UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB/A
                                AMENDMENT NO. 1

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

For the quarterly period ended: August 31, 2005

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

For the transition period from_____________ to_____________

Commission File No.:  0-26329


                                 Poseidis, Inc.
--------------------------------------------------------------------------------
     (Exact name of small business issuer as specified in its charter)

               Florida                                     65-0867538
-------------------------------------      -------------------------------------
(State or other jurisdiction                (I.R.S. Employer Identification No.)
   (of incorporation or organization)

             222 Lakeview Ave., Suite 160, West Palm Beach, FL 33401
             -------------------------------------------------------
                    (Address of principal executive offices)

                                 (305) 428-3757
             -------------------------------------------------------
                           (Issuer's telephone number)

------------
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 [_]


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


          APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEDINGS
                           DURING THE PAST FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15(b) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes [_] No [_]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest  practicable date: As of August 31, 2005 the issuer had
65,995,800 shares of common stock, $0.0001 par value per share, outstanding.


Transitional Small Business Disclosure Format: Yes [_] No [X]

<PAGE>


                       Statement Regarding This Amendment

     We are  amending  our Form 10-QSB for the quarter  ended  August 31,  2005,
previously  filed on October 17, 2005.  We have  identified  certain  accounting
errors related to (1) the  accounting  for certain debt  financing  conducted by
Poseidis,  Inc.  (the  "Company"  or "we")  in  August  2005 as well as  certain
compensatory  warrants  issued by the  Company  and (2) the  accounting  for the
issuance of the Company's common stock in payment of certain accrued expenses.

     We have  performed an analysis of our  existing  debt  agreements  and have
concluded  that we  incorrectly  recorded our debt  obligations  and  associated
warrants  in  conjunction  with  the  issuance  of  the  Company's  12%  Secured
Convertible Notes (the "Debentures").  Our analysis determined we needed to make
restatements in the accounting for the aforementioned debt financings  conducted
by the Company in August 2005 related to (1) the  valuation of several  discrete
elements of the  Debentures  and related  warrants and (2) the costs incurred by
the Company in conjunction with the issuance of the Debentures.  Accordingly, we
have also  filed an  amendment  to our Form  10-QSB for the three and nine month
periods ended November 30, 2005.

     The  discrete  elements  of the  Debentures  consisted  of  the  conversion
features at issuance, the embedded contingent call feature and the adjustment of
the conversion price of the Debentures in the case of default. Also required was
a fair market valuation of the warrants.

     We accounted for the embedded contingent call feature and the re-pricing of
the conversion for the Debentures in the case of default in accordance with SFAS
No. 133 "Accounting For Derivative  Instruments And Hedging Activities" and EITF
Issue No. 00-19 "Accounting For Derivative Financial  Instruments Indexed To And
Potentially Settled In A Company's Own Stock" which requires us to bifurcate and
separately account for the embedded  contingent call feature and the re- pricing
of the  conversion  for the  Debentures  in the  case  of  default  as  embedded
derivatives contained in the Debentures. Pursuant to SFAS No. 133, we bifurcated
the fair value of the conversion  feature from the convertible  notes, since the
conversion features were determined to not be clearly and closely related to the
debt host. The convertible Debentures are not considered to be conventional debt
under EITF Issue No.  00-19 or SFAS No. 133. We  therefore  bifurcated  the fair
value of the embedded  conversion  features from the debt host and accounted for
them as a derivative liability.

     The warrants  issued in  conjunction  with the  Debentures  were valued and
recorded as equity by us in  accordance  with EITF 00-19 and guidance  described
under  SFAS  No.  150 as we  made  the  determination  that  the  warrants  were
conventional.  We have valued the warrants by using the Black-Scholes  valuation
model and  accounted  for the fair value of the warrants in relation to the debt
host.  The  fair  value  of the  warrants  was  recorded  as a  discount  to the
Debentures.  This discount is being amortized on a straight-line  basis over the
life of the Debentures which approximates the effective interest method.





<PAGE>


     We recorded the fair value of the embedded derivatives as either short-term
or long-term liabilities (based on the underlying term of the Debentures) and as
a discount to the  Debentures  to the extent there was a net carrying  value for
the Debentures.  This discount is being amortized on a straight-line  basis over
the life of the Debentures which approximates the effective interest method. The
amount in excess of the net  carrying  value  was  charged  to loss on  embedded
derivative in the statement of operations.

     The costs incurred by the Company for the issuance of the  Debentures  have
been capitalized as Deferred Financing Costs and will be amortized over the term
of the Debentures.  These costs were previously  reflected as Professional  Fees
and expensed  when  incurred.  In addition,  we have  capitalized  certain costs
incurred  by the  Company  in  conjunction  with the  Company's  Standby  Equity
Distribution  Agreement ("SEDA") as Deferred Issuance Costs which will be offset
against the proceeds of the offering, when and as the SEDA is utilized.

     The  restatements  in the  accounting  for the  issuances of the  Company's
common stock in payment of certain accrued expenses relate to the corrections of
errors in the  Company's  accounting  for the issuance of  13,306,000  shares of
common stock as payment for consulting  services  provided to the Company by its
Chief Executive Officer and by a stockholder who is the beneficial owner of more
the five  percent of the  Company's  common  stock.  The stock  issuance  is now
reflected in the financial  results for the fiscal quarter ended August 31, 2005
and is now accounted for as a payment of accrued expenses as theses expenses had
been  previously  accrued by the  Company.  The stock  issuance  was  previously
recorded in the fiscal  quarter ended November 30, 2005 and was accounted for as
a  consulting  fee  expense.  This  expense is being  reversed  in the  restated
financial  statements for the fiscal quarter ended November 30, 2005 being filed
in our amended Form 10-QSB for the quarter ended  November 30, 2005. The Company
has entered into an amended and restated consulting agreement with each of these
individuals to provide for these corrections and other relevant matters.

     In addition, we have corrected the statement of the number of shares of our
common  stock  outstanding  as of August 31, 2005 to reflect the issuance of the
13,306,000  shares as well as some  minor  amount of share  issuances  that were
previously  recorded as issuances in the quarter ended November 30, 2005. We had
previously stated 51,024,328 shares of common stock,  whereas the correct figure
is 65,995,800  shares of common stock. We have also included a statement of risk
factors and inception to date results in accordance with FAS 7:  "Accounting and
Reporting by Development Stage  Enterprises" (as amended).  In this amended Form
10-QSB, we have also included a footnote to the financial  statements,  Note 12,
which  details  the effect of these  restatement  adjustments  on our  financial
statements  for the quarter and six month  periods  ended August 31, 2005 and we
have amended and updated Part I, Item 3.

     In all other  material  respects,  this  Amended  Quarterly  Report on Form
10-QSB/A is unchanged from the Quarterly Report on Form 10-QSB  previously filed
by us on October 17, 2005.  This  amendment  should also be read in  conjunction
with our Annual  Report on Form  10-KSB for the fiscal year ended  February  28,
2006 and our Amended  Quarterly  Report on Form  10-QSB/A for the quarter  ended
November 30, 2005.








<PAGE>




                                    PART I

ITEM 1. FINANCIAL STATEMENTS

     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets................................................. 5
Consolidated Statements of Operations and Comprehensive Income (Loss)....... 6
Consolidated Statements of Stockholders' Equity (Deficiency)................ 7
Consolidated Statements of Cash Flows.......................................11
Notes to Consolidated Financial Statements..................................12

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...........22
ITEM 3. CONTROLS AND PROCEDURES.............................................41


                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS...................................................41
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.........41
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.....................................41
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................41
ITEM 5. OTHER INFORMATION...................................................41
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................42















<PAGE>

                                     PART I

ITEM 1. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                         Poseidis, Inc. and Subsidiaries
                           (Development Stage Company)
                           Consolidated Balance Sheets

                                                               August 31,         February 28,
                                                                  2005                2005
                                                               (Unaudited)
                                                             ----------------- ------------------
<S>                                                          <C>               <C>
                 ASSETS
CURRENT ASSETS
   Cash                                                      $          74,874 $            1,051
   VAT taxes receivable                                                 20,059             39,750
                                                             ----------------- ------------------
           Total Current Assets                                         94,933             40,801
                                                             ----------------- ------------------
PROPERTY AND EQUIPMENT
   Land                                                                 36,162             40,863
   Land improvements                                                   134,097            151,530
   Furniture and fixtures                                               20,892             22,705
   Equipment                                                            27,867             30,806
                                                             ----------------- ------------------
      Subtotal Property and Equipment                                  219,018            245,904
      Less: Accumulated depreciation                                   (54,283)           (37,144)
                                                             ----------------- ------------------
            Net Property and Equipment                                 164,735            208,760
                                                             ----------------- ------------------
OTHER ASSETS
  Deferred financing costs                                              37,878                  -
   Deferred offering costs                                              60,195                  -
  Deposits                                                              31,989             35,889
                                                             ----------------- ------------------
            Total Other Assets                                         130,062             35,889
                                                             ----------------- ------------------
Total Assets                                                 $         389,730 $          285,450
                                                             ================= ==================
             LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
CURRENT LIABILITIES
   Accounts payable                                          $         239,256 $          188,667
   Accrued expenses                                                    135,512            887,238
   Accrued salaries/payroll taxes                                       11,825             26,719
  Secured convertible debentures, less debt
      discount of $150,000                                                   -                  -
  Derivative liability                                                 104,904                  -
    Short-term demand loan                                              29,009             29,009
                                                             ----------------- ------------------
            Total Current Liabilities                                  520,506          1,131,633
                                                             ----------------- ------------------
Total Liabilities                                                      520,506          1,131,633
                                                             ----------------- ------------------
STOCKHOLDERS' (DEFICIENCY)
   Preferred stock, $0.0001 par value, authorized
     10,000,000 shares; none issued                                          -                  -
   Common stock, $0.0001 par value, authorized
     100,000,000 shares;  65,995,800 and  51,761,881
     issued and outstanding at August 31, 2005
     and February 28, 2005, respectively                                 6,600              5,176
   Additional paid-in capital                                        7,179,579          5,947,965
   Accumulated comprehensive income (loss)                              30,311            (16,770)
   Deficit accumulated during the development stage                 (7,347,266)        (6,782,554)
                                                             ----------------- ------------------
            Total Stockholders' (Deficiency)                          (130,776)          (846,183)
                                                             ----------------- ------------------
Total Liabilities and Stockholders' (Deficiency)             $         389,730 $          285,450
                                                             ================= ==================
</TABLE>

                   The accompanying notes are an integral part
                    of the consolidated financial statements



                                       5
<PAGE>



<TABLE>
<CAPTION>
                         Poseidis, Inc. and Subsidiaries
                           (Development Stage Company)
      Consolidated Statements of Operations and Comprehensive Income (Loss)
                                   (Unaudited)

                                             Cumulative
                                             from Inception
                                            (June 10, 1998)     3 months Ended August 31,    6 months Ended August 31,
                                                    to       ----------------------------  -----------------------------
                                             August 31, 2005      2005            2004          2005              2004
                                             --------------- ------------- --------------  ---------------  --------------
<S>                                          <C>             <C>           <C>             <C>              <C>

REVENUES                                     $      557,012  $           - $            -  $             -  $            -

OPERATING EXPENSES
   General and administrative                     1,788,197         94,344        246,385          166,814         374,793
   Salaries                                          86,747              -          2,363                -           7,625
   Consulting fees                                5,185,890        242,336        179,162          300,614       2,388,780
   Depreciation                                      70,162         17,640          4,257           23,366           8,585
   Professional fees                                705,336         64,822         29,009           94,748          29,009
                                              -------------  -------------  -------------  ---------------  --------------
          Total operating expenses                7,836,332        419,143        461,176          585,542       2,808,792
                                              -------------  -------------  -------------  ---------------  --------------
Operating (loss)                                 (7,279,320)      (419,143)      (461,176)        (585,542)     (2,808,792)

OTHER INCOME (EXPENSE)
   Interest expense                                  (3,476)          (392)             -             (489)              0
   Loss on derivative liability                     (17,714)       (17,714)             -          (17,714)              0
  Bad debt expense                                  (93,806)             -         97,734                -          97,734
   Loss on fixed asset abandonment                  (23,769)             -              -                -               -

   Foreign currency transaction gain (loss)          22,916              -              -                -               -
  Gain on debt forgiveness                           35,117              -              -                -               -
  Gain on bankruptcy of subsidiary                   12,721              -              -                -               -
                                              -------------  -------------  -------------  ---------------  --------------

          Total other income (expense)              (68,011)       (18,106)        97,734          (18,203)         97,734

Net (loss) before minority interest              (7,347,331)      (437,249)      (363,442)        (603,745)     (2,711,058)

Minority interest in loss of
consolidated subsidiaries                                65              -              -                -               -
                                              -------------  -------------  -------------  ---------------  --------------
Net (loss)                                       (7,347,265)      (437,249)      (363,442)        (603,745)     (2,711,058)
OTHER COMPREHENSIVE INCOME (LOSS)
   Foreign currency translation gain (loss)          30,311        (15,425)         12,499           47,081          17,411

Comprehensive (loss)                          $  (7,316,955) $    (452,674) $    (350,943) $      (556,664) $   (2,693,647)
                                              =============  =============  =============  ===============  ==============
Net (loss) per common share - basic and
diluted                                                      $       (0.01) $       (0.02) $         (0.01) $        (0.06)
                                                             =============  =============  ===============  ==============

Weighted average number of shares                               59,562,174     45,075,592       55,648,998      45,107,242
                                                             =============  =============  ===============  ==============
</TABLE>

                   The accompanying notes are an integral part
                    of the consolidated financial statements


                                       6
<PAGE>


<TABLE>
<CAPTION>
                         Poseidis, Inc. and Subsidiaries
                          (Development Stage Company)
          Consolidated Statements of Stockholders' Equity (Deficiency)
                        For the period from June 10, 1998
                        (inception of development stage)
                               to August 31, 2005


                                                                                 Additional
                                                        Number        Common       Paid-in
                                                       of Shares       Stock        Captial
                                                     ------------- ---------- --------------
<S>                                                  <C>           <C>        <C>
Issuance of shares for services at inception-
   June 10, 1998 at par of $0.0001 per share             1,000,000 $      100 $          -
  1st Quarter - Shares issued for cash                   1,000,000        100        9,900
  2nd Quarter - Shares issued for cash                      50,000          5       49,995
   Net (loss)                                                    -          -            -
                                                     ------------- ---------- ------------
Balance as of February 28, 1999                          2,050,000        205       59,895
   Net (loss)                                                    -          -            -
                                                     ------------- ---------- ------------
Balance as of February 29, 2000                          2,050,000        205       59,895
  1st Quarter - Shares issued to pay accrued expenses       13,500          1        3,384
  1st Quarter - Common stock contributed                (1,000,000)      (100)         100
  1st Quarter - 16 for 1 forward split                  15,912,500      1,592       (1,592)
  1st Quarter - Reverse merger                          23,100,000      2,310      190,800
  1st Quarter - Shares issued for services               1,900,000        190            -
  1st Quarter - Stock subscription receivable              150,000         15      149,985
  2nd Quarter - Stock subscriptions received                     -          -            -
  2nd Quarter - Shares issued for services                 200,000         20      199,980
  2nd Quarter - Shares issued to acquire minority
                interest in subsidiary                   5,000,000        500       56,210
  3rd Quarter - Shares issued for services                 990,000         99      232,551
   Other comprehensive (loss)                                    -          -            -
Net (loss)                                                       -          -            -
                                                     ------------- ---------- ------------
BALANCE, February 28, 2001                              48,316,000      4,832      891,313
  1st Quarter - 1 for 10 reverse split                 (43,484,399)    (4,350)       4,350
  2nd Quarter - Shares issued for cash                     100,189         10      100,179
  2nd Quarter - Shares issued for services                  16,426          2       16,424
  2nd Quarter - Stock subscriptions receivable              76,712          8       76,704
  3rd Quarter - Common stock cancelled                    (569,600)       (57)          57
  3rd Quarter - Stock subscriptions received                     -
  3rd Quarter - Stock subscriptions receivable               7,813          1        9,765
  3rd Quarter - Shares issued for cash                       4,894          1        8,564
  3rd Quarter - Shares issued for services                   8,533          1       14,932
  4th Quarter - Stock subscriptions received
  4th Quarter - Shares issued for cash                      24,084          2       42,145
  Other comprehensive  (loss)                                    -          -            -
Net (loss)                                                       -          -            -
                                                     ------------- ---------- ------------
</TABLE>


                                  (Continued)


                                       7
<PAGE>


                         Poseidis, Inc. and Subsidiaries
                          (Development Stage Company
          Consolidated Statements of Stockholders' Equity (Deficiency)
                        For the period from June 10, 1998
                        (inception of development stage)
                               to August 31, 2005
                                   (Continued)

    Stock      Cumulative                    Total
Subscription  Translation   Accumulated  Stockholders
 Receivable    Adjustment     Deficit       Equity
------------- ------------ ------------- -------------

$           - $          - $           - $         100
            -            -             -        10,000
            -            -             -        50,000
            -            -        (8,743)       (8,743)
------------- ------------ ------------- -------------
            -            -        (8,743)       51,357
            -            -        (2,901)       (2,901)
------------- ------------ ------------- -------------
            -            -       (11,644)       48,456
            -            -             -         3,385
            -            -             -             -
            -            -             -             -
            -            -             -       193,110
            -            -             -           190
     (150,000)           -             -             -
      150,000            -             -       150,000
            -            -             -       200,000

            -            -             -        56,710
            -            -             -       232,650
            -      (11,637)            -       (11,637)
            -            -      (864,247)     (864,247)
------------- ------------ ------------- -------------
            -      (11,637)     (875,891)        8,617
            -            -             -             -
            -            -             -       100,189
            -            -             -        16,426
      (76,712)           -             -             -
            -            -             -             -
       76,712            -             -        76,712
       (9,766)           -             -             -
            -            -             -         8,565
            -            -             -        14,933
         9766            -             -         9,766
                         -             -        42,147
            -       (7,689)            -        (7,689)
            -            -      (473,929)     (473,929)
------------- ------------ ------------- -------------

                                  (Continued)


                                       8
<PAGE>


<TABLE>
<CAPTION>
                         Poseidis, Inc. and Subsidiaries
                          (Development Stage Company)
          Consolidated Statements of Stockholders' Equity (Deficiency)
                        For the period from June 10, 1998
                        (inception of development stage)
                               to August 31, 2005
                                   (Continued)

                                                                                    Additional
                                                           Number        Common       Paid-in
                                                         of Shares       Stock        Captial
                                                        -------------  ----------- --------------
<S>                                                     <C>            <C>         <C>
BALANCE, February 28, 2002                               4,500,652        450    1,164,432
   1st Quarter - 1 for 10 reverse split                 (4,054,058)      (405)         405
   1st Quarter - Shares issued for services              1,969,784        197    1,029,793
   1st Quarter - Shares issued for cash                      3,887          -        8,745
   1st Quarter - Shares issued to pay accrued expenses   1,080,000        108      134,892
   1st Quarter - Shares issued to settle short-term
                 debt                                      864,000         86      107,914
   1st Quarter - Shares issued for stock
                 subscriptions received                    800,000         80       99,920
   2nd Quarter - Stock subscription received                     -          -            -
   3rd Quarter - Shares issued for cash                      2,705          -        9,468
   4th Quarter - stock subscriptions received
   4th Quarter - Shares issued for cash                     35,062          4      122,713
   Other comprehensive (loss)                                    -          -            -
Net (loss)                                                       -          -            -
                                                     ------------- ---------- ------------
ENDING BALANCE, February 28, 2003                        5,202,032        520    2,678,282
   1st Quarter - Shares issued for services                100,000         10            -
   1st Quarter - Shares issued for cash                     42,224          4      152,314
   2nd Quarter - Shares issued for cash                     13,991          1       52,465
   4th Quarter - Shares issued for services                184,316         19      128,682
   4th Quarter - Shares issued for cash                     41,573          4      155,895
   Other comprehensive income                                    -          -            -
Net (loss)                                                       -          -            -
                                                     ------------- ---------- ------------
ENDING BALANCE, February 29, 2004                        5,584,136        558    3,167,638
   1st Quarter - Forward split - 8 for 1                39,295,606      3,930       (3,930)
   1st Quarter - Shares issued for services              1,614,861        162    2,244,084
   1st Quarter - Shares issued for cash                     93,225          9      116,522
   2nd Quarter - Shares issued for services                117,704         12      147,118
   2nd Quarter - Shares issued for cash                     83,069          8      103,828
   3rd Quarter - Forward split - 11 for 10               4,679,008        468         (468)
   3rd Quarter - Shares issued for services                113,043         11       15,673
   3rd Quarter - Shares issued for cash                     12,944          1       23,145
   4th Quarter - Shares issued for services                168,285         17       95,322
   Other comprehensive (loss)                                    -          -            -
Net (loss)                                                       -          -            -
                                                     ------------- ---------- ------------
ENDING BALANCE, February 28, 2005                       51,761,881      5,176    5,908,932
   1st Quarter - Shares issued for cash                    154,399         16       23,144
   2nd Quarter - Shares issued for services                585,123         58       51,536
   2nd Quarter - Shares issued for cash                    188,397         19       16,401
   2nd Quarter - Shares issued to pay accrued
                 expenses                               13,306,000      1,331    1,084,439
   2nd Quarter - Intrinsic value of warrants issued
                 with convertible debentures                     -          -       62,810
   2nd Quarter - Intrinsic value of warrants issued
                 with SEDA                                       -          -       32,317
      Other comprehensive income                                 -          -            -
  Net (loss)                                                     -          -            -
                                                     ------------- ---------- ------------
ENDING BALANCE, August 31, 2005 (Unaudited)             65,995,800   $  6,600   $7,179,579
                                                     ============= ========== ============
</TABLE>


                                  (Continued)

                                       9
<PAGE>

                         Poseidis, Inc. and Subsidiaries
                          (Development Stage Company)
          Consolidated Statements of Stockholders' Equity (Deficiency)
                        For the period from June 10, 1998
                        (inception of development stage)
                               to August 31, 2005

    Stock      Cumulative                    Total
Subscription  Translation   Accumulated  Stockholders
 Receivable    Adjustment     Deficit       Equity
------------- ------------ ------------- -------------
            -      (19,326)   (1,349,820)     (204,264)
            -            -             -             -
            -            -             -     1,029,990
                                                 8,745
            -            -             -       135,000

            -            -             -       108,000

     (100,000)           -             -             -
       50,000            -             -        50,000
            -            -             -         9,468
        50000                                   50,000
                                               122,717
            -       (2,609)            -        (2,609)
            -            -    (1,305,971)   (1,305,971)
------------- ------------ ------------- -------------
            -      (21,935)   (2,655,791)        1,076
                                                    10
                                               152,318
                                                52,466
            -            -             -       128,701
            -            -             -       155,899
            -        6,034             -         6,034
            -            -      (793,520)     (793,520)
------------- ------------ ------------- -------------
            -      (15,901)   (3,449,311)     (297,016)
            -            -             -             -
            -            -             -     2,244,246
            -            -             -       116,531
                                               147,130
                                               103,836
            -            -             -             -
            -            -             -        15,684
            -            -             -        23,146
                                                95,339
            -         (869)            -          (869)
            -            -    (3,294,210)   (3,294,210)
------------- ------------ ------------- -------------
            -      (16,770)   (6,743,521)     (846,183)
            -                                   23,160
            -                                   51,594
            -                                   16,420

            -                                1,085,770
                                                62,810
            -

                                       -        32,317


            -       47,081                      47,081
            -                   (603,745)     (603,745)
------------- ------------ ------------- -------------
 $          -  $    30,311  $ (7,347,266)$    (130,776)
============= ============ ============= =============

                   The accompanying notes are an integral part
                    of the consolidated financial statements


                                       10
<PAGE>

<TABLE>
<CAPTION>
                        Poseidis, Inc. and Subsidiaries
                         (Development Stage Company)
                      Consolidated Statements of Cash Flows
                                  (Unaudited)

                                                            Cumulative from         For the six months ended
                                                               Inception                   August 31,
                                                           (June 10, 1998) to       ------------------------
                                                            August 31, 2005          2005               2004
                                                           ------------------   --------------  -----------------
<S>                                                        <C>                  <C>             <C>
CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
Net (loss)                                                 $       (7,347,331)  $     (603,745) $      (2,711,058)
Adjustments to reconcile net loss to net cash used
  for development activities
   Stock issued for services                                        4,223,051          372,239          2,277,202
   Depreciation and amortization                                       70,162           23,366              8,585
Debt forgiveness                                                      (35,117)               -                  -
Loss on derivative liability                                           17,714           17,714                  -
Minority interest in consolidated subsidiaries' income                    (65)               -                  -
Gain on bankruptcy of subsidiary                                      (12,721)               -                  -
   Bad debt expense                                                   123,806                -             97,734
   Loss on fixed asset abandonment                                     23,769                -             23,064
Change in assets and liabilities
   (Increase) decrease in deferred costs                             (65,756)          (65,756)                 -
   (Increase) decrease in other assets                               (31,989)            3,900              4,973
   Increase (decrease) in accounts payable                            239,256           50,589             23,675
   Increase (decrease) in accrued expenses                            956,160           70,818            167,675
   Increase (decrease) in accrued salaries/payroll taxes               11,825          (14,894)            (4,811)
   Increase (decrease) in VAT payable/receivable                      (20,059)          19,691             (7,364)
                                                           ------------------   --------------  -----------------
Net cash (used) by development activities                          (1,847,230)        (126,078)          (143,195)
                                                           ------------------   --------------  -----------------
CASH FLOW FROM INVESTING ACTIVITIES:
   Deposit on land and land improvements                              (34,796)               -                  -
   Purchase of property and equipment                                (210,901)               -            (22,783)
                                                           ------------------   --------------  -----------------
Net cash (used) by investing activities                              (245,697)               -            (22,783)
                                                           ------------------   --------------  -----------------
CASH FLOW FROM FINANCING ACTIVITIES:
   Proceeds from short-term loans                                     170,804                -             29,009
   Repayment of short-term loan                                       (93,890)               -                  -
   Stock sold for cash                                              1,379,830           39,580            220,368
   Cash acquired in reverse merger                                     51,841                -                  -
   Receipt of stock subscriptions                                     490,000                -                  -
   Increase of bank overdraft                                          35,946                -                  -
   Proceeds from secured convertible debentures                       150,000          150,000                  -
                                                           ------------------   --------------  -----------------
Net cash provided by financing activities                           2,184,531          189,580            249,377
                                                           ------------------   --------------  -----------------
Effect of exchange rates on cash                                      (16,730)           10,321            (6,711)
                                                           ------------------   --------------  -----------------
Net increase in cash                                                   74,874           73,823             76,668

CASH, beginning of period                                                   -            1,051             30,788
                                                           ------------------   --------------  -----------------
CASH, end of period                                        $           74,874   $       74,874  $         107,476
                                                           ==================   ==============  =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Non-Cash Financing Activities:
     Common stock issued to pay accrued expenses           $          903,510   $      765,125  $               -
                                                           ==================   ==============  =================
     Common stock issued to pay short term debt            $          108,000   $            -  $               -
                                                           ==================   ==============  =================
</TABLE>

                   The accompanying notes are an integral part
                    of the consolidated financial statements


                                       11
<PAGE>


                         Poseidis, Inc. and Subsidiaries
                           (Development Stage Company)
                   Notes to Consolidated Financial Statements
                                   (Unaudited)


(1)  Organization and Business

Poseidis  was  incorporated  on June  10,  1998 in the  state  of  Florida.  Our
corporate  name was originally EZ Talk,  Inc.,  which was changed in May 2000 to
BillyWeb Corp. and changed in August 2002 to Poseidis, Inc.

In May 2000,  we entered into an  agreement  to acquire  77.3% of the issued and
outstanding common shares of a predecessor company which was then named BillyWeb
Corp.  (the  "Predecessor")  in a reverse  merger;  the  consideration  for this
transaction was 23,100,000  shares of the Company's  common stock. In July 2000,
we  acquired  the  remaining  22.7%  of the  Predecessor  company  that  was not
previously owned in exchange for 5,000,000 shares of restricted common stock. In
October 2000, we formed a subsidiary under the laws of France, SARL BillyWeb. In
December 2002, we placed SARL BillyWeb in bankruptcy  under French law. In April
2003, we created a new  subsidiary,  Poseidis,  SAS,  under French law and later
changed that  subsidiary's  name to Montespan SAS  ("Montespan").  We own 99% of
Montespan and a French citizen holds the remaining 1%, pursuant to French law.

We are a development stage company that, together with our subsidiary  Montespan
is engaged in the  development  of a sparkling  mineral  water spring in central
France known as the La Troliere  Spring (the  "Source").  Our  objectives are to
develop  and market a new brand of  sparkling  natural  mineral  water under the
brand name "l' Eau de Montespan" as well as other beverage products, potentially
a line of cosmetics  products utilizing the mineral water drawn from the Source,
and other related products and merchandise.


(2)  Summary of Significant Accounting Principles

Basis  of  presentation  - The  accompanying  unaudited  consolidated  financial
statements have been prepared in accordance with generally  accepted  accounting
principles for interim financial information.  Accordingly,  they do not include
all information and notes required by generally accepted  accounting  principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals)  considered necessary in order to make
the interim financial statements not misleading have been included.  Results for
the interim  periods are not  necessarily  indicative of the results that may be
expected for the fiscal year. For further information, refer to the consolidated
financial  statements and notes thereto  included in the Company's annual report
on Form 10-KSB for the year ended February 28, 2005.

Principles of consolidation - The consolidated  financial statements include the
accounts of Poseidis and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated.  The financial  statements do not include
any adjustments  relating to the  recoverability  and classification of recorded
asset amounts or classification of liabilities that might be necessary should we
be unable to operate in the normal course of business.

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 estimates and assumptions  that affect the reported
amounts of assets and  liabilities  and the disclosure of contingent  assets and
liabilities at the date of the financial statements, as well as reported amounts
of revenues and expenses  during the  reporting  period.  Actual  results  could
differ from those estimates.




                                       12
<PAGE>



Fair value of financial  instruments  - Fair value  estimates,  assumptions  and
methods used to estimate  fair value of our  financial  instruments  are made in
accordance with the requirements of SFAS No. 107,  "Disclosures about Fair Value
of Financial  Instruments." The Company has used available information to derive
its estimates.  However, because these estimates are made as of a specific point
in time,  they are not  necessarily  indicative  of amounts  the  Company  could
realize  currently.  The use of different  assumptions or estimating methods may
have a material  effect on the estimated  fair value  amounts.  We estimate that
there are no  material  variations  between  fair  value  and book  value of our
financial  assets or  liabilities  as of August 31, 2005 and 2005.  The carrying
amounts of cash and cash  equivalents,  accounts  payable,  accrued expenses and
short-term notes payable  approximate fair value due to the short-term nature of
the instruments.  Long-term  liabilities are comprised of the convertible  notes
which approximate fair value based on borrowing rates available to the Company.

Comprehensive  Income - We report our results in  accordance  with SFAS No. 130,
"Reporting   Comprehensive  Income"  which  requires  that  recognized  revenue,
expense, gains and losses be included in net income. Although certain changes in
assets  and  liabilities,  such as gains or losses  on  translation  of  foreign
currencies,  are reported as a separate  component of the equity  section of the
balance  sheet,   such  items,   along  with  net  income,   are  components  of
comprehensive income.

Property and  equipment - All property  and  equipment  are recorded at cost and
depreciated  over their estimated useful lives,  generally three,  five or seven
years, using the straight-line  method.  Upon sale or retirement,  the costs and
related accumulated  depreciation are eliminated from their respective accounts,
and the resulting gain or loss is included in the results of operations. Repairs
and maintenance charges which do not increase the useful lives of the assets are
charged to operations  as incurred.  Depreciation  expense was $17,600,  $4,257,
$23,366,  and $8,585 for the three and six month  periods  ended August 31, 2005
and 2004, respectively.

Long  Lived  Assets - In  accordance  with  SFAS No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets",  we record  impairment  losses on
long-lived  assets used in operations  when indicators of impairment are present
and the  undiscounted  cash flows  estimated to be generated by those assets are
less  than the  assets'  carrying  amounts.  SFAS No.  144  also  addresses  the
accounting for long-lived assets that are expected to be disposed of.

Revenue recognition - Revenue is recognized as services are rendered or products
excess of the net  carrying  value,  $17,734,  was  charged to loss on  embedded
derivative in the statement of operations.

Advertising - We expense all advertising costs as incurred.

Foreign currency  transaction and translation gains (losses) - On a consolidated
basis our  reporting  currency is the US Dollar.  The  functional  currency  for
foreign operations is the local currency (the euro). For these foreign entities,
we  translate  assets and  liabilities  at  end-of-period  exchange  rates.  For
revenues, expenses, gains and losses, the weighted average exchange rate for the
period  is used  to  translate  those  elements.  We  record  these  translation
adjustments in other comprehensive income (loss), a separate component of equity
in the consolidated balance sheet.

Income taxes - We account for income taxes under the provisions of SFAS No. 109,
"Accounting  for Income  Taxes."  Under  this  method,  deferred  tax assets and
liabilities  are  determined  based  on the  difference  between  the  financial
statement  and tax bases of assets and  liabilities  using  enacted tax rates in
effect for the years in which the  differences  are  expected to affect  taxable
income.  Valuation  allowances  will be  established  when  necessary  to reduce
deferred tax assets to the amounts expected to be realized.


                                       13
<PAGE>



Net loss per common share - We have presented net loss per common share pursuant
to SFAS No. 128,  "Earnings Per Share".  Net loss per common share is based upon
the weighted average number of outstanding  common shares.  Due to net losses in
the years ended  August 31, 2005 and 2005,  the effect of the  potential  common
shares resulting from convertible  notes payable,  stock options and warrants in
those years were excluded, as the effect would have been anti-dilutive.

Recent  Accounting  Pronouncements - In December 2004, the Financial  Accounting
Standards  Board,  or FASB,  issued  SFAS No.  153,  "Exchanges  of  Nonmonetary
Assets," (SFAS No. 153). SFAS No. 153 amends Accounting Principles Board ("APB")
Opinion No. 29, "Accounting for Nonmonetary  Transactions," to require exchanges
of  nonmonetary  assets be accounted  for at fair value,  rather than  carryover
basis. Nonmonetary exchanges that lack commercial substance are exempt from this
requirement.  SFAS 153 is effective for  nonmonetary  exchanges  entered into in
fiscal years  beginning  after June 15,  2005.  We do not  routinely  enter into
exchanges  that could be considered  non-monetary,  accordingly we do not expect
the adoption of SFAS 153 to have a material impact on our consolidated financial
statements.

In March 2005, the FASB issued  Interpretation No. 47 (FIN 47),  "Accounting for
Conditional  Asset Retirement  Obligations--an  interpretation of FASB Statement
No. 143." FIN 47  clarifies  that an entity is required to recognize a liability
for the fair value of a conditional asset retirement obligation when incurred if
the liability's  fair value can be reasonably  estimated.  FIN 47 also clarifies
when an entity would have sufficient information to reasonably estimate the fair
value  of an asset  retirement  obligation.  FIN 47 was  adopted  in the  fourth
quarter of 2005 and has had no significant impact on our consolidated  financial
position, results of operations or cash flows.

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections--a  replacement  of APB  Opinion  No. 20 and FASB  Statement  No. 3"
("SFAS  No.  154").  SFAS No.  154  requires  retrospective  application  as the
required  method  for  reporting  a  change  in  accounting  principle,   unless
impracticable or a pronouncement includes specific transition  provisions.  SFAS
No. 154 also requires that a change in  depreciation,  amortization or depletion
method  for  long-lived,  nonfinancial  assets be  accounted  for as a change in
accounting estimate effected by a change in accounting principle. This statement
carries  forward the guidance in APB Opinion No. 20,  "Accounting  Changes," for
the reporting of the correction of an error and a change in accounting estimate.
SFAS No.  154 is  effective  beginning  January  1,  2006.  SFAS No.  154 is not
expected to have a  significant  impact on our  financial  position,  results of
operations or cash flows.

In June 2005,  the Emerging  Issues Task Force  ("EITF")  reached a consensus on
EITF  Issue  No.  05-6,  "Determining  the  Amortization  Period  for  Leasehold
Improvements   Purchased  after  Lease  Inception  or  Acquired  in  a  Business
Combination" ("EITF 05-6"). EITF 05-6 requires that leasehold  improvements that
are placed in service  significantly  after and not  contemplated at or near the
beginning of the lease term be amortized  over the shorter of the useful life of
the assets or a term that includes  required lease periods and renewals that are
deemed to be  reasonably  assured  at the date the  leasehold  improvements  are
purchased.  EITF  05-6  did  not  have a  significant  impact  on our  financial
position, results of operations or cash flows.


(3)  Stockholders' Equity

We have  authorized  100,000,000  shares of $0.0001 par value  common  stock and
10,000,000 shares of $0.0001 par value preferred stock. Rights and privileges of
the  preferred  stock are to be  determined  by our Board of Directors  prior to
issuance.



                                       14
<PAGE>



(4)  Income Taxes

Deferred  income taxes  (benefits)  are provided for certain items of income and
expense that are recognized in different periods for tax and financial reporting
purposes.  We have net  operating  loss  carry-forwards  for federal  income tax
purposes,  but the future use of such carry-forwards may be severely limited due
to changes in  ownership.  The amounts  recorded  as  deferred  tax assets as of
February 28, 2006 and 2005,  which  represent the amounts of tax benefit related
to the loss carry-forwards, have been fully offset by equal valuation allowances
as we have not  determined  that the  realization  of the assets is "more likely
than not".


(5)  Going Concern and Management's Plans To Overcome Operating and Liquidity

Difficulties

The accompanying  consolidated  financial statements have been prepared assuming
that we will continue as a going concern,  which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
financial  statements do not include any adjustments  that might be necessary if
we are unable to  continue  as a going  concern.  Since our  inception,  we have
incurred losses, had an accumulated  deficit, and have experienced negative cash
flows from  operations.  The  expansion  and  development  of our business  will
require  additional  capital.  We are in the development stage and have realized
minimal revenues to date. These  conditions  raise  substantial  doubt about our
ability  to  continue  as a  going  concern.  If we fail  to  obtain  additional
financing when required,  we may have to modify, delay or abandon some or all of
our business and expansion plans.

Our development activities are at an early stage and the time and money required
to develop the commercial value and  marketability of our proposed products will
require significant cash expenditures for an indefinite period in the future. In
order to meet these cash needs,  we have entered into the  financing  agreements
detailed  in Notes 7, 8 and 12.  In  addition,  we  continue  to  actively  seek
additional financing to support our development activities.


(6)  Deferred Offering Costs and Deferred Financing Costs

We have incurred certain costs related to financing  activities since inception.
These costs consisted  primarily of placement  agent fees and commissions  which
are related to the placement of debt securities  (deferred  financing costs) and
equity securities (deferred offering costs).

At August 31, 2005 and February 28, 2005, we had net deferred financing costs of
$37,878 and $0,  respectively.  These costs were related to the placement of 12%
convertible  notes [Note 7] and will be amortized on a straight-line  basis over
the life of the debenture.

At August 31, 2005 and February 28, 2005, we had net deferred  offering costs of
$60,195 and $0, respectively. These costs were primarily related to a SEDA [Note
8] and will be offset against the proceeds of the offering, when consummated.



                                       15
<PAGE>



(7) Debt Financings

Short-Term  Notes  Payable- In fiscal 2005 we received a short-term  loan from a
third-party  in the  amount of  approximately  $29,000.  This loan is payable on
demand and carries no stated interest rate.

Secured Convertible  Debentures- In August 2005, we issued a Secured Convertible
Debenture in exchange for $150,000 in cash.  This  Debenture is due May 26, 2006
and carries an interest rate of 12%. In connection with the Debenture, we issued
to Cornell Capital a warrant to purchase 1,250,000 shares of our common stock at
an  exercise  price of $0.12 per  share.  The  Debenture  was  issued to Cornell
Capital  Partners,  LP ("Cornell  Capital").  The Debenture is convertible  into
shares of our  common  stock at a  conversion  price of $0.0497 at the option of
Cornell Capital. The conversion is subject to certain limitations including that
Cornell  Capital may not convert the  Debenture for a number of shares in excess
of that number of shares  which,  upon giving effect to such  conversion,  would
cause the aggregate  number of shares of our common stock  beneficially  held by
Cornell  Capital to exceed 4.9% of our then  outstanding  common stock.  Upon an
uncured  event of  default,  the  conversion  price for the  Debenture  would be
reduced to $0.0124 per share. We are permitted to redeem all or a portion of the
Debenture. In the event the closing bid price for our stock on a redemption date
is greater  than the  Debenture's  conversion  price,  we must pay a  redemption
premium of 20% of the amount redeemed in addition to such redemption costs.

The above issued  Debentures and related  warrants  required us to value several
discrete elements of the Debentures. For the Debentures, these discrete elements
consisted  of certain  conversion  features,  a  contingent  call  feature and a
re-pricing  of the  conversion  for the  debenture  in the case of  default.  We
accounted  for each of the discrete  elements of the  Debentures  at fair value.
Also required was a fair market valuation of the warrants.

We accounted for the embedded  contingent call feature and the re-pricing of the
conversion for the Debenture in the case of default in accordance  with SFAS No.
133  "Accounting  For Derivative  Instruments  And Hedging  Activities" and EITF
Issue No. 00-19 "Accounting For Derivative Financial  Instruments Indexed To And
Potentially Settled In A Company's Own Stock" which requires us to bifurcate and
separately  account for the embedded  contingent call feature and the re-pricing
of the  conversion  for the  Debentures  in the  case  of  default  as  embedded
derivatives contained in the Debentures. Pursuant to SFAS No. 133, we bifurcated
the fair value of the conversion  feature from the convertible  notes, since the
conversion features were determined to not be clearly and closely related to the
debt host. The derivative  liability related to the embedded contingent call and
default  re-pricing  factors has been valued at $58,727  using the Black Scholes
model.

The convertible Debentures are not considered to be conventional debt under EITF
Issue No. 00-19 or SFAS No. 133. We therefore  bifurcated  the fair value of the
embedded  conversion  features  from the debt host and  accounted  for them as a
derivative  liability.  The effect of this  valuation  was the  creation of fair
value of this conversion feature of $46,177.

The warrants issued in conjunction  with the Debentures were valued and recorded
as equity by us in accordance with EITF 00-19 and guidance  described under SFAS
No. 150 as we made the  determination  that the warrants were  conventional.  We
have  valued  the  warrants  by using  the  Black-Scholes  valuation  model  and
accounted for the fair value of the warrants in relation to the debt host.  This
resulted  in a fair value of the  warrants  of $62,810  which was  allocated  to
Additional  Paid In Capital and recorded as a discount to the  Debentures.  This
discount  is  being  amortized  on a  straight-line  basis  over the life of the
Debentures which approximates the effective interest method.

We recorded the fair value of the embedded  derivatives as either  short-term or
long-term  liabilities (based on the underlying term of the Debentures) and as a
discount to the  Debentures to the extent there was a net carrying value for the
Debentures,  which  resulted in a discount to the  Debentures  of $87,190.  This
discount  is  being  amortized  on a  straight-line  basis  over the life of the
Debentures  which  approximates  the effective  interest  method.  The amount in
excess of the net  carrying  value,  $17,714,  was  charged to loss on  embedded
derivative in the statement of operations.



                                       16
<PAGE>



(8)  Standby Equity Distribution Agreement ("SEDA")

On August 26, 2005, we entered into a SEDA with Cornell Capital. Pursuant to the
SEDA, we may, at our discretion,  periodically sell to Cornell Capital shares of
our common stock for a total purchase price of up to  $8,000,000.For  each share
of common stock purchased under the SEDA, Cornell Capital will pay us 96% of the
lowest  closing bid price of our common stock as quoted on the  Over-the-Counter
Bulletin Board ("OTC-BB") or other principal market on which our common stock is
traded  for the five days  immediately  following  the date we  deliver a notice
requiring  Cornell  Capital to  purchase  our shares  under the  Standby  Equity
Distribution Agreement.

Cornell  Capital's  obligation to purchase  shares of our common stock under the
SEDA is  subject  to  certain  conditions,  including  but not  limited  to, our
obtaining an effective  registration  statement  for shares of common stock sold
under the SEDA (the  "Registration  Statement")  and our shares being listed for
quotation on the Over-The-Counter Bulletin Board, and is limited to $300,000 per
weekly advance.

The  commitment  period under the SEDA  commences on the earlier to occur of (i)
the date that the Registration Statement is declared effective by the Securities
and Exchange  Commission (the "Effective Date"), or (ii) such earlier date as we
and Cornell Capital may mutually agree in writing.  The commitment  period under
the SEDA  expires  on the  earliest  to  occur of (i) the date on which  Cornell
Capital has  purchased an aggregate  amount of  $8,000,000  shares of our common
stock  under the SEDA,  (ii) the date  occurring  twenty-four  months  after the
Effective  Date, or (iii) the date the SEDA is earlier  terminated (in the event
that (x) there occurs any stop order or suspension of the  effectiveness  of the
Registration Statement for an aggregate of fifty trading days, other than due to
the acts of Cornell  Capital,  during  the  commitment  period,  and (y) we fail
materially  to comply with any of the  covenants  contained in the SEDA and such
failure is not cured  within  thirty days after  receipt of written  notice from
Cornell Capital,  provided,  however,  that this termination  provision does not
apply to any period commencing upon the filing of a post-effective  amendment to
the Registration Statement and ending upon the date on which such post effective
amendment  is declared  effective  by the  Securities  and  Exchange  Commission
("SEC").

We have agreed to pay Cornell  Capital 5% of the gross  proceeds that we receive
from each advance under the SSEDA. We paid Yorkville Advisors Management,  LLC a
fee of $15,000 for structuring in connection  with this  transaction and $10,000
for due diligence  expenses which have been recorded as deferred  offering costs
and will be offset against the proceeds of the offering,  when consummated [Note
6]. In addition,  we have issued to Cornell Capital warrants to purchase 500,000
shares of our common stock at an exercise price of $0.12 per share. The warrants
issued in conjunction  with the SEDA were valued and recorded as equity by us in
accordance  with EITF 00-19.  In valuing these  warrants,  we elected to use the
Black Scholes model. The effect of this valuation was the creation of fair value
of the  warrants of $32,317  which was  allocated  to APIC.  The charges for the
Common  Stock,  promissory  notes and  warrants  have been  recorded as deferred
offering  costs and will be offset  against the proceeds of the  offering,  when
consummated [Note 6].


(9)  Related Party Transactions

In July 2006 we entered into an amended and restated  consulting  agreement with
our CEO,  Mr.  Louis  Pardo in  connection  with the  services he provided to us


                                       17
<PAGE>



during the period from January 2001 through  December  2005.  The Company issued
6,653,000  shares of common  stock to Mr.  Pardo on July 11, 2005 as payment for
these  services.  The  shares  were at the time of  issuance,  and are as of the
balance sheet date,  subject to  restrictions  on  transferability.  The closing
market  price of our common stock on the OTC-BB on the date of issuance of these
shares was $0.10 per share. The issuance price of these shares was $0.816, based
on a discount of 20% to the five-day  trailing  average  price for the Company's
common stock on the OTC-BB as of July 11, 2005.

In July 2006,  we entered into an amended and restated  consulting  agreement in
connection with the services rendered by significant shareholder, Mr. Christophe
Giovannetti.  Mr.  Giovannetti  provided  these services to us during the period
from January 2001 through  December 2005. The Company issued 6,653,000 shares of
common stock to Mr.  Giovannetti on July 11, 2005 as payment for these services.
The shares were at the time of issuance,  and are as of the balance  sheet date,
subject to restrictions on  transferability.  The issuance price of these shares
was $0.816,  based on a discount of 20% to the five-day  trailing  average price
for our common  stock on the OTC-BB as of July 11,  2005.  We also  recorded  an
additional  charge of $135,487 in July 2005 related to this amended and restated
agreement.


(10) Concentration of Credit Risk

Financial  instruments that potentially subject the Company to concentrations of
credit  risk  consist  of  cash  and  cash  equivalent   accounts  in  financial
institutions,  which  from  time to time  exceed  Federal  depository  insurance
coverage  limits.  At August 31, 2005, cash and cash  equivalents did not exceed
federally insured limits.


(11) Subsequent events

In  October  2005,  we  issued a second  secured  convertible  debenture  in the
principal  amount of $150,000 to Cornell  Capital and also  amended and restated
the August,  2005 debenture as to its maturity date,  monthly payment  schedule,
reserved stock provisions and certain other provisions of the agreement.

In October 2005 we entered into a real estate purchase  agreement with Christian
Berthier  (the  "Berthier  Agreement")  to acquire  the land where the Source is
located for  2,150,000  euros.  The Berthier  Agreement  expires on February 28,
2008.

In  December   2005,   the  Company  filed  an  Amendment  to  its  Articles  of
Incorporation  increasing  its  authorized  common  stock  from  100,000,000  to
500,000,000 shares, with no change to its par value.

In February 2006, we entered into an agreement with Cornell Capital  pursuant to
which we issued a third secured convertible debenture in the principal amount of
$344,000.  We also amended and restated the $300,000  Debentures to provide that
the maturity  dates of those two  debentures  to coincide with the repayment and
amortization terms of third secured convertible debenture.

In March 2006 we entered into a bridge loan agreement with Portfolio Lenders II,
LLC with gross proceeds of $100,000 for which we issued 100,000  warrants to the
lender  exercisable  at $0.05 per share.  The bridge  loan was repaid in full in
April, 2006.

During  March and April 2006 we  undertook  a private  placement  to  accredited
investors of  convertible  debentures  and warrants  ("Units") for which we held
four closings  aggregating  gross  proceeds of $917,800.  Poseidis  issued (a) a


                                       18
<PAGE>



total of $917,800 in principal amount of convertible  debentures,  (b) 2,753,400
warrants  exercisable  at 125% of the fair market  value on the four  respective
closing dates (540,000 warrants at $ 0.086, 701,400 warrants at $0.078,  381,000
warrants  at $0.076,  and  1,131,000  warrants  at  $0.082),  and (c)  2,753,400
warrants  exercisable  at 145% of the fair market  value on the four  respective
closing dates (540,000 warrants at $0.099,  701,400 warrants at $0.090,  381,000
warrants at $0.088, and 1,131,000 warrants at $0.095).

In March  2006 our  consolidated  subsidiary,  Montespan  SAS,  entered  into an
amendment  and  restatement  of  Montespan's  October 2005 real estate  purchase
agreement  with  Christian  Berthier  pertaining  to  approximately  5 acres  in
Theneuille,  France  where the natural  mineral  water  spring is  located.  The
purchase price for this property is 2,150,000  euros of which Montespan has paid
430,000 euros toward the total  2,150,000  euros  purchase  price as of July 31,
2006. In the  agreement,  Montespan  agreed to pay Mr.  Berthier at least 10,000
euros per month.

In May 2006  Poseidis  issued a  promissory  note to  Portfolio  Lenders II, LLC
pursuant  to which  the  Company  obtained  a loan in the  principal  amount  of
$250,000  and issued  warrants to  purchase  1,000,000  shares of the  Company's
common stock exercisable at $0.05 per share.

In June 2006 Poseidis  formed an advisory board to advise the Board of Directors
and  senior  management  on  strategic  planning  issues,  business  development
matters,  and other corporate matters.  Three members have been appointed to the
advisory  board as of July 26, 2006.  Poseidis has agreed to issue stock options
to purchase  100,000 of our common  stock to each member of the  advisory  board
exercisable  at the then current  market value of Poseidis'  common stock on the
date of  approval  of such  options by the  Poseidis  Board of  Directors.  Such
options are to be issued under,  and governed by, an equity incentive plan to be
adopted by Poseidis.

In July 2006  Poseidis  issued a  promissory  note to Louis  Pardo,  a director,
officer,  and  substantial  stockholder  of the  Company,  pursuant to which the
Company  obtained a loan in the  principal  amount of  $30,000.  This note bears
interest at the rate of 9.25% per annum.  The  principal  and  accrued  interest
shall be paid in full on  demand,  not later than the fifth  business  day after
written demand for repayment is received by the Company.

On July 19, 2006, the OTC-BB  temporarily  ceased  quoting the Company's  shares
pending the completion of the audit of the Poseidis financial statements and the
filing of the  Company's  Annual Report on Form 10-KSB for the year ended August
31, 2005. The Company's  common stock has continued to be quoted through various
market makers on the Pink Sheets  Electronic  Quotation Service published by the
National Quotation Bureau under the symbol "PSED".

In July 2006 Poseidis  entered into amended and restated  consulting  agreements
with Louis  Pardo,  a  director,  officer  and  substantial  stockholder  in the
Company,  and  Christophe  Giovannetti,  also a substantial  stockholder  of the
Company,  in order to address errors identified by the Company in the historical
accounting  treatment of consulting  fees and the issuance of shares of Poseidis
common  stock  to Mr.  Pardo  and  Mr.  Giovannetti  under  previously  executed
consulting agreements [Note 9].

In August and September of 2006, the Company entered into letter agreements with
Cornell  pursuant to which,  among other  things,  Cornell  provided a waiver of
certain defaults that had arisen under applicable loan documents and Cornell and



                                       19
<PAGE>



the  Company  also  amended  certain  covenants  and other  terms under the loan
documents  including:  termination  of the Company's  obligation to further fund
with  cash or stock or  otherwise  an escrow  account  held for the  benefit  of
Cornell in connection with the $344,000  debenture that we had issued to Cornell
in February 2006; Cornell's consent to the release of approximately $60,000 from
such escrow account for the purpose of our payment of certain vendors'  invoices
relating to our  development  project at the Source in France;  changing the due
date for the first  scheduled  payment of  principal  and interest due under the
Debentures from September 1, 2006 to October 1, 2006; and revising the due dates
for our filing with the SEC of certain reports and our registration statement.

In September 2006, the Company filed with the SEC amended  quarterly  reports on
Form  10-QSB/A  for the  three-month  period  ended  August 31, 2005 and for the
three-month  period ended November 30, 2005, and the Company also filed with the
SEC the  Company's  annual  report on Form  10-KSB  for the  fiscal  year  ended
February 28, 2006. All three of these reports should be read in conjunction.


(12)  Restatement  We have  restated our  quarterly  financial  statements  from
amounts  previously  reported  August  31,  2005.  We  have  identified  certain
accounting  errors  related to (1) the  accounting  for certain  debt  financing
conducted in August 2005 as well as certain compensatory  warrants issued by the
Company and (2) the accounting for the issuance of the Company's common stock in
payment of certain accrued expenses.

We have  determined that we had  incorrectly  recorded our debt  obligations and
associated warrants in conjunction with the issuance of the of the Company's 12%
Secured  Convertible  Notes (the  "Debentures")  in August,  2005.  Our analysis
determined we needed to make  restatements  in the accounting for the Debentures
related to (1) the valuation of several discrete  elements of the Debentures and
related  warrants and (2) the costs incurred by the Company in conjunction  with
the  issuance  of the  Debentures.  The  discrete  elements  of  the  Debentures
consisted of the conversion  features of the conversion  price at issuance,  the
embedded  contingent  call feature and the  re-pricing of the conversion for the
debenture  in  the  case  of  default.  Note 7 was  augmented  to  disclose  the
accounting  treatment  and  financial  impact of the  discrete  elements  of the
Debentures  and  related  warrants.  We are  required to record  these  discrete
elements at fair value with changes in the values of these derivatives reflected
in the statement of operations  as "Gain (loss) on  derivative  liability".  The
effect of the  (non-cash)  changes  related to accounting  separately  for these
derivative  liabilities  on the  statement of  operations  for the three and six
months  ended  August 31, 2005 was an increase in the net loss  attributable  to
common  shareholders  of $17,714  for each  period and on the  balance  sheet at
August  31,  2005 was a  corresponding  increase  to short term  liabilities  of
$17,714.  We also recorded the fair value of the warrants  issued in conjunction
with the Debentures.  The effect of the (non-cash) changes related to accounting
for the fair value of the related  warrants  on the balance  sheet at August 31,
2005 was an increase to shareholders' equity of $62,810 and with a corresponding
reduction  in short term  liabilities.  There was no effect on the  statement of
operations for the three or six month periods ending August 31, 2005.

The costs incurred by the Company for the issuance of the  Debentures  have been
capitalized as Deferred  Financing  Costs and will be amortized over the term of
the Debentures.  These costs were previously  reflected as Professional Fees and
expensed when incurred.  In addition, we have capitalized certain costs incurred
by the Company in conjunction  with the Company's  Standby  Equity  Distribution
Agreement  ("SEDA") as Deferred  Issuance Costs which will be offset against the
proceeds of the offering,  when and as the SEDA is utilized. Note 6 was added to
disclose the treatment of the costs  incurred in connection  with the Debentures




                                       20
<PAGE>



and the SEDA. The effect of the (non-cash) changes related to accounting for the
capitalization  of costs incurred in connection with the Debentures and the SEDA
on the  statement  of  operations  for the three and six months ended August 31,
2005 was a  decrease  in the net loss  attributable  to common  shareholders  of
$98,073  in each  period  and on the  balance  sheet at August  31,  2005 was an
increase in other assets of $98,073.

We have restated the accounting for the issuances of our common stock in payment
of certain accrued expenses for consulting  services  provided to the Company by
its Chief Executive  Officer and by a stockholder who is the beneficial owner of
more the  five  percent  of the  Company's  common  stock.  Note 9 was  added to
disclose  the  treatment  of these  transactions.  The effect of the  (non-cash)
changes  related to  accounting  for these stock  issuances on the  statement of
operations for the three and six months ended August 31, 2005 was an increase in
the net loss attributable to common  shareholders of $135,487 in each period and
on the balance sheet at August 31, 2005 was a decrease in current liabilities of
$950,282 and a corresponding  net increase in shareholders'  equity of $950,282.
The number of shares of our common stock  outstanding  as of August 31, 2005 was
also  changed to reflect the issuance of the  13,306,000  shares as well as some
minor amount of share  issuances that were  previously  recorded as issuances in
the quarter ended November 30, 2005. The number of common shares  outstanding at
August 31, 2005 was increased by 14,971,472  shares to 65,995,800.  The weighted
average number of shares  outstanding for the three months ended August 31, 2005
increased by 8,826,505 shares to 50,735,669  shares and for the six months ended
August 31, 2005 by 5,161,445 shares to 50,487,553 shares.












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<PAGE>



Item 2. Management's Discussion and Analysis


                           FORWARD-LOOKING STATEMENTS

     The  Private  Securities  Litigation  Reform  Act of 1995  provides a "safe
harbor"  for   forward-looking   statements.   This  report   contains   certain
forward-looking  statements  and  information  that are based on the  beliefs of
management as well as assumptions made by and information currently available to
management. The statements contained in this report relating to matters that are
not  historical  facts are  forward-looking  statements  that involve  risks and
uncertainties,  including, but not limited to, the successful  commercialization
of our products and services,  future demand for our products,  general economic
conditions,  government and environmental  regulation,  competition and customer
strategies,  technological  innovations,  changes in our  business  strategy  or
development plans,  capital  deployment,  business  disruptions,  our ability to
consummate future financings,  the reinclusion of our common stock for quotation
on the NASD OTC Bulletin Board  ("OTC-BB"),  and other risks and  uncertainties,
certain of which are beyond our  control.  Additional  factors that could affect
the  Company's  forward-looking  statements  include,  among other  things:  the
restatement  of the  quarterly  financial  statement  for the  second  and third
quarters in the fiscal year ended February 28, 2006; negative reactions from the
Company's stockholders, creditors, or employees to the results of the review and
restatement or delay in providing  financial  information caused by restatement;
the impact and result of any litigation  (including private  litigation),  or of
any investigation by the Securities and Exchange Commission or any investigation
by any other governmental  agency related to the Company;  the Company's ability
to manage its operations  during and after the financial  statement  restatement
process;  and the Company's ability to successfully  implement internal controls
and  procedures  that  remediate  any  material  weakness in controls and ensure
timely, effective and accurate financial reporting.  Should one or more of these
risks or  uncertainties  materialize,  or should  underlying  assumptions  prove
incorrect,  actual results may differ  materially from those described herein as
anticipated, believed, estimated or expected.

     Forward-looking  statements  are based on  management's  current  views and
assumptions   and  involve  unknown  risks  that  could  cause  actual  results,
performance or events to differ  materially  from those  expressed or implied in
those  statements.  These risks  include,  but are not limited to, the risks set
forth  under the caption  "Risk  Factors."  Actual  events or results may differ
materially  from those  discussed in  forward-looking  statements as a result of
various factors,  including,  without limitation, the risks outlined under "Risk
Factors" and matters described in this report generally. In light of these risks
and uncertainties, there can be no assurance that the forward-looking statements
contained in this report will in fact occur.

     Information  included  or  incorporated  by  reference  in this  report may
contain  forward-looking  statements.  This  information  may involve  known and
unknown  risks,  uncertainties  and other  factors  which  may cause our  actual
results,  performance or achievements to be materially different from the future
results, performance or achievements expressed or implied by any forward-looking
statements.  Forward-looking statements,  which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of  the  words  "may,"  "will,"  "should,"  expect,"  "anticipate,"  "estimate,"
"believe,"  "intend"  or  "project"  or the  negative  of  these  words or other



                                       22
<PAGE>



variations on these words or comparable  terminology.  The following  discussion
and analysis  should be read in  conjunction  with our financial  statements and
notes  thereto  included  elsewhere  in this report and  appearing in our annual
report  filed on Form 10-KSB for the fiscal year ended  February 28, 2006 and in
our quarterly  report filed on Form 10-QSB/A for the three months ended November
30, 2005.

DISCUSSION AND ANALYSIS

     Poseidis,  Inc. f/k/a BillyWeb Corp.  f/k/a/ EZ Talk,  Inc. (the "Company")
was  organized  under the laws of the State of  Florida  on June 10,  1998.  The
Company was originally  organized for the purpose of engaging in the business of
selling/marketing a universal, hands-free mobile speaker for mobile phones.

     In May 2000,  however,  the Company changed its business plan in connection
with the  acquisition  of Billyweb  Corp.  to fulfill the  perceived  demand for
Interactive  accessing of the internet.  The Company was named after an animated
character, Billy, which was created by Billy Web Corp. which was to be used as a
Disney  star and  Disney  Club  show host in  partnership  with  Fprod  Fenomen.
However, in September 2002, the Company abandoned this business plan as well. In
connection  with the  abandonment of its business plan, the Company  changed its
name to its  current  name,  Poseidis,  Inc.  In December  2002,  SARL  Billyweb
Entertainment,  a wholly-owned subsidiary of the Company engaged in its old line
of business, filed for bankruptcy protection under French law.

     The  Company's  new  business  plan  is  the   commercial   and  industrial
exploitation of a natural mineral water spring called La Troliere Spring located
in the village of Theneuille,  Allier Department,  Canton Cerilly, in the region
of one of the largest natural forests in France.

     In that  regard,  the  Company  incorporated  Poseidis,  SAS  under  French
corporate law as a wholly-owned  subsidiary in Theneuille,  France in April 2003
for the purpose of establishing a manufacturing  facility to exploit the spring.
At the same time, a twenty year lease was purchased by Poseidis,  SAS,  granting
it an  exclusive  right  to  exploit  the  spring.  Additionally,  it  purchased
equipment  to be used in  connection  with  exploitation  of the  spring and the
results  of  significant  research  already  conducted  at the site.  Commercial
exploitation of the spring is not expected before the second half of 2005.

     The Company  maintains its executive offices at 222 Lakeview Ave., PMB 160,
West Palm Beach, FL 33401, telephone: (305) 428-3757.

Results of Operations For the Three Months Ended August 31, 2005 and 2004.

Financial Condition, Capital Resources and Liquidity

     For the three months  ended  August 31, 2005 and 2004 the Company  recorded
revenues  of $0  and $0  respectively.  The  Company  has  no  ongoing  business
generating revenues.

     For the three  months  ended  August  31,  2005 and 2004 the  Company  paid
consulting fees of $242,300 and $179,200 respectively.

     For the three  months  ended August 31, 2005 and 2004 the Company had, on a
consolidated basis, general and administrative expenses of $94,300 and $246,200,
respectively.

     For the three  months  ended August 31, 2005 and 2004 the Company had, on a
consolidated   basis,   total  operating   expenses  of  $419,100  and  $461,200
respectively.




                                       23
<PAGE>



Net Losses

     For the three months ended August 31, 2005 and 2004, the Company reported a
net loss from operations of $603,700 and $461,200 respectively.

Results of Operations For the Six Months Ended August 31, 2005 and 2004

Financial Condition, Capital Resources and Liquidity

     For the six months  ended  August 31,  2005 and 2004 the  Company  recorded
revenues  of $0  and $0  respectively.  The  Company  has  no  ongoing  business
generating revenues.

     For the six  months  ended  August  31,  2005  and 2004  the  Company  paid
consulting fees of $300,600 and $2,388,800 respectively.

     For the six months  ended  August 31, 2005 and 2004 the  Company  had, on a
consolidated basis, general and administrative expenses of $166,800 and $374,800
respectively.

     For the six months  ended  August 31, 2005 and 2004 the  Company  had, on a
consolidated   basis,  total  operating  expenses  of  $585,500  and  $2,808,800
respectively.

Net Losses

     For the six months ended August 31, 2005 and 2004,  the Company  reported a
net loss from operations of $770,400 and $2,711,100 respectively.

Liquidity/Working Capital

     At August 31,  2005,  the Company had cash of $74,900 as compared to $1,100
at February 28, 2005.  There can be no assurance  that the  Company's  financial
condition  will  improve.  The Company is  expected to continue to have  minimal
working capital or a working capital deficit as a result of current liabilities.

     The ability of the Company to continue as a going concern is dependent upon
its ability to deliver on its  commitment to its business  plan.  The Company is
currently  negotiating  with several  accredited  investors for a potential cash
investment.

     On August 26, 2005, we entered into a Standby Equity Distribution Agreement
("SEDA") with Cornell  Capital  Partners,  LP ("Cornell  Capital"),  pursuant to
which we may, at our discretion,  periodically sell to Cornell Capital shares of
our common stock for a total purchase price of up to $8,000,000.  For each share
of common stock purchased under the SEDA, Cornell Capital will pay us 96% of the
lowest  closing bid price of our common stock as quoted on the  Over-the-Counter
Bulletin Board or other principal market on which our common stock is traded for
the five days  immediately  following  the date we  deliver  a notice  requiring
Cornell Capital to purchase our shares under the SEDA.

     Cornell  Capital's  obligation to purchase shares of our common stock under
the Standby  Equity  Distribution  Agreement  is subject to certain  conditions,
including but not limited to, our obtaining an effective  registration statement
for shares of common  stock sold under the SEDA (the  "Registration  Statement")
and our shares  being  listed for  quotation  on the  Over-The-Counter  Bulletin
Board, and is limited to $300,000 per weekly advance.



                                       24
<PAGE>



     The  commitment  period under the SEDA commences on the earlier to occur of
(i) the date  that the  Registration  Statement  is  declared  effective  by the
Securities and Exchange  Commission (the "Effective Date"), or (ii) such earlier
date as we and Cornell  Capital may mutually  agree in writing.  The  commitment
period  under the SEDA expires on the earliest to occur of (i) the date on which
Cornell  Capital has purchased an aggregate  amount of $8,000,000  shares of our
common stock under the SEDA,  (ii) the date occurring  twenty-four  months after
the  Effective  Date, or (iii) the date the SEDA is earlier  terminated  (in the
event that (x) there occurs any stop order or suspension of the effectiveness of
the  Registration  Statement for an aggregate of fifty trading days,  other than
due to the acts of Cornell  Capital,  during the commitment  period,  and (y) we
fail  materially to comply with any of the  covenants  contained in the SEDA and
such failure is not cured  within  thirty days after  receipt of written  notice
from Cornell Capital,  provided,  however,  that this termination provision does
not apply to any period commencing upon the filing of a post-effective amendment
to the  Registration  Statement  and  ending  upon the date on which  such  post
effective amendment is declared effective by the SEC).

     We have agreed to pay Cornell  Capital 5% of the  proceeds  that we receive
from each advance  under the SEDA. In addition,  upon our obtaining  shareholder
approval and filing an amendment to our Certificate of Incorporation to increase
our  authorized  common stock,  we will pay Cornell  Capital a commitment fee by
issuing shares of our common stock in an amount equal to $320,000 at a price per
share that is the lowest  closing  bid price of our common  stock,  as quoted by
Bloomberg,  LP during the five trading days immediately  preceding the filing of
the  amendment  to our  Certificate  of  Incorporation  as described  above.  In
addition, we have issued to Cornell Capital a warrant to purchase 500,000 shares
of our common stock at an exercise price of $0.12 per share.

     We also  paid  Yorkville  Advisors  Management,  LLC a fee of  $15,000  for
structuring in connection  with this  transaction  and $10,000 for due diligence
expenses.

     We have  agreed to pay the  placement  agent a fee of $10,000 in our common
stock under a placement agent agreement  relating to the SEDA. These shares will
be issued upon our obtaining shareholder approval and filing an amendment to our
Certificate  of  Incorporation  to  increase  our  authorized  common  stock  as
described  above and will be at a price per share that is the lowest closing bid
price of our common  stock,  as quoted by  Bloomberg  LP during the five trading
days  immediately  preceding the filing of the amendment to our  Certificate  of
Incorporation.

Securities Purchase Agreement

     On August 26, 2005, we entered into a Securities  Purchase  Agreement  with
Cornell Capital pursuant to which we issued a secured  convertible  debenture in
the principal amount of $150,000 (the "First Debenture").  Upon the satisfaction
of certain conditions  (including the shareholder  approval and amendment to our
Certificate  of  Incorporation  as  described  above  and the  preparation  of a
registration  statement (the "Debenture  Registration  Statement")  covering the
shares of our common stock issuable upon conversion of the  Debenture),  we will
issue a second  debenture in the principal amount of $150,000 to Cornell Capital
(the  "Second   Debenture"  and  collectively   with  the  First  Debenture  the
"Debentures").  The Debentures have a nine-month term and accrue interest at 12%
per year.




                                       25
<PAGE>



     The Debentures are convertible  into shares of our common stock.  The First
Debenture is convertible,  and the Second  Debenture will be  convertible,  at a
price per share of  $0.0497,  as adjusted  in  accordance  with the terms of the
Debentures.

     The  Debentures  are  convertible  into  shares of our common  stock at the
option of Cornell Capital, subject to certain limitations including that Cornell
Capital may not convert the  Debenture  for a number of shares in excess of that
number of shares which,  upon giving effect to such conversion,  would cause the
aggregate  number of shares of our  common  stock  beneficially  held by Cornell
Capital to exceed 4.9% of our then  outstanding  common  stock.  Upon an uncured
event of default,  the conversion  price is reduced to $0.0124 per share. We are
permitted to redeem all or a portion of the Debentures. In the event the closing
bid price for our stock on a  redemption  date is greater  than the  Debenture's
conversion  price,  we must pay a  redemption  premium  of 20% of the  amount of
redeemed in addition to such redemption.

     We  have  granted  a  security   interest  to  Cornell   Capital   covering
substantially  all of our assets to secure the obligations under the Debentures.
Three of our  shareholders  (including Louis Pardo) have pledged an aggregate of
approximately  18 million shares of our stock to further secure our obligations.
These pledged shares will be replaced by the Company's  pledge of  approximately
$1,500,000 of the common stock upon our obtaining the  shareholder  approval and
filing the amendment to our Certificate of Incorporation as described above.

Employees

     At August 31, 2005, the Company had one (1) part-time employee. The Company
anticipates  that it will rely greatly on the  management  skills of Louis Pardo
and Bernard Bouverot.

Research and Development Plans

     For the  next  three  months  there  is not a plan  for  funding  extensive
research and development efforts.


                                  RISK FACTORS

WE ARE SUBJECT TO VARIOUS RISKS THAT MAY MATERIALLY HARM OUR BUSINESS, FINANCIAL
CONDITION  AND  RESULTS OF  OPERATIONS.  IF ANY OF THESE  RISKS OR  UNCERTANTIES
ACTUALLY OCCURS, OUR BUSINESS,  FINANCIAL CONDITION OR OPERATING RESULTS COLD BE
MATERIALLY  HARMED.  IN THAT CASE THE  TRADING  PRICE OF OUR COMMON  STOCK COULD
DECLINE AND CLOSE LOSE ALL OR PART OF YOUR INVESTMENT.

                   RISKS RELATED TO OUR BUSINESS AND INDUSTRY

WE NEED TO RAISE  ADDITIONAL  CAPITAL IN ORDER TO COMPLETE  OUR  PURCHASE OF THE
REAL  ESTATE  WHERE THE  SOURCE IS  LOCATED.  WE COULD  DEFAULT  ON OUR  PAYMENT
OBLIGATIONS UNDER THE BERTHIER REAL ESTATE PURCHASE AGREEMENT.

     We will  need to raise  additional  capital  in  order to make the  monthly
payments to Mr. Berthier and to pay the remaining 1,720,000 euros (approximately
$2,064,000)  balance due as of July 31,  2006 under the  Berthier  Agreement  by
February 28,  2008.  If we are unable to raise such capital and if we default on
the monthly  payments or fail to pay the entire  purchase  price by February 28,
2008, we will be unable to acquire exclusive title to the Berthier property.  In
that event,  the Berthier  Agreement  provides  that Mr.  Berthier and Montespan
shall be co-owners of the property in proportion to the 2,150,000  euro purchase
price, such that Montespan's co-ownership percentage shall be the fraction whose
numerator  is the  total  sum  paid  by  Montespan  to Mr.  Berthier  and  whose



                                       26
<PAGE>



denominator is 2,150,000 euros, and Mr. Berthier's co-ownership percentage shall
be 100% minus Montespan's co-ownership percentage.  In the event of co-ownership
of the  Berthier  property  between Mr.  Berthier  and  Montespan,  the Berthier
Agreement  provides  that each party will hold a right of  preemption to acquire
the interest of the other party when the other party wishes to sell its interest
to a third party.  Such right of preemption is exercisable on the same terms and
conditions that are proposed between the other party and the third party.

WE HAVE NO REVENUE FROM OPERATIONS AND MUST RAISE ADDITIONAL  CAPITAL TO FINANCE
OPERATIONS. OUR OPERATIONS SINCE INCEPTION HAVE NOT GENERATED A PROFIT.

     We have no  revenues  from our  current  operations  as of the date of this
report and we have relied on, and will continue to rely on, significant external
financing  to fund our  operations.  During the fiscal year ended  February  28,
2006,  our financing  came  primarily  from the sale of $644,000 of  convertible
debentures and approximately $86,000 in private placement proceeds. In addition,
we have recently  closed on $917,800 in gross  proceeds from the private sale of
our   securities   and  obtained   loans  of  $100,000,   $250,000  and  $30,000
respectively. We have a commitment for gross proceeds of up to $8.0 million that
will be  available  to us  under  the  SEDA  upon the  satisfaction  of  certain
conditions  including  the  effectiveness  of  an  SEC  registration   statement
covering, among other securities,  the common stock issuable in exchange for the
SEDA funds.  If we determine  not to utilize any of the $8.0 million SEDA funds,
we will need to raise at least  approximately $9.2 million in additional capital
to finance  operations  through  year-end  2007. To the extent we do draw on the
SEDA funds to finance  operations as described above, the aforesaid $9.2 million
figure will decrease by the amount of such draws.

     Our  operations  since  inception in 1998 have not  generated a profit.  We
generated a net loss of $793,520  during the year ended February 28, 2004, a net
loss of $3,294,210  during the year ended  February 28, 2005,  and a net loss of
$603,745 for the six months ended August 31, 2005.

     We cannot  assure you that  financing,  whether  from  external  sources or
related  parties,  will be available on favorable terms. Our inability to obtain
adequate  financing  will  result  in the need to  reduce  or  curtail  business
operations.  Any of these events would be materially harmful to our business and
may result in a lower stock price. We will need to raise  additional  capital to
fund our anticipated  future  development.  No financing  commitments for future
capital  needs have been  obtained as of the date of this report  other than the
$8.0 million SEDA funds.

WE NEED TO CONSTRUCT A SMALL-SCALE  PRODUCTION  PLANT,  A FULL-SCALE  PRODUCTION
PLANT, AND INFRASTRUCTURE IMPROVEMENTS; OBTAIN AND INSTALL EQUIPMENT; AND OBTAIN
FINANCING FOR THESE PURPOSES,  AND FOR WORKING CAPITAL IN A COMPRESSED TIMEFRAME
WITH LIMITED MANPOWER AND LIMITED RESOURCES. WE COULD FAIL.

     We plan to install pumping equipment at the Source and to construct, first,
a small-scale production facility capable of manufacturing limited quantities of
samples of our envisioned  final product (the  carbonation in these samples will
vary slightly compared to the carbonation in the final commercial  product) and,
second, a full-scale  commercial  production  plant plus related  infrastructure
improvements at and around the Source.  To accomplish this we will need to raise
approximately  $9.2 million in financing in 2007  (excluding the $8.0 million in
SEDA funds available to us). To the extent we utilize the SEDA funds,  such $9.2
million figure that we will need to raise will be reduced on a dollar-for-dollar
basis.  However,   there  can  be  no  assurance  that  one  or  more  financing
transactions will be completed at all, or on terms favorable to us.



                                       27
<PAGE>



WE NEED TO OBTAIN NUMEROUS REGULATORY PERMITS, CERTIFICATES, LICENSES, ETC. FROM
GOVERNMENTAL  AUTHORITIES  WHICH WE COULD  FAIL TO  OBTAIN OR WHICH  COULD  TAKE
LONGER OR BE MORE COSTLY TO OBTAIN THAN WE HAVE PLANNED.

     We are  subject  to a wide  range  of  governmental  regulation  by  French
national,  regional and local governmental agencies and by governmental agencies
in the other  jurisdictions in which our products will be marketed.  We are also
regulated  in the U.S.  by federal  and state  securities  regulators  and other
governmental agencies. Our business will require permits,  licenses,  approvals,
certifications, and various other authorizations including the following:

o    Building permit.

o    Water transportation  permit (pipeline from the Source to the plant). o Tag
     approval  (health-related  claims on our bottle  labeling).  o Gas pressure
     treatment approval.

o    Food and health permits from the applicable  French and other  governmental
     regulatory authorities.

     We do not have all the final permits, licenses, approvals,  certifications,
and other  authorizations in place that we need to commence the operation of our
business.  There  can be no  assurance  we will be able to  obtain,  or renew or
extend as applicable, these items on a timely basis or at all. There can also be
no guarantee we will be able to obtain these items at the cost we anticipate.

WE NEED TO OBTAIN  CONTRACTS  FOR OPERATING AND  PRODUCTION  FACILITIES  AND FOR
OTHER KEY COMPONENTS OF OUR BUSINESS.

     In order to conduct our  business,  we must enter into  several  agreements
including without limitation  agreements with one or more distributors,  general
contractors,   computer  hardware  and  software   providers,   quality  control
specialists,  flavors and fragrances suppliers,  and other vendors. There can be
no  assurance  that  we  will  be able  to  obtain  such  agreements.  If we are
unsuccessful in obtaining such  agreements,  we may not be able to implement our
business  plan and,  consequently,  our  ability  to  generate  revenue  and our
business in general will be adversely affected.

OUR BUSINESS IS DEPENDENT ON THE AVAILABILITY OF THE NATURAL MINERAL WATER DRAWN
FROM THE SOURCE.  SIGNIFICANT DISRUPTIONS IN THE SUPPLY OF WATER FROM THE SOURCE
COULD MATERIALLY ADVERSELY AFFECT OUR OPERATING RESULTS.

     Our  operating  results  will be  significantly  impacted  by any  negative
changes in the availability of the natural mineral spring water from the Source.
Changes in government policy concerning the Source or the bottled water industry
in  general,  environmental  concerns,  political  or civil  unrest,  and  other
unpredictable events could adversely affect our business in the future.

OUR  FAILURE  TO  SUCCESSFULLY  IMPLEMENT  OUR  GROWTH  STRATEGY  COULD HARM OUR
BUSINESS.

     Our growth strategy  involves  launch of our primary  product in France,  a
phase-in of our primary product in other geographic markets,  and then expanding
our  product  lines and the  number of  markets  served.  Achieving  our  growth
strategy is critical in order for our business to achieve economies of scale and
to achieve  profitability.  Increasing  the number of  products we offer and the
number of markets  we serve  depends  on a number of  factors  including  market



                                       28
<PAGE>



acceptance  of our  products,  our ability to raise  necessary  capital,  hiring
necessary management and operations  personnel,  successful  construction of our
small-scale  production plant and full-scale  production plant, our obtaining of
distribution  agreements  in our desired  markets on terms  favorable to us, and
other  ramp-up  milestones.  Any condition  that would deny,  limit or delay our
ability to achieve these and other  milestones in the future will  constrain our
ability to grow.  There can be no assurance that we will be able to successfully
implement our growth strategy.

     An inability to obtain  financing,  hire and retain  personnel,  secure the
required  equipment  and  facilities  in a  timely  and  cost-effective  manner,
efficiently operate our facilities, or obtain the necessary regulatory approvals
may  adversely  affect our  ability to achieve  our growth  strategy.  We cannot
assure you that we will be able to  successfully  establish  new markets and our
failure to do so could harm our business

     Expansion  of our product  lines and  markets may also strain our  existing
management  resources  and  operational,  financial and  management  information
systems to the point that they may be  inadequate  to  support  our  operations,
requiring us to make significant  expenditures in these areas. We expect that we
will need to develop further  financial,  operational  and management  controls,
reporting systems and procedures to accommodate  future growth. We cannot assure
you that we will be able to develop these  controls,  systems or procedures on a
timely basis, and the failure to do so could harm our business.

WE HAVE AN ABSENCE OF OPERATING HISTORY.

     Poseidis and Montespan do not have an operating history.  Our business plan
is focused on entry into the  sparkling  natural  mineral water  industry.  This
industry  is highly  competitive.  Our  efforts in this regard are recent and in
varying stages of development.  There can be no assurance that successful  entry
into this  industry  will occur or that we will be able to develop our  business
plan as a new line of business.  Moreover,  our lack of an operating  history in
our  industry  makes it  impossible  to predict  whether or not we will  operate
profitably  if we  are  able  to  enter  such  industry.  While  our  management
collectively  possesses  substantial  experience  in our  industry,  and certain
experience in taking start-up companies from early stage to an operational stage
as  described  in the  "Management"  section  of this  report,  there  can be no
assurances  that we  will be able to  locate,  hire  and  retain  the  necessary
personnel to initiate,  manage and operate the  business,  develop and implement
necessary systems, obtain contracts and obtain financing,  and achieve the other
key components as contemplated in our business plan.

FOREIGN CURRENCY RISKS.

     Poseidis will have  operations  throughout the world  including  production
facilities in France and offices in France and the U.S. We will export  products
to various  countries.  Poseidis  purchases services and materials and will sell
its products in foreign currencies,  therefore currency fluctuations may have an
effect on Poseidis'  results of operations,  balance sheet and cash flow,  which
could over time impact its results.  Since  Poseidis  will export many  products
from France and may generate a substantial portion of its revenues in currencies
other than euros, Poseidis' results of operations would be adversely affected by
an  appreciation of the euros against other  currencies,  in particular the U.S.
dollar. Further, the majority of the Company's financing to date has been raised
in U.S.  dollars while its major  expenditures and asset purchases are in euros,
leaving it exposed to significant changes in currency conversion rates.




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<PAGE>



CHANGES  IN OUR  GOVERNMENTAL  AUTHORIZATIONS,  PERMITS  OR  CERTIFICATES  COULD
ADVERSELY IMPACT OUR BUSINESS.

     A  modification,  suspension,  non-renewal,  or  revocation  of  any of our
authorizations,   permits  or  certificates  to  be  issued  by  the  regulatory
authorities  having  jurisdiction  over us or  institution  of  proceedings  for
non-compliance  with the regulations of such authorities  could adversely impact
our business,  once we have obtained the necessary approvals for our operations.
Several aspects of our operations are subject to regulation by authorities  that
may require changes to operating procedures that could impact our future ongoing
economic performance or operating performance.

THE BOTTLED WATER INDUSTRY IS SUBJECT TO EXTENSIVE  GOVERNMENT  REGULATION,  AND
CHANGES  IN  EXISTING  REGULATIONS  AND/OR  NEW  REGULATIONS  MAY  INCREASE  OUR
OPERATING COSTS.

     Bottled  water  producers  are subject to  extensive  regulatory  and legal
compliance  requirements  that result in significant  costs. The maintenance and
operation of our water  purification  system and bottling plant will necessitate
significant  expenditures.  We expect to continue  incurring  expenses to comply
with all applicable  regulations.  In addition,  in the geographical markets and
jurisdictions  that we intend to enter  after  introduction  of our  products in
France,  we will also need to comply with the applicable laws and regulations of
the governmental agencies in those markets and jurisdictions which could require
significant  expenditures.  We  have  not  yet  received  approvals  from  these
governmental  agencies;  however,  we will  be  obligated  to  comply  with  the
regulations  established  by  these  agencies  if and  when we do  receive  such
authorizations.

     New or additional laws, regulations, taxes and the like could significantly
increase the cost of, or reduce the demand for, our  products.  If adopted these
measures  could  have the  effect of raising  prices  charged to our  customers,
reducing revenue and increasing costs. We may not be able to increase our prices
to pass these  costs on to our  customers.  We cannot  assure you that these and
other laws or regulations enacted in the future will not harm our business.

RISK OF  COMPETITION  COULD  IMPACT OUR GROWTH  POTENTIAL  WITHIN A MARKET OR IN
EXPANSION MARKETS.

     If our  products  are  successful  in our initial  market,  our success may
prompt  others to imitate  our  products  and compete in our markets or in other
markets. Such a development could impact our operations or expansion timetable.

THE MARKET WE  ANTICIPATE  FOR OUR  SPARKLING  NATURAL  MINERAL  WATER AND OTHER
PRODUCTS  MIGHT NOT  DEVELOP  OR TAKE  LONGER TO  DEVELOP  OR BE MORE  COSTLY TO
DEVELOP THAN WE ANTICIPATE OR THE MARKET MAY BE UNRECEPTIVE TO OUR PRODUCTS.

     The French  market  that we have  targeted  for the  initial  launch of our
products  is very  competitive  with a very large  number of  sparkling  natural
mineral water products. The success of our new products in this market cannot be
guaranteed or accurately predicted.  The number of potential customers cannot be
predicted  with any degree of certainty  and there can be no  assurance  that we
will operate in a profitable manner.

INTERRUPTIONS  OR DISRUPTIONS IN OUR ABILITY TO PRODUCE AND DELIVER OUR PRODUCTS
COULD HAVE A MATERIAL ADVERSE IMPACT ON OUR OPERATIONS.

     Our business will be dependent on our operations at our planned  production
facility in  Theneuille,  France.  This  facility  at the Source  will  produce,
bottle,  and distribute 100% of our natural mineral water product. A significant
interruption  or disruption at this facility  could have a serious impact on our
business, financial condition and operating results.



                                       30
<PAGE>



WE ARE AT RISK OF  LOSSES  AND  ADVERSE  PUBLICITY  STEMMING  FROM  ANY  PRODUCT
LIABILITY CLAIMS INVOLVING OUR PRODUCTS.

     If our products were to cause health-related claims among our customers, we
could be exposed to significant  tort liability.  The insurance we plan to carry
to cover damages arising from any products  liability  claims may be inadequate.
In the  event  that our  insurance  is not  adequate,  we may be  forced to bear
substantial  losses from a claim or claims.  In addition,  any product liability
claims  involving our products or involving our industry in general could create
a public perception that our products are not safe or reliable, which could harm
our  reputation,  result in  customers  being  reluctant to purchase and use our
product, and harm our business.

     Customers  consider safety and reliability as primary concerns in selecting
consumer  products  and  especially  beverage and food  products.  If we fail to
maintain  a  record  of  safety  and  reliability  that is  satisfactory  to our
customers,  our ability to retain  customers  and attract new  customers  may be
adversely affected.

SEASONALITY AND OTHER FACTORS IMPACT DEMAND FOR OUR PRODUCTS.

     Demand  for  bottled  water is  affected  by factors  such as  seasonality,
economic  conditions,  pricing levels and other factors.  Due to these and other
factors,  operating results for an interim period are not necessarily indicative
of operating results for an entire year.

WE WILL HAVE A SIGNIFICANT AMOUNT OF DEBT AND FIXED OBLIGATIONS WHICH COULD HARM
OUR  ABILITY TO MEET OUR GROWTH  STRATEGY  AND IMPAIR OUR ABILITY TO SERVICE OUR
FIXED OBLIGATIONS.

     We will have a significant  amount of fixed obligations under our financing
arrangements. Our debt and fixed obligations could:

o    impact our  ability to obtain  additional  financing  to support  expansion
     plans and for working capital and other purposes on acceptable  terms or at
     all;

o    divert  substantial  cash flow from our operations  and expansion  plans in
     order to service our fixed obligations;

o    require us to incur  significantly  more interest expense than we currently
     do; and

o    place us at a possible competitive  disadvantage compared to less leveraged
     competitors and competitors that have better access to capital resources.

     Our ability to make  scheduled  payments on our debt and fixed  obligations
will depend on our future  operating  performance  and cash flow,  which in turn
will  depend on  prevailing  economic  conditions  and  financial,  competitive,
regulatory, business and other factors, many of which are beyond our control. We
cannot assure you that we will be able to generate sufficient cash flow from our
operations  to pay our debt and fixed  obligations  as they become due,  and our
failure to do so could harm our  business.  If we are unable to make payments on
our debt and fixed obligations,  we could be forced to seek to renegotiate those
obligations  or obtain  additional  equity or debt  financing.  To the extent we
finance our activities with additional  debt, we may become subject to financial
and other covenants that may restrict our ability to pursue our growth strategy.
We cannot  assure you that our efforts  would be successful or timely or that we
could refinance our obligations on acceptable terms, if at all.



                                       31
<PAGE>



OUR MAINTENANCE COSTS WILL INCREASE AT OUR PRODUCTION FACILITY.

     While our small-scale  production plant and full-scale production plant are
scheduled for construction in 2006 and 2007,  history has shown that maintenance
costs will increase over time. We will incur lower  maintenance  expenses during
the first few years of  operations.  As equipment  ages, the cost to maintain it
naturally  increases.  In addition,  the costs of maintenance increase each year
due to  increases  in parts  prices from  manufacturers  and  increases in labor
rates. Ongoing manufacturer and regulatory  directives also increase maintenance
costs.  Our  maintenance  costs will increase both on an absolute basis and as a
percentage of our operating expenses, as our production facility ages.

IF WE ARE UNABLE TO ATTRACT AND RETAIN  QUALIFIED  PERSONNEL AT REASONABLE COSTS
OR FAIL TO MAINTAIN OUR COMPANY CULTURE, OUR BUSINESS COULD BE HARMED.

     Our business plan requires  specialized  expertise in several fields and is
labor intensive,  with personnel costs representing a significant  percentage of
our anticipated  operating expenses.  We expect salaries,  wages and benefits to
increase on a gross basis and these costs could  increase as a percentage of our
overall costs.  Since we will compete  against the major bottled water suppliers
for management-level personnel and others and many of our competitors offer wage
and benefit packages that will exceed ours, we may be required to increase wages
and/or  benefits  in order to attract  and retain  qualified  personnel  or risk
considerable  employee  turnover.  If we are  unable to hire,  train and  retain
qualified  employees at a reasonable  cost,  our business could be harmed and we
may be unable to complete our expansion plans.

OUR  FAILURE  TO  SUCCESSFULLY  CONSTRUCT,   AND  COMMENCE  OPERATIONS  AT,  OUR
FULL-SCALE PRODUCTION FACILITY COULD HARM OUR BUSINESS.

     We intend to  construct  a  full-scale  commercial  production  facility of
approximately  17,000 square feet for the sourcing,  processing,  bottling,  and
shipping of our products. This facility is currently scheduled for completion in
March,  2008.  This  date  represents  the  anticipated  completion  date.  This
construction will require financing in the amount of approximately  $6.5 million
(excluding the other development  costs discussed in this report).  Construction
of this type of facility  involves a variety of risks relating to its ability to
be successfully placed into service, including:

o    difficulties or delays in obtaining the necessary approvals from regulatory
     authorities;

o    delays in meeting equipment delivery schedules; o difficulties in obtaining
     financing on acceptable terms; and

o    inability of the equipment and all of its  components to comply with agreed
     upon specifications and performance standards.

     In  addition,  we also face risks in  integrating  this  facility  into our
infrastructure  and  operations,   including  among  other  things,  the  costs,
resources  and time  needed  to hire and  train  management,  production  staff,
technicians and other personnel. Our failure to successfully construct and place
into service and integrate  into our  operations our new facility could harm our
business.




                                       32
<PAGE>



OUR  BUSINESS  IS  HIGHLY  DEPENDENT  ON THE  FRENCH  MARKET  AND  INCREASES  IN
COMPETITOIN  OR A REDUCTION  IN DEMAND FOR OUR PRODUCT IN THIS MARKET WOULD HARM
OUR BUSINESS.

     Our plan for market entry  contemplates  phased-in growth focused on France
followed by expansion of our territories and expansion of our product lines. Our
business would be harmed by any circumstances  causing a reduction in demand for
our  products  in the French  market such as adverse  changes in local  economic
conditions,  negative public perception of our product or our industry,  and the
like.

WE MAY BE SUBJECT TO UNIONIZATION,  WORK STOPPAGES, SLOWDOWNS OR INCREASED LABOR
COSTS.

     We have a non-union workforce.  If our employees unionize,  it could result
in demands that may increase our  operating  expenses and  adversely  affect our
profitability.  Each of our different employee groups could unionize at any time
and  require  separate  collective  bargaining  agreements.  If any group of our
employees were to unionize and we were unable to reach agreement on the terms of
their  collective  bargaining  agreement  or we were to  experience  wide spread
employee dissatisfaction, we could be subject to work slowdowns or stoppages. In
addition,  we may be subject to disruptions by organized labor groups protesting
our non-union status.  Any of these events would be disruptive to our operations
and could harm our business.

OUR RESULTS OF OPERATIONS WILL FLUCTUATE.

     We expect our  quarterly  operating  results to fluctuate due to additional
costs  associated  with new  market  entries  and new  product  development  and
introductions.  As we enter new markets,  we could also be subject to additional
seasonal variations along with any potential competitive responses to our entry.
As a result of these  factors,  quarter-to-quarter  comparisons of our operating
results may not be a good indicator of our future performance.  In addition,  it
is possible that in any future quarter our operating  results could be below the
expectations of investors and any published reports or analyses regarding us. In
that event, the price of our common stock could decline, perhaps substantially.

OUR BUSINESS COULD BE HARMED IF WE LOSE THE SERVICE OF OUR KEY PERSONNEL;  WE DO
NOT HAVE EMPLOYMENT AGREEMENTS WITH CERTAIN SENIOR EXECUTIVES; WE HAVE NOT HIRED
EMPLOYEES FOR CERTAIN KEY POSITIONS.

     Our business will depend upon the efforts of Louis Pardo (President and CEO
of  Poseidis),  Bernard  Bouverot  (Directeur  General  of  Montespan),  John J.
McGovern (Executive Vice President and Chief Financial Officer of Poseidis), and
a number of management and operating personnel. The Company has not entered into
employment agreements with its executive officers and key personnel except for a
consulting agreement between the Company and Bridgehead  Partners,  LLC (John J.
McGovern,  the Company's Chief Financial  Officer,  is the Chairman and Managing
Director of Bridgehead Partners, LLC). We do not maintain key-man life insurance
on Messrs.  Pardo,  Bouverot,  and McGovern.  The loss of the services of any of
these executives could materially harm our business because of the cost and time
necessary  to replace  and train a  replacement.  Such a loss would also  divert
management  attention  away  from  operational  issues.  We may have  difficulty
replacing  management  or other key  personnel  who are lost or who  leave  and,
therefore, the loss of the services of any of these individuals could materially
harm our business.




                                       33
<PAGE>



     In addition,  we have not hired personnel as of the date of this report who
will fill significant  operations  positions such as production facility manager
and sales  managers.  We may have to pay a higher  salary than we  anticipate to
retain the services of qualified  individuals for these positions.  There can be
no assurances  that we will be able to hire such persons on terms  acceptable to
us. In addition,  the failure to fill such  positions  may affect our ability to
implement our business plan.

OTHER COMPANIES MAY HAVE DIFFICULTY ACQUIRING US, EVEN IF DOING SO WOULD BENEFIT
OUR  STOCKHOLDERS,  DUE TO PROVISIONS UNDER OUR CORPORATE CHARTER AND BYLAWS, AS
WELL AS FLORIDA LAW.

     Provisions in our amended  certificate of  incorporation,  our bylaws,  and
under Florida law could make it more  difficult  for other  companies to acquire
us,  even if  doing  so would  benefit  our  stockholders.  Our  certificate  of
incorporation and bylaws contain the following  provisions,  among others, which
may inhibit an acquisition of our company by a third party:

o    advance   notification   procedures   for  matters  to  be  brought  before
     stockholder  meetings;
o    a limitation on who may call stockholder meetings; and
o    the ability of our board of directors to issue u p to 10,000,000  shares of
     preferred stock without a stockholder vote.

     We are also  subject to  provisions  of Florida  law that  prohibit us from
engaging in any business combination with any "interested shareholder",  meaning
generally that a shareholder  who  beneficially  owns more than 10% of our stock
cannot  acquire us unless  various  conditions  are met, such as approval of the
transaction   by   two-thirds  of  the  voting  shares  other  than  the  shares
beneficially  owned by the  interested  shareholder.  Any of these  restrictions
could have the effect of delaying or preventing a change in control.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY.

     Our  success and  ability to compete  depends in part upon our  proprietary
rights and intellectual property. We have no registered trademarks in the United
States,  but have two registered  trademarks in France.  They are "St. Troliere"
(stylized  letters) and "Montespan"  (stylized letters and fleur de lis design).
Both are registered in appropriate  International  Classes  consistent  with our
business development strategies. We do have the opportunity to seek registration
of these marks and others in the United States and in other  jurisdictions,  but
can give no assurance  whether  registration  will be granted.  In the meantime,
existing laws afford only limited  protection  for  intellectual  property based
upon use of the trademarks without registration.  If we are unable to adequately
protect our  intellectual  property or become subject to  intellectual  property
infringement claims, we could incur costly and time-consuming litigation.

IF WE WERE TO DETERMINE THAT OUR EQUIPMENT, PARTS OR INVENTORY WERE IMPAIRED, IT
WOULD HAVE A SIGNIFICANT ADVERSE EFFECT ON OUR OPERATING RESULTS.

     In accordance with GAAP, we plan to periodically perform impairment reviews
in order to  determine  whether  we need to  reduce  the  carrying  value of our
equipment and related assets with a related  charge to earnings.  In addition to
the fact that the value of our equipment will decline as it ages,  other factors
beyond our  control  may  further  contribute  to the decline of the fair market
value of our equipment and related assets and  inventory.  If such an impairment
does occur, Statement of Financial Accounting Standards No. 144, "Accounting for



                                       34
<PAGE>



the Impairment or Disposal of Long-Lived Assets", would require us to write down
these assets to their  estimated fair market value through a charge to earnings.
A significant charge to earnings would adversely affect our financial  condition
and operating results.

WE WILL BE DEPENDENT ON THIRD PARTY SUPPLIERS FOR PARTS AND COMPONENTS.

     Frequent  maintenance will be required for our plant, and maintenance costs
will likely comprise a significant  portion of our operating  costs.  Failure or
significant  delay by potential  vendors in providing  necessary parts could, in
the absence of alternative  sources of supply, have a material adverse effect on
our operations. If we are dependent on a small number of suppliers for parts and
other materials for our business, we may also be subject to adverse impacts from
unusually  high price  increases  which are greater  than  overall  inflationary
trends.

OUR FINANCIAL  STATEMENTS FOR THE YEAR ENDED FEBRUARY 28, 2006 WERE SUBJECT TO A
GOING CONCERN OPINION FROM OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. WE
MAY NOT BE ABE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING.

     Our independent  registered  public accounting firm included an explanatory
paragraph  to their  audit  opinion  issued in  connection  with the year  ended
February 28, 2006 financial  statements,  which states that Poseidis' ability to
continue as a going  concern  depends upon its ability to secure  financing  and
attain  profitable  operations.  Our ability to obtain  additional  funding will
determine  our  ability  to  continue  as a  going  concern.  Additionally,  our
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

WE FACE RISKS RELATED TO OUR ACCOUNTING RESTATEMENTS.

     On July 25, 2005 we publicly  announced that we had  discovered  accounting
errors in previously reported financial statements.  Following consultation with
our independent accountants, we have decided to restate our financial statements
for the quarters ended August 31, 2005 and November 30, 2005.  The  restatements
relate to (1) the  accounting  for  certain  debt  financings  conducted  by the
Company in August and  October  2005 as well as  certain  compensatory  warrants
issued by the Company and (2) the  accounting  for the issuance of the Company's
common stock in payment of certain accrued expenses.  Further  information about
these restatements is contained in our Current Report on Form 8-K filed July 25,
2006,  as amended  September  12,  2006,  our Amended  Quarterly  Report on Form
10-QSB/A for the three months ended August 31, 2005,  and our Amended  Quarterly
Report on Form 10-QSB/A for the three months ended November 30, 2005.

     The restatement of these financial statements may lead to litigation claims
and/or  regulatory  proceedings  against  us. The  defense of any such claims or
proceedings may cause the diversion of management's attention and resources, and
we may be  required to pay  damages if any such  claims or  proceedings  are not
resolved in our favor. Any litigation or regulatory proceeding, even if resolved
in our favor,  could cause us to incur significant legal and other expenses.  We
also may have difficulty raising equity capital or obtaining other financing. We
may not be able to effectuate our current business strategy. Moreover, we may be
the subject of negative publicity focusing on the financial statement errors and
resulting restatement and negative reactions from our stockholders, creditors or
others with whom we do business.  The  occurrence of any of the foregoing  could
harm our  business  and  reputation  and cause the  price of our  securities  to
decline.




                                       35
<PAGE>



IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL AND DISCLOSURE  CONTROLS,
WE MAY NOT BE ABLE TO ACCURATELY  REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD.
AS A RESULT,  CURRENT AND POTENTIAL  STOCKHOLDERS  COULD LOSE  CONFIDENCE IN OUR
FINANCIAL  REPORTING  WHICH WOULD HARM OUR BUSINESS AND THE TRADING PRICE OF OUR
SECURITIES.

     Effective internal and disclosure  controls are necessary for us to provide
reliable  financial  reports  and  effectively  prevent  fraud  and  to  operate
successfully  as a public  company.  If we  cannot  provide  reliable  financial
reports or prevent fraud, our reputation and operating  results would be harmed.
We have in the past  discovered,  and may in the future  discover,  areas of our
disclosure  and internal  controls  that need  improvement.  As a result after a
review of our August 31,  2005 and  November  30,  2005  operating  results,  we
identified  certain   deficiencies  in  some  of  our  disclosure  controls  and
procedures which we have addressed as stated above.

     We have undertaken  improvements  to our internal  controls in an effort to
remediate  these  deficiencies  through  the  following  efforts:  1) engaging a
qualified,  experienced  Chief  Financial  Officer as of January  12,  2006;  2)
implementing a review of all  convertible  securities to identify any securities
that   are   not   conventional   convertible   securities;   and  3)   periodic
reconciliations  of our common stock  transactions with our stock transfer agent
to assure accurate and timely recording of common stock issuances.  We cannot be
certain that our efforts to improve our internal and disclosure controls will be
successful  or that we will be able  to  maintain  adequate  controls  over  our
financial  processes  and  reporting  in the  future.  Any failure to develop or
maintain effective controls or difficulties  encountered in their implementation
or other  effective  improvement of our internal and  disclosure  controls could
harm  our  operating  results  or  cause  us  to  fail  to  meet  our  reporting
obligations.  If we are unable to  adequately  establish or improve our internal
controls  over  financial  reporting,  our external  auditors may not be able to
issue an unqualified  opinion on the effectiveness or our controls.  Ineffective
internal and disclosure  controls could also cause  investors to lose confidence
in our reported financial information, which would likely have a negative effect
on the trading price of our securities.

THERE  MAY  BE NO  REMAINING  PROCEEDS  FOR  STOCKHOLDERS  IN THE  EVENT  OF OUR
DISSOLUTION.

     In the event of our  dissolution,  the proceeds from the liquidation of our
assets,  if any,  will be first used to satisfy  the claims of  creditors.  Only
after all outstanding debts are satisfied will the remaining  proceeds,  if any,
be distributed to our stockholders.  Accordingly, the ability of any investor to
recover  all or any  portion  of an  investment  in our  securities  under  such
circumstances  will depend on the amount of funds so  realized  and claims to be
satisfied therefrom.

OUR COMMON  STOCK MAY BE AFFECTED BY LIMITED  TRADING  VOLUME AND MAY  FLUCTUATE
SIGNIFICANTLY.

     Our common stock may experience in the future  significant price and volume
fluctuations  that could  adversely  affect the market price of our common stock
and/or our stockholders'  ability to sell our common stock without regard to our
operating  performance.  In addition,  we believe that factors such as quarterly
fluctuations in our financial  results and changes in the overall economy or the
condition of the financial  markets could cause the price of our common stock to
fluctuate substantially.



                                       36
<PAGE>



THE OTC BULLETIN BOARD HAS TEMPORARILY CEASED QUOTING OUR COMMON STOCK. AFTER WE
COMPLETE AND FILE  CERTAIN  REPORTS WITH THE SEC SO THAT OUR STOCK WILL AGAIN BE
ELIGIBLE FOR QUOTATION ON THE OTC-BB, IT IS UNCERTAIN AS TO WHEN THE REINCLUSION
OF OUR SHARE QUOTATION ON THE OTC-BB WILL BE ACHIEVED.

     On July 19, 2006, the OTC-BB  temporarily ceased quoting our shares because
our annual  report on Form 10-KSB for the year ended  February  28, 2006 had not
been filed with the SEC. The filing of this report  eliminates that  eligibility
deficiency.  In  addition,  our  quarterly  report on Form  10-QSB for the three
months ended May 31, 2006, has not been filed with the SEC but we expect it will
be filed on or about  September 28, 2006. Upon filing of our 10-KSB for the year
ended  February 28, 2006 and our 10-QSB for the quarter ended May 31, 2006,  the
Company's stock will again be eligible for quotation on the OTC-BB,  and we will
pursue  reinclusion of our share quotation on the OTC-BB.  It is uncertain as to
when the reinclusion of our share quotation on the OTC-BB will be achieved.

OUR  COMMON  STOCK MAY BE DEEMED  TO BE  "PENNY  STOCK,"  WHICH MAY MAKE IT MORE
DIFFICULT FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS.

     Our common  stock is deemed to be "penny  stock" as that term is defined in
Rule  3a51-1  promulgated  under  the  Securities  Exchange  Act of 1934.  These
requirements  may reduce the  potential  market for our common stock by reducing
the number of potential investors. This may make it more difficult for investors
in our common stock to sell shares to third  parties or to otherwise  dispose of
them. This could cause our stock price to decline. Penny stocks are stock:

o    With a price of less  than  $5.00  per  share;  o That are not  traded on a
     "recognized" national exchange;

o    Whose  prices  are not  quoted on the  NASDAQ  automated  quotation  system
     (NASDAQ  listed  stock  must  still have a price of not less than $5.00 per
     share); or

o    In issuers with net  tangible  assets less than $2.0 million (if the issuer
     has been in continuous  operation for at least three years) or $5.0 million
     (if in continuous  operation  for less than three  years),  or with average
     revenues of less than $6.0 million for the last three years.

     Broker/dealers  dealing in penny stocks are  required to provide  potential
investors  with a  document  disclosing  the  risks of penny  stocks.  Moreover,
broker/dealers  are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.

                   RISKS RELATED TO CORNELL CAPITAL FINANCING

THE SEDA AND CONVERTIBLE  DEBENTURES  CONTAIN CERTAIN COVENANTS  PROHIBITING US,
AMONG OTHER THINGS,  FROM RAISING  CAPITAL AT LESS THAN THE MARKET PRICE OR LESS
THAN CORNELL CAPITAL'S PURCHASE PRICE OR PLEDGING ASSETS TO OTHER LENDERS.

     The SEDA and  Convertible  Debentures  contain  covenants that restrict the
following activities:

o    Raising capital from the sale of stock or other securities convertible into
     stock at a price less than the market  price of  Poseidis'  common stock on
     the date of issuance or less than Cornell Capital's purchase price; or

o    Granting a security interest in Poseidis'  assets,  which security interest
     may be needed  in order to  obtain  borrowings  or  capital  from a lender,
     except that the secured party is obligated to  subordinate  the priority of
     its security interest under certain circumstances.



                                       37
<PAGE>



o    Other  matters as stated in our  agreements  with Cornell as filed with our
     SEC reports which are available at the SEC website.

     The existence of these  covenants may severely limit  Poseidis'  ability to
borrow money or raise capital from the sale of stock or  convertible  securities
because any  potential  lender will likely  require  collateral in the form of a
security  interest on Poseidis'  assets to secure a loan and  purchasers  of our
stock or  convertible  securities may want to pay a discount to the market price
of our stock.

CORNELL  CAPITAL COULD ACQUIRE A SIGNIFICANT  AMOUNT OF OUR COMMON STOCK AND, IF
IT DOES SO, COULD EXERCISE SIGNIFICANT INFLUENCE OVER US.

     Cornell Capital  currently owns 3,000,000 shares of common stock and, based
upon the conversion rights under the Convertible Debentures as described in this
report, could acquire up to 29.48% of our common stock, subject to the terms and
conditions of the applicable agreements. If Cornell Capital acquired such 29.48%
of our common stock, it could exercise  significant  influence over the election
of directors,  determination  of policies,  appointing the persons  constituting
management,   and  determining  the  outcome  of  corporate   actions  requiring
stockholder approval, including mergers, consolidations,  and the sale of all or
substantially  all or our assets.  The  interests of Cornell  Capital may differ
from the interest of other stockholders.

POSSIBLE AMENDMENT OF STANDBY EQUITY DISTRIBUTION AGREEMENT (SEDA)

     As a result of the  number of shares  that  could be  acquired  by  Cornell
Capital  upon full  utilization  of the SEDA,  Cornell  Capital  could become an
affiliate of the Company and own a majority of the Company's  outstanding common
shares.  Accordingly,  in  light  of  recent  informal  positions  taken  by the
Securities  and  Exchange  Commission,  the Company may be required to amend the
SEDA to substantially  reduce the dollar amount available under the SEDA. To the
extent  that the  Company  must  substantially  reduce the  amount of  financing
available  under the  SEDA,  the  Company's  financing  plans may be  materially
adversely affected. Additionally, further delays could occur with respect to the
review and approval of the registration statement covering the SEDA shares.

OUR ABILITY TO IMPLEMENT OUR BUSINESS PLAN IS DEPENDENT UPON CORNELL CAPITAL.

     Cornell  Capital  has  provided   $644,000  in  funding   pursuant  to  the
Convertible  Debentures.  However,  in the future,  we will be reliant  upon the
ability of Cornell Capital to provide a significant  amount of funding  pursuant
to the SEDA, which it has agreed to do in accordance with the terms of the SEDA.
In the event that Cornell Capital is unable to fulfill its commitment  under the
SEDA for  whatever  reason,  our ability to  implement  our  business  plan will
suffer.

OUR  ABILITY TO  GENERATE  THE CASH  NEEDED TO MAKE  PAYMENT ON THE  CONVERTIBLE
DEBENTURES AND OUR OTHER OBLIGATIONS AND TO OPERATE OUR BUSINESS DEPENDS ON MANY
FACTORS BEYOND OUR CONTROL.

     Our ability to make payments on the  Convertible  Debentures  and our other
obligations  and to fund  working  capital  needs will  depend on our ability to
generate cash and secure financing in the future. This ability, to an extent, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors beyond our control.  If our business does not generate  sufficient
cash flow from operations,  and sufficient  future funds are not available to us
from other  sources of  financing,  we may not be able to repay the  Convertible
Debentures,  operate our business or fund our other  liquidity  needs. We cannot



                                       38
<PAGE>



assure  you that we will be able to obtain  additional  financing.  If we cannot
meet or finance our  obligations  when they are due, we may have to sell assets,
reduce  capital  expenditures  or take other actions which could have a material
adverse effect on us.

OUR INDEBTEDNESS  COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL  HEALTH,
OUR  ABILITY  TO OBTAIN  FINANCING  IN THE FUTURE AND TO REACT TO CHANGES IN OUR
BUSINESS.

     We have a significant  amount of debt. Our significant amount of debt could
have important consequences to stockholders. For example, it could:

o    Make it more  difficult  for us to satisfy our  creditors;  o Increase  our
     vulnerability to adverse economic and general industry conditions;

o    Require  us to  dedicate  a  substantial  portion  of our  cash  flow  from
     operations to payments on our debt,  which would reduce the availability of
     our cash flow from operations to fund working capital, capital expenditures
     or other general corporate purposes;

o    Limit our  flexibility  in planning  for, or  reacting  to,  changes in our
     business and industry;  and o Limit our ability to borrow  additional funds
     in the future.

IF WE DEFAULT UNDER THE CONVERTIBLE  DEBENTURES,  ALL OF OUR ASSETS ARE AT RISK,
AND WE MAY BE FORCED TO CURTAIL OR CEASE OUR OPERATIONS.  WE HAVE PLEDGED SHARES
OF OUR  COMMON  STOCK  WHICH MAY BE SOLD IF WE  DEFAULT  UNDER  THE  CONVERTIBLE
DEBENTURES.

     We have pledged all of our assets as a security interest to Cornell Capital
in  connection  with the  Convertible  Debentures.  In the event of a default to
Cornell Capital, we could lose some or all of our assets which would force us to
curtail or cease operations.  If we default on any of these agreements,  Cornell
Capital would be entitled to, among other things,  accelerate our obligations to
repay outstanding amounts under the Convertible  Debenture,  or to seize control
of our  assets and sell them to third  parties  or to sell  shares of our common
stock that we have pledged to Cornell Capital.

RESTRICTIONS UNDER THE CONVERTIBLE  DEBENTURES AND THE SEDA COULD  SIGNIFICANTLY
LIMIT OUR ABILITY TO ACCESS FUNDS UNDER THE SEDA.

     We are prohibited from issuing shares to Cornell Capital upon conversion of
the Convertible Debentures or pursuant to the SEDA which would result in Cornell
Capital  holding  in excess of 4.9% and 9.9%,  respectively,  of our  issued and
outstanding common stock.  Pursuant to the terms of the Convertible  Debentures,
this  restriction  may only be  waived  by  Cornell  Capital  either in its sole
discretion with 65 days' notice or without notice upon an event of default. This
restriction may significantly  limit and delay our ability to access funds under
the SEDA and,  accordingly,  may affect our ability to  implement  our  business
plan.

CONVERSION OF THE CONVERTIBLE DEBENTURES BY CORNELL CAPITAL WILL HAVE A DILUTIVE
EFFECT ON OUR SHAREHOLDERS.

     We have sold  $644,000 of our  secured  convertible  debentures  to Cornell
Capital.  In the  event  Cornell  Capital  elects  to  convert  the  Convertible
Debentures, the resulting share issuance to Cornell Capital will have a dilutive
effect upon our shareholders.  The Company's  financing  agreements with Cornell
include  anti-dilution  provisions  which,  if  activated,  could  result in the



                                       39
<PAGE>



issuance of a substantial  number of shares to Cornell and dilute the percentage
ownership  of the  investors  who  acquire  shares of our  common  stock.  These
anti-dilution  provisions are contained in the documents that we have filed with
our  periodic  SEC  reports  and are  available  at the SEC's  website  to which
prospective investors are referred.

EXISTING  SHAREHOLDERS  WILL  EXPERIENCE  SIGNIFICANT  DILUTION FROM OUR SALE OF
SHARES UNDER THE SEDA.

     The sale of shares  pursuant to the SEDA will have a dilutive impact on our
stockholders.  As a result,  our net income per share  could  decrease in future
periods,  and the market price of our common stock could  decline.  In addition,
the lower our stock  price is, the more  shares of common  stock we will have to
issue under the SEDA to draw down the full amount.  If our stock price is lower,
then our existing stockholders would experience greater dilution.

CORNELL  CAPITAL  WILL PAY LESS  THAN THE  THEN-PREVAILING  MARKET  PRICE OF OUR
COMMON STOCK FOR SHARES PURCHASED UNDER THE SEDA.

     The common  stock to be issued  under the SEDA will be issued at 96% of the
lowest volume weighted average price of our common stock as quoted on the OTC-BB
or other principal  market on which our common stock is traded for the five days
immediately  following  the notice date of an advance.  These  discounted  sales
could cause the price of our common stock to decline.

THE SALE OF OUR  STOCK  UNDER  OUR SEDA  COULD  ENCOURAGE  SHORT  SALES BY THIRD
PARTIES, WHICH COULD CONTRIBUTE TO THE FUTURE DECLINE OF OUR STOCK PRICE.

     The significant  downward  pressure on the price of our common stock caused
by the sale of material  amounts of common stock under the SEDA could  encourage
short sales by third  parties.  In a short sale, a  prospective  seller  borrows
stock from a shareholder or broker and sells the borrowed stock. The prospective
seller  hopes that the stock  price will  decline,  at which time the seller can
purchase  shares at a lower price to repay the lender.  The seller  profits when
the stock price declines  because it is purchasing  shares at a price lower than
the sale price of the borrowed  stock.  Such sales could place further  downward
pressure  on the price of our common  stock by  increasing  the number of shares
being sold.

WE MAY NOT BE ABLE TO ACCESS SUFFICIENT FUNDS UNDER THE SEDA WHEN NEEDED.

     We are  dependent  on  external  financing  to  fund  our  operations.  Our
financing  needs are expected to be provided  from the SEDA,  in large part.  No
assurances  can be given that such  financing  will be available  in  sufficient
amounts  or at all when  needed,  in  part,  because  the  amount  of  financing
available will  fluctuate with the price and volume of our common stock.  As the
price and volume decline,  then the amount of financing available under the SEDA
will decline.

     There are additional  restrictions on our ability to request advances under
the SEDA. For example,  our ability to request an advance is conditioned upon us
registering the shares of common stock with the SEC. Further, we may not request
advances  if the  shares to be issued in  connection  with such  advances  would
result in Cornell Capital owning more than 9.9% of our outstanding common stock.
Even if we request  advances  the amount of each advance is limited to a maximum
draw down of $300,000 every five (5) trading days.




                                       40
<PAGE>



Item 3. Controls and Procedures

     (a) Disclosure controls and procedures. Our management, including our Chief
Executive  Officer  and  Chief  Financial  Officer,  have  determined  that  the
disclosure  controls and  procedures  under rule 13a-15(e) and rule 15d-15(e) of
the  Securities  Exchange Act of 1934 are  ineffective  at the end of the fiscal
quarter covered by this report. Specifically,  we identified deficiencies in our
internal  controls and  disclosure  controls  related to the  accounting for (1)
convertible debt with conversion  features  contingent upon future prices of our
stock and convertible debt with detachable  warrants,  primarily with respect to
accounting for derivative liabilities in accordance with EITF 00-19 and SFAS 133
and (2) certain issuances of our common stock.

     (b) Changes in internal  control over  financial  reporting.  There were no
significant  changes in our internal control over financial reporting during the
fiscal  quarter  covered  by  this  report,  that  materially  affected,  or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.  Subsequent  to the fiscal  quarter  covered by this report,  we have
undertaken improvements to our internal controls in an effort to remediate these
deficiencies through the following efforts: 1) engaging a qualified, experienced
Chief Financial  Officer as of January 12, 2006; 2) implementing a review of all
convertible  securities  to identify any  securities  that are not  conventional
convertible  securities;  and 3) periodic  reconciliations  of our common  stock
transactions  with our  stock  transfer  agent to  assure  accurate  and  timely
recording of common stock issuances.  We believe we have remediated the material
weakness in internal control over financial reporting and the ineffectiveness of
our disclosure  controls and procedures by conducting a review of our accounting
treatment of our  financing  transactions  and for issuances of common stock and
correcting our method of accounting for such transactions.



                                     PART II

Item 1. Legal Proceedings

     The Company has no material legal proceedings.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     During the three months ended August 31, 2005 the Company issued a total of
14,079,520 shares of restricted,  unregistered common stock:  188,397 shares for
cash  proceeds in the amount of $16,420,  585,123  shares for services  provided
with a value of $51,594 and  13,306,000  shares in payment for accrued  expenses
with a  value  of  $1,085,770.  The  Company  relied  upon  Section  4(2) of the
Securities  Act of  1933,  as  amended,  and  Rule  506 of  Regulation  D and/or
Regulation S promulgated thereunder. These transactions did not involve a public
offering  and were exempt from  registration.


Item 3. Defaults upon Senior Securities

     None.


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

     None.


Item 5. Other Information

     None.



                                       41
<PAGE>



Item 6. Exhibits and Reports on Form 8-K

     (a) The exhibits  required to be filed  herewith by Item 601 of  Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:

Item No.         Description
---------        -----------------------------------------
2.1        [3] Share Exchange Agreement between the Company,  Billyweb Corp. and
               the shareholders of Billyweb Corp. dated May 15, 2000.

3(i).1     [1] Articles of Incorporation filed June 11, 1998.

3(i).2     [4] Articles of Amendment to the Articles of  Incorporation  changing
               name to Billyweb Corp. filed May 3, 2000.

3.2        [1] Bylaws.

5.1        [2] Opinion of Mintmire & Associates.

10.1       [2] EZ Talk, Inc. Employee/Consultant Stock Compensation Plan.

10.2       [4] Partnership Contract with Alidoo RCS Paris.

10.3       [4] Contract for Trading Content with Eurekan Multimedia, SA.

10.4       [4] Contract for Trading Content with Quelm.

10.5       [5] Lease of real property and exploitation  rights between Christian
               Bertheir and Poseidis SAS dated April 10, 2003.

10.6       [5] Sale of real  property  from  Jacques  Annet Paul to Poseidis SAS
               dated March 26, 2003.

10.7       [6] Standby Equity Distribution Agreement dated as of August 26, 2005
               between the Company and Cornell Capital Partners, LP

10.8       [6] Registration Rights Agreement dated as of August 26, 2005 between
               the Company and Cornell Capital Partners, LP

10.9       [6] Securities Purchase Agreement dated as of August 26, 2005 between
               the Company and Cornell Capital Partners, LP (Exhibits omitted)

10.10      [6] Security  Agreement  dated as of  August  26,  2005  between  the
               Company and Cornell Capital Partners, LP

10.11      [6] Investor  Registration  Rights  Agreement  dated as of August 26,
               2005 between the Company and Cornell Capital Partners, LP

10.12      [6] Insider Pledge  Agreement dated as of August 26, 2005 among Louis
               Pardo dit Pardo,  Cornell Capital Partners,  LP, Poseidis,  Inc.,
               and David Gonzalez (Escrow Agent)

10.13      [6] Insider  Pledge  Agreement  dated as of  August  26,  2005  among
               Christophe  Giovannetti,  Cornell Capital Partners, LP, Poseidis,
               Inc., and David Gonzalez (Escrow Agent)



                                       42
<PAGE>



10.14      [6] Insider  Pledge  Agreement  dated as of August 26, 2005 among DMI
               Joaillerie Paris, Cornell Capital Partners,  LP, Poseidis,  Inc.,
               and David Gonzalez (Escrow Agent)

10.15       *  Amended and  Restated  Consulting  Agreement  dated July 27, 2006
               between Poseidis, Inc. and Louis Pardo

10.16       *  Amended and  Restated  Consulting  Agreement  dated July 27, 2006
               between Poseidis, Inc. and Christophe Giovannetti

31.1        *  Certification by Chief Executive  Officer pursuant to Section 302
               of Sarbanes-Oxley Act of 2002.

31.2        *  Certification of Chief Financial  Officer pursuant to Section 302
               of Sarbanes-Oxley Act of 2002.

32.1        *  Certification  by Chief Executive  Officer  pursuant to 18 U.S.C.
               Section  1350,  as  adopted   pursuant  to  Section  906  of  the
               Sarbanes-Oxley Act of 2002.

32.2        *  Certification  by Chief Financial  Officer  pursuant to 18 U.S.C.
               Section  1350,  as  adopted   pursuant  to  Section  906  of  the
               Sarbanes-Oxley Act of 2002.

99.1       [6] Warrant  dated as of August 26,  2005  issued to Cornell  Capital
               Partners, LP (500,000 shares)

99.2       [6] Secured Convertible Debenture  dated as of August 26, 2005 issued
               to Cornell Capital Partners, LP

99.3       [6] Warrant  dated as of August 26,  2005  issued to Cornell  Capital
               Partners, LP (1,250,000 shares)
----------------

* Filed herewith.

[1]  Originally filed on June 10, 1999 with the Company's Registration Statement
     on Form 10-SB.
[2]  Originally filed on April 28, 2000 with the Company's Registration
     Statement on Form S-8.
[3]  Originally filed on May 16, 2000 with the Company's Current Report on Form
     8-K.
[4]  Originally filed on July 17, 2000 with the Company's Quarterly Report on
     Form 10QSB.
[5]  Originally filed on June 17, 2003 with the Company's Annual Report on Form
     10KSB.
[6]  Originally filed on September 1, 2005 with the Company's Current Report on
     Form 8-K.










                                       43
<PAGE>



                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                 Poseidis, Inc.
                                  (Registrant)



                                 By:/s/Louis Pardo
                                   -------------------------------------------
Dated:  September 13, 2006          Louis Pardo, Chief Executive Officer
                                     and President



                                 By: /s/John J. McGovern
                                   -------------------------------------------
Dated: September 13, 2006           John J. McGovern, Chief Financial Officer
                                     Executive Vice President and Treasurer
                                     (Principal Financial Officer
                                         And Principal Accounting Officer)









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