UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               FORM 10-KSB/A NO. 1

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

                    For the fiscal year ended March 31, 2004

[ ]  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. [ ]

<PAGE>

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.). $21,727,086.00 as of November 10, 2004.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 42,532,139 shares of common stock
were outstanding as of November 10, 2004.

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

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.
to engage in the development of respiratory therapy products. On September 30,
2003, as described below, we acquired CyGene, Inc. and 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 no revenue for our fiscal year ended March 31, 2004,
and had a net loss of $3,482,982. Our accumulated deficit as of March 31, 2004
was $20,410,163. We have not had any revenue during our current fiscal year.

On September 30, 2003, New Transpirator, Inc., our wholly-owned subsidiary,
merged with CyGene, Inc. Pursuant to the merger, the common stockholders of
CyGene, Inc. who were accredited investors, plus the largest 35 unaccredited
investors received approximately 85% of our issued and outstanding common stock
and the remaining stockholders of CyGene, Inc. received cash totaling
approximately $10,008 or $0.07143 per share of CyGene, Inc.'s common stock in
exchange for 100% of the capital stock of CyGene, Inc. Our stockholders
immediately prior to the merger retained approximately 15% of our issued and
outstanding common stock.

At the time of the transaction, we changed our name from Transpirator
Technologies, Inc. to CyGene Laboratories, Inc. Immediately prior to the merger,
our primary business was related to respiratory therapy. Pursuant to the terms
of the merger agreement, the assets and future royalties of Transpirator
Technologies, Inc., relating to its business were transferred to a limited
liability company established prior to September 30, 2003 for the benefit of
Transpirator Technologies, Inc.'s stockholders as determined immediately prior
to the merger. Thus, our stockholders have no interest in such assets or
royalties of our prior business.

Our company, through its operating subsidiary, CyGene, Inc., has built a
discovery, development and future commercialization platform for DNA/RNA
technologies which we believe will allow it to create significant value within
our franchise. 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.

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We currently hold five patents including a recent United States Patent and
Trademark office approval for our next generation gene-capture technology. This
technology has commercial potential not only in the diagnostics field, but also
for its use as a highly stable and efficient gene therapy drug for Antisense and
RNA Interference (RNAi).

We have been focused in the short term with developing commercial opportunities
in the diagnostic testing and individualized genetic characterization. We have
developed a patented business model 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 will offer consumers access to a variety of
DNA-based tests and analysis. While individualized genetic characterization
represents a relatively short term opportunity, which we plan to pursue with a
marketing and sales partner, we are also continuing 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. The commercial significance of our approach is considerable
with application at blood banks, clinical laboratories and large medical
centers. 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 application 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.

BUSINESS STRATEGY

CyGene, Inc.'s strategy is to be a leading next generation gene therapy and
diagnostics 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 actively 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.

     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. We
     believe that through utilizing these systems, a passive immunization can be
     developed which could protect an individual for up to a maximum of 90 days.
     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 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.

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     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 expended great effort and expense to
         protect our HP methodologies through patent protection. 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, thus
having a 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 ideal candidates for

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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 ideally 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 involves the analysis of
         genes in search for 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. Our plans
         call for securing a marketing and sales partner with an established
         distribution network to test market a product in the first quarter of
         2005.

Since CyGene, Inc. began operations in October 1995, it has been involved
primarily in research and development. To date, CyGene, Inc. has had no revenues
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, Great Smokey Mountain Labs, Hybridon Inc, Avigen Inc,
Isis Pharmaceuticals, Inc. and Geron Corp.

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<PAGE>

INTELLECTUAL PROPERTY

Patents and other proprietary rights are important to our business. Thus it is
our policy to seek patent protection for our inventions, and also to rely upon
trade secrets, know-how, and continuing technology innovations and licensing
opportunities to develop and maintain our competitive position.

We own four patents one additional patent allowed and we have 20 additional
technologies and technology processes patents pending.

     1.  U.S. Patent No. 5,962,225 Issued
                  Title: Methods and Compositions for Detection of Specific
                  Nucleotide Sequences

     2.  U.S. Patent No. 6,100,040 Issued
                  Title: Methods and Compositions for Detection of Specific
                  Nucleotide Sequences

     3.  U.S. Patent No. 6,458,540 Issued
                  Title: Methods and Compositions for Detection of Specific
                  Nucleotide Sequences

     4.  U.S. Patent No. 6,709,829 Issued
                  Title: Methods and Compositions for Detection of Disease

     5.  U.S. Utility Patent Application No. 10/055,732 Allowed, Published as
         2003US0135040
                  Title: Compositions and Methods of Synthesis and Use of Novel
                  Nucleic Acid Structures

     6.  Japanese Patent Application No. 9-516836 Pending, Published as WO
         1997US15691
                  Title: Methods and Compositions for Detection of Specific
                  Nucleotide Sequences

     7.  Canadian Patent Application No. 2,309,861 Pending, Published as WO
         1999US24621
                  Methods and Compositions for Detection of Specific Nucleotide
                  Sequences

     8.  South Korean Patent Application No. 7005156/2000 Pending, Published as
         WO 199US24621
                  Title: Methods and Compositions for Detection of Specific
                  Nucleotide Sequences

     9.  Japanese Patent Application No. 2000-519613 Pending, Published as WO
         1999US24621
                  Title: Methods and Compositions for Detection of Specific
                  Nucleotide Sequences

     10. Canadian Patent Application No. 2,447,892 Pending, Published as WO
         2003US063763
                  Title: Complement Mediated Assays for In Vivo and In Vitro
                  Methods

     11. Japanese Patent Application (Number Pending) Pending, Published as WO
         2003US063763
                  Title: Complement Mediated Assays for In Vivo and In Vitro
                  Methods

     12. EPO Patent Application No. EP02806678.5 Pending, Published as WO
         2003US063763
                  Title: Complement Mediated Assays for In Vivo and In Vitro
                  Methods

     13. PCT/US03/04680 Patent Pending, Published as WO 2003US085123
                  Title: Methods and Compositions for In Vivo Clearance of
                  Pathogens

     14. U.S. Utility Patent Application No. 10/367,418 Pending, Published as
         2003US0232045
                  Title: Methods and Compositions for In Vivo Clearance of
                  Pathogens

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     15. PCT/US03/18704 Patent Pending, Published as WO 2003US106695
                  Title: Methods and Compositions for In Vivo Clearance of
                  Pathogens

     16. U.S. Utility Patent Application No. 10/459,771 Pending, Published as
         2004US0033232
                  Title: Methods and Compositions for In Vivo Clearance of
                  Pathogens

     17. PCT/US02/39761 Patent Pending, Published as WO 2003US052144
                  Title: Diagnostic Assays for Biological Warfare Agents

     18. U.S. Utility Patent Application No. 10/319,068 Pending, Published as
         2004US0029135
                  Title: Diagnostic Assays for Biological Warfare Agents

     19. EPO Patent Application No. EP00975496.1 Pending, Published as
         2001W032924
                  Title: Compositions and Methods of Synthesis and Use of Novel
                  Nucleic Acid Structures

     20. U.S. Utility Patent Application No. 10/446,201 Pending, Published as
         2004US0029160
                  Title: Parallel Stranded Duplexes of Deoxyribonucleic Acid and
                  Methods of Use

EMPLOYEES

As of November 10, 2004, we employ six full-time employees, and six part-time
employees. Of our 12 employees, two 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 2,500 square feet of commercial office space in
Coral Springs, Florida, which encompasses our executive and administrative
offices and a portion of our operating activities. We currently lease this space
under a month to month arrangement at a rate of $3,600 per month.

On August 5, 2004, we entered into a five-year lease for a 7,100 square foot,
newly constructed, facility in a professional office park, with base rent of
approximately $11,692 per month, subject to an annual increase of 2%. The lease
is renewable for an additional five-year term at a 5% rent increase. We also
have a right of first refusal on additional rental space owned by the landlord
in the same development park as well as a right of first refusal on the purchase
of the entire building.

We have retained an architect to custom design the interior of the building to
our specifications. The landlord has provided for a $20 per square foot
leasehold improvement allowance that is required to be repaid to us.

ITEM 3. LEGAL PROCEEDINGS

We are not aware of any legal proceedings against us.

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

Not applicable.

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                                     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.

                                                      HIGH             LOW

 FISCAL YEAR ENDING MARCH 31, 2005
 (THROUGH THE DATE OF THIS REPORT)
 First Quarter (4/1/04 to 6/30/04)                    $ 1.17         $ 0.80
 Second Quarter (7/1/04 to 9/30/04)                   $ 1.65         $ 0.45
 Third Quarter (10/1/04 to 11/10/04)                  $ 1.01         $ 0.75

 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)                  $ 1.25         $ 0.50
 Fourth Quarter (1/2/04 to 3/31/04)                   $ 1.10         $ 0.61

 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 November 10, 2004, there were approximately 688 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.

In connection with our merger on September 30, 2003, pursuant to the terms of
the merger, we effected a stock dividend payable effective for stockholders of
record on September 29, 2003, of 0.58 shares for each share owned, so that the
shares owned by them and the shares received as a dividend were approximately
15% of our issued and outstanding shares. Additionally, our current assets and

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future royalties as they existed on September 29, 2003 were placed into a trust
for the benefit of our stockholders of record as of a date prior to the merger.

PURCHASES OF EQUITY SECURITIES

During the fiscal year ended March 31, 2004, 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 quarter ended March 31, 2004, we made the following sales of
unregistered securities which were exempt from registration under the Securities
Act of 1933 (the "Act"). The Reg. S offering referred to below was exempt under
Regulation S of the Act and the remaining offerings were exempt as nonpublic
offerings under Section 4(2) of the Act and Rule 506 thereunder:

  TYPE OF SALE                        PRICE      AMOUNT RECEIVED   SHARES ISSUED
  ------------                        -----      ---------------   -------------
Private Placement                   $  0.225      $ 315,250.15       1,401,104
Fee for Services                    $  0.83       $  32,054.00         142,462
Dispute Settlement                  $  0.50       $  73,323.00         146,646

Reg. S. Offering  Various Prices
                         Average    $  0.35       $ 124,875.00         355,368
Convertible Notes                   $  0.07143    $  15,500.80         217,006
Issuance of Stock to                $  0.83               N/A          300,000
Directors


Pursuant to our merger on September 30, 2003, the common stockholders of CyGene,
Inc., who were accredited investors, plus the largest 35 unaccredited investors,
received approximately 85% of our issued and outstanding common stock or
30,975,838 shares, and the remaining CyGene, Inc. stockholders received $0.07143
per share of their CyGene, Inc. common stock in exchange for 100% of the capital
stock of CyGene, Inc. Our stockholders as determined immediately prior to the
merger retained approximately 15% of our issued and outstanding common stock.

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
planned transition to a new facility and anticipated improvements to such
planned facility, 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

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needed over the next 12 months, our future liquidity, anticipated employment
levels for 2004 and 2005, 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 on
forward-looking statements that follows this section and those contained in
"Special Factors Relating to Our Business." 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 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, which typically occurs when
the customer accepts the shipment and products.

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         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.

OVERVIEW

Fiscal 2004 saw a fundamental change in the nature and business of the company.
Highlights were:

     o    Effective September 30, 2003, we engaged in a reverse merger with
          CyGene, Inc. Immediately prior to the merger, we declared a special
          dividend of our assets to stockholders of record prior to the merger
          so that as of the date of the merger we were a shell corporation
          without any operations;

     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. has not generated any revenue 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;

     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."

OUR CONSOLIDATED RESULTS OF OPERATIONS

We recognized no revenue in the fiscal years ended March 31, 2004 and 2003, but
incurred substantial costs related to our operations as a development stage
company. Total operating expenses for the fiscal years ended March 31, 2004 and
2003 were $3,324,692 and $2,135,486 respectively. The major components of these
expenses are detailed and discussed below:
<TABLE>
<CAPTION>

                                                     FISCAL YEAR
                                   FISCAL YEAR          ENDED
                                      ENDED         MARCH 31, 2003
                                  MARCH 31, 2004      (UNAUDITED)       CHANGE (1)       % CHANGE
                                  --------------      ----------        ----------       --------
<S>                                 <C>               <C>               <C>                <C>

Compensation and related
  taxes and benefits                $1,340,395        $  961,891        $  378,504          39%

Consulting and professional fees       781,441           533,382           248,059          47%

Research and development               721,991           567,082           154,909          27%

Advertising and public relations       224,506                --           224,506         100%

Interest                               173,399           105,782            67,617          64%
</TABLE>

(1) Change in total dollars from period to period.

The increase in compensation and related taxes and benefits primarily relate to
the issuance of common stock to our chief executive officer. Our employment
level increased between fiscal years 2003 and 2004; further headcount additions
are anticipated for fiscal year 2005.

                                       11
<PAGE>


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 audits since inception, 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 intend to
retain a limited number of skilled employees to reduce the need for extensive
assistance from outside law firms, consultants and accounting professionals.

Patent expenses relate to the cycle of 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 2004 reflects
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 2004,
and management expects the level of these expenses to remain consistent over the
coming periods.

Research and development costs relate to product development efforts, such as
the intellectual property development of the STE technology and the in-vitro
validation of the CyProbe gene therapy technology. Additionally, considerable
research and development has been conducted on optimizing the methods for the
genetic profiling services and automating them on our robotic platform. The
costs in fiscal year 2004 reflects outsourced laboratory services and leased
laboratory equipment, which management feels will be mitigated in coming periods
as we transition to a new facility and complete anticipated improvements to such
planned facility.

In the future, we expect that we that we will incur increased marketing and
public relations expenditures in connection with our efforts to create
promotional materials, ranging from brochures, to trade show collateral
materials, to broadcast media, as well as internet based applications, to
formally present 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, resulting in a
substantial increase 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, and potentially produce revenues and a positive
return on our investment in such advertising and promotional activities.

LIQUIDITY AND CAPITAL RESOURCES

During fiscal year 2004, we raised approximately $1,113,000 from private
placements of our common stock, and received $234,200 in debt financing from
outside parties. During the year, we employed these resources to fund operating
activities, acquire $24,828 in property and equipment, and repay $205,448 in

                                       12
<PAGE>

notes payable. Additionally, we converted $2,292,000 of combined trade accounts
payable, accrued interest and notes payable to common stock.

From inception, we have been largely reliant 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.

As of March 31, 2004, we had a working capital deficit of $2,137,204. Cash on
hand was $145,696 as of March 31, 2004. As of November 15, 2004, our cash
balances were approximately $25,000. In the quarter ended June 30, 2004, we
raised $403,500 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.
From July 1, 2004 through November 15, 2004, we have raised $137,900 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. The offering was
terminated on July 19, 2004. In July 2004, we raised $180,000 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.

We anticipate that an additional $3 million may be required to meet our
operating requirements during the next 12 months, although there can be no
assurances that this amount will be available or sufficient. In order to meet
our working capital needs, in late July 2004, we entered into a letter of intent
with a New York-based broker-dealer to initially raise between $750,000 and
$1,250,000 in bridge loan financing with warrants and then raise between
$4,000,000 to $6,000,000 in the sale of Series A Preferred Stock with warrants.
We have raised $216,000 of the bridge loan financing as of the date of this
Report, although we expect that we will receive further funds once this Report
is filed with the Securities and Exchange Commission. The Series A Preferred
Stock offering will only occur if the bridge loan financing is raised and is
subject to the broker-dealer's continuing due diligence including its review of
this Report and of the necessary documentation, as well as other customary
financing and closing contingencies. There can be no assurances that
we will be successful in raising any funds in the contemplated offerings. Any
significant shortfall may result in the delay, scaling back or elimination of
some or all of our research and development activities and other operations
planned or currently underway. Additionally, unless we raise at least
$1,000,000, we will not be able to remain operational over the next 6 months
even if we scale back our operations.

If we raise at least $3,000,000.00 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 third quarter of Fiscal 2005. 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 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:

                                       13
<PAGE>

     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.

SPECIAL FACTORS RELATING TO OUR BUSINESS

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 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 NOT COMMERCIALIZED ANY PRODUCTS.

We are in the development stage and have not completed development of nor
commercialized any of our proposed products or technologies. Our viability,
profitability and growth will depend upon successful commercialization of
products and technologies resulting from our research and product development
activities. There can be no assurance that any of our proposed products or
technology will be commercialized. 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.

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.

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

                                       14
<PAGE>

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.

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.

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

As described in "-Liquidity and Capital Resources," we received a term sheet
from a broker-dealer to raise debt and equity capital for us. We are dependent
upon the receipt of these funds to remain operational and commercialize our
products. If we do not receive sufficient funds from these pending offerings, we
may not be able to remain in business.

                                       15
<PAGE>

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.

                                       16
<PAGE>

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.

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 WILL NOT BE 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 bear the financial risk of losing their
entire investment.

                                       17
<PAGE>

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 Securities and Exchange Commission ("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, 2004 AND 2003



                      SEE F PAGES AT THE END OF THIS REPORT

                                       18
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

As we previously reported in our Form 8-K filed on May 5, 2004, we dismissed
Brimmer, Burek and Keelan LLP as our principal accountant and on April 29, 2004,
we engaged Eisner LLP as our principal accountant. The decision to change
principal accountants was approved by the Board of Directors. We had not
consulted with Eisner LLP on any matter during fiscal year 2003 or prior to
their engagement for fiscal year 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 the Company is in the
development stage, we will amend those reports filed after September 30, 2003
with the SEC to change the financial statements. We do not know, but believe
that Brimmer, Burek & Keelan LLP may disagree with the development stage
approach.

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

                                       19
<PAGE>

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            52     Chairman of the Board, CEO, and CFO
        Walter W. Witoshkin      59     Vice President of Strategic Development
        Raymond J. Romano        53     Member of the Board of Directors
        John Signorelli          62     Member of the Board of Directors
        Stanley Satz             61     Member of the Board of Directors


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.

Raymond J. Romano has been one of our directors since inception in 1986. He was
also our former CEO and Chairman of the Board of Directors from our inception
through September 30, 2003, the date of our merger with CyGene, Inc.. Mr. Romano
has been Vice President of Lodging Concepts, Inc., a privately held corporation
in Fairfield, New Jersey since January 1990.

John J. Signorelli has been one of our directors since 1987. He has been retired
since April 2001. Since retiring, he occasionally provides health care
consulting services on a part-time basis.

                                       20
<PAGE>

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
since 1995. 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 enrolled in the Ph.D. program at the
University of Ljubljana, Yugoslavia.

Previous experience with the SBIR program and the Advanced Technology Program of
NIST led to multiple successes, including major 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, radioimmunotherapeutic 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).

NAME                  FORM     DATE OF EVENT             EXPLANATION
----                  ----     -------------             -----------
Raymond J. Romano      4       January 5, 2004     Filed late on July 08, 2004
John J. Signorelli     3       April 27, 1987      Filed late on April 14, 2004
Stanley Satz           4       January 5, 2004     Filed late on June 15, 2004


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 Raymond Romano and John
Signorelli. Neither of Mr. Romano or Mr. Signorelli has advised us that he is an
audit committee financial expert within the meaning of the SEC's rules. In the
future, the board of directors intends to establish compensation and nominating

                                       21
<PAGE>

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, and it is for this reason that the Company does not know whether there
will be any difference in the manner in which the nominating committee will
evaluate nominees or candidates to be a director based on whether the nominee is
recommended by a security holder or otherwise. 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 the best of our knowledge, the
Company has not received any requests from any security holder recommending any
nominees or candidates to its board of directors.

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 the Company's
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, 2004, 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>                                                   <C>
  Martin Munzer,     2004      $655,770(1)                                           $   -
  President and CEO  2003      $250,000(2)                                               -
                     2002      $742,045(3)                                               -

 Raymond J. Romano   2004      $ 17,870(4)                               -
 (Former  CEO  and   2003      $     0                               40,000
  CFO)                                                               shares of
                                                                     common
                                                                     stock(5)

                     2002      $     0                               280,000
                                                                     shares of
                                                                     common
                                                                     stock(6)
</TABLE>

                                       22
<PAGE>

(1)  Mr. Munzer's salary for the year ended March 31, 2004 was $250,000. As of
     July 9, 2003, the Company owed Mr. Munzer accrued salary of $62,500 for the
     year ended March 31, 2002, $250,000 for the year ended March 31, 2003 and
     $69,230 for the period from April 1, 2003 through July 9, 2003. On July 9,
     2003 the Company issued 5,250,000 shares of common stock to Mr. Munzer
     which was valued at $.15 per share ($787,500) in payment of all accrued
     salary through that date. Mr. Munzer's salary from July 9, 2003 through
     March 31, 2004 aggregated $180,770, of which $62,005 remains unpaid as of
     March 31, 2004.

(2)  Mr. Munzer's salary for the year ended March 31, 2003 was $250,000, none of
     which was paid during the year (see (1) above).

(3)  For the year ended March 31, 2002, Mr. Munzer earned salary at a rate of
     $250,000 per annum. As of the beginning of that year, the Company owed
     $333,952 in unpaid salary to Mr. Munzer. As of December 31, 2001 the
     Company issued 1,013,497 shares of common stock to Mr. Munzer which was
     valued at $1.00 per share in payment of all accrued salary through that
     date. Mr. Munzer's salary from January 1, 2002 through March 31, 2002
     aggregated $62,500 and was not paid during the year (see (1) above).

(4)  Represents common stock issued to Mr. Romano in lieu of salary. See Item 12
     "Certain Relationships and Related Transactions".

(5)  Represents common stock issued to Mr. Romano as compensation for services.
     See Item 12 "Certain Relationships and Related Transactions".

(6)  Represents common stock issued to Mr. Romano as compensation for services.

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,
2004.

                       OPTIONS/GRANTS IN LAST FISCAL YEAR
<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>
Martin Munzer                             750,000                                             $0.25           9/30/08
                                             -
                                             -
</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 once all
prior grants of restricted stock have vested. 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.

                                       23
<PAGE>

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. The agreement provides for a base salary of
$250,000 per year. Mr. Munzer has been negotiating a new agreement with us, but
our Board of Directors has been unable to reach any agreement with him.

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

The following table sets forth, as of November 10, 2004, 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.

<TABLE>
<CAPTION>

                                                             AMOUNT AND NATURE
                         NAME AND ADDRESS                      OF BENEFICIAL         PERCENT
TITLE OF CLASS        OF BENEFICIAL OWNER (1)                    OWNERSHIP          OF CLASS (1)
--------------        -----------------------                    ---------         ------------
<S>                     <C>                                    <C>                  <C>
Common Stock            Martin Munzer                          8,651,109(2)         19.99%
                                                                      --
                        7786 Wiles Road
                        Coral Springs, FL 33067

Common Stock            Raymond J. Romano                      1,179,285(3)          2.72%
                                                                      --
                        2 Daniel Road
                        Fairfield, NJ 07004

Common Stock            John Signorelli                          702,433(4)          1.62%
                        P.O. Box 386
                        Goldens Bridge, NY 10526

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

Common Stock            Walter W. Witoshkin                      750,000(5)             *
                        321 Norristown Road, Suite 320
                        Amble, PA 19002

Common Stock            Elliot Ramberg                         4,279,864(6)          9.89%


All executive                                                                       24.33%
officers and
directors as a group
</TABLE>

                                       24
<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 includes 100,000 shares issuable upon the exercise of stock
         options. 177,777 of these shares are held by RKL Partner for which Mr.
         Romano controls 50% and 88,888 of these shares are held by M&R
         Associates for which Mr. Romano controls 50%.
(4)      This includes 100,000 shares issuable upon the exercise of stock
         options. It includes 74,300 shares which are held by Mr. Signorelli and
         his wife jointly, and 379,200 shares held by Mr. Signorelli's wife
(5)      This represents 750,000 shares issuable upon the exercise of stock
         options which are held by Windy Bush Trading Co. LLC of which Mr.
         Witoshkin is the controlling member.
(6)      Includes 1,721,349 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%

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
<TABLE>
<CAPTION>

                      EQUITY COMPENSATION PLAN INFORMATION
                                                                                NUMBER OF SECURITIES
                                                                               REMAINING AVAILABLE FOR
                                                                                FUTURE ISSUANCE UNDER
                            NUMBER OF SECURITIES TO      WEIGHTED-AVERAGE        EQUITY COMPENSATION
                            BE ISSUED UPON EXERCISE     EXERCISE PRICE OF         PLANS (EXCLUDING
                            OF OUTSTANDING OPTIONS,    OUTSTANDING OPTIONS,    SECURITIES REFLECTED IN
                              WARRANTS AND RIGHTS      WARRANTS AND RIGHTS           COLUMN (A))
      PLAN CATEGORY                   (A)                      (B)                       (C)
      -------------           -------------------      -------------------           -----------
<S>                                <C>                         <C>                   <C>
Equity compensation plans
approved by security
holders                            2,200,000                   1.69                   1,300,000
Equity compensation plans
not approved by security
holders                             960,500                    2.61                       -
          TOTAL                    3,160,500                   1.97                   1,300,000
</TABLE>


                                       25
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In July 2004, we borrowed $50,000 to use as a deposit for our new facility. The
lender was Transpirator LLC, an entity that received all of our assets which
existed as of September 29, 2004 and is managed by Mr, Raymond J. Romano, one of
our directors. The loan with 6% per annum interest is payable from the receipt
of our proposed bridge loan financing. As additional consideration, we agreed to
issue Transpirator LLC a warrant to purchase to purchase 50,000 shares of our
common stock at $.40 per share over a two year period.

On February 23, 2004 Mr. Romano purchased $10,000 of our common stock at $.225
per share and on January 9, 2004 Mr. Romano purchased $10,000 of our common
stock at $.225 per share. The shares were issued to M&R Associates, a
partnership in which Mr. Romano controls 50%. These shares were purchased as
part of a private placement of our securities.

Prior to the merger with CyGene, Inc., we conducted our operations at office
facilities provided free of charge by Mr. Romano.

On September 25, 2003 Mr. Romano purchased $10,000 of our common stock at $.225
per share. The shares were issued to RKL Associates, a partnership in which Mr.
Romano controls 50%. These shares were purchased as part of a private placement
of the Company's securities.

On September 12, 2003 Mr. Romano and Mr. John J. Signorelli, a director
purchased $20,000 and $5,000 of our common stock , respectively, at $0.15 per
share.

On July 2, 2003 the Board of Directors authorized the issuance of 47,025 shares
each to Messrs. Romano and Signorelli as compensation for the time and effort
spent on the merger with CyGene, Inc. in lieu of the $50.00 per hour that
otherwise would be due. The approximate value of the shares was $17,870 based
upon the closing price on July 2, 2003 of $.19 per share.

On December 12, 2002 the Board of Directors authorized the issuance of 80,000
restricted common shares to our three officers and directors as compensation for
their efforts in securing the re-listing of common stock on the OTC Bulletin
Board. The approximate value of the shares at the time of issue was $2,800 or
0.035 per share. The shares were issued as follows: Mr. Romano received 40,000
shares and Mr. Signorelli and a person no longer serving as an officer or
director each received 20,000 shares.

                                       26
<PAGE>

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

(a) EXHIBIT INDEX

Exhibit
Number      Description
------      -----------

10.1     CyGene, Inc. Employment Agreement with Martin Munzer(1)

10.2     Lease(1)

10.3     2004 Stock Plan(1)

10.4     CyGene, Inc. Consulting Agreement with Fred McCall-Perez(1)

10.5     CyGene, Inc. Consulting Agreement with Barry Dvorchik and Associates,
         Inc.(1)

21       Company Subsidiaries(1)

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

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

99.1     Code of Ethics(1)

(1) Contained in Form 10-KSB filed on September 17, 2004.

         None.

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, 2004 were $200,000 as
compared to $35,938 for the year ended March 31, 2003. Eisner LLP was our
registered public accounting firm for fiscal 2004 while Brimmer, Burek & Keelan
LLP was our independent accountant for fiscal 2003. Brimmer, Burek & Keelan LLP
billed us $20,000 in fees for reviews of our financial statements contained in
Form 10-QSB during 2004 and $20,000 for such services in 2003.

AUDIT-RELATED FEES

We incurred $0 and $0 in audit related fees during the fiscal years ended March
31, 2004 and 2003, respectively.

TAX FEES

Our principal independent accountants billed us $0 for tax services for the
years ended March 31, 2004 and March 31, 2003.

ALL OTHER FEES

Our principal independent accountants did not perform any other services for us
during the fiscal years ended March 31, 2004 or 2003.

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


                                       27
<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 24th day of November 2004.


                                         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.
<TABLE>
<CAPTION>

SIGNATURES                               TITLE                                          DATE
----------                               -----                                          ----
<S>                                      <C>                                            <C>
/s/ Martin Munzer                        Chairman of the Board of Directors Chief       November 24, 2004
-----------------                        Executive Officer, and Chief Financial
Martin Munzer                            Officer


/s/ Raymond J. Romano                    Director                                       November 24, 2004
---------------------
Raymond J. Romano


/s/ John Signorelli                      Director                                       November 24, 2004
-------------------
John Signorelli


/s/ Stanley Satz                         Director                                       November 24, 2004
----------------
Stanley Satz
</TABLE>


                                       28

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

<TABLE>
<CAPTION>
                                    CONTENTS

<S>         <C>       <C>
PAGE        F-1       REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PAGE        F-2       CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2004

PAGE        F-3       CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
                      AND PERIOD FROM OCTOBER 25, 1995 (INCEPTION) THROUGH MARCH 31, 2004 (UNAUDITED)

PAGES       F-4       CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL  DEFICIENCY FOR THE PERIOD FROM OCTOBER 25, 1995
                      (INCEPTION) THROUGH MARCH 31, 2004

PAGE        F-7       CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
                      AND PERIOD FROM OCTOBER 25, 1995 (INCEPTION) THROUGH MARCH 31, 2004 (UNAUDITED)

PAGES       F-8       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>

                                    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, 2004, the
related consolidated statements of operations and cash flows for the year then
ended and the related consolidated statement of changes in capital deficiency
for the period from October 25, 1995 (inception) through March 31, 2004. 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.

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

We did not audit the Company's results of operations for the years ended March
31, 2003 and 2002, reflecting net losses of $2,219,298 and $4,914,480,
respectively, which amounts enter into the determination of changes in capital
deficiency for the period from October 25, 1995 (inception) through March 31,
2004.

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, 2004, and the results of their operations
and their cash flows for the year then ended and, except for the effects of such
adjustments, if any, as might have been determined had we audited the results of
operations for the years ended March 31, 2003 and 2002, as discussed in the
preceding paragraph, the changes in capital deficiency for the period from
October 25, 1995 (inception) through March 31, 2004, 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 $3,482,982 for
the year ended March 31, 2004 and had a working capital deficiency of $2,137,124
and a capital deficiency of $2,258,792 as of March 31, 2004. 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.

The accompanying consolidated statements of operations and cash flows for the
year ended March 31, 2003 and for the period from October 25, 1995 (inception)
through March 31, 2004 were not audited by us and, accordingly, we do not
express an opinion on them.

Eisner LLP


New York, New York
August 18, 2004

With respect to the third paragraph of Note 11
November 9, 2004

                                       F-1
<PAGE>


                            CYGENE LABORATORIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2004
                                 --------------


CURRENT ASSETS
 Cash                                                             $    145,696
 Accounts receivable                                                     1,126
 Other current assets                                                   20,062
                                                                  ------------
         Total Current Assets                                          166,884

PROPERTY AND EQUIPMENT, NET                                             32,084

 Other assets                                                              840
                                                                  ------------

TOTAL ASSETS                                                      $    199,808
                                                                  ============


CURRENT LIABILITIES
 Accounts payable                                                 $    725,827
 Accrued officers salary                                                61,976
 Accrued salary and related benefits                                   974,138
 Other accrued expenses                                                 29,932
 Notes payable and convertible debentures (current portion)            473,410
 Note payable - shareholders                                            38,724
                                                                  ------------
         Total Current Liabilities                                   2,304,007
                                                                  ------------

LONG-TERM DEBT

 Notes payable and convertible debentures (non-current portion)        154,593
                                                                  ------------
         Total Long Term Debt                                          154,593
                                                                  ------------

TOTAL LIABILITIES                                                    2,458,600
                                                                  ------------

CAPITAL DEFICIENCY
 Class A common stock, $.001 par value, 95,000,000 shares
   authorized, 40,068,648 shares issued and outstanding                 40,069
 Class B common stock, $.001 par value, 10,000,000 shares
   authorized, none issued and outstanding                                  --

 Additional paid-in capital                                         18,172,491
 Deferred compensation                                                 (60,347)
 Deficit accumulated during development stage                      (20,410,163)
 Other comprehensive loss                                                 (842)
                                                                  ------------
         Total Capital Deficiency                                   (2,258,792)
                                                                  ------------

TOTAL LIABILITIES AND CAPITAL DEFICIENCY                          $    199,808
                                                                  ============

        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, 2004 AND 2003 AND PERIOD FROM OCTOBER 25, 1995
      --------------------------------------------------------------------
                       (INCEPTION) THROUGH MARCH 31, 2004
                       ----------------------------------
<TABLE>
<CAPTION>

                                               Year Ended        Year Ended      Inception through
                                                March 31,       March 31,2003     March 31, 2004
                                                  2004           (Unaudited)       (Unaudited)
                                              ------------      ------------      ------------
<S>                                           <C>               <C>               <C>
OPERATING EXPENSES
 Research and development                     $    721,991      $    567,082      $  3,428,282
 General and administrative                      2,602,701         1,568,404        15,389,752
                                              ------------      ------------      ------------
    Total Operating Expenses                     3,324,692         2,135,486        18,818,034
                                              ------------      ------------      ------------

LOSS FROM OPERATIONS                            (3,324,692)       (2,135,486)      (18,818,034)
                                              ------------      ------------      ------------

OTHER INCOME (EXPENSE)
  Other income (expense)                            15,109            21,970          (622,579)
  Interest expense                                (173,399)         (105,782)         (969,550)
                                              ------------      ------------      ------------
    Total Other Income (Expense)                  (158,290)          (83,812)       (1,592,129)
                                              ------------      ------------      ------------

NET LOSS                                        (3,482,982)       (2,219,298)      (20,410,163)
                                              ------------      ------------      ------------

Other comprehensive (loss) income
    Foreign currency translation
    adjustment                                      (1,904)            3,470              (842)
                                              ------------      ------------      ------------

TOTAL COMPREHENSIVE (LOSS)                    $ (3,484,886)     $ (2,215,828)     $(20,411,005)
                                              ============      ============      ============

Net loss per common share:
 Basic and fully diluted loss per share       $      (0.12)     $      (0.13)
                                              ============      ============

Weighted average number of common shares:
 Basic and fully diluted                        30,167,732        16,633,310
                                              ============      ============
</TABLE>


        See accompanying notes to the consolidated financial statements.


                                      F-3
<PAGE>

                        CYGENE LABORATORIES, INC.
         CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL DEFICIENCY
          FOR THE PERIOD FROM INCEPTION THROUGH MARCH 31, 2004
          ----------------------------------------------------
<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 at $.21 per share                 665,482            665         60,499             60        150,521
Common stock issued for services at $.21 per share              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 at $.21 per share                 387,231            387         35,203             35         91,033
Common stock issued for services at $.19 per share             308,000            308         28,000             28         77,714
Common stock issued for compensation at $.21 per share       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 at $.13 per share               2,508,051          2,508        228,005            228        339,271
Common stock issued for cash at $.21 per share                 730,037            730         66,367             66        162,464
Common stock issued for cash at $.67 per share                 100,375            100          9,125              9         72,891
Common stock issued for services at $.21 per share              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 at $.67 per share                  38,500             39          3,500              4         27,957
Common stock issued for cash at $1.00 per share                 82,500             83          7,500              8         89,910
Common stock issued for cash at $1.33 per share                 90,382             90          8,217              8        131,367
Common stock issued for cash at $5.00 per share                640,000            640             --             --      3,199,344
Common stock issued upon conversion of debt
   at $.23 per share                                            96,158             96             --             --         20,694
Common stock issued for services at $.67 per share               5,412              5            492              1          2,239
Common stock issued for services at $5.00 per share             72,500             73             --             --        361,928
Options issued for Compensation                                     --             --             --             --        303,151
Warrants issued in private placement of debt                        --             --             --             --         19,604
Net loss                                                            --             --             --             --             --

                                                          ------------   ------------   ------------   ------------   ------------
Balance at March 31, 2000                                   14,368,428   $     14,368      1,232,708   $      1,233   $  6,841,921

<CAPTION>
[RESTUBBED]

                                                                            Other                         Total
                                                          Accumulated   Comprehensive     Deferred       Capital
                                                             Deficit    Income (loss)   Compensation    Deficiency
                                                          ------------   ------------   ------------   ------------
<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 at $.21 per share                      --             --             --        151,246
Common stock issued for services at $.21 per share                  --             --             --         36,250
Net loss                                                      (153,983)            --             --       (153,983)

                                                          ------------   ------------   ------------   ------------
Balance at March 31, 1997                                 $   (154,381)            --   $         --   $     41,184

Common stock issued for cash at $.21 per share                      --             --             --         91,455
Common stock issued for services at $.19 per share                  --             --             --         78,050
Common stock issued for compensation at $.21 per share              --             --             --      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 at $.13 per share                      --             --             --        342,007
Common stock issued for cash at $.21 per share                      --             --             --        163,260
Common stock issued for cash at $.67 per share                      --             --             --         73,000
Common stock issued for services at $.21 per share                  --             --             --         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 at $.67 per share                      --             --             --         28,000
Common stock issued for cash at $1.00 per share                     --             --             --         90,001
Common stock issued for cash at $1.33 per share                     --             --             --        131,465
Common stock issued for cash at $5.00 per share                     --             --             --      3,199,984
Common stock issued upon conversion of debt
   at $.23 per share                                                --             --             --         20,790
Common stock issued for services at $.67 per share                  --             --             --          2,245
Common stock issued for services at $5.00 per share                 --             --             --        362,001
Options issued for Compensation                                     --             --             --        303,151
Warrants issued in private placement of debt                        --             --             --         19,604
Net loss                                                    (2,502,084)            --             --     (2,502,084)

                                                          ------------   ------------   ------------   ------------
Balance at March 31, 2000                                 $ (5,908,503)  $         --   $         --   $    949,019


</TABLE>


        See accompanying notes to the consolidated financial statements.


                                      F-4
<PAGE>

                            CYGENE LABORATORIES, INC.
             CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL DEFICIENCY
        FOR THE PERIOD FROM INCEPTION THROUGH MARCH 31, 2004 (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 at $5.00 per share                102,000            102             --             --   $    509,899
Common stock issued for services at $5.00 per share             46,750             47             --             --        233,703
Common stock issued for conversion of debt                     358,970            359             --             --         77,865
Options issued for services                                         --             --             --             --        804,341
Warrants issued in private placement of debt                        --             --             --             --         94,726
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   $  8,628,080

Common stock issued for conversion of debt at $1.00
   per share                                                    74,800             74             --             --         74,725
Common stock issued for services at $.22 per share             126,000            126             --             --        125,874
Common stock issued for conversion of accrued
   salary and compensation at $.01 per share                 1,881,167          1,881             --             --      1,879,286
Common stock issued for sale of equipment at $1.00
   per share                                                    10,000             10             --             --          9,990
Options issued for services                                         --             --             --             --         86,133
Options issued for compensation                                     --             --             --             --        103,874
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   $ 11,331,793

Common stock issued for cash at $.50 per share                 457,700            458             --             --        228,392
Common stock issued for purchase of equipment                  200,000            200             --             --         99,800
Common stock issued for services at $.50 per share             120,000            120             --             --         31,325
Common stock issued for conversion of debt at $1.00
   per share                                                    99,755            100             --             --         99,653
Warrants issued for services                                        --             --             --             --         23,570
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   $ 12,957,592


<CAPTION>
[RESTUBBED]

                                                                                Other                         Total
                                                              Accumulated   Comprehensive     Deferred       Capital
                                                                 Deficit    Income (loss)   Compensation    Deficiency
                                                              ------------   ------------   ------------   ------------
<S>                                                           <C>            <C>            <C>            <C>
Common stock issued for cash at $5.00 per share                         --             --             --   $    510,001
Common stock issued for services at $5.00 per share                     --             --             --        233,750
Common stock issued for conversion of debt                              --             --             --         78,224
Options issued for services                                             --             --             --        804,341
Warrants issued in private placement of debt                            --             --             --         94,726
Common shares issued by officers to employees
   for compensation                                                     --             --             --         65,625
Net loss                                                        (3,884,900)            --             --     (3,884,900)
                                                              ------------   ------------   ------------   ------------
Balance at March 31, 2001                                     $ (9,793,403)            --   $         --   $ (1,149,214)

Common stock issued for conversion of debt at $1.00
   per share                                                            --             --             --         74,799
Common stock issued for services at $.22 per share                      --             --             --        126,000
Common stock issued for conversion of accrued
   salary and compensation at $.01 per share                            --             --             --      1,881,167
Common stock issued for sale of equipment at $1.00
   per share                                                            --             --             --         10,000
Options issued for services                                             --             --             --         86,133
Options issued for compensation                                         --             --             --        103,874
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                                                        (4,914,480)            --             --     (4,914,480)
Other comprehensive loss - foreign currency
    translation                                                         --         (2,408)            --         (2,408)

                                                              ------------   ------------   ------------   ------------
Balance at March 31, 2002                                     $(14,707,883)  $     (2,408)  $         --   $ (3,360,299)

Common stock issued for cash at $.50 per share                          --             --             --        228,850
Common stock issued for purchase of equipment                           --             --             --        100,000
Common stock issued for services at $.50 per share                      --             --             --         31,445
Common stock issued for conversion of debt at $1.00
   per share                                                            --             --             --         99,753
Warrants issued for services                                            --             --             --         23,570
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                                                        (2,219,298)            --             --     (2,219,298)
Other comprehensive income - foreign
   currency translation                                                 --          3,470             --          3,470

                                                              ------------   ------------   ------------   ------------
Balance at March 31, 2003                                     $(16,927,181)  $      1,062   $         --   $ (3,949,450)
</TABLE>


               See accompanying notes to the financial statements


                                      F-5
<PAGE>

                            CYGENE LABORATORIES, INC.
             CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL DEFICIENCY
        FOR THE PERIOD FROM INCEPTION THROUGH MARCH 31, 2004 (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 at $.15 per share                 400,000            400             --             --         59,600
Common stock issued for cash at $.225 per share              4,325,763          4,326             --             --        923,585
Common stock issued for cash at $.36 per share                 355,368            355             --             --        124,520
Common stock issued for services at $.15 to
   $.83 per share                                              515,795            516             --             --        137,938
Common stock issued for conversion of accrued salaries and
   compensation at $.15 per share                            5,596,150          5,596        325,847            326        856,776
Common stock issued for conversion of debt at $.07 to
   $1.00 per share                                           3,271,806          3,272             --             --      2,288,755
Options issued for compensation                                     --             --             --             --        303,191
Warrants issued in connection with debt                             --             --             --             --         34,348
Warrants issued for services                                        --             --             --             --        130,287
Beneficial conversion feature of convertible debt                   --             --             --             --        146,700
Common shares issued by officers to employees
   for compensation                                                  --             --             --             --         50,000
Exchange of class  B shares to class A shares
   per merger agreement                                      1,558,555          1,559     (1,558,555)        (1,559)            --
Common stock issued for consulting fees                        810,000            810             --             --        174,606
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             --   $         --   $ 18,172,491
                                                          ============   ============   ============   ============   ============

<CAPTION>
[RESTUBBED]

                                                                              Other                         Total
                                                            Accumulated   Comprehensive     Deferred       Capital
                                                               Deficit    Income (loss)   Compensation    Deficiency
                                                            ------------   ------------   ------------   ------------
<S>                                                         <C>            <C>            <C>            <C>

Common stock issued for cash at $.15 per share                        --             --             --         60,000
Common stock issued for cash at $.225 per share                       --             --             --        927,911
Common stock issued for cash at $.36 per share                        --             --             --        124,875
Common stock issued for services at $.15 to
   $.83 per share                                                     --             --             --        138,454
Common stock issued for conversion of accrued salaries and
   compensation at $.15 per share                                     --             --             --        862,698
Common stock issued for conversion of debt at $.07 to
   $1.00 per share                                                    --             --             --      2,292,027
Options issued for compensation                                       --             --        (18,565)       284,626
Warrants issued in connection with debt                               --             --        (11,074)        23,274
Warrants issued for services                                          --             --        (30,708)        99,579
Beneficial conversion feature of convertible debt                     --             --             --        146,700
Common shares issued by officers to employees
  for compensation                                                    --             --             --         50,000
Exchange of class  B shares to class A shares
   per merger agreement                                               --             --             --             --
Common stock issued for consulting fees                               --             --             --        175,416
Shares placed in escrow as a result of merger                         --             --             --        (10,016)
Cygene shares issued to TTI stockholders                              --             --             --             --
Amortization of deferred costs                                        --             --             --             --
Net loss                                                      (3,482,982)            --             --     (3,482,982)
Other comprehensive loss - foreign
   currency translation                                               --         (1,904)            --         (1,904)

                                                            ------------   ------------   ------------   ------------
Balance at March 31, 2004                                   $(20,410,163)  $       (842)  $    (60,347)  $ (2,258,792)
                                                            ============   ============   ============   ============

</TABLE>

               See accompanying notes to the financial statements

                                      F-6
<PAGE>


                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
      YEARS ENDED MARCH 31, 2004 AND 2003 AND PERIOD FROM OCTOBER 25, 1995
      --------------------------------------------------------------------
                       (INCEPTION) THROUGH MARCH 31, 2004
                       ----------------------------------
<TABLE>
<CAPTION>
                                                                                                              Inception
                                                                                                               through
                                                                                            YEAR ENDED         March 31,
                                                                          YEAR ENDED       March 31, 2003        2004
                                                                        March 31, 2004      (UNAUDITED)       (UNAUDITED)
                                                                         ------------      ------------      ------------
<S>                                                                      <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                                $ (3,482,982)     $ (2,219,298)     $(20,410,163)
 Adjustments to reconcile net loss to net cash (used in) operating
  activities:
    Depreciation                                                               79,693            73,304           545,514
    Common stock, warrants and options issued in payment of expenses        1,657,297            55,115         5,443,540
    Loss (gain) on disposal of property and equipment                              --             9,384           470,729
    Common stock issued by officers for compensation                               --           873,615         1,440,184
    Common stock issued by officers for services                               50,000           265,971           315,971
    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 deferred costs                                             73,350                --            73,350
 Changes in operating assets and liabilities:
    Accounts receivable                                                         1,858            (1,834)           (1,126)
    Other assets                                                               (7,146)           10,018           (20,902)
    Accounts payable and accrued expenses                                     673,699           692,106         4,970,123
                                                                         ------------      ------------      ------------
       Net Cash Used In Operating Activities                                 (963,885)         (241,619)       (6,699,161)
                                                                         ------------      ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment                                           (24,828)           (3,945)       (1,057,136)
 Proceeds from disposals of property and equipment                                 --                --           153,808
                                                                         ------------      ------------      ------------
       Net Cash Used In Investing Activities                                  (24,828)           (3,945)         (903,328)
                                                                         ------------      ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Issuance of common stock                                                   1,102,770           228,895         6,455,686
 Borrowings on notes payable                                                  234,200            73,284         1,749,270
 Payments on notes payable                                                   (205,448)          (54,110)         (456,771)
                                                                         ------------      ------------      ------------
       Net Cash Provided By Financing Activities                            1,131,522           248,069         7,748,185
                                                                         ------------      ------------      ------------

NET INCREASE IN CASH DURING THE PERIOD                                        142,809             2,505           145,696

CASH - BEGINNING OF PERIOD                                                      2,887               382                --
                                                                         ------------      ------------      ------------

CASH -  END OF PERIOD                                                    $    145,696      $      2,887      $    145,696
                                                                         ============      ============      ============
</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 blood screening tests
for the West Nile Virus and other infectious diseases as well as the detection
of biological warfare agents.

In September of 2003, the Company merged with Transpirator Technologies, Inc.
("TTI") through its newly formed subsidiary New Transpirator, Inc. ("NTI") in a
transaction accounted for as a purchase. As the shareholders of the Company
obtained a majority ownership interest in the merged entity, the merger was
accounted for as a reverse merger with the Company treated as the acquirer. The
merger was a recapitalization for accounting purposes as TTI was effectively an
inactive public shell at the time of the merger. Accordingly, the financial
statements presented are the historical financial statements of CyGene
Laboratories, Inc.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company incurred a net loss of
$3,482,982 for the year ended March 31, 2004, and has a working capital deficit,
a capital deficiency and accumulated deficit of $2,137,124, $2,258,792, and,
$20,410,163, respectively, at March 31, 2004. 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>


Reclassifications - Certain amounts in the 2003 financial statements have been
reclassified to conform to the 2004 statement presentation.

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.

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,
2004 and 2003 would have been increased to the pro forma amounts indicated as
follows:

                                                    Year Ended March 31,
                                                  2004                 2003
                                                                    (Unaudited)
                                             -------------        -------------
Net loss as reported                         $  (3,482,982)       $  (2,219,298)

Effect of expensing stock options                 (276,439)            (275,400)
                                             -------------        -------------

Pro forma net loss                           $  (3,759,421)       $  (2,494,698)
                                             =============        =============

Net loss per share
   (basic and diluted)
      As reported                            $       (0.12)       $       (0.13)
Effect of expensing stock option                     (0.01)               (0.01)
                                             -------------        -------------
      Pro forma                              $       (0.13)       $       (0.14)
                                             =============        =============

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

Risk-free interest rate                            6.0%
Expected life of instrument (years)                3.36
Expected dividend yield                            0.0%
Expected volatility                               80.0%

Weighted average fair value                        $.34


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:

Options                                 2,200,000
Warrants                                  960,500
Convertible notes                       2,053,763
                                       -----------
Total dilutive shares                   5,214,263
                                       ===========

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


                                      F-10
<PAGE>


Recent Accounting Pronouncements - In April 2002, the FASB issued SFAS No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections." SFAS No. 145 rescinds the provisions of SFAS
No. 4, which requires companies to classify certain gains and losses from debt
extinguishments as extraordinary items, eliminates the provisions of SFAS No. 44
regarding transition to the Motor Carrier Act of 1980 and amends the provisions
of SFAS No. 13 to require that certain lease modifications be treated as sale
leaseback transactions. The provisions of SFAS No. 145 related to classification
of debt extinguishments are effective for fiscal years beginning after May 15,
2002, with earlier application encouraged. The adoption of this statement did
not have any impact on the Company's financial position or the results of its
operations.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Restructuring
Costs." SFAS No. 146 applies to costs associated with an exit activity
(including restructuring) or with a disposal of long-lived assets. Those
activities can include eliminating or reducing product lines, terminating
employees and contracts and relocating plant facilities or personnel. Under SFAS
No. 146, the Company will record a liability for a cost associated with an exit
or disposal activity when that liability is incurred and can be measured at fair
value. SFAS No. 146 will require the Company to disclose information about its
exit and disposal activities, the related costs, and changes in those costs in
the notes to the interim and annual financial statements that include the period
in which an exit activity is initiated and in any subsequent period until the
activity is completed. SFAS No. 146 is effective prospectively for exit or
disposal activities initiated after December 31, 2002, with earlier adoption
encouraged. Under SFAS No. 146, a company cannot restate its previously issued
financial statements and the new statement grandfathers the accounting for
liabilities that a company had previously recorded under Emerging Issues Task
Force Issue 94-3. The adoption of this statement did not have any impact on the
Company's financial position or the results of its operations.

Effective January 1, 2003, the Company adopted the recognition and measurement
provisions of FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" ("Interpretation 45"). This interpretation elaborates on the disclosures
to be made by a guarantor in interim and annual financial statements about the
obligations under certain guarantees. Interpretation 45 also clarifies that a
guarantor is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
initial recognition and initial measurement provisions of this interpretation
are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The Company does not currently provide guarantees on a
routine basis. As a result, this interpretation did not have any impact on the
Company's financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities-an Interpretation of APB No. 51 ("FIN 46"), which
addresses consolidation of variable interest entities. FIN 46 expands the
criteria for consideration in determining whether a variable interest entity
should be consolidated by a business entity, and requires existing
unconsolidated variable interest entities (which include, but are not limited
to, special-purpose entities ("SPEs") to be consolidated by their primary
beneficiaries if the entities do not effectively disperse risks among parties
involved. On October 9, 2003, the FASB issued Staff Position No. 46-6 which
deferred the effective date for applying the provisions of FIN 46 for interests
held by public entities in variable interest entities or potential variable
interest entities created before February 1, 2003. On December 24, 2003, the
FASB issued a revision to FIN 46. Under the revised interpretation, the
effective date was delayed to periods ending after March 15, 2004 for all
variable interest entities other than SPEs. The adoption of FIN 46 is not
expected to have an impact on the Company's financial condition, results of
operations or cash flows.


                                      F-11
<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.

NOTE 2- PROPERTY AND EQUIPMENT

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


Automobile                                                    $  32,809
Computer equipment                                               65,503
Furniture and fixtures                                           32,345
Machinery and equipment                                         316,895
                                                              ---------

Total property & equipment                                      447,552

Less accumulated depreciation amortization                     (415,468)
                                                              ---------

Net property and equipment                                    $  32,084
                                                              =========

Depreciation expense for the years ended March 31, 2004 and 2003 was $79,693 and
$73,304 respectively.



                                      F-12
<PAGE>


NOTE 3 - CONVERTIBLE DEBENTURES

In the 2004 fiscal year, the Company received proceeds of $86,700 by issuing
convertible debentures to outside investors, ranging in principal amounts from
$1,000 to $15,000. The debentures mature in 2005, bear interest at 4.5% on an
annual basis, and are convertible into common stock at a conversion price of
$0.07143 per share. Each debenture is convertible upon execution, resulting in
all of the proceeds being recorded as a beneficial conversion feature during the
year ended March 31, 2004 based on the fair value of the conversion feature. The
beneficial conversion feature is being amortized to interest expense using the
straight line amortization method over the life of the debentures, resulting in
$43,350 being included in interest expense for the year ended March 31, 2004.
The remaining amortization of $43,350 will be recorded as interest expense
during the fiscal year ending March 31, 2005.

Also during the 2004 fiscal year, the Company converted certain accrued expenses
to employees in the aggregate of $60,000 to convertible debentures. These
debentures mature in the fiscal year ending in 2005 and bear interest at 4.5% on
an annual basis, and are convertible into common stock at a conversion price of
$0.07143 per share. Each debenture is convertible upon execution, resulting in
all of the proceeds being recorded as a beneficial conversion feature during the
year ended March 31, 2004 based on the fair value of the conversion feature. The
beneficial conversion feature is being amortized to interest expense using the
straight line amortization method over the life of the debentures, resulting in
$30,000 being included in interest expense for the year ended March 31, 2004.
The remaining amortization of $30,000 will be recorded as interest expenses
during the fiscal year ending March 31, 2005.

                                      F-13
<PAGE>

NOTE 4- NOTES PAYABLE

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

<TABLE>
<S>                                                                                       <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.         $     21,649

Unsecured convertible debentures bearing interest at 8.0% per annum due in 2005.                   15,000

Convertible promissory notes bearing interest at 4.50% per annum due in 2005                      131,700

Note payable to a vendor of the Company bearing interest at 4.75% per annum.  The note
  is payable in a lump sum in 2005.                                                               188,527

Note payable to a vendor of the Company bearing interest at prime, collateralized by
  patents.  A portion of this note was converted to common stock during the fiscal year
  ended March 31, 2004; the remaining portion is due in 2005.                                     184,154

Notes payable to individuals bearing interest at 10.0% payable in 2005.                            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

$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
                                                                                             ------------

      Total debt                                                                                 701,353
      Less unamortized debt discount                                                             (73,350)
      Less current maturities                                                                   (473,410)
                                                                                             ------------
      Long term debt                                                                         $   154,593
                                                                                             ============
</TABLE>

Interest expense on these notes for the years ended March 31, 2004 was $107,245.



                                      F-14
<PAGE>

Maturities of notes payable as of March 31, 2004 are as follows:

               2005               $   546,760 (before deducting unamortized
                                               debt discount of $73,350)
               2006                    43,254
               2007                     6,044
               2008                     5,295
               2009                   100,000
            Thereafter                     --
                                  -----------
                                  $   701,353
                                  ===========

b) Loans from shareholders are at no stated interest and are payable in lump sum
payments in the fiscal year ending March 31, 2005. Portions of the loans were
converted to common stock during the fiscal year ended March 31, 2004.

NOTE 5- 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 Capital Deficiency 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.


                                      F-15
<PAGE>


Included in the common stock, warrants and options issued for compensation in
the accompanying Statement of Changes in Capital Deficiency 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
                   2000                      106,933                     --
                   2001                      106,933                     --
                   2002                    1,099,630                867,670
                   2004                      655,000                     --
                                          ----------             ----------

                   Total                  $2,091,996             $1,992,670
                                          ==========             ==========

NOTE 6 - 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, April 1, 2002 (unaudited) 1,950,000        .01 - 5.00      $    2.22
Granted (unaudited)                  350,000        .01 - 2.50           1.60
Cancelled (unaudited                (300,000)       .01 - 2.50           1.40
                                  ----------      ------------      ---------


Balance, March 31, 2003            2,000,000        .01 - 5.00      $    1.83
Granted                              200,000       0.25 - 4.25            .25
                                  ----------      ------------      ---------
Balance, March 31, 2004            2,200,000      $0.25 - 4.25      $    1.69
                                  ==========      =============     =========


                                      F-16
<PAGE>
<TABLE>
<CAPTION>
                                    Outstanding                                              Exercisable
                                    -----------                                              -----------
                                                                     Average                              Average
                                              Average Life          Exercise                              Exercise
                               Shares              (a)                Price            Shares              Price
                            -------------    ----------------     --------------    --------------      -------------
<S>          <C>               <C>                      <C>       <C>                   <C>             <C>
   $  0.01 - 2.50              1,600,000                4.61      $         .79         1,440,000       $        .79
      2.51 - 5.00                600,000                1.73               4.25           600,000               4.25
                            ------------                                            --------------
                               2,200,000                3.82      $        1.74         2,040,000       $       1.74
                            ============     ===============      =============     =============       ============
</TABLE>

(a) Average contractual life remaining in years.


NOTE 7 - STOCK WARRANTS ISSUED AND OUTSTANDING

The Company issued 500,000 and 322,500 warrants to purchase common stock of the
Company during the years ended March 31, 2004 and 2003, 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:
<TABLE>
<CAPTION>

                                                                               Range of            Weighted Average
                                                          Amount            Exercise Price          Exercise Price
                                                     -----------------     ------------------     -------------------
<S>                                                           <C>          <C>          <C>            <C>
Balance, March 31,2002 (unaudited)                            198,000      $     1.50 - 5.00           $        4.46
 Granted (unaudited)                                          322,500            1.50 - 3.00                    1.67
 Cancelled (unaudited)                                          -                      -
 Exercised (unaudited                                           -                      -
                                                     ----------------      -----------------           -------------

Balance, March 31, 2003                                       520,500            1.50 - 5.00                    2.83

 Granted                                                      500,000            1.50 - 3.00                    1.50
 Cancelled                                                   (60,000)            1.50 - 3.00                    3.00
 Exercised                                                      -
                                                     ----------------      -----------------           -------------
Balance, March 31, 2004                                       960,500      $     1.50 - 5.00          $         2.61
                                                     ================      =================          ===============
</TABLE>


                                      F-17
<PAGE>

<TABLE>
<CAPTION>

                                  Outstanding                                                 Exercisable
                                  -----------                                                 -----------
                                                                     Average                              Average
                                              Average Life          Exercise                              Exercise
                               Shares              (a)                Price            Shares              Price
                            -------------    ----------------     --------------    --------------      -------------

<S>          <C>                 <C>                    <C>    <C>                        <C>        <C>
   $  1.50 - 3.00                793,500                2.67   $           1.83           393,500    $          1.83
      3.01 - 5.00                167,000                 .87               5.00           167,000               5.00
                            ------------                                            -------------

                                 960,500                1.45   $           3.97           560,500    $          3.97
                            ============     ===============      =============     =============       ============
</TABLE>

(a) Average contractual life remaining in years.

NOTE 8 - 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 9 - SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

The following non-cash transactions are not included in the consolidated
statements of cash flows:
<TABLE>
<CAPTION>

                                                                     March 31,       March 31,        Inception to
                                                                       2004             2003         March 31, 2004
                                                                                    (Unaudited)       (Unaudited)
                                                                   -----------      -----------      --------------
<S>                                                                <C>              <C>              <C>
PROVIDED BY (USED IN) INVESTING ACTIVITIES:
 Acquisition of property and equipment
   in exchange for issuance of common stock                         $        --      $  (85,930)       $  (139,936)
                                                                    -----------      -----------       -----------
                                                                             --         (85,930)          (139,936)
                                                                    ===========      ===========       ===========
PROVIDED BY (USED IN) FINANCING ACTIVITIES:
 Conversion of lease obligations to common stock                    $        --      $    42,832       $    42,832
 Note payable issued for conversion of accounts payable                  37,823               --            37,823
 Note payable issued for conversion of accrued interest                  64,733               --            64,733

 Conversion of accrued expenses to employees for notes payable           60,000               --            60,000
 Conversion of accounts payable to common stock                       1,040,151               --         1,040,151
 Conversion of accrued interest to common stock                         163,056            7,753           170,809
 Conversion of  notes payable to common stock                         1,088,820           92,000         1,255,620
 Notes payable issued for acquired property and equipment                    --           28,762            72,768
 Common stock issued to acquire property and equipment                       --           57,168            67,168
                                                                    -----------      -----------       -----------
                                                                    $ 2,454,583      $   228,515       $ 2,811,904
                                                                    ===========      ===========       ===========
</TABLE>

                                      F-18
<PAGE>



NOTE 10 - 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, 2004 are as follows:

Deferred tax assets:

 Research and development tax credit carryforward             $   405,404
 Net operating loss carryforward                                4,497,432
                                                              -----------

Total deferred tax assets                                       4,902,836
Valuation allowance                                            (4,902,836)
                                                              -----------
Net deferred taxes                                            $        --
                                                              ===========

The Company has incurred net losses since inception. At March 31, 2004, the
Company had approximately $12,849,805 in net operating loss carryforwards for
United States Federal Income Tax purposes that expire beginning in 2016 through
2023. 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, 2004 and
2003, was an increase of approximately $1,000,000 and $377,000, 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 34% is primarily due to the increase in the valuation
allowance, resulting in no tax benefit being recorded.

Based on ownership changes that have occurred, future utilization of the net
operating loss carryforwards may be limited.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Operating Lease

The Company's lease for office space for its headquarters expired in March 2003.
Through June 2004, the Company continued to rent the office space under a
month-to-month arrangement at a rate of $3,600 per month. Rent expense under
this lease was $43,200 for the fiscal year ended March 31, 2004. In June 2004,
the Company entered into a new operating lease for its office space requiring
monthly rental payments of $11,692 through August 2009 ($140,304 per annum).

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-19
<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.

NOTE 12- 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.

NOTE 13- SUBSEQUENT EVENTS

In June 2004, the Company entered into an employment agreement with an
individual to serve as Vice President of Strategic Development, and serve as an
executive officer. The agreement includes a base salary, certain performance and
incentive bonus arrangements and grants to the individual's designee of stock
options to purchase up to 750,000 common shares of the Company. The options are
exercisable at $1.01 per share (fair value at date of issuance) and vest over a
four year period.

In July 2004, the Company entered into an agreement with a consulting firm to
provide advisory and consulting services over a period of one year. The
agreement calls for the Company to grant a total of 250,000 options to purchase
common stock of the Company over the period of the agreement. These options vest
in 12 equal monthly installments commencing on the execution date of the
agreement, and are exercisable at $.40 per share. This grant will result in a
charge of approximately $200,000 over the one year period.


                                      F-20