<SUBMISSION>
<ACCESSION-NUMBER>0000930413-08-001109
<TYPE>424B3
<PUBLIC-DOCUMENT-COUNT>2
<FILING-DATE>20080220
<DATE-OF-FILING-DATE-CHANGE>20080220
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>Assured Pharmacy, Inc.
<CIK>0001100592
<ASSIGNED-SIC>5912
<IRS-NUMBER>980233878
<STATE-OF-INCORPORATION>NV
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>424B3
<ACT>33
<FILE-NUMBER>333-121288
<FILM-NUMBER>08628911
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>17935 SKY PARK CIRCLE
<STREET2>SUITE F
<CITY>IRVINE
<STATE>CA
<ZIP>92614
<PHONE>949-222-9971
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>17935 SKY PARK CIRCLE
<STREET2>SUITE F
<CITY>IRVINE
<STATE>CA
<ZIP>92614
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>ERXSYS INC
<DATE-CHANGED>20030916
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>SURFORAMA COM INC
<DATE-CHANGED>20001128
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>c52427_424b3.htm
<TEXT>
<HTML>
<HEAD>
   <TITLE></TITLE>
</HEAD>

<BODY bgcolor="#ffffff">

<P align="right"><b><font size="2" face="serif">Filed pursuant to Rule 424(b)(3)<br>Reg. No. 333-121288</font></b></P>


<P align="center">
<B><FONT size=2 face="serif">13,599,250 Shares</FONT></B></P>

<P align="left">
<P align="center">
<B><img src="c50495_logo.jpg" width="308" height="133"></B></P>
<P align="left">
<P align="center">
<B><FONT size=2 face="serif">Common Stock</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The selling shareholders
named in this prospectus are offering up to 13,599,250 shares of common stock
offered through this prospectus (the &#147;</FONT><I><FONT size=2 face="serif">Shares</FONT></I><FONT size=2 face="serif">&#148;).
The selling shareholders named in this prospectus are offering all of the shares
of common stock being registered by this prospectus. We will not receive any
proceeds from this  offering and have not made any arrangements for the sale
of these securities. We may, however, receive proceeds upon the exercise of the
warrants registered for sale hereunder in the event that such warrants are exercised. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Of the 13,599,250 shares of common stock registered:</FONT></P>
<UL>
<LI>
<P align="left"><FONT size=2 face="serif">750,000 shares of our common stock and 1,378,750 shares of our common stock are issuable upon the exercise of warrants issued in a private placement of securities exempt
from the registration requirements of the Securities Act, completed on December 23, 2005;</FONT></P></LI>
</UL>
<UL><LI>
<P align="left"><FONT size=2 face="serif">2,458,000 shares of our common stock were issued upon the conversion of indebtedness on or about October 24, 2005;</FONT></P></LI>
</UL>
<UL><LI>
<P align="left"><FONT size=2 face="serif">2,500,000 shares of our common stock and 1,700,000 shares of our common stock are issuable upon the exercise of warrants issued in a private placement of securities exempt
from the registration requirements of the Securities Act, completed during the fiscal year ended December 31, 2006; and</FONT></P></LI>
<LI>
<P align="left"><FONT size=2 face="serif">4,812,500 shares of our common
    stock are issuable upon the exercise of warrants that
    will be issued should the holders of our convertible debentures
issued in a private placement of securities exempt from the
    registration requirements of the Securities Act completed in January 2007
convert the debentures into equity.</FONT></P>
</LI>
</UL>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our common stock is presently quoted on the over-the-counter bulletin board (the &#147;</FONT><I><FONT size=2 face="serif">OTCBB</FONT></I><FONT size=2 face="serif">&#148;) under the trading
symbol &#147;APHY&#148;. As a result, the actual price of the stock will be determined by </FONT></P>

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<P align="left" style="page-break-before:always"></P><PAGE>




<P align="left"><FONT size=2 face="serif">prevailing market prices at the time of sale or by
private transactions negotiated by the selling shareholders. The offering price
will thus be determined by market factors and the independent decisions of the
selling  shareholders. On February 12, 2008 the last sale price of our common
stock as reported by the OTCBB was &#36;0.15 per share.</FONT></P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif">The purchase of the
  securities offered through this prospectus involves a high degree of risk. See
  section entitled &#147;Risk Factors&#148; beginning
  on page 10.</FONT></B> </P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif">Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus.
Any representation to the contrary is a criminal offense.</FONT></B></P>


<P align="center"><FONT size=2 face="serif">The date of this Prospectus is February
14, 2008</FONT></P>

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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center">
<B><FONT size=2 face="serif">Table of Contents</FONT></B><FONT size=2 face="serif"> </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Page</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Prospectus
        Summary</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">3</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Selected
        Historical Financial Data </FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">9</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Risk
        Factors</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">10</FONT> </TD>
  </TR>
  <TR valign="bottom" style="border-bottom:1px solid #000000;">
      <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Use
          of Proceeds</FONT> </TD>
      <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
      <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">16</FONT> </TD>
  </TR>
  <TR valign="bottom" style="border-bottom:1px solid #000000;">
      <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Dividend
          Policy</FONT> </TD>
      <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
      <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">16</FONT> </TD>
  </TR>
  <TR valign="bottom" style="border-bottom:1px solid #000000;">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Capitalization</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">17</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Management
        Discussion &amp; Analysis</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">18</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Business</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">33</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Market
        for Common Equity and Related Stockholder Matters</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">43</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Management</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">46</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Certain
        Relationships and Related Transactions</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">52</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Security
        Ownership of Certain Beneficial Owners and Management</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">55</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Selling
        Security Holders</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">57</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Description
        of Capital Stock</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">64</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Plan
        of Distribution</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">68</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Legal
        Matters</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">69</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Experts</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">69</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Changes
        in and Disagreements with Accountants</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">69</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">Consolidated
        Financial Statements</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center width=7% nowrap style="border-bottom:1px solid #000000;"><FONT  size=2 face="serif">F-1</FONT> </TD>
  </TR>
</TABLE>
<BR>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT  size=2 face="serif">You
    should rely only on the information contained in this prospectus. We have
    not, and the selling stockholders have not, authorized any other person to
    provide you with information that is different from that contained in this
    prospectus. The information contained in this prospectus is accurate only
    as of the date of the prospectus, regardless of the delivery of this prospectus
    or of any sale of common stock. </FONT></P>

<P align="left">&nbsp;
</P>

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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center">
<B><FONT size=2 face="serif">PROSPECTUS SUMMARY</FONT></B></P>
<P align="left">
<B><I><FONT size=2 face="serif"> This Prospectus Summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in our common
stock. You should carefully read the entire prospectus, especially the risks of investing in our common stock discussed under &#147;Risk Factors&#148;. Unless we state otherwise, the terms &#147;we&#148;, &#147;us&#148;, &#147;our&#148;,
&#147;company&#148;, &#147;management&#148;, or similar terms collectively refer to Assured Pharmacy, Inc., a Nevada corporation, and its subsidiaries, as well as their respective predecessors. Some of the statements in this &#147;Prospectus
Summary&#148; are forward-looking statements. </FONT></I></B><I><FONT size=2 face="serif"> </FONT></I></P>
<P align="center">
<B><FONT size=2 face="serif">Our Business</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We were organized as a Nevada corporation on October 22, 1999 under the name Surforama.com, Inc. (&#147;</FONT><I><FONT size=2 face="serif">Surforama</FONT></I><FONT size=2 face="serif">&#148;)
and previously operated under the name eRXSYS, Inc. We changed our name to Assured Pharmacy, Inc. in October 2005. Since May 2003, we have been engaged in the business of establishing and operating pharmacies that specialize in the dispensing of
highly regulated pain medication for acute chronic pain management. We recently expanded the reach of our business beyond pain management to service customers that require prescriptions to treat cancer, psychiatric, and neurological conditions.
Because our focus is on dispensing medication, we typically will not keep in inventory non-prescription drugs, or health and beauty related products, such as walking canes, bandages and shampoo. We primarily derive our revenue from the sale of
prescription drugs. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The majority of our business is derived from physicians&#146; prescriptions, and we have limited &#147;walk-in&#148; prescriptions.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In April 2003, we entered into a joint venture with TPG Partners, L.L.C. (&#147;</FONT><I><FONT size=2 face="serif">TPG</FONT></I><FONT size=2 face="serif">&#148;) to form Safescript Pharmacies
of California, L.L.C. (&#147;</FONT><I><FONT size=2 face="serif">Joint Venture</FONT></I><FONT size=2 face="serif">&#148;). This Joint Venture was formed to establish and operate pharmacies. We had a 51% ownership interest in the Joint Venture with
TPG owning the remaining 49% (minority owner). In June 2003, the Joint Venture formed a wholly owned subsidiary, Safescript of California, Inc. (&#147;</FONT><I><FONT size=2 face="serif">Safescript</FONT></I><FONT size=2 face="serif">&#148;), to own
and operate the pharmacies. Effective September 8, 2004, Safescript filed amended articles of incorporation and changed its name to Assured Pharmacies, Inc. (&#147;</FONT><I><FONT size=2 face="serif">API</FONT></I><FONT size=2 face="serif">&#148;).
The Joint Venture established our first pharmacy in Santa Ana, California and our second pharmacy in Riverside, California. On December 15, 2006, we entered into a Purchase Agreement with TPG and acquired all of its right, title and interest in 49
shares of common stock of API for &#36;460,000 payable in monthly installments through February 15, 2009 and the issuance of 50,000 shares of our common stock. As a result of this acquisition, we increased our ownership interest in API to 100%
making it a wholly-owned subsidiary and consequently resulting in the termination of our joint venture with TPG. </FONT></P>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In February 2004, we entered into an agreement with TAPG, L.L.C. (&#147;<I>TAPG</I>&#148;), a Louisiana limited liability
company, and formed Safescript Northwest, Inc. (&#147;<I>Safescript Northwest</I>&#148;), a Louisiana corporation. Effective August 19, 2004, Safescript Northwest filed amended
articles of incorporation and changed its name to Assured Pharmacies Northwest, Inc. (&#147;<I>APN</I>&#148;). In accordance with our shareholders agreement with TAPG, TAPG will provide start-up costs in the amount of &#36;335,000 per pharmacy location established up to five (5)
pharmacies, and we will contribute technology, consulting services, and marketing expertise. Two pharmacies located in Portland, Oregon and one pharmacy located in Kirkland, Washington were opened pursuant to this joint venture with TAPG. Following the start-up period, we
advanced interest-free loans to sustain operations at the pharmacies operated by APN. On March 6, 2006, these loans were converted into APN capital stock. Following the conversion of this debt into equity, we increased our ownership interest in APN
from 75% to 94.8%. TAPG owns the remaining 5.2% interest. </FONT></P>
<P align="center"><FONT size=2 face="serif">3</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We currently have six operating pharmacies. The opening date and locations of our pharmacies are as follows:</FONT></P>
<TABLE width="90%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
<TD width=50% align=center nowrap>
<U><FONT size=2 face="serif">Location</FONT></U></TD>
<TD width=10%>&nbsp;</TD>
<TD width=40% align=center nowrap>
<U><FONT size=2 face="serif">Opening Date</FONT></U></TD>
</TR>
<TR>
<TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=center nowrap>
<FONT size=2 face="serif">2431 N. Tustin Ave., Unit L, Santa Ana, California, 92705</FONT></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>
<FONT size=2 face="serif">October 13, 2003</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=center nowrap>
<FONT size=2 face="serif">7000 Indiana, Ave., Suite 112, Riverside, California, 92506</FONT></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>
<FONT size=2 face="serif">June 10, 2004</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=center nowrap>
<FONT size=2 face="serif">12071 124th Avenue NE, Kirkland, Washington, 98034</FONT></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>
<FONT size=2 face="serif">August 11, 2004</FONT></TD>
</TR>

<TR valign="bottom">
<TD align=center nowrap><FONT size=2 face="serif">10196 SW Park Way, Portland,
    Oregon</FONT><font size="2" face="serif">, 97225</font></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>
<FONT size=2 face="serif">June 21, 2006</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=center nowrap>
<FONT size=2 face="serif">520 South El Camino Real &#150; Building 4B, Gresham, Oregon, 97030</FONT></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>
<FONT size=2 face="serif">January 26, 2007</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=center nowrap><FONT size=2 face="serif">801 South Rancho Dr., Suite E3A, Las Vegas, Nevada, 89106</FONT></TD>
  <TD>&nbsp;</TD>
  <TD align=center nowrap><FONT size=2 face="serif">December 17, 2007</FONT></TD>
</TR>
</TABLE>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We also previously operated
a pharmacy at 3822 S.E. Powell Blvd., Portland, Oregon. This pharmacy was closed
on February 6, 2008, and its operations were consolidated with those of our other
pharmacy in Portland, Oregon.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As of September 30, 2007,
we had a working capital deficit of &#36;3,094,864. We will be required
to seek additional funds to finance our long-term operations. The successful
outcome of future financing activities cannot be determined at this time and
there is no assurance that if achieved, we will have sufficient funds to execute
our intended business plan or generate positive operating results. Our auditors
have raised substantial doubt about our ability to continue as a going concern. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">History</FONT></B></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> We were organized as a Nevada corporation on October 22, 1999 under the name Surforama.com, Inc. and previously operated under the name eRXSYS, Inc. We changed our name to Assured Pharmacy, Inc. in October 2005. Since May
2003, we have been engaged in the business of establishing and operating pharmacies that specialize in the dispensing of highly regulated pain medication.</FONT></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> In January 2004, we changed our fiscal year end from November 30 to December 31.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Office </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our principal office is located at 17935 Sky Park Circle, Suite F, Irvine, California, 92614 and our phone number is 949-222-9971. </FONT></P>
<P align="center"><FONT size=2 face="serif">4</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center">
<B><FONT size=2 face="serif">Offering Background</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We are filing this registration
statement in order to register the resale by the selling stockholders of an aggregate
of 13,599,250 shares of our common stock. A detailed description of
those shares being registered is set forth below. </FONT></P>

<P align="left">
<B><FONT size=2 face="serif">2005 Unit Offering</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On December 23, 2005, we completed an exempt offering
of units. Each unit was priced at &#36;0.80 and consisted of two (2) shares of common stock and
one (1) warrant to purchase one (1) share of common stock at an exercise price of &#36;0.60 exercisable for thirty-six (36) months after the close of the offering. In connection with this offering, we issued 3,820,000 shares of our common stock and 1,910,000 warrants to
purchase shares of our common stock. During 2006, one purchaser exercised warrants to purchase 250,000 shares of our
common stock.</FONT></P>
<br><br>

<TABLE width="90%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
<TD width=38% align=left nowrap style="border-bottom:1px solid #000000;">
 &nbsp; &nbsp; &nbsp;<B><FONT size=2 face="serif">Number of Shares Being Registered</FONT></B></TD>
<TD width=12% style="border-bottom:1px solid #000000;">&nbsp;</TD>
<TD width=50% align=center nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">Explanation</FONT></B></TD>
</TR>
<TR>
<TD colspan=3>&nbsp;</TD>
</TR>

<TR valign="bottom">
  <TD align=left nowrap><FONT size=2 face="serif">750,000</FONT></TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap><FONT size=2 face="serif">Shares of our common stock issued to</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap><FONT size=2 face="serif">purchasers in this private placement of</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap><FONT size=2 face="serif">securities exempt from the registration</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap><FONT size=2 face="serif">requirements of the Securities Act.</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">1,378,750</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">Shares of our common stock underlying</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">the outstanding warrants issued to</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">investors in this private placement of</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">securities exempt from the registration</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">requirements of the Securities Act.</FONT></TD>
</TR>
</TABLE>

<P align="left">
<B><FONT size=2 face="serif">Debt Conversions</FONT></B></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During 2005, we issued an aggregate of 2,500,000 shares of our common stock in exchange for the conversion of debt and we are registering the resale of these shares in this
registration statement. </FONT></P>

<TABLE width="90%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
<TD width=38% align=left nowrap style="border-bottom:1px solid #000000;">
 &nbsp; &nbsp;<B><FONT size=2 face="serif">Number of Shares Being Registered</FONT></B>
</TD>
<TD width=12% style="border-bottom:1px solid #000000;">&nbsp;
</TD>
<TD width=50% align=left nowrap style="border-bottom:1px solid #000000;">
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<B><FONT size=2 face="serif">Explanation</FONT></B>
</TD>
</TR>
<TR>
<TD colspan=3>&nbsp;

</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">2,458,000</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">Shares of our common stock issued to a</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">creditor upon the conversion of</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">indebtedness outstanding on a line of</FONT>
</TD>
</TR>
</TABLE>

<BR>
<P align="center"><FONT size=2 face="serif">5</FONT></P>
<HR noshade align="center" width="100%" size=4>



<P align="left" style="page-break-before:always"></P><PAGE>


<TABLE width="90%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD colspan="3" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD width=38% align=left nowrap>&nbsp;</TD>
<TD width=12%>&nbsp;</TD>
<TD width=50% align=left nowrap>
<FONT size=2 face="serif">credit on or about October 24, 2005.</FONT></TD>
</TR>
</TABLE>

<P align="left">
<B><FONT size=2 face="serif">2006 Unit Offering</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During 2006, we completed an offering of units in a private placement of securities exempt from the registration requirements of the Securities Act. Each unit was priced at &#36;0.80
and consisted of two (2) shares of common stock and one (1) warrant to purchase
one (1) share of common stock at an exercise price of &#36;0.60 exercisable for thirty-six (36) months after the close of the offering. In connection
with this offering, we issued 4,425,000 shares of our common stock and 2,212,500 warrants to purchase shares of our common stock.</FONT></P>
<TABLE width="90%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
<TD width=38% align=left nowrap style="border-bottom:1px solid #000000;">
 &nbsp; &nbsp; &nbsp;<B><FONT size=2 face="serif">Number of Shares Being Registered</FONT></B></TD>
<TD width=12% style="border-bottom:1px solid #000000;">&nbsp;</TD>
<TD width=50% align=left nowrap style="border-bottom:1px solid #000000;">
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<B><FONT size=2 face="serif">Explanation</FONT></B></TD>
</TR>
<TR>
<TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">2,500,000</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">Shares of our common stock issued to</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">purchasers in this private placement of</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">securities exempt from the registration</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">requirements of the Securities Act.</FONT></TD>
</TR>
<TR>
<TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">1,700,000</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">Shares of our common stock underlying</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">the warrants issued to investors in this</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">private placement of securities exempt</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">from the registration requirements of the</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">Securities Act.</FONT></TD>
</TR>
<TR>
  <TD colspan=3>&nbsp;</TD>
</TR>
<TR>
<TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Convertible Debenture Offering</FONT></B></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
</TR>
</TABLE>
<BR>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In January 2007, we completed
a private offering of unsecured convertible debentures (&#147;</FONT><I><FONT size=2 face="serif">Debentures</FONT></I><FONT size=2 face="serif">&#148;)
 carrying an interest rate of 18% per annum. Each Debenture matures on the first
anniversary of the date of its issuance.  The Debentures provided that all the
interest is payable solely in the shares of our common stock on the issuance
date. The number of shares issued as interest was calculated based upon the average
closing  price for our common stock on the OTCBB for the five (5) consecutive
trading days preceding the issuance date. Each Debenture holder has the right
to convert its Debenture into fully paid non-assessable shares of our common
stock at a conversion  price of &#36;0.40 per share. For every two (2) shares
of common stock a Debenture holder receives upon conversion, the holder will
also receive a warrant to purchase one (1) share of common stock at an exercise
price of &#36;0.60 exercisable for 12 months after the conversion date and one
(1) share of common stock at an exercise price of &#36;0.80 exercisable
for 24 months. The total proceeds raised from  the issuance of the Debentures
through January 2007 was &#36;2,458,500. Subsequent to January 2007, we have
sold additional Debentures in the aggregate principal amount of $1,625,000. The
shares of our common stock potentially issuable in the event of the conversion
of these additional Debentures, together with shares of our common stock issued
to the holders of these Debentures as interest, are not included in this registration
statement. We do not currently have sufficient funds to repay the Debentures.
We intend to secure additional financing through additional debt or equity financing
arrangements. There can be no assurance that we will be successful in raising
all of the additional funding that we are seeking.</FONT></P>

<BR>
<P align="center"><FONT size=2 face="serif">6</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<TABLE width="90%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; &nbsp;<B><FONT size=2 face="serif">Number
          of Shares Being Registered</FONT></B></TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Explanation</FONT></B></TD>
  </TR>

<TR bgcolor="#FFFFFF">
  <TD colspan=3>&nbsp;</TD>
</TR>
<TR bgcolor="#FFFFFF">
<TD colspan=3>  </TD>
</TR>
<TR bgcolor="#FFFFFF">
  <TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD width="38%" align=left nowrap><font size="2" face="serif">2,406,250</font></TD>
<TD width="12%">&nbsp;</TD>
<TD width="50%" align=left nowrap>
<FONT size=2 face="serif">The total number of shares of our common</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">stock underlying warrants which are</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">potentially issuable and would be</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">exercisable at the exercise price of &#36;0.60 in</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">the event that all holders of convertible</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">debentures issued in this exempt offering</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">convert the entire principal amount into</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">shares of our common stock.</FONT></TD>
</TR>
<TR bgcolor="#FFFFFF">
<TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap><font size="2" face="serif">2,406,250</font></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">The total number of shares of our common</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">stock underlying warrants which are</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">potentially issuable and would be</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">exercisable at the exercise price of &#36;0.80 in</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">the event that all holders of convertible</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">debentures issued in this exempt offering</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#FFFFFF">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">convert the entire principal amount into</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">shares of our common stock.</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
</TABLE>



<BR>
<P align="center"><FONT size=2 face="serif">7</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>




<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
<TD align=center colspan=3>
<B><FONT size=2 face="serif">Offering Summary</FONT></B></TD>
</TR>
<TR>
<TD colspan=3></TD>
</TR>
<TR>
  <TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width=36% align=left nowrap>
<FONT size=2 face="serif">Securities Being Offered</FONT></TD>
<TD width=7%>&nbsp;</TD>
<TD width=57% align=left nowrap>
<FONT size=2 face="serif">Up to 13,599,250 shares of our common stock
of which </FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">include 5,708,000 that are currently issued and outstanding,</FONT></TD>
</TR>

<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">and 7,891,250 issuable upon the exercise of warrants.</FONT></TD>
</TR>
<TR>
<TD colspan=3></TD>
</TR>
<TR>
  <TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Offering Price and Alternative Plan of</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">All shares being offered are being sold by existing shareholders</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Distribution</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">without our involvement, so the actual price of the stock will be</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">determined by prevailing market prices at the time of sale or by</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">private transactions negotiated by the selling shareholders. The</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">offering price will thus be determined by market factors and the</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">independent decisions of the selling shareholders.</FONT></TD>
</TR>
<TR>
  <TD colspan=3>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=3></TD>
</TR>
<TR>
<TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Securities Issued and to be Issued</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">54,263,085 shares of our common stock are issued and</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">outstanding as of December 31, 2007. As
of December 31, 2007,</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">10,858,658 of our issued shares
are held as</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">treasury stock. All of the common stock to be sold under this</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">prospectus will be sold by existing shareholders. Our issued and</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">outstanding shares will increase if warrants issued to the selling</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">shareholders are exercised into common stock. If all of the</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">warrants issued to the selling shareholders are exercised into</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">common stock and the outstanding debenture are converted into</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">shares of our common stock, we will have 79,253,084
shares of</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">common stock issued and outstanding.</FONT></TD>
</TR>
<TR>
  <TD colspan=3>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=3></TD>
</TR>
<TR>
<TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Use of Proceeds</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">We will not receive any proceeds from the sale of the common</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">stock by the selling shareholders.</FONT></TD>
</TR>
</TABLE>
<BR>
<P align="left">
<B><FONT size=2 face="serif">You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. We are not making an offer to sell these securities in any jurisdiction where
the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, prospects, financial condition, and results of operations
may have changed since that date. </FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="center"><FONT size=2 face="serif">8</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center">
<B><FONT size=2 face="serif">SELECTED HISTORICAL FINANCIAL DATA</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The following condensed
statement of operations data for the years ended December 31, 2006 and 2005,
and the selected balance sheet data at December 31, 2006 and 2005, are derived
from our  financial statements and the related notes, audited by Miller Ellin &amp; Company
LLP, our independent auditors, and Squar, Milner, Peterson, Miranda &amp; Williamson, LLP, our former independent auditors. Our financial statements and the related notes
as of December 31, 2006 and 2005 and for the two years then ended are included
elsewhere herein. The unaudited selected statement of operations data for the
nine months ended September 30, 2007 and 2006, and the unaudited consolidated
selected balance sheet data at September 30, 2007 and 2006, are derived from
our unaudited financial statements, which have been prepared on a basis consistent
with our audited financial statements and, in the opinion of management, include
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of our financial position and results of operations. The results
of operations for any interim period are not necessarily indicative of results
to be expected for the entire year. The following data should be read in conjunction
with &#147;Management's
 Discussion and Analysis of Financial Condition and Results of Operations&#148; and
 our financial statements and the related notes included elsewhere in this prospectus.</FONT></P>
<P align="left"><B><FONT size=2 face="serif">Statement of Operations Data:</FONT></B><FONT size=2 face="serif"> </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD width="37%" align=left>&nbsp;</TD>
    <TD align=right colspan=3><B><U><FONT size=2 face="serif">Years Ended December
            31,</FONT></U></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD width="2%" align="center">&nbsp;</TD>
    <TD align=right colspan=3><B><U><FONT size=2 face="serif">Nine
            Months Ended</FONT></U></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD width="12%" align=center>&nbsp;</TD>
    <TD width="6%" align="center">&nbsp;</TD>
    <TD width="13%" align=center>&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD align=right colspan=3><B><U><FONT size=2 face="serif">September 30,</FONT></U></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><B><U><FONT size=2 face="serif">2006</FONT></U>&nbsp;&nbsp;&nbsp;</B> </TD>
    <TD align="center">&nbsp;</TD>
    <TD align="right"><B><U><FONT size=2 face="serif">2005</FONT></U>&nbsp;&nbsp;&nbsp;</B> </TD>
    <TD align="center">&nbsp;</TD>
    <TD width="15%" align=right><B><U><FONT size=2 face="serif">2007</FONT></U></B>&nbsp;&nbsp;&nbsp;</TD>
    <TD width="2%" align="center">&nbsp;</TD>
    <TD width="13%" align="right"><B><U><FONT size=2 face="serif">2006</FONT></U></B>&nbsp;&nbsp;&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Sales</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">&#36; 7,897,118&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36; 3,836,737&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;9,716,372&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;5,720,869&nbsp;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Cost of sales</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">6,222,267&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">3,120,958&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">7,287,141&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">4,310,959&nbsp;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Gross profit</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">1,674,851&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">715,779&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">2,429,231&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">1,409,910&nbsp;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Total operating expenses</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">5,871,564&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">6,633,595&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">4,189,750&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">4,300,411&nbsp;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Total other (expense) income</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">(363,882)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">844,889&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(455,120)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(209,396)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Loss before minority interest</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">(4,560,595)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(5,072,927)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(2,215,639)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(3,099,897)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Minority interest</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">58,756&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">275,835&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(16,892)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(45,086)</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Net loss</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">&#36;(4,501,839)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;(4,797,092)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;(2,232,531)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;(3,144,983)</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><B><FONT size=2 face="serif">Earnings per Share Information</FONT></B><FONT size=2 face="serif">:</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Basic and diluted net loss per</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;<FONT size=2 face="serif">share</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">&#36;(0.09)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;(0.12)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;(0.04)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;(0.06)</FONT> </TD>
  </TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD width="37%" align=left>&nbsp;<B><FONT size=2 face="serif">Balance Sheet
          Data</FONT></B><FONT size=2 face="serif">:</FONT> </TD>
    <TD width="12%" align=center>&nbsp;</TD>
    <TD width="6%" align="center">&nbsp;</TD>
    <TD width="13%" align=center>&nbsp;</TD>
    <TD width="2%" align="center">&nbsp;</TD>
    <TD width="15%" align=center>&nbsp;</TD>
    <TD width="2%" align="center">&nbsp;</TD>
    <TD width="13%" align=center>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right colspan=3><B><U><FONT size=2 face="serif">At December 31,</FONT></U></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD colspan=3 align=right><B><U><FONT size=2 face="serif">At September
            30,</FONT></U></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=right><B><U><FONT size=2 face="serif">2006</FONT></U>&nbsp;&nbsp;&nbsp;</B> </TD>
    <TD align="center">&nbsp;</TD>
    <TD align="right"><B><U><FONT size=2 face="serif">2005</FONT></U>&nbsp;&nbsp;&nbsp;</B> </TD>
    <TD align="center">&nbsp;</TD>
    <TD align=right><B><U><FONT size=2 face="serif">2007</FONT></U></B>&nbsp;&nbsp;&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD align="right"><B><U><FONT size=2 face="serif">2006</FONT></U></B>&nbsp;&nbsp;&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Cash and cash equivalents</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">&#36; 466,404&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;356,641&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;267,584&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">&#36;413,512&nbsp;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Working capital</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">(957,913)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(741,913)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(3,094,864)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">726,517&nbsp;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Total assets</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">3,276,942&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">1,621,356&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">4,171,261&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">2,536,636&nbsp;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Total debt</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">2,945,494&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">855,000&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">4,256,216&nbsp;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">1,516,229&nbsp;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Stockholders&#146; deficit</FONT> </TD>
    <TD align=right><FONT size=2 face="serif">(1,377,972)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(793,361)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right><font size="2" face="serif">(3,062,880)</font></TD>
    <TD>&nbsp;</TD>
    <TD align=right><FONT size=2 face="serif">(839,686)</FONT> </TD>
  </TR>
</TABLE>

<P align="center"><FONT size=2 face="serif">9</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center">
<B><FONT size=2 face="serif">RISK FACTORS</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT size=2 face="serif">An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this prospectus before investing in
our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. Due to any of these risks, you may lose all or part of your investment. </FONT></I></B></P>
<P align="left">
<B><FONT size=2 face="serif">Risks Related to Our Business</FONT></B></P>

<P align="left" style="margin-left:20px"><B><FONT size=2 face="serif">If we do not obtain additional financing, we may be required to discontinue operations.</FONT></B></P>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As of September 30, 2007,
we had cash in the amount of &#36;267,584. During the fourth quarter of fiscal
2006 and in 2007, we received financing in private equity and debt offerings
exempt from the registration requirements of the Securities Act. However, we
still require additional financing to implement our business plan for the next
twelve months. Our total liabilities as of September 30, 2007 were &#36;6,559,090.
Our management anticipates that our current cash on hand is insufficient for
us to operate our six existing pharmacies at the current level through the end
of the fiscal 2008. Our business plan calls for ongoing expenses in connection
with salary expense, implementing new marketing strategies, and establishing
additional pharmacies. These expenditures are anticipated to be approximately &#36;5,000,000
for fiscal 2008. In order to continue to pursue our business plan to establish
and operate  additional pharmacies, we will require additional funding. If we
are not able to secure additional funding, the implementation of our business
plan will be delayed and our ability to expand and develop additional pharmacies
will be impaired. We  intend to secure additional funding through increased sales
generated by our operations and additional debt or equity financing arrangements.
There can be no assurance that we will be successful in raising all of the additional
funding that we are  seeking.</FONT></P>

<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">If we are unable to support our current debt service and liabilities as they come due, we may be required to discontinue operations.</FONT></B><FONT size=2 face="serif"> </FONT></P>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our business is highly
leveraged, and had total debt in the amount of &#36;4,256,216 at September 30,
2007. This debt includes the &#36;2,883,500 of unsecured convertible notes described
 herein. If we are unable to meet our debt service obligations or default on
our obligations in any other way, even if we are otherwise generating positive
revenue, we could lose substantially all of our business assets as well as being
held liable for any deficiency in payment. The net result of such a failure would
likely be the end of our business operations. </FONT></P>

<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">Because we have a short operating history and a new business model, it is difficult to evaluate our future prospects and this increases the risk of your investment. </FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We were incorporated in October 1999. Our Internet web site was also developed in 1999 and never made a profit. We abandoned our prior business model and acquired a new business opportunity.
This new business model has not been proven successful or been tested by any other company in any respect. Accordingly, you have a limited opportunity to evaluate our business and future prospects because we have a limited operating history under
our current business model. There is no certainty that future operations will be profitable. There is a risk that we will be unable to develop a broad enough customer base to conduct enough volume to pay our operating costs. A limited operating
history requires frequent evaluation to improve operations and/or remedy unforeseen difficulties that may occur. If we are unable to remedy unforeseen difficulties that materialize, our ability to achieve profitable operations could be impaired. An
investor should consider the risks, expenses and uncertainties of a company like ours that has only recently commenced business operations. If we are unsuccessful in addressing these risks, we will likely be required to discontinue operations.
</FONT></P>
<P align="center"><FONT size=2 face="serif">10</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">Because we have only recently commenced business operations, we have incurred significant operating losses.</FONT></B><FONT size=2 face="serif"> </FONT></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As we pursue our business
plan, we are incurring increasing expenses and expect to do so for the foreseeable
future. We incurred an operating loss in the amount of &#36;1,760,519 for
the nine months ended September 30, 2007, &#36;4,196,713 for the year ended December
31, 2006 and an operating loss in the amount of &#36;5,917,816 for the year ended
December 31, 2005. As of September 30, 2007, we had an accumulated deficit of
approximately
&#36;21,967,907 and recurring losses from operations. The term accumulated deficit
means the total losses of the company over the life of the company. This differs
from profitability in that profitability generally refers to profits in a  defined
period of time. We anticipate that we will incur increased operating expenses
while we undertake our plan to establish additional pharmacies. Therefore, we
expect to incur significant losses until such
time  that each pharmacy opened is cash flow positive. There can be no assurance
that each pharmacy opened will achieve profitable operations.</FONT></P>

<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">If we are unable to generate significant revenues from our operations, our business will fail.</FONT></B></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As we pursue our business
plan, we are incurring significant expenses. We incurred operating expenses for
the nine months ended September 30, 2007 in the amount of &#36;4,189,750 and
had gross profit of &#36;2,429,231 on sales of &#36;9,716,372  for the same
 period. We incurred operating expenses for the year ended December 31, 2006
 in the amount of &#36;5,871,564
and had gross profit of &#36;1,674,851 on
sales of &#36;7,897,118 for such period. The success and viability of our business
is contingent upon generating significant revenues from the operations of our
pharmacies such that we are able to pay our operating expenses and operate our
business  at a profit. Currently, we are unable to generate significant revenues
from our existing business to pay our operating expenses and operate at a profit.
In the event that we remain unable to generate significant revenues from our
pharmacies to pay  our operating expenses, we will not be able to achieve profitability
or continue operations. In such circumstance, you may lose all of your investment.</FONT></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif">Our accountants have raised substantial doubt with respect to our ability to continue as a going concern.</FONT></B><FONT size=2 face="serif"> </FONT></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As noted in our financial
statements, we have only recently commenced operations. At September 30, 2007,
we had an accumulated deficit of &#36;21,967,907, recurring losses from
operations and negative cash flows from operating activities of &#36;1,458,257
for the nine  months then ended. We also had negative working capital of &#36;3,094,864
as of September 30, 2007. The audit report of Miller, Ellin
&amp; Company, LLP for the fiscal year ended December 31, 2006 contained a paragraph
that emphasizes the substantial doubt as to our continuance as a going concern.
This is a significant risk to investors who purchase shares of our common stock
 because there is an increased risk that we may not be able to generate and/or
raise enough resources to remain operational for an indefinite period of time.</FONT></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The success of our business operations depends upon our ability to generate increased sales and obtain further financing to complete the successful development of our business plan and to
attain profitable operations. It is not possible at this time for us to predict with assurance the outcome of these matters. If we are not able to successfully complete the development of our business plan and attain sustainable profitable
operations, then we may be required to discontinue our operations.</FONT></P>
<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">If we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively and execute our business plan. </FONT></B><FONT size=2 face="serif"> </FONT></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We depend on the services of our senior management. We retained the services of Robert DelVecchio to serve as our Chief Executive Officer and Haresh Sheth to serve as our Chief Financial
Officer. Our success depends on the continued efforts of Messrs. DelVecchio and Sheth. The loss of the services of either of Mr. DelVecchio or Mr. Sheth could have an adverse effect on our business, prospects, financial condition, and results of
operations.</FONT></P>

<P align="center"><FONT size=2 face="serif">11</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left">
<FONT size=2 face="serif">As our business develops, our success is largely dependent on our ability to hire and retain highly qualified managerial, sales and technical personnel. These
managerial, technical and sales personnel are generally in high demand and we may not be able to attract the staff we need at a cost that is within our operating budget. In addition, we may lose employees or consultants that we hire due to higher
salaries and fees being offered by other businesses. If we do not succeed in attracting excellent personnel or retaining or motivating existing personnel, we may be unable to grow effectively and implement our business plan. </FONT></P>

<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">We will not be able to compete effectively if we are unable to attract, hire and retain qualified pharmacists.</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">There is a nationwide shortage of qualified pharmacists. We current employ six pharmacists, one pharmacist at each operating pharmacy. Although we have not experienced any difficulty recruiting
pharmacists in the past, we may experience difficulty attracting, hiring and retaining qualified pharmacists in the future. If we are unable to attract, hire and retain enough qualified pharmacists, our business, prospects, financial condition, and
results of operations could be adversely affected.</FONT></P>
<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">If competition increases, our ability to attract and retain customers or expand our business could be impaired. </FONT></B><FONT size=2 face="serif"> </FONT></P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We face
    intense competition with local, regional and national companies, including
    other drugstore chains, independently owned drugstores, mail order pharmacies and
    drug importation. Competition in this industry is intense primarily because
    national pharmacies including Walgreens and CVS Pharmacy have expanded significantly
    and prescription drugs are now offered at a  variety of retail establishments
    when traditionally prescription drugs were only provided at local pharmacies.
    Supermarkets and discount stores now maintain retail pharmacies onsite as
    a part of a business plan to provide consumers with all of their  retail
    needs at one location. Retail pharmacies such as Walgreens, CVS Pharmacy,
    and Rite Aid use proprietary and/or commercialized paperless prescription
    technology in their pharmacy operations. Many of these retail pharmacies
    rely substantially on  the sale of non-prescription drugs or health and beauty
    related products to generate revenue. Our management is unaware of any company
    that operates pharmacies in the United States that exclusively dispense pharmaceutical
    products to patients who  require medication for chronic pain management
    and also provide technological support to physicians to enable them to e-prescribe
    medication for their patients to the pharmacy. It is possible that significant
    competition may emerge or chain retail  pharmacies will revise their business
    model and focus on dispensing pharmaceutical products to patients who require
    medication for chronic pain management. If competitors emerge and offer competing
    products and services that achieve greater market  acceptance, our business,
    prospects, financial condition, and results of operations could be negatively
    impacted. We may not be able to effectively compete against them because
    our existing or potential competitors may have financial and other  resources
    that are superior to ours. We may also fail to attract and retain consumers
    because they may prefer to purchase all of their consumer goods at one retail
    location. We cannot assure you that we will be able to continue to compete
     effectively in our market or increase our sales volume in response to further
    increased competition. In addition, we may be at a competitive disadvantage
    because we are more highly leveraged than our competitors. If we are unable
    to compete  effectively with our competition, we will not be able to attract
    and retain business resulting in a loss of business and potential discontinuation
of operations.</FONT></P>

<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">If we have difficulty adapting our service to accommodate any concerns of physicians and technological advances, our business, prospects, financial condition, and results of operations could be materially adversely
affected. </FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">To be successful, our web portal that physicians have the ability to utilize has to perform well and the service we provide at the pharmacy has to be efficient. Our business plan calls for us
to continually assess the technology we utilize and improve our efficiency. We must continuously evaluate and implement the most user-friendly technology. Feedback that we receive from physicians may require that we add new features and
functionality to the technology we utilize. Our inability to adequately address any functionality</FONT></P>
<P align="center"><FONT size=2 face="serif">12</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left">
<FONT size=2 face="serif">concerns of physicians could have adverse consequences such as a loss of business. If we are unable to provide technology that is user-friendly, we could experience a loss of business.</FONT></P>
<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">Our results of operations could be materially adversely affected if we are not able to supply our pharmacies with adequate inventory.</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In the event that we are unable to maintain adequate inventory in any of our pharmacies, we could experience an
interruption in our ability to service customers. During the year ended December 31, 2006, we purchased 99.9% of our inventory of prescription drugs from one wholesale drug vendor. Although management believes we could obtain our inventory though another distributor at competitive prices and upon competitive payment terms if our relationships with the wholesale drug vendor were
terminated, there can be no assurance that the termination of such a relationship would not adversely affect our business, prospects, financial condition, and results of operations. </FONT></P>

<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">If some third party payors continue to restrict
our ability to participate as suppliers of medication to participants in their
health coverage plans, we may experience loss of business resulting in a material
adverse financial impact on our financial results.</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Some third party payors. such as Health Net in California, have placed a moratorium on additional pharmacies which they will sanction as a supplier of medication to participants enrolled in the health benefit plans that
they administer. The failure of third party payors to approve additional pharmacies as suppliers of medication to participants enrolled in their health benefit plans could have a material adverse financial impact on our business, prospects,
financial condition, and results of operations.</FONT></P>

<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">Because we are dependent on third-party payors, our business is volatile and there is an increased risk of loss of your investment. </FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Nearly all of our pharmacy sales are to customers whose medications were covered by health benefit plans and other third party payors. Health benefit plans include insurance companies,
governmental health programs, workers&#146; compensation, self-funded ERISA plans, health maintenance organizations, health indemnity insurance, and other similar plans. In general, a health benefit plan agrees to pay for all or a portion of a
customer's eligible prescription purchases. Any significant loss of third-party payor business for any reason could have a material adverse effect on our business and results of operations. These third-party payors could unilaterally change how they
reimburse us, without our prior approval, for the prescription drugs that we provide to their members. The passing in December 2003 of the Medicare Prescription Drug, Improvement and Modernization Act will grant a prescription drug benefit to
participants. As a result of this benefit, we may be reimbursed for some prescription drugs at prices lower than our current reimbursement levels. There have been a number of recent proposals and enactments by various states to reduce Medicaid
reimbursement levels in response to budget problems, some of which propose to reduce reimbursement levels in the applicable states significantly, and we expect other similar proposals in the future. If third-party payors reduce their reimbursement
levels or if Medicare or state Medicaid programs cover prescription drugs at lower reimbursement levels, our margins on these sales would be reduced, and the profitability of our business and our results of operations, financial condition or cash
flows could be adversely affected. Additionally, there are no guarantees that health benefit plans will contract with our pharmacies.</FONT></P>
<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud resulting in current and potential stockholders losing confidence in our
financial reporting.</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Effective internal controls are necessary for us to provide reliable financials reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our
operating results could </FONT></P>
<P align="center"><FONT size=2 face="serif">13</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left">
<FONT size=2 face="serif">be harmed. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. Any failure to implement required new or improved controls, or difficulties encountered in
their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative
effect on the trading price of our stock. </FONT></P>
<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">Our quarterly financial results are subject to significant fluctuation, and if our future results are below the expectations of investors, the price of our common stock would likely decline.</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our operating results have in the past and could in the future vary significantly from quarter to quarter. Our quarterly operating results are likely to be particularly effected by the number
of physicians that utilize our e-scripting technology to prescribe medication for their patients and the volume of medication that they prescribe. Other factors that could affect our quarterly operating results include: </FONT></P>
<UL>
<LI>
<P align="left"><FONT size=2 face="serif">our ability to attract new customers and retain our current customers;</FONT></P></LI>
<LI>
<P align="left"><FONT size=2 face="serif">the emergence of competition;</FONT></P></LI>
<LI>
<P align="left"><FONT size=2 face="serif">the amount and timing of operating expenses and capital expenditures relating to the business.</FONT></P></LI>
</UL>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As a result of these and other factors we believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indicators of our future performance. In addition, we may
  be unable to accurately forecast our operating results because of our short operating history.</FONT></P>

<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">Because our common stock is quoted on the OTCBB and is subject to the &#147;Penny Stock&#148; rules, the level of trading activity in our stock may be reduced. </FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Broker-dealer practices in connection with transactions in &#147;penny stocks&#148; are regulated by penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally
are equity securities with a price of less than &#36;5.00 (other than securities registered on some national securities exchanges or quoted on the over-the-counter bulletin board administered by the NASD). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, broker-dealers who sell these
securities to persons other than established customers and &#147;accredited investors&#148; must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser&#146;s written agreement
to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it
difficult to sell their shares.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Risk Factors Relating to Our Industry</FONT></B></P>
<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">Our industry is subject to substantial federal and state regulation, compliance with which can be costly and time consuming.</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The operation of pharmacies is highly regulated and there are extensive federal and state government regulations affecting companies that dispense pharmaceutical products. Each pharmacy
location must be licensed by the state government. The licensing requirements vary from state to state. An additional registration certificate must be granted by the Drug Enforcement Agency, and, in some states, a separate controlled substance
license must be obtained to dispense Class 2 drugs. In addition, pharmacies selling Class 2 drugs are required to maintain extensive records and often report information to state agencies. The operation of our business is contingent upon compliance
with governmental regulations. In </FONT></P>
<P align="center"><FONT size=2 face="serif">14</FONT></P>
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<P align="left">
<FONT size=2 face="serif">the event that a state should revoke a current pharmacy&#146;s license or deny any potential store licenses, our future revenue could be materially impacted in a negative manner. Lastly, new government regulations cannot be
predicted and our business could be adversely affected if compliance with new government regulation becomes extremely onerous.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Risk Factors Relating to this Offering</FONT></B></P>
<P align="left" style="margin-left:20px">
<B><FONT size=2 face="serif">If the selling shareholders sell a substantial number of shares all at once or in large blocks, the market price of our shares would most likely decline.</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The selling shareholders
are offering 13.599,250 shares of our common stock through this prospectus. Our
common stock is presently quoted on the OTCBB and any sale of shares at a price
below the current market price at which the common stock is trading will cause
that market price to decline. Moreover, the offer or sale of a large number of
shares at any price may cause the market price to fall. We cannot predict the
effect, if any, that future sales of shares of our common stock into the market,
including those acquirable by the possible conversion of warrants into shares
of common stock, will have on the market price of our common stock. Sales of
substantial amounts of common stock, including shares issued upon the exercise
of warrants and stock options into common stock, or the perception that such
transactions could occur, may materially and adversely affect prevailing markets
prices for our common stock. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Forward-Looking Statements</FONT></B></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">This prospectus includes
forward-looking statements within the meaning of Section 27A of the Securities
Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the
&#147;</FONT><I><FONT size=2 face="serif">Exchange Act</FONT></I><FONT size=2 face="serif">&#148;).
Forward-looking statements are not statements of historical fact but rather reflect
our current expectations, estimates and predictions about future  results and
events. These statements may use words such as &#147;anticipate,&#148; &#147;believe,&#148;&#147;estimate,&#148;&#147;expect,&#148;&#147;intend,&#148;&#147;predict,&#148;&#147;project&#148; and
similar expressions as they relate to us or  our management. When we make forward-looking
statements, we are basing them on our beliefs and assumptions, using information
currently available to us. These forward-looking statements are subject to risks,
uncertainties and assumptions, including  but not limited to, risks, uncertainties
and assumptions discussed in this prospectus. Factors that can cause or contribute
to these differences include those described under the headings &#147;Risk Factors,&#148; &#147;Business&#148; and &#147;Management
Discussion and Analysis.&#148; </FONT></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual result may vary materially from what we projected. Any
forward-looking statements you read in this prospectus reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy
and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You should specifically consider the factors identified in
this prospectus that would cause actual results to differ before making an investment decision. </FONT></P>
<P align="center"><FONT size=2 face="serif">15</FONT></P>
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<P align="center">
<B><FONT size=2 face="serif">USE OF PROCEEDS</FONT></B></P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We will not receive any
  proceeds from the sale of the common stock offered through this prospectus by
  the selling shareholders. We estimate that we will receive &#36;8,843,460
  in proceeds assuming the exercise in full of the warrants described herein. We
  intend to use the net proceeds of such exercises for general corporate purposes
  and working capital purposes.</FONT></P>

<P align="center">
<B><FONT size=2 face="serif">DIVIDEND POLICY</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We have not paid any cash dividends on our common stock and do not currently anticipate paying cash dividends in the foreseeable future. The agreements into which we may enter in the future, including indebtedness, may
impose limitations on our ability to pay dividends or make other distributions on our capital stock. Future dividends on our common stock, if any, will be at the discretion of our board of directors and will depend on, among other things, our
results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. We intend to retain future earnings, if any, for reinvestment in the development and
expansion of our business. </FONT></P>
<P align="center"><FONT size=2 face="serif">16</FONT></P>
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<P align="center">
<B><FONT size=2 face="serif">CAPITALIZATION</FONT></B></P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> The
    following table presents our capitalization as of September 30, 2007. You
  should read the following table in conjunction with &#147;Selected Consolidated
  Financial Data&#148;, &#147;Management&#146;s Discussion and Analysis of Financial
  Condition and Results of Operations&#148; and
our financial statements and related notes included elsewhere in this prospectus.</FONT></P>

<table width="100%" border=0 cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td width="71%" align=left>&nbsp;</td>
    <td width="18%">&nbsp;</td>
    <td width="11%" align=right nowrap style="border-bottom:1px solid #000000"><b><font size=2 face="serif">September 30, 2007</font></b> </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left><font size=2 face="serif">Convertible Debentures</font> </td>
    <td>&nbsp;</td>
    <td align=right><font size=2 face="serif">2,883,500&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left><font size=2 face="serif">Notes payable to related parties
        and stockholders</font> </td>
    <td>&nbsp;</td>
    <td align=right style="border-bottom:1px solid #000000"><font size=2 face="serif">1,372,716&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left><b><font size=2 face="serif">Total debt</font></b> </td>
    <td>&nbsp;</td>
    <td align=right style="border-bottom:1px solid #000000"><font size=2 face="serif">&#36;4,256,216&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left><b><font size=2 face="serif">Stockholders&#146; equity</font></b> </td>
    <td>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left><font size=2 face="serif">Preferred shares, par value &#36;0.001
        per share, 5,000,000</font> </td>
    <td>&nbsp;</td>
    <td align=right><font size=2 face="serif">&#36; -&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left><font size=2 face="serif">shares authorized; no preferred
        shares issued or</font> </td>
    <td>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left><font size=2 face="serif">outstanding,</font> </td>
    <td>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign="bottom">
    <td align=left><font size=2 face="serif">Common shares, par value &#36;0.001
        per share, 150,000,000</font> </td>
    <td>&nbsp;</td>
    <td align=right><font size=2 face="serif">64,796&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left><font size=2 face="serif">shares authorized, 64,631,116 common
        shares issued</font> </td>
    <td>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left><font size=2 face="serif">Treasury stock (10,858,658 shares)</font> </td>
    <td>&nbsp;</td>
    <td align=right><font size=2 face="serif">(2,849,366)&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left><font size=2 face="serif">Additional Paid in Capital</font> </td>
    <td>&nbsp;</td>
    <td align=right><font size=2 face="serif">21,142,007&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left><font size=2 face="serif">Accumulated Deficit</font> </td>
    <td>&nbsp;</td>
    <td align=right><font size=2 face="serif">(21,967,907)&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left><b><font size=2 face="serif">Total stockholders&#146; deficit</font></b> </td>
    <td>&nbsp;</td>
    <td align=right style="border-bottom:1px solid #000000"><font size=2 face="serif">(3,062,880)&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left><b><font size=2 face="serif">Total capitalization</font></b> </td>
    <td>&nbsp;</td>
    <td align=right style="border-bottom:3px double #000000"><font size=2 face="serif">&#36;&nbsp;1,193,336&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
</table>

<P align="center"><FONT size=2 face="serif">17</FONT></P>
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<P align="center"><B><FONT size=2 face="serif">MANAGEMENT&#146;S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND <br>
  RESULTS OF OPERATIONS </FONT></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">The
      following Management&#146;s Discussion and Analysis of Financial Condition
      and Results of Operations contains forward-looking statements which involve
      risks and uncertainties. Our actual results could differ materially from
      those anticipated in these forward-looking statements as a result of certain
      factors, including those set forth under &#147;Risk Factors&#148; and elsewhere
      in this prospectus. We assume no obligation to update forward-looking statements
      or the risk factors. You should read the following discussion in conjunction
      with our financial statements and related notes filed as an exhibit to
      the registration statement of which this prospectus forms a part. </FONT></I></P>
<P align="left"> <B><FONT size=2 face="serif">Overview</FONT></B></P>


<P align="left"> <B><FONT size=2 face="serif">Forward-Looking Statements </FONT></B></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Certain statements, other than purely
    historical information, including estimates, projections, statements relating
    to our business plans, objectives, and expected operating results, and the
    assumptions upon which those statements are based, are &#147;forward-looking
    statements&#148; within the meaning of the Private Securities Litigation
    Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section
    21E of the Securities Exchange Act of 1934. These forward-looking statements
    generally are identified by the words &#147;believes,&#148; &#147;project,&#148; &#147;expects,&#148; &#147;anticipates,&#148; &#147;estimates,&#148; &#147;intends,&#148; &#147;strategy,&#148; &#147;plan,&#148; &#147;may,&#148; &#147;will,&#148; &#147;would,&#148; &#147;will
    be,&#148; &#147;will continue,&#148; &#147;will likely result,&#148; and
    similar expressions. We intend such forward-looking statements to be covered
    by the safe-harbor provisions for forward-looking statements contained in
    the Private Securities Litigation Reform Act of 1995, and are including this
    statement for purposes of complying with those safe-harbor provisions. Forward-looking
    statements are based on current expectations and assumptions that are subject
    to risks and uncertainties which may cause actual results to differ materially
    from the forward-looking statements. Our ability to predict results or the
    actual effect of future plans or strategies is inherently uncertain. Factors
    which could have a material adverse affect on our operations and future prospects
    on a consolidated basis include, but are not limited to: changes in economic
    conditions, legislative/regulatory changes, availability of capital, interest
    rates, competition, and generally accepted accounting principles. These risks
    and uncertainties should also be considered in evaluating forward-looking
    statements and undue reliance should not be placed on such statements. We
    undertake no obligation to update or revise publicly any forward-looking
    statements, whether as a result of new information, future events or otherwise.
    Further information concerning our business, including additional factors
    that could materially affect our financial results, is included herein and
    in our other filings with the SEC.</FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Business Description </FONT></B></P>
<P align="left">
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We currently have six operating pharmacies.
    As a result of the growth in our business and improvement in our operations,
    our management is seeking to expand our business by establishing additional
    pharmacies which are wholly-owned. Our management anticipates opening ten
    additional wholly-owned pharmacies during 2008. Opening new pharmacies,
    however, will require additional funding from external sources. In August 2007, we executed
    a lease for our seventh pharmacy in Lomita, California. We anticipate that
    operations at the Lomita location will commence prior to the end of the second quarter of 2008.
    We are currently considering future locations within or in close proximity
    to medical facilities located in major metropolitan areas in Arizona, California,
    Nevada, Oregon, Texas, and Washington.</FONT></P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Our pharmacies have principally specialized
    in dispensing highly regulated pain medication for acute chronic pain management.
    During 2006, we expanded the reach of our business beyond pain management
    to service customers that require prescriptions to treat cancer, psychiatric,
    and neurological conditions. Our management attributes the recent growth
    in our business in part to our being able to fill prescriptions that can
    accommodate a broader range of customers.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Typical retail pharmacies either do
    not keep in inventory or maintain limited amounts of highly regulated medications.
    As a result, the time it takes for a traditional retail pharmacy to fill
    these prescriptions is prolonged. Our specialty pharmacies maintain an inventory
    of highly regulated medication that is specifically tailored to the needs
    of our recurring customers. This practice frequently enables our pharmacies
    to fill customers&#146; prescriptions from its existing inventory and decreases
    the wait time required to fill these prescriptions. Our focus and familiarity
    with dispensing highly regulated medications better positions our pharmacists
    to understand the needs of our customers. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In an attempt to further expand our
    business and improve our marketing plan, we retained the marketing firm of
    Rainmaker &amp; Sun Integrated Marketing, Inc. (&#147;Rainmaker&#148;). With
    the assistance of Rainmaker, we launched a new marketing campaign in July
    2006 which consisted primarily of print advertisements in newspaper inserts,
    on billboards, bus shelter displays and in direct mailings targeted to consumers
    in the Seattle, Washington and Los Angeles, California test markets. These
    marketing efforts did not reach the level of success anticipated by management.
    Our management decided to discontinue these marketing efforts in favor of
    increasing our sales force because the efforts of our sales personnel have
    produced the greatest success in significantly increasing our business. Based
    upon the success of our sales personnel, our management has committed to
    staffing each pharmacy with its own sales person who will be exclusively
    responsible for generating sales. Our management anticipates that this staffing
    model will continue to have a positive material impact on our operations. </FONT></P>

<P align="center"><font size="2" face="serif">18</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<p>
<FONT size=2 face="serif">The table set forth
below summarizes the number of prescriptions filled by our six operating pharmacies
during the three and nine months ended September 30, 2007 and 2006.</FONT></P>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
  <TR>
    <TD width=18%></TD>
    <TD width=2%></TD>
    <TD width=18%></TD>
    <TD width=2%></TD>
    <TD width=18%></TD>
    <TD width=2%></TD>
    <TD width=18%></TD>
    <TD width=2%></TD>
    <TD width=17%></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center><FONT size=2 face="serif">Three months ended</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center><FONT size=2 face="serif">Three months ended</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center><FONT size=2 face="serif">Nine months ended</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center><FONT size=2 face="serif">Nine months ended</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center><U><FONT size=2 face="serif">September 30, 2007</FONT></U> </TD>
    <TD>&nbsp;</TD>
    <TD align=center><U><FONT size=2 face="serif">September 30, 2006</FONT></U> </TD>
    <TD>&nbsp;</TD>
    <TD align=center><U><FONT size=2 face="serif">September 30, 2007</FONT></U> </TD>
    <TD>&nbsp;</TD>
    <TD align=center><U><FONT size=2 face="serif">September 30, 2006</FONT></U> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#e5ffff">
    <TD align=left bgcolor="#e5ffff"><FONT size=2 face="serif">Total Number</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center><FONT size=2 face="serif">26,403</FONT> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=center><FONT size=2 face="serif">14,816</FONT> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=center><FONT size=2 face="serif">68,421</FONT> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=center><FONT size=2 face="serif">38,229</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#e5ffff">
    <TD align=left><FONT size=2 face="serif">of Prescriptions</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left><font color="#000000">&nbsp;</font> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=left><font color="#000000">&nbsp;</font> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=left><font color="#000000">&nbsp;</font> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=left><font color="#000000">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Average Prescriptions</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center><FONT size=2 face="serif">2,031</FONT> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=center><FONT size=2 face="serif">1,140</FONT> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=center><FONT size=2 face="serif">1,754</FONT> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=center><FONT size=2 face="serif">980</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Per Week</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left><font color="#000000">&nbsp;</font> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=left><font color="#000000">&nbsp;</font> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=left><font color="#000000">&nbsp;</font> </TD>
    <TD><font color="#000000">&nbsp;</font> </TD>
    <TD align=left><font color="#000000">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
</TABLE>
<P align="left"> <FONT size=2 face="serif">Our second pharmacy established
    in Portland, Oregon commenced operations on June 21, 2006 and generated minimal
    prescription sales during the period ended September 30, 2006. Our
    pharmacy in Gresham, Oregon began filling prescriptions during
    the three months ended March 31, 2007. Excluding the prescriptions filled
    at these pharmacies and based upon only our four pharmacies which had active
    operations during the three and nine months ended September 30, 2007 and
    2006 the total number of prescriptions filled at our pharmacies for the three
    months ended September 30, 2007 increased to 19,776 which is approximately
    a 40% increase from the 14,101 total prescriptions filled at these same four
    pharmacies during the three months ended September 30, 2006. The total number
    of prescriptions filled at these same four pharmacies for the three months
    ended September 30, 2007 increased by approximately 8% from the 18,329 total
    prescriptions filled at the same four pharmacies in the prior three months
    ended June 30, 2007. These same four pharmacies filled 54,540 prescriptions
    during the nine months ended September 30, 2007, which is a 45% increase
    from the 37,514 total prescriptions filled at these same four pharmacies
    during the nine months ended September 30, 2006. Our management primarily
    credits the increases in our business to the efforts of additional sales
    personnel added during the reporting period and the expanded reach of our
    business beyond pain management. </FONT></P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">During
    2006, we implemented a monthly call program where our pharmacies contact
    each recurring patient directly on a monthly basis to ensure that the patient
    has experienced no complications with the prescribed medication and to inquire
    into whether the patient needs the prescription refilled. At the time of
    each monthly call, our pharmacies also inquire into whether other members
    of the household also need a prescription refilled. Our management believes
    that the monthly call program has enhanced consumer loyalty and will continue
    to increase the total number of prescriptions filled at our pharmacies. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">On an
    ongoing basis, our management is evaluating our operations and seeking additional
    opportunities to expand our business. During the fiscal quarter ended March
    31, 2006, we established a working relationship with a specialty compounding
    pharmacy, which enabled our pharmacies to fill prescriptions for custom compounded
    drugs. Since this time, we established a relationship with another compound
    drug provider to increase our available inventory of compounded drugs. Pharmaceutical
    compounding is the combining, mixing, or altering of ingredients to create
    a customized medication for an individual patient in response to a licensed
    physician&#146;s prescription. Physicians often prescribe compounded medications
    for reasons that include situations where there is not presently a commercially
    available drug to treat the unique health condition of an individual patient
    or to combine several medications the patient is taking to increase compliance.
    Custom compounded drugs can offer additional means of treating chronic pain.
    We anticipate that our ability to fill prescriptions for custom compounded
    drugs will expand our business and enable us to better service patients who
    require treatment for chronic pain management. During the three months ended
    September 30, 2007, we filled 157 prescriptions for custom compounded drugs
    with an associated gross profit margin of 68%. Our management is committed
    to expanding the sales of compounded drugs due to the higher associated gross
    profit margin relative to other non-compounded drugs including generic brands.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Our
    management also determined that we could expand our business through developing
    arrangements with third party health plan providers to accept traditional
    co-payments and fill prescriptions for their members who rely upon overnight
    courier for delivery of their prescription. Our management believes that
    such arrangements will broaden our consumer base and enable us to access
    a particular niche of consumer that receives their prescriptions exclusively
    via courier as opposed to patronizing traditional retail pharmacy locations.</FONT></P>

<P align="center"><font size="2" face="serif">19</font></P>
<HR noshade align="center" width="100%" size=4>


<P align="left" style="page-break-before:always"></P><PAGE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">On January
    3, 2006, we incorporated Assured Pharmacy Plus, Corp. (&#147;Plus Corp.&#148;)
    as a wholly-owned subsidiary to develop this opportunity. We entered into
    an arrangement with Affiliated Healthcare Administrators (&#147;AHA&#148;),
    a third party health plan administrator, to provide prescription service
    to their members. Under the arrangement with AHA, our pharmacies provide
    prescription service to AHA members upon receipt of a traditional co-payment.
    Thereafter, we process the prescription claim with AHA and receive the remaining
    balances due for their member&#146;s prescription purchases. Plus Corp. processes
    claims relating to the prescription filled at our pharmacies for AHA members
    in exchange for an administration fee. Our management is contemplating expanding
    the operations of Plus Corp. by licensing the entity as a pharmacy that exclusively
    focuses on servicing the niche of consumers that are members of third party
    health plan administrators and receive their prescriptions exclusively via
courier.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Also
    on January 3, 2006, we incorporated Assured Pharmacy DME, Corp. (&#147;DME&#148;)
    as a wholly-owned subsidiary for the purpose of facilitating and making available
    specialized medical equipment to our consumers. We established a relationship
    with a provider of specialized medical equipment to make these products available
    to our consumers. In July 2006, we began notifying our consumers of the availability
    of these products by disseminating a notification with each prescription
    filled at our pharmacies. We accept and process orders for specialized medical
    equipment. We will not maintain any inventory of specialized medical equipment
    at any of our pharmacies. All orders will be shipped directly to the consumer
    from a product wholesaler. The gross profit margin on orders we received
    for specialized medical equipment during the year ended December 31, 2006
    was approximately 63%. Our management was encouraged by our consumers&#146; early
    response to our offering of specialized medical equipment, but has not committed
    any significant resources to expanding this area because it is presently
    allocating our resources towards developing future locations and increasing
    our sales of custom compounded drugs.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Our
    revenue generated from the operations of Plus Corp. and DME for the three
    and nine months ended September 30, 2007 has been relatively insignificant
    to our business. To date, our management has not advanced these opportunities
    because our resources are currently being devoted to expanding the sales
    of compounded drugs, focusing on the establishment of additional pharmacies,
    and growth within our existing pharmacy locations. Our management anticipates
    focusing more on these opportunities during 2008 or at such time that allocating
    resources to these opportunities is in our best interest.</FONT></P>
<P align="left"><B><FONT size=2 face="serif">Results of Operations for the Years
Ended December 31, 2006 and 2005</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left"> <I><FONT size=2 face="serif">Revenues</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our
    total revenue reported for the year ended December 31, 2006 was &#36;7,897,118,
    an increase of 106% from &#36;3,836,737 for the year ended December 31, 2005.
    Our revenue for the years ended December 31, 2006 and 2005 was generated almost
    exclusively from the sale of prescription drugs. The average revenue generated
    per prescription during the years ended December 31, 2006 was &#36;146. We
    generated more revenue in the year ended December 31, 2006 than in any other
    annual period since our inception.</FONT></P>

<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
    table set forth below shows our total reported gross revenue generated for
each quarterly period during fiscal 2005 and 2006: </FONT></P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD align=left width=49% nowrap>&nbsp;</TD>
    <TD align=right width=7% nowrap><div align="center"><B><U><FONT size=2 face="serif">2005</FONT></U></B> </div></TD>
    <TD width=8% nowrap><div align="center"></div></TD>
    <TD align=right width=7% nowrap><div align="center"><B><U><FONT size=2 face="serif">2006</FONT></U></B> </div></TD>
    <TD align=right width=29% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49% nowrap><FONT size=2 face="serif">Quarterly Period
        Ended March 31</FONT> </TD>
    <TD align=right width=7% nowrap><FONT size=2 face="serif">$648,402</FONT> </TD>
    <TD width=8% nowrap>&nbsp;</TD>
    <TD align=right width=7% nowrap><FONT size=2 face="serif">$1,515,645</FONT> </TD>
    <TD align=right width=29% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49% nowrap><FONT size=2 face="serif">Quarterly Period
        Ended June 30</FONT> </TD>
    <TD align=right width=7% nowrap><FONT size=2 face="serif">$789,404</FONT> </TD>
    <TD width=8% nowrap>&nbsp;</TD>
    <TD align=right width=7% nowrap><FONT size=2 face="serif">$1,894,976</FONT> </TD>
    <TD align=right width=29% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49% nowrap><FONT size=2 face="serif">Quarterly Period
        Ended September 30</FONT> </TD>
    <TD align=right width=7% nowrap><FONT size=2 face="serif">$980,181</FONT> </TD>
    <TD width=8% nowrap>&nbsp;</TD>
    <TD align=right width=7% nowrap><FONT size=2 face="serif">$2,310,248</FONT> </TD>
    <TD align=right width=29% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49% nowrap><FONT size=2 face="serif">Quarterly Period
        Ended December 31</FONT> </TD>
    <TD align=right width=7% nowrap><FONT size=2 face="serif">$1,418,749</FONT> </TD>
    <TD width=8% nowrap>&nbsp;</TD>
    <TD align=right width=7% nowrap><FONT size=2 face="serif">$2,176,249</FONT> </TD>
    <TD align=right width=29% nowrap>&nbsp;</TD>
  </TR>
</TABLE>
<BR>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our
    management attributes the significant increase in our revenue from the prior
    fiscal year to our successful marketing efforts and an expansion of our business
    beyond the pain management sector to service customers that require prescriptions
    to treat cancer, psychiatric, and neurological conditions. Our management
    anticipates that our revenues generated will continue to increase based upon
    the efforts of additional sales personnel retained during the reporting period
    and the establishment of additional pharmacies in the current year. After
    approximately a two year period without opening any additional </FONT></P>
<P align="center"><font size="2" face="serif">20</font></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>



<P align="left"><FONT size=2 face="serif">pharmacy locations, we opened our
      fifth pharmacy located in Portland, Oregon on June 21, 2006 and our sixth
      pharmacy located in Gresham, Oregon on January 26, 2007. Although the operations
      at these new locations had no material impact on our results of operations,
      we anticipate the establishment of these pharmacies and additional locations
      will increase our revenues for the fiscal year ending December 31, 2007.</FONT></P>

<P align="left"><I><FONT size=2 face="serif">Cost of Sales</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
    total cost of sales for the year ended December 31, 2006 was &#36;6,222,267,
    a 99% increase from &#36;3,120,958 for the year ended December 31, 2005.
    The cost of sales consists primarily of the pharmaceuticals. The increase
    in cost of sales is primarily attributable to increased sales in the reporting
period. Our sales increased in the year ended December 31, 2006 by 106%. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During
    the fiscal year ended December 31, 2005, we negotiated cost reductions and
    more favorable credit terms with our primary drug supplier. As a result,
    we incurred lower costs of sales on a per unit basis during the year ended
    December 31, 2006.</FONT></P>
<P align="left"> <I><FONT size=2 face="serif">Gross Profit</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Gross
    profit increased to &#36;1,674,851, or approximately 21%, for the year ended
    December 31, 2006. This is an increase from a gross profit of &#36;715,779,
or approximately 19% of sales for the year ended December 31, 2005.</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
    increase in the gross profit percentage for the year ended December 31, 2006
    when compared to the prior fiscal year is attributable to increased sales
    of generic type drugs which have lower costs and higher gross margins. In
    addition, we negotiated cost reductions and more favorable credit terms from
    our primary pharmaceutical supplier during the year ended December 31, 2005.</FONT></P>
<P align="left"> <I><FONT size=2 face="serif">Operating Expenses</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Operating
    expenses for the year ended December 31, 2006 was &#36;5,871,564, a 11% decrease
    from &#36;6,633,595 for the year ended December 31, 2005. Our operating expenses
    for the year ended December 31, 2006 consisted of salaries and related expenses
    of &#36;2,193,682, consulting and other compensation of &#36;1,555,354, and
    selling, general and administrative expenses of &#36;2,122,528. Our operating
    expenses for the year ended December 31, 2005 consisted of salaries and related
    expenses of &#36;3,574,137, consulting and other compensation of &#36;1,579,524,
    selling, general and administrative expenses of &#36;1,286,053 and restructuring
    charges of &#36;193,881.</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Salaries
    and related expenses were significantly higher in the year ended December
    31, 2005 when compared to the current fiscal year primarily as a result of
    out of the money options valued at &#36;1,950,000 and common stock valued
    at &#36;70,000 granted to our executive officers in 2005. The increase in
    consulting and other compensation is primarily attributable to the amortization
    resulting from the issuance of shares of restricted common stock to consultants
    over the life of the consulting agreements. The increase in selling, general
    and administrative expenses is primarily attributable to the expenses associated
    to launch our new marketing plan. </FONT></P>
<P align="left"> <I><FONT size=2 face="serif">Other Income and Expense</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During
    the year ended December 31, 2006, we reported other expenses in the amount
    of &#36;363,882, compared to reporting other income in the amount of &#36;844,889
    for the prior year. The other income reported during the year ended December
    31, 2005 was primarily attributable to the forgiveness of a note payable
    in the amount of approximately &#36;1,013,000. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We incurred
    interest expense of &#36;201,735 during the year ended December 31, 2006
    and &#36;131,539 during the year ended December 31, 2005. Interest expense
    for the year ended December 31, 2006 was incurred on financing from related
    parties and on convertible debentures issued during the reporting period.</FONT></P>
<P align="center"><font size="2" face="serif">21</font></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> <I><FONT size=2 face="serif">Net Loss</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Net
    loss for the year ended December 31, 2006 was &#36;4,501,839, compared to
    net loss of &#36;4,797,092 for the year ended December 31, 2005. The decrease
    in our net loss was primarily attributable to increased gross profit and
    lower operating expenses during the reporting period.</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our
    loss per common share for the year ended December 31, 2006 was &#36;0.09,
    compared to a loss per common share of &#36;0.12 for the year ended December
    31, 2005.</FONT></P>


<P align="left"> <B><FONT size=2 face="serif">Results of Operations for the three
      and nine months ended September 30, 2007 and 2006</FONT></B><FONT size=2 face="serif"> </FONT><BR>
  <BR>
  <I><FONT size=2 face="serif">Sales</FONT></I><FONT size=2 face="serif"> </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Our
    total revenue reported for the three months ended September 30, 2007 was &#36;3,676,798,
    a 59% increase from &#36;2,310,248 for the three months ended September 30,
    2006 and an 11% increase from the prior three month period ended June 30,
    2007. Our total revenue reported for the nine months ended September 30,
    2007 was &#36;9,716,372, an approximate 70% increase from &#36;5,720,869
    for the nine months ended September 30, 2006.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Our
    revenue for the three and nine months ended September 30, 2007 and 2006 was
    generated almost exclusively from the sale of prescription drugs. We generated
    more revenue in the three months ended September 30, 2007 than in any other
    quarterly period since our inception.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">The
    table set forth below shows our total reported gross revenue generated for
    each quarterly period during fiscal 2005, 2006, and 2007: </FONT></P>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0  style="border:1px solid #000000;">
  <TR>
    <TD width=55%></TD>
    <TD width=15%></TD>
    <TD width=15%></TD>
    <TD width=15%></TD>
  </TR>
  <TR valign="bottom">
    <TD width="55%" align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="15%" align=right style="border-bottom:1px solid #000000; border-left:1px solid #000000;"><div align="center"><FONT size=2 face="serif">2005</FONT></div></TD>
    <TD width="15%" align=left style="border-bottom:1px solid #000000; border-left:1px solid #000000;"><div align="center"><FONT size=2 face="serif">2006</FONT></div></TD>
    <TD width="15%" align=center style="border-bottom:1px solid #000000; border-left:1px solid #000000;"><FONT size=2 face="serif">2007</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD width="55%" align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">&nbsp;&nbsp;Quarterly
        Period Ended March 31</FONT> </TD>
    <TD width="15%" align=left style="border-bottom:1px solid #000000; border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36; 648,402</FONT> </TD>
    <TD width="15%" align=left style="border-bottom:1px solid #000000; border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36;1,515,645</FONT> </TD>
    <TD width="15%" align=left style="border-bottom:1px solid #000000; border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36;2,733,683</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="55%" align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">&nbsp;&nbsp;Quarterly
        Period Ended September 30</FONT> </TD>
    <TD width="15%" align=left style="border-bottom:1px solid #000000; border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36; 789,404</FONT> </TD>
    <TD width="15%" align=left style="border-bottom:1px solid #000000; border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36;1,894,976</FONT> </TD>
    <TD width="15%" align=left style="border-bottom:1px solid #000000; border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36;3,305,891</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="55%" align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">&nbsp;&nbsp;Quarterly
        Period Ended September 30</FONT> </TD>
    <TD width="15%" align=left style="border-bottom:1px solid #000000; border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36;980,181</FONT> </TD>
    <TD width="15%" align=left style="border-bottom:1px solid #000000; border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36;2,310,248</FONT> </TD>
    <TD width="15%" align=left style="border-bottom:1px solid #000000; border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36;3,676,798</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="55%" align=left><FONT size=2 face="serif">&nbsp;&nbsp;Quarterly
        Period Ended December 31</FONT> </TD>
    <TD width="15%" align=left  style="border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36;1,418,749</FONT> </TD>
    <TD width="15%" align=left  style="border-left:1px solid #000000;">&nbsp;&nbsp;<FONT size=2 face="serif">&#36;2,176,249</FONT> </TD>
    <TD width="15%" align=center  style="border-left:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
  </TR>
</TABLE>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Management
    attributes the significant increase in our revenue from the prior quarterly
    period and the same reporting period in the prior year to the increase in
    our sales force, the establishment of new pharmacies, and an expansion of
    our business beyond the pain management sector to service customers that
    require prescriptions to treat cancer, psychiatric, and neurological conditions.
    Our management anticipates that revenues will continue to increase based
    upon the efforts of additional sales personnel retained and the establishment
    of additional pharmacies in the current year.</FONT></P>
<P align="left"> <I><FONT size=2 face="serif">Cost of Sales</FONT></I><FONT size=2 face="serif"> </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">The
    total cost of sales for the three months ended September 30, 2007 was &#36;2,826,026,
    a 64% increase from &#36;1,719,320 for the three months ended September 30,
    2006. For the nine months ended September 30, 2007, the total cost of sales
    increased 69% to &#36;7,287,141, from &#36;4,310,959 for the nine months
    ended September 30, 2006. The cost of sales consists primarily of the pharmaceuticals.
    The increase in the cost of sales is primarily attributable to the increased
    sales in the reporting period.</FONT></P>
<P align="left"> <I><FONT size=2 face="serif">Gross Profit</FONT></I><FONT size=2 face="serif"> </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Gross
    profit increased to &#36;850,772, or approximately 23% of sales, for the
    three months ended September 30, 2007, as compared to gross profit of &#36;590,928,
    or approximately 25% of sales for the three months ended September 30, 2006.
    The decrease in our gross profit percentages for the three months ended September
    30, 2007 when compared to the same reporting period in the prior fiscal year
    is primarily attributable to a change in legislation affecting our California
    pharmacies resulting in lower profits on reimbursements for prescriptions
    related to workers compensation claims. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Gross
    profit increased to &#36;2,429,231, or approximately 25% of sales, for the
    nine months ended September 30, 2007, as compared to gross profit of &#36;1,409,910,
    or approximately 25% of sales for the nine months ended September 30, 2006.
    There has been no change in our gross profit percentage for the nine months
    ended September 30, 2007 when compared to the same reporting period in the
    prior fiscal year. Increase in gross profit is primararily due to increase
    in sales volume. </FONT></P>

<P align="center"><font size="2" face="serif">22</font></P>
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<P align="left" style="page-break-before:always"></P><page>


<P align="left"> <I><FONT size=2 face="serif">Operating Expenses</FONT></I><FONT size=2 face="serif"> </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Operating
    expenses for the three months ended September 30, 2007 were &#36;1,405,718,
    a 1% decrease from &#36;1,426,963 for the three months ended September 30,
    2006. Our operating expenses for the three months ended September 30, 2007
    consisted of salaries and related expenses of &#36;654,326, consulting and
    other compensation of &#36;224,650, and selling, general and administrative
    expenses of &#36;526,742. Our operating expenses for the three months ended
    September 30, 2006 consisted of salaries and related expenses of &#36;500,382,
    consulting and other compensation of &#36;384,218, and selling, general and
administrative expenses of &#36;542,363.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Operating
    expenses for the nine months ended September 30, 2007 were &#36;4,189,750,
    a 2% decrease from &#36;4,300,411 for the nine months ended September 30,
    2006. Our operating expenses for the nine months ended September 30, 2007
    consisted of salaries and related expenses of &#36;1,948,442, consulting
    and other compensation of &#36;672,285, and selling, general and administrative
    expenses of &#36;1,569,023. Our operating expenses for the nine months ended
    September 30, 2006 consisted of salaries and related expenses of &#36;1,580,847,
    consulting and other compensation of &#36;1,210,918, and selling, general
and administrative expenses of &#36;1,508,646.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Salaries
    and related expenses were significantly higher in the three and nine months
    ended September 30, 2007 when compared to the three and nine months ended
    September 30, 2006 primarily attributable to retaining additional personnel
    to adequately staff our second location in Portland, Oregon which we opened
    in June 2006 and our Gresham, Oregon location which opened in January 2007.
    The decrease in consulting and other compensation for the three and nine
    months ended September 30, 2007, when compared to the three and nine months
    ended September 30, 2006, is primarily attributable a reduction in the number
    of consultants retained during the reporting period. The increase in selling,
    general and administrative expenses for the nine months ended September 30,
    2007, as compared to the same reporting period in the prior year was primarily
    a result of granting to outside members of our board of directors common
stock valued at &#36;120,000 during the first quarter of 2007. </FONT></P>
<P align="left"> <I><FONT size=2 face="serif">Other Expenses</FONT></I><FONT size=2 face="serif"> </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">During
    the three months ended September 30, 2007, we reported other expenses in
    the amount of &#36;162,607, compared to &#36;107,142 for the three months
    ended September 30, 2006.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">During
    the nine months ended September 30, 2007, we reported other expenses in the
    amount of &#36;455,120, compared to &#36;209,396 for the nine months ended
    September 30, 2006.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Other
    expenses reported during the three and nine months ended September 30, 2007
    consisted almost entirely of interest expense which was incurred in connection
    with our acquisition of 49% of the ownership interest in Assured Pharmacies
    Inc. and interest on convertible debentures issued in a private offering.
    Interest expense for the three and nine months ended September 30, 2006 was</FONT></P>

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<P align="left"><FONT size=2 face="serif"> incurred on financing from related
    parties. The increase in other expenses is primarily due to interest expense
    attributable to the issuance of convertible debentures.</FONT></P>
<P align="left"> <I><FONT size=2 face="serif">Net Loss</FONT></I><FONT size=2 face="serif"> </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Net
    loss for the three months ended September 30, 2007 was &#36;722,185, a 26%
    decrease from the net loss of &#36;981,085 for the three months ended September
    30, 2006. Net loss for the nine months ended September 30, 2007 was &#36;2,232,531,
    a 29% decrease from the net loss of &#36;3,144,983 for the nine months ended
    September 30, 2006. The decrease in our net loss was primarily attributable
    to increased gross profit and lower operating expenses during the reporting
    periods. When comparing the three months ended September 30, 2007 to the
    same reporting period in the prior year, we were able to increase gross profit
    by approximately 44% while simultaneously reducing operating expenses by
    1%. When comparing the nine months ended September 30, 2007 to the same reporting
    period in the prior year, we were able to increase gross profit by approximately
    72% while simultaneously reducing operating expenses by 2%. Our management
    believes that this is a favorable trend toward profitability. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Our
    loss per common share for the three months ended September 30, 2007 was &#36;0.01,
    compared to a loss per common shares of &#36;0.02 for the three months ended
    September 30, 2006. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Our
    loss per common share for the nine months ended September 30, 2007 was &#36;0.04,
    compared to a loss per common shares of &#36;0.06 for the nine months ended
    September 30, 2006. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Liquidity and Capital Resources </FONT></B></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">As of
    September 30, 2007, we had &#36;267,584 in cash. As of September 30, 2007,
    we had current assets in the amount of &#36;3,150,608 and current liabilities
    in the amount of &#36;6,245,472 resulting in a working capital deficit of &#36;3,094,864.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Operating
    activities used &#36;1,458,257 in cash for the nine months ended September
    30, 2007, as compared to &#36;2,716,764 for the same period last year. Our
    net loss of &#36;2,232,531 was the primary reason for our negative operating
    cash flow. In addition, our accounts receivable increased by &#36;855,772
    and inventories increased by &#36;486,634 mainly due to increased sales and
    additional operations. Investing activities during the nine months ended
    September 30, 2007 used &#36;51,288 for the purchase of property and equipment.
    Net cash flows provided by financing activities during the nine months ended
    September 30, 2007 was &#36;1,310,723 due primarily to the &#36;925,000 we
    received from as proceeds from the issue of convertible notes and &#36;568,000
    from notes issued to related parties during the reporting period. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">At December 31, 2007,
convertible notes in the aggregate principal amount of &#36;1,958,500
    were past due. In order for us to finance
    operations, continue our growth plan and service our existing debt (including
    the repayment of the convertible notes), additional funding will be required
    from external sources. We intend to fund operations through increased sales
    and debt and/or equity financing arrangements, which may be insufficient
    to fund our capital expenditures, working capital, or other cash requirements
    for the next twelve months. Our</FONT></p>


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<P align="left"><FONT size=2 face="serif"> management anticipates that its financing
    efforts will result in sufficient funds to finance our operations beyond
    the next twelve months, but there can be no assurance that such additional
financing will be available to us on acceptable terms, or at all.</FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Off Balance Sheet Arrangements</FONT></B></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">As of
    September 30, 2007, there were no off balance sheet arrangements.</FONT></P>
<P align="left"><B><FONT size=2 face="serif">Going Concern </FONT></B></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">The
    accompanying condensed consolidated financial statements have been prepared
    assuming that we will continue as a going concern, which contemplates, among
    other things, the realization of assets and satisfaction of liabilities in
    the ordinary course of business. As of September 30, 2007, we had an accumulated
    deficit of &#36;21,967,907, recurring losses from operations and negative
    cash flow from operating activities of &#36;1,458,257 for the nine months
    ended September 30, 2007. We also had a negative working capital of &#36;3,094,864
    as of September 30, 2007. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">We intend
    to fund operations through increased sales and debt and/or equity financing
    arrangements, which may be insufficient to fund capital expenditures, working
    capital or other cash requirements for the next twelve months. We intend
    to seek additional funds to finance our long-term operations. The successful
    outcome of future financing activities cannot be determined at this time
    and there is no assurance that if achieved, we will have sufficient funds
    to execute our intended business plan or generate positive operating results.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">These
    factors, among others, raise substantial doubt about our ability to continue
    as a going concern. The accompanying condensed consolidated financial statements
    do not include any adjustments related to recoverability and classification
    of asset carrying amounts or the amount or classification of liabilities
    that might result should we be unable to continue as a going concern. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">In response
    to these problems, management has taken the following actions:</FONT></P>
<UL>
  <LI>
    <P align="left"><FONT size=2 face="serif">We are expanding our revenue base
        beyond the pain management sector to service customers
        that require prescriptions to treat cancer, psychiatric, and neurological conditions.</FONT></P>
  </LI>
  <LI>
    <P align="left"><FONT size=2 face="serif">We are aggressively signing up
        new physicians, which will result in new patients.</FONT></P>
  </LI>
  <LI>
    <P align="left"><FONT size=2 face="serif">We are seeking investment capital.</FONT></P>
  </LI>
  <LI>
    <P align="left"><FONT size=2 face="serif">We retained additional sales personnel
        to attract business.</FONT></P>
  </LI>
</UL>
<P align="left"> <B><FONT size=2 face="serif">Critical Accounting Policies </FONT></B></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">In December
    2001, the SEC requested that all registrants list their most &#147;critical
    accounting polices&#148; in the Management Discussion and Analysis. The SEC
    indicated that a &#147;critical accounting policy&#148; is one which is both
    important to the portrayal of a company&#146;s financial condition and results,
    and requires management&#146;s most difficult, subjective or complex </FONT>
</P>

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<p align="left">
<FONT size=2 face="serif">judgments,
    often as a result of the need to make estimates about the effect of matters
    that are inherently uncertain. We believe that the following accounting policies
    fit this definition. </FONT><P align="left"><B><FONT size=2 face="serif">Inventories</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Inventories
    are stated at the lower of cost (first-in, first-out method) or estimated
    market, and consist primarily of pharmaceutical drugs. Market is determined
    by comparison with recent sales or net realizable value. Net realizable value
    is based on management&#146;s forecast for sales of its products or services
    in the ensuing years and/or consideration and analysis of changes in customer
    base, product mix, payor mix, third party insurance reimbursement levels
    or other issues that may impact the estimated net realizable value. Management
    regularly reviews inventory quantities on hand and records a reserve for
    shrinkage and slow-moving, damaged and expired inventory, which</FONT><I><FONT size=2 face="serif"> </FONT></I><FONT size=2 face="serif">is
    measured as the difference between the inventory cost and the estimated market
    value based on management&#146;s assumptions about market conditions and
    future demand for its products. No reserves were provided at September 30,
    2007 and 2006, respectively, as the reserves were insignificant to the accompanying
    financial statements. Should the demand for the our products prove to be
    less than anticipated, the ultimate net realizable value of our inventories
    could be substantially less than reflected in the accompanying consolidated
    balance sheet. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Inventories
    are comprised of brand and generic pharmaceutical drugs. Brand drugs are
    purchased primarily from one wholesale vendor and generic drugs are purchased
    primarily from multiple wholesale vendors. Our pharmacies maintain a wide
    variety of different drug classes, known as Schedule II, Schedule III, and
    Schedule IV drugs, which vary in degrees of addictiveness. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Schedule
    II drugs, considered narcotics by the DEA are the most addictive; hence,
    they are highly regulated by the DEA and are required to be segregated and
    secured in a separate cabinet. Schedule III and Schedule IV drugs are less
    addictive and are not regulated. Because our business model focuses on servicing
    pain management doctors and chronic pain patients, we carry in inventory
    a larger amount of Schedule II drugs than most other pharmacies. The cost
    in acquiring Schedule II drugs is higher than Schedule III and IV drugs.</FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Long-Lived Assets</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">We adopted
    Statement of Financial Accounting Standard (&#147;SFAS&#148;) No. 144,  &#147;</FONT><I>Accounting
    for the Impairment or Disposal of Long-Lived Assets</I>&#148;, <FONT size=2 face="serif">which
    addresses financial accounting and reporting for the impairment or disposal
    of long-lived assets. SFAS No. 144 requires that long-lived assets be reviewed
    for impairment whenever events or changes in circumstances indicate that
    their carrying amount may not be recoverable. If the cost basis of a long-lived
    asset is greater than the projected future undiscounted net cash flows from
    such asset, an impairment loss is recognized. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Impairment
    losses are calculated as the difference between the cost basis of an asset
    and its estimated fair value. SFAS No. 144 also requires companies to separately
    report discontinued operations, and extends that reporting to a component
    of an entity that either has been disposed of (by sale, abandonment or in
    a distribution to owners) or is classified as held for sale. Assets to be
    disposed of are reported at the lower of the carrying amount or the estimated
    fair value less costs to sell. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Our
    long-lived assets consist of computers, software, office furniture and equipment,
    store fixtures and </FONT></P>

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<P align="left"><FONT size=2 face="serif">leasehold improvements on pharmacy
    build-outs which are depreciated with useful lives varying from 3 to 10 years.
    Leasehold improvements are depreciated over the shorter of the useful life
    or the remaining lease term, typically 5 years. We assess the impairment
of these long-lived assets at least annually and makes adjustment accordingly. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Intangible Assets</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">Statement
    of Financial Accounting standard (&#147;SFAS&#148;) No. 142,&#147;Goodwill
    and Other Intangible Assets&#148;, addresses how intangible assets that are
    acquired individually or with a group of other assets should be accounted
    for upon their acquisition and after they have been initially recognized
    in the financial statements. SFAS No. 142 requires that goodwill and identifiable
    intangible assets that have indefinite lives not be amortized but rather
    be tested at least annually for impairment, and intangible assets that have
    finite useful lives be amortized over their estimated useful lives. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">SFAS
    No. 142 provides specific guidance for testing goodwill and intangible assets
    that will not be amortized for impairment. In addition, SFAS No. 142 expands
    the disclosure requirements about intangible assets in the years subsequent
    to their acquisition. Impairment losses for goodwill and indefinite-life
    intangible assets that arise due to the initial application of SFAS No. 142
are to be reported as a change in accounting principle. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Revenue Recognition</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">We recognize
    revenue on an accrual basis when the product is delivered to the customer.
    Payments are received directly from the customer at the point of sale, or
    the customers&#146; insurance provider is billed. Authorization which assures
    payment is obtained from the customers&#146; insurance provider before the
    medication is dispensed to the customer. Authorization is obtained for the
    vast majority of these sales electronically and a corresponding authorization
    number is issued by the customers&#146; insurance provider. </FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT size=2 face="serif">We account
    for shipping and handling fees and costs in accordance with EITF 00-10  &#147;<I>Accounting
    for Shipping and Handling Fees and Costs.</I>&#148;  Such
    fees and costs are immaterial to our operations. </FONT></P>

<P align="left"> <B><FONT size=2 face="serif">Recently Issued Accounting Pronouncements</FONT></B></P>

<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB
    Staff Position (FSP) No. FAS 123(R)-5, &#147;</FONT><I><FONT size=2 face="serif">Amendment
    of FASB Staff Position FAS 123(R)-1, Classification of Options and Similar
    Instruments Issued as Employee Compensation That Allow for Cash Settlement
    upon the Occurrence of a Contingent Event&#148;,</FONT></I><FONT size=2 face="serif"> was
    posted on October 10, 2006. This FASB Staff Position (FSP) addresses whether
    a modification of an instrument in connection with an equity restructuring
    should be considered a modification for purposes of applying FSP FAS 123(R)-1.
    This FSP states that a freestanding financial instrument issued to an employee
    in exchange for past or future employee services that is subject to Statement
    123(R) or was subject to Statement 123(R) upon initial adoption of that Statement
    shall continue to be subject to the recognition and measurement provisions
    of Statement 123(R) throughout the life of the instrument, unless its terms
    are modified when the holder is no longer an employee. The guidance in this
    should be applied upon initial adoption of Statement 123(R).</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB
    Staff Position (FSP) No. FAS 123(R)-6, &#147;</FONT><I><FONT size=2 face="serif">Technical
    Corrections of FASB Statement No. 123(R)&#148;,</FONT></I><FONT size=2 face="serif"> was
    posted on October 10, 2006. This FASB Staff Position (FSP) (a) exempts nonpublic
    entities from disclosing the aggregate intrinsic value of outstanding fully
    vested share options (or share units) and share options expected to vest,
    (b) revises the computation of the minimum compensation cost that must be
    recognized to clarify that at the date that for awards that are no longer
    probable of vesting, any previously recognized compensation cost should have
    be reversed.</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Statement
    of Financial Accounting Standards No. 155, &#147;</FONT><I><FONT size=2 face="serif">Accounting
    for Certain Hybrid Financial Instruments&#151;an amendment of FASB Statements
    No. 133 and 140&#148;</FONT></I><FONT size=2 face="serif">, was issued in
    February 2006 and is effective for all financial instruments acquired or
    issued after the beginning of an entity&#146;s first fiscal year that begins
    after September 15, 2006. Certain parts of this Statement may be applied
    prior to the adoption of this Statement. Earlier adoption is permitted as
    of the beginning of an entity&#146;s fiscal year, provided the entity has
    not yet issued financial statements, including financial statements for any
    interim period for that fiscal year. Provisions of this Statement may be
    applied to instruments that an entity holds at the date of adoption on an
    instrument-by-instrument basis.</FONT></P>


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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets&#151;an amendment of FASB Statement No. 140, pertains to the servicing of financial assets and
was issued in March 2006 and should be adopted as of the beginning of its first fiscal year that begins after September 15, 2006. Earlier adoption is permitted as of the beginning of an entity&#146;s fiscal year, provided the entity has not yet
issued financial statements, including interim financial statements, for any period of that fiscal year.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Statement of Financial Accounting Standards No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant
measurement attribute.  Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including
financial statements for an interim period within that fiscal year.</FONT><FONT face="serif"> </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities &#150; Including an Amendment to FASB Statement No. 115. This Statement
permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board&#146;s long-term measurement
objectives for accounting for financial instruments. This Statement is effective as of the beginning of an entity&#146;s first fiscal year that begins after November 15, 2007, and interim periods within those fiscal years. Early adoption is
permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB Staff Position (FSP) No. FAS 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction, was posted
on July 13, 2006 and is effective for fiscal years beginning after December 15, 2006. This FSP addresses how a change or projected change in the timing of cash flows relating to income taxes generated by a leveraged lease transaction affects the
accounting by a lessor for that lease. The guidance in this FSP amends FASB Statement No. 13, Accounting for Leases.  The guidance in this FSP is to be applied to fiscal years beginning after December 15, 2006. Earlier application is permitted as of
the beginning of an entity&#146;s fiscal year, provided that the entity has not yet issued financial statements, including financial statements for any interim period, for that fiscal year.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes&#151;an Interpretation of FASB Statement No. 109 (FIN 48) in June 2006.  This Interpretation primarily relates
to tax positions taken or expected to be taken in a tax return and clarifies the accounting for uncertainty in income taxes recognized in an enterprise&#146;s financial statements. Under this Interpretation the effects of a tax position would be
recognized or derecognized </FONT></P>


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<P align="left">
<FONT size=2 face="serif">depending on what outcome is more likely than not to occur with respect to the position. The Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure, and transition. It requires that all tax positions be evaluated using the more-likely-than-not recognition threshold, and that the enterprise should presume that the position will be examined by the appropriate taxing authority that
would have full knowledge of all relevant information for recognition, derecognition, and measurement using consistent criteria.  Disclosures are required about the effect of unrecognized tax benefits related to tax positions as well as information
about the nature of the uncertainties related to tax positions where it is reasonably possible that changes in the tax provision will occur in the next 12 months of this Interpretation will provide more information about the uncertainty in income
tax assets and liabilities. This Interpretation is effective for fiscal years beginning after December 15, 2006.  Earlier application of the provisions of this Interpretation is encouraged if the enterprise has not yet issued financial statements,
including interim financial statements, in the period this Interpretation is adopted.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB Staff Position (FSP) No. FTB 85-4-1, Accounting for Life Settlement Contracts by Third-Party Investors, was posted in March 27, 2006 and is effective for fiscal years beginning after June
15, 2006. It provides initial and subsequent measurement guidance and financial statement presentation and disclosure guidance for investments by third-party investors in life settlement contracts.  This FSP also amends certain provisions of FASB
Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance, and FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB Staff Position (FSP) No. AUG AIR-1, Accounting for Planned Major Maintenance Activities, was posted on September 8, 2006 and is effective for the first fiscal year beginning after December
15, 2006. This FSP addresses the accounting for planned major maintenance activities and amends certain provisions in the AICPA Industry Audit Guide, Audits of Airlines (Airline Guide), and APB Opinion No. 28, Interim Financial Reporting. The
Airline Guide permits four alternative methods of accounting for planned major maintenance activities: direct expense, built-in overhaul, deferral, and accrual (accrue-in-advance). Those methods are widely used by other industries. The FSP prohibits
the use of the accrue-in-advance method. The Company does not expect that this pronouncement will have any significant effect on future financial statements.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB Staff Position No. FAS 126-1, Applicability of Certain Disclosure and Interim Reporting Requirements for Obligors for Conduit Debt Securities, was posted on October 25, 2006. This FASB
Staff Position (FSP) clarifies the definition of a public entity in certain accounting standards to include entities that are conduit bond obligors for conduit debt securities that are traded in a public market.  The guidance in this FSP is to be
applied prospectively in fiscal periods beginning after December 15, 2006.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB Staff Position No. FIN 46(R)-6, Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R). This FASB Staff Position (FSP) addresses how a reporting enterprise
should determine the variability to be considered in applying FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities. The variability that is considered in applying Interpretation 46(R) affects the
determination of (a) whether the entity is a variable interest entity (VIE), (b) which interests are variable interests1 in the entity, and (c) which party, if any, is the primary beneficiary of the VIE. That variability will affect any calculation
of expected losses and expected residual returns, if such a calculation is necessary. Retrospective application, if elected, must be completed no later than the end of the first annual reporting period ending after July 15, 2006. </FONT></P>

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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In September 2005, AcSEC issued Statement of Position 05-1: Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance
Contracts (SOP 05-1).  SOP 05-1 is effective for fiscal years beginning after December 15, 2006, with earlier adoption encouraged.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF Issue 05-1, Accounting for the Conversion of an Instrument That Became Convertible upon the Issuer's Exercise of a Call Option. The Task Force reached a consensus that the issuance of
equity securities to settle a debt instrument (pursuant to the instrument's original conversion terms) that became convertible upon the issuer's exercise of a call option should be accounted for as a conversion if the debt instrument contained a
substantive conversion feature as of its issuance date, as defined herein. That is, no gain or loss should be recognized related to the equity securities issued to settle the instrument. The issuance of equity securities to settle a debt instrument
that became convertible upon the issuer's exercise of a call option should be accounted for as a debt extinguishment if the debt instrument did not contain a substantive conversion feature as of its issuance date. That is, the fair value of the
equity securities issued should be considered a component of the reacquisition price of the debt. This Issue applies to all conversions within the scope of this Issue that result from the exercise of call options and is effective in interim or
annual reporting periods beginning after June 28, 2006 (the Board ratification date of the consensus), irrespective of whether the instrument was entered into prior or subsequent to Board ratification of this Issue. For instruments issued prior to
the effective date of this consensus, the assessment as to whether a substantive conversion feature exists at issuance should be based only on assumptions, considerations, and/or marketplace information available as of the issuance date.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF Issue 06-1, Accounting for Consideration Given by a Service Provider to a Manufacturer or Reseller of Equipment Necessary for an End-Customer to Receive Service from the Service Provider
The Task Force reached a consensus that if the consideration given by a service provider to a manufacturer or reseller (that is not a customer of the service provider) can be linked contractually to the benefit received by the service
provider&#146;s customer, a service provider should use the guidance in Issue 01-9 to determine the characterization of the consideration (that is, &#147;cash consideration&#148; or &#147;other than cash&#148; consideration). Issue 01-9 presumes
that an entity should characterize &#147;cash consideration&#148; as a reduction of revenue unless an entity meets the requirements of paragraph 9 of Issue 01-9. Under Issue 01-9, &#147;other than cash&#148; consideration should be characterized as
an expense. In applying that guidance, the service provider should characterize the consideration given to a third-party manufacturer or reseller based on the form of consideration directed by the service provider to be provided to the service
provider's customer. If the form of the consideration is directed to be anything other than "cash consideration" (as defined in Issue 01-9), then the form of the consideration should be characterized as "other than cash" consideration. If the
service provider does not control the form of the consideration provided to the service provider's customer, the consideration should be characterized as "other than cash" consideration. In reaching this conclusion, Task Force members observed that
consideration paid by a service provider that results in a customer receiving a reduced price on equipment purchased from a manufacturer or reseller should be characterized as "other than cash" consideration for purposes of applying Issue 01-9. The
consensus in this Issue is effective for the first annual reporting period beginning after June 15, 2007. Earlier application is permitted for financial statements that have not yet been issued. Entities should recognize the effects of applying the
consensus in this Issue as a change in accounting principle through retrospective application to all prior periods unless it is impracticable to do so.</FONT></P>

<P align="center"><font size="2" face="serif">30</font></P>

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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF Issue 06-2, Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43, "Accounting for Compensated Absences"  An employer may provide its employees with
sabbatical leave or other similar benefits.  Sabbatical leave involves an employee receiving time off upon working at the employer for a specific period of time.  When an employer provides sabbatical leave or another similar benefit, the employer
must determine whether such benefit should be accrued based on the guidance in FASB Statement No. 43, Accounting for Compensated Absences. The Task Force reached a consensus that an employee's right to a compensated absence under a sabbatical or
other similar benefit arrangement (a) that requires the completion of a minimum service period and (b) in which the benefit does not increase with additional years of service accumulates pursuant to Statement 43 for arrangements in which the
individual continues to be a compensated employee and is not required to perform duties for the entity during the absence.  Therefore, assuming all of the other conditions of Statement 43 are met, the compensation cost associated with a sabbatical
or other similar benefit arrangement should be accrued over the requisite service period.  This Issue should be effective for fiscal years beginning after December 15, 2006. An entity should apply the consensus reached in this Issue through either
(a) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets in the statement of financial position at the beginning of the year of adoption or (b) a change in
accounting principle through retrospective application to all prior periods. Earlier adoption of this guidance is permitted as of the beginning of an entity's fiscal year provided that the entity has not yet issued financial statements, including
interim financial statements, for any period of that fiscal year. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF Issue 06-3, How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation). The
issue concerns whether various non-income taxes assessed by governmental authorities should be presented gross or net in an entity's income statement. Non-income taxes on which this question has arisen include sales tax, use tax, excise tax, value
added tax, and various taxes related to specific industries (e.g., the severance tax in the oil and gas industry and the franchise tax in the cable industry). The Task Force reached a consensus that the scope of this Issue includes any tax assessed
by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added, and some excise taxes. The Task Force also reached a consensus
that the presentation of taxes on either a gross (included in revenues and costs) or a net (excluded from revenues) basis is an accounting policy decision that should be disclosed pursuant to Opinion 22. In addition, for any such taxes that are
reported on a gross basis, a company should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. The disclosure of those taxes can
be done on an aggregate basis.  The consensuses in this Issue should be applied to financial reports for interim and annual reporting periods beginning after December 15, 2006. Earlier application is permitted.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF Issue 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. An endorsement split-dollar life insurance
should be recognized as a liability for future benefits in accordance with Statement 106 (if, in substance, a postretirement benefit plan exists) or Opinion 12 (if the arrangement is, in substance, an individual deferred compensation contract) based
on the substantive agreement with the employee. The consensus in this Issue is effective for fiscal years beginning after December 15, 2007, with earlier application permitted.</FONT></P>
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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF Issue 06-5, Accounting for Purchases of Life Insurance&#151;Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4.  A policyholder should
consider any additional amounts included in the contractual terms of the policy in determining the amount that could be realized under the insurance contract. When it is probable (as is used in FASB Statement No. 5) that contractual terms would
limit the amount that could be realized under the insurance contract, the Task Force agreed that these contractual limitations should be considered when determining the realizable amounts. Those amounts that are recoverable by the policyholder at
the discretion of the insurance company should be excluded from the amount that could be realized under the insurance contract. The consensus in this Issue is effective for fiscal years beginning after December 15, 2006. Earlier application is
permitted as of the beginning of a fiscal year for periods in which interim or annual financial statements have not yet been issued.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF Issue 06-8, Applicability of the Assessment of a Buyer's Continuing Investment under FASB Statement No. 66 for Sales of Condominiums. In assessing the collectibility of the sales price
pursuant to paragraph 37(d) of Statement 66, an entity should evaluate the adequacy of the buyer's initial and continuing investment to conclude that the sales price is collectible. This Issue is effective for the first annual reporting period
beginning after March 15, 2007. Earlier application is permitted as of the beginning of an entity's fiscal year provided that the entity has not yet issued financial statements for that fiscal year.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF Issue 06-10, Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements.  The Task Force reached a consensus on Issue 1 that an employer should recognize a liability for
the postretirement benefit related to a collateral assignment split-dollar life insurance arrangement if the employer has agreed to maintain a life insurance policy during the employee's retirement or provide the employee with a death benefit based
on the substantive agreement with the employee.</FONT></P>


<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Management
    does not believe that SFAS No. 155, 156, 157 and 159 will have an impact on our consolidated
    financial statements. </FONT></P>

<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Other
    recent accounting pronouncements issued by the FASB (including its Emerging
    Issues Task Force), the American Institute of Certified Public Accountants,
    and the SEC did not or are not believed by management to have a material
    impact on our present or future consolidated financial statements included
    elsewhere herein. </FONT></P>
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<P align="center"> <B><FONT size=2 face="serif">BUSINESS</FONT></B></P>
<P align="left"> <B><FONT size=2 face="serif">Overview</FONT></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We are
    engaged in the business of operating specialty pharmacies that dispense highly
    regulated pain medication. We recently expanded our business beyond pain
    management to service customers that require prescriptions to treat cancer,
    psychiatric, and neurological conditions. We derive our revenue primarily
    from the sale of prescription drugs and do not keep in inventory non-prescription
    drugs or health and beauty related products inventoried at traditional pharmacies.
    The majority of our business is derived from repeat business from our customers. &#147;Walk-in&#148; prescriptions
    from physicians are limited.</FONT></P>
<P align="left">
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We currently
    have six operating pharmacies. Our first pharmacy was opened on October 13,
    2003 in Santa Ana, California. On June 10, 2004, we opened our second pharmacy
    in Riverside, California. These pharmacies were opened pursuant to a joint
    venture agreement entered into with TPG, LLC where we maintained a 51% ownership
    interest in these pharmacies. On December 15, 2006, we entered into a Purchase
    Agreement with TPG and acquired its 49% ownership in these pharmacies. As
    a result of this acquisition, we increased our ownership interest in these
    pharmacies to 100%. We opened our third pharmacy in Kirkland, Washington
    on August 11, 2004. Our fourth pharmacy was opened in Portland, Oregon on
    September 21, 2004. On June 21, 2006, we opened our fifth pharmacy also located
    in Portland, Oregon. The pharmacies located in Kirkland and Portland were
    opened pursuant to a joint venture agreement with TAPG LLC in which we have
    a 94.8% ownership interest in these pharmacies. In January 2007, we opened
our sixth pharmacy in Gresham, Oregon and our third wholly-owned pharmacy. In
    December 2007, we opened our seventh pharmacy in Las Vegas, Nevada, but in
    February 2008 we consolidated our two pharmacies in Portland, Oregon into
    a single operation.</FONT></P>



<P align="left"> <B><I><FONT size=2 face="serif">Agreement with TPG, L.L.C.</FONT></I></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On April
    24, 2003, we entered into an agreement with TPG, L.L.C. (&#147;</FONT><I><FONT size=2 face="serif">TPG</FONT></I><FONT size=2 face="serif">&#148;)
    for the purpose of funding the establishment and operations of pharmacies.
    Under this agreement, TPG held the right to fund on a joint venture basis
    fifty pharmacies that we established. In exchange for contributing financing
    in the amount of &#36;230,000 per pharmacy location, TPG acquired a 49% ownership
    interest in each pharmacy established under this agreement and we owned the
    remaining 51%. Under the terms of the agreement with TPG, our contribution
    to establish pharmacies primarily consisted of the right to utilize our intellectual
    property rights and to provide sales and marketing services. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Assured
    Pharmacies, Inc. (&#147;</FONT><I><FONT size=2 face="serif">API</FONT></I><FONT size=2 face="serif">&#148;)
    was formed to establish and operate the pharmacies that would be operated
    under the agreement with TPG. In accordance with the terms of the agreement
    with TPG, we owned 51% of API and TPG owned the remaining 49%.</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Under
    this joint venture, we established our first pharmacy in Santa Ana, California
    and our second pharmacy in Riverside, California. On December 15, 2006, we
    entered into a Purchase Agreement with TPG and acquired all of its right,
    title and interest in 49 shares of common stock of API for &#36;460,000 and
    the issuance of 50,000 shares of our common stock. The cash component of
    the purchase price is payable as follows: </FONT></P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="top">
    <TD width="10%" nowrap><div align="right"><FONT size=2 face="serif">i.</FONT></div></TD>
    <TD width="5%" nowrap>&nbsp;</TD>
    <TD width=85%><P align="left"><FONT size=2 face="serif">&#36;15,000 was
          paid on or about December 15, 2006;</FONT></P></TD>
  </TR>
  <TR valign="top">
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD width="10%" nowrap><div align="right"><FONT size=2 face="serif">ii.</FONT></div></TD>
    <TD width="5%" nowrap>&nbsp;</TD>
    <TD width=85%><P align="left"><FONT size=2 face="serif">Eleven (11) consecutive
          monthly installments of &#36;5,000 payable on or before the 15</FONT><SUP><FONT size=2 face="serif">th </FONT></SUP><FONT size=2 face="serif">of
          each month commencing in January 2007 through November 2007;</FONT></P></TD>
  </TR>
</TABLE>
<p align="center"><font size="2" face="serif">33</font></p>
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<P align="left" style="page-break-before:always"></P><PAGE>
<TABLE border=0 cellspacing=0 cellpadding=0>
  <TR valign="top">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width=85%><P align="left">&nbsp;</P></TD>
  </TR>
  <TR valign="top">
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD nowrap><div align="right"><FONT size=2 face="serif">iii.</FONT></div></TD>
    <TD nowrap>&nbsp;</TD>
    <TD width=85%><P align="left"><FONT size=2 face="serif">Fourteen (14) consecutive
          monthly installments of &#36;15,000 payable on or before the 15</FONT><SUP><FONT size=2 face="serif">th </FONT></SUP><FONT size=2 face="serif">of
          each month commencing in December 2007 through January 2009; and</FONT></P></TD>
  </TR>
  <TR valign="top">
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD nowrap><div align="right"><FONT size=2 face="serif">iv.</FONT></div></TD>
    <TD nowrap>&nbsp;</TD>
    <TD width=85%><P align="left"><FONT size=2 face="serif">&#36;180,000 payable
          together with interest at the rate of prime plus 2% per annum commencing
          from the date of this Purchase Agreement payable on or before February
          15, 2009. Interest shall accrue as of December 15, 2006, the effective
          date of this Agreement.</FONT></P></TD>
  </TR>
  <TR valign="top">
    <TD colspan=3>&nbsp;</TD>
  </TR>
</TABLE>
<P align="left"> <FONT size=2 face="serif">As a result of this acquisition, we
    increased our ownership interest in API to 100% making it a wholly-owned
    subsidiary and consequently resulting in the termination of our joint venture
    with TPG. </FONT></P>
<P align="left"> <B><I><FONT size=2 face="serif">Agreement with TAPG, L.L.C.</FONT></I></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In February
    2004, we entered into an agreement (the &#147;</FONT><I><FONT size=2 face="serif">Agreement</FONT></I><FONT size=2 face="serif">&#148;)
    with TAPG, L.L.C. (&#147;</FONT><I><FONT size=2 face="serif">TAPG</FONT></I><FONT size=2 face="serif">&#148;),
    a Louisiana limited liability company, and formed Safescript Northwest, Inc.  (&#147;</FONT><I><FONT size=2 face="serif">Safescript
      Northwest&#148;</FONT></I><FONT size=2 face="serif">), a Louisiana corporation.
      Safescript Northwest was formed to establish and operate up to five pharmacies.
      Effective August 19, 2004, Safescript Northwest filed amended articles
      of incorporation and changed its name to Assured Pharmacies Northwest,
      Inc. (&#147;APN&#148;). We initially owned 75% of APN, while TAPG owned
      the remaining 25%. In accordance with our shareholders agreement with TAPG,
      TAPG will provide start-up costs in the amount of &#36;335,000 per pharmacy
      location established not to exceed five pharmacies. Under the terms of
      the agreement with TAPG, our contribution to establish pharmacies primarily
      consisted of the right to utilize our intellectual property rights and
      to provide sales and marketing services. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
    Agreement provides that TAPG will contribute start-up costs in the amount
    of &#36;335,000 per pharmacy location established not to exceed five pharmacies.
    Our contribution under the Agreement consists of granting the right to utilize
    our intellectual property rights and to provide sales and marketing services.
    Between March and October 2004, APN received from TAPG start-up funds in
    the amount of &#36;854,213 as its capital contribution for three pharmacies.
    This capital contribution funded the opening of a pharmacy in Kirkland, Washington
    in August 2004 and another pharmacy in Portland, Oregon in September 2004.
    Included in these monies was a partial capital contribution in the amount
    of &#36;190,000 for the establishment of our second pharmacy location in
    Portland, Oregon. TAPG remains obligated to contribute an additional &#36;145,000
    to satisfy their full contribution. We and APN requested that TAPG provide
    the &#36;150,787 balance of its full capital contribution. TAPG is also obligated
    to contribute their proportionate share of the start-up costs in excess of
    their initial capital contribution of &#36;335,000 per pharmacy. The Agreement
    defines start-up costs as any costs associated with the opening of any open
    pharmacy location that accrue within one hundred eighty days following the
    opening of that particular pharmacy.</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Following
    the start-up period, we advanced interest-free loans to sustain operations
    at the pharmacies operated by APN. On March 6, 2006, these loans were converted
    into APN capital stock. Following the conversion of this debt into equity,
    we increased our ownership interest in APN from 75% to 94.8%. TAPG owns
    the remaining 5.2% interest. </FONT></P>
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<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT size=2 face="serif">Safescript Pharmacies, Inc.
        (formerly known as RTIN Holdings, Inc.) License</FONT></I></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In May
    2003, we acquired by assignment the exclusive licensing rights to establish
    and operate pharmacies under the name &#147;Safescript Pharmacies&#148; throughout
    California, Oregon, Washington and Alaska (the &#147;</FONT><I><FONT size=2 face="serif">License</FONT></I><FONT size=2 face="serif">&#148;). </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Safescript
    Pharmacies, Inc. (the &#147;</FONT><I><FONT size=2 face="serif">Licensor</FONT></I><FONT size=2 face="serif">&#148;)
    failed to provide us with essential services as set forth in the license
    agreement and this has forced us to terminate our use of all technology and
    rights granted by the License. On March 17, 2004, we filed a lawsuit in Nevada
    State Court against the Licensor seeking damages, declaratory relief, to
    rescind the License and to recover the consideration paid. On March 19, 2004,
    the Licensor filed for Chapter 11 bankruptcy protection. The litigation in
    Nevada State Court has been stayed by reason of the Licensor&#146;s filing
    for bankruptcy. We refiled substantially the same claim as an adversary proceeding
    in the Licensor&#146;s bankruptcy case in the U.S. Bankruptcy court located
    in Tyler, Texas. In July 2004, this case was transferred to the U.S. District
    Court for the Eastern District of Texas located in Tyler, Texas. </FONT></P>

<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On June
    30, 2005, the United States Bankruptcy Court for the Eastern District of
    Texas located in Tyler, Texas approved a Settlement Agreement and Mutual
    Release (the &#147;<i>Settlement Agreement</i>&#148;) between the Licensor and us.</FONT></P>

<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Under
    the Terms of the Settlement Agreement, the Licensor retained 100,000 shares
    of our common stock and returned 4,344,444 shares of common stock for cancellation.
    In addition, we issued the Licensor 500,000 additional shares of our common
    stock and dismissed the lawsuit pending in the U.S. District Court for the
    Eastern District of Texas located in Tyler, Texas with prejudice. The Agreement
    contained a mutual release which resulted in the Licensor releasing us from
    of any outstanding liability with respect to a note payable due to the Licensor
    in the amount of approximately &#36;1,013,000. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On July
    11, 2005, a creditor of the Licensor filed a motion with the District Court
    for reconsideration of its approval of the Settlement Agreement. On October
    14, 2005, the District Court denied the creditor&#146;s motion. The creditor
    appealed the District Court&#146;s approval of the Settlement Agreement.
    Due to a settlement between the Licensor and the creditor, the appeal was
    withdrawn finalizing our Settlement Agreement with the Licensor. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT size=2 face="serif">License Agreement with Network
        Technology, Inc. (&#147;RxNT&#148;)</FONT></I></B></P>

<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On March
    15, 2004, we entered into a technology license agreement (&#147;<i>Technology
    License</i>&#148;) with Network Technology, Inc. (&#147;</FONT><I><FONT size=2 face="serif">RxNT</FONT></I><FONT size=2 face="serif">&#148;).
    The Technology License grants us the right to use RxNT&#146;s e-prescribing
    technology under the brand name &#147;Assured Script&#148; and enables us
    to accept prescriptions electronically transmitted to our pharmacies. Pursuant
    to the Technology License agreement, we paid RxNT a licensing fee of &#36;100,000
    and are also responsible for paying RxNT a royalty equal to twenty five percent
    (25%) of the gross profit from sales of the &#147;Assured Script&#148; product,
    which refers to the licensed products and technology set forth in the Technology
    License and not prescription drug sales. Given that we are in the business
    of owning and operating pharmacies, management does not anticipate that we
    would make any sales of the &#147;Assured Script&#148; product resulting
    in a royalty payment to RxNT. </FONT></P>

<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On March
    17, 2007, we renewed this agreement for a period of three years and agreed
to pay an annual license fee of &#36;54,000.</FONT></P>
<P align="center"><font size="2" face="serif">35</font></P>
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<P align="left"> <B><FONT size=2 face="serif">Market for Our Products and Services</FONT></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our
    target market initially was to dispense pharmaceutical products exclusively
    to patients who require medication for chronic pain management. We recently
    expanded our business beyond pain management to service customers that require
    prescriptions to treat cancer, psychiatric, and neurological conditions.
    These types of patients are likely to require prescription medications far
    more frequently and for longer periods of time than patients in most other
    medical categories. In order to access this target market, our current marketing
    campaign is designed to further increase consumer awareness of our pharmacies
    and the services they provide to consumers in the Seattle, Washington and
    Los Angeles, California markets. Our specialty pharmacies maintain an inventory
    of highly regulated medication that is specifically tailored to the needs
    of our recurring customers. This practice frequently enables our pharmacies
    to fill customers&#146; prescriptions from its existing inventory and decreases
    the wait time required to fill these prescriptions. Our focus and familiarity
    with dispensing highly regulated medications better positions our pharmacists
    to understand the needs of our customers. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Principal Suppliers</FONT></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We purchased
    99.9% of our inventory of prescription drugs from one wholesale drug vendor
    during the year ended December 2006. Management believes that the wholesale
    pharmaceutical and non-pharmaceutical distribution industry is highly competitive
    because of the consolidation of the pharmacy industry and the practice of
    certain large pharmacy chains to purchase directly from product manufacturers.
    Although management believes we could obtain the majority of our inventory
    through other distributors at competitive prices and upon competitive payment
    terms if our relationship with our primary wholesale drug vendor was terminated,
    there can be no assurance that the termination of such a relationship would
    not adversely affect us. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Customers and Third-Party Payors</FONT></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In fiscal
    2006, nearly all of our pharmacy sales were to customers covered by health
    care insurance plans, which typically contract with a third-party payor such
    as an insurance company, a prescription benefit management company, a governmental
    agency, workers&#146; compensation, a private employer, a health maintenance
    organization or other managed care provider that agrees to pay for all or
    a portion of a customer's eligible prescription purchases. Any significant
    loss of third-party payor business could have a material adverse effect on
    our business and results of operations. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Competition</FONT></B></P>

<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We face
    intense competition with local, regional and national companies, including
    other drugstore chains, independently owned drugstores, mail order pharmacies and
    drug importation. Competition in this industry is intense primarily because
    national pharmacies including Walgreens and CVS Pharmacy have expanded significantly
    and prescription drugs are now offered at a variety of retail establishments
    when traditionally prescription drugs were only provided at local pharmacies.
    Supermarkets and discount stores now maintain retail pharmacies onsite as
    a part of a business plan to provide consumers with all of their retail needs
    at one location. Retail pharmacies such as Walgreens, CVS Pharmacy, and Rite
    Aid are not focused or dedicated to physicians practicing in pain management.
    These retail pharmacies traditionally keep in inventory non-prescription
    drugs, or health and beauty related products such as walking canes, bandages
    and shampoo. Consumers are</FONT></P>

<P align="center"><font size="2" face="serif">36</font></P>
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<P align="left"> <FONT size=2 face="serif">able to have their prescriptions filled
    at these retail pharmacies, but typical retail pharmacies either do not keep
    in inventory or keep limited amounts of Class 2 drugs in inventory. As a
    result, the time it takes for traditional retail pharmacies to fill a prescription
    for Class 2 drug is extended. Because of our pain management focus, we maintain
    an appropriate inventory level of Class 2 drugs to meet the needs of physicians
    that transmit prescription to our pharmacies and do not keep in inventory
    non-prescription drugs or health and beauty related products. We do not intend
    to sell over-the-counter medication or fill prescriptions unrelated to chronic
    pain management or other similar recurring conditions at our pharmacies.
    We will fill prescriptions that address any side effects experienced by individuals
    who have health conditions that require them to be treated for chronic pain. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our
    management is unaware of any company that operates pharmacies in the United
    States that exclusively dispense pharmaceutical products to patients who
    require medication for chronic pain management or other chronic conditions.</FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Patents, Licenses, Trademarks,
      Franchises, Concessions, Royalty Agreements, or Labor Contracts</FONT></B><FONT size=2 face="serif"> </FONT></P>

<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On March
    15, 2004, we entered into a technology license agreement (&#147;</FONT><I><FONT size=2 face="serif">Technology
    License</FONT></I><FONT size=2 face="serif">&#148;) with RxNT. The Technology
    License grants us the right to use RxNT&#146;s e-prescribing technology under
    the brand name &#147;Assured Script.&#148; </FONT></P>

<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On November
    9, 2004, we received trademark approval (registration number 2901258) by
    the United States Patent and Trademark Office for the &#147;</FONT><I><FONT size=2 face="serif">eRXSYS</FONT></I><FONT size=2 face="serif">&#148; company
    logo. We changed our name to Assured Pharmacy, Inc. in October 2005 and no
    longer utilize the trademarked &#147;</FONT><I><FONT size=2 face="serif">eRXSYS</FONT></I><FONT size=2 face="serif">&#148; logo.</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">State
    law requires pharmacies to apply to the State Board of Pharmacy to receive
    a license to operate. The application process to operate a pharmacy is substantially
    similar among different states. The application process for a license on
    average takes sixty days in the state of California. In addition, each pharmacy
    must employ a licensed pharmacist to serve as the Pharmacist in Charge (PIC).
    The PIC oversees personnel and reports on the operations at a specific pharmacy.
    State law regulates the number of employees and clerks that can work under
    the supervision of one PIC. Currently, we are licensed to operate four pharmacies. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Research and Development</FONT></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We did
    not incur any research and development expenditures in either the fiscal
    year ended December 31, 2006 or the fiscal year ended December 31, 2005. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Existing and Probable Governmental
      Regulation</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Pharmacy
    operations are subject to significant governmental regulation on the federal
    and state level. Compliance with governmental regulation is essential to
    continued operations. We are in compliance with each of the laws, rules,
    and regulations set forth below and have not experienced any incidence of
    noncompliance. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">Licensure Laws</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Each
    state&#146;s board of pharmacy enforces laws and regulations governing pharmacists
    and pharmacies. Each of our pharmacies applied and received a license. Licensure
    requires strict </FONT></P>
<P align="center"><font size="2" face="serif">37</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left"> <FONT size=2 face="serif">compliance with state pharmacy standards.
    Although we believe our pharmacies are compliant, changes in pharmacy laws
    and differing interpretations regarding such laws could impact our level
    of compliance. A pharmacy&#146;s failure to comply with applicable law and
    regulation could result in licensure revocation as well as the imposition
    of fines and penalties. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">Drug Enforcement Laws</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
    United States Department of Justice enforces the Drug Enforcement Act through
    the Drug Enforcement Agency (DEA). The DEA strictly enforces regulations
    governing controlled substances. In addition to regulation by the DEA, we
    are subject to significant state regulation regarding controlled substances.
    Because our pharmacies&#146; operations focus on highly regulated pain medications,
    failure to adhere to DEA and state controlled substance requirements could
    jeopardize our ability to operate. While we believe we are in compliance
    with current DEA requirements, such requirements and interpretation of these
    requirements do change over time. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">Federal Health Programs</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As we
    grow, we believe that a significant amount of our revenues will be derived
    from governmental programs such as Medicaid. With the recent passage of the
    Medicare Modernization and Prescription Drug Act of 2003, we also believe
    that Medicare will become a significant source of funding. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">The Federal Health Care Programs
      Anti-Kickback Act</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Federal
    law prohibits the solicitation or receipt of remuneration in return for referrals
    and the offer or payment of remuneration to induce the referral of patients
    or the purchasing, leasing, ordering or arranging for any good, facility,
    service or item for which payment may be made under a &#147;federal health
    care program&#148; (defined as &#147;any plan or program that provides health
    benefits, whether directly, through insurance, or otherwise, which is funded
    directly, in whole or in part, by the United States Government other than
    the Federal Employees Health Benefit Program&#148;). </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Because
    our business and operations involve providing health care services, we are
    subject to the Federal Health Care Programs Anti-Kickback Act (the &#147;</FONT><I><FONT size=2 face="serif">Act</FONT></I><FONT size=2 face="serif">&#148;).
    The Anti-Kickback Statute, codified in 42 U.S.C. &#167; 1320a-7b(b), prohibits
    individuals and entities from knowingly and willfully soliciting, receiving,
    offering or paying any remuneration to other individuals and entities (directly
    or indirectly, overtly or covertly, in cash or in kind): </FONT></P>
<TABLE border=0 cellspacing=0 cellpadding=0>
  <TR valign="top">
    <TD width="5%" nowrap><div align="right"><FONT size=2 face="serif">(i)</FONT></div></TD>
    <TD width=5%>&nbsp;</TD>
    <TD width=90%><P align="left"><FONT size=2 face="serif">In return for referring
          an individual to a person for the furnishing or arranging for the furnishing
          of any item or service for which payment may be made under a federal
          or state health care program; or</FONT></P></TD>
  </TR>
  <TR valign="top">
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD width="5%" nowrap><div align="right"><FONT size=2 face="serif">(ii)</FONT></div></TD>
    <TD width=5%>&nbsp;</TD>
    <TD width=90%><P align="left"><FONT size=2 face="serif">In return for purchasing,
          leasing, ordering or arranging for or recommending purchasing, leasing,
          or ordering any good, facility, service or item for which payment may
          be made under a federal or state health care program.</FONT></P></TD>
  </TR>
  <TR valign="top">
    <TD colspan=3>&nbsp;</TD>
  </TR>
</TABLE>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">There
    are both criminal and civil penalties for violating the Federal Statute.
    Criminal sanctions include a fine not to exceed &#36;25,000 or imprisonment
    up to five years or both, for each offense. In addition, monetary penalties
    for each offense may be increased to up to &#36;250,000 for individuals and
    up to &#36;500,000 for organizations. Civil penalties include fines of up
    to &#36;50,000 for each violation, monetary damages up to three times the
    amount paid for referrals and/or </FONT></P>
<P align="center"><font size="2" face="serif">38</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> <FONT size=2 face="serif">exclusion from the Medicare program.
    Courts have broadly construed the Anti-Kickback Statute to include virtually
    anything of value given to an individual or entity if one purpose of the
    remuneration is to influence the recipient&#146;s reason or judgment relating
    to referrals. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
    Department of Health and Human Service&#146;s Office of Inspector General
    (&#147;</FONT><I><FONT size=2 face="serif">OIG</FONT></I><FONT size=2 face="serif">&#148;)
    promulgated safe harbor regulations specifying payment practices that will
    not be considered to violate the statute. If a payment practice falls within
    one of the safe harbors, it will be immune from criminal prosecution and
    civil exclusion under the Act even if it fails to fall within another potentially
    applicable safe harbor. Significantly, failure to fall within any safe harbor
    does not necessarily mean that the payment arrangement violates the statute.
    Failure to comply with a safe harbor can mean one of three things: (1) the
    arrangement does not fall within the broad scope of the anti-fraud and abuse
    rules so there is no risk of prosecution; (2) the arrangement is a clear
    statutory violation and is subject to prosecution; or (3) the arrangement
    may violate the anti-fraud and abuse rules in a less serious manner, in which
    case there is no way to predict the degree of risk. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Because
    our pharmacies maintain relationships with referring physicians, our operations
    are subject to scrutiny under the Act. Although we will attempt to structure
    our financial relationships with physicians in a manner that qualifies for
    safe harbor protection, we anticipate that our relationships with physicians
    will not qualify for safe harbor protection. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">If our
    operations fail to comply with the Act, we could be criminally sanctioned.
    In addition, the right of any of our pharmacies to participate in governmental
    health plans could be terminated. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">Ethics in Patient Referrals Act</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
    Ethics in Patient Referrals Act, 42 U.S.C. &#167;1395nn, commonly referred
    to as Stark II (&#147;</FONT><I><FONT size=2 face="serif">Stark II</FONT></I><FONT size=2 face="serif">&#148;),
    prohibits physicians from referring or ordering certain Medicare or Medicaid
    reimbursable &#147;designated health services&#148; from any entity with
    which the physician or any immediate family member of the physician has a
    financial relationship. A financial relationship is generally defined as
    a compensation or ownership/investment interest. The purpose of the prohibition
    is to assure that physicians base their treatment decisions upon the needs
    of the patients and not upon any financial benefit that would inure to the
    physician as a result of the referral. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Prescription
    medications are classified as &#147;designated health services&#148; under
    Stark II. Physicians owning stock in our Company are not allowed to refer
    any Medicare or Medicaid patient to any of our pharmacies until and unless
    our Company&#146;s capitalization exceeds &#36;75,000,000. A referral made
    in violation of Stark II results in non-payment to the pharmacy and could
    result in the imposition of fines and penalties as well as termination of
    our participation in Medicare and Medicaid. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">State Fraud and Abuse Laws</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">States
    have generally adopted their own laws similar to the Act and Stark II. However,
    in some instances, state laws apply to all health care services, regardless
    of whether such services are payable by a government health plan. For example,
    in California, physicians and other practitioners are not permitted to own
    more than 10% of any entity that owns a pharmacy. </FONT></P>
<P align="center"><font size="2" face="serif">39</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">HIPAA</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We are impacted by the Health Insurance
    Portability and Accountability Act of 1996 (&#147;</FONT><I><FONT size=2 face="serif">HIPAA</FONT></I><FONT size=2 face="serif">&#148;),
    which mandates, among other things, the adoption of standards to enhance
    the efficiency and simplify the administration of the healthcare system.
    HIPAA requires the Department of Health and Human Services to adopt standards
    for electronic transactions and code sets for basic healthcare transactions
    such as payment and remittance advice (&#147;</FONT><I><FONT size=2 face="serif">transaction
    standards</FONT></I><FONT size=2 face="serif">&#148;); privacy of individually
    identifiable healthcare information (&#147;</FONT><I><FONT size=2 face="serif">privacy
    standards</FONT></I><FONT size=2 face="serif">&#148;); security and electronic
    signatures (&#147;</FONT><I><FONT size=2 face="serif">security standards</FONT></I><FONT size=2 face="serif">&#148;),
    as well as unique identifiers for providers, employers, health plans and
    individuals; and enforcement. We are required to comply with these standards
    and are subject to significant civil and criminal penalties for failure to
    do so. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Management believes that we are in
    material compliance with these standards. However, HIPAA's privacy and transaction
    standards only recently became effective, and the security standards are
    mandatory as of April 21, 2005. Considering HIPAA's complexity, there can
    be no assurance that future changes will not occur. Changes in standards
    as well as changes in the interpretation of those standards could require
    us to incur significant costs to ensure compliance. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Management anticipates that federal
    and state governments will continue to review and assess alternate healthcare
    delivery systems, payment methodologies and operational requirements for
    pharmacies. Given the continuous debate regarding the cost of healthcare
    services, management cannot predict with any degree of certainty what additional
    healthcare initiatives, if any, will be implemented or the effect that any
    future legislation or regulation may have on us. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">OBRA 1990</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our business is subject to various
    other federal and state regulations. For example, pursuant to the Omnibus
    Budget Reconciliation Act of 1990 (&#147;</FONT><I><FONT size=2 face="serif">OBRA&#148;</FONT></I><FONT size=2 face="serif">)
    and comparable state regulations, our pharmacists are required to offer counseling,
    without additional charge, to our customers about medication, dosage, delivery
    systems, common side effects and other information deemed significant by
    the pharmacists and may have a duty to warn customers regarding any potential
    adverse effects of a prescription drug if the warning could reduce or negate
    such effect. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">California Senate Bill #151 was chaptered
    by the California Secretary of State on September 17, 2003. This legislation
    tightens the regulations on prescribing prescription medication. The legislation
    allows for electronic prescribing of all prescription medication except Class
    2 substances. Generally, Class 2 substances are drugs that exhibit a high
    potential for abuse or diversion. Class 2 substances are required to be dispensed
    only against a hard copy prescription. This will not pose any operational
    problem for us because we currently generate a hard copy of the electronic
    prescription for all Class 2 prescriptions issued. Management believes that
    this legislation will create no undue burden or competitive disadvantage
    for us. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">Other Laws</FONT></I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In recent years, an increasing number
    of legislative proposals have been introduced or proposed in Congress and
    in some state legislatures that would effect major changes in the healthcare
    system, either nationally or at the state level. The legislative initiatives
    include prescription drug benefit proposals for Medicare participants. Although
    we believe we are well</FONT></P>
<P align="center"><font size="2" face="serif">40</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left"> <FONT size=2 face="serif">positioned to respond to these developments,
    we cannot predict the outcome or effect of legislation resulting from these
    reform efforts. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Compliance with Environmental Laws</FONT></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We did not incur any costs in connection
    with the compliance with any federal, state, or local environmental laws. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Employees</FONT></B></P>
<P align="left">
 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We currently have 38 employees
    of whom 31 are full-time employees. We currently retain four consultants.
    Our employees are not represented by labor unions or collective bargaining
    agreements. The classification of our full-time employees and consultant
positions are broken down as follows: </FONT></P>
<TABLE border=0 cellspacing=0 cellpadding=0 width=100%>
  <TR valign="bottom">
    <TD align=center width=48% nowrap><B><FONT size=2 face="serif">Characterization
          of</FONT></B> </TD>
    <TD align=center width=18% nowrap><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
    <TD align=center width=20% nowrap><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center width=48% nowrap style="border-bottom:0px solid;"><B><U><FONT size=2 face="serif">Employee&#146;s
            Duties</FONT></U></B> </TD>
    <TD align=center width=18% nowrap><B><U><FONT size=2 face="serif">Employees</FONT></U></B> </TD>
    <TD align=center width=20% nowrap><B><U><FONT size=2 face="serif">Consultants</FONT></U></B> </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=center width=48% nowrap style="border-bottom:0px solid #000000;"><FONT size=2 face="serif">Corporate
        Management /</FONT> </TD>
    <TD align=center width=18% nowrap><FONT size=2 face="serif">3</FONT> </TD>
    <TD align=center width=20% nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center width=48% nowrap style="border-bottom:0px solid #000000;"><FONT size=2 face="serif">Officer</FONT> </TD>
    <TD align=left width=18% nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
    <TD align=left width=20% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=center width=48% nowrap style="border-bottom:0px solid #000000;"><FONT size=2 face="serif">Sales
        / Business Development</FONT> </TD>
    <TD align=center width=18% nowrap style="border-bottom:0px solid #000000;"><FONT size=2 face="serif">8</FONT> </TD>
    <TD align=center width=20% nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center width=48% nowrap style="border-bottom:0px solid #000000;"><FONT size=2 face="serif">Technology</FONT> </TD>
    <TD align=center width=18% nowrap style="border-bottom:0px solid #000000;"><FONT size=2 face="serif">2</FONT> </TD>
    <TD align=center width=20% nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center width=48% nowrap style="border-bottom:0px solid #000000;"><FONT size=2 face="serif">Accounting</FONT> </TD>
    <TD align=center width=18% nowrap style="border-bottom:0px solid #000000;"><FONT size=2 face="serif">1</FONT> </TD>
    <TD align=center width=20% nowrap><FONT size=2 face="serif">1</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center width=48% nowrap style="border-bottom:0px solid #000000;"><FONT size=2 face="serif">Pharmacist</FONT> </TD>
    <TD align=center width=18% nowrap><FONT size=2 face="serif">5</FONT> </TD>
    <TD align=center width=20% nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center width=48% nowrap style="border-bottom:0px solid #000000;"><FONT size=2 face="serif">Technicians
        / Pharmacy</FONT> </TD>
    <TD align=center width=18% nowrap><FONT size=2 face="serif">12</FONT> </TD>
    <TD align=center width=20% nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center width=48% nowrap><FONT size=2 face="serif">Support</FONT> </TD>
    <TD align=left width=18% nowrap>&nbsp;</TD>
    <TD align=left width=20% nowrap>&nbsp;</TD>
  </TR>
</TABLE>
<BR>

<P align="left"> <B><FONT size=2 face="serif">Properties</FONT></B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We are currently leasing our executive
    offices and pharmacy locations. Our executive offices are located at 17935
    Sky Park Circle, Suite F, Irvine, California 92614.</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We currently operate six retail pharmacies
    at the following locations:</FONT></P>
<P align="left">
<FONT size=2 face="serif">2431 N. Tustin Ave., Unit L, Santa
    Ana, California, 92705 <br>
  7000 Indiana, Ave., Suite 112, Riverside, California,
  92506 <br>
  12071 124th Avenue NE, Kirkland, Washington, 98034 <br>
  <br>
  10196 SW Park Way, Portland, Oregon, 97225<br>
 520 South El Camino Real - Building
    4B, Gresham, Oregon, 97030<br>
801 South Rancho Drive, Suite E3A, Las Vegas, Nevada 89106<br>
</FONT></P>


<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Future store locations, when established,
    will be selected based on the following criteria: 1) proximity to the physician
    members and medical facilities, 2) convenience of location, and 3) fast growing
    metropolitan areas with a population of at least 500,000. Retail pharmacies
    are approximately 1,500 square feet and are leased from various property
    management companies for approximately five years.</FONT></P>
<P align="center"><font size="2" face="serif">41</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left"> <B><FONT size=2 face="serif">Legal Proceedings</FONT></B></P>
<P align="left">  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> From time to time, we may be involved
    in various claims, lawsuits, and disputes with third parties, actions involving
    allegations of discrimination or breach of contract actions incidental to
    the normal operations of the business.</FONT></P>
<P align="left">  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> Providing pharmacy services entails
    an inherent risk of medical and professional malpractice liability. We may
    be named as a defendant in such lawsuits and thus become subject to the attendant
    risk of substantial damage awards. We believe that we have adequate professional
    and medical malpractice liability insurance coverage. There can be no assurance,
    however, that we will not be sued, that any such lawsuit will not exceed
    our insurance coverage, or that we will be able to maintain such coverage
    at acceptable costs and on favorable terms. </FONT></P>
<P align="left">  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> We are not currently involved in
    any litigation which we believe could have a material adverse effect on our
    financial position or results of operations. </FONT></P>
<P align="center"><font size="2" face="serif">42</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center"><B><FONT size=2 face="serif">MARKET FOR COMMON EQUITY AND RELATED
        STOCKHOLDER MATTERS</FONT></B></P>

<P align="left"><B><FONT size=2 face="serif">Market Information</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is currently quoted
    on the OTCBB, which is sponsored by the NASD. The OTCBB is a network of security
    dealers who buy and sell stock. The dealers are connected by a computer network
    that provides information on current &#147;bids&#148; and &#147;asks&#148;,
    as well as volume information. Our shares are quoted on the OTCBB under the
symbol &#147;APHY.&#148; </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the
    range of high and low bid quotations for our common stock for each of the
    periods indicated as reported by the OTCBB. These quotations reflect inter-dealer
    prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions. </FONT></P>

<TABLE width="50%" border=0 align="center" cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left width=68% nowrap colspan=3 style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Fiscal Year
Ended December 31, 2007</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Quarter
        Ended</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">High &#36;</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Low &#36;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">March
        31, 2007</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.42</FONT></TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.32</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">June
        30, 2007</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.38</FONT></TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.25</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">September
        30, 2007</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.32</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.22</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">December
    31, 2007</FONT></TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.31</FONT></TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.16</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap colspan=3 style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Fiscal
        Year Ended December 31, 2006</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Quarter
        Ended</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">High &#36;</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Low &#36;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">March
        31, 2006</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.57</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.24</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">June
        30, 2006</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.491</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.25</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">September
        30, 2006</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.40</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.35</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">December
        31, 2006</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.44</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.35</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap colspan=3 style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Fiscal
        Year Ended December 31, 2005</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Quarter
        Ended</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">High &#36;</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Low &#36;</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">March
        31, 2005</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.50</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.28</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">June
        30, 2005</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.42</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.28</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">September
        30, 2005</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.48</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.33</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">December
        31, 2005</FONT> </TD>
    <TD width=68% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=68% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.48</FONT> </TD>
    <TD width=18% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.34</FONT> </TD>
  </TR>
</TABLE>
<BR>
<P align="left"><font size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February 12, 2008, the last sales price of our common stock was &#36;0.15.</FONT></P>

<P align="left"> <B><FONT size=2 face="serif">Penny Stock</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC has adopted rules that regulate
    broker-dealer practices in connection with transactions in penny stocks.
    Penny stocks are generally equity securities with a market price of less
    than &#36;5.00, other than securities registered on certain national securities
    exchanges or quoted on the NASDAQ system, provided that current price and
    volume information with respect to transactions in such securities is provided
    by the exchange or system. The penny stock rules require a broker-dealer,
    prior to a transaction in a penny stock, to deliver a standardized risk disclosure
    document prepared by the SEC, that: (a) contains a description of the nature
    and level of risk in the market for penny stocks in both public offerings
    and secondary trading; (b) contains a description of the broker's or dealer's
    duties to the customer and of the rights and remedies available to the customer
    with respect to a violation of such duties or other requirements of the securities
    laws; (c) contains a brief, clear, narrative description of a dealer market,
    including bid and ask prices for penny stocks and the significance of the
    spread between the bid and ask price; (d) contains a toll-free telephone
    number for inquiries on disciplinary actions; (e) defines significant terms
    in the disclosure document or in the conduct of trading in penny stocks;
    and (f) contains such other information and is in such form, including language,
    type, size and format, as the SEC shall require by rule or regulation. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The broker-dealer also must provide,
    prior to effecting any transaction in a penny stock, the customer with (a)
    bid and offer quotations for the penny stock; (b) the compensation of the
    broker-dealer and its salesperson in the transaction; (c) the number of shares
    to which such bid and ask prices apply, or </FONT></P>
<div align="center"><FONT size=2 face="serif">43</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left"> <FONT size=2 face="serif">other comparable information relating
    to the depth and liquidity of the market for such stock; and (d) a monthly
    account statement showing the market value of each penny stock held in the
    customer's account. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the penny stock rules
    require that prior to a transaction in a penny stock not otherwise exempt
    from those rules; the broker-dealer must make a special written determination
    that the penny stock is a suitable investment for the purchaser and receive
    the purchaser's written acknowledgment of the receipt of a risk disclosure
    statement, a written agreement as to transactions involving penny stocks,
    and a signed and dated copy of a written suitability statement. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These disclosure requirements may
    have the effect of reducing the trading activity for our common stock. Therefore,
    stockholders may have difficulty selling our securities. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Holders of Our Common Stock</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
    of December 31, 2007, we had approximately 127 holders
    of record of our common stock and several other stockholders hold shares
    in street name. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Dividends</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no restrictions in our
    articles of incorporation or bylaws that restrict us from declaring dividends.
    The Nevada Revised Statutes, however, do prohibit us from declaring dividends
    where, after giving effect to the distribution of the dividend: </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. We would not be able to pay our
    debts as they become due in the usual course of business; or </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Our total assets would be less
    than the sum of our total liabilities, plus the amount that would be needed
    to satisfy the rights of shareholders who have preferential rights superior
    to those receiving the distribution. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not declared any dividends,
    and we do not plan to declare any dividends in the foreseeable future. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Securities Authorized for Issuance
      Under Equity Compensation Plans</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    following table provides information about our compensation plans under which
    shares of common stock may be issued upon the exercise of options as of December
31, 2006.</FONT></P>
<div align="center"><FONT size=2 face="serif">44</FONT>
  <br><BR>
</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left"> <B><FONT size=2 face="serif">Equity Compensation Plans as of
      December 31, 2006</FONT></B><FONT size=2 face="serif"> </FONT></P>
<TABLE width="70%" border=0 align="center" cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left width=19% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=21% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">A</FONT> </TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=22% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">B</FONT> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=24% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">C</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap><B><FONT size=2 face="serif">securities remaining</FONT></B> </TD>
  </TR>
  <TR valign="bottom">   <TD align=left width=19% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap><B><FONT size=2 face="serif">available for
          future</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap><B><FONT size=2 face="serif">securities to
          be</FONT></B> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap><B><FONT size=2 face="serif">issuance under</FONT></B> </TD>
  </TR>
  <TR valign="bottom">    <TD align=left width=19% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap><B><FONT size=2 face="serif">issued upon</FONT></B> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap><B><FONT size=2 face="serif">Weighted-average</FONT></B> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap><B><FONT size=2 face="serif">equity</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap><B><FONT size=2 face="serif">exercise of</FONT></B> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap><B><FONT size=2 face="serif">exercise price
          of</FONT></B> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap><B><FONT size=2 face="serif">compensation
          plans</FONT></B> </TD>
  </TR>
  <TR valign="bottom">   <TD align=left width=19% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap><B><FONT size=2 face="serif">outstanding</FONT></B> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap><B><FONT size=2 face="serif">outstanding</FONT></B> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap><B><FONT size=2 face="serif">(excluding</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap><B><FONT size=2 face="serif">options, warrants</FONT></B> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap><B><FONT size=2 face="serif">options, warrants</FONT></B> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap><B><FONT size=2 face="serif">securities reflected</FONT></B> </TD>
  </TR>
  <TR valign="bottom">    <TD align=left width=19% nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Plan
          Category</FONT></B> </TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=21% nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">and
          rights</FONT></B> </TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=22% nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">and
          right</FONT></B> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=24% nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">in
          column (A))</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap><FONT size=2 face="serif">Equity</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap><FONT size=2 face="serif">compensation
        plans</FONT> </TD>
    <TD align=left width=4% nowrap>&nbsp;</TD>
    <TD align=left width=21% nowrap><font size=2 face="serif"> -</font></TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap><FONT size=2 face="serif">5,520,613</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap><FONT size=2 face="serif">approved by</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">security
        holders</FONT> </TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=21% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=22% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=24% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap><FONT size=2 face="serif">Equity</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap><FONT size=2 face="serif">compensation
        plans</FONT> </TD>
    <TD align=left width=4% nowrap>&nbsp;</TD>
    <TD align=left width=21% nowrap><font size=2 face="serif"> 9,680,000</font></TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap><font size=2 face="serif">&#36; 0.60</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap><FONT size=2 face="serif">9,680,000</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap><FONT size=2 face="serif">not approved by</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=21% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=22% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=24% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">security
        holders</FONT> </TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=21% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=22% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=24% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=19% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Total</FONT> </TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=21% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">9,680,000</FONT> </TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=22% nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">&#36; 0.60</FONT> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=24% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">15,200,613</FONT> </TD>
  </TR>
</TABLE>
<BR>
<div align="center"><FONT size=2 face="serif">45</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<P align="center"> <B><FONT size=2 face="serif">MANAGEMENT</FONT></B></P>
<P align="left"> <B><FONT size=2 face="serif">Directors and Executive Officers</FONT></B></P>
<P align="left">
<FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following information sets forth
    the names of our directors and executive officers, their ages and their present
    positions with the Company as of November 15, 2007.</FONT></P>
<TABLE width="45%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left width=29% nowrap style="border-bottom:1px solid #000000;"><I><FONT size=2 face="serif">Name</FONT></I> </TD>
    <TD align=center width=6% nowrap style="border-bottom:1px solid #000000;"><I><FONT size=2 face="serif">Age</FONT></I> </TD>
    <TD align=left width=53% nowrap style="border-bottom:1px solid #000000;"><I><FONT size=2 face="serif">Office(s)
          Held</FONT></I> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=29% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Robert
        DelVecchio</FONT> </TD>
    <TD align=center width=6% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">43</FONT> </TD>
    <TD align=left width=53% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Chief
        Executive Officer &amp;Director</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=29% nowrap><FONT size=2 face="serif">James</FONT> </TD>
    <TD align=center width=6% nowrap><FONT size=2 face="serif">45</FONT> </TD>
    <TD align=left width=53% nowrap><FONT size=2 face="serif">Director</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=29% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Manfredonia</FONT> </TD>
    <TD align=left width=6% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=53% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=29% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Richard
        Falcone</FONT> </TD>
    <TD align=center width=6% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">53</FONT> </TD>
    <TD align=left width=53% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Director</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=29% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Haresh
        Sheth</FONT> </TD>
    <TD align=center width=6% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">57</FONT> </TD>
    <TD align=left width=53% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Chief
        Financial Officer &amp; Director</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=29% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">John
        Eric Mutter</FONT> </TD>
    <TD align=center width=6% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">46</FONT> </TD>
    <TD align=left width=53% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Chief
        Technology Officer</FONT> </TD>
  </TR>
</TABLE><br>


<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is a brief description
    of the background and business experience of each of our current executive
    officers and directors. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Robert DelVecchio</FONT></B><FONT size=2 face="serif">.
    On February 3, 2005, our board of directors appointed Mr. Robert DelVecchio
    to serve as Chief Executive Officer. Mr. DelVecchio was appointed as a member
    of the board of directors on March 31, 2005. Mr. DelVecchio also served as
    our Chief Financial Officer from March 2005 to December 2006. Since 1995,
    Mr. DelVecchio has acted as Chief Executive Officer and President of Brockington
    Securities, Inc., a broker-dealer who is a member of the National Association
    of Securities Dealers. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;James Manfredonia. </FONT></B><FONT size=2 face="serif">Mr.
    Manfredonia was appointed to the board of directors of Assured Pharmacy,
    Inc. in June 2004. Since 2002, Mr. Manfredonia has served as manager of listed
    equity trading and New York Stock Exchange operations at Bear Stearns. Mr.
    Manfredonia currently serves as the Chairman of the New York Stock Exchange
    Upstairs Traders Advisory Committee and as a member of the Market Performance
    Committee of the New York Stock Exchange. Prior to joining Bear Stearns,
    Mr. Manfredonia worked for ten years at Merrill Lynch where he managed the
    listed trading desk with additional responsibilities for NASDAQ, portfolio
    trading, sales trading, and NYSE staff. Mr. Manfredonia was the founding
    general partner of Blair Manfredonia Limited Partners, a hedge fund/broker-dealer.
    Mr. Manfredonia has also worked at Lehman Brothers, Salomon Brothers, and
    Drexel Burnham. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richard Falcone. </FONT></B><FONT size=2 face="serif">Mr.
    Falcone was appointed to the board of directors of Assured Pharmacy, Inc.
    in July 2004. From February 2006 to December 2006, Mr. Falcone served as
    President and Chief Executive Officer of Tasker Capital Corp. Mr. Falcone
    also served as Chairman of the Board of Tasker Capital Corp. from May 2006
    to December 2006. From 2001 to February 2006, Mr. Falcone served as Chief
    Financial Officer of The A Consulting Team, Inc., an IT service company.
    Mr. Falcone has served as Chief Financial Officer of Netgrocer.com. In 1990,
    Mr. Falcone joined Bed Bath &amp; Beyond, Inc. as its Chief Financial Officer.
    In 1983, Mr. Falcone joined Tiffany &amp; Co. and served as Manager of Audit,
    Director of Financial Control, and Director of International Finance and
    Operations. Mr. Falcone has also worked at PriceWaterhouseCoopers &amp; Co.,
    an international public accounting firm. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Haresh Sheth. </FONT></B><FONT size=2 face="serif">Mr.
    Sheth was appointed to serve as our Chief Operating Officer on May 1, 2006
    and served in this capacity until December 15, 2006 when Mr. Sheth was appointed
    our </FONT></P>
<div align="center"><FONT size=2 face="serif">46</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left"> <FONT size=2 face="serif">Chief Financial Officer. Mr. Sheth
    was appointed to the board of directors of Assured Pharmacy, Inc. in September
    2005. Mr. Sheth is a graduate of West Virginia University where he earned
    an engineering degree. Since 1991, Mr. Sheth has acted as President of Janus
    Finance Corporation, an asset based finance company. Mr. Sheth joined Mosaic
    Capital Advisors LLC in 2004 as their group financial officer. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;John Eric Mutter</FONT></B><FONT size=2 face="serif">.
    Mr. Mutter was appointed to serve as Chief Operating Officer on May 11, 2005
    and served in this capacity until May 1, 2006 when Mr. Mutter was appointed
    Chief Technology Officer. Since January 2004, Mr. Mutter has acted as a consultant
    to Assured Pharmacy, Inc. providing technology and information systems support.
    From 2000 to 2003, Mr. Mutter performed similar responsibilities for the
    MedEx Systems Inc. designing, implementing and managing a digital prescribing
    infrastructure for Pegasus Pharmacies. Prior to these positions, Mr. Mutter
    has held numerous field engineering and technology positions with Alpha Microsystems,
    Tomba Communications, Neosoft Inc., Checkpoint Systems, and Southwest Communications.</FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Term of Office</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our directors are appointed for a
    one-year term to hold office until the next annual meeting of our shareholders
    or until removed from office in accordance with our bylaws. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our executive officers are appointed
    by our board of directors and hold office until removed by the board. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Family Relationships</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no family relationships
    between or among the directors, executive officers or persons nominated or
    chosen by the Company to become directors or executive officers. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Involvement in Certain Legal Proceedings</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the best of our knowledge, during
    the past five years, none of the following occurred with respect to a present
    or former director, executive officer, or employee of the Company: (1) any
    bankruptcy petition filed by or against any business of which such person
    was a general partner or executive officer either at the time of the bankruptcy
    or within two years prior to that time; (2) any conviction in a criminal
    proceeding or being subject to a pending criminal proceeding (excluding traffic
    violations and other minor offenses); (3) being subject to any order, judgment
    or decree, not subsequently reversed, suspended or vacated, of any court
    of competent jurisdiction, permanently or temporarily enjoining, barring,
    suspending or otherwise limiting his or her involvement in any type of business,
    securities or banking activities; and (4) being found by a court of competent
    jurisdiction (in a civil action), the SEC or the Commodities Futures Trading
    Commission to have violated a federal or state securities or commodities
    law, and the judgment has not been reversed, suspended or vacated. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Executive Compensation</FONT></B></P>


<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below summarizes all compensation
    awarded to, earned by, or paid to our former or current executive officers
    for the fiscal years ended 2007 and 2006. </FONT></P>

<div align="center"><FONT size=2 face="serif">47</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap colspan=9 style="border-bottom:1px solid #000000;">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">SUMMARY
        COMPENSATION TABLE</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD rowspan="6" align=left nowrap style="border-right:1px solid #000000">    </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD rowspan="6" align=left nowrap style="border-right:1px solid #000000"></TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><font size=2 face="serif">Non-Equity</font> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">Name</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><font size=2 face="serif">Incentive</font> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><font size=2 face="serif">Nonqualified</font></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">and</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><font size=2 face="serif">Stock</font> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Option</FONT> </TD>
    <TD align=center nowrap><font size=2 face="serif">Plan</font>  </TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=center nowrap><font size=2 face="serif">Deferred</font> </TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=center nowrap><font size=2 face="serif">All Other</font></TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">principal</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="center"><FONT size=2 face="serif">Salary</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Bonus</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><div align="center"><font size=2 face="serif">Awards</font> </div></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Awards</FONT> </TD>
    <TD align=center nowrap><FONT size=2 face="serif"> Compensation</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Compensation</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Compensation</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Total</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right style="border-bottom:1px solid #000000;"><div align="left"><FONT size=2 face="serif">Position</FONT> </div></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><div align="center"><FONT size=2 face="serif">Year</FONT> </div></TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><div align="center"><font size=2 face="serif">(&#36;)</font> </div></TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Earnings
        (&#36;)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">Robert DelVecchio </FONT><FONT size=1 face="serif">(1</FONT><font size=1 face="serif">)</font> </div></TD>
    <TD align=left nowrap style="border-right:1px solid #000000">&nbsp;</TD>
    <TD align=left nowrap><div align="right"><FONT size=2 face="serif">2007
        </FONT></div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><div align="right"><font size=2 face="serif">165,224</font> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><font size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;5,000</font></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap style="border-right:1px solid #000000">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">170,224</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif"></font> </div></TD>
    <TD align=left nowrap style="border-right:1px solid #000000">&nbsp;</TD>
    <TD align=left nowrap><div align="right"><FONT size=2 face="serif">2006 </FONT></div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><div align="right"><font size=2 face="serif">150,000</font> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><div align="center"><font size=2 face="serif"> 128,860</font></div></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap style="border-right:1px solid #000000">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">278,860</FONT> </TD>
  </TR>

  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">CEO &amp; Former</FONT> </div></TD>
    <TD rowspan="8" align=left nowrap style="border-right:1px solid #000000">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD rowspan="8" align=left nowrap style="border-right:1px solid #000000">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">CFO</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">Haresh Sheth </FONT><SUP><FONT size=2 face="serif">(2)</FONT></SUP> </div></TD>
    <TD align=right nowrap><FONT size=2 face="serif">2007
        </FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><div align="right"><FONT size=2 face="serif">165,224</FONT></div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;5,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT></TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">170,224</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">CFO &amp; Former</FONT> </div></TD>
    <TD align=right nowrap><FONT size=2 face="serif">2006</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><font size=2 face="serif">110,577</font></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">283,333</FONT></TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">393,910</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">COO</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">John Eric Mutter </FONT><SUP><FONT size=2 face="serif">(3)</FONT></SUP> </div></TD>
    <TD align=right nowrap><FONT size=2 face="serif">2007</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><div align="right"><font size="2">193,000</font> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">193,000</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">CTO &amp; Former</FONT> </div></TD>
    <TD align=right nowrap><FONT size=2 face="serif">2006</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><font size=2 face="serif">185,000</font></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">185,000</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=right><div align="left"><FONT size=2 face="serif">COO</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="19" align=right style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
</TABLE>

<BR>
<TABLE border=0 cellspacing=0 cellpadding=0>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">(1)</FONT></TD>
    <TD width=100%><P align="left"><FONT size=2 face="serif">Mr. DelVecchio resigned
          as our Chief Financial Officer on December 15, 2006.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">(2)</FONT></TD>
    <TD width=100%><P align="left"><FONT size=2 face="serif">Mr. Sheth was appointed
          as our Chief Operating Officer on May 1, 2006 and served in this capacity
          until his appointment as Chief Financial Officer on December 15, 2006.
          The information in the summary compensation table includes all compensation
          paid to Mr. Sheth for the full fiscal year ended December 31, 2006.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">(3)</FONT></TD>
    <TD width=100%><P align="left"><FONT size=2 face="serif">Mr. Mutter was appointed
          as our Chief Operating Officer on May 11, 2005 and served in this capacity
          until his appointment as Chief Technology Officer on December 15, 2006.
          The information in the summary compensation table includes all compensation
          paid to Mr. Mutter for the full fiscal years ended December 31, 2007
    and 2006.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2> </TD>
  </TR>
</TABLE>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Salary and stock options granted
    to our executive officers based on their level of experience and contributions
    to the company. </FONT></P>
<P align="left">&nbsp;  </P>
<div align="center"><FONT size=2 face="serif">48</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left"> <B><FONT size=2 face="serif">Employment Agreements</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September 2005, we entered into
    an employment agreement with our Chief Executive Officer, Robert DelVecchio.
    As provided in the employment agreement, Mr. DelVecchio is paid a base salary
    of &#36;150,000. Mr. DelVecchio received &#36;39,577 in salary for the fiscal
    year ended December 31, 2005 and &#36;150,000 in salary for the fiscal year
    ended December 31, 2006. Salary paid is recorded in the summary compensation
    table above in the column titled &#147;Salary.&#148; Upon execution of the
    employment agreement, Mr. DelVecchio was granted options to purchase 5,000,000
    shares of our common stock for a period of ten years from the date of issuance
    and exercisable at the exercise price of &#36;0.60 per share. These options
    became fully vested and exercisable upon issuance. The aggregate fair value
    of these options was computed in accordance with FAS 123R and is reported
    in the summary compensation table above in the column titled &#147;Option
    Awards.&#148; Based upon the overall performance of our company since his
    appointment as Chief Executive Officer, the board of directors in 2006 approved
    and paid Mr. DelVecchio &#36;128,860 in bonus compensation.</FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May 1, 2006, we entered into an
    employment agreement with Mr. Sheth. As provided in the employment agreement,
    Mr. Sheth is paid a base salary of &#36;150,000. During the fiscal year ended
    December 31, 2006, Mr. Sheth received &#36;110,577 in salary and this is
    recorded in the summary compensation table above in the column titled &#147;Salary.&#148; Upon
    execution of the employment agreement, Mr. Sheth was granted options to purchase
    1,133,334 shares of common stock exercisable for a period of ten years from
    the date of issuance at the exercise price of &#36;0.60 per share. The aggregate
    fair value of these options was computed in accordance with FAS 123R and
    is reported in the summary compensation table above in the column titled &#147;Option
    Awards.&#148;</FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At no time during the last fiscal
    year was any outstanding option repriced or otherwise modified. There was
    no tandem feature, reload feature, or tax-reimbursement feature associated
    with any of the stock options we granted to our executive officers or otherwise. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Outstanding Equity Awards at Fiscal
      Year-End </FONT></B></P>
<P align="left">
 <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below summarizes all unexercised
    options, stock that has not vested, and equity incentive plan awards for
    each named executive officer as of December 31, 2007. </FONT></P>

<div align="center"><FONT size=2 face="serif">49</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=center colspan=19 style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">OUTSTANDING
          EQUITY AWARDS AT FISCAL YEAR-END</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap colspan=3 style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=2 face="serif">OPTION
          AWARDS</FONT></B> </div></TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=5% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap colspan=3 style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">STOCK
          AWARDS</FONT></B> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=9% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Equity</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=9% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Equity</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Incentive</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=9% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Incentive</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Plan</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=9% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Market</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Plan</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Awards:</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=9% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Value</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Awards:</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Market or</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=9% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Equity</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">of</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Number</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Payout</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=9% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Incentive</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Number</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Shares</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">of</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Value of</FONT> </TD>
  </TR>
  <TR valign="bottom">  <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=9% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Plan</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">of</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">or</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Unearned</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Unearned</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=9% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Awards:</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Shares</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Units</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Shares,</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Shares,</FONT> </TD>
  </TR>
  <TR valign="bottom">  <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><div align="left"><FONT size=2 face="serif">Number of</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=right width=9% nowrap><div align="left"><FONT size=2 face="serif">Number of</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Number of</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">or Units</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">of</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Units or</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Units or</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><div align="left"><FONT size=2 face="serif">Securities</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=right width=9% nowrap><div align="left"><FONT size=2 face="serif">Securities</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Securities</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">of</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Stock</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Other</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Other</FONT> </TD>
  </TR>
 <TR valign="bottom">    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><div align="left"><FONT size=2 face="serif">Underlying</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=right width=9% nowrap><div align="left"><FONT size=2 face="serif">Underlying</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Underlying</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Stock That</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">That</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Rights</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Rights</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><div align="left"><FONT size=2 face="serif">Unexercised</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=right width=9% nowrap><div align="left"><FONT size=2 face="serif">Unexercised</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Unexercised</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">Option</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Option</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Have</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Have</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">That Have</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">That</FONT> </TD>
  </TR>
 <TR valign="bottom">    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><div align="left"><FONT size=2 face="serif">Options</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=right width=9% nowrap><div align="left"><FONT size=2 face="serif">Options</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Unearned</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">Exercise</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Expiration</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Not</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Not</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Not</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Have Not</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap>&nbsp;</TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><div align="left"><FONT size=2 face="serif">(#)</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=right width=9% nowrap><div align="left"><FONT size=2 face="serif">(#)</FONT> </div></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Options</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">Price</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Date</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Vested</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">Vested</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=11% nowrap><FONT size=2 face="serif">Vested</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">Vested</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Name</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><div align="left"><FONT size=2 face="serif">Exercisable</FONT> </div></TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right width=9% nowrap style="border-bottom:1px solid #000000;"><div align="left"><FONT size=2 face="serif">Unexercisable</FONT> </div></TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(#)</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=5% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(#)</FONT> </TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(#)</FONT> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(#)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Robert
        DelVecchio</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><div align="left"><FONT size=2 face="serif">5,000,000</FONT> </div></TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right width=9% nowrap style="border-bottom:1px solid #000000;"><div align="left"><FONT size=2 face="serif">-</FONT> </div></TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=5% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.60</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">09/19/2015</FONT> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=19></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Haresh
        Sheth</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><div align="left"><FONT size=2 face="serif">1,133,334</FONT></div></TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right width=9% nowrap style="border-bottom:1px solid #000000;"><div align="left"><FONT size=2 face="serif">-</FONT> </div></TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=5% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.60</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">05/01/2016</FONT> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=19></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=13% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">John
        Eric Mutter</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><div align="left"><FONT size=2 face="serif">250,000</FONT> </div></TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right width=9% nowrap style="border-bottom:1px solid #000000;"><div align="left"><FONT size=2 face="serif">-</FONT> </div></TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=5% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.60</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">08/29/2008</FONT> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=11% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
  </TR>
</TABLE>
<P align="left"><B><FONT size=2 face="serif">Compensation of Directors</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
 <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below summarizes all compensation
of our directors as of December 31, 2007.</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD colspan="15" align=left nowrap style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=2 face="serif">DIRECTOR
    COMPENSATION</FONT></B> </div></TD>
  </TR>
  <TR valign="bottom">
    <TD width=18% align=left nowrap><FONT size=2 face="serif">Name</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=9% align=center nowrap><FONT size=2 face="serif">Fees</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align=left nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=8% align=left nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=13% align=center nowrap><FONT size=2 face="serif">Non-Equity</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=13% align=center nowrap><FONT size=2 face="serif">Non-Qualified</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=10% align=left nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=7% align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Earned or</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Incentive</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Deferred</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">All</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Paid in</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Stock</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Option</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Plan</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Compensation</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Other</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Cash</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Awards(1)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Awards</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Compensation</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Earnings</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Compensation</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Total</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(&#36;)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Robert
        DelVecchio</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=15>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Haresh
        Sheth</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=15>&nbsp;</TD>
  </TR>
  <TR valign="bottom" style="border-bottom:1px solid #000000;">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Richard
        Falcone</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">$60,000</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=15>&nbsp;</TD>
  </TR>
  <TR valign="bottom"  style="border-bottom:1px solid #000000;">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">James Manfredonia</FONT> </TD>
    <TD  style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap  style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD  style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap  style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">$60,000</FONT> </TD>
    <TD  style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap  style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD  style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap  style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD  style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap  style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD  style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap  style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD  style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap  style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
  </TR>
</TABLE>
<BR>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
  <TD width=3%></TD>
     <TD width=97%></TD></TR>
<TR valign="bottom">
  <TD align=left nowrap><FONT size="2" face="serif">(1)</FONT></TD>
  <TD align=left nowrap><font size="2">The amounts reflect the estimated fair
      value of the 150,000 shares of common stock issued to each director based
      on the trading price on the date of issuance.</font>       </TD>
</TR>

</TABLE>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All fees earned or paid in cash
    and stock options awards granted to Robert DelVecchio and Haresh Sheth
    were earned in connection with their employment agreement as executive officers.
    Robert DelVecchio and Haresh Sheth received no compensation for their service
    as members of our board of directors. We only compensate outside directors
    for their service as members of our board of directors.</FONT></P>

<P align="left">&nbsp;</P>
<div align="center"><FONT size=2 face="serif">50</FONT>
</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left"> <B><FONT size=2 face="serif">Indemnification for Securities
      Act Liabilities</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our articles of incorporation provide
    that we will indemnify an officer, director, or former officer or director,
    to the full extent permitted by law. We have been advised that in the opinion
    of the SEC indemnification for liabilities arising under the Securities Act
    is against public policy as expressed in the Securities Act, and is, therefore,
    unenforceable. In the event that a claim for indemnification against such
    liabilities is asserted by one of our directors, officers, or controlling
    persons in connection with the securities being registered hereby, we will,
    unless in the opinion of our legal counsel the matter has been settled by
    controlling precedent, submit the question of whether such indemnification
    is against public policy to a court of appropriate jurisdiction. We will
    then be governed by the court's decision. </FONT></P>
<div align="center"><FONT size=2 face="serif">51</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center"> <B><FONT size=2 face="serif">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as disclosed below, none of
    our directors or executive officers, nor any proposed nominee for election
    as a director, nor any person who beneficially owns, directly or indirectly,
    shares carrying more than 5% of the voting rights attached to all of our
    outstanding shares, nor any members of the immediate family (including spouse,
    parents, children, siblings, and in-laws) of any of the foregoing persons
    has any material interest, direct or indirect, in any transaction since the
    beginning of our last fiscal year on January 1, 2006 or in any presently
    proposed transaction which, in either case, has or will materially affect
    us. </FONT></P>
<P align="left">
<FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2007, we
completed a private offering of unsecured convertible debentures (&#147;Debenture&#148;)
    carrying an interest rate of 18% per annum. Each Debenture matures on the
first anniversary of the date of its issuance. The Debenture provides that all
    the interest is payable solely in the shares of our common stock on the issuance
    date. The number of shares issued as interest was calculated based upon average
    closing price for our common stock on NASD OTCBB for the five (5) consecutive
    trading days preceding the issuance date. Each Debenture holder has the
    right to convert its Debenture into fully paid non-assessable shares of
    our common stock at &#36;0.40 per share. For every two (2) shares of common
    stock a Debenture holder receives upon conversion, the holder will also receive
    a warrant to purchase one (1) share of common stock at an exercise price
    of &#36;0.60
    exercisable for 12 months after the conversion date and one (1)
    share of common stock at an exercise price of &#36;0.80 exercisable
    for 24 months. The total proceeds raised from the issuance of the Debenture
     through January 2007 was $2,458,500. Subsequent to January 2007, we have
sold additional Debentures in the aggregate principal amount of $425,000.
     We do not currently have sufficient funds to repay the Debentures.
We intend to secure additional financing through additional debt or equity
    financing  arrangements. There can be no assurance thatwe will be successful
    in raising all of  the additional funding that we are seeking.</FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brockington Securities, Inc. (&#147;Brockington&#148;)
    purchased &#36;250,000 in Debentures and was issued 138,500  shares
    of our common stock as interest. Robert DelVecchio, our Chief Executive Officer
    and member of our board of directors, is the President and Chief Executive
    Officer of Brockington. Brockington purchased the Debenture on the same terms
as was received by all other investors. </FONT></P>

<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Woodfield Capital Services Inc. (&#147;Woodfield&#148;)
    purchased &#36;350,000 in Debentures and was issued 195,652 restricted shares
    of our common stock as interest. Haresh Sheth, our Chief Financial Officer
    and member of our board of directors, is the President of Woodfield. Woodfield
purchased the Debenture on the same terms as was received by all other investors. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Janus Financial Services Inc. (&#147;Janus&#148;)
    purchased &#36;50,000 in Debentures and was issued 28,125 restricted shares
    of our common stock as interest. Haresh Sheth, our Chief Financial Officer
    and member of our board of directors, is the President of Janus. Janus purchased
the Debenture on the same terms as was received by all other investors. </FONT></P>
<P align="left">
 <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mosaic Private Equity (US) LP Series
    E2 purchased &#36;1,200,000 in Debentures and was issued 306,010 restricted
    shares of our common stock as interest. Mosaic Private Equity (US) LP Series E2 purchased the Debentures
on the same terms as was received by all other investors. </FONT></P>

<P align="center"><FONT size=2 face="serif">52</FONT></P>

<HR noshade width="100%" size=4>

<P STYLE="page-break-before:always"></P><PAGE>
<P align="center">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The following table sets forth certain information concerning prior securities transactions between us and selling shareholders who hold convertible debentures. </FONT></P>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
  <TR>
    <TD width=10%></TD>
    <TD width=2%></TD>
    <TD width=10%></TD>
    <TD width=2%></TD>
    <TD width=10%></TD>
    <TD width=2%></TD>
    <TD width=10%></TD>
    <TD width=2%></TD>
    <TD width=10%></TD>
    <TD width=2%></TD>
    <TD width=10%></TD>
    <TD width=2%></TD>
    <TD width=10%></TD>
    <TD width=2%></TD>
    <TD width=10%></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">Number of</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">Percentage</FONT></B> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">shares</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">of shares</FONT></B> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">outstanding</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=right nowrap><font size="2">&nbsp;</font></TD>
    <TD align=right nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">outstanding</FONT></B></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">prior to</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">and held by</FONT></B> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">Market</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">transaction</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">persons</FONT></B> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">price of a</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">Market</FONT></B>&nbsp; </font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">and held by</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">other than</FONT></B> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">share of</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">price of a</FONT></B>&nbsp; </font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">Holder of</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">Number of</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">persons</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">holders of</FONT></B> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">common</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">share of</FONT></B>&nbsp; </font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">convertible</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">shares</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">other than</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">convertible </FONT></B>&nbsp; </font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">stock at</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">common</FONT></B>&nbsp; </font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">debenture</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">outstanding</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">holders of</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">Securities</FONT></B> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">debentures</FONT></B> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">the time of</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">stock as of</FONT></B>&nbsp; </font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap><font size="2"><B><FONT face="serif">Date of</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">and</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">prior to</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">convertible</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">issued in</FONT></B> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><B><FONT size="2" face="serif">issued in</FONT></B> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">the</FONT></B>&nbsp; </font></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2"><B><FONT face="serif">November</FONT></B>&nbsp; </font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2"><B><FONT face="serif">transaction</FONT></B>&nbsp; </font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2"><B><FONT face="serif">affiliates</FONT></B>&nbsp; </font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2"><B><FONT face="serif">transaction</FONT></B>&nbsp; </font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2"><B><FONT face="serif">debentures</FONT></B>&nbsp; </font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="1"><B><FONT size="2" face="serif">transaction </FONT></B> </font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size="2" face="serif">transaction</FONT></B> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size="2" face="serif">transaction</FONT></B></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2"><B><FONT face="serif">15,
            2007</FONT></B>&nbsp; </font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size="2" face="serif">February</FONT> <FONT size="2" face="serif">26,
        2004</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Brockington</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">57,606,041</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">57,606,041</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">500,000</FONT> <FONT size="2" face="serif">shares
        of</FONT> <FONT size="2" face="serif"><br>
    </FONT></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">0.9 %</FONT> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.64</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.25</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Securities,</FONT> <FONT size="2" face="serif">Inc. <sup>(1)</sup></FONT><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">common</FONT> <FONT size="2" face="serif">stock</FONT><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size="2" face="serif">June 30, 2004</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Mosaic</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">63,157,391</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">62,657,391</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">125,000</FONT> <FONT size="2" face="serif">shares
        of</FONT></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">0.3 %</FONT> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.64</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.25</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Partners</FONT> <FONT size="2" face="serif">Fund</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">common</FONT> <FONT size="2" face="serif">stock
        and</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">warrants to</FONT> <FONT size="2" face="serif">purchase</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">62,500</FONT> <FONT size="2" face="serif">shares
        at an</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">exercise</FONT> <FONT size="2" face="serif">price
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><div style="border-bottom:1px solid #000000"><font size="2" face="serif">&#36;0.60
          per</font> <font size="2" face="serif">share</font> </div></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size="2" face="serif">June 17,</FONT> <FONT size="2" face="serif">2004</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Brockington</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">63,157,391</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">62,657,391</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Warrants to</FONT> <FONT size="2" face="serif">purchase</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">0.6 %</FONT> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.64</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">0.25</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Securities,</FONT> <FONT size="2" face="serif">Inc. <sup>(1)</sup></FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">350,000</FONT> <FONT size="2" face="serif">shares
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">common</FONT> <FONT size="2" face="serif">stock
        at an</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">exercise</FONT> <FONT size="2" face="serif">price
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">&#36;0.60
        per</FONT> <FONT size="2" face="serif">share</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size="2" face="serif">June 30,</FONT> <FONT size="2" face="serif">2004</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Brockington</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">64,107,391</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">63,482,391</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">150,000</FONT> <FONT size="2" face="serif">shares
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">0.2%</FONT> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.63</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.25</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Securities,</FONT> <FONT size="2" face="serif">Inc. <sup>(1)</sup></FONT> <font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">common
        stock</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size="2" face="serif">June 3,</FONT> <FONT size="2" face="serif">2005</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Mosaic</FONT> <FONT size="2" face="serif">Partners</FONT></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">35,716,428</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">34,941,428</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">312,500</FONT> <FONT size="2" face="serif">shares
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">1.3%</FONT> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.36</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.25</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Fund and</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">common</FONT> <FONT size="2" face="serif">stock
        and</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Mosaic</FONT> <FONT size="2" face="serif">Partners</FONT></TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">warrants to</FONT> <FONT size="2" face="serif">purchase</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Fund LP</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">156,250</FONT> <FONT size="2" face="serif">shares
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">common</FONT> <FONT size="2" face="serif">stock
        at an</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">exercise</FONT> <FONT size="2" face="serif">price
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">&#36;0.60
        per</FONT> <FONT size="2" face="serif">share</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size="2" face="serif">September</FONT> <FONT size="2" face="serif">16,
        2005</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Mosaic</FONT> <FONT size="2" face="serif">Partners</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">42,020,094</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">40,932,594</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">250,000</FONT> <FONT size="2" face="serif">shares
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">3.7%</FONT> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.41</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.25</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Fund and Mosaic</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">common</FONT> <FONT size="2" face="serif">stock
        and</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Partners</FONT> <FONT size="2" face="serif">Fund
        LP</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">warrants to</FONT> <FONT size="2" face="serif">purchase</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif"></FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">125,000 shares
    of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">common</FONT> <FONT size="2" face="serif">stock
        at an</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">exercise</FONT> <FONT size="2" face="serif">price
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">&#36;0.60
        per shares</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size="2" face="serif">October 24,</FONT> <FONT size="2" face="serif">2005</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Mosaic</FONT> <FONT size="2" face="serif">Financial</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">47,205,634</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">45,118,134</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">2,500,000</FONT> <FONT size="2" face="serif">shares
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">5.5%</FONT> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.39</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.25</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Services
        LLC</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">common
        stock <sup>(2)</sup></FONT> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size="2" face="serif">August 7,</FONT> <FONT size="2" face="serif">2006</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Mosaic</FONT> <FONT size="2" face="serif">Private</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">46,041,471</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">41,453,971</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">4,500,000</FONT> <FONT size="2" face="serif">shares
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">11.8%</FONT> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.31</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><FONT size="2" face="serif">&#36;0.25</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">Equity III</FONT> <FONT size="2" face="serif">Limited,</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><FONT size="2" face="serif">common</FONT> <FONT size="2" face="serif">stock
        and</FONT> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=left nowrap><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
    <TD><font size="2">&nbsp;</font> </TD>
    <TD align=center nowrap><font size="2">&nbsp;</font> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size="2" face="serif">Mosaic</FONT> <FONT size="2" face="serif">Private</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size="2" face="serif">warrants to</FONT> <FONT size="2" face="serif">purchase</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">Equity US</FONT> <FONT size="2" face="serif">LP&#151;</FONT></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">2,250,000 shares
    of</FONT> </TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">Series B,
    Mosaic</FONT> </TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">common stock
    at an</FONT> </TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">Private Equity</FONT></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">exercise</FONT> <FONT size="2" face="serif">price
        of</FONT> </TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif"> US</FONT> <FONT size="2" face="serif">LP&#151;Series</FONT> <FONT size="2" face="serif">E,</FONT></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">&#36;0.60 per</FONT> <FONT size="2" face="serif">shares</FONT> </TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif"> Janus</FONT> <FONT size="2" face="serif">Finance</FONT> </TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">Corporation</FONT> <FONT size="2" face="serif"><sup>(3)</sup>,</FONT> </TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">Woodfield</FONT> <FONT size="2" face="serif">Capital</FONT> </TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">Services Inc.</FONT> <FONT size="2" face="serif"><sup>(3)</sup> and</FONT> </TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><FONT size="2" face="serif">Jyotsna P.</FONT> <FONT size="2" face="serif">Shah</FONT> </TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Revocable
        Trust</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD align=left nowrap><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
    <TD><font size="2">&nbsp;</font></TD>
    <TD align=center nowrap><font size="2">&nbsp;</font></TD>
  </TR>
</TABLE>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
  <TD width=3%></TD>
     <TD width=97%></TD></TR>
<TR valign="bottom">
  <TD align=left nowrap><FONT size="2" face="serif">(1)</FONT></TD>
  <TD align=left nowrap>
    <FONT size="2" face="serif"> Robert DelVecchio, our Chief Executive Officer and a member
of our board of directors,</FONT>  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap><font size="2">&nbsp;</font></TD>
  <TD align=left nowrap>
    <FONT size="2" face="serif">is the President and Chief Executive Officer of Brockington Securities, Inc. On</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap><font size="2">&nbsp;</font></TD>
  <TD align=left nowrap>
    <FONT size="2" face="serif">September 9, 2005, Mr. DelVecchio was granted options to purchase 5,000,000 shares of</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap><font size="2">&nbsp;</font></TD>
  <TD align=left nowrap>
    <FONT size="2" face="serif">our common stock at an exercise price of &#36;0.60
    per share.</FONT></TD>
</TR>
<TR>
  <TD><font size="2">&nbsp;</font></TD>
  <TD><font size="2">&nbsp;</font>

  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap><FONT size="2" face="serif">(2)</FONT></TD>
  <TD align=left nowrap>
    <FONT size="2" face="serif"> Issued in connection with conversion of outstanding indebtedness.</FONT></TD>
</TR>
<TR>
  <TD><font size="2">&nbsp;</font></TD>
  <TD><font size="2">&nbsp;</font>

  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap><FONT size="2" face="serif">(3)</FONT></TD>
  <TD align=left nowrap>
    <FONT size="2" face="serif"> Haresh Sheth, our Chief Financial Officer and a member of
our board of directors, is the</FONT>  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap><font size="2">&nbsp;</font></TD>
  <TD align=left nowrap>
    <FONT size="2" face="serif">President of Woodfield Capital Services Inc. and the President of Janus Finance</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>
    <FONT size="2" face="serif">Corporation. On May 1, 2006, Mr. Sheth was granted options to purchase 1,133,335</FONT><font size="1">&nbsp;
    </font></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>
    <FONT size="2" face="serif">shares of our common stock at an exercise price
    of &#36;0.60 per share.</FONT><font size="1">&nbsp;
    </font></TD>
</TR>
</TABLE>
<BR>





<P align="center"><FONT size=2 face="serif">53</FONT></P>

<HR noshade width="100%" size=4>

<P STYLE="page-break-before:always"></P><PAGE><br>



<P align="left">
<FONT size="2" face="serif">The following table provides certain information related to our shareholders: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
<TD align=center nowrap>
<B><FONT size="2" face="serif">Number of shares of common stock</FONT></B>
</TD>
<TD>&nbsp;
</TD>
<TD align=center nowrap>
<B><FONT size="2" face="serif">Number of shares of common stock being</FONT></B>
</TD>
</TR>
<TR valign="bottom">
<TD align=center nowrap>
<B><FONT size="2" face="serif">outstanding prior to issuance of</FONT></B>
</TD>
<TD>&nbsp;
</TD>
<TD align=center nowrap>
<B><FONT size="2" face="serif">registered for resale by selling</FONT></B>
</TD>
</TR>
<TR valign="bottom">
<TD align=center nowrap>
<B><FONT size="2" face="serif">Debentures held by persons other than</FONT></B>
</TD>
<TD>&nbsp;
</TD>
<TD align=center nowrap>
<B><FONT size="2" face="serif">shareholders and their affiliates <sup>(1)</sup></FONT></B>
</TD>
</TR>
<TR valign="bottom">
<TD align=center nowrap style="border-bottom:3px double #000000;">
<B><FONT size="2" face="serif">selling shareholders and their affiliates</FONT></B>
</TD>
<TD style="border-bottom:3px double #000000;">&nbsp;
</TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

</TD>
</TR>
<TR>
<TD colspan=3>&nbsp;

</TD>
</TR>
<TR valign="bottom">
<TD align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size="2" face="serif">36,256,117</FONT>
</TD>
<TD style="border-bottom:1px solid #000000;">&nbsp;
</TD>
<TD align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size="2" face="serif">33,197,593</FONT>
</TD>
</TR>
</TABLE>
<P align="left">
<FONT size="2" face="serif">(1) No shares of our common stock have been previously registered for resale by any of the selling shareholders or any of their respective affiliates. </FONT></P>

<P align="center"><FONT size=2 face="serif">54</FONT></P><br>
<br>
<hr noshade align="center" width="100%" size=4>

<P align="left" style="page-break-before:always"></P><PAGE>
<P align="center"> <B><FONT size=2 face="serif">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</FONT></B></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size="2" face="serif">The
    following table sets forth certain information with respect to the beneficial
    ownership of the Company as of December 31, 2007 by (i) each stockholder
    beneficially owning more than 5% of the outstanding shares of the Company&#146;s
    Common Stock, (ii) each director of the Company, (iii) each executive officer
    of the Company and (iv) all executive officers and directors as a group. </FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size="2" face="serif">As
    used in the table below and elsewhere in this Memorandum, the term </FONT><I><FONT size="2" face="serif">beneficial
    ownership </FONT></I><FONT size="2" face="serif">with respect to a security
    consists of sole or shared voting power, including the power to vote or direct
    the vote and/or sole or shared investment power, including the power to dispose
    or direct the disposition, with respect to the security through any contract,
    arrangement, understanding, relationship, or otherwise, including a right
    to acquire such power(s) during the next 60 days following the date of this
    prospectus. Except as otherwise indicated, the stockholders listed in the
    table have sole voting and investment powers with respect to the shares indicated.</FONT></P>
<P align="left"> <FONT size=1 face="serif"> </FONT><FONT size="2" face="serif">Except
    as otherwise noted below, the address of each of the persons in the table
    is c/o Assured Pharmacy, Inc., 17935 Sky Park Circle, Suite F, Irvine, California
    92624. </FONT></P>

<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD width="30%" align=left>&nbsp;</TD>
    <TD><B><FONT size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Name and
          address</FONT></B> </TD>
    <TD align=center><B><FONT size="2" face="serif">Amount of</FONT></B> </TD>
    <TD align=center><B><FONT size="2" face="serif">Percent</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="30%" align=left><B><FONT size="2" face="serif">Title of class</FONT></B> </TD>
    <TD><B><FONT size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;of beneficial
          owner</FONT></B> </TD>
    <TD align=center><B><FONT size="2" face="serif">beneficial</FONT></B> </TD>
    <TD align=center><B><FONT size="2" face="serif">of class*</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="30%" align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center style="border-bottom:1px solid #000000;"><B><FONT size="2" face="serif">ownership<sup>(1)</sup></FONT></B> </TD>
    <TD align=center style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left colspan=2 style="border-bottom:1px solid #000000;"><B><FONT size="2" face="serif">Executive
          Officers &amp; Directors:</FONT></B> </TD>
    <TD align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width="30%" align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Common</FONT> </TD>
    <TD align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Robert
        DelVecchio</FONT> </TD>
    <TD align=center style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">7,238,500
    shares<sup>(2)</sup></FONT> </TD>
    <TD align=center style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">11.9%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="30%" align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Common</FONT> </TD>
    <TD align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">James
        Manfredonia</FONT> </TD>
    <TD align=center style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">500,000
        shares</FONT> </TD>
    <TD align=center style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">0.9%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="30%" align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Common</FONT> </TD>
    <TD align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Richard
        Falcone</FONT> </TD>
    <TD align=center style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">500,000
        shares</FONT> </TD>
    <TD align=center style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">0.9%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="30%" align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Common</FONT> </TD>
    <TD align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Haresh
        Sheth</FONT> </TD>
    <TD align=center style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">5,048,777
    shares<sup>(3)</sup></FONT> </TD>
    <TD align=center style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">8.6%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="30%" align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">Common</FONT> </TD>
    <TD align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">John
        Eric Mutter</FONT> </TD>
    <TD align=center style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">825,000
        shares<sup>(4)</sup></FONT> </TD>
    <TD align=center style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">1.5%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left colspan=2><B><FONT size="2" face="serif">Total of All Directors
          and Executive</FONT></B> </TD>
    <TD align=center><FONT size="2" face="serif">13,545,612 shares</FONT> </TD>
    <TD align=center><FONT size="2" face="serif">23.0%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="2" align=left style="border-bottom:1px solid #000000;"><B><FONT size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Officers:</FONT></B> </TD>
    <TD align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=4>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left colspan=2 style="border-bottom:1px solid #000000;"><B><FONT size="2" face="serif">More
          Than 5% Beneficial Owners:</FONT></B> </TD>
    <TD align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width="30%" align=left><FONT size="2" face="serif">Common</FONT> </TD>
    <TD align=left><FONT size="2" face="serif">Mosaic Capital Advisors, LLC</FONT> </TD>
    <TD align=center><FONT size="2" face="serif">10,244,221 shares<sup>(5)</sup></FONT> </TD>
    <TD align=center><FONT size="2" face="serif">17.5%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="30%" align=left>&nbsp;</TD>
    <TD align=left><FONT size="2" face="serif">545 Fifth Avenue, Suite 709</FONT> </TD>
    <TD align=center><FONT size="2" face="serif"></FONT> </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width="30%" align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left style="border-bottom:1px solid #000000;"><FONT size="2" face="serif">New
        York, NY 10017</FONT> </TD>
    <TD align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
</TABLE>
<BR>
<TABLE border=0 cellspacing=0 cellpadding=0>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">(1)&nbsp; &nbsp; &nbsp;</FONT></TD>
    <TD width=100%><P align="left"><FONT size="2" face="serif">As used in this
          table, "beneficial ownership" means the sole or shared power to vote,
          or to direct the voting of, a security, or the sole or shared investment
          power with respect to a security (i.e., the power to dispose of, or
          to direct the disposition of, a security). In addition, for purposes
          of this table, a person is deemed, as of </FONT></P></TD>
  </TR>
</TABLE>
<p>&nbsp;</p>



<div align="center"><FONT size=2 face="serif">55</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>




<TABLE border=0 cellspacing=0 cellpadding=0>
  <TR>
    <TD>&nbsp;</TD>
    <TD><FONT size="2" face="serif">any date, to have "beneficial ownership" of
        any security that such person has the right to acquire within 60 days
    after such date.</FONT></TD>
  </TR>
  <TR>
    <TD colspan=2> </TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">(2)&nbsp; &nbsp; &nbsp;</FONT></TD>
    <TD width=100%><P align="left"><FONT size="2" face="serif">Includes
          5,000,000 shares issuable under options exercisable by Mr. DelVecchio
          within 60 days. Also includes (i) 638,500 shares held by Brockington
          Securities, Inc. (&#147;Brockington&#148;), (ii) 350,000 shares issuable
          under warrants exercisable by Brockington within 60 days and (iii)
          625,000 shares issuable upon the conversion of a Convertible Debenture
          held by Brockington and 625,000 shares issuable under warrants to
          be issued to Brockington upon the conversion of its Convertible Debenture.
    Mr. DelVecchio is the President and Chief Executive Officer of Brockington.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">(3)&nbsp; &nbsp; &nbsp;</FONT></TD>
    <TD width=100%><P align="left"><FONT size="2" face="serif">Includes
          1,133,334 shares issuable under options exercisable by Mr. Sheth within
          60 days. Also includes (i) 570,652 shares held by Woodfield Capital
          Services Inc. (&#147;Woodfield&#148;), (ii) 187,500 shares issuable
          under warrants exercisable by Woodfield within 60 days and (iii) 875,000
          shares issuable upon the conversion of a Convertible Debenture held
          by Woodfield and 875,000 shares issuable under warrants to be issued
          to Woodfield upon the conversion of its Convertible Debenture. Mr.
          Sheth is the President of Woodfield. Also includes (i) 375,000 shares
          held by Janus Finance Corporation (&#147;Janus Finance&#148;) and (ii)
          187,500 shares issuable under warrants exercisable by Janus Finance
          within 60 days. Mr. Sheth is the President of Janus Finance. Also includes
          (i) 28,125 shares held by Janus Financial Services Inc (&#147;Janus
          Financial&#148;), (ii) 566,666 shares issuable under options exercisable by Janus Financial within
60 days and (iii) 125,000 shares issuable upon the conversion
          of a Convertible Debenture held by Janus Financial and 125,000 shares
          issuable under warrants to be issued to Janus Financial upon the conversion
          of its Convertible Debenture. Mr. Sheth is
    the President of Janus Financial.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2> </TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">(4)&nbsp; &nbsp; &nbsp;</FONT></TD>
    <TD width=100%><P align="left"><FONT size="2" face="serif">Includes
          500,000 shares issuable under options exercisable by Mr. Mutter within
          60 days.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2> </TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">(5)&nbsp; &nbsp; &nbsp;</FONT></TD>
    <TD width=100%><P align="left"><FONT size="2" face="serif">Includes
          (i) 1,025,000 shares held by MPE III Ltd. Class
          L and 512,500 shares issuable under warrants exerciable by MPE III
          Ltd. Class L within 60 days, (ii) 1,250,000 shares held by MPE US LP
          Series B and 625,000 shares issuable under warrants exercisable by
          MPE US LP Series B within 60 days, (iii) 975,000 shares held by MPE
          US LP Series E and 487,500 shares issuable under warrants exercisable
          by MPE US LP Series E within 60 days, (iv) 243,721 shares held by Mosaic
          Private Equity Fund (US) LP Series E2, 1,333,750 shares issuable upon
          the conversion of a Convertible Debenture held by Mosaic Private Equity
          Fund (US) LP Series E2 and 1,333,750 shares issuable under warrants
          to be issued to Mosaic Private Equity Fund (US) LP Series E2 upon the
          conversion of its Convertible Debentures and (v) 2,458,000 shares
          held by Mosaic Financial Services, LLC. Mosaic Capital Advisors, LLC
          (&#147;MCA&#148;) is the investment advisor to Mosaic Partners Fund,
          Mosaic Partners Fund LP, MPE III Ltd. Class L, MPE US LP Series B,
          MPE US LP Series E, and Mosaic Private Equity Fund (US) LP Series E2.
    Mosaic Financial Services, LLC is a wholly-owned subsidiary of MCA.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2> </TD>
  </TR>
</TABLE>

<p>&nbsp;</p>

<div align="center"><FONT size=2 face="serif">56</FONT>

</div>
<hr noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left">&nbsp;</P>
<P align="center"> <B><FONT size=2 face="serif">SELLING SECURITY HOLDERS</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> The selling shareholders named in
    this prospectus are offering all of the shares of common stock being registered
    by this prospectus. The shares include the following: </FONT></P>

<UL>
  <LI>
    <P align="left"><FONT size=2 face="serif">750,000 shares of our common
        stock and 1,378,750 shares of our common stock issuable upon the
        exercise of warrants issued in an exempt offering completed on December
        23, 2005;</FONT></P>
  </LI>
  <LI>
    <P align="left"><FONT size=2 face="serif">2,458,000 common shares
        issued to credit providers upon the conversion of debt into equity</FONT></P>
  </LI>
  <LI>
    <P align="left"><FONT size=2 face="serif">2,500,000 shares of our common
        stock and 1,700,000 shares of our common stock issuable upon the
        exercise of warrants in an exempt offering completed during the fiscal
        year ended December 31, 2006; and</FONT></P>
  </LI>
  <LI>
    <P align="left"><FONT size=2 face="serif">4,812,500 shares of our
        common stock issuable upon the exercise of warrants
        that will be issued should the holders of our convertible debentures issued in
an exempt offering completed in January 2007 convert the debentures into equity.</FONT></P>
  </LI></UL>

<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling shareholder purchased
    their shares in the ordinary course of business. At the time of the purchase,
    the selling shareholder had no agreements or understandings to distribute
    the securities. </FONT></P>

<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    following table provides information regarding the beneficial ownership of
    our common stock by each of the selling shareholders as of January 28, 2008,
    including: </FONT></P>

<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD width="2%" valign=top nowrap>&nbsp;</TD>
    <TD width="5%" valign=top nowrap><FONT size=2 face="serif">1.</FONT></TD>
    <TD width=93%><P align="left"><FONT size=2 face="serif">the number of shares
          owned by each prior to this offering;</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top>&nbsp;</TD>
    <TD nowrap valign=top><FONT size=2 face="serif">2.</FONT></TD>
    <TD width=93%><P align="left"><FONT size=2 face="serif">the number of shares
          to be received upon the exercise of warrants;</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top>&nbsp;</TD>
    <TD nowrap valign=top><FONT size=2 face="serif">3.</FONT></TD>
    <TD width=93%><P align="left"><FONT size=2 face="serif">the total number
          of shares that are to be offered by each;</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top>&nbsp;</TD>
    <TD nowrap valign=top><FONT size=2 face="serif">4.</FONT></TD>
    <TD width=93%><P align="left"><FONT size=2 face="serif">the total number
          of shares that will be owned by each upon completion of the offering;</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top>&nbsp;</TD>
    <TD nowrap valign=top><FONT size=2 face="serif">5.</FONT></TD>
    <TD width=93%><P align="left"><FONT size=2 face="serif">the percentage owned
          by each upon completion of the offering; and</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top>&nbsp;</TD>
    <TD nowrap valign=top><FONT size=2 face="serif">6.</FONT></TD>
    <TD width=93%><P align="left"><FONT size=2 face="serif">the identity of
          the beneficial holder of any entity that owns the shares.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
</TABLE>

<P align="left">
<FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The named party beneficially
owns and has sole voting and investment power over all shares or rights to the
    shares, unless otherwise shown in the table. The numbers in this table assume
    that none of the selling shareholders sells shares of common stock not being
    offered in this prospectus or purchases additional shares of common stock,
    and assumes that all shares offered are sold. The percentages are based on
    54,263,085 shares of common stock outstanding on December 31, 2007. </FONT></P>


<div align="center"><FONT size=2 face="serif">57</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Shares To</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Total</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Total</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap>&nbsp;</TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Shares</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Be
          Received </FONT></B></TD>
    <TD width="2%" align=left nowrap>&nbsp;</TD>
    <TD width="9%" align=left nowrap><b><font size=2 face="serif">Number Of</font></b> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Shares To</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><B><FONT size=2 face="serif">Percent</FONT></B> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Shares</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">To Be</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Upon The</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Shares To Be</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Be Owned</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><B><FONT size=2 face="serif">Owned</FONT></B> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Owned</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Received</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Conversion</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Offered For</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Upon</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><B><FONT size=2 face="serif">Upon</FONT></B> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Prior to</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Upon The</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Of</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Selling</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Completion
          </FONT></B> </TD>
    <TD width="2%" align=left nowrap>&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><B><FONT size=2 face="serif">Completion</FONT></B> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><B><FONT size=2 face="serif">Name and
          Address of Selling</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">This</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Exercise of</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">Outstanding
          </FONT></B> </TD>
    <TD width="2%" align=left nowrap>&nbsp;</TD>
    <TD width="9%" align=left nowrap><b><font size=2 face="serif">Shareholder</font></b></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><B><FONT size=2 face="serif">of This</FONT></B> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><B><FONT size=2 face="serif">Of This</FONT></B> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Shareholder</FONT></B> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Offering</FONT></B> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Warrants</FONT></B> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Debentures</FONT></B> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Account</FONT></B> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Offering</FONT></B> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=right nowrap style="border-bottom:1px solid #000000;"><div align="left"><B><FONT size=2 face="serif">Offering</FONT></B> </div></TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>


  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Jeff Conroy</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">280,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">280,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">0.5%</FONT></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">150 Marion
        Point</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Belews
        Creeks, NC 27009</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Robert T. Lempert</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">100,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">100,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0.2%</FONT>  </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">23 Briarwood Drive</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Voorhees,
        NJ 08043</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>

  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Periscope
        Partners, LP </FONT><SUP><FONT size=2 face="serif">1</FONT></SUP> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">1,250,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">187,500</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">187,500</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">1,250,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">2.3%</FONT>  </div></TD>
    <TD width="3%" align=left nowrap>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">1600
        Flat Rock Road</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Penn
        Valley, PA 19072</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Ben B. Shenassa</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">50,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0</FONT> </div></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">50,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT>  </div></TD>
    <TD width="3%" align=left nowrap>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">3544 Alana Drive</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Sherman
        Oaks, CA 91403</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Christopher K.
        Pepper</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">12,500</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0</FONT> </div></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">12,500</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">Less
    than</FONT> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">2519 Crest Drive</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Manhattan
        Beach, CA 90266</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Amy Taus</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">50,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0</FONT> </div></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">50,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT>  </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">11 Darius Court</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Dix
        Hills, NY 11746</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Capital Growth
        Trust </FONT><SUP><FONT size=2 face="serif">2</FONT></SUP> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">400,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">200,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0</FONT> </div></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">200,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">400,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0.7%</FONT>  </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">13 Pastto Street</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Andover,
        MA 01810</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Steve Goodman</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">9,500</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">4,750</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0</FONT> </div></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">4,750</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">9,500</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">Less
    than</FONT> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">4032 Hilton Head
        Way</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Tarzana,
        CA 91356</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Stellar Capital
        Fund LLC </FONT><SUP><FONT size=2 face="serif">3</FONT></SUP> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">500,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">250,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0</FONT> </div></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">250,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">500,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0.9%</FONT>  </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">5633 Strand Blvd.,
        Suite 318</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Naples,
        FL 34110</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Donald E. Cohen</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;<FONT size=2 face="serif">20,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">10,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0</FONT> </div></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">10,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">20,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">Less
    than</FONT> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">54 Main Street,
        Unit 10</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Westhampton
        Beach, NY 11978</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Argyll Equities
        LLC </FONT><SUP><FONT size=2 face="serif">4</FONT></SUP> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;<FONT size=2 face="serif">375,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">187,500</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0</FONT> </div></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">187,500</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">375,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0.7%</FONT>  </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">4225 Executive
        Square, Suite 260</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">La
        Jolla, CA 92037</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Ronald M. Shippel</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;<FONT size=2 face="serif">50,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0</FONT> </div></TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap><FONT size=2 face="serif">50,000</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT>  </div></TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">4507 Roma Court</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="9%" align=left nowrap>&nbsp;</TD>
    <TD width="3%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Marina
        Del Rey, CA 90292</FONT> </TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="9%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="3%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
</TABLE>

<BR>

<div align="center"><FONT size=2 face="serif">58</FONT>

</div>
<hr noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>



<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Judy M. Shippel</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=5% align=left nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width=7%>&nbsp;</TD>
    <TD width=10% align=left nowrap><FONT size=2 face="serif">12,500</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD width=11% align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD width=11% align=left nowrap><FONT size=2 face="serif">12,500</FONT> </TD>
    <TD width=6% align=right nowrap><FONT size=2 face="serif">25,000</FONT> </TD>
    <TD width=6%>&nbsp;</TD>
    <TD width=7% align=right nowrap><div align="left"><FONT size=2 face="serif">Less
          than</FONT> </div></TD>
    <TD width=3% align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">4507 Roma Court</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width=7% align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Marina
        Del Rey, CA 90292</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Ray Y. Yamada</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">14,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">7,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">7,000</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">14,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD width=7% align=right nowrap><div align="left"><FONT size=2 face="serif">Less
          than</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">7671 Barbi Ln</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width=7% align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">La
        Palma, CA 90623</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Richard
        H. Gearns and Linda Gearns </FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2 face="serif">44,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">22,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">22,000</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">44,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">2087 Willow Street</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Wantagh,
        NY 11793</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Dorothy Breslin</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">70,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">35,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">35,000</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">70,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">3 Forte Drive</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Old
        Westbury, NY 11568</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Mosaic Financial
        Services, LLC </FONT><SUP><FONT size=2 face="serif">5</FONT></SUP> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">2,458,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">2,458,000</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">0%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">545 Fifth Avenue,
        Suite 709</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">New
        York, NY 10017</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Mosaic Private
        Equity III Limited </FONT><SUP><FONT size=2 face="serif">5</FONT></SUP> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">1,025,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><font size="2" face="serif">512,500</font></TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">1,025,000</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">0%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Akara Bldg 24 De
        Castro St.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Wickhams Cay</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Road
        Town, Tortola BVI</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>

  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Janus Finance Corporation <sup>6</sup></FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">375,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">187,500</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">187,500</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">375,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">0.7%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">27 Woodfield Ct.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Princeton,
        NJ 08540</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Martin Koutcher</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">62,500</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">31,250</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">31,250</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">62,500</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">574 Willis Ln.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Wayne,
        PA 19087</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Mosaic
        Private Equity US LP &#150; </FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2 face="serif">1,250,000</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2 face="serif">625,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">1,875,000</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">0%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Series B </FONT><SUP><FONT size=2 face="serif">5</FONT></SUP> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">545 Fifth Ave.,
        Suite 709</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">New
        York, NY 10017</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><FONT size=2 face="serif">Mosaic
        Private Equity US LP &#150; </FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2 face="serif">975,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">487,500</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">1,462,500</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">0%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Series E </FONT><SUP><FONT size=2 face="serif">5</FONT></SUP> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">545 Fifth Ave.,
        Suite 709</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">New
        York, NY 10017</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Michael Bellino</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">62,500</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">62,500</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">0.2%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">310 Society Hill
        Blvd.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Cherry
        Hill, NJ 08003</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Joseph N. Giulii</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">62,500</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">62,500</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">0.2%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">1445 Ford Rd.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Bensalem,
        PA 19020</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Jyotsna P. Shah
        Revocable Trust </FONT><SUP><FONT size=2 face="serif">7</FONT></SUP> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">523,936</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">375,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">375,000</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">523,936</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=2 face="serif">1.0%</FONT> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">13330 Cathy Lane</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Planfield,
        IL 60585</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Barry L. Kahn</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">62,500</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">31,250</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">31,250</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">62,500</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0.1%</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">7 Mosswood Drive</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">&nbsp;</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Voorhees,
        NJ 08043</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">Janus Financial
        Services, Inc. </FONT><SUP><FONT size=2 face="serif">8</FONT></SUP> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">28,125</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">28,125</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left">
      <div align="left"><FONT size=2 face="serif">Less than</FONT> </div>
    </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left><FONT size=2 face="serif">P.O. Box 23</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">0.1%</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Franklin
        Park, NJ 08823</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=30% align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Woodfield
        Capital Services Inc. </FONT><SUP><FONT size=2 face="serif">9</FONT></SUP> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">570,652</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">1,062,500</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">875,000</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">1,062,500</FONT> </TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">570,652</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><div align="left"><FONT size=2 face="serif">1.1%</FONT> </div></TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
</TABLE>
<BR>
<div align="center"><FONT size=2 face="serif">59</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">27 Woodfield Ct.</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Princeton,
        NJ 08540</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Baruch Halpern
        Rev TTDTD 6/13/06</FONT> <SUP><FONT size=2 face="serif">10</FONT></SUP></TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">119,205</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">500,000</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">500,000</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">500,000</FONT> </TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap><FONT size=2 face="serif">119,205</FONT> </TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">0.2%</FONT> </TD>
    <TD align=left width=3% nowrap><FONT size=2 face="serif"></FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Baruch Halpern
        TTEE</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">9601 Collins Ave.,
        #303</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Bal
        Harbour, FL 33154</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Pinewood Trading
        Fund LP </FONT><SUP><FONT size=2 face="serif">11</FONT></SUP> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">127,198</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">250,000</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">250,000</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">250,000</FONT> </TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap><FONT size=2 face="serif">127,198</FONT> </TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">0.2%</FONT> </TD>
    <TD align=left width=3% nowrap><FONT size=2 face="serif"></FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">1029 East Drive</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Beaumont,
        TX 77706</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Brockington Securities,
        Inc.</FONT><SUP><FONT size=2 face="serif">12</FONT></SUP> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">638,500</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">625,000</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">625,000</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">625,000</FONT> </TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap><FONT size=2 face="serif">638,500</FONT> </TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">1.2%</FONT> </TD>
    <TD align=left width=3% nowrap><FONT size=2 face="serif"></FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">2805 Veterans Hwy.,
        Suite 1</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Ronkonkoma,
        NY 11779</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>

  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Beth S. Levine &amp; Claudia
        Carter,</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">23,810</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap><FONT size=2 face="serif">23,810</FONT> </TD>
    <TD width=10%>&nbsp;</TD>
    <TD width=7% align=left nowrap><FONT size=2 face="serif">Less than</FONT></TD>
    <TD width=3% align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">JTTEN</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD width=7% align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD width=3% align=right nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">434 Hasbrouck Blvd.</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Oradell,
        NJ 07649</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Cornix Management
        LLC </FONT><SUP><FONT size=2 face="serif">13</FONT></SUP> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">37,293</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">187,500</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">187,500</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">187,500</FONT> </TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap><FONT size=2 face="serif">37,293</FONT> </TD>
    <TD width=10%>&nbsp;</TD>
    <TD width=7% align=left nowrap><FONT size=2 face="serif">Less than</FONT></TD>
    <TD align=left width=3% nowrap><FONT size=2 face="serif"></FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">17 State Street,
        Suite 1600</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD width=7% align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">New
        York, NY 10004</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Alpha Capital Anstalt </FONT><SUP><FONT size=2 face="serif">14</FONT></SUP> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">122,951</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">625,000</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">625,000</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">625,000</FONT> </TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap><FONT size=2 face="serif">122,951</FONT> </TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">0.2%</FONT> </TD>
    <TD align=left width=3% nowrap><FONT size=2 face="serif"></FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Pradafant 7 9490
        Furstentums</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Vaduz,
        Lechtenstein</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Harbor View Master
        Fund LP </FONT><SUP><FONT size=2 face="serif">15</FONT></SUP> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">142,105</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">750,000</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">750,000</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">750,000</FONT> </TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap><FONT size=2 face="serif">142,105</FONT> </TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">0.3%</FONT> </TD>
    <TD align=left width=3% nowrap><FONT size=2 face="serif"></FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Water Front Drive
        Road Towne</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Tortola,
        BVI</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Monarch Capital
        Fund Ltd. </FONT><SUP><FONT size=2 face="serif">16</FONT></SUP> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">78,718</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">375,000</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">375,000</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">375,000</FONT> </TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap><FONT size=2 face="serif">78,718</FONT> </TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">0.1%</FONT> </TD>
    <TD align=left width=3% nowrap><FONT size=2 face="serif"></FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">2</FONT><SUP><FONT size=2 face="serif">nd </FONT></SUP><FONT size=2 face="serif">Floor,
        Harbour House</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Waterfront Drive,
        Road Town,</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">Tortola</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">British
        Virgin Islands</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">LB Financial Holdings,
        LLC </FONT><SUP><FONT size=2 face="serif">17</FONT></SUP> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">26,706</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap><FONT size=2 face="serif">26,706</FONT> </TD>
    <TD width=10%>&nbsp;</TD>
    <TD width=7% align=left nowrap><FONT size=2 face="serif">Less than</FONT></TD>
    <TD align=left width=3% nowrap><FONT size=2 face="serif"></FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">2248 Meridian Boulevard,
        Suite H</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD width=7% align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Minden,
        NV 89423</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">CMS Capital </FONT><SUP><FONT size=2 face="serif">18</FONT></SUP> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap><FONT size=2 face="serif">26,239</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap><FONT size=2 face="serif">125,000</FONT> </TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap><FONT size=2 face="serif">26,239</FONT> </TD>
    <TD width=10%>&nbsp;</TD>
    <TD width=7% align=left nowrap><FONT size=2 face="serif">Less than</FONT></TD>
    <TD align=left width=3% nowrap><FONT size=2 face="serif"></FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap><FONT size=2 face="serif">9612 Van Nuys #108</FONT> </TD>
    <TD width=1%>&nbsp;</TD>
    <TD align=left width=7% nowrap>&nbsp;</TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=4%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=3%>&nbsp;</TD>
    <TD align=left width=8% nowrap>&nbsp;</TD>
    <TD width=5%>&nbsp;</TD>
    <TD align=left width=1% nowrap>&nbsp;</TD>
    <TD width=10%>&nbsp;</TD>
    <TD width=7% align=right nowrap><div align="left"><FONT size=2 face="serif">0.1%</FONT> </div></TD>
    <TD align=left width=3% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=32% nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Panorama
        City, CA 91402</FONT> </TD>
    <TD width=1% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=2% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=4% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=3% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=8% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=5% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=1% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width=10% style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=7% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left width=3% nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
</TABLE>

<P align="left"> <FONT size=2 face="serif">Other than as disclosed below, none
    of the selling shareholders: </FONT></P>
<TABLE width="71%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD width="2%">&nbsp;</TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">&#149;  has
          had a material relationship with us other than as a shareholder at
          any time within the past three years; or </FONT></P></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><font size=2 face="serif">&#149;  has
    been one of our officers or directors.</font></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD valign="top"><font size=1 face="serif">1</font></TD>
    <TD valign=top nowrap><FONT size=2 face="serif">Leon Frenkel is the beneficial
    owner of the shares held by Periscope Partners, LP.</FONT></TD>
  </TR>
  <TR>
    <TD colspan=2 valign="top">&nbsp;</TD>
  </TR>

  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">2</FONT></TD>
    <TD><P align="left"><FONT size=2 face="serif">Vicki
          Appel is the trustee of shares held by Capital Growth Trust.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
</TABLE>
<br>
<div align="center"><FONT size=2 face="serif">60</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD width="2%" valign=top nowrap><FONT size=1 face="serif">3</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Richard Schmidt
          is the managing member and beneficial owner of shares held by Stellar
          Capital Fund LLC.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">4</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Doug McClain, Jr.
          is the President and beneficial owner of shares held by Argyll Equities
          LLC.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">5</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Mosaic Capital Advisors,
          LLC (&#147;MCA&#148;) is the investment advisor to Mosaic Partners
          Fund, Mosaic Partners Fund LP, MPE III Ltd. Class L, MPE US LP Series
          B, MPE US LP Series E, and Mosaic Private Equity Fund (US) LP Series
          E2. Mosaic Financial Services, LLC is a wholly-owned subsidiary of
          MCA. Ameet Shah is the natural person who exercises the voting and
          dispositive powers with respect to the shares held by entities in which
    MCA acts as investment advisor.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">6</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Haresh Sheth is
          the beneficial owner of the shares held by Janus Finance Corporation.
          Mr. Sheth currently serves as our Chief Financial Officer and as a
          member of our board of directors.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">7</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Jyotsna P. Shah
          is the beneficial owner of the shares held by the Jyotsna P. Shah Revocable
          Trust.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">8</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Haresh Sheth is
          the beneficial owner of the shares held by Janus Financial Services,
          Inc. Mr. Sheth currently serves as our Chief Financial Officer and
          as a member of our board of directors.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">9</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Haresh Sheth is
          the beneficial owner of the shares held by Woodfield Capital Services
          Inc. Mr. Sheth currently serves as our Chief Financial Officer and
          as a member of our board of directors.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">10</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Baruch Halpern is
          the beneficial owner of the shares held by Baruch Halpern Rev TTDTD.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">11</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Jeb Brooks is the
          beneficial owner of the shares held by Pinewood Trading Fund LP.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">12</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Robert DelVecchio
          is the beneficial owner of the shares held by Brockington Securities
          Inc. Mr. DelVecchio currently serves as our Chief Executive Officer
          and as a member of our board of directors.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">13</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Steven Urbach is
          the beneficial owner of the shares held by Cornix Management LLC.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">14</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Konrad Ackerman
          is the beneficial owner of the shares held by Alpha Capital Anstalt.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">15</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">David Stefansky
          is the beneficial owner of the shares held by Harbor View Master Fund
          LP.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">16</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Howard Weiss is
          the beneficial owner of the shares held by Monarch Capital Fund Ltd.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">17</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Joseph Piacentile
          is the beneficial owner of the shares held by LB Financial Holdings,
          LLC.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=1 face="serif">18</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">Howard Weiss is
          the beneficial owner of the shares held by CMS Capital.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
</TABLE>
<br>
<div align="center"><FONT size=2 face="serif">61</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<P align="center"> <B><FONT size=2 face="serif">DESCRIPTION OF CAPITAL STOCK</FONT></B></P>
<P align="left"> <B><FONT size=2 face="serif">Common Stock</FONT></B></P>


<P align="left"><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
      have authorized 150,000,000 shares of our common stock with a par value
    of &#36;0.001
      per share, of which 54,263,085 shares were outstanding as of December 31, 2007.</FONT></P>


<P align="left"> <B><FONT size=2 face="serif">Voting Rights</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of common stock have the
    right to cast one vote for each share of stock held in his or her own name
    on the books of the corporation, whether represented in person or by proxy,
    on all matters submitted to a vote of holders of common stock, including
    the election of directors. There is no right to cumulative voting in the
    election of directors. Except where a greater requirement is provided by
    statute, the Articles of Incorporation, or the Bylaws, the presence, in person
    or by proxy duly authorized, of the holder or holders of 33 1/3 percent of
    the outstanding shares of the our common voting stock shall constitute a
    quorum for the transaction of business.</FONT></P>
<P align="left"> <FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The vote by the holders of a majority
    of such outstanding shares is required to effect certain fundamental corporate
    changes such as liquidation, merger or amendment of the Company's Articles
    of Incorporation. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of our common stock have
    no pre-emptive rights, no conversion rights and there are no redemption provisions
    applicable to our common stock. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Preferred Stock</FONT></B></P>

<P align="left"><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have
    authorized 5,000,000 shares of our preferred stock with a par value of &#36;0.001
    per share, of which no shares were outstanding as of December 31, 2007.</FONT></P>

<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Preferred stock may be issued in
    one or more series, each series to be appropriately designated by a distinguishing
    letter or title, prior to the issuance of any shares thereof. The voting
    powers, designations, preferences, limitations, restrictions, and relative,
    participating, optional and other rights, and the qualifications, limitations,
    or restrictions thereof, of the preferred stock shall be prescribed by resolution
    of the board of directors pursuant to Section 3 of Article III of the Articles
    of Incorporation. </FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Warrants</FONT></B></P>


<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are registering the common stock
    underlying certain warrants issued in exempt offerings. These warrants are described
below.</FONT></P>

<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    holder(s) of warrants to purchase 1,660,000 shares of our common stock issued
    in the exempt offering that closed on December 23, 2005 have the option to purchase
    shares of our common stock for a 36-month period from the date of issuance.
    The exercise price for these warrants is &#36;0.60 per share. If the average
    closing price for our common stock on the OTCBB for thirty consecutive trading
    days following the effectiveness of this registration statement is equal
    to or greater than &#36;1.20, we shall have unlimited discretion to call
    the warrants at their exercise price of &#36;0.60 for a period of fifteen
business days following such occurrence. Of the 1,660,000 warrants  issued, 1,378,250 remain outstanding, and the shares of our common stock issuable upon the exercise of these warrants are being registered in
this prospectus.</FONT></P>


<div align="center"><FONT size=2 face="serif">62</FONT>

</div>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    holder(s) of warrants to purchase 2,212,500 shares of our common stock issued
    in the exempt offering during the fiscal year ended December 31, 2006 have
    the option to purchase shares of our common stock for
    a 36-month period from the date of issuance. The exercise price for these
    warrants is &#36;0.60
    per share. If the average closing price for our common stock on the OTCBB
    for thirty consecutive trading days following the effectiveness of this registration
    statement is equal to or greater than &#36;1.20, we shall have unlimited
    discretion to call the warrants at their exercise price of &#36;0.60 for
    a period of fifteen business days following such occurrence. Of the 2,212,500 shares of our common stock issuable upon the exercise of these warrants, 1,700,000 shares are being registered in this prospectus.</FONT></P>
<P align="left">
<FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2007, we
completed a private offering of one-year unsecured convertible debentures (&#147;</FONT><I><FONT size=2 face="serif">Debenture</FONT></I><FONT size=2 face="serif">&#148;)
    carrying an interest rate of 18% per annum and raised total proceeds of &#36;2,458,500.
    The Debenture provides that all the interest is payable solely in the shares
    of our common stock on the issuance date. The number of shares issued as
    interest was calculated based upon average closing price for our common stock
    on NASD OTCBB for the five (5) consecutive trading days preceding the issuance
    date. We issued 1,265,987 shares of our common stock as
    interest. Each Debenture holder has the right to convert its Debenture
    into fully paid non-assessable shares of our common stock at &#36;0.40 per
    share. For every two (2) shares that a Debenture holder receives upon conversion,
    the holder  will also receive a warrant to purchase one (1) share of
    common stock at an exercise price of &#36;0.60 exercisable for 12 months
    after the conversion date and one (1) share of  common
    stock at an exercise price of &#36;0.80 exercisable for 24 months.  Subsequent
    to January 2007, we have sold additional Debentures in the aggregate principal
    amount of $1,625,000. The shares of our common stock potentially issuable
    in the event of the conversion of these additional Debentures, together with
    shares of our common stock issued to the holders of these Debentures as interest,
    are not included in this registration statement. We do
    not currently have sufficient funds to repay the Debentures. We intend to
    secure additional financing through additional debt or equity financing arrangements.
    There can be no assurance that we will be successful in raising all of the
additional funding that we are seeking. Of the 6,416,250 shares of our common
    stock issuable upon the exercise of warrants that will be issued in the event
    of the conversion of the  Debentures, 4,812,500 are being registered in this
    prospectus.</FONT></P>


<P align="left">
<FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we issued 1,040,000
    warrants to purchase shares of our common stock to consultants. The shares
    of common stock issuable upon exercise of theses warrants are not being registered
    in this prospectus. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of all warrants have no voting
    rights unless and until the warrants are converted into common stock. As
    a result of owning these warrants, warrant holders have no right to participate
    in any shareholder decisions.</FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Nevada Anti-Takeover Laws</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nevada Revised Statutes Sections
    78.378 to 78.379 provide state regulation over the acquisition of a controlling
    interest in certain Nevada corporations unless the articles of incorporation
    or bylaws of the corporation provide that the provisions of these sections
    do not apply. Our articles of incorporation and bylaws do not state that
    these provisions do not apply. The statute creates a number of restrictions
    on the ability of a person or entity to acquire control of a Nevada company
    by setting down certain rules of conduct and voting restrictions in any acquisition
    attempt, among other things. The statute is limited to corporations that
    are organized in the state of Nevada and that have 200 or more stockholders,
    at least 100 of whom are stockholders of record and residents of the State
    of Nevada; and does business in the State of Nevada directly or through an
    affiliated corporation. Because of these conditions, the statute currently
    does not apply to our Company. </FONT></P>
<div align="center"><FONT size=2 face="serif">63</FONT>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> <B><FONT size=2 face="serif">Shares Eligible for Future Sale</FONT></B></P>
<P align="left">
 <FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assuming
    the exercise in full of the warrants and the conversion in full of the Debentures,
    assuming no exercise of
    options outstanding following this offering, we will have an aggregate of
    84,550,682 shares of common stock outstanding upon completion of
    this offering. Of these shares, 44,399,178 shares will be freely tradable
    without restriction or further registration under the Securities Act, unless
    purchased by &#147;</FONT><I><FONT size=2 face="serif">affiliates</FONT></I><FONT size=2 face="serif">&#148; as
    that term is defined under Rule 144 of the Securities Act, who may sell only
    the volume of share described below and whose sales would be subject to additional
    restrictions described below. The remaining 40,151,504 shares of
    common stock will be held by our existing stockholders and will be deemed
    to be &#147;</FONT><I><FONT size=2 face="serif">restricted
    securities</FONT></I><FONT size=2 face="serif">&#148; under Rule 144. Restricted
    securities may only be sold in the public market pursuant to an effective
    registration statement under the Securities Act or pursuant to an exemption
    from registration under Rule 144, Rule 701 or Rule 904 under the Securities
Act. These rules are summarized below. </FONT></P>



<P align="left"> <B><FONT size=2 face="serif">Eligibility of Restricted Shares
      for Sale in the Public Market</FONT></B></P>



<P align="left"> <FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    following indicates approximately when the 40,151,504 shares of
    common stock that are not being sold in this offering, but which will be
    outstanding at the time this offering is complete (assuming the exercise
    in full of the warrants and the conversion in full of the Debentures, but
    no exercise of outstanding options), will be eligible for sale into the public
    market, under the provisions of Rule 144: beginning on the date of this prospectus,
    32,011,505 of these shares are eligible for resale, subject to volume, manner
    of sale and other limitations under Rule 144 and the 8,139,999 shares issuable
    upon the exercise of outstanding warrants not being registered in this prospectus
    will be eligible for resale, subject to volume, manner of sale and other
limitations under Rule 144, one year after the warrant date of exercise.</FONT></P>



<P align="left"> <B><FONT size=2 face="serif">Rule 144</FONT></B></P>
<P align="left"> <FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule 144 as currently
    in effect, a person who has beneficially owned shares of common stock for
    at least one year is entitled to sell within any three-month period a number
    of shares that does not exceed the greater of:</FONT></P>
<UL>
  <LI>
    <P align="left"><FONT size=2 face="serif">1.0% of the number of shares of
        common stock then outstanding, which is expected to equal approximately
        123,461 shares of common stock immediately after this offering; or</FONT></P>
  </LI>
  <LI>
    <P align="left"><FONT size=2 face="serif">the average weekly trading volume
        of the shares of common stock on the OTCBB during the four calendar
        weeks preceding the filing of a notice on Form 144 in connection with
        the sale.</FONT></P>
  </LI>
</UL>
<P align="left"> <FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales under Rule 144 are also subject
    to manner of sale provisions and notice requirements and to the availability
    of current public information about us. In addition, under Rule 144(k) as
    currently in effect, a person:</FONT></P>
<UL>
  <LI>
    <P align="left"><FONT size=2 face="serif">who is not considered to have been
        one of our affiliates at any time during the 90 days preceding a sale;
        and</FONT></P>
  </LI>
  <LI>
    <P align="left"><FONT size=2 face="serif">who has beneficially owned the
        shares proposed to be sold for at least two years, including the holding period
        of any prior owner other than an affiliate,</FONT></P>
  </LI>
</UL>
<P align="left"> <FONT size=2 face="serif">is entitled to sell his shares without
    complying with the manner of sale, public information, volume limitation
    or notice provisions of Rule 144.</FONT></P>
<P align="left"> <B><FONT size=2 face="serif">Rule 701</FONT></B></P>
<P align="left"> <FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule 701, any of
    our employees, directors, officers, consultants, or advisors who purchased
    shares of common stock from us under a compensatory stock option plan or
    other written agreement before the closing of this offering is entitled to
    resell these shares. These shares can be resold 90 days after the effective
    date of this offering in reliance on Rule 144, without having to comply with
restrictions, including the holding period, contained in Rule 144.</FONT></P>
<div align="center"><FONT size=2 face="serif">64</FONT></div>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> <FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Securities and Exchange Commission
    has indicated that Rule 701 will apply to typical share options granted by
    an issuer before it becomes subject to the reporting requirements of the
    Securities Exchange Act of 1934, along with the shares acquired upon exercise
    of these options, including exercises after the date of this prospectus.
    Securities issued in reliance on Rule 701 are restricted securities and,
    subject to the contractual restrictions described above, beginning 90 days
after the date of this prospectus, may be sold:</FONT></P>
<UL>
  <LI>
    <P align="left"><FONT size=2 face="serif">by persons other than affiliates
        subject only to the manner of sale provisions of Rule 144; and</FONT></P>
  </LI>
  <LI>
    <P align="left"><FONT size=2 face="serif">by affiliates under Rule 144 without
        compliance with its one year minimum holding period requirement.</FONT></P>
  </LI>
</UL>
<P align="left"> <B><FONT size=2 face="serif">Registration Rights</FONT></B></P>



<P align="left"> <FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
    the completion of this offering, the holders of an aggregate of 1,265,987 </FONT> <FONT size=2 face="serif">shares
    of common stock and the holders of debentures convertible into 10,208,750
    shares are entitled to &#147;piggy
    back&#148; registration
    rights, also subject to cutback for marketing reasons. Registration of such
    shares under the Securities Act would result in such shares becoming freely
    tradable without restriction under the Securities Act, except for shares
    purchased by affiliates, immediately upon the effectiveness of such registration.
    Any sales of securities by these stockholders could have a material adverse
effect on the trading price of our common stock.</FONT></P>


<div align="center"><FONT size=2 face="serif">65</FONT></div>
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<P align="center"> <B><FONT size=2 face="serif">PLAN OF DISTRIBUTION</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> The selling shareholders may sell
    some or all of their common stock in one or more transactions, including
    block transactions: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD width="2%" valign=top nowrap><FONT size=2 face="serif">1.</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">on such public markets
          or exchanges as the common stock may from time to time be trading;</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=2 face="serif">2.</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">in privately negotiated
          transactions;</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=2 face="serif">3.</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">through the writing
          of options on the common stock;</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=2 face="serif">4.</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">in short sales,</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=2 face="serif">5.</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">in any combination
          of these methods of distribution; or</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=2 face="serif">6.</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">any other method
          permitted by applicable law.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
</TABLE>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is quoted on the
    OTCBB, so the offering price of the stock will be determined by prevailing
    market prices at the time of sale or by private transactions negotiated by
    the selling shareholders. The offering price will thus be determined by market
    factors and the independent decisions of the selling shareholders. The sales
    price to the public may be: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD width="2%" valign=top nowrap><FONT size=2 face="serif">1.</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">the market price
          of our common stock prevailing at the time of sale;</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=2 face="serif">2.</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">a price related
          to such prevailing market price of our common stock, or;</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top><FONT size=2 face="serif">3.</FONT></TD>
    <TD width=98%><P align="left"><FONT size=2 face="serif">such other price
          as the selling shareholders determine from time to time.</FONT></P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
</TABLE>
<P align="left"> <FONT size=2 face="serif"> The shares may also be sold in compliance
    with the Securities and Exchange Commission's Rule 144.</FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule 144 of the
    Securities Act as currently in effect, a person who has beneficially owned
    restricted securities for at least one year would be entitled to sell within
    any three-month period a number of shares that does not exceed the greater
    of the following: </FONT></P>
<UL>
  <LI>
    <P align="left"><FONT size=2 face="serif">one percent of the number of shares
        of common stock then outstanding, or</FONT></P>
  </LI>
  <LI>
    <P align="left"><FONT size=2 face="serif">the average weekly trading volume
        of the common stock during the four calendar weeks preceding
        the sale. However, pursuant to the rules and regulations promulgated
        under the Securities Act, the OTC Bulletin
        Board, where our common stock is quoted, is not an &#147;automated
        quotation system&#148; referred to in Rule 144(e). As a consequence,
        this market- based volume limitation
        allowed for securities listed on an exchange or quoted on NASDAQ
        is unavailable for our common stock.</FONT></P>
  </LI>
</UL>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales under Rule 144 are also subject
    to requirements with respect to manner-of-sales requirements, notice requirements
    and the availability of current public information about us. Under Rule 144(k),
    a person who is not deemed to have been our affiliate at any time during
    the three months preceding a sale, and who has beneficially owned the shares
    proposed to be sold for at least two years, is entitled to sell his or her
    shares without complying with the manner-of-sale, public information, volume
    limitation or notice provisions of Rule 144.</FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling shareholders may also
    sell their shares directly to market makers acting as agents in unsolicited
    brokerage transactions. Any broker or dealer participating in such transactions
    as an agent may receive a commission from the selling shareholders, or if
    they act as agent for the purchaser of such common stock, from such purchaser.
    The selling shareholders will likely pay the usual and customary brokerage
    fees for such services. If applicable, the selling shareholders may distribute
    shares to one or more of their partners who are unaffiliated with us. Such
    partners may, in turn, distribute such shares as described above. Under such
    circumstance, all unidentified security holders will be identified in pre-effective
    or post-effective amendment(s) or prospectus supplement(s), as applicable.
    We can provide no assurance that all or any of the common stock offered being
    registered hereby will be sold by the selling shareholders. </FONT></P>
<div align="center"><FONT size=2 face="serif">66</FONT>
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<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are bearing all costs relating
    to the registration of the common stock. The selling shareholders, however,
    will pay any commissions or other fees payable to brokers or dealers in connection
    with any sale of the common stock. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selling shareholders must comply
    with the requirements of the Securities Act and the Exchange Act in the offer
    and sale of the common stock. In particular, during such times as the selling
    shareholders may be deemed to be engaged in a distribution of the common
    stock, and therefore be considered to be an underwriter, they must comply
    with applicable law and may, among other things: </FONT></P>
<table width="100%" border=0 cellpadding=0 cellspacing=0>
  <tr>
    <td width="2%" valign=top nowrap><font size=2 face="serif">1.</font></td>
    <td width=98%><p align="left"><font size=2 face="serif">not engage in any
          stabilization activities in connection with our common stock;</font></p></td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td nowrap valign=top><font size=2 face="serif">2.</font></td>
    <td width=98%><p align="left"><font size=2 face="serif">furnish each broker
          or dealer through which common stock may be offered, such copies of
          this prospectus, as amended from time to time, as may be required by
          such broker or dealer; and;</font></p></td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td nowrap valign=top><font size=2 face="serif">3.</font></td>
    <td width=98%><p align="left"><font size=2 face="serif">not bid for or purchase
          any of our securities or attempt to induce any person to purchase any
          of our securities other than as permitted under the Exchange Act.</font></p></td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
</table>
<P align="left"> </P>
<P align="left"><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition,
    Brockington Securities, Inc. is registered as a broker-dealer under the Securities
    Exchange Act of 1934, as amended, and, accordingly, is deemed to be an underwriter
    in connection with the sale of its shares of common stock.</FONT> </P>
<P align="left"> </P>
<P align="left"><B><FONT size=2 face="serif">Determination of Offering Price</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
    shares being offered will be sold by existing shareholders without our involvement,
    consequently the actual price of the stock will be determined by prevailing
    market prices at the time of sale or by private transactions negotiated by
    the selling shareholders. The offering price will thus be determined by market
    factors and the independent decisions of the selling shareholders.</FONT></P>
<P align="center"> <B><FONT size=2 face="serif">LEGAL MATTERS</FONT></B></P>

<P align="left">
<FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
      legal matters in connection with this offering will be passed upon for
us by Cane Clark LLP &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</FONT></P>

<P align="center"> <B><FONT size=2 face="serif">EXPERTS</FONT></B></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Miller, Ellin &amp; Company, LLP
    has audited our consolidated financial statements included in this prospectus
    and registration statement to the extent and for the period set forth in
    their audit report. Miller, Ellin &amp; Company, LLP has presented their
    report with respect to our December 31, 2006 consolidated financial statements.
    The report of Miller, Ellin &amp; Company, LLP is included in reliance upon
    their authority as experts in accounting and auditing. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Squar, Milner, Peterson, Miranda &amp; Williamson,
    LLP, formerly known as Squar, Milner, Reehl &amp; Williamson, LLP has audited
    our consolidated financial statements included in this prospectus and registration
    statement to the extent and for the period set forth in their audit report.
    Squar, Milner, Peterson, Miranda &amp; Williamson, LLP has presented their
    report with respect to our December 31, 2005 consolidated financial statements.
    The report of Squar, Milner, Peterson, Miranda &amp; Williamson, LLP is included
    in reliance upon their authority as experts in accounting and auditing. </FONT></P>
<P align="center"> <B><FONT size=2 face="serif">CHANGES IN AND DISAGREEMENTS
      WITH ACCOUNTANTS</FONT></B></P>
<P align="left"> <FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No events occurred requiring disclosure
    under Item 304(b) of Regulation S-B.</FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April 5, 2006, Squar, Milner,
    Reehl &amp; Williamson, LLP (the &#147;Squar Milner&#148;) was dismissed
    as our independent registered public accounting firm. We engaged Miller,
    Ellin &amp; Co. LLP as our principal accountants effective April 5, 2006.
    The decision to change accountants was approved by our board of directors.
    We did not consult with Miller, Ellin &amp; Co. LLP on any matters prior
    to retaining such firm as our principal accountants. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Squar Milner&#146;s audit reports
    on our consolidated financial statements for the fiscal years ended December
    31, 2005 and December 31, 2004 contained no adverse opinion or disclaimer
    of opinion, nor </FONT></P>
<div align="center"><FONT size=2 face="serif">67</FONT>

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<P align="left" style="page-break-before:always"></P><PAGE>
<P align="left"> <FONT size=2 face="serif">were they qualified or modified as
    to uncertainty, audit scope or accounting principles, except that the audit
    reports on our financial statements for the fiscal years ended December 31,
    2005 and December 31, 2004 contained an uncertainty about our ability to
    continue as a going concern. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the years ended December 31,
    2005 and December 31, 2004, and through the subsequent period ended April
    5, 2006, there were no disagreements with Squar Milner on any matter of accounting
    principles or practices, financial statement disclosure, or auditing scope
    or procedures, which disagreements if not resolved to the satisfaction of
    Squar Milner would have caused them to make reference thereto in their reports
    on the consolidated financial statements for such periods. </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the years ended December 31,
    2005 and December 31, 2004, and through the subsequent period ended April
    5, 2006, Squar Milner did not advise us with respect to any of the matters
    described in paragraphs (a)(1)(iv)(A) or (B) of Item 304 of Regulation S-B
    except as follows: </FONT></P>
<P align="left"> <FONT size=2 face="serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March 30, 2006, Squar Milner advised
    our board of directors about a material weakness in the internal control
    that we do not have sufficient staffing in the financial reporting and accounting
    departments regarding the specialized knowledge and expertise in accounting
    principles generally accepted in the United States (&#147;GAAP&#148;) that
    is necessary to (i) prevent errors in financial reporting and related disclosures
    and (ii) otherwise comply with accounting pronouncements.</FONT></P>
<div align="center"><FONT size=2 face="serif">68</FONT>
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<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=right width=92% nowrap><div align="center"><B><FONT size=2 face="serif">INDEX TO CONSOLIDATED
          FINANCIAL STATEMENTS</FONT></B> </div></TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap><B><FONT size=2 face="serif">Audited Financial
          Statements:</FONT></B> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Report of Independent Registered Public Accounting Firm - 2006</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-1</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Report of Independent Registered Public Accounting Firm - 2005</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-2</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Consolidated
    Balance Sheet as of December 31, 2006 (As Restated)</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-3</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Consolidated Statements of Operations - Years Ended December 31, 2006</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-4</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">and 2005</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Consolidated
        Statement of Stockholders&#146; Deficit for </FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-5</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">the
    Years Ended December 31, 2006 and 2005 (As Restated)</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Consolidated Statements of Cash Flows for the Years Ended December 31,</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-6</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">2006 and 2005</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Notes to Consolidated Financial Statements</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-7</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap><B><FONT size=2 face="serif">Unaudited Financial Statements:</FONT></B> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Unaudited
    Condensed Consolidated Balance Sheet as of September 30, 2007 (As Restated)</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-43</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Unaudited
    Condensed Consolidated Statements of Operations for the nine</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-44</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">months
    ended September 30, 2007 and 2006</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Unaudited
    Condensed Consolidated Statements of Cash Flows for the nine</FONT></TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-45</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">months
    ended September 30, 2007 and 2006</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=92% nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Notes to Unaudited Condensed Consolidated Financial Statements</FONT> </TD>
    <TD width=2%>&nbsp;</TD>
    <TD align=left width=5% nowrap><FONT size=2 face="serif">F-46</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
</TABLE>

<BR>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>



<P align="center">
<B><FONT size=2 face="serif">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></B><B><FONT size=2 face="serif">  </FONT></B></P>
<P align="left">
<FONT size=2 face="serif">To the Board of Directors and Stockholders   <br>
Assured Pharmacy, Inc.  </FONT></P>


<P align="left">
<FONT size=2 face="serif">We have audited the consolidated balance sheet as
of December 31, 2006 and the related statements of operations, stockholders&#146; deficit
and cash flows of Assured Pharmacy, Inc. And Subsidiaries (collectively the &#147;Company&#148;)
for the year ended December 31, 2006. These financial statements are the responsibility
of the Company&#146;s
management. Our responsibility is to express an opinion on these financial statements
based on our audit.  </FONT></P>


<P align="left">
<FONT size=2 face="serif">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.   </FONT></P>
<P align="left">
<FONT size=2 face="serif">In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Company for the year ended December 31, 2006 in conformity with
accounting principles generally accepted in the United States.   </FONT></P>

<p> </p>
<P align="left"><FONT size=2 face="serif">As more fully described in Note 14,
    the Company accounted for two transactions in 2005 in which common stock
    was returned in exchange for the extinguishment of debt at the par value.
    Accounting principles generally accepted in the United States of America
    require that the treasury stock in such transactions be accounted for at
    estimated fair value. As a result, the Company has recorded offsetting restatements
    to treasury stock and additional paid-in capital to reflect the correction
    in the cost of treasury stock from par value to estimated fair value. In
    our opinion, this correction does not have a material effect on the Company&#146;s
    2006 financial statements.</FONT></P>

<P align="left">
<FONT size=2 face="serif">The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company had negative cash flow from operations of approximately &#36;3.7 million in 2006,
an accumulated deficit of approximately &#36;19.7 million at December 31, 2006, and recurring losses from operations. These factors, among others, raise substantial doubt about the Company&#146;s ability to continue as a going concern.
Management&#146;s plans regarding these matters are described in Note 1. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
</FONT></P>
<TABLE width="50%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left width=100% nowrap>
<U><FONT size=2 face="serif">/s/ Miller, Ellin &amp; Company, LLP</FONT></U>
  </TD>
</TR>
<TR valign="bottom">
  <TD align=left width=100% nowrap>
<FONT size=2 face="serif">New York, New York</FONT>
  </TD>
</TR>
<TR valign="bottom">
  <TD align=left width=100% nowrap>
<FONT size=2 face="serif">April 2, 2007, except for Note 14, as to which the
date is January 29, 2008</FONT>  </TD>
</TR>
</TABLE>


<P align="left">&nbsp;</P>
<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-1</font></P>
<HR noshade align="center" width="100%" size=4>

<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center">

<B><FONT size=2 face="serif">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
<FONT size=2 face="serif">To the Board of Directors and Stockholders   <br>
Assured Pharmacy, Inc.  </FONT></P>


<P align="left">
<FONT size=2 face="serif">We have audited the consolidated statements of operations, stockholders&#146; deficit and cash flows of Assured Pharmacy, Inc. and Subsidiaries (collectively the &#147;Company&#148;) for the year ended December 31, 2005.
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.   </FONT></P>


<P align="left">
<FONT size=2 face="serif">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.  </FONT></P>


<P align="left">
<FONT size=2 face="serif">In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Company for the year ended December 31, 2005 in conformity with
accounting principles generally accepted in the United States of America.</FONT></P>

<P align="left"><FONT size=2 face="serif">We have also audited the adjustments
described in Note 14 that were applied to restate the Company&#146;s December
31, 2005 consolidated balance sheet (which is not presented herein) and statement
of stockholders' deficit to correct an error. In our opinion, such adjustments
(which did not affect the previously reported total stockholders&#146; deficit
at December 31, 2005) are appropriate and have been properly applied.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company had negative cash flow from operations of approximately &#36;2.7 million in 2005,
an accumulated deficit of approximately &#36;15.2 million at December 31, 2005 and recurring losses from operations. These factors, among others, raise substantial doubt about the Company&#146;s ability to continue as a going concern.
Management&#146;s plans regarding these matters are described in Note 1. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
</FONT></P>
<P align="left">
<FONT size=2 face="serif">/s/ Squar, Milner, Peterson, Miranda &amp; Williamson, LLP  </FONT></P>
<P align="left">
<FONT size=2 face="serif">Newport Beach, California<br>
March 20, 2006 (except Note 14 and the fourth paragraph of this report, as to which the date is January 28, 2008)</FONT></P>


<P align="left">&nbsp;</P>
<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-2</font></P>
<HR noshade align="center" width="100%" size=4>

<P align="left" style="page-break-before:always"></P><PAGE>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><B><FONT size=1 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES (formerly known as eRxsys, Inc.)</FONT></B><BR>
  <B><FONT size=1 face="serif">CONSOLIDATED BALANCE SHEET</FONT></B><BR>
  <B><FONT size=1 face="serif">December 31, 2006</FONT></B></P>
<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">&nbsp;</P>

<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
    <div align="center"><B><FONT size=1 face="serif">As Restated</FONT></B>    </div></TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:0px solid #000000;">
    <div align="center"></div></TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=center colspan=9>
<B><FONT size=1 face="serif">ASSETS</FONT></B>  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Current Assets</FONT></B>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Cash</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>
<FONT size=1 face="serif">&#36;</FONT>  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">466,404</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Accounts receivable, net</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">884,026</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Inventories</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">414,914</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Prepaid expenses and other assets</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">368,530</FONT>  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">2,133,874</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Long Term Assets</FONT></B>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Accounts receivable - non-current, net</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">92,313</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Property and Equipment, net</FONT></B>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">442,939</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Goodwill</FONT></B>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">607,816</FONT>  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">&#36;</FONT>  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">3,276,942</FONT>  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px double #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:0px double #000000;">&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px double #000000;">&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=center colspan=9>
<B><FONT size=1 face="serif">LIABILITIES AND STOCKHOLDERS' DEFICIT</FONT></B>  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Current Liabilities</FONT></B>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Accounts payable and accrued liabilities</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>
<FONT size=1 face="serif">&#36;</FONT>  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">1,051,260</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Line of credit from a related party</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=center nowrap>
    <div align="right"><FONT size=1 face="serif">-</FONT>    </div></TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Notes payable</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">62,027</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Unsecured convertible notes payable</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">1,958,500</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Notes payable to related parties and stockholders</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">20,000</FONT>  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">3,091,787</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Notes Payable to Related Party and Stockholders, net of current portion</FONT></B>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">904,967</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">&nbsp;</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Minority Interest</FONT></B>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">658,160</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Commitments and Contingencies</FONT></B>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Stockholders' Deficit</FONT></B>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Preferred shares; par value &#36;0.001 per share;</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">authorized 5,000,000 shares; no preferred shares issued</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">or outstanding</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=center nowrap>
<FONT size=1 face="serif">-</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">&nbsp;</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Common shares; par value &#36;0.001 per share;</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">150,000,000 and
 70,000,000 shares authorized, respectively; 64,264,368</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">common shares issued
 and outstanding at December 31, 2006 (as restated)</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">64,764</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Treasury stock (as restated)</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap><FONT size=1 face="serif">(2,849,366</FONT></TD>
  <TD align=left nowrap><FONT size=1 face="serif">)</FONT></TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Additional paid-in
 capital, net (As Restated)</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">21,142,007</FONT>  </TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>

<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Accumulated deficit</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">(19,735,377</FONT></TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT></TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Stockholders' deficit</FONT>  </TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">(1,377,972</FONT></TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT></TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px solid #000000;">&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">&#36;</FONT>  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">3,276,942</FONT></TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px double #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:0px double #000000;">&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:0px double #000000;">&nbsp;</TD>
</TR>
</TABLE>
<BR>
<div style="border-bottom:2px solid #000000">&nbsp;</div>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left nowrap>
<FONT size=1 face="serif">&nbsp;</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>
    <div align="right"><FONT size=1 face="serif">The accompanying notes are an integral part of the consolidated financial statements.</FONT>
    </div></TD>
</TR>
</TABLE>

<P align="center"><FONT size=2 face="serif">F-3</font></P>
<HR noshade align="center" width="100%" size=4>

<P align="left" style="page-break-before:always"></P><PAGE>

<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><B><FONT size=2 face="serif">ASSURED PHARMACY, INC AND SUBSIDIARIES (formerly known as eRxsys, Inc.)</FONT></B><BR>
  <B><FONT size=1 face="serif"> CONSOLIDATED STATEMENTS OF OPERATIONS</FONT></B><BR>
  <B><FONT size=1 face="serif">For the Years Ended December 31, 2006 and 2005</FONT></B></P>
<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center">&nbsp;</P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD><div style="border-bottom:1px solid #000000">&nbsp;</div></TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
    <div align="center"><B><FONT size=1 face="serif">2006</FONT></B>
    </div></TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
    <div align="center"><B><FONT size=1 face="serif">2005</FONT></B>
    </div></TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">GROSS SALES</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>
    <div align="left"><FONT size=1 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">7,897,118</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>
<FONT size=1 face="serif">&#36;</FONT>
  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">3,836,737</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">COST OF SALES</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">(6,222,267</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">(3,120,958</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">)</FONT>
  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">GROSS PROFIT</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">1,674,851</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">715,779</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">OPERATING EXPENSES</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Salaries and related expenses</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">2,193,682</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">3,574,137</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Consulting and other compensation</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">1,555,354</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">1,579,524</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Selling, general and administrative</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">2,122,528</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">1,286,053</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Restructuring charges</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=center nowrap style="border-bottom:1px solid #000000;">
    <div align="right"><FONT size=1 face="serif">-</FONT>
    </div></TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">193,881</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=center nowrap>
    <div align="left"> &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<B><FONT size=1 face="serif">TOTAL OPERATING EXPENSES</FONT></B>
    </div></TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">5,871,564</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">6,633,595</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">LOSS FROM OPERATIONS</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">(4,196,713</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">(5,917,816</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">)</FONT>
  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">OTHER (EXPENSE) INCOME</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Interest expense</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">(201,735</FONT>
  </TD>
  <TD align=left nowrap>
<FONT size=1 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">(131,539</FONT>
  </TD>
  <TD align=left nowrap>
<FONT size=1 face="serif">)</FONT>
  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Other expense</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">(162,147</FONT>
  </TD>
  <TD align=left nowrap>
<FONT size=1 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">(35,094</FONT>
  </TD>
  <TD align=left nowrap>
<FONT size=1 face="serif">)</FONT>
  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Gain on forgiveness of debt</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=center nowrap style="border-bottom:1px solid #000000;">
    <div align="right"><FONT size=1 face="serif">-</FONT>
    </div></TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">1,011,522</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<B><FONT size=1 face="serif">TOTAL OTHER INCOME (EXPENSE)</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">(363,882</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">844,889</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">LOSS BEFORE MINORITY INTEREST</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,560,595</FONT>
  </TD>
  <TD align=left nowrap>
<FONT size=1 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=1 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,072,927</FONT>
  </TD>
  <TD align=left nowrap>
<FONT size=1 face="serif">)</FONT>
  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">MINORITY INTEREST</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">58,756</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=1 face="serif">275,835</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">NET LOSS</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
    <div align="left"><FONT size=1 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">(4,501,839</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">&#36;</FONT>
  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">(4,797,092</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">)</FONT>
  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Basic and diluted loss per common share</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
    <div align="left"><FONT size=1 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">(0.09</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">&#36;</FONT>
  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">(0.12</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">)</FONT>
  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=left nowrap>
<B><FONT size=1 face="serif">Basic and diluted weighted average number of common</FONT></B>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width="90%" align=right nowrap>
    <div align="left"><B><FONT size=1 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares outstanding</FONT></B>
    </div></TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">51,376,193</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=1 face="serif">40,961,989</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
</TR>
</TABLE>
<BR>
<div style="border-bottom:2px solid #000000">&nbsp;</div>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left nowrap>
<FONT size=1 face="serif">&nbsp;</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>
    <div align="right"><FONT size=1 face="serif">The accompanying notes are an integral part of the consolidated financial statements.</FONT>
    </div></TD>
</TR>
</TABLE>

<P align="center"><FONT size=2 face="serif">F-4</font></P>
<HR noshade align="center" width="100%" size=4>

<P align="left" style="page-break-before:always"></P><PAGE>

<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center">
<B><FONT size=1 face="serif">ASSURED PHARMACY, INC AND SUBSIDIARIES (formerly known as eRxsys, Inc.)<br>
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT<br>
  For the Years Ended December 31, 2006 and 2005</FONT></B></P>
<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center">&nbsp;</P>

<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap colspan=6 style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=1 face="serif">Common
            Stock</FONT></B> </div></TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap colspan=6 style="border-bottom:1px solid #000000;"><div align="center"></div>
        <div align="center"><B><FONT size=1 face="serif">Treasury Stock</FONT></B> </div></TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><div align="center"><B><FONT size=1 face="serif">Additional</FONT></B> </div></TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap><B><FONT size=1 face="serif">Paid In</FONT></B></TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><div align="center"><B><FONT size=1 face="serif">Amount</FONT></B></div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap><B><FONT size=1 face="serif">Capital</FONT></B> </TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><B><FONT size=1 face="serif">(Accumulated)</FONT></B> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><B><FONT size=1 face="serif">Stockholders'</FONT></B></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align=right nowrap style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=1 face="serif">Shares</FONT></B></div></TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap colspan=3 style="border-bottom:1px solid #000000;">&nbsp; &nbsp;<B><FONT size=1 face="serif">Amount</FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align=right nowrap style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=1 face="serif">Shares</FONT></B> </div></TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><div align="center"></div></TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=1 face="serif">(As Restated)*</FONT></B> </div></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=1 face="serif">(As Restated)*</FONT></B> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=1 face="serif">(Deficit)</FONT></B> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=1 face="serif">Deficit</FONT></B></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><B><FONT size=1 face="serif">Balance December 31, 2004 </FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">44,977,899</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">44,978</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">8,560,824</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(10,436,446</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(1,830,644</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        in connection with a private placement</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">3,820,000</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">3,820</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,507,964</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,511,784</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        for services rendered</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">2,907,499</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">2,907</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">825,308</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">828,215</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        for debt conversion</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">2,500,000</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">2,500</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">697,500</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">700,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock to former
        CEO for debt settlement</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">494,000</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">494</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">118,466</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">118,960</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of warrants to former
        CEO for debt settlement</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><div align="right"><FONT size=1 face="serif">-</FONT> </div></TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">329,000</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">329,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        options to CEO for services</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><div align="right"><FONT size=1 face="serif">-</FONT> </div></TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,950,000</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,950,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        to RTIN in connection with debt settlement</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">500,000</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">500</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">148,000</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">148,500</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Stock returned to the Company
        by RTIN and former officer and directors</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><div align="right"><FONT size=1 face="serif">-</FONT> </div></TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(10,858,658</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(2,849,366</FONT></TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">2,849,366</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif"></FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of warrants and options for services</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><div align="right"><FONT size=1 face="serif">-</FONT> </div></TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap><div align="right"><FONT size=1 face="serif">247,916</FONT> </div></TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">247,916</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Net loss</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><div align="right"><FONT size=1 face="serif">-</FONT> </div></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><div align="right"><FONT size=1 face="serif">-</FONT> </div></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">(4,797,092</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">(4,797,092</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><B><FONT size=1 face="serif">Balance December 31, 2005 (As Restated)</FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">55,199,398</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">55,199</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">(10,858,658</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">(2,849,366</FONT></TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right style="border-bottom:3px double #000000;"><FONT size=1 face="serif">17,234,344</FONT></TD>
    <TD align=right style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">(15,233,538</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">(793,361</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        in connection with a private placement</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">4,438,231</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">4,438</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,770,854</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,775,292</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        in connection with debenture interest</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,011,373</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,011</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">351,519</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">352,530</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        for services rendered</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">2,752,866</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">2,753</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,070,989</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,073,742</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        for debt conversion</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,062,500</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,063</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">423,937</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">425,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        for warrant exercised</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">250,000</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">250</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">149,750</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">150,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of common stock
        for acquisition of minority interest in <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assured Pharmacies, Inc.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">50,000</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">50</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">19,450</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">19,500</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif"> Beneficial conversion on
        notes payable</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">10,625</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">10,625</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Issuance of warrants and options for services rendered</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">110,539</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">110,539</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=1 face="serif">Net loss</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">(4,501,839</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><font size="1" face="serif">(4,501,839</font></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><B><FONT size=1 face="serif">Balance December 31, 2006 (As Restated)</FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">64,764,368</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">64,764</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right style="border-bottom:3px double #000000;"><FONT size=1 face="serif">(10,858,658</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right style="border-bottom:3px double #000000;"><FONT size=1 face="serif">(2,849,366</FONT></TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">21,142,007</FONT></TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">(19,735,377</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">(1,377,972</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
</TABLE>
<br>

<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="2%"><FONT size=2 face="serif">*</FONT></td>
    <td><FONT size=2 face="serif">As discussed in Note 14 to the accompanying consolidated financial statements, the December 31, 2005 balance of this account has been restated.</FONT></td>
  </tr>
</table>



<div style="border-bottom:2px solid #000000">&nbsp;</div>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left nowrap>
<FONT size=1 face="serif">&nbsp;</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>
    <div align="right"><FONT size=1 face="serif">The accompanying notes are an integral part of the consolidated financial statements.</FONT>
    </div></TD>
</TR>
</TABLE>


<P align="center"><FONT size=2 face="serif">F-5</font></P>
<HR noshade align="center" width="100%" size=4>

<P align="left" style="page-break-before:always"></P><PAGE>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><B><FONT size=1 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES (formerly known as eRxsys, Inc.) </FONT></B><B><FONT size=1 face="serif"><br>
  CONSOLIDATED STATEMENTS OF CASH FLOWS<br>
</FONT></B><B><FONT size=1 face="serif">For the Years Ended December 31, 2006 and 2005</FONT></B></P>
<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center">&nbsp;</P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap colspan=5 style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=1 face="serif">Years
            Ended</FONT></B> </div></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=1 face="serif">2006</FONT></B> </div></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=1 face="serif">2005</FONT></B> </div></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9></TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">CASH FLOWS FROM
        OPERATING ACTIVITIES:</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Net
        loss</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap><FONT size=1 face="serif">(4,501,839</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap><FONT size=1 face="serif">(4,797,092</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Adjustments
        to reconcile net loss to net cash</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">used
        in operating activities:</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Depreciation
        and amortization of property and equipment</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">133,504</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">108,136</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Amortization
        of debt discount</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">10,625</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Impairment
        of property and equipment related to restructuring</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">193,881</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">equity
        instruments issued in relation to deferred
        consulting fee</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,184,281</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">643,111</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Loss
        on settlement of debt</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">9,350</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">87,960</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Gain
        on forgiveness of debt</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(1,011,522</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Issuance
        of common stock in lieu of interest</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">67,406</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Issuance
        of common stock for services</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">7,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Impairment
        of intangible asset</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Minority
        interest in net loss of joint venture</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(58,756</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(275,835</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Issuance
        of common stock and options for services to CEO</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">2,387,364</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Provision
        for doubtful accounts</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">177,597</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Changes
        in operating assets and liabilities:</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Accounts
        receivable</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(623,206</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(348,303</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Inventories</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(153,144</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(103,761</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Prepaid
        expenses and other current assets</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(2,161</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">3,567</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Accounts
        payable and accrued liabilities</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">22,505</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">378,817</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Net
        cash used in operating activities</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">(3,726,838</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">(2,733,677</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">CASH FLOWS FROM
        INVESTING ACTIVITIES:</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Purchases
        of property and equipment</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(135,473</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(2,791</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Advance
        on purchase of company</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(50,000</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Purchase
        of minority interest</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">(20,000</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Net
        cash used in investing activities</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">(205,473</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">(2,791</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">CASH FLOWS FROM
        FINANCING ACTIVITIES:</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Proceeds
        from line of credit</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">2,035,365</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Proceeds
        from the issuance of notes payable to related parties and shareholders</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">600,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">305,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Proceeds
        from the issuance of short term loans</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">425,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Principal
        repayments on line of credit</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(200,000</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(1,135,365</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Principal
        repayments on notes payable</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(156,812</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Principal
        repayments on notes payable to related parties and shareholders</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(96,907</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">(135,000</FONT> </TD>
    <TD align=left nowrap><FONT size=1 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Proceeds
        from issuance of common stock</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,775,292</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,511,784</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Proceeds
        from issuance of convertible debentures</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,958,500</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Proceeds
        from issuance of common stock due to warrants exercised</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">150,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Proceeds
        towards minority investment</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">12,000</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Net
        cash provided by financing activities</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,042,073</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3,006,784</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">Net increase in
        cash</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">109,763</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=1 face="serif">270,316</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">Cash at beginning
        of year</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">356,641</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=1 face="serif">86,325</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">Cash at end of
        year</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">466,404</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">356,641</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">Supplemental disclosure
        of cash flow information-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">Cash paid during
        the year for:</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">Interest</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">131,252</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">131,539</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">Income taxes</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">2,262</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap><FONT size=1 face="serif">NON-CASH INVESTING
        AND FINANCING ACTIVITIES</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Conversion
        of accrued interest to principal</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">8,163</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Notes
        issued to acquire minority interest</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">567,998</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Issuance
        of common stock to acquire minority interst</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">19,500</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Issuance
        of common stock for debt converstion</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">425,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">967,460</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Issuance
    of warrants for debt converstion</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">329,000</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Issuance
        of common stock for services rendered</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,073,472</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">828,215</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Issuance
    of options for services rendered</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">1,950,000</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Issuance
        of common stock in lieu of debenture note interest</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">352,530</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=90% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=1 face="serif">Beneficial
        conversion on notes payable</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=1 face="serif">10,625</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><div align="left"><FONT size=1 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><font size="1" face="serif">-</font></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap></TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
</TABLE>
<BR>
<P align="left">
<FONT size=1 face="serif">See the accompanying notes for disclosures about non-cash investing and financing activities. </FONT></P>



<div style="border-bottom:2px solid #000000">&nbsp;</div>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left nowrap>
<FONT size=1 face="serif">&nbsp;</FONT></TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>
    <div align="right"><FONT size=1 face="serif">The accompanying notes are an integral part of the consolidated financial statements.</FONT>
    </div></TD>
</TR>
</TABLE>


<P align="center"><FONT size=2 face="serif">F-6</font></P>
<HR noshade align="center" width="100%" size=4>

<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT><BR>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT><BR>
<FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
<FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005</FONT></P>

<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center">&nbsp;</P>
<P align="left">
<B><FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
<FONT size=2 face="serif">Assured Pharmacy, Inc. (&#147;Assured Pharmacy&#148; or the &#147;Company&#148;) was organized as a Nevada corporation on October 22, 1999 under the name Surforama.com, Inc. and previously operated under the name eRXSYS, Inc. The
Company is engaged in the business of operating specialty pharmacies that dispense highly regulated pain medication. The Company has recently expanded its business beyond pain management to service customers that require prescriptions to treat
cancer, psychiatric, and neurological conditions. The Company offers physicians the ability to electronically transmit prescriptions to its pharmacies. The Company derives its revenue primarily from the sale of prescription drugs and does not keep
in inventory non-prescription drugs or health and beauty related products inventoried at traditional pharmacies. The majority of the Company&#146;s business is derived from repeat business from its customers. &#147;Walk-in&#148; prescriptions from
physicians are limited. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In April 2003, Assured Pharmacy entered into a joint venture agreement (&#147;Joint Venture&#148;) with TPG Partners, L.L.C. (&#147;TPG&#148;) to establish and operate pharmacies. In June 2003, Safescript of California, Inc.
(&#147;Safescript&#148;) was incorporated to own and operate pharmacies that the parties may jointly establish under the Joint Venture. Assured Pharmacy owned 51% of the Joint Venture and TPG owned the remaining 49%. Effective September 8, 2004,
Safescript filed amended articles of incorporation and changed its name to Assured Pharmacies, Inc. (&#147;API&#148;).</FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of the Joint Venture, TPG was obligated to contribute start-up costs of &#36;230,000 per pharmacy location to establish up to fifty pharmacies. TPG was also obligated to contribute their proportionate share
of the start-up costs in excess of their initial capital contribution of &#36;230,000 per pharmacy. The Joint Venture defined start-up costs as any costs associated with the opening of any open pharmacy location that accrue within the ninety-day
period following the opening of that particular pharmacy.</FONT></P>


<P align="left">
<FONT size=2 face="serif">On December 15, 2006, the Company acquired TPG&#146;s 49% interest of API. The Company agreed to the following consideration: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
  <TD valign=top nowrap>&nbsp;</TD>
  <TD valign=top nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD colspan="2" align="center" style="border-bottom:1px solid #000000"><FONT size=2 face="serif"><b>Amount</b></FONT></TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD width="1%" valign=top nowrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
  <TD width="3%" valign=top nowrap>
<FONT size=2 face="serif">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="left"><FONT size=2 face="serif">50,000 restricted shares (&#147;Shares&#148;) of common stock valued at</FONT></P>  </TD>
  <TD width=1%><div align="right"><FONT size=2 face="serif">&#36;</FONT></div></TD>
  <TD width=6%><div align="right"><FONT size=2 face="serif">19,500</FONT></div></TD>
  <TD width=14%>&nbsp;</TD>
</TR>
<TR><TD colspan=6>&nbsp;</TD></TR><TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD nowrap valign=top>
<FONT size=2 face="serif">2.</FONT></TD>
  <TD>
<P align="left"><FONT size=2 face="serif">Initial down payment which was paid by December 15, 2006</FONT></P>  </TD>
  <TD width=1%>&nbsp;</TD>
  <TD width=6%><div align="right"><FONT size=2 face="serif">15,000</FONT></div></TD>
  <TD width=14%>&nbsp;</TD>
</TR>
<TR><TD colspan=6>&nbsp;</TD></TR><TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD nowrap valign=top>
<FONT size=2 face="serif">3.</FONT></TD>
  <TD>
<P align="left"><FONT size=2 face="serif">Eleven (11) consecutive monthly installments of &#36;5,000 commencing in January 2007 through November 2007</FONT></P>  </TD>
  <TD width=1%>&nbsp;</TD>
  <TD width=6%><div align="right"><FONT size=2 face="serif">55,000</FONT></div></TD>
  <TD width=14%>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD width="1%">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD width="3%" valign=top nowrap>
<FONT size=2 face="serif">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
  <TD><FONT size=2 face="serif">Fourteen (14) consecutive monthly installments
    of &#36;15,000 commencing in December 2007 through January 2009</FONT></TD>
  <TD width="1%">&nbsp;</TD>
  <TD><div align="right"><FONT size=2 face="serif">210,000</FONT></div></TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD width="1%">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
<TD valign=top nowrap>
<FONT size=2 face="serif">5.</FONT></TD>
  <TD><FONT size=2 face="serif">Loan payable together with interest at
      the rate of prime plus 2% per annum commencing from the date of this Purchase
    Agreement payable on or before February 15, 2009</FONT></TD>
  <TD width="1%">&nbsp;</TD>
  <TD><div align="right"><FONT size=2 face="serif">180,000</FONT></div></TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD width="1%">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD valign=top nowrap>
<FONT size=2 face="serif">6.</FONT></TD>
  <TD><FONT size=2 face="serif">Forgiveness of a net receivable from minority
      interest</FONT></TD>
  <TD width="1%">&nbsp;</TD>
  <TD align="right" style="border-bottom:1px solid #000000"><FONT size=2 face="serif">213,266</FONT></TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD width="1%">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD><div align="right"><FONT size=2 face="serif">692,766</FONT></div></TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD><FONT size=2 face="serif">Less:&nbsp;&nbsp;Debt Discount</FONT></TD>
  <TD style="border-bottom:1px solid #000000">&nbsp;</TD>
  <TD style="border-bottom:1px solid #000000"><div align="right"><FONT size=2 face="serif">(84,950</FONT></div></TD>
  <TD><FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD style="border-bottom:3px double #000000"><div align="right"><FONT size=2 face="serif">&#36;</FONT></div></TD>
  <TD style="border-bottom:3px double #000000"><div align="right"><FONT size=2 face="serif">607,816</FONT></div></TD>
  <TD>&nbsp;</TD>
</TR>
</TABLE>
<br>

<p><FONT size=2 face="serif">The total purchase price of &#36;607,816 was recorded as goodwill as there were no identifiable assets to ascribe the purchase price.</FONT></p>



<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-7</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>



<P align="center">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
<FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
<FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>


<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
  <TD width="1%" valign=top nowrap>&nbsp;</TD>
  <TD width="99%" colspan=2>&nbsp;</TD>
</TR>
<TR>
  <TD nowrap valign=top>
<B><FONT size=2 face="serif">1.&nbsp;</FONT></B></TD>
  <TD colspan=2>
<P align="left"><B><FONT size=2 face="serif">ORGANIZATION AND BASIS OF PRESENTATION </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>  </TD>
</TR>
</TABLE>
<P align="left">
<FONT size=2 face="serif">As a result of this acquisition, the Company increased it&#146;s ownership interest in API to 100% making it a wholly-owned subsidiary and consequently resulting in the termination of its joint venture with TPG. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In February 2004, Assured Pharmacy entered into an agreement (the &#147;Agreement&#148;) with TAPG, L.L.C. (&#145;TAPG&#146;), a Louisiana limited liability company, and formed Safescript Northwest, Inc., a Louisiana corporation,
to establish and operate pharmacies. Effective August 19, 2004, Safescript Northwest, Inc. changed its name to Assured Pharmacies Northwest, Inc. (&#145;APN&#146;).</FONT></P>
<P align="left">
<FONT size=2 face="serif">The Agreement provides that TAPG will contribute start-up costs in the amount of &#36;335,000 per pharmacy location established not to exceed five pharmacies. The Company&#146;s contribution under the Agreement consists of
granting the right to utilize its intellectual property rights and to provide sales and marketing services. Between March and October 2004, APN received from TAPG start-up funds in the amount of &#36;854,213 as its capital contribution for three
pharmacies. This capital contribution funded the opening of two pharmacies in Kirkland, Washington in August 2004 and Portland, Oregon in September 2004. Included in these monies was a partial capital contribution in the amount of &#36;190,000 for
the establishment of another pharmacy located in Portland, Oregon. TAPG remained obligated to contribute an additional &#36;145,000 to satisfy their full contribution. The Company and APN requested that TAPG provide the &#36;150,787 balance of its
full capital contribution. TAPG was also obligated to contribute their proportionate share of the start-up costs in excess of their initial capital contribution of &#36;335,000 per pharmacy. The Agreement defines start-up costs as any costs
associated with the opening of any open pharmacy location that accrue within one hundred eighty days following the opening of that particular pharmacy.</FONT></P>
<P align="left">&nbsp;</P>
<P align="left">&nbsp;</P>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-8</font></P>
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<P align="center">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
<FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
<FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>


<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>
<P align="left">
<FONT size=2 face="serif">Following the start-up period, the Company advanced interest-free loans, totaling $352,000 to APN, to sustain operations at both pharmacies operated by APN. On March 6, 2006, these loans were converted into 378 shares of APN capital stock. Following the
conversion of this debt into equity, the Company recognized an investment of $857,000, which increased their ownership interest in APN from 75% to 94.8%. TAPG owns the remaining 5.2% interest. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company&#146;s common stock is quoted on the Over-the-Counter Bulletin Board (the &#147;OTCBB&#148;) under the symbol &#147;APHY.&#148; </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company's management determined that its business could be expanded through developing arrangements with third party health plan providers to accept traditional co-payments and fill prescriptions for their members who rely
upon overnight courier for delivery of their prescription. The Company's management believes that such arrangements will broaden its consumer base and enable it to access a particular niche of consumer that receives their prescriptions exclusively
via courier as opposed to patronizing traditional retail pharmacy locations. On January 3, 2006, the Company incorporated Assured Pharmacy Plus, Corp. (&#147;Plus Corp.&#148;) as a wholly-owned subsidiary to develop this opportunity.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Also on January 3, 2006, the Company incorporated Assured Pharmacy DME, Corp. (&#147;DME&#148;) as a wholly-owned subsidiary for the purpose of facilitating and making available specialized medical equipment to its consumers. The
Company's consumers who require treatment for chronic pain commonly require specialized medical equipment and/or rehabilitative equipment.</FONT></P>
<P align="left">
<FONT size=2 face="serif">During the third quarter, the Company incorporated three wholly-owned subsidiaries for the purpose of operating additional pharmacies. On July 21, 2006, the Company incorporated Assured Pharmacy Gresham, Inc.
(&#147;Gresham&#148;). On August 11, 2006, the Company incorporated Assured Pharmacy Irvine, Inc. (&#147;Irvine&#148;), and on September 25, 2006, the Company incorporated Assured Pharmacy Los Angeles 1, Inc. (&#147;L.A. 1&#148;).</FONT></P>
<P align="left">&nbsp;</P>
<P align="left">&nbsp;</P>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-9</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Going Concern Considerations</FONT></I></B></P>


<P align="left">
<FONT size=2 face="serif">The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern, which contemplates,
among other things, the realization of assets and satisfaction of liabilities
in the  ordinary course of business. As of December 31, 2006, the Company had
an accumulated deficit of &#36;19,735,377,
recurring losses from operations and negative cash flow from operating activities
of &#36;3,726,838 for the year then ended. The Company
also had a negative working capital of &#36;957,913 as of December 31, 2006. </FONT></P>

<P align="left">
<FONT size=2 face="serif">The Company intends to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital or other cash requirements for the year
ending December 31, 2007. The Company is seeking additional funds to finance its immediate and long-term operations. The successful outcome of future financing activities cannot be determined at this time and there is no assurance that if achieved,
the Company will have sufficient funds to execute its intended business plan or generate positive operating results.</FONT></P>
<P align="left">
<FONT size=2 face="serif">These factors, among others, raise substantial doubt about the Company&#146;s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments related to
recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In response to these problems, management has taken the following actions:</FONT></P>
<UL>
<LI>
<P align="left"><FONT size=2 face="serif">The Company is expanding its revenue base beyond the pain management sector to service customers that require prescriptions to treat cancer, psychiatric, and neurological conditions.</FONT></P></LI>
<LI>
<P align="left"><FONT size=2 face="serif">The Company is aggressively signing up new physicians, which will result in new patients</FONT></P></LI>
<LI>
<P align="left"><FONT size=2 face="serif">The Company is seeking investment capital.</FONT></P></LI>
<LI>
<P align="left"><FONT size=2 face="serif">The Company implemented a new marketing strategy and retained additional sales personnel to attract business.</FONT></P></LI>
</UL>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-10</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
<FONT size=2 face="serif">The summary of significant accounting policies presented below is designed to assist in understanding the Company's consolidated financial statements. Such financial statements and accompanying notes are the representations of the
Company&#146;s management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (&#147;GAAP&#146;) in all material respects, and have
been consistently applied in preparing the accompanying consolidated financial statements. </FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Principles of Consolidation</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">The consolidated financial statements for the year ended December 31, 2006 include the accounts of Assured Pharmacy, Inc., the Company&#146;s 94.8% ownership interest in APN. The statement of operations also, includes 51%
ownership interest in API, till December 15, 2006. In accordance with the joint venture agreement, the minority partner, does not have participation rights that allow them to block decisions proposed by the Company. The minority joint venture has
given the Company the ability to control all daily operations and management of the joint venture; therefore, the Company has consolidated the joint venture in its financial statements. All significant inter-company accounts and transactions have
been eliminated in consolidation. </FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Use of Estimates</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include revenue recognition, the allowance for doubtful accounts, the
deferred tax asset valuation allowance, and the realization of inventories and long-lived assets. Actual results could materially differ from these estimates. </FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Risks and Uncertainties</FONT></I></B></P>


<P align="left">
<FONT size=2 face="serif">The Company operates in a highly competitive industry that is subject to intense competition. The Company has a limited operating history since it has finished only its fourth year of operations. The Company faces risks and
uncertainties relating to its ability to successfully implement its business strategy. Among other things, these risks include the ability to develop and sustain revenue growth; managing expanding operations; competition; attracting, retaining and
motivating qualified personnel; maintaining and</FONT></P>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-11</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Risks and Uncertainties (continued)</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">developing new strategic relationships; and the ability to anticipate and adapt to the changing markets and any changes in government regulations.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Therefore, the Company may be subject to the risks of delays in obtaining (or failing to obtain) regulatory clearance and other uncertainties, including financial, operational, technological, regulatory and other risks associated
with an emerging business, including the risk of business failure. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company&#146;s leased pharmacies are subject to licensing and regulation by the health, sanitation, safety, building and fire agencies in the state or municipality where located. Difficulties or failures in obtaining or
maintaining the required licensing and/or approvals could prevent the continued operation of such pharmacies. Management believes that the Company is operating in compliance with all applicable laws and regulations. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company purchased 99% of its inventory of prescription drugs from one wholesale vendor during the year ended December 31, 2006. Management believes that the wholesale pharmaceutical and non-pharmaceutical distribution industry
is highly competitive because of consolidation in the industry and the practice of certain large pharmacy chains to purchase directly from product manufacturers. Although management believes it could obtain the majority of our inventory from other
distributors at competitive prices and upon competitive payment terms if our relationship with our primary wholesale drug vendor was terminated, there can be no assurance that the termination of such relationship would not adversely affect us.
</FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Governmental Regulations</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">The pharmacy business is subject to extensive and often changing federal, state and local regulations, and our pharmacies are required to be licensed in the states in which they are located or do business. While management
continuously monitors the effects of regulatory activity on the Company&#146;s operations and we currently have a pharmacy license for each pharmacy the Company operates, the failure to obtain or renew any regulatory approvals or licenses could
adversely affect the continued operations of the Company&#146;s business.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company is also subject to federal and state laws that prohibit certain types of direct and indirect payments between healthcare providers. These laws, commonly known as the fraud and abuse laws, prohibit payments intended to
induce or encourage the referral of patients to, or the recommendation of, a particular provider of products and/or services. Violation of these laws can result in a loss of licensure, civil and criminal</FONT></P>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-12</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
  FORMERLY KNOWN AS eRXSYS, INC. <br>
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
  DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Governmental Regulations </FONT></I></B><B><FONT size=2 face="serif">(continued)</FONT></B></P>


<P align="left">
<FONT size=2 face="serif">penalties and exclusion from various federal and state healthcare programs. The Company expends considerable resources in connection with compliance efforts. Management believes that the Company is in compliance with federal and
state regulations applicable to its business.</FONT></P>

<P align="left">
<FONT size=2 face="serif">The Company is also impacted by the Health Insurance Portability and Accountability Act of 1996 (&#145;HIPAA&#146;), which mandates, among other things, the adoption of standards to enhance the efficiency and simplify the
administration of the healthcare system. HIPAA requires the Department of Health and Human Services to adopt standards for electronic transactions and code sets for basic healthcare transactions such as payment and remittance advice
(&#145;transaction standards&#146;); privacy of individually identifiable healthcare information (&#145;privacy standards&#146;); security and electronic signatures (&#145;security standards&#146;), as wells as unique identifiers for providers,
employers, health plans and individuals; and enforcement. The Company is required to comply with these standards and is subject to significant civil and criminal penalties for failure to do so. Management believes the Company is in compliance with
these standards. There can be no assurance, however, that future changes will not occur which the Company may not be, or may have to incur significant costs to be, in compliance with new standards or regulations. Management anticipates that federal
and state governments will continue to review and assess alternate healthcare delivery systems, payment methodologies and operational requirements for pharmacies. Given the continuous debate regarding the cost of healthcare services, management
cannot predict with any degree of certainty what additional healthcare initiatives, if any, will be implemented or the effect any future legislation or regulation will have on the Company.</FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Cash and Cash Equivalents</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">The Company considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. </FONT></P>


<P align="left">
<FONT size=2 face="serif">The financial instrument that potentially exposes the Company to a concentration of credit risk principally consists of cash. The Company deposits its cash with high credit financial institutions, and at times the balances may
exceed the insurance limit of the Federal Deposit Insurance Corp. Management believes that there is little risk of loss due to this policy.</FONT></P>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-13</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>

<P align="left">
<B><I><FONT size=2 face="serif">Accounts Receivable, non-current</FONT></I></B></P>
<P align="left">
<B><FONT size=2 face="serif">The Company carries &#36;183,741 of receivables which are over 180 days. These receivables are primarily from Workmen&#146;s Compensation Board of State of California (&#147;CA Board&#148;). These receivables are due to
disputes between the claimant and the employer, with the CA Board, known as &#147;Green Leins&#148;. The settlement period for such Green Lien cases takes anywhere from 1 year to 5 years. The Management classified such receivables as Non-current
long term assets. The Management also, provided 50% allowance for doubtful receivables against such receivables.</FONT></B><B><I><FONT size=2 face="serif"> </FONT></I></B></P>

<P align="left">
<B><I><FONT size=2 face="serif">Allowance for Doubtful Accounts Receivable </FONT></I></B></P>


<P align="left">
<FONT size=2 face="serif">The Company&#146;s receivables are from reputable insurance companies. However, management periodically reviews the collectibility of accounts receivable and provides an allowance for doubtful accounts receivable as management
deems necessary. For the year ended December 31, 2006, Management provided approximately &#36;177,000 towards such allowance. This provision also, includes 50% provision towards Green Lein claims. Management concluded there was no need for such an
allowance as of December 31, 2005. </FONT></P>

<P align="left">
<B><I><FONT size=2 face="serif">Inventories</FONT></I></B></P>


<P align="left">
<FONT size=2 face="serif">Inventories are stated at the lower of cost (first-in, first-out) or estimated market, and consist primarily of pharmaceutical drugs. Market is determined by comparison with recent sales or net realizable value. Net realizable
value is based on management&#146;s forecast for sales of its products or services in the ensuing years and/or consideration and analysis of changes in customer base, product mix, payor mix, third party insurance reimbursement levels or other issues
that may impact the estimated net realizable value. Management regularly reviews inventory quantities on hand and records a reserve for shrinkage and slow-moving, damaged and expired inventory, which is measured as the difference between the
inventory cost and the estimated market value based on management&#146;s assumptions about market conditions and future demand for its products. No reserevations were provided at December 31, 2006 and 2005, respectively, as the reserves were
insignificant to the accompanying financial statements. Should the demand for the Company's products prove to be less than anticipated, the ultimate net realizable value of its inventories could be substantially less than reflected in the
accompanying consolidated balance sheet. </FONT></P>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-14</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Inventories (continued)</FONT></I></B></P>

<P align="left">
<FONT size=2 face="serif">Inventories are comprised of brand and generic pharmaceutical drugs. Brand drugs are purchased primarily from one wholesale vendor and generic drugs are purchased primarily from multiple wholesale vendors. The Company's pharmacies
maintain a wide variety of different drug classes, known as Schedule II, Schedule III, and Schedule IV drugs, which vary in degrees of addictiveness.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Schedule II drugs, considered narcotics by the DEA are the most addictive; hence, they are highly regulated by the DEA and are required to be segregated and secured in a separate cabinet. Schedule III and Schedule IV drugs are
less addictive and are not regulated. Because the Company's business model focuses on servicing pain management doctors and chronic pain patients, the Company carries in inventory a larger amount of Schedule II drugs than most other pharmacies. The
cost in acquiring Schedule II drugs is higher than Schedule III and IV drugs. </FONT></P>

<P align="left">
<B><I><FONT size=2 face="serif">Long Lived Assets:</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">The Company adopted Statement of Financial Accounting Standard (</FONT><I><FONT size=2 face="serif">&#147;</FONT></I><FONT size=2 face="serif">SFAS&#148;) No. 144, &#147;</FONT><I><FONT size=2 face="serif">Accounting for the Impairment or Disposal of
Long-Lived Assets&#148;,</FONT></I><FONT size=2 face="serif"> which, addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that their carrying amount may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows from such asset, an impairment loss is recognized.
Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value. SFAS No. 144 also requires companies to separately report discontinued operations, and extends that reporting to a component of an
entity that either has been disposed of (by sale, abandonment or in a distribution to owners) or is classified as held for sale. Assets to be disposed of are reported at the lower of the carrying amount or the estimated fair value less costs to
sell. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company's long-lived assets consist of computers, software, office furniture and equipment, store fixtures and leasehold improvements on pharmacy build-outs which are depreciated with useful lives varying from 3 to 10 years.
Leasehold improvements are depreciated over the shorter of the useful life or the remaining lease term, typically 5 years. The Company assesses the impairment of these long-lived assets at least annually and makes adjustment accordingly. There were
no impairments for 2006 or 2005. </FONT></P>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-15</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>

<P align="left">
<B><I><FONT size=2 face="serif">Property and Equipment</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">Property and equipment are stated at cost, and are being depreciated using the straight-line method over the estimated useful lives of the related assets, which generally range between three and ten years. Leasehold improvements
are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the remaining lease terms. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. At
the time of retirement, other disposition of property and equipment or termination of a lease, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in results of operations.
</FONT></P>

<P align="left">
<B><I><FONT size=2 face="serif">Intangible Assets</FONT></I></B></P>

<P align="left">
<FONT size=2 face="serif">The Company follows SFAS No. 142,</FONT><I><FONT size=2 face="serif">&#146;Goodwill and Other Intangible Assets&#146;, </FONT></I><FONT size=2 face="serif">which, addresses how intangible assets that are acquired individually or with a group of
other assets should be accounted for upon their acquisition and after they have been initially recognized in the financial statements. SFAS No. 142 requires that goodwill and identifiable intangible assets that have indefinite lives not be amortized
but rather be tested at least annually for impairment, and intangible assets that have finite useful lives be amortized over their estimated useful lives. </FONT></P>
<P align="left">
<FONT size=2 face="serif">SFAS No. 142 provides specific guidance for testing goodwill and intangible assets for impairment. In addition, SFAS No. 142 expands the disclosure requirements about intangible assets in the years subsequent to their
acquisition.</FONT></P>

<P align="left">
<B><I><FONT size=2 face="serif">Advertising</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">The Company expenses the cost of advertising, including marketing and promotions, when incurred. Advertising costs for the years ended December 31, 2006 and December 31, 2005 &#36;478,523 and &#36;25,673, respectively. They are
included in selling, general and administrative expenses in the accompanying consolidated statements of operations</FONT></P>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-16</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
  FORMERLY KNOWN AS eRXSYS, INC. <br>
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
  DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div style="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>

<P align="left">
<B><I><FONT size=2 face="serif">Stock-based Compensation </FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">Stock-based compensation includes awards of common stock as well as warrants and options to purchase common stock.  Stock awards generally consist of awards of restricted shares that become unrestricted as the requisite
services are rendered. Those awards have been made to non-employees and have been valued at the trading price on the date of issue.  The value is charged to deferred compensation and recognized in expenses as the services are rendered.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Stock purchase warrants have been issued to non-employees in exchange for services. The fair value of such awards has been charged to expense when the related services have been rendered. Fair values are determined using
the Black-Scholes pricing model on the date the warrants are issued.</FONT></P>
<P align="left">
<FONT size=2 face="serif">During the years ended December 31, 2006 and 2005 stock-based compensation consisted of the expense related to awards granted to non-employees. Therefore, in 2006 and 2005, the recorded stock-based compensation expense
included the expense of stock awards to non-employees that became unrestricted because the required services were rendered and the award date fair value of stock purchase warrants issued to non-employees in exchange for services. The expense
recognized in 2006 and 2005 related to non-employee services was $1,184,281 and $643,111, respectively.</FONT></P>
<P align="left">
<FONT size=2 face="serif">On January 1, 2006 the Company adopted a fair value method of accounting for awards to employees of warrants and options to purchase common stock. Compensation expense for all such newly granted awards and awards modified,
repurchased, or cancelled after January 1, 2006 is determined using the grant date fair value of the award. Compensation cost for the unvested portion of awards that were outstanding as of January 1, 2006 is recognized ratably over the remaining
vesting period based on the fair value at date of grant. The cumulative effect of this change in accounting principle related to stock-based awards was immaterial.  Prior to January 1, 2006, Assured accounted for stock-based compensation using the
intrinsic value method.  Under that method, no compensation expense was recognized for stock options.</FONT></P>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-17</font></P>
<HR noshade align="center" width="100%" size=4>

<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </FONT></B><FONT size=2 face="serif">(continued) </FONT></P>

<P align="left">
<FONT size=2 face="serif">The following table summarizes the pro forma effect on net income (loss) and income (loss) per share for 2006 and 2005 as if the Company had applied fair value recognition to account for stock warrants or options awarded
prior to January 1, 2006 as compensation to employees.</FONT></P>
<TABLE width="75%" border=0 align="center" cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD colspan="7" align=left nowrap><div style="border-bottom:1px solid #000000">&nbsp;</div></TD>
  </TR>
<TR valign="bottom">
        <TD align=left nowrap>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD width="2%" align=left nowrap>&nbsp;</TD>
        <TD align=center nowrap><div style="border-bottom:1px solid #000000"> <b><font size=2 face="serif">2006</font></b> </div></TD>
        <TD width="1%" align=left nowrap>&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD width="2%" align=left nowrap>&nbsp;</TD>
        <TD align=center nowrap><div style="border-bottom:1px solid #000000"> <b><font size=2 face="serif">2005</font></b> </div></TD>
        <TD width="1%" align=left nowrap>&nbsp;</TD>
</TR>
<TR>
        <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">Net loss applicable to common</FONT></TD>
        <TD>&nbsp; </TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">stockholders:</FONT></TD>
        <TD>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">As reported</FONT></TD>
        <TD>&nbsp;</TD>
        <TD align=left nowrap>
<FONT size=2 face="serif">$</FONT></TD>
        <TD width="12%" align=right nowrap><div style="border-bottom:1px solid #000000"><FONT size=2 face="serif">(4,501,839</FONT></div></TD>
        <TD align=left nowrap><div style="border-bottom:1px solid #000000"><FONT size=2 face="serif">)</FONT></div></TD>
        <TD width="5%">&nbsp;</TD>
        <TD align=left nowrap><FONT size=2 face="serif">$</FONT></TD>
        <TD width="12%" align=right nowrap><div style="border-bottom:1px solid #000000"><FONT size=2 face="serif">(4,797,092</FONT></div></TD>
        <TD align=left nowrap><div style="border-bottom:1px solid #000000"><FONT size=2 face="serif">)</FONT></div></TD>
</TR>
<TR>
        <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">Deduct: Total stock-based</FONT></TD>
        <TD>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">employee compensation</FONT></TD>
        <TD>&nbsp;      </TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="5%">&nbsp;   </TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">expense determined under fair</FONT></TD>
        <TD>&nbsp;      </TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="5%">&nbsp;   </TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">value based method for all awards</FONT></TD>
        <TD>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=right nowrap><div style="border-bottom:1px solid #000000"><font size=2 face="serif">-</font></div></TD>
        <TD align=left nowrap style="border-bottom:1px solid #000000">&nbsp;</TD>
        <TD width="5%">&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=right nowrap><div style="border-bottom:1px solid #000000"> <font size=2 face="serif">(2,600</font></div></TD>
        <TD align=left nowrap style="border-bottom:1px solid #000000">)
    <FONT size=2 face="serif">&nbsp;</FONT> </TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">Pro forma</FONT></TD>
        <TD>&nbsp;</TD>
        <TD align=left nowrap>
<FONT size=2 face="serif">$</FONT></TD>
        <TD width="12%" align=right nowrap style="border-bottom:3px double #000000"> <font size=2 face="serif">(4,501,839</font></TD>
        <TD align=left nowrap style="border-bottom:3px double #000000">)
    <FONT size=2 face="serif">&nbsp;</FONT> </TD>
        <TD width="5%">&nbsp;</TD>
        <TD align=left nowrap>
<FONT size=2 face="serif">$</FONT></TD>
        <TD width="12%" align=right nowrap><div style="border-bottom:3px double #000000"> <font size=2 face="serif">(4,799,692</font> </div></TD>
        <TD align=left nowrap><FONT size=2 face="serif">)</FONT> <div style="border-bottom:3px double #000000"> </div></TD>
</TR>
<TR>
        <TD colspan=9>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">Basic and diluted (loss) per</FONT></TD>
        <TD>&nbsp;      </TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="5%">&nbsp;   </TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">common share:</FONT>  </TD>
        <TD>&nbsp;      </TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="5%">&nbsp;   </TD>
        <TD align=left nowrap>&nbsp;</TD>
        <TD width="12%" align=left nowrap>&nbsp;</TD>
        <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">As reported</FONT></TD>
        <TD>&nbsp;      </TD>
        <TD align=left nowrap>
<FONT size=2 face="serif">$</FONT></TD>
        <TD width="12%" align=right nowrap><div style="border-bottom:3px double #000000"> <font size=2 face="serif">(0.09</font> </div></TD>
        <TD align=left nowrap><div style="border-bottom:3px double #000000"> <font size=2 face="serif">)</font> </div></TD>
        <TD width="5%">&nbsp;   </TD>
        <TD align=left nowrap>
<FONT size=2 face="serif">$</FONT></TD>
        <TD width="12%" align=right nowrap><div style="border-bottom:3px double #000000"> <font size=2 face="serif">(0.12</font> </div></TD>
        <TD align=left nowrap style="border-bottom:3px double #000000">)
    <FONT size=2 face="serif">&nbsp;</FONT> </TD>
</TR>
<TR valign="bottom">
        <TD align=left nowrap>
<FONT size=2 face="serif">Pro forma</FONT></TD>
        <TD>&nbsp;      </TD>
        <TD align=left nowrap>
<FONT size=2 face="serif">$</FONT></TD>
        <TD width="12%" align=right nowrap><div style="border-bottom:3px double #000000"> <font size=2 face="serif">(0.09</font> </div></TD>
        <TD align=left nowrap><div style="border-bottom:3px double #000000"> <font size=2 face="serif">)</font> </div></TD>
        <TD width="5%">&nbsp;   </TD>
        <TD align=left nowrap>
<FONT size=2 face="serif">$</FONT></TD>
        <TD width="12%" align=right nowrap><div style="border-bottom:3px double #000000"> <font size=2 face="serif">(0.12</font> </div></TD>
        <TD align=left nowrap style="border-bottom:3px double #000000">)
    <FONT size=2 face="serif">&nbsp;</FONT> </TD>
</TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">The above pro-forma effects are not necessarily representative of the impact on the results of operations for future years.</FONT></P>


<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-18</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">3. PROPERTY AND EQUIPMENT</FONT></B></P>
<P align="left">
<FONT size=2 face="serif">Property and equipment consisted of the following at December 31, 2006 and 2005:</FONT></P>
<table width="100%" border=0 cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td width=90% align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
    <td align=right nowrap><div align="center"><b><u><FONT size=2 face="serif">2006</font></u></b> </div></td>
    <td align=left nowrap>&nbsp;</td>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </td>
    <td align=left nowrap>&nbsp;</td>
    <td align=right nowrap><div align="center"><b><u><FONT size=2 face="serif">2005</font></u></b> </div></td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=9>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width=90% align=left nowrap><FONT size=2 face="serif">Furniture and equipment</font> </td>
    <td>&nbsp;</td>
    <td align=left nowrap><FONT size=2 face="serif">&#36;</font> </td>
    <td align=right nowrap><FONT size=2 face="serif">29,681</font> </td>
    <td align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left nowrap><FONT size=2 face="serif">&#36;</font> </td>
    <td align=right nowrap><FONT size=2 face="serif">17,212</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width=90% align=left nowrap><FONT size=2 face="serif">Computer equipment and
        information systems</font> </td>
    <td>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
    <td align=right nowrap><FONT size=2 face="serif">403,278</font> </td>
    <td align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
    <td align=right nowrap><FONT size=2 face="serif">341,611</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width=90% align=left nowrap><FONT size=2 face="serif">Leasehold improvements</font> </td>
    <td>&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">296,695</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">242,833</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width=90% align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
    <td align=right nowrap><FONT size=2 face="serif">729,654</font> </td>
    <td align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
    <td align=right nowrap><FONT size=2 face="serif">601,656</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width=90% align=left nowrap><FONT size=2 face="serif">Less: accumulated depreciation
        and amortization</font> </td>
    <td>&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(286,715</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">)</font> </td>
    <td>&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(160,686</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">)</font> </td>
  </tr>
  <tr valign="bottom">
    <td width=90% align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">&#36;</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">442,939</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">&#36;</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">440,970</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
  </tr>
</table>
<BR>
<P align="left">
<FONT size=2 face="serif">Depreciation and amortization for the years ended December 31, 2006 and 2005 was &#36;133,500 and &#36;108,135, respectively. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">4. LINE OF CREDIT FROM A RELATED PARTY </FONT></B></P>
<P align="left">
<FONT size=2 face="serif">In February 2005, the Company entered into an accounts receivable servicing agreement and a line of credit agreement with Mosaic Financial Services, Inc. (the &#147;Lender&#148; or &#147;Mosaic&#148;).  This agreement provided the
Company financing for inventory purchases over an extended period of time. Under the terms of the line of credit agreement, the Company was able to draw a maximum of &#36;500,000 to purchase inventory. On July 1, 2005, the line of credit limit was
increased to &#36;700,000. These agreements were for a one-year term with a provision to automatically renew unless either party provided notice of termination within 180 days prior to the end of the term.  The line of credit had a monthly interest
rate of 1.25% of the then line of credit limit.  The line of credit was secured by substantially all of the Company's existing and future assets.</FONT></P>

<P align="left">
<FONT size=2 face="serif">Pursuant to the above agreement, the Lender had a continuing
right during the term to convert all or a portion of the outstanding obligations
into a number of shares of the Company&#146;s common stock determined at a conversion
 price equal to 80% of the volume weighted average price of the Company&#146;s
 common stock as quoted by Bloomberg, LP for the seven trading day weighted average
 closing bid price for the common stock on the OTCBB (or such other equivalent
 market on  which the common stock is then quoted) calculated as of the trading
 day immediately preceding the date the conversion right is exercised. The conversion
 price per share shall not be less than &#36;0.25 or more than &#36;0.75. The
 Lender is only  entitled to piggyback registration rights upon exercise of this
 conversion right, and the Company is not contractually liable for any registration
rights penalties. The beneficial conversion feature amount was not significant.</FONT></P>

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<P align="center"><FONT size=2 face="serif">F-19</font></P>
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<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">4. LINE OF CREDIT FROM A RELATED PARTY </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>
<P align="left">
<FONT size=2 face="serif">On October 24, 2005, the Company authorized the issuance of 2,500,000 restricted common shares at &#36;0.28 per share to Mosaic in order to convert their entire outstanding balance of &#36;700,000 into common stock in accordance
with the conversion right in the line of credit agreement.  The issuance of these shares to Mosaic satisfied in full the Company&#146;s obligations under such agreement.  These shares were issued pursuant to Section 4(2) of the Securities Act of
1933, as amended (the &#147;Securities Act&#148;). </FONT></P>

<P align="left">
<FONT size=2 face="serif">On October 31, 2005, the Company entered into Line of Credit Agreement (&#147;LOC&#148;) with Mosaic Financial Services, Inc. (&#147;Mosaic&#148;) for &#36;1,000,000 to purchase inventory. This LOC has a one time commitment fee
equal to three percent (3%) of the initial amount of the LOC. The LOC has a monthly finance charge of 1.5% of the then LOC limit. These finance charges are deducted prior to any advances. Under the terms of the LOC, Mosaic has a conversion right to
convert all or a portion of the outstanding advances into shares of our common stock where the conversion price is based on the weighted average closing bid price for the common stock on the over-the-counter bulletin board (or such other equivalent
market on which our common stock is quoted) for the seven trading days immediately preceding the date the conversion right is exercised. The conversion price shall not be less than &#36;0.40 or more than &#36;0.80. This LOC is secured by
substantially all of our assets. On May 1, 2006, the Company repaid &#36;200,000, which was drawn down in October, 2005. Since April 15 2006, the Company has been able to finance its inventory purchases without the need to draw down funds from the
LOC. The beneficial conversion feature amount was not significant.</FONT></P>

<P align="left">
<FONT size=2 face="serif">A member of the Company&#146;s board of directors since
September 2005 and its Chief Financial Officer was previously the group financial
officer for Mosaic Capital Advisors, LLC, which is the parent company of Mosaic.
This LOC agreement was terminated on May 1, 2006. The beneficial conversion feature
amount was not significant.</FONT></P>
<P align="left">&nbsp;</P>
<P align="left">&nbsp;</P>

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<P align="center"><FONT size=2 face="serif">F-20</font></P>
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<P align="center">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
<FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
<FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>


<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">5. NOTES PAYABLE TO RELATED PARTIES AND STOCKHOLDERS</FONT></B></P>

<P align="left">
<B><I><FONT size=2 face="serif">Licensor Note</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">In May 2003, the Company assumed a note payable from Safescript Pharmacies, Inc. (the &#147;Licensor&#148;) of approximately &#36;3,177,000 in connection with acquisition of a License (see Note 4), of which &#36;2,000,000 was
converted into 4,444,444 shares of the Company&#146;s restricted common stock at &#36;0.45 per share.  The remaining balance of approximately &#36;1,177,000 was payable in monthly installments of &#36;25,000 including interest at 5% per annum with a
balloon payment of approximately &#36;802,000 due in December 2004. This note was secured by the License.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Due to the Company&#146;s dispute with the Licensor (see Note 12), the Company ceased making monthly installment payments. The outstanding balance of the note was approximately &#36;1,013,000 as of December 31, 2004. On June 30,
2005, the United States Bankruptcy Court for the Eastern District of Texas approved a Settlement Agreement and Mutual Release (the &#147;Settlement Agreement&#148;) between the Company and the Licensor. Under the terms of the Settlement Agreement,
the Licensor retained 100,000 shares of the Company&#146;s common stock and returned the remaining 4,344,444 shares of common stock for cancellation.  In addition, we issued the Licensor 500,000 additional shares of Company common stock and agreed
to dismiss the lawsuit then pending in the U.S. District Court for the Eastern District of Texas with prejudice. </FONT></P>


<P align="left">
<FONT size=2 face="serif">The Settlement Agreement contained a mutual release which resulted in the Licensor releasing the Company from any liability with respect to the note payable due to the Licensor in the amount of approximately &#36;1,013,000. For
financial reporting purposes, the Company has treated the 500,000 shares issued to the Licensor as constructively issued as of June 30, 2005. Accordingly, the Company has reported a credit to common stock for &#36;500; a
credit to additional paid in capital for &#36;148,000 (the estimated fair value of the stock based on the trading price on the settlement date); and a gain on settlement of debt of approximately &#36;1,012,000 in the accompanying
calendar 2005 consolidated statement of operations. Based on SFAS No. 145 and APB No. 30, management concluded that such gain is not considered extraordinary and is presented as a component of loss from continuing operations.</FONT></P>
<P align="left"><FONT size=2 face="serif">See Note 14 for additional information regarding the transaction described in the preceding two paragraphs.</FONT></P>



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<P align="center"><FONT size=2 face="serif">F-21</font></P>
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<P align="center">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
<FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
<FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>


<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">5. NOTES PAYABLE TO RELATED PARTIES AND STOCKHOLDERS </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>

<P align="left">
<I><FONT size=2 face="serif">Note to Former CEO</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">In December 2003, the Company entered into a note payable with its former Chief Executive Officer (&#147;former CEO&#148;) for &#36;370,000 in connection with the acquisition of a License. This note accrued interest at a fixed
rate of 5% per annum. The note was secured by the License and was to mature in December 31, 2007.</FONT></P>


<P align="left">
<FONT size=2 face="serif">In February 2005, the Company entered into a termination and settlement agreement with the former CEO, whereby he agreed to accept &#36;10,000 cash, 494,000 shares of restricted common stock and warrants (fully vested and
immediately exercisable, at a price range of &#36;0.75 to &#36;1.25 per share, over a five year period) to purchase 1,300,000 shares of the Company&#146;s common stock and forever discharge the Company from all liability associated with this debt.
During the quarter ended September 30, 2005, the Company paid the &#36;10,000 on this settlement. In addition, the Company recorded a credit to subscribed stock for &#36;494; a credit to additional paid in capital for &#36;118,066 (the estimated
fair value of the stock based on the trading price on the settlement date); a credit to additional paid in capital for &#36;329,400 (the estimated fair value of the warrants based on the Black-Scholes pricing model on the settlement date);
and a loss on settlement of debt of &#36;87,960, thereby extinguishing this liability.</FONT></P>

<P align="left"><FONT size=2 face="serif">See Note 14 for additional information regarding the transaction described in the preceding paragraph.</FONT></P>


<P align="left">
<I><FONT size=2 face="serif">TAPG Note</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">In January 2005, the Company entered into an agreement with TAPG where TAPG was to advance &#36;270,000 in connection with establishing pharmacies in the Pacific Northwest of the United States (see Note 1). The note was to be
funded by TAPG LLC in monthly instalments of &#36;45,000 up to a maximum of &#36;270,000. The note accrued interest at a fixed rate of 7% per annum. The note is secured by the assets of API&#146;s pharmacies, in which the Company holds a controlling
interest. However, the Company received only &#36;40,000 during 2005. The note matured in January 2006 and was not extended. As of December 31, 2006, the Company paid &#36;20,000 payment on this note. The Company intends to retire the remaining
balance due of &#36;20,000.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Convertible Loans</FONT></I></P>


<P align="left">
<FONT size=2 face="serif">On October 25, 2005, the Company entered into a loan agreement with Malaton Investment Corporation S.A. (&#147;Malaton&#148;). Under the terms of the agreement, the Company received &#36;250,000 for a two month term which can be
extended for an additional twelve (12) month period by mutual consent. On the date of funding, the Company paid the lender a one time commitment fee equal to 3% of the initial amount of the loan. The loan has an interest rate of 15% per annum to be
paid in monthly installments.</FONT></P>


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<P align="center"><FONT size=2 face="serif">F-22</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">5. NOTES PAYABLE TO RELATED PARTIES AND STOCKHOLDERS </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Convertible Loans (continued)</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, Malaton had a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of the Company&#146;s common
stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other equivalent market on which the Common Stock is quoted) calculated as of the
trading day immediately preceding the date the Conversion Right is exercised. The conversion price per share was not to be less than &#36;0.40 or more than &#36;0.80. On March 1, 2006, Malaton elected to convert the loan into 625,000 shares of the
Company&#146;s restricted common stock. The shares issued upon conversion are entitled to piggyback registration rights.</FONT></P>
<P align="left">
<FONT size=2 face="serif">On December 21, 2005, the Company entered into a loan agreement with Kenido Holdings, Inc. (&#147;Kenido&#148;). Under the terms of the agreement, the Company received &#36;175,000 for a twelve (12) month term which can be
extended for an additional twelve (12) month period by mutual consent. On the date of funding, the Company paid the lender a one time commitment fee equal of 3% of the initial amount of the loan. The loan had an interest rate of 15% per annum
payable in monthly installments. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, the Kenido had a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of the Company&#146;s
common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other equivalent market on which the Common Stock is quoted) calculated as of the
trading day immediately preceding the date the Conversion Right is exercised. The conversion price per share was not to be less than &#36;0.40 or more than &#36;0.80. On March 1, 2006, Kenido elected to convert the loan into 437,500 shares of the
Company&#146;s restricted common stock. The shares issued upon conversion are entitled to piggyback registration rights. </FONT></P>


<P align="left">
<FONT size=2 face="serif">The conversion price on both the notes to, Kenido and Malaton, was &#36;0.40. The weighted average price of the shares of the Company&#146;s common stock was calculated at &#36;0.41. Due to this, the Company recognized a
beneficial conversion of &#36;10,625 as an expense. </FONT></P>


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<P align="center"><FONT size=2 face="serif">F-23</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">5. NOTES PAYABLE TO RELATED PARTIES AND STOCKHOLDERS </FONT></B><FONT size=2 face="serif">(continued)</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Convertible Loans (continued)</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">During first quarter of 2005, the Company entered into ninety-day note payable to VVPH Inc. for &#36;50,000. During first quarter of 2006, the Company extended this agreement to January 31, 2007. VVPH also, agreed to convert
accrued interest of &#36;1,907 to principal.</FONT></P>
<P align="left">
<FONT size=2 face="serif">On January 21, 2006, the Company entered additional two (2) loan agreements with VVPH Inc. Under the terms of the agreements, the Company received &#36;600,000 for a twelve (12) month term which can be extended for an additional
twelve (12) month period by mutual consent. The loan has an interest rate of 15% per annum to be paid in monthly installments.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, the VVPH has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of the Company&#146;s common
stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other equivalent market on which the Common Stock is quoted) calculated as of the
trading day immediately preceding the date the Conversion Right is exercised. The Conversion Price shall not be less than &#36;0.40 or more than &#36;0.80. VVPH Inc shall be entitled to piggyback registration rights upon exercise of this conversion
right. During the year ended December 31, 2006, the Company paid &#36;75,000 towards the principal of this loan, along with interest of &#36;64,315. As of December 31, 2006, the Company owes &#36;575,988 along with the interest, towards these notes.
</FONT></P>
<P align="left">
<FONT size=2 face="serif">In March 2007, the Company extended these agreements until January, 2008. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the first quarter of 2005, the Company entered into three ninety-day notes payable to three stockholders totaling &#36;190,000. These notes are unsecured and have various fixed interest rate ranging from 3% to 7.50% per
annum. On August 15, 2005, the Company repaid one note bearing 3% interest rate, of the &#36;50,000 note together with accrued interest of &#36;1,350. Also, during the quarter ended September 30, 2005, the Company extended the maturity date of the
remaining two notes payable to January 31, 2006.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company was able to further extend the maturity date of these three notes from January 31, 2006 to January 31, 2007. Company also converted accrued interest of &#36;6,256 to notes payable. During the year ended December 31,
2006, the Company repaid 2 notes of &#36;146,256. along with the interest of &#36;6,125.</FONT></P>

<div style="border-bottom:2px solid #000000">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-24</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>



<P align="center">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
<FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
<FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>


<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">6. EQUITY TRANSACTIONS</FONT></B></P>
<P align="left">
<B><I><FONT size=2 face="serif">Common Stock </FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">On July 17, 2006, the Company amended its Articles of Incorporation to increase the number of authorized shares of common stock available for issuance from 70,000,000 to 150,000,000, par value of $0.001 per share.
</FONT></P>
<P align="left">
<FONT size=2 face="serif">In March 2005, the Company issued 124,997 shares of restricted common stock to four consultants in connection with services rendered valued at $33,249 (estimated to be the fair value based on the trading price on the
issuance date). These securities were issued pursuant to Section 4(2) of the Securities Act. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the quarter ended March 31, 2005, the Company issued 100,000 shares of its common stock to directors of the Company in consideration for their services rendered during the March 31, 2005 quarter. Such shares were
valued at $38,000 (estimated to be the fair value based on the trading price on the issuance date). These securities were issued pursuant to Section 4(2) of the Securities Act. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In a termination and settlement agreement entered into
with the Company's former CEO on February 1, 2005, the Company agreed to issue
the former CEO 494,000 shares of restricted common stock (see Note 5). The former
CEO  also agreed to return 5,400,000 shares of the Company's common stock to
treasury. In termination and settlement agreements with two other officers, they
agreed to return 1,114,214 shares of the Company's common stock to treasury.
See Note 14 for additional information regarding this transaction.</FONT></P>
<P align="left">
<FONT size=2 face="serif">During the quarter ended June 30, 2005, the Company commenced a private equity offering to accredited investors and sold 910,000 units at $0.80 per unit, for an aggregate of approximately $712,000 in net proceeds. Each unit
is priced at $0.80 and consists of two shares of restricted common stock and one warrant to purchase one share of restricted common stock at an exercise price of $0.60 exercisable for thirty-six months after the close of the offering. These
securities were issued pursuant to Rule 506 of Regulation D. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the quarter ended June 30, 2005, the Company issued 168,412 shares of restricted common stock to consultants in connection with services rendered valued at $49,042 (estimated to be the fair value based on the trading
price on the issuance date). These securities were issued pursuant to Section 4(2) of the Securities Act. </FONT></P>


<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-25</FONT></P>
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<P align="center">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
<FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
<FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>


<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">6. EQUITY TRANSACTIONS </FONT></B><FONT size=2 face="serif">(continued)</font></P>
<P align="left">
<I><FONT size=2 face="serif">Common Stock (continued)</FONT></I></P>

<P align="left">
<FONT size=2 face="serif">Under the terms of the Settlement Agreement (see Note
5), the Licensor retained 100,000 shares of the Company's common stock and returned
the remaining 4,344,444 shares of common stock for cancellation. In addition,
the Company agreed to issue the Licensor 500,000 additional shares of its common
stock. These securities were issued pursuant to Section 4(2) of the Securities
Act. See Note 14 for additional information regarding the transaction described
in this paragraph.</FONT></P>
<P align="left">
<FONT size=2 face="serif">In August 2005, the Company issued 500,000 shares of its common stock to directors of the Company in consideration for services rendered during the September 30, 2005 quarter. These shares were valued at $140,000 (estimated
to be the fair value based on the trading price on the issuance date). These securities were issued pursuant to Section 4(2) of the Securities Act. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the quarter ended September 30, 2005, the Company sold 856,250 units at $0.80 per unit, or an aggregate of $685,000 in proceeds, to accredited investors in a private equity offering. Each unit was priced at $0.80 and
consisted of two shares of restricted common stock and one warrant to purchase one share of restricted common stock at an exercise price of $0.60 exercisable for thirty-six months after the close of the offering. These securities were issued
pursuant to Rule 506 of Regulation D. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the quarter ended September 30, 2005 the Company issued 165,000 shares of restricted common stock to a consultant for services rendered, valued at $46,200 (estimated to be the fair value based on the trading price on
the issuance date). This security was issued pursuant to Section 4(2) of the Securities Act. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the quarter ended September 30, 2005, the Company issued 1,430,000 shares of restricted common stock to consultants in connection with one-year service agreements. Such stock was valued at $449,500 (estimated to be
the fair value based on the trading price on the issuance date). . These securities were issued pursuant to Section 4(2) of the Securities Act. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the quarter ended September 30, 2005, the Company issued 169,090 shares of restricted common stock to a consultant for services rendered, valued at $60,872 (estimated to be the fair value based on the trading price
on the issuance date). These securities were issued pursuant to Section 4(2) of the Securities Act. </FONT></P>


<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-26</FONT></P>
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<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005</FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">6. EQUITY TRANSACTIONS </FONT></B><FONT size=2 face="serif">(continued)</font></P>
<P align="left">
<I><FONT size=2 face="serif">Common Stock (continued)</FONT></I></P>

<P align="left">
<FONT size=2 face="serif">Also, in August 2005, the Company issued 250,000 shares of restricted common stock for a performance-based bonus earned by an officer of the Company valued at $70,000 (estimated to be the fair value based on the trading
price on the issuance date). The Company also granted options to purchase 250,000 shares of the Company's common stock exercisable one-third per year for a period of three years from the date of issuance at a price of $0.60 per share. These
securities were issued pursuant to Section 4(2) of the Securities Act. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the quarter ended December 31, 2005, the Company sold 143,750 units at $0.80 per unit, or an aggregate of $115,000 in proceeds, to accredited investors in a private equity offering. Each unit was priced at $0.80 and
consisted of two shares of restricted common stock and one warrant to purchase one share of restricted common stock at an exercise price of $0.60 exercisable for thirty-six months after the close of the offering. These securities were issued
pursuant to Rule 506 of Regulation D. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the quarter ended December 31, 2005, the Company issued of 2,500,000 restricted common shares to convert the outstanding balance due under a line of credit into common stock in accordance with the conversion right in
the line of credit agreement. These shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended (the &#147;Securities Act&#148;). </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the three months ended March 31, 2006, the Company sold 156,250 units at $0.80 per unit, or an aggregate of $125,000 in proceeds, to accredited investors in a private equity offering. Each unit consists of two (2)
shares of restricted common stock and one (1) warrant to purchase one (1) share of restricted common stock at an exercise price of $0.60 exercisable for thirty six (36) months after the acceptance date of the subscription. These securities were
issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the three months ended March 2006, the Company entered into debt conversion agreements with two lenders converting the total principal balances of $425,000 into 1,062,500 restricted shares of common stock. These
shares were issued pursuant to Section 4(2) of the Securities Act.</FONT></P>


<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-27</FONT></P>
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<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">6. EQUITY TRANSACTIONS </FONT></B><FONT size=2 face="serif">(continued)</font></P>
<P align="left">
<I><FONT size=2 face="serif">Common Stock (continued)</FONT></I></P>

<P align="left">
<FONT size=2 face="serif">During the three months ended March 2006, the Company issued 625,000 shares of restricted common stock to three (3) consultants in connection with service agreements with various ending dates. Such stock was valued at
$254,250 (estimated to be the fair value based on the trading price on the issuance date).</FONT></P>
<P align="left">
<FONT size=2 face="serif">During the three months ended June 30, 2006, the Company issued 750,000 shares of restricted common stock to 3 (three) consultants in connection with the existing service agreements with various ending dates. Such stock was
valued at $350,000 (estimated to be the fair value based on the trading price on the issuance date). . </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the three months ended June 30, 2006, the Company sold 1,968,750 units at $0.80 per unit, or an aggregate of $1,575,000 in proceeds, to accredited investors in a private
equity offering. Each unit consists of two (2) shares of restricted common stock and one (1) warrant to purchase one (1) share of restricted common stock at an exercise price of $0.60 exercisable for thirty six (36) months
after the acceptance date of the subscription. These securities were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the three months ended September 30, 2006, the Company issued 590,000 shares of restricted common stock to two consultants in connection with the existing service agreements with various ending dates. Such stock was
valued at $246,400 (estimated to be the fair value based on the trading price on the issuance date).</FONT></P>
<P align="left">
<FONT size=2 face="serif">During the three months ended September 30, 2006, the Company sold 87,500 units at $0.80 per unit, or an aggregate of $70,000 in proceeds, to accredited investors in a private equity offering. Each unit consists of two (2)
shares of restricted common stock and one (1) warrant to purchase one (1) share of restricted common stock at an exercise price of $0.60 exercisable for thirty six (36) months after the acceptance date of the subscription. These securities were
issued pursuant to Section 4(2) of the Securities Act of 1933, as amended. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the three months ended December 31, 2006, the Company issued 250,000 shares of restricted common stock to two consultants in connection with the existing service agreements with various ending dates. Such stock was
valued at $89,500 (estimated to be the fair value based on the trading price on the issuance date). . </FONT></P>
<P align="left">
<FONT size=2 face="serif">During three months ended December 31, 2006, one (1) investor exercised 250,000 warrants to purchase 250,000 shares of restricted common stock at an exercise price of $0.60 for total consideration of $150,000. </FONT></P>


<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-28</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">6. EQUITY TRANSACTIONS </FONT></B><FONT size=2 face="serif">(continued)</font></P>
<P align="left">
<I><FONT size=2 face="serif">Common Stock (continued)</FONT></I></P>

<P align="left">
<FONT size=2 face="serif">During three months ended December 31, 2006, the Company issued 50,000 shares of restricted common stock to TPG as a part of agreement to acquire 49% of API. These shares were valued at $19,500 </FONT></P>
<P align="left">
<FONT size=2 face="serif">During three months ended December 31, 2006, the Company issued 1,011,373 shares of restricted common stock in lieu of the total interest of $352,350, due to the convertible Debenture note holders (See note 7). </FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Warrants </FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">During the year ended December 31, 2005, under the settlement agreement with its former CEO (see Note 5), the Company issued warrants to purchase 1,300,000 shares of the Company's restricted common stock at various exercise
prices ranging from $0.64 to $1.06 exercisable for five (5) years. The warrants were accounted for at their estimated fair value on the settlement date based on the Black-Scholes pricing model. The Black-Scholes computation was made assuming that
there will be no dividends, using the 5 year exercisable period, a risk-free interest rate of 3.71%, and an expected volatility of 148.4% based upon the historical volatility of the Company&#146;s common stock.</FONT></P>
<P align="left">
<FONT size=2 face="serif">During the year ended December 31, 2005, the Company issued warrants to purchase 125,000 shares of its common stock to consultants for services. Such warrants were valued at $31,250 (estimated to be the fair value based on
the Black-Scholes pricing model on the issuance date). The Company recorded such amount as consulting expense which is included in consulting and other compensation in the accompanying consolidated statements of operations. The Black-Scholes
computation was made assuming that there will be no dividends, using the 2 year exercisable period, a risk-free interest rate of 4.22%, and an expected volatility of 143.2% based upon the historical volatility of the Company&#146;s common
stock.</FONT></P>
<P align="left">
<FONT size=2 face="serif">During the year ended December 31, 2005, in connection with a private placement, the Company issued warrants to purchase 1,910,000 shares of the Company's restricted common stock at an exercise price of $0.60 exercisable
for thirty-six months after October 2005.</FONT></P>
<P align="left">
<FONT size=2 face="serif">During the year ended December 31, 2006, the Company issued warrants to purchase 1,133,334 shares of its restricted common stock to an officer of the Company. Such warrants valued at $373,097 (estimated to be the fair value
based on the Black-Scholes pricing model on the issuance date). One-half of such warrants were vested immediately and the rest are to be vested in 2007. The Black-Scholes computation was made assuming that there will be no dividends, using the 17
month exercisable period, a risk-free interest rate of 5.14%, and an expected volatility of 79.5% based upon the historical volatility of the Company&#146;s common stock.</FONT></P>


<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-29</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">6. EQUITY TRANSACTIONS </FONT></B><FONT size=2 face="serif">(continued)</font></P>
<P align="left">
<I><FONT size=2 face="serif">Common Stock (continued)</FONT></I></P>

<P align="left">
<FONT size=2 face="serif">During the year ended December 31, 2006, in connection with a private placement, the Company issued warrants to purchase 2,212,500 shares of the Company's restricted common stock at an exercise price of $0.60 exercisable
for thirty-six months after October 2008. The estimated to be the fair value of these warrants was determined to be $310,512 based on the Black-Scholes pricing model on the issuance date, assuming that there will be no dividends, using the 3 year
exercisable period, a risk-free interest rate of 4.00%, and an expected volatility of 65.7% based upon the historical volatility of the Company&#146;s common stock.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The following tables summarize information concerning outstanding warrants as of December 31, 2006 and 2005:</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap colspan=2>
<B><FONT size=2 face="serif">Weighted</FONT></B></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap><B><FONT size=2 face="serif">Number
      of</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap colspan=2>
<B><FONT size=2 face="serif">Average</FONT></B></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap><B><FONT size=2 face="serif">Shares</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap colspan=2>
<B><FONT size=2 face="serif">Exercise</FONT></B></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap><B><FONT size=2 face="serif">Weighted</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Aggregate</FONT></B> </TD>
    <TD align=center nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000"><B><FONT size=2 face="serif">(all
      vested)</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap colspan=2  STYLE="border-bottom:1px solid #000000">
<B><FONT size=2 face="serif">Price</FONT></B></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap  STYLE="border-bottom:1px solid #000000"><B><FONT size=2 face="serif">Average</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=center nowrap  STYLE="border-bottom:1px solid #000000"><B><FONT size=2 face="serif">Intrinsic</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<td><FONT size=2 face="serif">Warrants outstanding and exercisable at:</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">January 1, 2005</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap><div style="border-bottom:1px solid #000000"> <font size=2 face="serif">4,145,875</font> </div></TD>
<TD align=left nowrap></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">$0.60</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Granted</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">3,335,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">0.60</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Exercised, cancelled, forfeited, or expired</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap><div style="border-bottom:1px solid #000000"> <font size=2 face="serif">-</font> </div></TD>
<TD align=left nowrap><div style="border-bottom:1px solid #000000"> </div></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">December 31, 2005</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap><div style="border-bottom:1px solid #000000"> <font size=2 face="serif">7,480,875</font> </div></TD>
<TD align=left nowrap><div style="border-bottom:1px solid #000000"> </div></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">0.60</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Granted</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">3,345,834</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">0.60</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Exercised, cancelled, forfeited, or expired</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap><div style="border-bottom:1px solid #000000"> <font size=2 face="serif">(250,000</font> </div></TD>
<TD align=left nowrap><div style="border-bottom:1px solid #000000"> <font size=2 face="serif">)</font> </div></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">0.60</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap style="border-bottom:1px solid #000000">&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap style="border-bottom:1px solid #000000">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">December 31, 2006</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap><div style="border-bottom:3px double #000000"> <font size=2 face="serif">10,576,709</font> </div></TD>
<TD align=left nowrap><div style="border-bottom:3px double #000000"> </div></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000">
<FONT size=2 face="serif">$0.60</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">1.3</FONT></TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">$-</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR>
<TD colspan=13>&nbsp;</TD>
</TR>
<TR>
<TD colspan=13>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=CENTER nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=CENTER nowrap>&nbsp;</TD>
<TD align=CENTER nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=CENTER nowrap><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=CENTER nowrap><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
<TD align=center nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=CENTER nowrap><B><FONT size=2 face="serif">Number
      of</FONT></B> </TD>
<TD align=CENTER nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=center nowrap><B><FONT size=2 face="serif">Weighted</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000"><B><FONT size=2 face="serif">Shares</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000"><B><FONT size=2 face="serif">Shares</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000"><B><FONT size=2 face="serif">Shares</FONT></B> </TD>
<TD align=center nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap STYLE="border-bottom:1px solid #000000"><B><FONT size=2 face="serif">Average</FONT></B> </TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">Warrants outstanding and exercisable at:</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">January 1, 2005</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">-</FONT> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">4,145,875</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">4,145,875</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">$0.28</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">Granted</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap><FONT size=2 face="serif">-</FONT> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">3,335,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">3,335,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">0.24</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">Exercised, cancelled, forfeited, or expired</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">-</FONT> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">December 31, 2005</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">-</FONT> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">7,480,875</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">7,480,875</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">0.26</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">Granted</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap><FONT size=2 face="serif">566,667</FONT> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">2,779,167</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">3,345,834</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">0.20</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">Exercised, cancelled, forfeited, or expired</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">-</FONT> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">(250,000</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">(250,000</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">0.28</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">December 31, 2006</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000"><FONT size=2 face="serif">566,667</FONT> </TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000"><FONT size=2 face="serif">10,010,042</FONT> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000">
<FONT size=2 face="serif">10,576,709</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000">
<FONT size=2 face="serif">$0.24</FONT></TD>
    <TD align=right nowrap>&nbsp;</TD>
</TR>
</TABLE>



<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-30</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">6. EQUITY TRANSACTIONS </FONT></B><FONT size=2 face="serif">(continued)</font></P>
<P align="left">
<B><I><FONT size=2 face="serif">Stock Options </FONT></I></B></P>

<P align="left">
<FONT size=2 face="serif">During the year ended November 30, 2003, the Company's Board of Directors approved an Incentive Stock Option Plan ("ISOP") to grant options to its key personnel. There are two types of options that can be granted under the
ISOP: i) options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code ("Qualified Stock Options"), and ii) options not specifically qualified for favorable income tax treatment under the Internal Revenue Code
("Non-Qualified Stock Options"). The ISOP is administered by the Company's board of directors or the compensation committee (the "Administrator"). The Company is authorized to grant qualified stock options to any of its employees or
directors.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The purchase price for the shares subject to any option shall be determined by the Administrator at the time of the grant, but shall not be less than 85% of the fair market value per share of the Company's common stock on
the grant date. Except as described below, the purchase price for the shares subject to any Qualified Stock Option shall not be less than 100% of fair market value per share of common stock on the grant date. In the case of any Qualified Stock
Option granted to an employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its subsidiaries, the option price shall not be less than 110% of the fair market value per
share of the Company's common stock on the grant date. </FONT></P>
<P align="left">
<FONT size=2 face="serif">No option is exercisable after the expiration of the earliest of: (a) ten years after the option is granted, (b) three months after the optionee's employment with the Company and its subsidiaries terminates, or a
non-employee director or consultant ceases to provide services to the Company, if such termination or cessation is for any reason other than disability or death, or (c) one year after the optionee's employment with the Company and its subsidiaries
terminates, or a non-employee director or consultant ceases to provide services to the Company, if such termination or cessation is a result of death or disability; provided, however, that the agreement for any option may provide for shorter periods
in each of the foregoing instances. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Administrator has a right to set the period within which each option shall vest or be exercisable and to accelerate such time frames; however; each option shall be exercisable at the rate of at least 20% per year from
the grant date. Unless otherwise provided by the Administrator, options will not be subject to any vesting requirements. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In September 2005, the Company entered into an employment agreement with its Chief Executive Officer, Robert DelVecchio. Pursuant to the terms of such agreement, the Company granted options to Mr. DelVecchio to purchase
5,000,000 shares of our common stock for a period of ten years from the date of issuance and exercisable at a price of $0.60 per share. These options became fully vested and exercisable upon issuance, with a fair value of $1,950,000 (using Black
Scholes to estimate the fair value upon date of issuance). Such expense is included in salaries and related in the accompanying consolidated statement of operations. These options were issued pursuant to Section 4(2) of the Securities Act. The Board
of Directors issued such options to Mr. DelVecchio for his past services to the Company other than as an employee or director. The Black-Scholes computation was made assuming that there will be no dividends, using the 10 year exercisable period, a
risk-free interest rate of 4.13%, and an expected volatility of 141.7% based upon the historical volatility of the Company&#146;s common stock.</FONT></P>



<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-31</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">6. EQUITY TRANSACTIONS </FONT></B><FONT size=2 face="serif">(continued)</font></P>
<P align="left">
<I><FONT size=2 face="serif">Stock Options (continued)</FONT></I></P>

<P align="left">
<FONT size=2 face="serif">In 2005, the Company granted 1,965,000 options to purchase its common stock to consultants in connection with three service agreements. Such options were valued at $498,750 (estimated to be the fair value based on the
Black-Scholes pricing model on the issuance date), and are amortized over the lives of the service agreements. The President of Janus Financial Services, Inc., an entity that received 1.7 million of the above options has been a member of the
Company's board of directors since September 2005. The Company recorded such amount as a debit to deferred compensation and a credit to additional paid in capital. The options have an exercise price of $0.60 per share and have contractual lives that
range from two to three years. The Black-Scholes computation was made assuming that there will be no dividends, using a 2 year exercisable period for  1,700,000 options and a 3 year exercisable period for 265,000 options, a risk-free interest rate of 4.13%, and an expected volatility of 135.4% based upon the historical volatility of the Company&#146;s common
stock.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Also in 2005, the Company granted options to purchase 280,000 shares of common stock to employees under the ISOP. The stock options have exercise prices that range from $0.39 to $0.60 per share and vest one-third each
consecutive year following the date of grant. Such stock options expire on the earlier of three years after vesting or ninety days after termination of employment with the Company. Such options were valued at $498,750 (estimated to be the fair value
based on the Black-Scholes pricing model on the issuance date), and are amortized over the lives of the service agreements. The Black-Scholes computation was made assuming that there will be no dividends, using a 1 year exercisable period for 20,000
options and a 3 year exercisable period for 260,000 options, a risk-free interest rates of 4.22% and 4.13%, and expected volatilities of 143.2% and 135.4%, respectively, based upon the historical volatility of the Company&#146;s common
stock.</FONT></P>
<P align="left">
<FONT size=2 face="serif">In May 2006, the Company cancelled 1,133,334 options, constituting the non-vested part of 1.7 million options granted to Janus Financial Services, Inc. in 2005. The President of Janus Financial Services, Inc. is the Chief
Financial Officer and former Chief Operating Officer of the Company.</FONT></P>
<P align="left">
<FONT size=2 face="serif">In addition, options to purchase 10,000 shares of common stock issued to employees were terminated in 2006.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The following tables summarize information concerning outstanding stock options as of December 31, 2005
and 2006:</FONT></P>

<TABLE width="100%" border=0 cellspacing=0 cellpadding=0>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap><B><FONT size=2 face="serif">Weighted</FONT></B> </TD>
<TD align=center nowrap>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap><B><FONT size=2 face="serif">Average</FONT></B> </TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>
<B><FONT size=2 face="serif">Number of</FONT></B></TD>
<TD align=center nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap><B><FONT size=2 face="serif">Exercise</FONT></B> </TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=center nowrap>
<B><FONT size=2 face="serif">Weighted</FONT></B></TD>
<TD align=center nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>
<B><FONT size=2 face="serif">Aggregate</FONT></B></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000">
<B><FONT size=2 face="serif">Shares</FONT></B></TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000"><B><FONT size=2 face="serif">Price</FONT></B> </TD>
<TD align=center nowrap>&nbsp;</TD>
<TD align=center nowrap>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000">
<B><FONT size=2 face="serif">Average</FONT></B></TD>
<TD align=center nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000">
<B><FONT size=2 face="serif">Intrinsic</FONT></B></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">Options outstanding at:</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">January 1, 2005</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">55,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">$0.42</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">Granted</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">7,245,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">0.59</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">Cancelled, forfeited, or expired</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">December 31, 2005</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">7,300,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">0.59</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">Granted</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">Cancelled, forfeited, or expired</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">(1,163,334</FONT></TD>
<TD align=left nowrap><FONT size=2 face="serif">)</FONT></TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">0.59</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap style="border-bottom:1px solid #000000">&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
 &nbsp;<FONT size=2 face="serif">December 31, 2006</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000">
<FONT size=2 face="serif">6,136,666</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000">
<FONT size=2 face="serif">$0.59</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000">
<FONT size=2 face="serif">4.9</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000"><FONT size=2 face="serif">$-</FONT> </TD>
<TD>&nbsp;</TD>
  </TR>

<TR>
<TD colspan=13>&nbsp;</TD>
</TR>
<TR>
<TD colspan=13>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>
<B><FONT size=2 face="serif">Number of</FONT></B></TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD align=center nowrap>
<B><FONT size=2 face="serif">Number of</FONT></B></TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>
<B><FONT size=2 face="serif">Weighted</FONT></B></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000">
 &nbsp;<B><FONT size=2 face="serif">Shares</FONT></B></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000"><B><FONT size=2 face="serif">Shares</FONT></B> </TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000">
<B><FONT size=2 face="serif">Shares</FONT></B></TD>
<TD align=center nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=center nowrap STYLE="border-bottom:1px solid #000000">
<B><FONT size=2 face="serif">Average</FONT></B></TD>
    <TD align=right nowrap>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Options outstanding at:</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">January 1, 2005</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">55,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">55,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">$0.14</FONT></TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Granted</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">260,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">6,985,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">7,245,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap><FONT size=2 face="serif">0.35</FONT> </TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Vesting</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(18,333</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">18,333</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Cancelled, forfeited, or expired</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap style="border-bottom:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">December 31, 2005</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">296,667</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">7,003,333</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">7,300,000</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap><FONT size=2 face="serif">0.35</FONT> </TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Granted</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Vesting</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(101,666</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">101,666</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Cancelled, forfeited, or expired</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">(1,163,334</FONT></TD>
<TD align=left nowrap><FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000">
<FONT size=2 face="serif">(1,163,334</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">0.25</FONT> </TD>
<TD>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">December 31, 2006</FONT></TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000">
<FONT size=2 face="serif">195,001</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000">
<FONT size=2 face="serif">5,941,665</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000">
<FONT size=2 face="serif">6,136,666</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000">
<FONT size=2 face="serif">$0.37</FONT></TD>
<TD>&nbsp;</TD>
  </TR>
</TABLE>

<P align="left">
<FONT size=2 face="serif">There was no expense related to employee stock options in 2006 since no options were both granted and became vested.</FONT></P>


<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-32</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005</FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">7. UNSECURED CONVERTIBLE DEBENTURE NOTES </FONT></B></P>
<P align="left">
<FONT size=2 face="serif">During the year ended December 31, 2006, the Company raised &#36;1,958,500 by issuing one year unsecured convertible debentures (&#147;Debenture&#148;) with interest at 18% per annum.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The Debenture holders have the right to convert their notes into fully paid non-assessable shares of common stock and Common Stock Purchase Warrants at the conversion price of &#36;0.40 The Common Stock Purchase warrants are
convertible into the shares of the company&#146;s common stock at the exercise price of &#36;0.60 for a period of one (1) year and &#36;0.80 per share for a period of two (2) years.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The total interest is payable solely by the issuance of shares of the Company&#146;s common stock. The number of shares to be issued in payment of the interest is to be calculated based upon average closing price for the
Company&#146;s common stock on NASD OTCBB for the five (5) consecutive trading days preceding the issuance date. The Company issued 1,011,373 shares of restricted common stock to pay the total interest of &#36;352,530, of which &#36;67,406 is
interest expense to December 31 2006 and &#36;285,124 is included in prepaid expenses and other assets on the balance sheet. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">8. COMMITMENTS AND CONTINGENCIES </FONT></B><FONT size=2 face="serif"> </FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Operating Leases</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">The Company occupies buildings and retail space under operating lease agreements expiring on various dates through January 2012 with monthly payments ranging from approximately &#36;1,400 to &#36;2,500. Certain leases include
future rental escalations and renewal options </FONT></P>
<P align="left">
<FONT size=2 face="serif">As of December 31, 2006, future minimum payments under operating leases approximated the following: </FONT></P>
<TABLE width="30%" border=0 align="center" cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD width=95% align=left nowrap>
<FONT size=2 face="serif">2007</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>
    <div align="right"><FONT size=2 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">181,469</FONT>
  </TD>
  <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=95% align=left nowrap>
<FONT size=2 face="serif">2008</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">162,360</FONT>
  </TD>
  <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=95% align=left nowrap>
<FONT size=2 face="serif">2009</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">75,354</FONT>
  </TD>
  <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=95% align=left nowrap>
<FONT size=2 face="serif">2010</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">30,902</FONT>
  </TD>
  <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=95% align=left nowrap>
<FONT size=2 face="serif">2011</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">30,902</FONT>
  </TD>
  <TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=95% align=left nowrap>
<FONT size=2 face="serif">Thereafter</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2,578</FONT>
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=95% align=left nowrap>
<FONT size=2 face="serif">Total</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
    <div align="right"><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;483,565</FONT>
  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">&nbsp;&nbsp;</TD>
</TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">Total rent expense for the years ended December 31, 2006 and 2005 was approximately &#36;202,000 and &#36;141,000, respectively.</FONT></P>

<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-33</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif"> 8. COMMITMENTS AND CONTINGENCIES (Continued)</FONT></B></P>
<P align="left">
<B><I><FONT size=2 face="serif">Legal Matters</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">Providing pharmacy services entails an inherent risk of medical and professional malpractice liability. The Company may be named as a defendant in such lawsuits and become subject to the attendant risk of substantial damage
awards. The Company believes it possesses adequate professional and medical malpractice liability insurance coverage. There can be no assurance that the Company will not be sued, that any such lawsuit will not exceed our insurance coverage, or that
it will be able to maintain such coverage at acceptable costs and on favorable terms. </FONT></P>
<P align="left">
<FONT size=2 face="serif">From time to time, the Company may be involved in various claims, lawsuits, dispute with third parties, actions involving allegations of discrimination or breach of contract actions incidental to the normal operations of the
business. The Company is not a party to any pending litigation which it believes could have a material adverse effect on the Company&#146;s financial position or results of operations. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">9. LOSS PER COMMON SHARE</FONT></B></P>
<P align="left">
<FONT size=2 face="serif">The following is a reconciliation of the numerators and denominators of the basic and diluted loss per common share computations for the years ended December 31, 2006 and 2005: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD width=90% align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD colspan="3" align=left nowrap style="border-bottom:1px solid #000000;">
    <div align="center"></div>
    <div align="center"><B><FONT size=2 face="serif">2006</FONT></B>
      </div>  </TD>
  <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </TD>
  <TD colspan="3" align=left nowrap style="border-bottom:1px solid #000000;">
    <div align="center"><B><FONT size=2 face="serif">2005</FONT></B>
    </div></TD>
  </TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Numerator for basic and diluted</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">loss per common share:</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Net loss to common stockholders</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
    <div align="right"><FONT size=2 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(4,501,839</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
    <div align="right"><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(4,797,092</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Denominator for basic and diluted</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">loss per common share:</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Weighted average number of shares outstanding</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">52,013,352</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">40.961.989</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Basic and diluted loss per common share</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
    <div align="right"><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.09</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
    <div align="right"><FONT size=2 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.12</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>
  </TD>
</TR>
</TABLE>

<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-34</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>

<P align="left">
<B><FONT size=2 face="serif">9. LOSS PER COMMON SHARE (continued) </FONT></B></P>
<P align="left">
<FONT size=2 face="serif">Due to their anti-dilutive effect, the following potential common shares have been excluded from the computation of diluted earnings per share: </FONT></P>
<table width="100%" border=0 cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;</td>
    <td width=90% align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=center nowrap><u><FONT size=2 face="serif">2006</font></u> </td>
    <td align=center nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=center nowrap><u><FONT size=2 face="serif">2005</font></u> </td>
    <td align=center nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=center nowrap>&nbsp;</td>
    <td align=center nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=center nowrap>&nbsp;</td>
    <td align=center nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td width=90% align=left nowrap><FONT size=2 face="serif">Warrants</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><FONT size=2 face="serif">10,576,709</font> </td>
    <td align=right nowrap>&nbsp;</td>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </td>
    <td align=right nowrap><FONT size=2 face="serif">7,480,875</font> </td>
    <td align=right nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;</td>
    <td width=90% align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=right nowrap>&nbsp;</td>
    <td align=right nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=right nowrap>&nbsp;</td>
    <td align=right nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;</td>
    <td width=90% align=left nowrap><FONT size=2 face="serif">Stock options</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,136,666</font> </td>
    <td align=right nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=right nowrap><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,091,667</font> </td>
    <td align=right nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;</td>
    <td width=90% align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=right nowrap>&nbsp;</td>
    <td align=right nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=right nowrap>&nbsp;</td>
    <td align=right nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;</td>
    <td align=left nowrap><FONT size=2 face="serif">Convertible notes</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><FONT size=2 face="serif">9,792,500</font> </td>
    <td align=right nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=right nowrap><FONT size=2 face="serif">-</font></td>
    <td align=right nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;</td>
    <td width=90% align=left nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td>&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;</td>
    <td width=90% align=left nowrap><FONT size=2 face="serif">Total</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">26,505,874</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;">&nbsp;&nbsp;</td>
    <td>&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">13,304,792</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;">&nbsp;&nbsp;</td>
  </tr>
</table>
<p><B><FONT size=2 face="serif">10. RESTRUCTURING COSTS</FONT></B></p>
<p><FONT size=2 face="serif">Because the Company&#146;s revenue and operating margin
    had not grown in line with management&#146;s original expectations, the Company
    adopted a non-discretionary restructuring plan that resulted in a workforce
    reduction and other cost reductions (collectively, the &#147;Restructuring&#148;)
    intended to strengthen the Company&#146;s future operating performance. The
    Company implemented the Restructuring during the fourth quarter of 2004 through
    the first quarter of 2005. The Company&#146;s total expense related to this
    Restructuring which was recognized in 2005 was approximately $194,000. No
    restructuring costs have been incurred since in 2006.</font></p>
<p><FONT size=2 face="serif">The Restructuring charge recognized in the first quarter
    of 2005 was comprised primarily of fixed asset write-offs from the termination
    of construction work for the regional office in Fort Woth, Texas and the
    pharmacy in Santa Monica, California. The Company accounts for the costs
    associated with exiting an activity, including costs associated with a reduction
    of its workforce, in accordance with SFAS No. 146. </font> </p>
<P align="left">
<B><FONT size=2 face="serif">11. CHANGES IN THE MANAGEMENT </FONT></B></P>
<P align="left">
<FONT size=2 face="serif">On May 1, 2006, John Eric Mutter resigned as the Company&#146;s Chief Operating Officer and the Company&#146;s board of directors appointed Mr. Mutter as the Company&#146;s Chief Technology Officer. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On May 1, 2006, the Company&#146;s board of directors appointed Haresh Sheth as the Company&#146;s Chief Operating Officer.</FONT></P>
<P align="left">
<FONT size=2 face="serif">On December 15, 2006, Robert Delvecchio resigned as the Chief Financial Officer. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On December 15, 2006, Haresh Sheth resigned as the Chief Operating Officer and the Company&#146;s board of directors appointed Mr. Sheth as the Company&#146;s Chief Financial Officer. </FONT><B><FONT size=2 face="serif"> </FONT></B></P>

<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-35</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">12. INCOME TAXES</FONT></B></P>
<P align="left">
<FONT size=2 face="serif">A reconciliation of income taxes computed at the U.S. Federal Statutory income tax rate to the provision for income tax is as follows: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD width=90% align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
    <div align="center"><B><FONT size=2 face="serif">2006</FONT></B>
    </div></TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
    <div align="center"><B><FONT size=2 face="serif">2005</FONT></B>
    </div></TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">U.S. Federal Statutory tax at 34%</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT>
  </TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,032,408</FONT>
  </TD>
  <TD align=left nowrap>
<FONT size=2 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </TD>
  <TD align=right nowrap>
    <div align="left"><FONT size=2 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1,725,000</FONT>
  </TD>
  <TD align=left nowrap>
<FONT size=2 face="serif">)</FONT>
  </TD>
</TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">State Taxes, net of federal benefit</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT>
  </TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">(888,072</FONT>
  </TD>
  <TD align=left nowrap>
<FONT size=2 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap>
    <div align="left"><FONT size=2 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">(305,000</FONT>
  </TD>
  <TD align=left nowrap>
<FONT size=2 face="serif">)</FONT>
  </TD>
</TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Valuation Allowance</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">&#36;</FONT>
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(5,920,480</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
    <div align="left"><FONT size=2 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2,035,000</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Provision for income taxes</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">&#36;</FONT>

  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">-</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
    <div align="left"><FONT size=2 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">5,000</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
</TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">Due to losses incurred for the years ended December 31, 2006 and 2005, there is no current provision for income taxes. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Deferred tax assets consist of the following at December 31, 2006 and 2005: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
  <TD width=90% align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD colspan="3" align=left nowrap>
    <div align="center"></div>
    <div align="center"><U><FONT size=2 face="serif">2006</FONT></U>
      </div>  </TD>
  <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  </TD>
  <TD colspan="3" align=left nowrap>
    <div align="center"></div>
    <div align="center"><U><FONT size=2 face="serif">2005</FONT></U>
      </div>  </TD>
  </TR>
<TR>
  <TD colspan=10>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Net operating loss carried forward</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>
    <div align="right"><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#36;</FONT>
    </div></TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">5,846,086</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>
    <div align="right"><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#36;</FONT>
    </div></TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">4,045,350</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Depreciable assets</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">3,355</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">10,472</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Accounts receivable</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">71,039</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">-</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD width=90% align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">5,920,480</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
  <TD align=right nowrap>
<FONT size=2 face="serif">4,055,822</FONT>
  </TD>
  <TD align=left nowrap>&nbsp;

  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Valuation allowance</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5,920,480</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;

  </TD>
  <TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4,055,822</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
  </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD width=90% align=left nowrap>
<FONT size=2 face="serif">Deferred tax assets</FONT>
  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
    <div align="right"><FONT size=2 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">-</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
  <TD>&nbsp;
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">
    <div align="right"><FONT size=2 face="serif">&#36;</FONT>
    </div></TD>
  <TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">-</FONT>
  </TD>
  <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;

  </TD>
</TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">Based upon the net operating losses incurred since inception, management has determined that it is more likely than not that the deferred tax assets as of December 31, 2006 will not be recognized. Consequently, the Company has
established a valuation allowance against the entire deferred tax assets. </FONT></P>
<P align="left">
<FONT size=2 face="serif">As of December 31, 2006, the Company has federal and state net operating losses of approximately &#36;14,600,000 that expire from 2022 to 2026. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The utilization of some or all of the Company&#146;s net operating losses may be severely restricted now or in the future by a significant change in ownership as defined under the provisions of Section 382 of the Internal Revenue
Code of 1986, as amended. In addition, utilization of the Company&#146;s California net operating losses for the years beginning in 2002 and 2003 has been suspended under state law. </FONT></P>

<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-36</FONT></P>
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<P align="left" style="page-break-before:always"></P><PAGE>


<P align="left"> </P>
<P align="center"><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
  <FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
  <FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
  <FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>
<P align="left"> </P>
<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">13. SUBSEQUENT EVENTS</FONT></B><FONT size=2 face="serif"> </FONT><BR>
<BR>
<B><I><FONT size=2 face="serif">Unsecured Convertible Debenture Note</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">Subsequent to the reporting period, the Company raised &#36;500,000 by issuing a one-year unsecured convertible debenture (&#147;Debenture&#148;) carrying an interest rate of 18% per annum. The Debenture provides that all the
interest is payable solely in the shares of the Company&#146;s common stock on the issuance date. The number of shares to be issued as interest is to be calculated based upon average closing price for our common stock on NASD OTCBB for the five (5)
consecutive trading days preceding the issuance date.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company issued 254,614 shares of common stock as payment of interest on the Debenture. The Debenture holders have the right to convert their Debenture into fully paid non-assessable shares of common stock at &#36;0.40 and
Common Stock Purchase Warrants to purchase one (1) share of restricted common stock at an exercise price of &#36;0.60 exercisable for 12 months after the conversion date and to purchase one (1) share of restricted common stock at an exercise price
of &#36;0.80 exercisable for 24 months.</FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">Equity Transactions</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">In February 2007, the Company granted as a performance base bonus to an officer of the Company options to purchase 750,000 shares of its common stock vesting over a two year period of time from the date of issuance and exercisable
at the exercise price of &#36;0.60 per share.</FONT></P>
<P align="left">
<FONT size=2 face="serif">In February 2007, the Company issued 300,000 shares of its common stock to outside members of its board of directors in consideration for services rendered as a member of the board. These shares were valued at &#36;114,000
(estimated to be the fair value based on the trading price on the issuance date).</FONT></P>
<P align="left">
<FONT size=2 face="serif">In February 2007, the Company issued 100,000 shares of restricted common stock, valued at &#36;34,000 (estimated to be the fair value based on the trading price on the issuance date) granted warrants to purchase 100,000 shares of
its common stock, exercisable at &#36;0.60 per share until December 31, 2009, and granted warrants to purchase 100,000 shares of its common stock, exercisable at &#36;0.80 per share until December 31, 2009 to a consultant in exchange for services
rendered.</FONT></P>
<P align="left">
<FONT size=2 face="serif">In January 2007, the Company issued 75,000 shares of restricted common stock to one consultant for services rendered, valued at &#36;28,500 (estimated to be the fair value based on the trading price on the issuance date).
</FONT><B><I><FONT size=2 face="serif"> </FONT></I></B></P>

<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-37</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>



<P align="center">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT><BR>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC. </FONT><BR>
<FONT size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</FONT><BR>
<FONT size=2 face="serif">DECEMBER 31, 2006 and December 31, 2005 </FONT></P>


<div STYLE="border-bottom:2px solid #000000">&nbsp;</div>
<P align="left">
<B><FONT size=2 face="serif">13. SUBSEQUENT EVENTS (continued)</FONT></B></P>
<P align="left">
<B><I><FONT size=2 face="serif">Opening of a New Store</FONT></I></B></P>
<P align="left">
<FONT size=2 face="serif">The Company opened their new store in Gresham, Oregon, a suburb of Portland on January 26, 2007. This store is owned by Assured Pharmacy Gresham, Inc., a wholly owned subsidiary of the Company.</FONT></P>


<P align="left"><B><FONT size=2 face="serif">14. RESTATEMENT AND RECLASSIFICATION OF CERTAIN EQUITY ACCOUNTS</FONT></B></P>
<P align="left"><FONT size=2 face="serif">As more fully explained in Note 5,
    the Company executed two debt-extinguishment transactions in calendar 2005.
    In connection with these transactions, the former  credits returned a total
    of approximately 10.9 million shares of common stock to the Company&#146;s
    treasury. As required by GAAP, the Company&#146;s consolidated statement of
    operations for the year ended  December 31, 2005 reported gain/loss on such
    transactions. This gain/loss was determined in part based on measuring the
    aforementioned shares of treasury stock at par value; thus, the Company&#146;s
    accounting  does not attribute any gain or loss (to any material extent)
to the treasury stock elements of the transactions.</FONT></P>

<P align="left"><FONT size=2 face="serif">Upon further review, in January 2008,
    management determined that GAAP which governs nonmonetary transactions requires
    the treasury stock described above to be accounted  for at estimated fair
    value. As a result, the accompanying December 31, 2006 consolidated balance
     sheet has been restated to increase both treasury stock and additional paid-in
    capital by approximately  $2,849,000. Since GAAP prohibits the recognition
    of any &#147;gain&#148; on treasury stock transactions, this adjustment did
    not affect the Company&#146;s December 31, 2005 consolidated statement of
    operations.  In addition, because the aforementioned retroactive adjustment
    only affected equity accounts, the net impact on the Company&#146;s previously
    reported total stockholders&#146; deficit was nil.</FONT></P>

<P align="left">
<FONT size=2 face="serif">In addition, $553,587 of deferred compensation that was outstanding at December 31, 2005
was reclassified into the applicable equity accounts to conform to the 2006 presentation.</FONT></P>



<div STYLE="border-bottom:2px solid #000000;">&nbsp;</div>
<P align="center"><FONT size=2 face="serif">F-38</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<br>


<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td style="border-bottom:2px solid #000000;"><div align="center"><B><FONT size=2 face="serif">ASSURED PHARMACY, INC AND SUBSIDIARIES (formerly
            known as eRxsys, Inc.)</FONT></B><BR>
            <B><FONT size=2 face="serif">CONDENSED CONSOLIDATED BALANCE SHEET</FONT></B><BR>
            <B><FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT></B><br>
            <B><FONT size=2 face="serif">(UNAUDITED)</FONT></B></div></td>
  </tr>
</table>
<br>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR valign="bottom">
<TD width="84%" align=center><font size="2">&nbsp;</font></TD>
    <TD width="2%" align=center><font size="2">&nbsp;</font></TD>
    <TD width="2%" align=center style="border-bottom:0px solid #000000;"><div align="right"><font size="2"></font></div></TD>
    <TD width="10%" align=center style="border-bottom:1px solid #000000;"><font size="2"><B><FONT size=2 face="serif">As Restated</FONT></B></font></TD>
    <TD width="2%" align=center style="border-bottom:0px solid #000000;"><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD width="84%" align=left><div align="center"><font size="2"><B><FONT size=2 face="serif">ASSETS</FONT></B></font></div></TD>
  <TD><font size="2">&nbsp;</font></TD>
  <TD width="2%" align=left><div align="right"><font size="2"></font></div></TD>
  <TD width="10%" align=left><font size="2">&nbsp;</font></TD>
  <TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD width="84%" align=left><font size="2">&nbsp;</font></TD>
  <TD><font size="2">&nbsp;</font></TD>
  <TD width="2%" align=left><div align="right"><font size="2"></font></div></TD>
  <TD width="10%" align=left><font size="2">&nbsp;</font></TD>
  <TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left bgcolor="#E5FFFF">
<B><FONT size=2 face="serif">Current Assets</FONT></B></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=left><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Cash</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>
      <FONT size=2 face="serif">&#36;</FONT></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">267,584</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accounts receivable, net</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">1,781,684</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Inventories</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">901,548</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Prepaid expenses and other assets</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">
  <font size="2">&nbsp;</font></TD>
<TD width="10%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">199,792</FONT></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
</TR>



<TR valign="bottom">
<TD width="84%" align=left><font size="2">&nbsp;</font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">3,150,608</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left>
<B><FONT size=2 face="serif">Long Term Assets</FONT></B></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=left><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accounts receivable - non-current, net</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">50,427</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD align=left bgcolor="#E5FFFF">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
<B><FONT size=2 face="serif">Property and Equipment, net</FONT></B></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">292,338</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2"><B><FONT size=2 face="serif">Intangible  asset,  Net</FONT></B>  </font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">70,072</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
<B><FONT size=2 face="serif">Goodwill</FONT></B></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">

  <font size="2">&nbsp;</font></TD>
<TD width="10%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">607,816</FONT></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left><font size="2">&nbsp;</font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;">
      <div align="left"><FONT size=2 face="serif">&#36;</FONT>      </div></TD>
<TD width="10%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">4,171,261</FONT></TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font></TD>
</TR>
<TR>
<TD colspan=5><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD align=center>
<B><FONT size=2 face="serif">LIABILITIES AND STOCKHOLDERS&#146; DEFICIT</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
<B><FONT size=2 face="serif">Current Liabilities</FONT></B></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=left><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accounts payable</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>
      <div align="left"><FONT size=2 face="serif">&#36;</FONT>      </div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">2,006,846</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accrued liabilities</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">296,028</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Unsecured convertible notes payable</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">2,883,500</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Notes payable to related parties and stockholders</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2"></font>&nbsp;</div></TD>
<TD width="10%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,059,098</FONT></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left><font size="2">&nbsp;</font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">6,245,472</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left>
<B><FONT size=2 face="serif">Notes Payable to Related Party and Stockholders, net of current portion</FONT></B></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">313,618</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left>
<B><FONT size=2 face="serif">Minority Interest</FONT></B></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">675,051</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left>
<B><FONT size=2 face="serif">Commitments and Contingencies</FONT></B></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=left><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="84%" align=left>
<B><FONT size=2 face="serif">Stockholders&#146; Deficit</FONT></B></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=left><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Preferred
      shares; par value &#36;0.001 per share; authorized 5,000,000 shares; no preferred shares issued or outstanding</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=center>
<FONT size=2 face="serif">-</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Common
      shares; par value &#36;0.001 per share; 150,000,000 shares authorized, 64,796,743 common shares issued and<br>
&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;outstanding</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right>
<FONT size=2 face="serif">64,796</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Treasury stock at cost, 10,858,658 shares (as restated)</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>

<TD width="10%" align=right><FONT size=2 face="serif">(2,849,366</FONT></TD>
<TD width="2%" align=left><FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Additional paid-in capital, net (as restated)</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left>

  <div align="right"><font size="2"></font></div></TD>
<TD width="10%" align=right><FONT size=2 face="serif">21,689,597</FONT> </TD>
<TD width="2%" align=left><font size="2">&nbsp;</font></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accumulated deficit</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2">&nbsp;</font></div></TD>
<TD width="10%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(21,967,907</FONT></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Stockholders&#146; deficit</FONT></font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2">&nbsp;</font></div></TD>
<TD width="10%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(3,062,880</FONT></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
  <TD align=left>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
  <TD align=right>&nbsp;</TD>
  <TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="84%" align=left><font size="2">&nbsp;</font></TD>
<TD><font size="2">&nbsp;</font></TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;">
      <div align="left"><FONT size=2 face="serif">&#36;</FONT>      </div></TD>
<TD width="10%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">4,171,261</FONT></TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font></TD>
</TR>
</TABLE>


<p>&nbsp;</p>
<p>&nbsp;</p>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=3%></TD>
     <TD width=95%></TD></TR>
<TR valign="bottom">
<TD align=right style="border-top:2px solid #000000; padding-top:2pt">
      <div align="left"><FONT size=1 face="serif">&nbsp;</FONT></div></TD>
<TD width="95%" align=left style="border-top:2px solid #000000; padding-top:2pt">
      <div align="right"><FONT size=1 face="serif">The accompanying notes are an integral part of the consolidated financial statements.&nbsp;&nbsp;</FONT>
      </div></TD>
</TR>
</TABLE>
<BR>

<P align="center"><FONT size=2 face="serif">F-39</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<br>

<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td style="border-bottom:2px solid #000000;"><div align="center"><B><FONT size=2 face="serif">ASSURED PHARMACY, INC AND SUBSIDIARIES (formerly
            known as eRxsys, Inc.)</FONT></B><BR>
            <B><FONT size=2 face="serif"> CONSOLIDATED STATEMENTS OF OPERATIONS</FONT></B><BR>
            <B><FONT size=2 face="serif">(UNAUDITED)</FONT></B></div></td>
  </tr>
</table>
<br>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=41%></TD>
     <TD width=2%></TD>
     <TD width=2%></TD>
     <TD width=8%></TD>
     <TD width=2%></TD>
     <TD width=3%></TD>
     <TD width=2%></TD>
     <TD width=8%></TD>
     <TD width=2%></TD>
     <TD width=3%></TD>
     <TD width=2%></TD>
     <TD width=8%></TD>
     <TD width=2%></TD>
     <TD width=3%></TD>
     <TD width=2%></TD>
     <TD width=8%></TD>
     <TD width=2%></TD></TR>
<TR valign="bottom">
<TD width="41%" align=left><font size="2">&nbsp;</font>

</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD colspan="7" align=left style="border-bottom:1px solid #000000;"><div align="center"><font size="2"></font>
          <B><FONT size=2 face="serif">Three Months Ended September 30</FONT></B>
    </div></TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD colspan="7" align=left style="border-bottom:1px solid #000000;"><div align="center"><font size="2"></font>
          <B><FONT size=2 face="serif">Nine Months Ended September 30</FONT></B>
    </div></TD>
  </TR>
<TR valign="bottom">
<TD width="41%" align=left><font size="2">&nbsp;</font>

</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD colspan="3" align=left style="border-bottom:1px solid #000000;"><div align="center"><font size="2"></font>
          <B><FONT size=2 face="serif">2007</FONT></B>
    </div></TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD colspan="3" align=left style="border-bottom:1px solid #000000;"><div align="center"><font size="2"></font>
          <B><FONT size=2 face="serif">2006</FONT></B>
    </div></TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD colspan="3" align=left style="border-bottom:1px solid #000000;"><div align="center"><font size="2"><B><FONT size=2 face="serif">2007</FONT></B>
    </font></div></TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD colspan="3" align=left style="border-bottom:1px solid #000000;"><div align="center"><font size="2"></font>
          <B><FONT size=2 face="serif">2006</FONT></B>
    </div></TD>
  </TR>
<TR>
<TD colspan=17><div align="center"><font size="2"></font>

</div></TD>
</TR>
<TR>
<TD colspan=17><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="41%" align=left>
<B><FONT size=2 face="serif">SALES</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">3,676,798</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left>
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">2,310,248</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">9,716,372</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left>
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">5,720,869</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=17><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="41%" align=left>
<B><FONT size=2 face="serif">COST OF SALES</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2,826,026</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,719,320</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">7,287,141</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">4,310,959</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=17><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="41%" align=left>
<B><FONT size=2 face="serif">GROSS PROFIT</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">850,772</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">590,928</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2,429,231</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,409,910</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=17><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="41%" align=left>
<B><FONT size=2 face="serif">OPERATING EXPENSES</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="41%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Salaries and related expenses</FONT></font>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">654,326</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">500,382</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">1,948,442</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">1,580,847</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="41%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Consulting and other compensation</FONT></font>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">224,650</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">384,218</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">672,285</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">1,210,918</FONT>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="41%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Selling, general and administrative</FONT></font>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">526,742</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">542,363</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,569,023</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,508,646</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="41%" align=center>
<B><FONT size=2 face="serif">TOTAL OPERATING EXPENSES</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,405,718</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,426,963</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">4,189,750</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">4,300,411</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=17><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="41%" align=left>
<B><FONT size=2 face="serif">LOSS FROM OPERATIONS</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(554,946</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(836,035</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(1,760,519</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(2,890,501</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR>
<TD colspan=17><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="41%" align=left>
<B><FONT size=2 face="serif">OTHER EXPENSES</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="41%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Interest expense</FONT></font>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(162,496</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(35,738</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(455,009</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(113,726</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="41%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Other expense</FONT></font>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(111</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(71,404</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(111</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(95,670</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD width="41%" align=center>
<B><FONT size=2 face="serif">TOTAL OTHER EXPENSES</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(162,607</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(107,142</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(455,120</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(209,396</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR>
<TD colspan=17><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="41%" align=left>
<B><FONT size=2 face="serif">LOSS BEFORE MINORITY INTEREST</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(717,553</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(943,177</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(2,215,639</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(3,099,897</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD width="41%" align=left>
<B><FONT size=2 face="serif">MINORITY INTEREST</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(4,632</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(37,908</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(16,892</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(45,086</FONT>
</TD>
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR>
<TD colspan=17><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="41%" align=left>
<B><FONT size=2 face="serif">NET LOSS</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(722,185</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(981,085</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(2,232,531</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(3,144,983</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR>
<TD colspan=17><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="41%" align=left>
<B><FONT size=2 face="serif">Basic and diluted loss per common share</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.01</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.02</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.04</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT>
</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.06</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR>
<TD colspan=17><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="41%" align=left bgcolor="#E5FFFF">
<B><FONT size=2 face="serif">Basic and diluted weighted average number of common</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="41%" align=right>
      <div align="left"><B><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares outstanding</FONT></B>
      </div></TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">54,510,539</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">51,605,167</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">54,541,131</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="3%"><font size="2">&nbsp;</font>
</TD>
<TD align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">48,702,702</FONT>
</TD>
<TD align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
</TABLE>
<p>&nbsp;</p>
<p>&nbsp;</p>


<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=100% colspan="2"></TD></TR>
<TR valign="bottom">
<TD align=left style="border-top:2px solid #000000; padding-top:2pt">
      <div align="left"><FONT size=1 face="serif">The accompanying notes are an integral part of the consolidated financial statements.&nbsp;&nbsp;</FONT>
    </div></TD>
    <TD align=right style="border-top:2px solid #000000; padding-top:2pt">
    <div align="right"><FONT size=1 face="serif">&nbsp;</FONT></div></TD>
</TR>
</TABLE>
<BR>

<P align="center"><FONT size=2 face="serif">F-40</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<br>

<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td style="border-bottom:2px solid #000000;"><div align="center"><B><FONT size=2 face="serif">ASSURED PHARMACY, INC AND SUBSIDIARIES (formerly
            known as eRxsys, Inc.)</FONT></B><BR>
            <B><FONT size=2 face="serif">CONSOLIDATED STATEMENTS OF CASH FLOWS</FONT></B><BR>
            <B><FONT size=2 face="serif">(UNAUDITED)</FONT></B></div></td>
  </tr>
</table>
<br>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR valign="bottom">
<TD width="65%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%"><font size="2">&nbsp;</font>
</TD>
<TD colspan="7" align=left style="border-bottom:1px solid #000000;"><div align="right"><font size="2"></font>
        <B><FONT size=2 face="serif">NINE MONTHS ENDED SEPTEMBER 30</FONT></B>
    </div></TD>
  </TR>
<TR valign="bottom">
<TD width="65%" align=left><font size="2">&nbsp;</font>

</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD colspan="3" align=left style="border-bottom:1px solid #000000;"><div align="right"><font size="2"></font>
        <B><FONT size=2 face="serif">2007</FONT></B>
    </div></TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD align=center colspan=3 style="border-bottom:1px solid #000000;">
      <div align="center"><font size="2"><B><FONT size=2 face="serif">2006</FONT></B>
      </font></div></TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<B><FONT size=2 face="serif">CASH FLOWS FROM OPERATING ACTIVITIES:</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Net loss</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left>
      <div align="right"><FONT size=2 face="serif">&#36;</FONT>
    </div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(2,232,531</FONT>
</TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>
      <div align="right"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="8%" align=right bgcolor="#E5FFFF"><FONT size=2 face="serif">(3,144,983</FONT></TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Adjustments to reconcile net loss to net cash used in operating activities:</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Depreciation and amortization of property and equipment</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">131,817</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">87,083</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Amortization of debt discount</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">349,895</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Amortization of deferred consulting fees</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">362,622</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">891,364</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Issuance of common stock for services</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right><FONT size=2 face="serif">-</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">7,000</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Minority interest in net income /(loss) of joint venture</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">16,892</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">57,087</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Issuance of common stock and options for director services</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">120,000</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Return of common stock due to termination of contract</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(70,000</FONT>
</TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Provision for doubtful accounts</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">45,000</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<I><FONT size=2 face="serif">Changes in operating assets and liabilities:</FONT></I>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accounts receivable</FONT></font>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(855,772</FONT>
</TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right><FONT size=2 face="serif">(650,233</FONT></TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Inventories</FONT></font>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(486,634</FONT>
</TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right><FONT size=2 face="serif">(134,464</FONT></TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Prepaid expenses and other current assets</FONT></font>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(28,621</FONT>
</TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right><FONT size=2 face="serif">(126,043</FONT></TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accounts payable and accrued liabilities</FONT></font>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,234,075</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">251,425</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<B><FONT size=2 face="serif">Net cash used in operating activities</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">(1,458,257</FONT></B>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">)</FONT></B>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">(2,716,764</FONT></B></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">)</FONT></B>
</TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">CASH FLOWS FROM INVESTING ACTIVITIES:</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Purchases of property and equipment</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(51,286</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(79,751</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Advance on purchase of company</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Purchase of minority interest</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<B><FONT size=2 face="serif">Net cash used in investing activities</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">(51,286</FONT></B>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">)</FONT></B>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">(79,751</FONT></B>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">)</FONT></B>
</TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">CASH FLOWS FROM FINANCING ACTIVITIES:</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Proceeds from line of credit</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Proceeds from the issuance of notes payable</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">100,000</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Proceeds from the issuance of notes payable to related parties and shareholders</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">468,000</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">615,000</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Principal repayments on line of credit</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right><FONT size=2 face="serif">(200,000</FONT></TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Principal repayments on notes payable to related parties and shareholders</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(182,277</FONT>
</TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right><FONT size=2 face="serif">(136,906</FONT></TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Proceeds from issuance of common stock</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right><FONT size=2 face="serif">1,775,292</FONT></TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Proceeds from issuance of convertible debentures</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">925,000</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">800,000</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<B><FONT size=2 face="serif">Net cash provided by financing activities</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">1,310,723</FONT></B>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">2,853,386</FONT></B></TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<B><FONT size=2 face="serif">Net decrease in cash</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right>
<B><FONT size=2 face="serif">(198,820</FONT></B>
</TD>
<TD width="2%" align=left>
<B><FONT size=2 face="serif">)</FONT></B>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right>
<B><FONT size=2 face="serif">56,871</FONT></B>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<B><FONT size=2 face="serif">Cash at beginning of period</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">466,404</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="5%" style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:1px solid #000000;">

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=right style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">356,641</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:1px solid #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<B><FONT size=2 face="serif">Cash at end of period</FONT></B>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;">
      <div align="right"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">267,584</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="5%" style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:3px double #000000;"><div align="right"><FONT size=2 face="serif">&#36;</FONT>

</div></TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">413,512</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Supplemental disclosure of cash flow information-</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Cash paid during the period for:</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Interest</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;">
      <div align="right"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="8%" align=right style="border-bottom:double #000000;">
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="5%" style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:3px double #000000;"><div align="right"><FONT size=2 face="serif">&#36;</FONT>

</div></TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">104,683</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Income taxes</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;">
      <div align="right"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">830</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
<TD width="5%" style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right style="border-bottom:3px double #000000;"><div align="right"><FONT size=2 face="serif">&#36;</FONT>

</div></TD>
<TD width="8%" align=right style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">1,630</FONT>
</TD>
<TD width="2%" align=left style="border-bottom:3px double #000000;"><font size="2">&nbsp;</font>

</TD>
</TR>
<TR>
<TD colspan=9><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">NON-CASH INVESTING AND FINANCING ACTIVITIES :</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left><div align="right"><font size="2"></font>

</div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right>

  <div align="right"><font size="2"></font></div></TD>
<TD width="8%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Conversion of notes payable to common stock</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left>
      <div align="right"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right><div align="right"><FONT size=2 face="serif">&#36;</FONT>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">425,000</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Conversion of accrued interest in to notes payable</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left>
      <div align="right"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right><div align="right"><FONT size=2 face="serif">&#36;</FONT>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">8,135</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Issuance of common stock for services rendered</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left>
      <div align="right"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">155,000</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right><div align="right"><FONT size=2 face="serif">&#36;</FONT>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">739,500</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom">
<TD width="65%" align=left>
<FONT size=2 face="serif">Issuance of common stock in lieu of debenture note interest</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left>
      <div align="right"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">135,000</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right><div align="right"><FONT size=2 face="serif">&#36;</FONT>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD width="65%" align=left>
<FONT size=2 face="serif">Return of common stock due to termination of contract</FONT>
</TD>
<TD><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=left>
      <div align="right"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">(70,000</FONT>
</TD>
<TD width="2%" align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD width="5%"><font size="2">&nbsp;</font>
</TD>
<TD width="2%" align=right><div align="right"><FONT size=2 face="serif">&#36;</FONT>

</div></TD>
<TD width="8%" align=right>
<FONT size=2 face="serif">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>
</TD>
<TD width="2%" align=left><font size="2">&nbsp;</font>

</TD>
</TR>
</TABLE>
<p>&nbsp;</p>
<p>&nbsp;</p>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=3%></TD>
     <TD width=95%></TD></TR>
<TR valign="bottom">
<TD align=right style="border-top:2px solid #000000; padding-top:2pt">
      <div align="left"><FONT size=1 face="serif">&nbsp;</FONT></div></TD>
<TD width="95%" align=left style="border-top:2px solid #000000; padding-top:2pt">
      <div align="right"><FONT size=1 face="serif">The accompanying notes are an integral part of the consolidated financial statements.&nbsp;&nbsp;</FONT>
      </div></TD>
</TR>
</TABLE>
<BR>

<P align="center"><FONT size=2 face="serif">F-41</FONT></P>
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<br>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">A. Organization:</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Assured Pharmacy, Inc. (&#147;Assured Pharmacy&#148; or
the &#147;Company&#148;) was organized as a Nevada corporation on October 22, 1999 under
the name Surforama.com, Inc. and  previously operated under the name eRXSYS,
Inc. The Company is engaged in the business of operating specialty pharmacies
that primarily dispense highly regulated pain medication. During 2006, the Company
expanded its business beyond pain management  to service customers that require
prescriptions to treat cancer, psychiatric, and neurological conditions. The
Company offers physicians the ability to electronically transmit prescriptions
to its pharmacies. The Company derives its revenue  primarily from the sale of
prescription drugs and does not keep in inventory non-prescription drugs or health
and beauty related products inventoried at traditional pharmacies. The majority
of the Company&#146;s
business is derived from repeat business from its customers. &#147;Walk-in&#148; prescriptions from physicians are limited. </FONT></P>
<P align="left">
<FONT size=2 face="serif">We currently have six operating pharmacies. Our first pharmacy was opened on October 13, 2003 in Santa Ana, California. On June 10, 2004, we opened our second pharmacy in Riverside, California.  These pharmacies were opened
pursuant to a joint venture agreement entered into with TPG, LLC where we maintained a 51 % ownership interest in these pharmacies. On December 15, 2006, we entered into a Purchase Agreement with TPG and acquired its 49% ownership in these
pharmacies. As a result of this acquisition, we increased our ownership interest in these pharmacies to 100%. We opened our third pharmacy in Kirkland, Washington on August 11, 2004. Our fourth pharmacy was opened in Portland, Oregon on September
21, 2004. On June 21, 2006, we opened our fifth pharmacy also located in Portland, Oregon. The pharmacies located in Kirkland and Portland were opened pursuant to a joint venture agreement with TAPG LLC and we have a 94.8% ownership interest in
these pharmacies. In January 2007, we opened our sixth pharmacy in Gresham, Oregon that became our third wholly-owned pharmacy.</FONT></P>
<P align="left">
<FONT size=2 face="serif">We anticipate opening two more pharmacies, one in Las Vegas, Nevada and other in Lomita, California. We have executed lease agreements for both these locations. Pharmacy operations are expected to commence in Las Vegas, Nevada in
November 2007 and in Lomita, California before the end of 2007.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Agreement with TPG, L.L.C.</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">On April 24, 2003, we entered into an agreement with TPG, L.L.C. (&#147;TPG&#148;) for the purpose of funding the
establishment and operations of pharmacies. Under this agreement, TPG held the right to fund on a joint venture basis fifty pharmacies that we established. In exchange for contributing financing in the amount of &#36;230,000 per pharmacy location,
TPG acquired a 49% ownership interest in each pharmacy established under this agreement and we owned the remaining 51%. Under the terms of the agreement with TPG, our contribution to establish pharmacies primarily consisted of the right to utilize
our intellectual property rights and to provide sales and marketing services. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Assured Pharmacies, Inc. (&#147;API&#148;) was formed to establish and operate the pharmacies that would be operated under the agreement with TPG. In accordance with the terms
of the agreement with TPG, we owned 51% of API and TPG owned the remaining 49%. </FONT></P>
<P align="left">&nbsp;</P>

<P align="center"><FONT size=2 face="serif">F-42</FONT></P>
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<br>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION (continued) </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Agreement with TPG, L.L.C. (continued)</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Under this joint venture, we established our first pharmacy in Santa Ana, California and our second pharmacy in Riverside, California. On December 15, 2006, we entered into a Purchase Agreement with TPG and acquired all of its
right, title and interest in 49 shares of common stock of API for &#36;460,000 and the issuance of 50,000 shares of our common stock. The cash component of the purchase price is payable as follows: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
<TD width="3%" align=right valign=top>
      <FONT size=2 face="serif">i.</FONT></TD>
<TD width="2%" align=right valign=top>&nbsp;</TD>
<TD width=95% valign="top">
<FONT size=2 face="serif">&#36;15,000 was paid on or about December
    15, 2006;</FONT>
</TD>
</TR>
<TR><TD colspan=3><div align="right"></div></TD></TR><TR>
<TD width="3%" align=right valign=top>
      <div align="right"><FONT size=2 face="serif">ii.</FONT></div></TD>
<TD width="2%" align=right valign=top>&nbsp;</TD>
<TD width=95%>
<P align="left"><FONT size=2 face="serif">Eleven (11) consecutive monthly installments of &#36;5,000 payable on or before the 15th of each month commencing in January 2007 through November 2007;</FONT></P>
</TD>
</TR>
<TR><TD colspan=3><div align="right"></div></TD></TR><TR>
<TD width="3%" align=right valign=top>
      <div align="right"><FONT size=2 face="serif">iii.</FONT></div></TD>
<TD width="2%" align=right valign=top>&nbsp;</TD>
<TD width=95%>
<P align="left"><FONT size=2 face="serif">Fourteen (14) consecutive monthly installments of &#36;15,000 payable on or before the 15th of each month commencing in December 2007 through January 2009; and</FONT></P>
</TD>
</TR>
<TR><TD colspan=3><div align="right"></div></TD></TR><TR>
<TD width="3%" align=right valign=top>
      <div align="right"><FONT size=2 face="serif">iv.</FONT></div></TD>
<TD width="2%" align=right valign=top>&nbsp;</TD>
<TD width=95%>
<P align="left"><FONT size=2 face="serif">&#36;180,000 payable together with interest at the rate of prime plus 2% per annum commencing from the date of this Purchase Agreement payable on or before February 15, 2009. Interest shall accrue as of December
15, 2006, the effective date of this Agreement.</FONT></P>
</TD>
</TR>
</TABLE>
<P align="left">
<FONT size=2 face="serif">As a result of this acquisition, we increased our ownership interest in API to 100% making it a wholly-owned subsidiary and consequently resulting in the termination of our joint venture with TPG. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Agreement with TAPG, L.L.C.</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">In February 2004, we entered into an agreement (the &#147;Agreement&#148;) with TAPG, L.L.C. (&#147;TAPG&#148;), a Louisiana limited liability company, and formed Safescript Northwest,
Inc. (&#147;Safescript Northwest&#148;), a Louisiana corporation. Safescript Northwest was formed to establish and operate up to five pharmacies. Effective August 19, 2004, Safescript Northwest filed amended articles of incorporation and changed its name to
Assured Pharmacies Northwest, Inc. (&#147;APN&#148;). We initially owned 75% of APN, while TAPG owned the remaining 25%. In accordance with our shareholders agreement with TAPG, TAPG will provide start-up costs in the amount of &#36;335,000 per pharmacy
location established not to exceed five pharmacies. Under the terms of the agreement with TAPG, our contribution to establish pharmacies primarily consisted of the right to utilize our intellectual property rights and to provide sales and marketing
services. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Agreement provides that TAPG will contribute start-up costs in the amount of &#36;335,000 per pharmacy location established not to exceed five pharmacies. Our contribution under the Agreement consists of granting the right to
utilize our intellectual property rights and to provide sales and marketing services. Between March and October 2004, APN received from TAPG start-up funds in the amount of &#36;854,213 as its capital contribution for three pharmacies. This capital
contribution funded the opening of a pharmacy in Kirkland, Washington in August 2004 and another pharmacy in Portland, Oregon in September 2004. Included in these monies was a partial capital contribution in the amount of &#36;190,000 for the
establishment of our second pharmacy location in Portland, Oregon. TAPG remains obligated to contribute an additional</FONT></P>
<P align="left">&nbsp;</P>

<P align="center"><FONT size=2 face="serif">F-43</FONT></P>
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<br>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION (continued) </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Agreement with TAPG, L.L.C. (continued)</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">&#36;145,000 to satisfy their full contribution. We and APN requested that TAPG provide the &#36;150,787 balance of its full capital contribution. TAPG is also obligated to contribute their proportionate share of the start-up
costs in excess of their initial capital contribution of &#36;335,000 per pharmacy. The Agreement defines startup costs as any costs associated with the opening of any open pharmacy location that accrue within one hundred eighty days following the
opening of that particular pharmacy. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Following the start-up period, we advanced interest-free loans to sustain operations at the pharmacies operated by APN. On March 6, 2006, these loans were converted into APN capital stock. Following the conversion of this debt
into equity, we increased our ownership interest in APN from 75% to 94.8% . TAPG owns the remaining 5.2% interest. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">License Agreement with Network Technology, Inc. (&#147;RxNT&#148;) </FONT></I></P>
<P align="left">
<FONT size=2 face="serif">On March 15, 2004, we entered into a technology license agreement (&#147;Technology License&#148;) with Network
Technology, Inc. (&#147;RxNT&#148;). The Technology License grants us the right to use RxNT&#146;s prescribing technology under the brand name &#147;Assured Script&#148; and enables us
to accept prescriptions electronically transmitted to our pharmacies. Pursuant to the Technology License agreement, we paid RxNT a licensing fee of &#36;100,000 and are also responsible for paying RxNT a royalty equal to twenty five percent (25%) of
the gross profit from sales of the &#147;Assured Script&#148; product, which refers to the licensed products and technology set forth in the Technology License and not prescription drug sales. Given that we are in the business of owning and operating
pharmacies, management does not anticipate that we would make any sales of the &#147;Assured Script&#148; product resulting in a royalty payment to RxNT. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On March 17, 2007, we renewed this agreement for a period
of three years and agreed to pay an annual license fee of &#36;54,000. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Other Subsidiaries:</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company&#146;s management determined that its business could be expanded through developing arrangements with third party health plan providers to accept traditional co-payments and fill prescriptions for their members who rely
upon overnight courier for delivery of their prescription. The Company&#146;s management believes that such arrangements will broaden its consumer base and enable it to access a particular niche of consumer that receives their prescriptions exclusively
via courier as opposed to patronizing traditional retail pharmacy locations. On January 3, 2006, the Company incorporated Assured Pharmacy Plus, Corp. (&#147;Plus Corp.&#148;) as a wholly-owned
subsidiary to develop this opportunity. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Also on January 3, 2006, the Company incorporated Assured Pharmacy DME, Corp. (&#147;DME&#148;) as a wholly-owned subsidiary for the purpose of facilitating and making available
specialized medical equipment to its consumers. The Company&#146;s consumers who require treatment for chronic pain commonly require specialized medical equipment and/or rehabilitative equipment. </FONT></P>


<P align="center"><FONT size=2 face="serif">F-44</FONT></P>
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<br>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION (continued) </FONT></P>

<P align="left">
<I><FONT size=2 face="serif">Other Subsidiaries (continued):</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">During the third quarter of 2006, the Company had incorporated three wholly-owned subsidiaries for the purpose of operating additional pharmacies.  On July 21, 2006, the Company incorporated Assured Pharmacy Gresham, Inc.
(&#147;Gresham &#148; ). On August 11, 2006, the Company incorporated Assured Pharmacy Irvine, Inc. (&#147;Irvine &#148; ), and on September 25,
2006, the Company incorporated Assured Pharmacy Los Angeles 1, Inc. (&#147;L.A. 1&#148;). </FONT></P>
<P align="left">
<FONT size=2 face="serif">On June 19, 2007, the Company incorporated Assured Pharmacy Las Vegas Inc., as a wholly-owned subsidiary for the purpose of operating its new pharmacy in Las Vegas, Nevada. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Quotation on OTCBB</FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company &#146; s
common stock is quoted on the Over-the-Counter Bulletin Board (the &#147;OTCBB &#148; )
under the symbol &#147;APHY.</FONT>&#148;</P>
<P align="left">
<I><FONT size=2 face="serif">B. Basis of Presentation</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company &#146; s management, without audit, prepared the condensed consolidated financial statements for the three and nine months ended September 30, 2007 and 2006. The
information furnished has been prepared in accordance with accounting principles generally accepted in the United States of America ( &#147; GAAP &#148; ) for interim financial reporting. Accordingly, certain disclosures normally included in financial statements prepared in accordance with GAAP have been condensed and consolidated or omitted. In the
opinion of management, all adjustments considered necessary for the fair presentation of the Company&#146;s financial position, results of operations and cash flows have been included and are only of a normal recurring nature. The results of operations
for the three and nine months ended September 30, 2007 are not necessarily indicative of the results of operations for the year ending December 31, 2007. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The consolidated financial statements include the accounts of Assured Pharmacy, Inc., its wholly-owned subsidiaries, and majority-owned subsidiaries. All inter-company accounts and transactions have been eliminated in
consolidation. </FONT></P>
<P align="left">
<FONT size=2 face="serif">These condensed consolidated financial statements should be read in conjunction with the Company&#146;s audited consolidated financial statements as of December 31, 2006, which are included in the Company &#146; s Annual Report on Form 10-KSB that was filed with the Securities and Exchange Commission (the  &#147;SEC &#148; ) on April 2, 2007. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Going Concern Considerations</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The accompanying condensed consolidated financial statements
have been prepared assuming the Company will continue as a going concern, which
contemplates, among other things, the realization of assets and satisfaction
of  liabilities in the ordinary course of business. As of September 30, 2007,
the Company had an accumulated deficit of &#36;21,967,907, recurring losses from
operations and negative cash</FONT><FONT size=2 face="serif">flow from operating activities for the nine month period
ended September 30, 2007 of &#36;1,458,257. The Company also had a negative working
capital of &#36;3,165,909 as of September 30, 2007. </FONT></P>


<P align="center"><FONT size=2 face="serif">F-45</FONT></P>
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<br>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">&nbsp;</P>
<P align="left">
<FONT size=2 face="serif">The Company intends to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital or other cash requirements. The Company is
seeking additional funds to finance its immediate and long-term operations. The successful outcome of future financing activities cannot be determined at this time and there is no assurance that if achieved, the Company will have sufficient funds to
execute its intended business plan or generate positive operating results. These factors, among others, raise substantial doubt about the Company &#146; s ability to continue as a going
concern. The accompanying condensed consolidated financial statements do not include any adjustments related to recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In response to these problems, management has taken the following actions: </FONT></P>
<UL>
<LI>
<P align="left"><FONT size=2 face="serif">The Company is expanding its revenue base beyond the pain management sector to service customers that require prescriptions to treat cancer, psychiatric, and neurological conditions.</FONT></P></LI>
<LI>
<P align="left"><FONT size=2 face="serif">The Company is aggressively signing up new physicians, which will result in new patients.</FONT></P></LI>
<LI>
<P align="left"><FONT size=2 face="serif">The Company is seeking investment capital. (See Note 5 for additional information).</FONT></P></LI>
<LI>
<P align="left"><FONT size=2 face="serif">The Company retained additional sales personnel to attract business.</FONT></P></LI>
</UL>
<P align="left">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </FONT></P>
<P align="left">
<FONT size=2 face="serif">The summary of significant accounting policies presented below is designed to assist in understanding the Company&#146;s consolidated financial statements. Such financial statements and accompanying notes are the representations of the
Company&#146;s management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (&#147;GAAP&#148;) in all material respects, and have been consistently
applied in preparing the accompanying consolidated financial statements. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Principles of Consolidation</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The consolidated financial statements for the quarter ended September 30, 2007, include the accounts of the Company &#146; s 94.8% ownership interest in APN. In accordance
with the joint venture agreement, the minority partner does not have participation rights that allow them to block decisions proposed by the Company. The minority joint venture has given the Company the ability to control all daily operations and
management of the joint venture; therefore, the Company has consolidated the joint venture in its financial statements. All significant inter-company accounts and transactions have been eliminated in consolidation.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Use of Estimates</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of</FONT></P>


<P align="center"><FONT size=2 face="serif">F-46</FONT></P>
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<br>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE>
<BR>

<P align="left"><FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)</FONT></P>
<P align="left"><I><FONT size=2 face="serif">Use of Estimates (continued)</FONT></I></P>
<P align="left"><FONT size=2 face="serif">contingent assets and liabilities at the date
    of the financial statements, and the reported amounts of revenues and expenses
    during the reporting period. Significant estimates made by management include
    revenue recognition, the allowance for doubtful
    accounts, the deferred tax asset valuation allowance, and the realization
    of inventories and long-lived assets. Actual results could materially differ
  from these estimates. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Risks and Uncertainties</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company operates in a highly competitive industry that is subject to intense competition. The Company faces risks and uncertainties relating to its ability to successfully implement its business strategy. Among other things,
these risks include the ability to develop and sustain revenue growth; managing and expanding operations; competition; attracting, retaining and motivating qualified personnel; maintaining and developing new strategic relationships; and the ability
to anticipate and adapt to the changing markets and any changes in government regulations. </FONT></P>
<P align="left">
<FONT size=2 face="serif">As a result, the Company may be subject to the risk of delays in obtaining (or failing to obtain) regulatory clearance and other uncertainties, including financial, operational, technological, regulatory and other risks associated
with an emerging business, including the risk of business failure. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company &#146; s leased pharmacies are subject to licensing and regulation by the health, sanitation, safety, building and fire agencies in the state or municipality
where located. Difficulties or failures in obtaining or maintaining the required licensing and/or approvals could prevent the continued operation of such pharmacies. Management believes that the Company is operating in compliance with all applicable
laws and regulations. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the nine months ended on September 30, 2007, the Company purchased 99% of its inventory of its prescription drugs from one wholesale vendor. Management believes that the wholesale pharmaceutical and non-pharmaceutical
distribution industry is highly competitive because of consolidation in the industry and the practice of certain large pharmacy chains to purchase directly from product manufacturers. Although management believes it could obtain the majority of our
inventory from other distributors at competitive prices and upon competitive payment terms if our relationship with our primary wholesale drug vendor was terminated, there can be no assurance that the termination of such relationship would not
adversely affect us. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Governmental Regulations</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The pharmacy business is subject to extensive and often changing federal, state and local regulations, and our pharmacies are required to be licensed in the states in which they are located or do business. While management
continuously monitors the effects of regulatory activity on the Company &#146; s operations and it currently has a pharmacy license for each pharmacy the Company operates, the failure to obtain
or renew any regulatory approvals or licenses could adversely affect the continued operations of the Company &#146; s business. </FONT></P>


<P align="center"><FONT size=2 face="serif">F-47</FONT></P>
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<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Governmental Regulations (continued)</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company is also subject to federal and state laws that prohibit certain types of direct and indirect payments between healthcare providers. These laws, commonly known as the fraud and abuse laws, prohibit payments intended to
induce or encourage the referral of patients to, or the recommendation of, a particular provider of products and/or services. Violation of these laws can result in a loss of licensure, civil and criminal penalties and exclusion from various federal
and state healthcare programs. The Company expends considerable resources in connection with compliance efforts. Management believes that the Company is in compliance with federal and state regulations applicable to its business. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company is also impacted by the Health Insurance Portability and Accountability Act of 1996 (&#147;HIPAA&#148;), which mandates, among other things, the adoption of standards to enhance the efficiency and simplify the administration of
the healthcare system. HIPAA requires the Department of Health and Human Services to adopt standards for electronic transactions and code sets for basic healthcare transactions such as payment and remittance advice (&#147;transaction standards&#148;); privacy
of individually identifiable healthcare information (&#147;privacy standards&#148;); security and electronic signatures (&#147;security standards&#148;), as wells as unique identifiers for providers, employers, health plans and individuals; and enforcement. The Company
is required to comply with these standards and is subject to significant civil and criminal penalties for failure to do so. Management believes the Company is in compliance with these standards. There can be no assurance, however, that future
changes will not occur which the Company may not be, or may have to incur significant costs to be in compliance with new standards or regulations. Management anticipates that federal and state governments will continue to review and assess alternate
healthcare delivery systems, payment methodologies and operational requirements for pharmacies. Given the continuous debate regarding the cost of healthcare services, management cannot predict with any degree of certainty what additional healthcare
initiatives, if any, will be implemented or the effect any future legislation or regulation will have on the Company. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Cash and Cash Equivalents</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The financial instrument that potentially exposes the Company to a concentration of credit risk principally consists of cash. The Company deposits its cash with high credit financial institutions, and at times the balances may
exceed the insurance limit of the Federal Deposit Insurance Corp. Management believes that there is little risk of loss due to this policy. </FONT></P>


<P align="center"><FONT size=2 face="serif">F-48</FONT></P>
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<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Accounts Receivable, non-current</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company carries &#36;121,472 of receivables which are over 180 days old. These receivables are primarily from Workmen&#146;s Compensation Board of State of California (&#147;CA Board &#148; ).
These receivables are due to disputes between the claimant and the employer,
with the CA Board, known as &#147;Green Liens</FONT>&#148;<FONT size=2 face="serif">. The settlement period for such Green Lien cases
takes anywhere from 1 year to 5 years. The Management classified such receivables as long term assets. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Allowance for Doubtful Accounts Receivable</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company &#146; s receivables are from reputable insurance companies. However, management periodically reviews the collectability of accounts receivable and provides an
allowance for doubtful accounts receivable as management deems necessary. For the year ended December 31, 2006, management provided approximately &#36;177,000 towards such allowance of which &#36;71,045 applies to the non-current receivables.
</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Inventories</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Inventories are stated at the lower of cost (first-in, first-out method) or estimated market, and consist primarily of pharmaceutical drugs. Market is determined by comparison with recent sales or net realizable value. Net
realizable value is based on management &#146; s forecast for sales of its products or services in the ensuing years and/or consideration and analysis of changes in customer base, product mix,
payor mix, third party insurance reimbursement levels or other issues that may impact the estimated net realizable value. Management regularly reviews inventory quantities on hand and records a reserve for shrinkage and slow-moving, damaged and
expired inventory, which</FONT><I><FONT size=2 face="serif"> </FONT></I><FONT size=2 face="serif">is measured as the difference between the inventory cost and the estimated market value based on management &#146; s assumptions about market conditions and future demand for its products. No reserves were provided at September 30, 2007 and 2006, respectively, as the reserves were insignificant to the accompanying financial statements. Should the
demand for the Company&#146;s products prove to be less than anticipated, the ultimate net realizable value of its inventories could be substantially less than reflected in the accompanying consolidated balance sheet. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Inventories are comprised of brand and generic pharmaceutical drugs. Brand drugs are purchased primarily from one wholesale vendor and generic drugs are purchased primarily from multiple wholesale vendors. The Company&#146;s pharmacies
maintain a wide variety of different drug classes, known as Schedule II, Schedule III, and Schedule IV drugs, which vary in degrees of addictiveness. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Schedule II drugs, considered narcotics by the DEA are the most addictive; hence, they are highly regulated by the DEA and are required to be segregated and secured in a separate cabinet. Schedule III and Schedule IV drugs are
less addictive and are not regulated. Because the Company&#146;s business model focuses on servicing pain management doctors and chronic pain patients, the Company carries in inventory a larger amount of Schedule II drugs than most other pharmacies. The
cost in acquiring Schedule II drugs is higher than Schedule III and IV drugs.</FONT></P>


<P align="center"><FONT size=2 face="serif">F-49</FONT></P>
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<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Long Lived Assets:</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company adopted Statement of Financial Accounting Standard (&#147;SFAS&#148;) No. 144, </FONT>&#147;<I>Accounting for the Impairment or Disposal of Long-Lived Assets</I>&#148;, <FONT size=2 face="serif">which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that
their carrying amount may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows from such asset, an impairment loss is recognized.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value. SFAS No. 144 also requires companies to separately report discontinued operations, and extends that reporting to a
component of an entity that either has been disposed of (by sale, abandonment or in a distribution to owners) or is classified as held for sale. Assets to be disposed of are reported at the lower of the carrying amount or the estimated fair value
less costs to sell. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company&#146;s long-lived assets consist of computers, software, office furniture and equipment, store fixtures and leasehold improvements on pharmacy build-outs which are depreciated with useful lives varying from 3 to 10 years.
Leasehold improvements are depreciated over the shorter of the useful life or the remaining lease term, typically 5 years. The Company assesses the impairment of these long-lived assets at least annually and makes adjustment accordingly. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Property and Equipment</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Property and equipment are stated at cost, and are being depreciated using the straight-line method over the estimated useful lives of the related assets, which generally range between three and ten years. Leasehold improvements
are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the remaining lease terms. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. At
the time of retirement, other disposition of property and equipment or termination of a lease, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in results of operations.
</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Intangible Assets</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Statement of Financial Accounting standard (&#147;SFAS</FONT>&#148;<FONT size=2 face="serif">)
No. 142,&#147;Goodwill and Other Intangible Assets &#148; ,
addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for upon their acquisition and after they have been initially recognized in the financial statements. SFAS No. 142 requires that
goodwill and identifiable intangible assets that have indefinite lives not be amortized but rather be tested at least annually for impairment, and intangible assets that have finite useful lives be amortized over their estimated useful lives. </FONT></P>


<P align="center"><FONT size=2 face="serif">F-50</FONT></P>
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<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE>
<br>

<P align="left">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Intangible Assets (continued)</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">SFAS No. 142 provides specific guidance for testing goodwill and intangible assets that will not be amortized for impairment. In addition, SFAS No. 142 expands the disclosure requirements about intangible assets in the years
subsequent to their acquisition. Impairment losses for goodwill and indefinite-life intangible assets that arise due to the initial application of SFAS No. 142 are to be reported as a change in accounting principle. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Advertising</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company expenses the cost of advertising, including marketing
and promotions, when incurred. Advertising costs for the three months ended September
30, 2007 and September 30, 2006 were &#36;9,621 and &#36;108,266,
respectively.  Advertising costs for the nine months ended September 30, 2007
and September 30, 2006 were &#36;12,675 and &#36;424,942, respectively.  When
incurred, such expenses are included in selling, general and administrative
expenses.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Revenue Recognition</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company recognizes revenue on an accrual basis when the product is delivered to the customer. Payments are received directly from the customer at the point of sale, or the customers &#146;  insurance provider is billed. Authorization which assures payment is obtained from the customers &#146;  insurance provider before the medication
is dispensed to the customer. Authorization is obtained for the vast majority of these sales electronically and a corresponding authorization number is issued by the customers&#146; insurance provider. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company accounts for shipping and handling fees and costs
in accordance with EITF 00-10  &#147;<I>Accounting for Shipping
and Handling Fees and Costs.</I>&#148;  Such fees and costs
are immaterial to the Company&#146;s operations. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Stock-based Employee Compensation</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Effective January 1, 2006, the Company adopted the provisions of statement of Financial Standards No. 123 (revised 2004), Share-Based Payment (&#147;SFAS No. 123 (R)</FONT>&#148;<FONT size=2 face="serif">),
which is a revision of SFAS No. 123. SFAS No. 123 (R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach to accounting for share-based payments
in SFAS No. 123 (R) is similar to the approach described in SFAS No. 123. </FONT></P>
<P align="left">
<FONT size=2 face="serif">However, SFAS 123 (R) requires all new share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Pro forma disclosure of the fair value
of new share-based payments is no longer an alternative to financial statement recognition.</FONT></P>


<P align="center"><FONT size=2 face="serif">F-51</FONT></P>
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<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) </FONT><BR>
<BR>
<I><FONT size=2 face="serif">Stock-based Employee Compensation (continued) </FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Prior to 2006, the Company accounted for its employee stock
option plans under the intrinsic value method, in accordance with the provisions
of Accounting Principles Board (&#147;APB&#148;)
Opinion No. 25, &#147;Accounting for Stock Issued to Employees,</FONT>&#148;<FONT size=2 face="serif"> and
related interpretations. Compensation expense related to the granting of employee
stock options is recorded over the vesting period only, if, on the date of grant,
the fair value of the underlying stock exceeds the option&#146;s exercise price.
The Company had adopted the disclosure-only requirements of SFAS No. 123, &#147;Accounting
for Stock-Based Compensation,</FONT>&#148;<FONT size=2 face="serif"> which allowed entities
continue to apply the provisions of APB No. 25 for the transactions with employees
and provide forma net income and pro forma income per share disclosures for employee
stock grants made as if fair value based  method of accounting in SFAS No. 123
had been applied to these transactions.</FONT></P>
<P align="left">
<FONT size=2 face="serif">In the event the Company determined compensation expense of the employee stock options issued prior January 1, 2006, based on the estimated fair value of the stock options at the grant date and consistent with guidelines of SFAS
123, its net loss and loss per share would have been the same as there were no effects based on SFAS 123. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The effects of applying SFAS 123 are not necessarily representative of the impact on the results operations for future years.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Basic and Diluted Loss per Common Share</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company computes loss per common share using SFAS No.
128 &#147;<I>Earnings
Per Share</I>&#148;.
Basic loss per share is computed by dividing net
loss applicable to common shareholders by the weighted average number of common
shares outstanding for the reporting period. Diluted loss per share reflects
the potential  dilution that could occur if securities or other contracts, such
as stock options and warrants to issue common stock, were exercised or converted
into common stock. Because the Company has incurred net losses and there are
no dilutive potential  common shares, basic and diluted loss per common share
are the same.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Income Taxes</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company accounts for income taxes under the provisions of SFAS No. 109,  &#147;<I>Accounting for Income Taxes</I>&#148;.  SFAS No. 109 requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been included in the financial statements or income tax returns. Under this method deferred tax liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax rates for the year in which the differences are expected to reverse. </FONT></P>


<P align="center"><FONT size=2 face="serif">F-52</FONT></P>
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<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Fair Values of Financial Instruments</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Management believes that the carrying amounts of the Company&#146;s financial instruments, consisting primarily of cash, accounts receivable, and accounts payable and accrued liabilities approximated their fair values at September 30,
2007 and 2006, due to their short-term nature. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Management also believes that the September 30, 2007 and 2006 interest rate associated with the notes payable approximates the market interest rate for this type of debt instrument and as such, the carrying amount of the notes
payable approximates its fair value. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The fair values of related party transactions are not determinable due to their related party nature.</FONT></P>
<P align="left">
<FONT size=2 face="serif">3. NOTES PAYABLE TO RELATED PARTIES AND STOCKHOLDERS</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">TAPG Note</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">In January 2005, the Company entered into an agreement
with TAPG where TAPG was to advance &#36;270,000 in connection with establishing
pharmacies in the Pacific Northwest of the United States (see Note 1). The note
was to be  funded by TAPG in monthly installments of &#36;45,000 up to a maximum
of &#36;270,000. The note accrued interest at a fixed rate of 7% per annum. The
note is secured by the assets of APN &#146; s pharmacies, in which the Company
holds a controlling interest. However, the Company received only &#36;40,000
during 2005. The note matured in January 2006 and was not extended. As of September
30, 2007, the Company had paid &#36;20,000
on this note. The Company intends to retire the remaining balance due of &#36;20,000. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Convertible Loans</FONT></I><BR>
<BR>
<I><FONT size=2 face="serif">VVPH Inc. Loans </FONT></I></P>
<P align="left">
<FONT size=2 face="serif">During first quarter of 2005, the Company entered into a ninety-day note payable to VVPH Inc. for &#36;50,000. During first quarter of 2006, the Company extended this agreement to January 31, 2007. VVPH also agreed to convert
accrued interest of &#36;1,907 to principal. The Company repaid this note fully on July 7, 2007. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On January 21, 2006, the Company entered into two (2) additional loan agreements with VVPH Inc. Under the terms of the agreements, the Company received &#36;600,000 for a twelve (12) month term which can be extended for an
additional twelve (12) month period by mutual consent. The loan has an interest rate of 15% per annum to be paid in monthly installments. In March 2007, the parties entered into a modification and extension agreement to further extend the maturity
dates of these loan agreements to January 2008 and modify the interest rates on these loans to 12% per annum. At September 30, 2007, the Company has repaid &#36;100,000 on this loan. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On May 2, 2007, the Company entered into additional loan agreement with VVPH Inc. Under the terms of this loan agreement, the Company received &#36;75,000 for a twelve (12) month terms which can be extended</FONT></P>


<P align="center"><FONT size=2 face="serif">F-53</FONT></P>
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<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">for an additional twelve (12) month period by mutual consent. The loan has interest rate of 12% per annum to be paid in monthly installments. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, VVPH Inc. has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of the
Company &#146; s common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other
equivalent market on which the Common Stock is quoted) calculated as of the trading day immediately preceding the date the Conversion Right is exercised. The Conversion Price shall not be less than &#36;0.40 or more than &#36;0.80. VVPH Inc shall be
entitled to piggyback registration rights upon exercise of this conversion right.</FONT></P>
<P align="left">
<FONT size=2 face="serif">As of September 30, 2007, the Company owes &#36;606,457 inclusive
of interest on these notes. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Brockington Securities, Inc. Loans</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">On April 19, 2007, the Company entered into a loan agreement with Brockington Securities Inc. (&#147;Brockington&#148;). Under the terms of the agreement the Company received &#36;93,000 for a twelve (12) month term which can be
extended for an additional twelve (12) month period by mutual consent. The loan has an interest rate of 12% per annum to be paid in monthly installments. Brockington is a related party because its President is also an officer and director of the
Company.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, Brockington has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of the
Company &#146; s common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other
equivalent market on which the Common Stock is quoted) calculated as of the trading day immediately preceding the date the Conversion Right is exercised. The Conversion Price shall not be less than &#36;0.40 or more than &#36;0.80. Brockington shall
be entitled to piggyback registration rights upon exercise of this conversion right. As of September 30, 2007, the Company owes &#36;98,017, inclusive of interest on this note.. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On August 1, 2007, the Company entered into an additional loan agreement with Brockington Securities Inc. (&#147;Brockington&#148;). Under the terms of this agreement the Company received &#36;50,000 for a twelve (12) month term
which can be extended for an additional twelve (12) month period by mutual consent. The loan has an interest rate of 12% per annum to be paid in monthly installments.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, Brockington has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of the
Company &#146; s common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other
equivalent market on which the Common Stock is quoted) calculated as of the trading day immediately preceding the date the Conversion Right is exercised. The Conversion Price shall not be less than &#36;0.40 or more than &#36;0.80. Brockington shall
be entitled to piggyback registration rights upon exercise of this conversion right.</FONT></P>
<P align="left">
<FONT size=2 face="serif">As of September 30, 2007, the Company owes &#36;51,000, inclusive of interest on this note.</FONT></P>


<P align="center"><FONT size=2 face="serif">F-54</FONT></P>
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<br>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<I><FONT size=2 face="serif">Sheth Loan</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">On May 25, 2007, the Company entered into a loan agreement with Mr. Haresh C. Sheth, the Company&#146;s Chief Financial Officer and a member of its board of directors. Under the terms of this agreement, the Company received
&#36;25,000 for a twelve (12) month term which can be extended for an additional twelve (12) month period by mutual consent. The loan has an interest rate of 12% per annum to be paid in monthly installments. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, Mr. Haresh C. Sheth has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of the
Company &#146; s common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other
equivalent market on which the Common Stock is quoted) calculated as of the trading day immediately preceding the date the Conversion Right is exercised. The Conversion Price shall not be less than &#36;0.40 or more than &#36;0.80. Mr. Haresh C.
Sheth shall be entitled to piggyback registration rights upon exercise of this conversion right.</FONT></P>
<P align="left">
<FONT size=2 face="serif">As of September 30, 2007, the Company owes &#36;25,919, inclusive of interest on this note. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On August 1, 2007, the Company entered into another loan agreement with Mr. Haresh C. Sheth, the Company&#146;s Chief Financial Officer and a member of its board of directors. Under the terms of this agreement, the Company
received &#36;25,000 for a twelve (12) month term which can be extended for an additional twelve (12) month period by mutual consent. The loan has interest rate of 12% per annum to be paid in monthly installments. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, Mr. Haresh C. Sheth has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of the
Company &#146; s common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other
equivalent market on which the Common Stock is quoted) calculated as of the trading day immediately preceding the date the Conversion Right is exercised. The Conversion Price shall not be less than &#36;0.40 or more than &#36;0.80. Mr. Haresh C.
Sheth shall be entitled to piggyback registration rights upon exercise of this conversion right.</FONT></P>
<P align="left">
<FONT size=2 face="serif">As of September 30, 2007, the Company owes &#36;25,500, inclusive of interest on this note. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Woodfield Capital Services Inc.</FONT></P>
<P align="left">
<FONT size=2 face="serif">On July 10, 2007, the Company entered into a loan agreement with Woodfield Capital Services Inc. Under the terms of this agreement, the Company received &#36;150,000 for a twelve (12) month term at an interest rate of 12% per
annum, with interest payable on a monthly basis. Woodfield Capital Services, Inc. is a related party to this transaction, as its President is an officer and director of the Company. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, Woodfield Capital Services Inc. has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of
the Company &#146; s common stock determined at a conversion price equal to the rolling seven (7)</FONT></P>


<P align="center"><FONT size=2 face="serif">F-55</FONT></P>
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<br>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other equivalent market on which the Common Stock is quoted) calculated as of the trading day immediately preceding the date the Conversion
Right is exercised. The Conversion Price shall not be less than &#36;0.40 or more than &#36;0.80. Woodfield Capital Services Inc. shall be entitled to piggyback registration rights upon exercise of this conversion right.</FONT></P>
<P align="left">
<FONT size=2 face="serif">As of September 30, 2007, the Company owes &#36;154,084 inclusive of interest on this note. </FONT></P>
<P align="left">
<FONT size=2 face="serif">4. EQUITY TRANSACTIONS</FONT><BR>
<BR>
<I><FONT size=2 face="serif">Common Stock </FONT></I></P>
<P align="left">
<FONT size=2 face="serif">In February 2007, the Company granted as a performance base bonus to an officer of the Company options to purchase 750,000 shares of its common stock vesting over a two year period of time from the date of issuance and exercisable
at the exercise price of &#36;0.60 per share. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In February 2007, the Company issued 300,000 Shares of its common stock to outside members of its board of directors in consideration for services rendered as a member of the board. These shares were valued at &#36;120,000
(estimated to be the fair value based on the trading price on the issuance date). As a result of the issue of shares the company debited director fees expense and credited common stock for &#36;300 and paid in capital for &#36;119,700. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In February 2007, the Company issued 100,000 shares of restricted common stock, valued at &#36;35,000 (estimated to be the fair value based on the trading price on the issuance date) granted warrants to purchase 100,000 shares of
its common stock, exercisable at &#36;0.60 per share until December 31, 2009, and granted warrants to purchase 100,000 shares of its common stock, exercisable at &#36;0.80 per share until December 31, 2009 to a consultant in exchange for services
rendered. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In view of a Waiver and Release agreement entered in to with a consultant, in February 2007, the Company cancelled and returned 250,000 shares valued at &#36;70,000 (Valued at the consideration value for the issue of shares). As a
result of cancellation of these shares the Company debited common stock and additional paid in capital for &#36;250 and &#36; 69,750 respectively and credited consulting expenses for &#36;70,000. </FONT></P>
<P align="left"><FONT size=2 face="serif">5. UNSECURED CONVERTIBLE DEBENTURE NOTES </FONT></P>
<P align="left">
<FONT size=2 face="serif">During the three months ended September 30, 2007, the Company raised &#36;325,000 by issuing a one-year unsecured convertible debenture (&#147;Debenture &#148; ) carrying an
interest rate of 18% per annum. The Debenture provides that all the interest is payable solely in the shares of the Company &#146; s common stock on the issuance date.</FONT></P>


<P align="center"><FONT size=2 face="serif">F-56</FONT></P>
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<br>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">The number of shares to be issued in payment of the interest is to be calculated based upon average closing price for the Company&#146;s common stock on NASD OTCBB for the five (5) consecutive trading days preceding the issuance
date. The Company issued 165,627 shares of restricted common stock to pay the total interest of &#36;45,000 on debentures worth &#36; 250,000. Interest expense was &#36;11,250 and &#36;12,750 for the three and nine months ended September 30, 2007
and &#36;32,250 is included in prepaid expenses and other assets on the balance sheet. Shares for the interest on new debentures worth &#36;175,000 are yet to be issued.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company is obligated to issue further 128,380 shares of common stock as payment of interest on the Debenture. The Debenture holders have the right to convert their Debenture into fully paid non-assessable shares of common
stock at &#36;0.40 and Common Stock Purchase Warrants to purchase one (1) share of restricted common stock at an exercise price of &#36;0.60 exercisable for two (2) years after the conversion date and to purchase one (1) share of restricted common
stock at an exercise price of &#36;0.80 exercisable for three (3) years after the conversion date.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company extended the maturity dates of &#36;800,000 worth of debentures, which were due to expire by September 30, 2007. The extension is for a period of thirty days or more at the option of the Company. As per the terms of
extension, the interest and prinicipal amount of debentures may be repaid in cash or in stock at the option of the Company. </FONT></P>
<P align="left">
<FONT size=2 face="serif">6. COMMITMENTS AND CONTINGENCIES </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Operating Leases</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company occupies buildings and retail space under operating lease agreements expiring on various dates through January 2012 with monthly payments ranging from approximately &#36;1,400 to &#36;2,800. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Certain leases include future rental escalations and renewal options. </FONT></P>
<P align="left">
<FONT size=2 face="serif">As of September 30, 2007, future minimum payments under operating leases approximated the following: </FONT></P>
<TABLE width=40% border=0 align="center" cellpadding=0 cellspacing=0>
<TR>
     <TD width=63%></TD>
     <TD width=13%></TD>
     <TD width=3%></TD>
     <TD width=21%></TD></TR>
<TR valign="bottom">
<TD align=left>
<FONT size=2 face="serif">For the year ending</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD width="3%" align=right>&nbsp;

</TD>

<TD width="21%" align=left>&nbsp;

</TD>
</TR>
<TR valign="bottom">
<TD align=left style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">December 31, 2007</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD width="3%" align=right>&nbsp;

</TD>
<TD width="21%" align=left>&nbsp;

</TD>
</TR>
<TR valign="bottom">
<TD align=left>
<FONT size=2 face="serif">2007</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD width="3%" align=right>
      <div align="left"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="21%" align=left>

 <div align="right"><FONT size=2 face="serif">34,913</FONT>
    </div></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD align=left bgcolor="#E5FFFF">
<FONT size=2 face="serif">2008</FONT>
</TD>
<TD bgcolor="#E5FFFF">&nbsp;
</TD>
<TD width="3%" align=right>
      <div align="left"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="21%" align=left bgcolor="#E5FFFF">

 <div align="right"><FONT size=2 face="serif">222,120</FONT>
    </div></TD>
</TR>
<TR valign="bottom">
<TD align=left>
<FONT size=2 face="serif">2009</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD width="3%" align=right>
      <div align="left"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="21%" align=left>

 <div align="right"><FONT size=2 face="serif">135,113</FONT>
    </div></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD align=left bgcolor="#E5FFFF">
<FONT size=2 face="serif">2010</FONT>
</TD>
<TD bgcolor="#E5FFFF">&nbsp;
</TD>
<TD width="3%" align=right>
      <div align="left"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="21%" align=left bgcolor="#E5FFFF">

 <div align="right"><FONT size=2 face="serif">75,732</FONT>
    </div></TD>
</TR>
<TR valign="bottom">
<TD align=left>
<FONT size=2 face="serif">2011</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD width="3%" align=right>
      <div align="left"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="21%" align=left>

 <div align="right"><FONT size=2 face="serif">60,802</FONT>
    </div></TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD align=left bgcolor="#E5FFFF">
<FONT size=2 face="serif">Thereafter</FONT>
</TD>
<TD bgcolor="#E5FFFF">&nbsp;
</TD>
<TD width="3%" align=right style="border-bottom:1px solid #000000;">
      <div align="left"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="21%" align=left bgcolor="#E5FFFF" style="border-bottom:1px solid #000000;">

 <div align="right"><FONT size=2 face="serif">15,786</FONT>
    </div></TD>
</TR>
<TR valign="bottom">
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD width="3%" align=right style="border-bottom:3px solid #000000;">
      <div align="left"><FONT size=2 face="serif">&#36;</FONT>
      </div></TD>
<TD width="21%" align=left style="border-bottom:3px double #000000;">

 <div align="right"><FONT size=2 face="serif">544,466</FONT>
    </div></TD>
</TR>
</TABLE>


<P align="center"><FONT size=2 face="serif">F-57</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<br>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>
<P align="left">
<FONT size=2 face="serif">Total rent expense for the nine months ended September 30, 2007 and September 30, 2006 was &#36;176,588 and &#36;138,147 respectively.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Legal Matters</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Providing pharmacy services entails an inherent risk of medical and professional malpractice liability. The Company may be named as a defendant in such lawsuits and become subject to the attendant risk of substantial damage
awards. The Company believes it possesses adequate professional and medical malpractice liability insurance coverage. There can be no assurance that the Company will not be sued, that any such lawsuit will not exceed our insurance coverage, or that
it will be able to maintain such coverage at acceptable costs and on favorable terms. </FONT></P>
<P align="left">
<FONT size=2 face="serif">From time to time, the Company may be involved in various claims, lawsuits, dispute with third parties, actions involving allegations of discrimination or breach of contract actions incidental to the normal operations of the
business. In the opinion of management, the Company is not currently involved in any litigation which it believes could have a material adverse effect on the Company&#146;s financial position or results of operations. </FONT></P>
<P align="left">
<FONT size=2 face="serif">8. LOSS PER COMMON SHARE</FONT></P>
<P align="left">
<FONT size=2 face="serif">The following is a reconciliation of the numerators and denominators of the basic and diluted loss per common share computations for the nine months September 30, 2007 and 2006: </FONT></P>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR>
     <TD width=40%></TD>
     <TD width=9%></TD>
     <TD width=1%></TD>
     <TD width=7%></TD>
     <TD width=8%></TD>
     <TD width=4%></TD>
     <TD width=4%></TD>
     <TD width=9%></TD>
     <TD width=1%></TD>
     <TD width=3%></TD>
     <TD width=9%></TD>
     <TD width=5%></TD></TR>
<TR valign="bottom">
<TD align=left>&nbsp;

</TD>
<TD align=center colspan=5>
<FONT size=2 face="serif">Three Months Ended</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD align=center colspan=5>
<FONT size=2 face="serif">Nine Months Ended</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>&nbsp;

</TD>
<TD align=center colspan=5 style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">September 30,</FONT>
</TD>
<TD style="border-bottom:1px solid #000000;">&nbsp;
</TD>
<TD align=center colspan=5 style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">September 30,</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>&nbsp;

</TD>
<TD align=center>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><FONT size=2 face="serif">2007</FONT></U>
</TD>
<TD align=center>&nbsp;</TD>
<TD align="center">&nbsp;
</TD>
<TD align=center>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><FONT size=2 face="serif">2006</FONT></U>
</TD>
<TD align=center>&nbsp;</TD>
<TD align="center">&nbsp;
</TD>
<TD align=center><U><FONT size=2 face="serif">2007</FONT></U> </TD>
<TD align=center>&nbsp;</TD>
<TD align="center">&nbsp;
</TD>
<TD align=center>
<U><FONT size=2 face="serif">2006</FONT></U>
</TD>
    <TD align=center>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD align=left>
<FONT size=2 face="serif">Numerator for basic and diluted loss</FONT>
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
</TR>
<TR valign="bottom">
<TD align=left>
<FONT size=2 face="serif">per common share:</FONT>
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD align=left>
<FONT size=2 face="serif">Net loss to common stockholders</FONT>
</TD>
<TD align=right>
<FONT size=2 face="serif">(&#36;722,185</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD align=right>
<FONT size=2 face="serif">(&#36;981,085</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD align=right>
<FONT size=2 face="serif">(&#36;2,232,531</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD align=right>
<FONT size=2 face="serif">(&#36;3,144,983</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
<TR>
<TD colspan=12>&nbsp;

</TD>
</TR>
<TR valign="bottom">
<TD align=left>
<FONT size=2 face="serif">Denominator for basic and diluted</FONT>
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD align=left>
<FONT size=2 face="serif">loss per common share:</FONT>
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
</TR>
<TR valign="bottom">
<TD align=left>
<FONT size=2 face="serif">Weighted average number of shares</FONT>
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD align=left>
<FONT size=2 face="serif">outstanding</FONT>
</TD>
<TD align=right>
<FONT size=2 face="serif">54,510,539</FONT>
</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=right>
<FONT size=2 face="serif">51,605,167</FONT>
</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=right>
<FONT size=2 face="serif">54,541,131</FONT>
</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=right>
<FONT size=2 face="serif">48,702,702</FONT>
</TD>
<TD align=left>&nbsp;

</TD>
</TR>
<TR>
<TD colspan=12>&nbsp;

</TD>
</TR>
<TR valign="bottom">
<TD align=left>
<FONT size=2 face="serif">Basic and diluted loss per common</FONT>
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
<TD>&nbsp;
</TD>
<TD align=left>&nbsp;

</TD>
<TD align=left>&nbsp;

</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
<TD align=left>
<FONT size=2 face="serif">share</FONT>
</TD>
<TD align=right>
<FONT size=2 face="serif">(&#36;0.01</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD align=right>
<FONT size=2 face="serif">(&#36;0.02</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD align=right>
<FONT size=2 face="serif">(&#36;0.04</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
<TD>&nbsp;
</TD>
<TD align=right>
<FONT size=2 face="serif">(&#36;0.06</FONT>
</TD>
<TD align=left>
<FONT size=2 face="serif">)</FONT>
</TD>
</TR>
</TABLE>


<P align="center"><FONT size=2 face="serif">F-58</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<br>

<TABLE border=0 width=100% cellspacing=0 cellpadding=0>
<TR>
     <TD width=99%></TD></TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=center>
<FONT size=2 face="serif">FORMERLY KNOWN AS eRXSYS, INC.</FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align=left>
      <div align="center"><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</FONT>
      </div></TD>
</TR>
<TR valign="bottom">
<TD align=center style="border-bottom:2px solid #000000;">
<FONT size=2 face="serif">SEPTEMBER 30, 2007</FONT>
</TD>
</TR>
</TABLE><BR>

<P align="left">
<FONT size=2 face="serif">9. INCOME TAXES</FONT></P>

<P align="left">
<FONT size=2 face="serif">Due to losses incurred for the three and nine months ended September 30, 2007 and 2006, there is no current provision for income taxes. </FONT></P>
<P align="left">
<FONT size=2 face="serif">10. SUBSEQUENT EVENTS:</FONT></P>
<P align="left">
<FONT size=2 face="serif">On October 23, 2007, the Company entered into a loan agreement with Mr. Haresh C. Sheth Under the terms of this agreement, the Company received &#36;50,000 for a twelve (12) month term at an interest rate of 12% per annum, with
interest payable on a monthly basis.</FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, Mr. Haresh C. Sheth has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of the
Company &#146; s common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other
equivalent market on which the Common Stock is quoted) calculated as of the trading day immediately preceding the date the Conversion Right is exercised. The Conversion Price shall not be less than &#36;0.40 or more than &#36;0.80. Mr. Haresh C.
Sheth shall be entitled to piggyback registration rights upon exercise of this conversion right.</FONT></P>
<P align="left">
<FONT size=2 face="serif">On October 23, 2007, the Company entered into a loan agreement with VVPH. Under the terms of this agreement, the Company received &#36;75,000 for a twelve (12) month term at an interest rate of 12% per annum, with interest payable
on a monthly basis. VVPH is a related party to this transaction, as its President is an officer and director of the Company. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of this agreement, VVPH has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the obligations into a number of shares of the Company &#146; s common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Common Stock on the OTC:BB (or such other equivalent market on which
the Common Stock is quoted) calculated as of the trading day immediately preceding the date the Conversion Right is exercised. The Conversion Price shall not be less than &#36;0.40 or more than &#36;0.80. VVPH shall be entitled to piggyback
registration rights upon exercise of this conversion right.</FONT></P>


<P align="left"><FONT size=2 face="serif">11. RESTATEMENT OF CERTAIN EQUITY ACCOUNTS</FONT></P>
<P align="left"><FONT size=2 face="serif">As more fully explained in Note 5 to
    the Company's December 31, 2006 and 2005 consolidated financial statements
    included elsewhere herein, the Company executed  two debt-extinguishment
    transactions in calendar 2005. In connection with these transactions, the
    former creditors returned a total of approximately 10.9 million shares of
    common stock to the  Company&#146;s treasury. As required by GAAP, the Company&#146;s
    consolidated statement of operations for the year ended December 31, 2005
    reported gain/loss on such transactions. This gain/loss was determined  in
    part based on measuring the aforementioned shares of treasury stock at par
    value; thus, the Company&#146;s accounting does not attribute any gain or
    loss (to any material extent) to the treasury stock elements of the transactions.</FONT></P>

<P align="left"><FONT size=2 face="serif">Upon further review in January 2008,
    management determined that GAAP which governs nonmonetary transactions requires
    the treasury stock described above to be accounted for at estimated fair
    value. As a result, the accompanying September 30, 2007 unaudited condensed
    consolidated balance sheet has been restated to increase both treasury stock
    and additional paid-in capital by approximately $2,849,000. Since GAAP prohibits
    the recognition of any &#147;gain&#148; on treasury stock transactions, this
    adjustment did not affect any of the Company&#146;s consolidated statements
    of operations.  In addition, because the aforementioned retroactive adjustment
    only affected equity accounts, the net impact on the Company&#146;s previously
    reported total stockholders&#146; deficit at September 30, 2007 was nil.</FONT></P>



<P align="center"><FONT size=2 face="serif">F-59</FONT></P>
<HR noshade align="center" width="100%" size=4>
<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center">
<B><FONT size=2 face="serif">13,599,250 Shares</FONT></B></P>

<P align="center">
<B><img src="c50495_logo.jpg" width="308" height="133"></B></P>

<P align="center">
<B><FONT size=2 face="serif">Common Stock </FONT></B></P>
<P align="center">&nbsp;</P>
<P align="center"><b><font size="2" face="serif">________________</font></b></P>
<P align="center">
<B><FONT size=2 face="serif">Prospectus</FONT></B><FONT size=2 face="serif"> </FONT></P>



<P align="center">
<FONT size=2 face="serif">February 14, 2008</FONT>
  </P>
<P align="center"><b><font size="2" face="serif">________________</font></b></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Until
March 25,
2008, all dealers that buy, sell, or trade the common stock, may be required
to deliver a prospectus, regardless of whether they are participating in this
offering. This is in addition to the dealers&#146; obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold  allotments or subscriptions.</FONT></P>

<HR noshade align="center" width="100%" size=4>



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