                                       F-8


<PAGE>


Property and Equipment - Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation of property and
equipment is provided using the straight-line method over the estimated useful
lives of the assets. Improvements made to leased property are amortized on a
straight-line basis over the estimated useful lives of the improvements or the
period of the lease remaining, whichever is less. The following is a summary of
the estimated useful lives used in computing depreciation expense:

                   Automobiles                                       3 years
                   Computer equipment                                3 years
                   Furniture and fixtures                            5 years
                   Machinery and equipment                           7 years


Expenditures for major repairs and renewals that extend the useful life of the
asset are capitalized. Minor repair expenditures are charged to expense as
incurred.

Long Lived Assets - The Company reviews for the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be recognized when the
total of estimated future cash flows expected to result from the use of the
asset and its eventual disposition is less than its carrying amount.

Patents - Costs associated with obtaining patents for the Company's proprietary
software are capitalized and amortized over their estimated useful lives upon
the completion and approval of the patents.

Revenue recognition- When sales activities commence, revenue will be recognized
when goods are shipped and title or risk of loss resides with the end customer
and payment is assured.

Income Taxes - The Company accounts for income taxes under the accrual method
established by SFAS No. 109, "Accounting for Income Taxes," which requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences and events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statements and tax
bases of assets and liabilities using enacted rates for the year in which the
differences are expected to reverse. Allowances are provided for deferred tax
assets if the future utilization is uncertain.

Accounting for Stock Options - The Company applies APB Opinion No. 25,
"Accounting for Stock Issued to Employees and Related Interpretations," in
accounting for its stock option grants and, accordingly, records compensation
cost in the financial statements for its stock options to employees equal to the
excess of the fair value of the Company's shares at the grant date over the
exercise price.

                                       F-9


<PAGE>


Had compensation costs for the Company's stock option grants been determined
based on the fair value at the grant dates consistent with the methodology of
SFAS No. 123, the Company's net loss per share for the years ended March 31,
2005 and 2004 would have been increased to the pro forma amounts indicated as
follows:

                                                        Year Ended March 31,
                                                        2005           2004
                                                    -----------     -----------
Net loss as reported                                $(3,697,127)    $(3,196,583)

Effect of expensing stock options, net of tax          (262,937)       (603,855)
                                                    -----------     -----------
Pro forma net loss                                  $(3,960,064)    $(3,800,438)
                                                    ===========     ===========

Net loss per share
(basic and diluted)
As reported                                         $      (.09)    $      (.11)
Effect of expensing stock option                           (.00)           (.02)
                                                    -----------     -----------

Pro forma                                           $      (.09)    $      (.13)
                                                    ===========     ===========

Fair value of stock options is estimated at the grant date using the
Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate                     Ranging from 3.46% to 3.86%
Expected life of instrument (years)           Ranging from 3 to 5 years
Expected dividend yield                                            0.0%
Expected volatility                                               80.0%

Weighted average fair value                                        $.55

Earnings per share - In accordance with SFAS No. 128, "Earnings Per Share",
basic net loss per share has been computed based on the weighted-average of
common shares outstanding during the period. Potentially dilutive securities,
which were excluded from the computation of diluted loss per share because their
inclusion would have been anti-dilutive, are as follows:

                                                        Year Ended March 31,
                                                        2005           2004
                                                    -----------     -----------
Options                                               2,287,500       2,200,000
Warrants                                              2,840,900         960,500
Convertible notes                                     3,383,137       2,053,763
                                                    -----------     -----------
Total dilutive shares                                 8,511,537       5,214,263

Research and Development - The Company expenses research and development costs
as incurred.

Restatements and differences in presentations from prior periods.

These financial statements differ from financial statements issued for prior
periods in two significant aspects. The first is that prior period financial
statements were issued on an operating basis versus the current statements
reflecting the Company as a development stage enterprise. As a result, prior
period statements did not reflect expenses, cash flows nor statements of changes
in stockholders' deficit from inception.

In addition, the Company's officers gifted shares of stock to various vendors
and employees during periods prior to March 31, 2005 and 2004 for the benefit of
the Company. Those shares are accounted for in the current financial statements
as expenses in the cumulative (from inception) amounts as appropriate and the
related statements of changes in cash flows and changes in stockholders'
deficit. These expenses were not previously recorded in prior period financial
statements and amounted to approximately $1,900,000.

                                      F-10


<PAGE>


In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No.149 amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The changes in SFAS No. 149
improve financial reporting by requiring that contracts with comparable
characteristics be accounted for similarly. This statement is effective for
contracts entered into or modified after June 30, 2003. The adoption of this
statement did not have any impact on the Company's financial position or the
results of its operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting For Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
changes the accounting for certain financial instruments with characteristics of
both liabilities and equity that, under previous pronouncements, issuers could
account for as equity. The new accounting guidance contained in SFAS No. 150
requires that those instruments be classified as liabilities in the balance
sheet.

SFAS No. 150 affects the issuer's accounting for three types of freestanding
financial instruments. One type is mandatorily redeemable shares, which the
issuing company is obligated to buy back in exchange for cash or other assets. A
second type includes put options and forward purchase contracts, which involves
instruments that do or may require the issuer to buy back some of its shares in
exchange for cash or other assets. The third type of instruments that are
liabilities under this Statement is obligations that can be settled with shares,
the monetary value of which is fixed, tied solely or predominantly to a variable
such as a market index, or varies inversely with the value of the issuers'
shares. SFAS No. 150 does not apply to features embedded in a financial
instrument that is not a derivative in its entirety.

Most of the provisions of SFAS No. 150 are consistent with the existing
definition of liabilities in FASB Concepts Statement No. 6, "Elements of
Financial Statements". The remaining provisions of this Statement are consistent
with the FASB's proposal to revise that definition to encompass certain
obligations that a reporting entity can or must settle by issuing its own
shares. This Statement was effective for financial instruments entered into or
modified after May 31, 2003. The adoption of this statement did not have any
impact on the Company's financial position or the results of its operations.

In December 2004, the Financial Accounting Standards Board ("FASB") issued a
revision to SFAS No. 123, SFAS 123R Share-Based Payment. SFAS No. 123R requires
all companies to measure compensation costs for all share based payments,
including stock options, at fair value and expense such payments over the
service period. SFAS No. 123R specifies that companies must use an
option-pricing model to estimate fair value, although it does not specifically
require the use of a particular model. The new standard is effective for small
business issuers for annual periods beginning after December 15, 2005 and,
therefore, will be effective for the company beginning with the first quarter of
2006. Under the provisions of FAS 123R, companies can select from three
transition methods for the implementation of this standard. The modified
prospective method would require all new awards that are granted after the
effective date to use the provisions of FAS 123R. Under this method, for vested
awards that are outstanding on the effective date of FAS 123R, a company would
not have to record any additional compensation expense. For unvested awards that
are outstanding on the effective date of FAS 123R and were previously included
as part of pro forma net income and earnings per share under the provisions of
FAS 123 would be charged to expense over the remaining vesting period, without
any changes in measurement. The second alternative is a variation of the
modified prospective method, which would allow companies to restate earlier
interim periods in the year that FAS 123R is adopted using the applicable FAS
123 pro forma amounts. Under the third alternative, the modified retrospective
method, companies would apply the modified prospective method and also restate
their prior financial statements to include the amounts that were previously
recognized in their pro forma disclosures under the original provisions of FAS
123. Currently the Company discloses the estimated effect on net income of these
share-based payments in the footnotes to the financial statements and the
estimated fair value of the share-based payments has historically been
determined using the Black-Scholes option pricing model. The Company has not
determined which option-pricing model or transition method to use upon
implementation of this standard and has not yet completed its evaluation of the
impact of SFAS No. 123R.

NOTE 2- PROPERTY AND EQUIPMENT

The following table is a summary of property and equipment as of March 31, 2005
and 2004:

                                                       2005              2004
                                                    ---------         ---------

Automobile                                          $  32,809         $  32,809
Computer equipment                                     37,665            65,508
Furniture and fixtures                                 10,475            32,345
Machinery and equipment                               332,992           316,890
                                                    ---------         ---------
Total property & equipment                            413,941           447,552

Less accumulated depreciation amortization           (389,665)         (415,468)
                                                    ---------         ---------
Net property and equipment                          $  24,276         $  32,084
                                                    =========         =========

Depreciation expense for the years ended March 31, 2005 and 2004 was $72,436 and
$79,693, respectively.

                                      F-11


<PAGE>


NOTE 3- NOTES PAYABLE

a) The following is a listing of notes payable as of March 31, 2005 and 2004:

<TABLE>
<CAPTION>
                                                                                                   2005             2004
                                                                                                ----------       ---------
<S>                                                                                             <C>              <C>
Automobile loan payable in 72 installments to a financial institution, The loan
bears interest at 10.75% and is due in monthly installments through 2008.
Collateralized by the automobile.                                                               $   16,058       $  20,856

Unsecured convertible debenture bonds bearing interest at 8.0% per annum. As of
3/31/04 and 05 these convertible debentures were in default.                                        17,500          17,500

Convertible debenture notes bearing interest at 4.50% per annum. As of 3/31/05
$89,000 of these notes were in default.                                                            765,000         131,700

Note payable to a vendor of the Company bearing interest at 4.75% per annum.
As of 3/31/05 the note was in default.                                                             188,527         188,527

Note payable to a vendor of the Company bearing interest at prime,
collateralized by certain interests in intellectual property. A portion of this
note was converted to common stock during the fiscal year ended March 31, 2004;
As of 3/31/05 the
balance of  this note was in default.                                                              184,154         184,154

Notes payable to individuals bearing interest at 10.0% payable in 2005.  These notes
were in default as of 3/31/04.                                                                      22,500          22,500

Notes payable to vendors of the Company bearing interest at 1.25% payable in
lump sums in fiscal year ending March 31, 2006. These notes represent
conversions of certain
trade payable accounts made during the fiscal year ended in 2004.                                   37,823          37,823

$100,000 note payable to TTI bearing interest at 5.0% payable in a lump sum in the
fiscal year ending March 31, 2009.                                                                 100,000         100,000

Shareholder loans                                                                                   29,595          33,639

$50,000 note payable to TTI.                                                                        50,000              --
                                                                                                ----------       ---------
Total debt                                                                                       1,411,157         736,699
Less unamortized debt discount                                                                    (223,891)        (73,350)
Less debt in default                                                                              (501,681)        (22,500)
Less current maturities                                                                           (574,246)       (486,257)
                                                                                                ----------       ---------
Long term debt                                                                                  $  111,339       $ 154,592
                                                                                                ==========       =========
</TABLE>

Interest expense on these notes for the years ended March 31, 2005 and 2004 was
$51,818 and $78,976, respectively.

During the years ended March 31, 2005 & 2004, the Company received proceeds of
$676,000 and $86,700, respectively by issuing convertible debenture notes to
outside investors, ranging in principal amounts from $1,000 to $200,000. The
notes mature at various times during fiscal years 2004 to 2006 and bear annual
interest ranging from 4.5% to 10%. The notes are convertible into common stock
at a conversion prices ranging from $0.07 to $0.70 per share. Detachable
warrants were also granted with these notes. Per the guidance of EITF 00-27 and
EITF 98-05, the Company computed the debt discount on each note, using the Black
Scholes option pricing model, with a volatility of 80%, risk free interest rate
ranging from 3.32% to 3.60%, a three year life and a zero dividend yield.

In addition, during the fiscal year ended March 31, 2004, the Company converted
certain accrued expenses to convertible debenture notes, bearing interest at
4.5% per annum. $60,000 of these notes matured during fiscal year 2005. The
beneficial conversion feature of these notes was computed based on the fair
value of the conversion feature and is included in the total debt discount.

The resulting total debt discount is being amortized over the lives of the debt,
resulting in amortization of approximately $165,000 and $30,000, respectively
for fiscal years ended March 31, 2005 and 2004 being included in interest
expense. As of March 31, 2005, the remaining unamortized debt discount was
approximately $223,891.

As of March 31, 2005, approximately $89,000 of these convertible debenture notes
were in default.

                                      F-12

<PAGE>


Maturities of notes payable as of March 31, 2005 are as follows:

        2006                      $1,299,818      (Before deducting unamortized
                                                  debt discount of $223,890)
        2007                           5,430
        2008                           5,909
        2009                         100,000
     Thereafter                           --
                                  ----------
                                  $1,411,157
                                  ==========

b) Loans from shareholders are at no stated interest and are payable in lump sum
payments in the fiscal year ending March 31, 2005.

NOTE 4- ISSUANCE OF COMMON STOCK

From inception, the Company has issued shares of its common stock and warrants
to purchase shares of its common stock to employees, consultants, vendors and
others for compensation, consulting and other services, to creditors as
inducements for them to convert their debt to equity and to investors in
exchange for cash. In addition, the principal stockholders of the Company have
issued Company common stock from their own personal holdings for the same
purposes. These issuances, as summarized in the accompanying statement of
Changes in Stockholders' Deficit included in the following (all amounts are
adjusted for the effects of a one for thirty reverse split in July 1998 and
twelve for one forward split in April 1999):

a)         The issuance of 2,958,633 shares of Class A common stock and 268,967
           shares of Class B common stock to the founders of the Company at
           approximately $.003 per share in October 1995.
b)         Private placement of 1,782,750 shares of Class A common stock and
           162,069 shares of Class B common stock at $.21 per share from May
           1996 through October 1998.
c)         Private placement of 2,508,051 shares of Class A common stock and
           228,005 shares of Class B common stock at $.13 per share from October
           1998 through March 1999.
d)         Private placement of 138,875 shares of Class A common stock and
           12,625 shares of Class B common stock at $.67 per share from March
           1999 through April 1999.
e)         Private placement of 82,500 shares of Class A common stock and 7,500
           shares of Class B common stock at $1.00 per share in April 1999.
f)         Private placement of 90,382 shares of Class A common stock and 8,217
           shares of Class B stock at $1.33 per share in April 1999.
g)         Private placement of 742,000 shares of Class A common stock at $5.00
           per share from June 1999 through January 2001.
h)         Private placement of 74,800 shares of Class A common stock at $1.00
           per share from May 2001 through March 2002.
i)         Private placement of 657,700 shares of Class A common stock at $.50
           per share from June 2002 through March 2003.


In addition, in the fiscal year ended March 31, 2004, the Company issued
5,081,131 shares of its common stock at prices ranging from $.15 per share
through $.36 per share in a private placement in conjunction with the merger
with TTI (see Note 1) and a subsequent private placement. In addition,
shareholders of TTI were issued 5,530,000 shares of common stock as a result of
the merger.

In the fiscal year ended March 31, 2005, the Company issued approximately
198,000 shares for consulting services, 1,911,000 shares for cash, 41,000 shares
for payment of accounts payable and finders fees and 549,000 shares for
conversion of convertible debt.

                                      F-13

<PAGE>


Included in the common stock, warrants and options issued for compensation in
the accompanying Statement of Changes in Stockholders' Deficit are the following
values of equity instruments issued to the Company's current Chief Executive
Officer and its former Chairman of the Board of Directors and Secretary (see
Note 11 c) (at fair value at date of issuance):

      Year ended                 Current Chief              Former Chairman
       March 31                Executive Officer             And Secretary

        1998                     $  123,500                  $1,125,000
        2002                      1,031,497                     867,670
        2004                        375,000
                                 ----------
        Total                    $1,529,997                  $1,992,670
                                 ==========                  ==========

NOTE 5 - STOCK OPTIONS ISSUED AND OUTSTANDING

In April of 1999, the Company's Board of Directors adopted the CyGene, Inc. 1999
Stock Option Plan (the "Plan"). The Plan was amended by the Board of Directors
in January 2004 and renamed the Restated 2004 Stock Plan (the "Amended Plan"). A
total of 3,500,000 shares of the Company's Class A Common Stock were reserved
for issuance under the Amended Plan. The Amended Plan provides for the issuance
to Company employees, non-employee directors and consultants and advisors shares
of Common Stock pursuant to the grant of incentive stock options, non-qualified
stock options and restricted stock. The options are issuable at the discretion
of the Company's Board of Directors and generally have an exercise price equal
to or greater than the fair market value of the underlying common stock at the
grant date.

A summary of issued and outstanding stock options is as follows:

                                                 Range of       Weighted Average
                               Number         Exercise Price     Exercise Price

Balance, March 31, 2003      3,050,000        $.25-$4.25            $1.54
Cancelled                    (750,000)              1.60             1.60

Balance, March 31, 2004      2,300,000      $0.25 - 4.25            $1.62

Granted                        437,500              1.01             1.01
Cancelled/Expired            (450,000)       1.51 - 4.25             2.88

Balance, March 31, 2005      2,287,500      $0.25 - 4.25            $1.31

                                      F-14

<PAGE>

<TABLE>
<CAPTION>
                                      Outstanding                                                 Exercisable

                                                   Average               Average
                                                Average Life            Exercise          Exercise
                                 Shares              (a)                  Price            Shares                Price
<S>                           <C>                   <C>                   <C>           <C>                     <C>
$0.25 - 1.01                  1,487,500               2                   $.79          1,487,500                $.79
1.60 - 4.25                     800,000             3.2                   2.93            800,000                2.93
                             ----------                                                ----------
                              2,287,500               3                  $1.76          2,287,500               $1.76
                             ==========                                                ==========
</TABLE>

(a) Average contractual life remaining in years.

NOTE 6 - STOCK WARRANTS ISSUED AND OUTSTANDING

The Company issued -0- and 500,000 warrants to purchase common stock of the
Company during the years ended March 31, 2005 and 2004, respectively. These
issuances were in return for services rendered to the Company and inducements to
convert certain debt obligations of the Company to common stock during the
fiscal years ended.

A summary of issued and outstanding stock warrants is as follows:

                                                  Range of      Weighted Average
                                  Amount       Exercise Price    Exercise Price
                                ---------       -----------      --------------
Balance, March 31, 2003            520,500      1.50 - 5.00             3.25

Granted                            500,000        .22 - .25              .23
Cancelled                         (60,000)      1.50 - 3.00             2.50
Exercised                              --

Balance, March 31, 2004            960,500      1.50 - 5.00             2.61

Granted                          2,045,400        .40 - .80              .70
Cancelled                         (165,000)            1.75             1.75
                                ---------       -----------          -------
Balance, March 31, 2005          2,840,900      $.22 - 5.00          $  1.23

                                      F-15


<PAGE>

<TABLE>
<CAPTION>
                                     Outstanding                                                  Exercisable
                                                                         Average                                Average
                                                Average Life            Exercise                               Exercise
                                Shares              (a)                  Price           Shares                 Price
                             ----------         ------------            --------       ----------              --------
<S>                          <C>                   <C>                   <C>           <C>                     <C>
$.22 - .80                    2,045,400               3                    .70          2,045,400                 .70
$1.50 - 5.00                    795,500               2                  $1.75            795,500               $1.75
                             ----------                                                ----------

                              2,840,900            2.50                  $1.23          2,840,900               $1.23
                             ==========                                                ==========
</TABLE>

(a) Average contractual life remaining in years.

NOTE 7 - FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts of all cash, accounts receivable, accounts payable, accrued
expenses, notes payable and other obligations reported in the balance sheet are
estimated by management to approximate fair value due to the interest rates
applicable to those items.

NOTE 8 - INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred income tax assets at March 31, 2005 and 2004 are as
follows:

Deferred tax assets:
                                                              March 31
                                                          2005          2004
                                                      -----------   -----------
Research and development tax credit carryforward      $   420,000   $   400,000
Net operating loss carryforward                         5,700,000     4,500,000
                                                      -----------   -----------
Total deferred tax assets                               6,120,000     4,900,000
Valuation allowance                                    (6,120,000)   (4,900,000)
                                                      -----------   -----------
Net deferred taxes                                    $        --   $        --
                                                      ===========   ===========

The Company has incurred net losses since inception. At March 31, 2005, the
Company had approximately $16,500,000 in net operating loss carryforwards for
United States Federal Income Tax purposes that expire beginning in 2017 through
2024. Based on the weight of available evidence, both positive and negative, a
valuation allowance to fully provide for the net deferred tax assets has been
recorded since it is more likely than not that the deferred tax assets will not
be realized.

The net change in the valuation allowance for the years ended March 31, 2005 and
2004, was an increase of approximately $1,220,000 and $1,200,000, respectively
resulting primarily from net operating losses generated. The difference between
the benefit for income taxes and the amount which results from applying the
federal statutory rate of 35% is primarily due to the increase in the valuation
allowance, resulting in no tax benefit being recorded.

Income taxes for the years ended March 31, 2005 and 2004 differ from the amounts
computed by applying the effective income tax rate of 35% to loss before income
taxes as a result of the change in the valuation allowance and certain permanent
non-deductible items as follows:

Computed tax benefit at the statutory rate and increase (decrease) in taxes
resulting from:

                                                March 31         March 31
                                                  2005             2004

Net loss                                     $ 1,290,000      $ 1,210,000
Permanent differences:
Non deductible travel and entertainment          (10,000)        ( 10,000)
Amortization of debt discount                    (60,000)              --
                                             -----------      -----------
Current income tax benefit                     1,220,000        1,200,000

Change in valuation allowance                 (1,220,000)      (1,200,000)
                                             -----------      -----------
Net Income tax benefit                       $        --      $        --
                                             ===========      ===========

Based on ownership changes that have occurred, future utilization of the net
operating loss carryforwards pertaining to Transpirator Technologies, Inc. of
approximately $2,600,000, may be severely limited and therefore has not been
included in the above loss carryforward amount.

                                      F-16

<PAGE>

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Operating Lease

The Company has operating leases for office space and equipment. The Company's
lease for office space for its headquarters expired in March 2003. Through June
2005, the Company continued to rent the office space under a month-to-month
arrangement at a rate of $3,600 per month.

During August 2004, the Company entered into a lease for its corporate offices.
The lease was for an initial term of five years, with a renewable clause for an
additional five years. Monthly base rental payments were $11,692 for the first
year of the agreement, increasing annually on the anniversary date by 2%.

Upon signing the lease, the Company remitted payment for the first and last
month's rent, plus a security deposit. In addition, the Company paid an
additional month's rental payment.

Shortly after signing the lease and prior to moving, the Company incurred
funding issues and negotiated a verbal release from the agreement. At the time,
the leasing company was in negotiations to sell the building. When these
negotiations began to slow down, the leasing company stated that they would
retain their rights to enforce the lease terms, if they deemed it necessary.

Per the terms of the lease, the Company could remain liable for amounts due
under the lease until the premises were reletted. The Company feels that if the
leasing company had been actively trying to relet the office space, it could
have reasonably been leased within one year. Based on that assumption, the
Company has accrued one year's estimated lease payments, less amounts paid, plus
18% interest.

         Estimated lease payments(including
         taxes & additional rental assessments)                         $192,774

         Less amounts paid                                                66,304

         Liability remaining on term for one year                        126,470

         Interest at 18% per annum                                        22,765

         Accrued liability as of March 31, 2005                         $149,235

As of March 31, 2005 and subsequent to the time of filing, no course of action
has been taken by the leasing company to enforce the terms of the lease.

Rent expense under these leases was $274,500 and $43,507 for the fiscal years
ended March 31, 2005 and 2004, respectively.

Employment Agreements

The Company has an employment agreement with its chief executive officer
providing for an annual salary of $250,000 through April 2006.

                                      F-17


<PAGE>


Contingencies

The founder of the Company Elliott Ramberg and his wife Carol have asserted that
the Company's chief executive officer, Martin Munzer, coerced them to making
gifts of their shares of the common stock of CyGene to third parties on behalf
of CyGene. They also recently asserted claims relating to sums due them by
CyGene and receipt of their shares of common stock and options to purchase
common stock of the Company. On November 9, 2004 the Company entered into a
settlement agreement with the Rambergs resolving all issues between them the
Company and CyGene and general releases were exchanged. The releases
specifically excluded any claims the Rambergs had against Mr. Munzer. On
February 13, 2003 the Rambergs entered into a settlement agreement; this 2003
agreement specifically releases CyGene and its officers and affiliates which
includes Mr. Munzer. On or before October 3, 2003, Mr. Ramberg reaffirmed the
2003 agreement and stated that he would not sue the Company, CyGene or Mr.
Munzer. The Company's management currently does not feel there is any
significant liability to the Company from these asserted claims and has filed a
counter lawsuit against the Ramberg's attorney for various issues pertaining to
his efforts in representing the Rambergs.

NOTE 10- RELATED PARTY TRANSACTIONS

In July 2003, the Company issued 5,250,000 of its common shares to its President
as payment for accrued salary in the amount of $374,850, and 336,000 of its
common shares to two members of the Board of Directors as payment for directors'
fees of $24,000. Since the value of the Company's common stock at the time of
these issuances was $.15 per share, additional compensation expense of $439,050
was recognized at that time.

In February 2003 the Chief Technology Officer (the "CTO") resigned from the
Company pursuant to certain agreed terms and conditions. In return for waiving
the right to receive any outstanding compensation, the CTO accepted a $7,500
deferred consulting fee, and a $179,500 note payable. The CTO was issued 222,667
common shares in exchange for $167,000 of the note payable in September 2003.

Also in February 2003, the Director of Operations (the "DO") resigned from the
Company pursuant to certain agreed terms and conditions. In return for waiving
the right to receive any outstanding compensation, the DO was issued 827,230
common shares of the Company from two officers of the Company and another
shareholder, and 33,333 common shares by the Company. Expense of $414,000 was
recorded by the Company for these issuances. In addition, the DO was issued
437,500 stock options exercisable at $1.01 per share and they were vested as of
March 31, 2005 with a life of three years.

NOTE 11 - SUBSEQUENT EVENTS

The Company had the following financing activity after March 31, 2005:

     o    Sale of approximately 790,000 shares of common stock for approximately
          $66,600 - June 30, 2005

     o    Sale of approximately 820,000 shares of common stock for approximately
          $90,000 - September 30, 2005

     o    Issued approximately $365,000 in convertible debentures plus warrants
          secured by the Company's intellectual property

     o    Sale of approximately 2,330,000 units consisting of one share of stock
          and one warrant for approximately $465,500 - December 31, 2005

     o    Sold approximately 1,425,000 units consisting of one share of common
          and one warrant for approximately $285,000 - March 31, 2006

     o    Sold approximately 1,300,000 units of one share of common and two
          warrants for approximately $260,000.

The Company had sales of approximately $130,000 to one customer in May, 2006.

                                      F-18