<SUBMISSION>
<ACCESSION-NUMBER>0000930413-08-002143
<TYPE>10KSB
<PUBLIC-DOCUMENT-COUNT>8
<PERIOD>20071231
<FILING-DATE>20080331
<DATE-OF-FILING-DATE-CHANGE>20080331
<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>10KSB
<ACT>34
<FILE-NUMBER>000-33165
<FILM-NUMBER>08726375
</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>10KSB
<SEQUENCE>1
<FILENAME>c52928_10ksb.htm
<TEXT>
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<P align="center">
<B><FONT size=2 face="serif">UNITED STATES </FONT></B><BR>
<B><FONT size=2 face="serif">SECURITIES AND EXCHANGE COMMISSION </FONT></B><BR>
<B><FONT size=2 face="serif">WASHINGTON, D.C. 20549 </FONT></B><BR>
<BR>
<B><FONT size=2 face="serif">FORM 10-KSB </FONT></B><BR>
<BR>
<FONT size=2 face="serif">(Mark One) </FONT><BR>
<B><FONT size=2 face="serif">[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF</FONT></B><BR>
<B><FONT size=2 face="serif">THE SECURITIES EXCHANGE ACT OF 1934 </FONT></B><BR>
<BR>
<B><FONT size=2 face="serif">For the Fiscal Year Ended December 31, 2007 </FONT></B><BR>
<BR>
<B><FONT size=2 face="serif">[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF</FONT></B><BR>
<B><FONT size=2 face="serif">THE SECURITIES EXCHANGE ACT OF 1934 </FONT></B><BR>
<BR>
<B><FONT size=2 face="serif">For the transition period from _________
to
__________
</FONT></B><BR>
<BR>
<B><FONT size=2 face="serif">Commission file number: 000-33165 </FONT></B><BR>
<BR>
<B><FONT size=2 face="serif">ASSURED PHARMACY, INC.</FONT></B><BR>
<FONT size=2 face="serif">(Exact name of registrant as specified in its charter) </FONT></P>
<TABLE width="70%" border=0 align="center" cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD width=49% align=center nowrap>
<B><FONT size=2 face="serif">Nevada</FONT></B>	</TD>
	<TD>&nbsp;	</TD>
	<TD width=49% align=center nowrap>
<B><FONT size=2 face="serif">98-0233878</FONT></B>	</TD>
</TR>
<TR valign="bottom">
	<TD align=center nowrap>
<FONT size=2 face="serif">(State or other jurisdiction of</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=center nowrap>
<FONT size=2 face="serif">(IRS Employer Identification No.)</FONT>	</TD>
</TR>
<TR valign="bottom">
	<TD align=center nowrap>
<FONT size=2 face="serif">incorporation or organization)</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
</TABLE><BR>
<P align="center">
<B><FONT size=2 face="serif">17935 Sky Park Circle, Suite F <BR>Irvine, California 92624 </FONT></B><BR>
<FONT size=2 face="serif">(Address of principal executive offices) </FONT><BR>
<BR>
<B><FONT size=2 face="serif">(949) 222-9971</FONT></B><FONT size=2 face="serif"> </FONT><BR>
<FONT size=2 face="serif">(Registrant's telephone number, including area code) </FONT><BR>
<BR>
<FONT size=2 face="serif">Securities registered pursuant to Section 12(b) of the Exchange Act: None </FONT></P>
<P align="center">
<FONT size=2 face="serif">Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001 par value </FONT></P>
<P align="left">
<FONT size=2 face="serif">Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes&nbsp;[X]&nbsp;&nbsp;No&nbsp;[&nbsp;&nbsp;&nbsp;] </FONT></P>
<P align="left">
<FONT size=2 face="serif">Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant&#146;s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form&nbsp;10-KSB. [&nbsp;&nbsp; ]</FONT></P>
<P align="left">
<FONT size=2 face="serif">Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes&nbsp;[&nbsp;&nbsp;&nbsp;]&nbsp;&nbsp;No&nbsp;[X] </FONT></P>
<P align="left">
<FONT size=2 face="serif">State issuer&#146;s revenues for its most recent fiscal
year: $13,923,487. </FONT></P>
<P align="left">
<FONT size=2 face="serif">State the aggregate market value of the voting and
non-voting common equity held by non-affiliates computed by reference to the
price at which the common equity was sold, or the average bid and asked price
of such common equity, as of a specified date within the past 60 days. As of
March 13, 2008: $5,439,849 shares at $0.12 per share).</FONT></P>
<P align="left">
<FONT size=2 face="serif">State the number of shares outstanding of each of the
registrant's classes of common equity, as of the latest practicable date: 54,263,085
shares of common stock issued and outstanding as of March 13, 2008. </FONT></P>
<P align="center">


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


<P align="center">
<B><U><FONT size=2 face="serif">TABLE OF CONTENTS</FONT></U></B><B><FONT size=2 face="serif"> </FONT></B></P>
<P align="center">
<IMG src="c52928_10ksbx2x1.jpg" border=0>
</P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD width=9% align=left nowrap>&nbsp;</TD>
    <TD  width=2%>&nbsp;</TD>
    <TD width=81% align=left nowrap>&nbsp;</TD>
    <TD  width=2%>&nbsp;</TD>
    <TD width=6% align=center nowrap><U><FONT size=2 face="serif">Page</FONT></U> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center colspan=5><U><FONT size=2 face="serif">PART I</FONT></U> </TD>
  </TR>
  <TR>
    <TD colspan=5>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 1.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Description of Business</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">3</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 1A</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Risk Factors</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><div align="center"><FONT size=2 face="serif">11</FONT></div></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 2.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Description of Property</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">16</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 3.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Legal Proceedings</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">17</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 4.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Submission of Matters to
        a Vote of Security Holders</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">17</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=5>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=5>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=center colspan=5><U><FONT size=2 face="serif">PART II</FONT></U> </TD>
  </TR>
  <TR>
    <TD colspan=5>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 5.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Market for Common Equity
        and Related Stockholder Matters</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">17</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 6.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Management&#146;s Discussion
        and Analysis</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">21</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 7.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Financial Statements</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">33</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 8.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Changes In and Disagreements
        With Accountants on Accounting and</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">51</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Financial Disclosure</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 8A.(T)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Controls and Procedures</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">51</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 8B.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Other Information</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">53</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=5>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=center colspan=5><U><FONT size=2 face="serif">PART III</FONT></U> </TD>
  </TR>
  <TR>
    <TD colspan=5>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 9.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Directors, Executive Officers,
        Promoters and Control Persons;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">53</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Compliance With Section 16(a)
        of the Exchange Act</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 10.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Executive Compensation</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">56</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 11.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Security Ownership of Certain
        Beneficial Owners and Management and</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">60</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Related Stockholder Matters</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 12.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Certain Relationships and
        Related Transactions</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">62</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 13.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Exhibits</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">65</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Item 14.</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Principal Accountant Fees
        and Services</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">67</FONT> </TD>
  </TR>
</TABLE>
<BR>

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


<P align="left">
<B><FONT size=2 face="serif">PART I </FONT></B><BR>
<BR>
<B><FONT size=2 face="serif">ITEM 1 - DESCRIPTION OF BUSINESS </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I><FONT size=2 face="serif">This Annual Report on Form 10-KSB (including the section regarding Management's Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking
statements regarding our business, financial condition, results of operations and prospects.  Words such as &#147;expects,&#148; &#147;anticipates,&#148; &#147;intends,&#148; &#147;plans,&#148; &#147;believes,&#148; &#147;seeks,&#148;
&#147;estimates&#148; and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this Annual
Report on Form 10-KSB. Additionally, statements concerning future matters are forward-looking statements. </FONT></I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Although
forward-looking statements in this Annual Report on Form 10-KSB reflect the good
faith judgment of our management, such statements can only be based on facts
and factors currently  known by us. Consequently, forward-looking statements
are inherently subject to risks and uncertainties and actual results and outcomes
may differ materially from the results and outcomes discussed in or anticipated
by the forward-looking  statements. Factors that could cause or contribute to
such differences in results and outcomes include, without limitation, those specifically
addressed under the heading &#147;</FONT><I><FONT size=2 face="serif">Risks Related
to Our  Business</FONT></I><FONT size=2 face="serif">&#148; below, as well as
those discussed elsewhere in this Annual Report on Form 10-KSB. Readers are urged
not to place undue reliance on these forward-looking statements, which speak
only as of the date  of this Annual Report on Form 10-KSB. We file reports with
the Securities and Exchange Commission (the &#147;<i>SEC</i>&#148; or &#147;</FONT><I><FONT size=2 face="serif">Commission</FONT></I><FONT size=2 face="serif">&#148;).
We make available on our website under
"Investors/SEC Filings,&#148; free of charge, our annual reports on Form 10-KSB,
quarterly reports on Form 10-QSB, current reports on Form 8-K and amendments
to those reports as soon as reasonably practicable after we electronically file
such  materials with or furnish them to the SEC. Our website address is www.assuredpharmacy.com.
You can also read and copy any materials we file with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can  obtain
additional information about the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site (www.sec.gov)
that contains reports, proxy and information statements, and other  information
regarding issuers that file electronically with the SEC, including us. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-KSB. Readers are urged to carefully
review and consider the various disclosures made throughout the entirety of this Annual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and
prospects. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As used in this Annual Report, the terms &#147;</FONT><I><FONT size=2 face="serif">we</FONT></I><FONT size=2 face="serif">,&#148; &#147;</FONT><I><FONT size=2 face="serif">us</FONT></I><FONT size=2 face="serif">,&#148;
&#147;</FONT><I><FONT size=2 face="serif">our</FONT></I><FONT size=2 face="serif">,&#148; and &#147;</FONT><I><FONT size=2 face="serif">Assured Pharmacy</FONT></I><FONT size=2 face="serif">&#148; mean Assured Pharmacy, Inc. and our subsidiaries
unless otherwise indicated.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Overview </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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><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">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 </FONT></P>
<P align="center">
<FONT size=2 face="serif">3 </FONT></P>

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


<P align="left">
<FONT size=2 face="serif">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><B><FONT size=2 face="serif"> </FONT></B></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;&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
$230,000 per pharmacy location, TPG would acquire a 49% ownership interest in
each pharmacy established under this agreement and we would own 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;&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;&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 $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 valign=top align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
	<TD valign=top align=right>
<FONT size=2 face="serif">i.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">$15,000 was paid on or about December 15, 2006;</FONT>	</TD>
</TR>
<TR><TD>&nbsp;</TD>
  <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR><TR>
  <TD valign=top align=right>&nbsp;</TD>
	<TD valign=top align=right>
<FONT size=2 face="serif">ii.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Eleven (11) consecutive monthly installments of $5,000 were paid during year ended December 31, 2007;</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
  <TD valign=top align=right>&nbsp;</TD>
	<TD valign=top align=right>
<FONT size=2 face="serif">iii.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Fourteen (14) consecutive monthly installments of $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>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
  <TD valign=top align=right>&nbsp;</TD>
	<TD valign=top align=right>
<FONT size=2 face="serif">iv.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">$180,000 payable together with interest at the rate
of prime plus 2% per annum commencing from the date of the Purchase Agreement
payable on or before February 15, 2009.</FONT></TD>
</TR>
</TABLE>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In
February 2004, we entered into an  agreement (the &#147;<I>TAPG Agreement</I>&#148;)
with  TAPG, L.L.C. (&#147;<I>TAPG</I>&#148;), a Louisiana limited liability company,
and formed Safescript Northwest,  Inc. (&#147;<I>Safescript
Northwest&#148;</I>), 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, </FONT></P>
<P align="center">
<FONT size=2 face="serif">4 </FONT></P>

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<P align="left">
<FONT size=2 face="serif">while TAPG owned the remaining 25%. In accordance with our shareholders agreement with TAPG, TAPG will provide start-up costs in the amount of $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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
TAPG Agreement provides that TAPG will contribute start-up costs in the amount
of $335,000 per pharmacy location established not to exceed five pharmacies.
Our contribution under the TAPG 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 $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 $190,000 for
the establishment of our second pharmacy location in Portland, Oregon. TAPG remains
obligated to contribute an additional $145,000 to satisfy their full contribution.
We and APN requested that TAPG provide the $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 $335,000
per pharmacy. The TAPG 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;&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>
<P align="center">
<FONT size=2 face="serif">5 </FONT></P>

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<PAGE><br>
<P align="left">
<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;&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 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 terms of the Technology License, we paid RxNT a licensing
fee of $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;&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 $54,000. </FONT></P>
<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;&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. 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We purchased 99% of our inventory of prescription drugs from one wholesale drug vendor during the year ended December 31, 2007. 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In fiscal 2007, 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 </FONT></P>
<P align="center">
<FONT size=2 face="serif">6 </FONT></P>

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<P align="left">
<FONT size=2 face="serif">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;&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 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
prescriptions 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;&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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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 six 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;&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, 2007 or December 31, 2006.</FONT></P>
<P align="center">
<FONT size=2 face="serif">7 </FONT></P>

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<P align="left">
<B><FONT size=2 face="serif">Existing and Probable Governmental Regulation</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"></FONT><I><FONT size=2 face="serif">Licensure Laws</FONT></I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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
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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"></FONT><I><FONT size=2 face="serif">Drug Enforcement Laws</FONT></I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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;&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;&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;&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>
  <TD nowrap valign=top>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<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>	</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">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">In return for purchasing, leasing, ordering or arranging for or recommending purchasing,</FONT>	</TD>
</TR>
</TABLE>
<P align="center">
<FONT size=2 face="serif">8 </FONT></P>

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<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td width="2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td width="93%"><FONT size=2 face="serif">leasing, or ordering any good, facility, service
        or item for which payment may be made under a federal or state health
    care program. </FONT></td>
  </tr>
</table>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 $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 $250,000 for individuals and up to $500,000 for organizations. Civil penalties include fines of up to $50,000 for each violation, monetary damages up to three times
the amount paid for referrals and/or 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;&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;&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.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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;&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 $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;&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;&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">9 </FONT></P>

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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"></FONT><I><FONT size=2 face="serif">HIPAA</FONT></I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">OBRA 1990</FONT></I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">Other Laws</FONT></I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 positioned to respond to these developments, we cannot predict the
outcome or effect of legislation resulting from these reform efforts.</FONT></P>
<P align="center">
<FONT size=2 face="serif">10 </FONT></P>

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<P align="left">
<B><FONT size=2 face="serif">Compliance with Environmental Laws</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During fiscal year ended December 31, 2007, 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As
of March 12, 2008, we have 39 employees of whom 32 are full-time employees. 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 width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=center nowrap><B><U><FONT size=2 face="serif">Characterization
            of Employee&#146;s Duties</FONT></U></B> </TD>
    <TD  width=1%>&nbsp;</TD>
    <TD align=center nowrap><B><U><FONT size=2 face="serif">Number of Employees</FONT></U></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><B><U><FONT size=2 face="serif">Number of Consultants</FONT></U></B> </TD>
  </TR>
  <TR>
    <TD colspan=5>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Corporate
        Management /</FONT> </TD>
    <TD  width=1%>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">3</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Officer</FONT> </TD>
    <TD  width=1%>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Sales
        / Business Development</FONT> </TD>
    <TD  width=1%>&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">9</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Technology</FONT> </TD>
    <TD  width=1%>&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">1</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Accounting</FONT> </TD>
    <TD  width=1%>&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">5</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Pharmacist</FONT> </TD>
    <TD  width=1%>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">8</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Technicians
        / Pharmacy</FONT> </TD>
    <TD  width=1%>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">12</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap><FONT size=2 face="serif">Driver</FONT> </TD>
    <TD  width=1%>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">1</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0</FONT> </TD>
  </TR>
</TABLE>
<BR>
<P align="left">
<B><FONT size=2 face="serif">ITEM 1A &#150; RISK FACTORS </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As of December 31, 2007, we had cash in the amount of $408,305. 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 December 31, 2007 were $8,229,630. 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 $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="center">
<FONT size=2 face="serif">11 </FONT></P>

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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our business is highly leveraged, and had total debt in the amount of $8,229,630 at December 31, 2007. 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><B><FONT size=2 face="serif"> </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif">Because we have only recently commenced business operations, we have incurred significant operating losses.</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 $2,609,531 for the year ended
December 31, 2007, $4,196,713 for the year ended December 31, 2006 and $5,917,816 for the year ended December 31, 2005. As of December 31, 2007, we had an accumulated deficit of approximately $23,008,195 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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;&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 year ended December 31, 2007 in the amount of $5,808,779 and had gross profit of
$3,199,248 on sales of $13,923,487 for the same period. We incurred operating expenses for the year ended December 31, 2006 in the amount of $5,871,564 and had gross profit of $1,674,851 on sales of $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="center">
<FONT size=2 face="serif">12 </FONT></P>

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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As
noted in our financial statements, we have only recently commenced operations.
At December 31, 2007, we had an accumulated deficit of $23,008,195 and for fiscal
year ended December 31, 2007 recurring losses from operations and negative cash
flows from operating activities of $2,246,690. We also had negative working capital
of $4,093,065 as of December 31, 2007. The audit report of Miller, Ellin &amp; Company,
LLP for the fiscal year  ended December 31, 2007 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;&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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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. 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 </FONT></P>
<P align="center">
<FONT size=2 face="serif">13 </FONT></P>

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<PAGE><br>


<P align="left">
<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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;&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, 2007, we purchased 99% 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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="center">
<FONT size=2 face="serif">14 </FONT></P>

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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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>
<FONT size=2 face="serif">our ability to attract new customers and retain our current customers;</FONT></LI>
<LI>
<FONT size=2 face="serif">the emergence of competition;</FONT></LI>
<LI>
<FONT size=2 face="serif">the amount and timing of operating expenses and capital expenditures relating to the business.</FONT></LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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></P>
<P align="center">
<FONT size=2 face="serif">15 </FONT></P>

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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 $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">ITEM 2 - PROPERTIES </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We currently operate six retail pharmacies at the following locations: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD width="4%" align=left nowrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD width="4%" align=left nowrap><FONT size=2 face="serif">-</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD width="92%" align=left nowrap><FONT size=2 face="serif">2431 N. Tustin
        Ave., Unit L, Santa Ana, California, 92705</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">7000 Indiana, Ave., Suite
        112, Riverside, California, 92506</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">12071 124th Avenue NE, Kirkland,
        Washington, 98034</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">10196 SW Park Way, Portland,
        Oregon, 97225</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">520 South El Camino Real
        - Building 4B, Gresham, Oregon, 97030</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">801 South Rancho Drive, Suite
        E3A, Las Vegas, Nevada 89106</FONT> </TD>
  </TR>
</TABLE>
<BR>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 </FONT></P>
<P align="center">
<FONT size=2 face="serif">16 </FONT></P>

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<P align="left">
<FONT size=2 face="serif">1,500 square feet and are leased from various property management companies for approximately five years. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">ITEM 3 - LEGAL PROCEEDINGS </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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="left">
<B><FONT size=2 face="serif">ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> None. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">PART II </FONT></B></P>
<P align="left">
<B><FONT size=2 face="serif">ITEM 5 - 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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 were
provided by Yahoo and reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.</FONT></P>
<TABLE width="60%" border=0 align="center" cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><I><FONT size=2 face="serif">Fiscal
          Year Ended December 31, 2007</FONT></I> </TD>
    <TD width="1%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="10%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="1%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="10%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Quarter
        Ended</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">High
        $</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Low
        $</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">March
        31, 2007</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.42</FONT> </TD>
    <TD align=left nowrap 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>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">June
        30, 2007</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.38</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left 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 align=left nowrap 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 align=left nowrap 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" bgcolor="#E5FFFF">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">December
        31, 2007</FONT> </TD>
    <TD align=left nowrap 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 align=left nowrap 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 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 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 nowrap style="border-bottom:1px solid #000000;"><I><FONT size=2 face="serif">Fiscal
          Year Ended December 31, 2006</FONT></I> </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 align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Quarter
        Ended</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">High
        $</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Low
        $</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">March
        31, 2006</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.57</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.24</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">June
        30, 2006</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.49</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left 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, 2006</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.40</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.35</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">December
        31, 2006</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.44</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">0.35</FONT> </TD>
  </TR>
</TABLE>
<BR>
<P align="center">
<FONT size=2 face="serif">17 </FONT></P>

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

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On
March 13, 2008, the last sales price of our common stock was $0.12. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Penny Stock</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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
$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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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="center">
<FONT size=2 face="serif">18 </FONT></P>

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

<P align="left">
<B><FONT size=2 face="serif">Dividends</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">Recent Sales of Unregistered Securities </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif"> </FONT></B><FONT size=2 face="serif">During the year ended December 31, 2007, we issued unregistered securities to the persons, as described below. We believe that each transaction was exempt from the registration
requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof and/or Rule 506 of Regulation D promulgated thereunder.</FONT></P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As
    of December 31, 2007, we are obligated under the terms of previous debentures
    that matured and were renewed, to issue an aggregate of 1,444,124 shares
of our common stock as payment of interest.</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During
    the fiscal year ended December 31, 2007 and December 31, 2006, we entered
    into convertible loan agreements in the aggregate principal amount of $1,488,000
    at interest rates ranging from 12% to 15% per annum. As of December 31, 2007,
    the principal amount of $1,063,000 is outstanding. Pursuant to the terms
    of these agreements, the note holder 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 our common stock determined at a conversion
    price equal to the rolling seven (7) trading day weighted average closing
    bid price for our common stock on the OTCBB (or such other equivalent market
    on which the Company's common stock is quoted) calculated as of the trading
    day immediately preceding the date the conversion right is exercised. The
    agreements provide that the conversion price shall not be less than $0.40
    or more than $0.80 and the note holder shall be entitled to piggyback registration
    rights upon exercise of this conversion right.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During
the three months ended December 31, 2007, we issued unsecured convertible debentures
carrying an interest rate of 18% per annum and raised total proceeds of $ 950,000.
The debentures mature on March 31, 2008. The debentures provide that all the
interest is payable solely in the shares of our common stock on the issuance
date. As of December 31, 2007, we are obligated to issue 260,570 shares of common
stock as payment of total interest on the debentures. The number of shares issued
as interest was calculated based upon average closing price for our common stock
on the OTCBB for the five (5) consecutive trading days preceding the issuance
date. The debenture holders have the right to convert their debenture into fully
paid non-assessable shares of our common stock at $0.40. Upon any conversion
of the debentures, the debenture holders will also be issued Common Stock Purchase
Class A Warrants to purchase one (1) share of common stock at an exercise
price of $0.60 exercisable for two (2) years after the conversion date and Common
Stock Purchase Class B Warrants to purchase one (1) share of common
stock at an exercise price of $0.80 exercisable for three (3) years. One Class
A Warrant and one Class B Warrant will be issued for each two shares of common
stock issued upon conversion of the debentures.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During
the three months ended September 30, 2007, we issued one-year unsecured convertible
debentures carrying an interest rate of 18% per annum and raised  total proceeds
of $325,000. The debentures provide that all the interest is payable solely
in the shares of our common stock on the issuance date. As of December 31, 2007,
we issued 97,445 shares of our common stock as payment of interest and are  obligated
to issue a further 129,461 shares of common stock as payment of interest. The
number of shares issued as interest was calculated based upon  average closing
price for our common stock on OTCBB for the five (5) consecutive trading days
preceding the issuance date. The debenture holders have the right to convert
their debentures into fully paid non-assessable shares of our common  stock at
$0.40. Upon any conversion of the debentures, the debenture holders will also
be issued Common Stock Purchase Class A Warrants to purchase one (1) share of
common stock at an exercise price of $0.60 exercisable for two (2)
years  after the conversion date and Common Stock Purchase Class B Warrants to
purchase one (1) share of common stock at an exercise price of $0.80
exercisable for three (3) years. One Class A Warrant and one Class B Warrant
will be issued for  each two shares of common stock issued upon conversion of
the debentures.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During the three months ended June 30, 2007, we issued a one-year unsecured convertible debenture carrying an interest rate of 18% per annum and raised total
proceeds of $100,000. The debenture provides that all the interest is payable solely in the shares of our common stock on the </FONT></P>
<P align="center">
<FONT size=2 face="serif">19 </FONT></P>

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


<P align="left">
<FONT size=2 face="serif">issuance date. As of December 31, 2007, we issued 68,182
shares of our common stock as payment of interest. The number of shares issued
as interest was calculated based upon average closing price for our common stock
on the OTCBB for the five (5) consecutive trading days preceding the issuance
date. The debenture holder has the right to convert its debenture into fully
paid non-assessable shares of our common stock at $0.40. Upon any conversion
of the debentures, the debenture holders will also be issued Common Stock Purchase
Class A Warrants to purchase one (1) share of common stock at an exercise
price of $0.60 exercisable for two (2) years after the conversion date and Common
Stock Purchase Class B Warrants to purchase one (1) share of common
stock at an exercise price of $0.80 exercisable for three (3) years. One Class
A Warrant and one Class B Warrant will be issued for each two shares of common
stock issued upon conversion of the debentures.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In the three months ended March 31, 2007, we issued one-year unsecured convertible debentures carrying an interest rate of 18% per annum and raised total proceeds of $500,000. 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. </FONT><FONT size=2
face="serif">As of December 31, 2007, we issued 254,614 shares of our common stock as payment of interest.</FONT><FONT size=2
face="serif"> 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 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 $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 $0.60 exercisable for 12 months after the conversion date and one (1) share of common stock at an exercise price of $0.80 exercisable for 24 months. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We
previously issued warrants to purchase 3,695,875 shares of our common stock at
the exercise price of $0.60 per share as part of an exempt offering that was
completed on June 17, 2004. On June 29, 2007, our board of directors further
extended the termination date of these 3,695,875 warrants from June 30, 2007
to December 31, 2007. On December 31, 2007, these warrants expired without being
exercised. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In
February 2007, we granted as a performance base bonus to an officer of the company
options to purchase 750,000 shares of our common stock vesting over a three year
period of time from the date of issuance and exercisable at the exercise price
of $0.60 per share. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In
February 2007, we issued 100,000 shares of common stock, valued at $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 our common stock, exercisable at $0.60
per share until December 31, 2009, and granted warrants to purchase 100,000 shares
of our common stock, exercisable at $0.80 per share until December 31, 2009 to
a consultant in exchange for services rendered.</FONT></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In
    January 2007, we issued 300,000 shares of our common stock to outside members
    of our board of directors in consideration for services rendered as a member
    of the board. These shares were valued at $120,000 (estimated to be the fair
value based on the trading price on the issuance date). </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In
January 2007, we issued 75,000 shares of common stock to one consultant for services
rendered, valued at $28,500 (estimated to be the fair value based on the trading
price on the issuance date).</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Purchases of Equity Securities by the Issuer and Affiliated Purchasers</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif"></FONT></B><FONT size=2 face="serif">We did not purchase any of our shares of common stock or other securities during the year ended December 31, 2007. </FONT><B><FONT size=2 face="serif"> </FONT></B></P>
<P align="center">
<FONT size=2 face="serif">20 </FONT></P>

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<P align="left">
<B><FONT size=2 face="serif">ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS AND
RESULTS OF OPERATION</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;&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;&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 </FONT></P>
<P align="center">
<FONT size=2 face="serif">21 </FONT></P>

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<P align="left">
<FONT size=2 face="serif">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;&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;&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;<i>Rainmaker</i>&#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="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The table set forth below summarizes the number of prescriptions filled by our six operating pharmacies
during the year ended December 31, 2007 and 2006.</FONT></P>

  <table width="91%" align="center" cellpadding=0 cellspacing=0  style="border:1px solid #000000;">
    <tr valign="bottom">
      <td align=left nowrap>&nbsp;</td>
      <td width="1%" align=center nowrap style="border-left:1px solid #000000;">&nbsp;</td>
      <td width="30%" align=center nowrap><font size=2 face="serif">Year ended</font> </td>
      <td width="1%" align=center nowrap>&nbsp;</td>
      <td width="1%" align=center nowrap style="border-left:1px solid #000000;">&nbsp;</td>
      <td width="30%" align=center nowrap><font size=2 face="serif">Year ended</font> </td>
      <td width="1%" align=center nowrap>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
      <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
      <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">December
          31, 2007</font> </td>
      <td align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
      <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
      <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">December
          31, 2006</font> </td>
      <td align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    </tr>
    <tr valign="bottom" bgcolor="#E5FFFF">
      <td align=left nowrap><font size=2 face="serif">Total Number of Prescriptions</font> </td>
      <td align=center nowrap style="border-left:1px solid #000000;">&nbsp;</td>
      <td align=center nowrap><font size=2 face="serif">96,192</font> </td>
      <td align=center nowrap>&nbsp;</td>
      <td align=center nowrap style="border-left:1px solid #000000;">&nbsp;</td>
      <td align=center nowrap><font size=2 face="serif">54,891</font> </td>
      <td align=center nowrap>&nbsp;</td>
    </tr>
</table>

<BR>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our second pharmacy established in Portland, Oregon commenced operations on June 21, 2006. Our pharmacy in Gresham, Oregon began filling prescriptions during January 2007. Excluding the
prescriptions filled at these pharmacies and based upon only four pharmacies which had active operations during the year 2007 and 2006, total number of prescriptions filled at our pharmacies for the year ended December 31, 2007 increased to 74,743
which is approximately a 42% increase from the 52,655 total prescriptions filled at the same four pharmacies in the prior year ended December 31, 2006. Total number of prescriptions filled at our all pharmacies for the year ended December 31, 2007
increased to 96,192 which is approximately a 75% increase from the 54,891 total prescriptions filled at all our pharmacies in the prior year ended December 31, 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;&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;&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 </FONT></P>
<P align="center">
<FONT size=2 face="serif">22 </FONT></P>

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<P align="left">
<FONT size=2 face="serif">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 year ended December 31, 2007, we generated $162,890 in revenue for compounded drugs. The gross profit margin on these prescriptions
was 61%.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On January 3, 2006, we incorporated Assured Pharmacy Plus, Corp. (&#147;</FONT><I><FONT size=2 face="serif">Plus Corp</FONT></I><FONT size=2 face="serif">.&#148;) as a wholly-owned subsidiary
to develop this opportunity. We entered into an arrangement with Affiliated Healthcare Administrators (&#147;</FONT><I><FONT size=2 face="serif">AHA</FONT></I><FONT size=2 face="serif">&#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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Also on January 3, 2006, we incorporated Assured Pharmacy DME, Corp. (&#147;</FONT><I><FONT size=2 face="serif">DME</FONT></I><FONT size=2 face="serif">&#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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our revenue generated from the operations of Plus Corp. and DME for the years ended December 31, 2006 and 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="center">
<FONT size=2 face="serif">23 </FONT></P>

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<PAGE><br>

<P align="left">
<B><FONT size=2 face="serif">Results of Operations for the Years Ended December 31, 2007 and 2006 </FONT></B></P>
<P align="left">
<I><FONT size=2 face="serif">Revenues</FONT></I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our total revenue reported for the year ended December 31, 2007 was $13,923,487, a 76% increase from $7,897,118 for the year ended December 31, 2006. Our revenue for the year ended December 31, 2007 and 2006 was generated
almost exclusively from the sale of prescription drugs. The average revenue generated per prescription during the year ended December 31, 2007 was $144. We generated more revenue in the year ended December 31, 2007 than in any other annual period
since our inception.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 2006 and 2007: </FONT></P>
<table width="80%" align="center" cellpadding=0 cellspacing=0  style="border:1px solid #000000;">
  <tr valign="bottom">
    <td width="1%" align=left nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td width="1%" align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td width="1%" align=right nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">2006</font> </td>
    <td width="1%" align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td width="1%" align=right nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">2007</font> </td>
    <td width="1%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Quarterly
        Period Ended March 31</font> </td>
    <td align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;<font size=2 face="serif">$1,515,645</font> </td>
    <td align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;<font size=2 face="serif">$2,733,685</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Quarterly
        Period Ended June 30</font> </td>
    <td align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;<font size=2 face="serif">$1,894,976</font> </td>
    <td align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;<font size=2 face="serif">$3,305,890</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Quarterly
        Period Ended September 30</font> </td>
    <td align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;<font size=2 face="serif">$2,310,248</font> </td>
    <td align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;<font size=2 face="serif">$3,676,798</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 align=left nowrap><font size=2 face="serif">Quarterly Period Ended December
        31</font> </td>
    <td align=right nowrap>&nbsp;</td>
    <td align=right nowrap style="border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap>&nbsp;<font size=2 face="serif">$2,176,249</font> </td>
    <td align=right nowrap>&nbsp;</td>
    <td align=right nowrap style="border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap>&nbsp;<font size=2 face="serif">$4,207,115</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
</table>
<BR>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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. In 2008, we consolidated the operations
of two of our pharmacies and opened a new pharmacy at Las Vegas.
We plan to open another pharmacy at Oak Lomita in the  second quarter of 2008.
We anticipate the establishment of these additional pharmacies will increase
our revenues for the fiscal year ended December 31, 2008.</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
total cost of sales for the year ended December 31, 2007 was $10,724,239, a 72%
increase from $6,222,267 for the year ended December 31, 2006. 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.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Gross Profit</FONT></I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Gross
profit increased to $3,199,248, or approximately 23% of sales, for the year ended
December 31, 2007. This is an increase from a gross profit of $1,674,851, or
approximately 21% of sales for the year ended December 31, 2006.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The increase in the gross profit percentage for the year ended December 31, 2007 when compared to the prior fiscal year is attributable to increased sales of generic type drugs which have lower costs and higher gross
margins.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Operating Expenses</FONT></I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Operating expenses for the year ended December 31, 2007 was $5,808,779, a 1% decrease from $5,871,564 for the year ended December 31, 2006. Our operating expenses for the year ended December 31, 2007 consisted of salaries
and related expenses of $2,670,088, consulting and other compensation of $921,258, and selling, general and administrative expenses of $2,217,433. Our operating expenses for the year ended December 31, 2006 consisted of salaries and related expenses
of $2,193,682, consulting and other compensation of $1,555,354, selling, general and administrative expenses of $2,122,528.</FONT></P>
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<FONT size=2 face="serif">24 </FONT></P>

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<PAGE><br>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Salaries
and related expenses were significantly higher in the year ended December 31,
2007 when compared to the previous fiscal year primarily as a result of increase
in sales and the opening of new pharmacies. The significant decrease in consulting
and other compensation is primarily attributable to less consulting services
utilized in the fiscal year ended 2007. The increase in selling, general and
administrative expenses is nominal. </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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During the year ended December 31, 2007, we reported other expenses in the amount of $644,700, compared to $363,882 for the prior year. We incurred interest expense of $644,447 during the year ended December 31, 2007 as
compared to $201,735 during the year ended December 31, 2006. Interest expense for the year ended December 31, 2007 was incurred on financing from related parties and convertible debentures issued during the reporting period.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Net Loss</FONT></I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Net
loss for the year ended December 31, 2007 was $3,272,818, compared to net loss
of $4,501,839 for the year ended December 31, 2006. 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our loss per common share for the year ended December 31, 2007 was $0.06 , compared to a loss per common share of $0.09 for the year ended December 31, 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As
of December 31, 2007, we had $408,305 in cash which primarily resulted from funds
raised in the private offering of unsecured convertible debentures. As of December
31, 2007, we had current assets in the amount of $3,183,480 and had current liabilities
in the amount of $7,276,545 resulting in a working capital deficit of $4,093,065.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Operating
activities used $2,246,690 in cash for the year ended December 31, 2007. Our
net loss of $3,272,818, less non-cash expenses of $1,100,358 principally for
$451,285 for non-cash services, $285,124 for amortization of debt discount and
$181,362 of depreciation and amortization were the primary reasons for our negative
operating cash flow. Investing activities during the year ended December 31,
2007 used $112,385 for the purchase of property. Net cash flows provided by financing
activities during the year ended December 31, 2007 was $2,300,976. We received
$1,875,000 as proceeds from the issuance of debentures and $425,976 as proceeds
from the issuance of notes during year ended December 31, 2007.
</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As of December 31, 2007, there were no off balance sheet arrangements.</FONT><B><FONT size=2 face="serif"> </FONT></B></P>

<P align="center">
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<PAGE><br>

<P align="left">
<B><FONT size=2 face="serif">Going Concern </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
accompanying 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 December 31, 2007, we had an accumulated deficit of $23,008,195,
recurring losses from operations of prior years and negative cash flow from operating
activities of $2,246,690 for the year ended December 31, 2007. We also had a
negative working capital of $4,093,065 as of December 31, 2007. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 year ending
December 31, 2008. 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;&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;&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>
<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></LI>
<LI>
<FONT size=2 face="serif">We are aggressively signing up new physicians.</FONT></LI>
<LI>
<FONT size=2 face="serif">We are seeking investment capital.</FONT></LI>
<LI>
<FONT size=2 face="serif">We implemented a new marketing strategy and retained
additional sales personnel to attract business.</FONT></LI>
<LI>
<FONT size=2 face="serif">We consolidated our two pharmacies in Portland, Oregon
into a single operation. This consolidation is expected to allow us to further
leverage our existing infastructure and is expected to result in a reduction
of costs.</FONT></LI>
<LI>
<FONT size=2 face="serif">In March 2008, we entered into an accounts receivable
purchase agreement whereby we have agreed
to sell certain accounts receivable
for a price equal to 80% of the outstanding
accounts receivable
being purchased. We expect this additional source of working
capital to help significantly with the daily operations.</FONT></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;&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 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>
<P align="left">
<B><FONT size=2 face="serif">Inventories</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 </FONT></P>
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<FONT size=2 face="serif">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;&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;&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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We adopted Statement of Financial Accounting Standard (&#147;<i>SFAS</i>&#148;) No. 144, &#147;</FONT><I><FONT size=2 face="serif">Accounting for the Impairment or Disposal of Long-Lived
Assets</FONT></I><FONT size=2 face="serif">,&#148; 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;&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;&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 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 make adjustment  accordingly.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Intangible Assets</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Statement of Financial Accounting standard (&#147;<i>SFAS</i>&#148;) No. 142,&#147;<i>Goodwill
and Other Intangible Assets</i>,&#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;&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>

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<B><FONT size=2 face="serif">Revenue Recognition</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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;&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;</FONT><I><FONT size=2 face="serif">Accounting for Shipping and Handling Fees and Costs.</FONT></I><FONT size=2 face="serif">&#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;&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;&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 awards  are no longer probable of vesting, any previously
recognized compensation cost should be reversed. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Statement
of Financial Accounting Standards No. 156, &#147;<i>Accounting for Servicing
of Financial Assets&#151;an amendment of FASB Statement No. 140</i>,&#148; pertains
to the servicing of financial assets and was issued in March 2006 and should
be adopted as of the beginning of an entity&#146;s 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Statement of Financial Accounting Standards No. 157, &#147;<i>Fair Value Measurements</i>.&#148; 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 </FONT></P>
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<FONT size=2 face="serif">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></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Statement of Financial Accounting Standards No. 159, &#147;<i>The Fair Value Option for Financial Assets and Financial Liabilities &#150; Including an Amendment to FASB Statement No. 115.</i>&#148; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB Staff Position (FSP) No. FAS 13-2, &#147;<i>Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction</i>,&#148; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The FASB issued Interpretation No. 48, &#147;<i>Accounting for Uncertainty in Income Taxes&#151;an Interpretation of FASB Statement No. 109</i>&#148; (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 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB Staff Position (FSP) No. FTB 85-4-1, &#147;<i>Accounting for Life Settlement Contracts by Third-Party Investors</i>,&#148; 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, &#147;<i>Accounting for Purchases of Life Insurance</i>,&#148; and FASB Statement No. 133, &#147;<i>Accounting for Derivative Instruments and Hedging Activities</i>.&#148; </FONT></P>
<P align="center">
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB
Staff Position (FSP) No. AUG AIR-1, &#147;<i>Accounting for Planned Major Maintenance
Activities</i>,&#148;
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. We do not expect that
this pronouncement will have any significant effect on future financial statements. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB
Staff Position No. FAS 126-1, &#147;<i>Applicability of Certain Disclosure and
Interim Reporting Requirements for Obligors for Conduit Debt Securities</i>,&#148;
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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">FASB
Staff Position No. FIN 46(R)-6, &#147;<i>Determining the Variability to Be Considered
in Applying FASB Interpretation No. 46(R)</i>.&#148; 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), &#147;<i>Consolidation
of Variable Interest Entities</i>.&#148; 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>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In
September 2005, AcSEC issued Statement of Position 05-1: &#147;<i>Accounting
by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications
or Exchanges of Insurance  Contracts (SOP 05-1)</i>.&#148; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF
Issue 05-1, &#147;<i>Accounting for the Conversion of an Instrument That Became
Convertible upon the Issuer's Exercise of a Call Option</i>.&#148; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF
Issue 06-1, &#147;<i>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</i>.&#148; 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 </FONT></P>
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<FONT size=2 face="serif">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="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF
Issue 06-2, &#147;<i>Accounting for Sabbatical Leave and Other Similar Benefits
Pursuant to FASB Statement No. 43</i>,&#148; &#147;<i>Accounting for Compensated
Absences</i>&#148; 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, &#147;<i>Accounting
for Compensated Absences</i>.&#148; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF
Issue 06-3, &#147;<i>How Sales Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement (That Is,
Gross Versus Net Presentation)</i>.&#148; 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</FONT></P>
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<FONT size=2 face="serif">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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF
Issue 06-4, &#147;<i>Accounting for Deferred Compensation and Postretirement
Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements</i>.&#148; 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>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF
Issue 06-5, &#147;<i>Accounting for Purchases of Life Insurance&#151;Determining
the Amount That Could Be Realized in Accordance with FASB Technical Bulletin
No. 85-4</i>.&#148; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF
Issue 06-8, &#147;<i>Applicability of the Assessment of a Buyer's Continuing
Investment under FASB Statement No. 66 for Sales of Condominiums</i>.&#148; 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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">EITF
Issue 06-10, &#147;<i>Accounting for Collateral Assignment Split-Dollar Life
Insurance Arrangements</i>.&#148; 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;&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;&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>
<P align="center">
<FONT size=2 face="serif">32</FONT></P>

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


<P align="left">
<FONT FACE="serif" SIZE="2"><U>Table of Contents</U></FONT></P>
<P align="left">
<B><FONT size=2 face="serif">ITEM 7 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</FONT></B></P>

<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Index
    to Financial Statements:</font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br>
</div>
<div align="center">&#160;</div>

  <table cellpadding="0" cellspacing="0" border="0" width="100%">
    <tr>
      <td align="left" colspan="2" valign="top" width="80%"><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Audited
              Financial Statements:</strong></font></div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div></td>
    </tr>
    <tr>
      <td align="left" valign="top" width="5%"><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-2</font></div></td>
      <td align="left" valign="top" width="74%"><div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Report
      of Independent Registered Public Accounting Firm;</font></div></td>
    </tr>
    <tr>
      <td align="left" valign="top" width="5%"><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font></div></td>
      <td align="left" valign="top" width="74%"><div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Consolidated
                Balance Sheets as of December 31, 2007 and 2006;</font></div></td>
    </tr>
    <tr>
      <td align="left" valign="top" width="5%"><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-4</font></div></td>
      <td align="left" valign="top" width="74%"><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Consolidated
                Statements of Operations - Years Ended December 31, 2007 and
                2006;</font></div></td>
    </tr>
    <tr>
      <td align="left" valign="top" width="5%"><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font></div></td>
      <td align="left" valign="top" width="74%"><div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Consolidated
                Statements of Stockholders&#8217; Equity (Deficit) and Comprehensive
                Loss for the Years Ended December 31, 2007 and 2006; </font></div></td>
    </tr>
    <tr>
      <td align="left" valign="top" width="5%"><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
         <font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-6</font></div></td>
         <td align="left" valign="top" width="74%">
         <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
         <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2007
                and 2006;</font></div></td>
    </tr>
    <tr>
      <td align="left" valign="top" width="5%"><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
          <font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F-7</font>
          <font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font></div></td>
          <td align="left" valign="top" width="74%">
          <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
          <div style="DISPLAY: block; MARGIN-LEFT: 54pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notes
                to Consolidated Financial Statements;</font></div></td>
    </tr>
  </table>
<HR noshade width="100%" size=4>
<P STYLE="page-break-before:always"></P>
<PAGE><br>

<BR>
<P align="center"><B><FONT size=2 face="serif">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></B></P>
<P align="left">
<FONT size=2 face="serif">To the Board of Directors and Stockholders</FONT><BR>
<FONT size=2 face="serif">Assured Pharmacy, Inc. </FONT></P>
<P align="left">
<FONT size=2 face="serif">We have audited the consolidated balance sheets as of December 31, 2007 and 2006 and the related statements of operations, stockholders' deficit and cash flows of Assured Pharmacy, Inc. and Subsidiaries for the years ended
December 31, 2007 and 2006. 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 years ended December 31, 2007 and 2006 in
conformity with accounting principles generally accepted in the United States. </FONT></P>
<P align="left">
<FONT size=2 face="serif">As more fully described in Note 11, 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'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 $2.2 million in 2007 and
$3.7 million in 2006, an accumulated deficit of approximately $23 million at December 31, 2007 and $19.7 million at December 31, 2006, and recurring losses from operations for the years ended December 31, 2007 and 2006. These factors, among others,
raise substantial doubt about the Company's ability to continue as a going concern. Management'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="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD width=49% align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD width=49% align=left nowrap>
<FONT size=2 face="serif">/s/ Miller, Ellin &amp; Company, LLP</FONT>	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">CERTIFIED PUBLIC ACCOUNTANTS</FONT>	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="serif">New York, New York</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="serif">March 26, 2008</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
</TABLE><BR>
<P align="center">
<FONT size=2 face="serif">F-2</FONT></P>

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

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


<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=2 face="serif">CONSOLIDATED BALANCE SHEETS</FONT></B><BR>
<B><FONT size=2 face="serif">DECEMBER 31, 2007 AND 2006</FONT></B></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 style="border-bottom:1px solid #000000;">&nbsp;	</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">2007</FONT></B>	</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=right nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">2006</FONT></B>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=center nowrap>
<B><FONT size=2 face="serif">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 align=right 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>
<B><FONT size=2 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 align=right 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" bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Cash</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">408,305</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">466,404</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accounts receivable, net</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">2,167,969</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">884,026</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Inventories</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">440,354</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">414,914</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 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=2 face="serif">166,852</FONT>	</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=right nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">368,530</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">3,183,480</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">2,133,874</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<B><FONT size=2 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 align=right 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" bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accounts receivable - non-current, net</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">49,868</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">92,313</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">Property and Equipment, net</FONT></B>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">373,961</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">442,939</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=left nowrap>
<B><FONT size=2 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=2 face="serif">607,816</FONT>	</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=right nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">607,816</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>&nbsp;	</TD>
	<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">4,215,125</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;	</TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">3,276,942</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" bgcolor="#E5FFFF">
	<TD align=center nowrap>
<B><FONT size=2 face="serif">LIABILITIES AND 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 align=right 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>
<B><FONT size=2 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 align=right 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" bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accounts payable</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">2,306,415</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">1,051,260</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Notes payable</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=center nowrap>
<FONT size=2 face="serif">-</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">62,027</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Unsecured convertible notes payable</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">3,833,500</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">1,958,500</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 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=2 face="serif">1,136,630</FONT>	</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=right nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
	<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">20,000</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">7,276,545</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">3,091,787</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<B><FONT size=2 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=2 face="serif">276,337</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">904,967</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">Minority Interest</FONT></B>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">676,748</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">658,160</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<B><FONT size=2 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 align=right 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>
<B><FONT size=2 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 align=right 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; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Preferred shares; par value $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 align=right 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; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 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 align=right 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; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">or outstanding</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=center nowrap>
<B><FONT size=2 face="serif">-</FONT></B>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=center nowrap>
<B><FONT size=2 face="serif">-</FONT></B>	</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=center nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=center nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Common shares; par value $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 align=right 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" bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">150,000,000 shares authorized, 65,659,609 common shares issued and outstanding</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">65,659</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">64,764</FONT>	</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=right 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>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Treasury stock at cost, 10,858,658 shares</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">(2,849,366</FONT>	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT>	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">(2,849,366</FONT>	</TD>
	<TD align=left nowrap>
<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=right 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>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Additional paid-in capital, net</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">21,777,397</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>&nbsp;</TD>
	<TD align=right nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">21,142,007</FONT>	</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=right 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>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 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=2 face="serif">(23,008,195</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>	</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=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(19,735,377</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=right 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>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 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=2 face="serif">(4,014,505</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>	</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=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(1,377,972</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>	</TD>
</TR>
<TR valign="bottom" bgcolor="#E5FFFF">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD width="1%">&nbsp;	</TD>
	<TD width="1%" align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD width="6%" align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">4,215,125</FONT>	</TD>
	<TD width="1%" align=left nowrap style="border-bottom:3px double #000000;">&nbsp;	</TD>
	<TD width="4%" align=right nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
	<TD width="1%" align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD width="6%" align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">3,276,942</FONT>	</TD>
	<TD width="1%" align=left nowrap style="border-bottom:3px double #000000;">&nbsp;	</TD>
</TR>
</TABLE>
<P align="left">&nbsp;</P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td colspan="2"><div style="border-bottom:1px solid #000000"> &nbsp;</div></td>
  </tr>
</table>

<P align="center"><FONT size=2 face="serif">The accompanying notes are an integral part of the consolidated financial statements.<BR><BR>F-3</FONT></P>

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

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


<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=2 face="serif"> CONSOLIDATED STATEMENTS OF OPERATIONS</FONT></B></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD colspan="7" align=center nowrap style="border-bottom:1px solid #000000;">
      <B><FONT size=2 face="serif">YEARS ENDED DECEMBER 31</FONT></B>	</TD>
  </TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD colspan="2" align=center nowrap style="border-bottom:1px solid #000000;">
      <B><FONT size=2 face="serif">2007</FONT></B>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
	<TD width="4%" align=left nowrap>&nbsp;</TD>
	<TD colspan="2" align=center nowrap style="border-bottom:1px solid #000000;">
      <B><FONT size=2 face="serif">2006</FONT></B>	</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>
	<TD colspan=9>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">SALES</FONT></B>	</TD>
	<TD width="1%">&nbsp;	</TD>
	<TD width="1%" align=left nowrap>
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD width="6%" align=right nowrap>
<FONT size=2 face="serif">13,923,487</FONT>	</TD>
	<TD width="1%" align=left nowrap>&nbsp;	</TD>
	<TD width="4%" align=left nowrap>&nbsp;</TD>
	<TD width="1%" align=left nowrap>
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD width="6%" align=right nowrap>
<FONT size=2 face="serif">7,897,118</FONT>	</TD>
	<TD width="1%" align=left nowrap>&nbsp;	</TD>
</TR>
<TR>
	<TD colspan=9>&nbsp;	</TD>
</TR>
<TR valign="bottom"  bgcolor="#E5FFFF">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">COST OF SALES</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=2 face="serif">(10,724,239</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>	</TD>
	<TD width="4%" align=left nowrap>&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">(6,222,267</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>	</TD>
</TR>
<TR>
	<TD colspan=9>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">GROSS PROFIT</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=2 face="serif">3,199,248</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
	<TD width="4%" align=left nowrap>&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">1,674,851</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"  bgcolor="#E5FFFF">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">OPERATING EXPENSES</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 width="4%" align=left nowrap>&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; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Salaries and related expenses</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">2,670,088</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD width="4%" align=left nowrap>&nbsp;</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">2,193,682</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom"  bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Consulting and other compensation</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">921,258</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD width="4%" align=left nowrap>&nbsp;</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">1,555,354</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Selling, general and administrative</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">2,217,433</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
	<TD width="4%" align=left nowrap>&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">2,122,528</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
</TR>
<TR valign="bottom"  bgcolor="#E5FFFF">
	<TD align=left nowrap>
<B> &nbsp; &nbsp; &nbsp; &nbsp;&nbsp; &nbsp; <FONT size=2 face="serif">TOTAL OPERATING EXPENSES</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=2 face="serif">5,808,779</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
	<TD width="4%" align=left nowrap>&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">5,871,564</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 align=left nowrap>
<B><FONT size=2 face="serif">LOSS FROM OPERATIONS</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=2 face="serif">(2,609,531</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>	</TD>
	<TD width="4%" align=left nowrap>&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">(4,196,713</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>	</TD>
</TR>
<TR>
	<TD colspan=9>&nbsp;	</TD>
</TR>
<TR valign="bottom"  bgcolor="#E5FFFF">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">OTHER EXPENSES</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 width="4%" align=left nowrap>&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; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Interest expense</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">644,447</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD width="4%" align=left nowrap>&nbsp;</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">201,735</FONT>	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom"  bgcolor="#E5FFFF">
	<TD align=left nowrap>
 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Other expense</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">253</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
	<TD width="4%" align=left nowrap>&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">162,147</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<B> &nbsp; &nbsp; &nbsp; &nbsp;&nbsp; &nbsp; <FONT size=2 face="serif">TOTAL OTHER EXPENSES</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=2 face="serif">(644,700</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>	</TD>
	<TD width="4%" align=left nowrap>&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">(363,882</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>	</TD>
</TR>
<TR>
	<TD colspan=9>&nbsp;	</TD>
</TR>
<TR valign="bottom"  bgcolor="#E5FFFF">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">LOSS BEFORE MINORITY INTEREST</FONT></B>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">(3,254,231</FONT>	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT>	</TD>
	<TD width="4%" align=left nowrap>&nbsp;</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=right nowrap>
<FONT size=2 face="serif">(4,560,595</FONT>	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT>	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">MINORITY INTEREST</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=2 face="serif">(18,587</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT>	</TD>
	<TD width="4%" align=left nowrap>&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">58,756</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"  bgcolor="#E5FFFF">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">NET LOSS</FONT></B>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(3,272,818</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>	</TD>
	<TD width="4%" align=left nowrap>&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD 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">)</FONT>	</TD>
</TR>
<TR>
	<TD colspan=9>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">Basic and diluted loss per common share</FONT></B>	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">$</FONT>	</TD>
	<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.06</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">)</FONT>	</TD>
	<TD width="4%" align=left nowrap>&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">$</FONT>	</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>
</TR>
<TR>
	<TD colspan=9>&nbsp;	</TD>
</TR>
<TR valign="bottom"  bgcolor="#E5FFFF">
	<TD align=left nowrap>
<B><FONT size=2 face="serif">Basic and diluted weighted average number of common</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 width="4%" align=left nowrap>&nbsp;</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
	<TD align=left nowrap>&nbsp;	</TD>
</TR>
<TR valign="bottom"  bgcolor="#E5FFFF">
	<TD align=left nowrap>
<B>&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">shares outstanding</FONT></B>	</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">53,969,551</FONT>	</TD>
	<TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;	</TD>
	<TD width="4%" align=left nowrap>&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>
</TR>
</TABLE>
<BR>
<P align="left">&nbsp;</P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td colspan="2"><div style="border-bottom:1px solid #000000"> &nbsp;</div></td>
  </tr>
</table>
<P align="center"><FONT size=2 face="serif">The accompanying notes are an integral part of the consolidated financial statements.<BR><BR>F-4</FONT></P>

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


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

<div align="center"><b><br>


  <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 STOCKHOLDERS'
      DEFICIT</font></b><br>
        <b><font size=2 face="serif">FOR THE YEARS ENDED DECEMBER 31, 2007 AND
          2006 </font></b>

  <br>

</div>
<table width="100%" border=0 cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td align=center nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=center nowrap colspan=5 style="border-bottom:1px solid #000000;">&nbsp; &nbsp; &nbsp;<b><font size=1 face="serif">Common
          Stock</font></b> </td>
    <td align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td>&nbsp;</td>
    <td align=center nowrap colspan=6 style="border-bottom:1px solid #000000;"><b><font size=1 face="serif">Treasury
          Stock</font></b> </td>
    <td>&nbsp;</td>
    <td align=center nowrap colspan=3><b><font size=1 face="serif">Additional</font></b> </td>
    <td>&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=right nowrap>&nbsp;</td>
    <td align=center nowrap>&nbsp;</td>
    <td align=center nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=center 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>
    <td align=center nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=center nowrap>&nbsp;</td>
    <td align=center nowrap>&nbsp;</td>
    <td>&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=center nowrap colspan=3><b><font size=1 face="serif">Paid
          In</font></b> </td>
    <td>&nbsp;</td>
    <td align=center nowrap colspan=3><b><font size=1 face="serif">(Accumulated)</font></b> </td>
    <td>&nbsp;</td>
    <td align=center nowrap colspan=3><b><font size=1 face="serif">Stockholders'</font></b> </td>
  </tr>
  <tr valign="bottom">
    <td align=center nowrap>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=center nowrap colspan=2 style="border-bottom:1px solid #000000;"><b><font size=1 face="serif">Shares</font></b> </td>
    <td style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap colspan=3 style="border-bottom:1px solid #000000;"><b><font size=1 face="serif">Amount</font></b> </td>
    <td style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap colspan=2 style="border-bottom:1px solid #000000;"><b><font size=1 face="serif">Shares</font></b> </td>
    <td style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap colspan=3 style="border-bottom:1px solid #000000;"><b><font size=1 face="serif">Amount</font></b> </td>
    <td style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap colspan=3 style="border-bottom:1px solid #000000;"><b><font size=1 face="serif">Capital</font></b> </td>
    <td style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap colspan=3 style="border-bottom:1px solid #000000;"><b><font size=1 face="serif">(Deficit)</font></b> </td>
    <td style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap colspan=3 style="border-bottom:1px solid #000000;"><b><font size=1 face="serif">(Deficit)</font></b> </td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><b><font size=1 face="serif">Balance December
          31, 2005 </font></b> </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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=right nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap style="border-bottom:3px double #000000;"><b><font size=1 face="serif">(as restated)</font></b> </td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">55,199,398</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">55,199</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">(10,858,658</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">)</font> </td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</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 style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">17,234,344</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</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 style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </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>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">Issuance of common
        stock in</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">connection with
        a private</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">placement</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">4,438,231</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">4,438</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=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=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">1,770,854</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">-</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">1,775,292</font> </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</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">connection with
        debenture</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">interest</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">1,011,373</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</font> </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=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 align=right nowrap><font size=1 face="serif">351,519</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">-</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">352,530</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">Issuance of common
        stock for</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">services rendered</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">2,752,866</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">2,753</font> </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=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 align=right nowrap><font size=1 face="serif">1,070,989</font> </td>
    <td align=left nowrap>&nbsp;</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=right 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>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">Issuance of common
        stock for</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">debt conversion</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">1,062,500</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">1,063</font> </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=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 align=right nowrap><font size=1 face="serif">423,937</font> </td>
    <td align=left nowrap>&nbsp;</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=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">425,000</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">Issuance of common
        stock for</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">warrant exercised</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">250,000</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">250</font> </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=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 align=right nowrap><font size=1 face="serif">149,750</font> </td>
    <td align=left nowrap>&nbsp;</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=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">150,000</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">Issuance of common
        stock for</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">acquisition of
        minority interest</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">in Assured Pharmacies,
        Inc.</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">50,000</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">50</font> </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=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 align=right nowrap><font size=1 face="serif">19,450</font> </td>
    <td align=left nowrap>&nbsp;</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=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">19,500</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">Beneficial
        conversion on</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">notes payable</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>&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=left nowrap>&nbsp;</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=left nowrap>&nbsp;</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=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">10,625</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">Issuance of warrants
        and options</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">for services rendered</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>&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=left nowrap>&nbsp;</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=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 align=right nowrap><font size=1 face="serif">110,539</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=1 face="serif">Net
        loss</font> </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 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>
    <td 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 align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td 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 align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td style="border-bottom:1px solid #000000;">&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">(4,501,839</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=1 face="serif">)</font> </td>
    <td style="border-bottom:1px solid #000000;">&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">(4,501,839</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><b><font size=1 face="serif">Balance December
          31, 2006</font></b> </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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=right nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap style="border-bottom:3px double #000000;"><b><font size=1 face="serif">(as restated)</font></b> </td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">64,764,368</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">64,764</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
    <td style="border-bottom:3px double #000000;">&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 style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">(2,849,366</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">)</font> </td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">21,142,007</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">(19,735,377</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">)</font> </td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</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>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">Issuance of common
        stock in</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">connection with
        debenture</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">interest</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">420,241</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">420</font> </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=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 align=right nowrap><font size=1 face="serif">134,580</font> </td>
    <td align=left nowrap>&nbsp;</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=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">135,000</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">Issuance of common
        stock for</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">services rendered</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">725,000</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">725</font> </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=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 align=right nowrap><font size=1 face="serif">119,275</font> </td>
    <td align=left nowrap>&nbsp;</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=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">120,000</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">Cancellation of
        shares on</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap><font size=1 face="serif">termination of
        service contract</font> </td>
    <td>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">(250,000</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">(250</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>&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 align=right nowrap><font size=1 face="serif">(69,750</font> </td>
    <td align=left nowrap><font size=1 face="serif">)</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=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">(70,000</font> </td>
    <td align=left nowrap><font size=1 face="serif">)</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">Issuance of warrants
        and options</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>&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=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</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=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 align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap><font size=1 face="serif">for services rendered</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>&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=left nowrap>&nbsp;</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">451,285</font> </td>
    <td align=left nowrap>&nbsp;</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=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=1 face="serif">451,285</font> </td>
    <td align=left nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=1 face="serif">Net
        loss</font> </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 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>
    <td 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 align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td 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 align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td style="border-bottom:1px solid #000000;">&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">(3,272,818</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=1 face="serif">)</font> </td>
    <td style="border-bottom:1px solid #000000;">&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">(3,272,818</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=1 face="serif">)</font> </td>
  </tr>
  <tr>
    <td colspan=27>&nbsp;</td>
  </tr>
  <tr valign="bottom" >
    <td align=left nowrap style="border-bottom:3px double #000000;"><b><font size=1 face="serif">Balance
          December 31, 2007</font></b> </td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">65,659,609</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">65,659</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">(10,858,658</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">)</font> </td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</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 style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">21,777,397</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">(23,008,195</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">)</font> </td>
    <td style="border-bottom:3px double #000000;">&nbsp;</td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">$</font> </td>
    <td align=right nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">(4,014,505</font> </td>
    <td align=left nowrap style="border-bottom:3px double #000000;"><font size=1 face="serif">)</font> </td>
  </tr>
</table>
<P align="left">&nbsp;</P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td colspan="2"><div style="border-bottom:1px solid #000000"> &nbsp;</div></td>
  </tr>
</table>
<P align="center"><FONT size=2 face="serif">The accompanying notes are an integral part of the consolidated financial statements.<BR><BR>F-5</FONT></P>

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


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


<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=2 face="serif">CONSOLIDATED STATEMENTS</FONT></B><B><FONT size=2 face="serif"> </FONT></B><B><FONT size=2 face="serif">OF
  CASH FLOWS</FONT></B><BR>
  <B><FONT size=2 face="serif">(AUDITED)</FONT></B></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD width=95% align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap colspan=5 style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=2 face="serif">YEARS
            ENDED DECEMBER 31</FONT></B> </div></TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap bgcolor="#FFFFFF">&nbsp;</TD>
    <TD bgcolor="#FFFFFF">&nbsp;</TD>
    <TD align=right nowrap bgcolor="#FFFFFF" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap bgcolor="#FFFFFF" style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=2 face="serif">2007</FONT></B> </div></TD>
    <TD align=left nowrap bgcolor="#FFFFFF" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD bgcolor="#FFFFFF">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
    <TD align=left nowrap bgcolor="#FFFFFF" style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap bgcolor="#FFFFFF" style="border-bottom:1px solid #000000;"><div align="center"><B><FONT size=2 face="serif">2006</FONT></B> </div></TD>
    <TD align=left nowrap bgcolor="#FFFFFF" style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><B><FONT size=2 face="serif">CASH FLOWS FROM
          OPERATING ACTIVITIES:</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" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Net loss</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (3,272,818</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</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; (4,501,839</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Adjustments to
        reconcile net loss to net cash 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" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=2 face="serif">181,362</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">133,504</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Amortization of
        debt discount</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">285,124</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">10,625</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=2 face="serif">451,285</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">1,184,281</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Loss on settlement
        of debt</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right 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=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">9,350</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Issuance of common
        stock in lieu of debenture interest</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">114,000</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">67,406</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 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=2 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=2 face="serif">7,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Minority interest
        in net income /(loss) of joint venture</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">18,587</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">(58,756</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Issuance of common
        stock and options for director services</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">120,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><div align="right"><FONT size=2 face="serif">-</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Return of common
        stock due to termination of contract</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(70,000</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><div align="right"><FONT size=2 face="serif">-</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Provision for doubtful
        accounts</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right 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=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">177,597</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=95% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Accounts
        receivable</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(1,241,498</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(623,206</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 face="serif">Inventories</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(25,440</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(153,144</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 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=2 face="serif">(62,445</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(2,161</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2 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=2 face="serif">1,255,153</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">22,505</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=95% align=left nowrap><FONT size=2 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=2 face="serif">(2,246,690</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">(3,726,838</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=95% align=left nowrap><FONT size=2 face="serif">Purchases of property
        and equipment</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(112,385</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(135,473</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Advance on purchase
        of company</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right 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=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(50,000</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 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=2 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=2 face="serif">(20,000</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=2 face="serif">(112,385</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">(205,473</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 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" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=2 face="serif">888,000</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">600,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 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=2 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=2 face="serif">(200,000</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=2 face="serif">(462,024</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(96,907</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Principal repayments
        on notes payable</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right 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=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(156,812</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=2 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=2 face="serif">1,775,292</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 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=2 face="serif">1,875,000</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">1,958,500</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=2 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=2 face="serif">150,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 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=2 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=2 face="serif">12,000</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" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=2 face="serif">2,300,976</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">4,042,073</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=95% align=left nowrap><FONT size=2 face="serif">Net Increase (decrease)
        in cash</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(58,099</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">109,763</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=2 face="serif">466,404</FONT> </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;"><FONT size=2 face="serif">356,641</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=95% align=left nowrap><FONT size=2 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=2 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">408,305</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD><div style="border-bottom:3px double #000000"> &nbsp;</div></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">466,404</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" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=95% align=left nowrap><FONT size=2 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>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Interest</FONT> </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">-</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD><div style="border-bottom:3px double #000000"> &nbsp;</div></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">131,522</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=95% align=left nowrap><FONT size=2 face="serif">Income taxes</FONT> </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">830</FONT> </TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp;</TD>
    <TD><div style="border-bottom:3px double #000000"> &nbsp;</div></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">2,262</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" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=95% align=left nowrap><FONT size=2 face="serif">Conversion of accrued
        interest in to notes payable</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">-</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">8,163</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Notes issued to
        acquire Minority Interest</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">-</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">567,998</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Issuance of Common
        Stock to acquire Minority Interest</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">-</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">19,500</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Issuance of common
        stock for debt conversion</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">-</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">425,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Issuance of common
        stock for services rendered</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">252,250</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">1,073,472</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 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=2 face="serif">&#36;</FONT> </div></TD>
    <TD align=right nowrap><FONT size=2 face="serif">135,000</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">352,530</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Return of common
        stock due to termination of contract</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">(70,000</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">&#36;</FONT> </TD>
    <TD align=center nowrap><div align="right"><FONT size=2 face="serif">-</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width=95% align=left nowrap><FONT size=2 face="serif">Benificial conversion
        on notes payable</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right 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=left nowrap><FONT size=2 face="serif">&#36;</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">10,625</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
</TABLE>
<P align="center">&nbsp;</P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td colspan="2"><div style="border-bottom:1px solid #000000"> &nbsp;</div></td>
  </tr>
</table>

<P align="center"><FONT size=2 face="serif">The accompanying notes are an integral part of the consolidated financial statements.<BR><BR>F-6</FONT></P>

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<PAGE><br>


<div style="border-bottom:1px solid #000000">
  <div align="center"><font size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES<br>
    FORMERLY KNOWN AS eRXSYS, INC.<br>
    </font><font size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
      DECEMBER 31, 2007 AND 2006 </font> </div>
</div>
<P align="left">&nbsp;</P>
<P align="left">
<B><FONT size=2 face="serif">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ORGANIZATION AND PLAN OF OPERATIONS</FONT></B></P>
<P align="left">
<B><I><FONT size=2 face="serif">A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Organization:</FONT></I></B></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. 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'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">The Company currently has six operating pharmacies. The first pharmacy was opened on October 13, 2003 in Santa Ana, California. On June 10, 2004, the Company opened its second pharmacy in Riverside, California. These
pharmacies were opened pursuant to a joint venture agreement entered into with TPG, LLC where the Company maintained a 51 % ownership interest. On December 15, 2006, the Company entered into a Purchase Agreement with TPG and acquired a 49% ownership
interest. As a result of this acquisition, the Company increased its ownership interest in these pharmacies to 100%. The Company opened its third pharmacy in Kirkland, Washington on August 11, 2004. The Company&#146;s fourth pharmacy was opened in
Portland, Oregon on September 21, 2004. On June 21, 2006, the Company opened its 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 the
Company has a 94.8% ownership interest in these pharmacies. In January 2007, the Company opened its sixth pharmacy in Gresham, Oregon, becoming its third wholly-owned pharmacy. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In February 2008, the Company consolidated the operations of its two pharmacies in Portland, Oregon, into one location. This consolidation is expected to allow the Company to further leverage its existing infrastructure and
is expected to result in a reduction of costs. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In addition, during the first quarter of fiscal year ending December 31, 2008, the Company opened a new pharmacy in Las Vegas, Nevada. The Company anticipates opening another new pharmacy in Oak Lomita, California in the
second quarter of fiscal year ending December 31, 2008. The Company has an executed lease agreement for the Oak Lomita location and the build out is complete and is awaiting the requisite licenses.</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, the Company 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 the Company established. In exchange
for contributing financing in the amount of $230,000 per pharmacy location, TPG
would acquire a 49% ownership interest in each pharmacy established under this
agreement and the Company would acquire the remaining 51%. Under the terms of
the agreement with TPG, the Company&#146;s contribution to establish pharmacies
primarily consisted of the right to utilize the Company&#146;s intellectual property
rights and to provide sales and marketing services. </FONT></P>
<P align="center">
<FONT size=2 face="serif">F-7</FONT></P>

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


<div style="border-bottom:1px solid #000000">
  <div align="center"><font size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES<br>
    FORMERLY KNOWN AS eRXSYS, INC.<br>
    </font><font size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
      DECEMBER 31, 2007 AND 2006 </font> </div>
</div>
<P align="left"><br>
  <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, the Company owned 51% of API and TPG owned the remaining 49%. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Under this joint venture, the Company established its first pharmacy in Santa Ana, California and a second pharmacy in Riverside, California. On December 15, 2006, the Company 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 $460,000 and the issuance of 50,000 shares of the Company&#146;s 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 valign=top align=right>
<FONT size=2 face="serif">i.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">$15,000 was paid on or about December 15, 2006;</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD valign=top align=right>
<FONT size=2 face="serif">ii.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Eleven (11) consecutive monthly installments of $5,000 were paid during year ended December 31, 2007;</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD valign=top align=right>
<FONT size=2 face="serif">iii.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Fourteen (14) consecutive monthly installments of $15,000 payable on or before the 15th of each month commencing in December 2007 through January 2009; and</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD valign=top align=right>
<FONT size=2 face="serif">iv.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">$180,000 payable together with interest at the rate of prime plus 2% per annum payable on or before February 15, 2009.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<P align="left">
<FONT size=2 face="serif">As a result of this acquisition, the Company increased
its ownership interest in API to 100% making it a wholly-owned subsidiary and
consequently resulting in the termination of the Company&#146;s 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, the Company entered into an agreement (the &#147;TAPG 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;). The Company initially owned 75% of APN, while TAPG owned the remaining 25%. In accordance with the Company&#146;s shareholders agreement with TAPG and the TAPG Agreement, TAPG is required to provide
start-up costs in the amount of $335,000 per pharmacy location established not to exceed five pharmacies. Under the terms of the agreement with TAPG, the Company&#146;s contribution to establish pharmacies primarily consisted of the right to utilize
the Company&#146;s intellectual property rights and to provide sales and marketing services. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Between March and October 2004, APN received from TAPG start-up funds in the amount of $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 $190,000 for the establishment of the Company&#146;s second pharmacy location in
Portland, Oregon. TAPG remains obligated to contribute an additional $145,000 to satisfy its full contribution. The Company and APN requested that TAPG provide the $150,787 balance of its full capital contribution. TAPG is also obligated to
contribute its proportionate share of the start-up costs in excess of its initial capital contribution of $335,000 per pharmacy. The TAPG 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">
<FONT size=2 face="serif">Following the start-up period, the Company 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, the Company increased its 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">F-8</FONT></P>

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<P STYLE="page-break-before:always"></P>
<PAGE>
<div style="border-bottom:1px solid #000000">
  <div align="center"><font size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES<br>
    FORMERLY KNOWN AS eRXSYS, INC.<br>
    </font><font size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
      DECEMBER 31, 2007 AND 2006 </font> </div>
</div>
<P align="left"><br>
  <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, the Company entered into a technology
license agreement (&#147;Technology License&#148;) with Network Technology, Inc.
(&#147;RxNT&#148;). The Technology License grants the Company the right to use
RxNT's  prescribing technology under the brand name &#147;Assured Script&#148; and
enables the Company to accept prescriptions electronically transmitted to its
 pharmacies. Pursuant to the Technology License, the Company paid RxNT a licensing
fee of $100,000 and is  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. Since the Company is in the business
of owning and operating pharmacies, management does not anticipate that it will
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, the Company renewed this agreement
for a period of three years and agreed to pay an annual license fee of $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'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 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;), which will carry on the business at the Oak Lomita store set to open in the 2nd Quarter of 2008.  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 which was opened in the 1st Quarter of 2008.
</FONT></P>
<P align="left">
<B><I><FONT size=2 face="serif">B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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, 2007, the Company had an accumulated deficit of $23,008,195, recurring losses from operations and negative cash flow from operating activities for the year ended December 31, 2007 of $2,246,690.
The Company also had a</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-9</FONT></P>

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


<div style="border-bottom:1px solid #000000">
  <div align="center"><font size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES<br>
    FORMERLY KNOWN AS eRXSYS, INC.<br>
    </font><font size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
      DECEMBER 31, 2007 AND 2006 </font> </div>
</div>
<P align="left"><br>
<FONT size=2 face="serif">negative working capital of $4,093,065 as of December 31, 2007. </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, 2008. 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's ability to continue as a going concern. The
accompanying 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>

<div align="left">
<UL>
<LI>
<FONT size=2 face="serif">The Company is expanding its revenue base beyond the pain management sector to service</FONT> <FONT size=2 face="serif">customers that require prescriptions to treat cancer, psychiatric, and neurological
conditions.</FONT></LI>
<LI>
<FONT size=2 face="serif">The Company is aggressively signing up new physicians.</FONT></LI>
<LI>
<FONT size=2 face="serif">The Company is seeking investment capital. (See Note 5 for additional information).</FONT></LI>
<LI>
<FONT size=2 face="serif">The Company implemented a new marketing strategy and retained additional sales personnel to</FONT> <FONT size=2 face="serif">attract business.</FONT></LI>
<LI>
<FONT size=2 face="serif">The Company has consolidated the operations of its two pharmacies in Portland, Oregon into a</FONT> <FONT size=2 face="serif">single location. This consolidation is expected to allow the Company to further leverage
its</FONT> <FONT size=2 face="serif">existing infrastructure and is expected to result in a reduction of costs.</FONT></LI>
<LI>
<FONT size=2 face="serif">In March 2008, the Company entered into an Accounts Receivable Purchase Agreement whereby</FONT> <FONT size=2 face="serif">the Company has agreed to sell certain of its accounts receivables for a price equal to 80% of
the</FONT> <FONT size=2 face="serif">outstanding accounts receivable balance purchased. The Company expects this additional source</FONT> <FONT size=2 face="serif">of working capital to help significantly with the daily operations.</FONT></LI>
</UL>
</div>
<P align="left">
<B><FONT size=2 face="serif">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </FONT></B></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's management, which 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 include the accounts of the Company and its subsidiaries.  All significant inter-company accounts and transactions have been eliminated. </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 in the financial statements and accompanying notes. Significant
estimates and assumptions relate to the collectability of accounts receivable, the allowance for doubtful accounts, the deferred tax asset valuation allowance, and the realization of</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-10</FONT></P>


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<PAGE><br>


<div style="border-bottom:1px solid #000000">
  <div align="center"><font size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES<br>
    FORMERLY KNOWN AS eRXSYS, INC.<br>
    </font><font size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
      DECEMBER 31, 2007 AND 2006 </font> </div>
</div>
<P align="left"><br>
<FONT size=2 face="serif">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'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 year ended December 31, 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 its
 inventory from other distributors at competitive prices and with competitive
payment terms, if its relationship with its primary wholesale drug vendor was
terminated, there can be no assurance that the termination of such relationship
would not adversely affect the Company. </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 the Company&#146;s 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'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'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 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</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-11</FONT></P>


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<PAGE><br>


<div style="border-bottom:1px solid #000000">
  <div align="center"><font size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES<br>
    FORMERLY KNOWN AS eRXSYS, INC.<br>
    </font><font size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
      DECEMBER 31, 2007 AND 2006 </font> </div>
</div>
<P align="left"><br>
  <FONT size=2 face="serif">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. 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="left">
<I><FONT size=2 face="serif">Accounts Receivable, non-current</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">As of December 31, 2007, the Company carries $49,868 of receivables which are over 180 days old. These receivables are primarily from the Workmen's Compensation Board of the 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&#148;. The settlement period for such Green Lien cases takes anywhere from 1 year to 5 years. Management has classified such
receivables as long term assets. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Allowance for Doubtful Accounts</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company's accounts receivables are from reputable insurance companies. However, management periodically reviews the collectability of these accounts receivable and provides an allowance for doubtful accounts as
management deems necessary. For the years ended December 31, 2007 and 2006, management provided approximately $177,000 towards such an allowance. During the year ended December 31, 2007, the Company has not made any additional provision, as
management believes that the amounts provided are sufficient. </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'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's assumptions about market conditions and future demand for its products. No provision has been made for excess or obsolete</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-12</FONT></P>

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


<div style="border-bottom:1px solid #000000">
  <div align="center"><font size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES<br>
    FORMERLY KNOWN AS eRXSYS, INC.<br>
    </font><font size=2 face="serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
      DECEMBER 31, 2007 AND 2006 </font> </div>
</div>
<P align="left"><br>
  <FONT size=2 face="serif">inventory at December 31, 2007 and
    2006, respectively, as the amounts 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>
<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 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">
<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, &#147;</FONT><I><FONT size=2 face="serif">Accounting for the Impairment or Disposal of Long-Lived Assets</FONT></I><FONT size=2
face="serif">,&#148; 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. The Company's long-lived assets consist of computers, software, office furniture and equipment, store fixtures and leasehold improvements on pharmacy build-outs 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="center">
<FONT size=2 face="serif">F-13</FONT></P>

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<PAGE><br>


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<P align="left"><br>
<I><FONT size=2 face="serif">Intangible Assets</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Statement of Financial Accounting standard No. 142, &#147;</FONT><I><FONT size=2 face="serif">Goodwill and Other Intangible Assets</FONT></I><FONT size=2 face="serif">,&#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">
<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">
<FONT size=2 face="serif">The reported amounts of goodwill for each reporting unit are reviewed for impairment on an annual basis and more frequently when negative conditions such as significant current or projected operating losses exist. The
annual impairment test for goodwill is a two-step process and involves comparing the estimated fair value of each reporting unit to the reporting unit&#146;s carrying value, including goodwill. If the fair value of a reporting unit exceeds its
carrying amount, goodwill of the reporting unit is not considered impaired, and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test
would be performed to measure the amount of impairment loss to be recorded, if any. During the year ended December 31, 2006, the Company recorded goodwill of $607,816 in connection with its acquisition of the 49% interest in API. The Company&#146;s
annual impairment tests resulted in no goodwill impairment at December 31, 2007. </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 year ended
December 31, 2007 and December 31, 2006 were $8,679 and $478,523, 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' insurance provider is billed.
Authorization which assures payment is obtained from the customers' 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' 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;</FONT><I><FONT size=2 face="serif">Accounting for Shipping and Handling Fees and Costs</FONT></I><FONT size=2
face="serif">&#148;. Such fees and costs are immaterial to the Company'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), &#147;<i>Share-Based
Payment</i>&#148; (&#147;SFAS No. 123 (R)&#148;), which is a revision of SFAS
No. 123. SFAS No. 123 (R) supersedes APB Opinion No. 25, &#147;<i>Accounting
for Stock Issued to Employees</i>,&#148; and amends FASB Statement No. 95, &#147;<i>Statement
of Cash Flows</i>.&#148; 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="center">
<FONT size=2 face="serif">F-14</FONT></P>

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<PAGE><br>


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br>

<P align="left">
<FONT size=2 face="serif"><br>
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="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;<i>Accounting
for Stock Issued to Employees</i>,&#148; 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's exercise price. The Company had adopted the disclosure-only
requirements of SFAS No. 123, &#147;<i>Accounting for Stock-Based Compensation</i>,&#148; which
allowed entities to continue to apply the provisions of APB No. 25 for the transactions
with employees and provide pro forma net income and pro forma income per share
disclosures for employee stock grants made as if the 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 to 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 of 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;</FONT><I><FONT size=2 face="serif">Earnings Per Share</FONT></I><FONT size=2 face="serif">&#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. At December 31,
2007 and 2006 there were warrants exercisable for 6,955,833 and 10,576,708 shares of the Company&#146;s common stock, respectively. In addition, at December 31, 2007 and 2006 there were options exercisable into 6,831,666 and 6,136,666 shares of the
Company's common stock, respectively. </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="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's financial instruments, consisting primarily of cash, accounts receivable, accounts payable and accrued liabilities, and notes payable</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-15</FONT></P>

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


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<P align="left">
<FONT size=2 face="serif">approximated their fair values at December 31, 2007 and 2006, due to their short-term nature. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Management also believes that the December 31, 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">
<B><FONT size=2 face="serif">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; PROPERTY AND EQUIPMENT</FONT></B></P>
<P align="left">
<FONT size=2 face="serif">Property and equipment consisted of the following at December 31, 2007 and 2006:</FONT></P>
<TABLE width="60%" border=0 align="center" cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">2007</FONT></B> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD colspan="2" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">2006</FONT></B> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=9>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Furniture and equipment</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="6%" align=right nowrap><FONT size=2 face="serif">42,191</FONT> </TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="6%" align=right nowrap><FONT size=2 face="serif">29,681</FONT> </TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Computer equipment and</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&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><FONT size=2 face="serif">information systems</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">487,781</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">403,278</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Leasehold improvements</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=2 face="serif">312,067</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&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=2 face="serif">296,695</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><FONT size=2 face="serif">842,039</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">729,654</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Less: accumulated depreciation
        and</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">amortization</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=2 face="serif">(468,078</FONT></TD>
    <TD align=left nowrap valign=middle><FONT size=2 face="serif">)</FONT> </TD>
    <TD width="4%">&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=2 face="serif">(286,715</FONT></TD>
    <TD align=left nowrap valign=middle><FONT size=2 face="serif">)</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="10%" align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">373,961</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="10%" align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">442,939</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">Depreciation and amortization for the years ended December 31, 2007 and 2006 was $181,362 and $133,500 respectively.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOTES PAYABLE TO RELATED PARTIES AND STOCKHOLDERS</FONT></B></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 $270,000 in connection with establishing pharmacies in the Pacific Northwest of the United States (see Note 1). The
note accrues interest at a fixed rate of 7% per annum. The note is secured by the assets of APN's pharmacies, in which the Company holds a controlling interest. The note matured in January 2006 and was not extended. As of December 31, 2007, $20,000
is outstanding under this note. The Company intends to retire the remaining balance due in 2008. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">TPG Note</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">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 $460,000 and 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 nowrap valign=top>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
	<TD nowrap valign=top>
<FONT size=2 face="serif">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">$15,000 was paid on or about December 15, 2006;</FONT>	</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.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Eleven (11) consecutive monthly installments of $5,000 were paid during year ended December 31, 2007;</FONT>	</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.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Fourteen (14) consecutive monthly installments of $15,000 payable on or before the 15th of each month commencing in December 2007 through January 2009; and</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR></TABLE>
<P align="center">
<FONT size=2 face="serif">F-16 </FONT></P>

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<PAGE><br>


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
  <TD width="4%" valign=top nowrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
	<TD width="4%" valign=top nowrap>
<FONT size=2 face="serif">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=92%>
<FONT size=2 face="serif">$180,000, payable together with interest at the rate of prime plus 2% per annum, payable on or before February 15, 2009.</FONT>	</TD>
</TR>
</TABLE>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As of December 31, 2007, the outstanding balance on this note was $375,000.</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 the first quarter of 2005, the Company entered into a ninety-day note payable to VVPH Inc. for $50,000. During the first quarter of 2006, the Company extended this agreement to January 31, 2007. VVPH Inc. also agreed
to convert accrued interest of $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 these agreements, the Company received a twelve month loan of $600,000 extendable 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. The Company has repaid $175,000 on this loan. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On May 2, 2007, the Company entered into an additional loan agreement with VVPH Inc. Under the terms of this loan agreement, the Company received a twelve month loan of $75,000 extendable for an additional twelve 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">On August 15, 2007, the Company entered into an additional loan agreement with VVPH Inc. Under the terms of this loan agreement, the Company received a twelve month loan of $50,000 extendable for an additional twelve 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">On October 23, 2007, the Company entered into an additional loan agreement with VVPH Inc. Under the terms of this loan agreement, the Company received a twelve month loan of $70,000 extendable for an additional twelve 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 these agreements, 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's
common stock determined at a conversion price equal to the rolling seven trading day weighted average closing bid price for the Company&#146;s common stock on the OTCBB (or such other equivalent market on which the Company&#146;s common stock is
quoted) calculated as of the trading day immediately preceding the date the conversion right is exercised. The agreements provide that the conversion price shall not be less than $0.40 or more than $0.80 and 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 December 31, 2007, the outstanding balances on these notes amounted to $620,000 along with accrued interest in the amount of $74,564.</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-17</FONT></P>

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<PAGE><br>


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<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 a twelve month loan of
$93,000 extendable for an additional twelve month period by mutual consent. The
loan had 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. The Company has repaid $50,000 on this loan as of December 31,
2007. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On August 1, 2007, the Company entered into another loan agreement with Brockington. Under the terms of this agreement the Company received a twelve month loan of $50,000 extendable for an additional twelve 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">On November 19, 2007, the Company entered into an additional loan agreement with Brockington. Under the terms of this loan agreement, the Company received a twelve month loan of $100,000 extendable for an additional twelve
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 these agreements, 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's
common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Company&#146;s common stock on the OTCBB (or such other equivalent market on which the Company&#146;s common stock is
quoted) calculated as of the trading day immediately preceding the date the conversion right is exercised. The agreements provide that the conversion price shall not be less than $0.40 or more than $0.80 and 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 December 31, 2007, the outstanding balance on these notes amounted to $193,000 along with accrued interest in the amount of $11,316. </FONT></P>
<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 a twelve month loan of $25,000 extendable
for an additional twelve month period by mutual consent. The loan had an interest
rate of 12% per annum to be paid in monthly installments. The Company has fully
repaid this loan. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On August 1, 2007, the Company entered into another
loan agreement with Mr. Sheth. Under the terms of this agreement, the Company
received a twelve month loan of $25,000 extendable for an additional twelve month
period by mutual consent. The loan had an interest rate of 12% per annum to be
paid in monthly installments. The Company has fully repaid this loan. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On October 23, 2007, the Company entered into another
loan agreement with Mr. Sheth. Under the terms of this agreement, the Company
received a twelve month loan of $50,000 extendable for an additional twelve (12)
month period by mutual consent. The loan had an interest rate of 12% per annum
to be paid in</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-18</FONT></P>

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<PAGE><br>


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<P align="left">
<FONT size=2 face="serif">monthly installments. The Company has fully repaid this loan. </FONT></P>
<P align="left">
<FONT size=2 face="serif">On November 16, 2007, the Company entered into another
loan agreement with Mr. Sheth. Under the terms of this agreement, the Company
received a twelve month loan of $100,000 extendable for an additional twelve
month period by mutual consent. The loan had an interest rate of 12% per annum
to be paid in monthly installments. The Company has fully repaid this loan. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Pursuant to the terms of these agreements, Mr. 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's
common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Company&#146;s common stock on the OTCBB (or such other equivalent market on which the Company&#146;s common stock is
quoted) calculated as of the trading day immediately preceding the date the conversion right is exercised. The agreements provide that the conversion price shall not be less than $0.40 or more than $0.80 and Mr. 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 December 31, 2007, the Company owes $3,954 of interest on these notes. </FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Woodfield Capital Services Inc</FONT></I></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. (&#147;Woodfield&#148;) Under the terms of this agreement, the Company received a twelve month loan of $150,000 at an interest
rate of 12% per annum, with interest payable on a monthly basis. Woodfield is a related party 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 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's
common stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Company&#146;s common stock on the OTCBB (or such other equivalent market on which the Company&#146;s common stock is
quoted) calculated as of the trading day immediately preceding the date the conversion right is exercised. The agreement provides that the conversion price shall not be less than $0.40 or more than $0.80 and Woodfield 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 December 31, 2007, the outstanding balance on this note was $150,000 along with accrued interest in the amount of $8,585.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Weil Consulting</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">On August 14, 2007, the Company entered into a loan agreement with Weil Consulting (&#147;Weil&#148;). Under the terms of this agreement, the Company received a twelve month loan of $100,000 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, Weil 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's common
stock determined at a conversion price equal to the rolling seven (7) trading day weighted average closing bid price for the Company&#146;s common stock calculated as of the trading day immediately preceding the date the Conversion Right is
exercised. The agreement provides that the conversion price shall not be less than $0.40 or more than $0.80 and Weil shall be entitled to piggyback registration rights upon exercise of this conversion right.</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-19</FONT></P>

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<PAGE><br>


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<P align="left">
<FONT size=2 face="serif">As of December 31, 2007, the outstanding balance on this note was $100,000 along with accrued interest in the amount of $5,694. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; UNSECURED CONVERTIBLE DEBENTURE NOTES </FONT></B></P>
<P align="left">
<FONT size=2 face="serif">During the year ended December 31, 2007, the Company raised $1,875,000 by issuing unsecured convertible debentures carrying an interest rate of 18% per annum. Debentures worth $1,958,500 which expired at various times
during the year were renewed for a term of one year.</FONT><B><FONT size=2 face="serif"> </FONT></B></P>
<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 the average closing price for the Company&#146;s
common stock on the OTCBB for the five consecutive trading days preceding the
issuance  date. The Company issued 420,241 shares against debenture interest
as of December 31, 2007. The debentures provided that interest is payable in
the shares of common stock of the Company. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company is obligated to issue as of December 31,
2007 a further 1,834,155 shares of its common stock as payment of interest on
the debentures. The debenture holders have the right to convert their debentures
into fully paid non-assessable shares of common stock at $0.40 and received warrants
to purchase one share of common stock for every two converted debenture shares
at an exercise price of $0.60 exercisable for two years after the conversion
date and to purchase one share of common stock for every two converted debenture
shares at an exercise price of $0.80
exercisable for three years after the conversion date.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; EQUITY TRANSACTIONS</FONT></B></P>
<P align="left">
<I><FONT size=2 face="serif">Common Stock</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">In January 2007, the Company issued 75,000 shares of
its common stock, valued at $24,750 (calculated based upon average closing price
for the Company&#146;s common stock on the OTCBB for the five consecutive trading
 days preceding the issuance date) to a consultant in exchange for services rendered. </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 $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 $300 and paid in capital for $119,700. </FONT></P>
<P align="left">
<FONT size=2 face="serif">In January 2007, the Company issued 100,000 shares
of its common stock, valued at $35,000 (estimated to be the fair value
based on the trading price on the issuance date), and accompanied with warrants
to purchase 100,000 shares of common stock, exercisable at $0.60 per share until
December 31, 2009, and warrants to purchase 100,000 shares of its common stock,
exercisable at $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 June 2007, the Company issued 250,000 shares of
its common stock, valued at $72,500 (calculated based upon average closing
price for the Company&#146;s common stock on the OTCBB for the five consecutive
trading days preceding the issuance date) to a consultant in exchange for services
rendered. </FONT></P>
<P align="center">
<FONT size=2 face="serif">F-20</FONT></P>

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<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<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 250,000 shares valued at $70,000 (the consideration value for the issue of shares). As a result of the
cancellation of shares, the Company debited common stock and additional paid in capital for $250 and $69,750 respectively and credited consulting expense for $70,000. </FONT></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">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 its common stock and one (1) warrant to purchase one (1) share
of its common stock at an exercise price of $0.60 exercisable for thirty
six (36) months after the acceptance date of the subscription.</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 shares of its common stock.</FONT></P>
<P align="left">
<FONT size=2 face="serif">During the three months ended March 2006, the Company
issued 625,000 shares of its 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).
As a result of these transactions, the Company recorded a debit to deferred compensation
of $254,250 and a credit to common stock and additional paid-in capital of $625
and $253,625, respectively. </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 its 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). As a result of these transactions, the Company recorded
a debit to deferred compensation of $350,000 and a credit to common stock and
additional paid-in capital of $750 and $349,250 respectively. </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 its common stock and one (1) warrant to purchase one (1) share
of its common stock at an exercise price of $0.60 exercisable for thirty
six (36) months after the acceptance date of the subscription.</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 its 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). The Company recorded $199,500 as deferred compensation, and $7,000 as consulting
expense. As a result of these transactions, the Company recorded a debit to deferred compensation and consulting expense of $239,400 and $7,000, respectively and, a credit to common stock and additional paid-in capital of $590 and $238,810
respectively. </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 its common stock and one (1) warrant to purchase one (1) share of</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-21</FONT></P>

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<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<P align="left">
<FONT size=2 face="serif">its common stock at an exercise price of $0.60 exercisable for thirty six (36) months after the acceptance date of the subscription.</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 its 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). As a result of these transactions, the Company recorded
a debit to deferred compensation of $89,500 and a credit to common stock and
additional paid-in capital of $250 and $89,250 respectively. </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 its common
stock at an exercise price of $0.60 for total consideration of $150,000. </FONT></P>
<P align="left">
<FONT size=2 face="serif">During three months ended December 31, 2006, the Company
issued 50,000 shares of its 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 its common stock in lieu of the total interest of
$352,350, due to the convertible Debenture note holders .</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,
    2006, in connection with a private placement, the Company issued warrants
    to purchase 2,212,500 shares of the Company&#146;s  common stock at an
    exercise price of $0.60 exercisable for thirty-six months after October 2008.
    The estimated fair value based of these warrants was determined by $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">During the year ended December 31, 2007, the Company
issued warrants to a consultant to purchase 100,000 shares of its
common stock at an exercise price of $0.60 exercisable for 36 months after January
2007. The  estimated fair value of these warrants was determined to be $9,965
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 4.88%, and  an expected volatility of 53.61% 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, 2007, the Company
issued warrants to a consultant to purchase 100,000 shares of its common stock
at an exercise price of $0.80 exercisable for 36 months after January 2007.The
estimated fair value of these warrants was determined to be $7,040 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 4.88%, and an expected volatility of 53.61% based upon the historical volatility
of the Company&#146;s common stock. </FONT></P>
<P align="center">
<FONT size=2 face="serif">F-22</FONT></P>

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<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<P align="left">
<FONT size=2 face="serif">A summary of the warrants issued is presented in the table below:</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 align=right nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD width="4%" align=right nowrap>&nbsp;</TD>
    <TD width="10%" align=center nowrap><B><FONT size=2 face="serif">Weighted-</FONT></B></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 width="4%">&nbsp;</TD>
    <TD width="10%" align=center nowrap><B><FONT size=2 face="serif">Average</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap colspan=2><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=center nowrap><B><FONT size=2 face="serif">Exercise</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap colspan=2><B><FONT size=2 face="serif">Shares</FONT></B> </TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=center nowrap><B><FONT size=2 face="serif">Price</FONT></B> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Outstanding and exercisable
        at</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">January 1, 2006</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD width="10%" align=right nowrap><FONT size=2 face="serif">7,480,875</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=center nowrap><FONT size=2 face="serif">$0.70</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=6>&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">2,212,500</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=center nowrap><FONT size=2 face="serif">$0.70</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Exercised, cancelled, forfeited
        or</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">expired</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><U><FONT size=2 face="serif">(250,000</FONT></U> </TD>
    <TD align=left nowrap><U><FONT size=2 face="serif">)</FONT></U> </TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=center nowrap><FONT size=2 face="serif">$0.70</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Outstanding and exercisable
        at</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">January 1, 2007</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">9,443,375</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=center nowrap><FONT size=2 face="serif">$0.70</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Granted</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">200,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=center nowrap><FONT size=2 face="serif">$0.70</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Exercised, cancelled, forfeited
        or</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">expired</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(4,102,125</FONT> </TD>
    <TD width="1%" align=left valign=middle nowrap><FONT size=2 face="serif">)</FONT></TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">$0.70</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Outstanding and exercisable
        at</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">December 31, 2007</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">5,541,250</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%" align=center nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">$0.70</FONT> </TD>
  </TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">The following tables summarize information about warrants outstanding and exercisable as of December 31, 2007:</FONT></P>
<TABLE width="75%" border=0 align="center" cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap colspan=5 style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="5" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Exercisable</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Weighted-</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Weighted-</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap><B><FONT size=2 face="serif">Range</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Weighted- </FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Average</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Weighted- </FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Average</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap><B><FONT size=2 face="serif">of</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Average </FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Remaining</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Average </FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Remaining</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap><B><FONT size=2 face="serif">Exercise</FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif"> Number</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Exercise</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Life</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Number</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Exercise</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Life</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD width="13%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Price</FONT></B></TD>
    <TD width="1%"></TD>
    <TD width="13%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">of
          Shares</FONT></B></TD>
    <TD width="1%"></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Price</FONT></B></TD>
    <TD width="1%"></TD>
    <TD width="13%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">(Years)</FONT></B></TD>
    <TD width="1%"></TD>
    <TD width="13%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">of
          Shares</FONT></B></TD>
    <TD width="1%"></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Price</FONT></B></TD>
    <TD width="1%"></TD>
    <TD width="13%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">(Years)</FONT></B></TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=center nowrap><FONT size=2 face="serif">$0.60-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=center nowrap><FONT size=2 face="serif">$1.25</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">5,541,250</FONT></TD>
    <TD></TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.70</FONT></TD>
    <TD></TD>
    <TD align=center nowrap><FONT size=2 face="serif">1.39</FONT></TD>
    <TD></TD>
    <TD align=center nowrap><FONT size=2 face="serif">5,541,250</FONT></TD>
    <TD></TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.70</FONT></TD>
    <TD></TD>
    <TD align=center nowrap><FONT size=2 face="serif">1.39</FONT></TD>
  </TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">The weighted average fair value of warrants granted
during the years ended December 31, 2007 and 2006 were $0.70 and $1.01, respectively. </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&#146;s Board of Directors approved an Incentive Stock Option Plan (&#147;ISOP&#148;) 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 (&#147;Qualified Stock Options&#148;), and ii) options not specifically qualified for favorable income tax
treatment under the Internal Revenue Code (&#147;Non-Qualified Stock Options&#148;). The ISOP is administered by the Company&#146;s board of directors or the compensation committee (the &#147;Administrator&#148;). The Company is authorized to grant
qualified stock options to any of its employees or directors.</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-23</FONT></P>

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

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


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<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&#146;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&#146;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&#146;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&#146;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">During 2007, the Company granted options to purchase
750,000 shares of common stock to an officer. The stock options have an exercise
price of $0.60 per share exercisable for a period of 36 months from the date
of issuance. Such stock options are exercisable for a period of 3 years from
the date of issuance. The estimated fair value of these warrants was determined
to be $74,734 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 4.88%, and an expected volatility of 53.61% based
upon the historical volatility of the Company&#146;s common stock. The Company
incurred a non cash charge to earnings of approximately $21,000, which is reflected
in consulting and other compensation expense. </FONT></P>
<P align="left"><FONT size=2 face="serif">During the year ended December 31,
    2006, the Company issued options to purchase 1,133,334 shares of its common
    stock to an officer of the Company. Such warrants were 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 vested immediately and the
    rest 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>
<P align="left"><FONT size=2 face="serif">In May, 2006, the Company cancelled 1,133,334 options granted to Janus Financial Services, Inc. The President of Janus Financial Services, Inc. is a Chief Financial Office and former Chief Operating Officer of the
  Company.</FONT></P>
<P align="left">
<FONT size=2 face="serif">In addition, options to purchase 30,000 shares of common stock issued to employees had expired. </FONT></P>
<P align="left">
<FONT size=2 face="serif">The following tables summarize information concerning outstanding stock options as of December 31, 2007 and 2006:</FONT></P>
<BR>
<P align="center">
<FONT size=2 face="serif">F-24 </FONT></P>

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

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


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>
<TABLE width="75%" border=0 align="center" cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%" align=right nowrap>&nbsp;</TD>
    <TD width="1%" align=right nowrap>&nbsp;</TD>
    <TD width="4%" align=right nowrap>&nbsp;</TD>
    <TD width="8%" align=center nowrap><B><FONT size=2 face="serif">Weighted-</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Average</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=center nowrap colspan=2><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Exercise</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=center nowrap colspan=2><B><FONT size=2 face="serif">Shares</FONT></B> </TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Price</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Options outstanding and</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">exercisable at</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">January 1, 2006</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">7,300,000</FONT> </TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=center  nowrap><FONT size=2 face="serif">$0.60</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Granted</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">1,133,334</FONT> </TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=center  nowrap>&nbsp;<FONT size=2 face="serif">$0.60</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Cancelled, forfeited or expired</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">(1,163,334</FONT> </TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">) </FONT> </TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=center  nowrap><FONT size=2 face="serif">$0.60</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">January 1, 2007</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">7,270,000</FONT> </TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=center  nowrap><FONT size=2 face="serif">$0.60</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Granted</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">750,000</FONT> </TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=center  nowrap><FONT size=2 face="serif">$0.60</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Cancelled, forfeited or expired</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">(55,000</FONT> </TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">) </FONT> </TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=center  nowrap style="border-bottom:1px solid #000000"><FONT size=2 face="serif">$0.60</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Options outstanding and</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">exercisable at</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">December 31, 2007</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">7,965,000</FONT> </TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">$0.60</FONT> </TD>
  </TR>
</TABLE>
<BR>
<TABLE width="75%" border=0 align="center" cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap colspan=5 style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap colspan=5 style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Exercisable</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Weighted-</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Weighted-</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap><B><FONT size=2 face="serif">Range</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Weighted-</FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif"> Average</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Weighted- </FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Average</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap><B><FONT size=2 face="serif">of</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Average </FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Remaining</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Average </FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Remaining</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap><B><FONT size=2 face="serif">Exercise</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Exercise</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Life</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Exercise</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Life</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD width="13%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Price</FONT></B></TD>
    <TD width="1%"></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Number
          of Shares</FONT></B></TD>
    <TD width="1%"></TD>
    <TD width="13%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Price</FONT></B></TD>
    <TD width="1%"></TD>
    <TD width="13%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">(Years)</FONT></B></TD>
    <TD width="1%"></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Number
          of Shares</FONT></B></TD>
    <TD width="1%"></TD>
    <TD width="13%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Price</FONT></B></TD>
    <TD width="1%"></TD>
    <TD width="13%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">(Years)</FONT></B></TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=center nowrap><FONT size=2 face="serif">$0.60</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">7,965,000</FONT></TD>
    <TD></TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.60</FONT></TD>
    <TD></TD>
    <TD align=center nowrap><FONT size=2 face="serif">6.95</FONT></TD>
    <TD></TD>
    <TD align=center nowrap><FONT size=2 face="serif">7,965,000</FONT></TD>
    <TD></TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.60</FONT></TD>
    <TD></TD>
    <TD align=center nowrap><FONT size=2 face="serif">6.95</FONT></TD>
  </TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">The weighted average fair value of options granted
was $0.60 for the years ended December 31, 2007 and 2006,
respectively. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; COMMITMENTS AND CONTINGENCIES</FONT></B></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 $1,400 to $2,800. </FONT></P>
<P align="left">
<FONT size=2 face="serif">Certain leases include future rental escalations and renewal options. </FONT></P>
<P align="left">
<FONT size=2 face="serif">As of December 31, 2007, future minimum payments under operating leases were as follows: </FONT></P>
<P align="left">&nbsp;</P>
<TABLE width="35%" border=0 align="center" cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD colspan="4" align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">For the years ending</FONT><BR>
      <FONT size=2 face="serif">December 31,</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">2008</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="10%" align=right nowrap>&nbsp;<FONT size=2 face="serif">222,000</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">2009</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="10%" align=right nowrap>&nbsp;<FONT size=2 face="serif">135,000</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">2010</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="10%" align=right nowrap>&nbsp;<FONT size=2 face="serif">75,000</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">2011</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="10%" align=right nowrap>&nbsp;<FONT size=2 face="serif">61,000</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Thereafter</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="10%" align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;<FONT size=2 face="serif">16,000</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%" align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="10%" align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;<FONT size=2 face="serif">509,000</FONT> </TD>
  </TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">Total rent expense for the years ended December 31, 2007 and December 31, 2006 was $ 244,874 and $201,788, respectively.</FONT></P>

<P align="center">
<FONT size=2 face="serif">F-25</FONT></P>

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

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


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<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's financial position or results of operations. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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: </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=center nowrap colspan=4 style="border-bottom: solid black 1px"><FONT size=2 face="serif">December 31</FONT> </TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:solid black 1px"><div align="center"><FONT size=2 face="serif">2007</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:solid black 1px"><div align="center"><FONT size=2 face="serif">2006</FONT> </div></TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Numerator for basic and diluted
        loss per</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">common share:</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&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">Net loss to common stockholders</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">($3,272,818</FONT> </TD>
    <TD align=left valign="middle" nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">($4,501,839</FONT> </TD>
    <TD align=left valign="middle" nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Denominator for basic and
        diluted loss per</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%" align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="6%" align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">common share:</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&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">Weighted average number of
        shares</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&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">outstanding</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">53,969,551</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="4%">&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>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Basic and diluted loss per
        common share</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">($0.06</FONT> </TD>
    <TD align=left valign="middle" nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD width="4%">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">($0.09</FONT> </TD>
    <TD align=left valign="middle" nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
</TABLE>
<BR>
<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="50%" align="center" cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;</td>
    <td align=left nowrap>&nbsp;</td>
    <td width="4%" align=right nowrap>&nbsp;</td>
    <td width="18%" align=right nowrap><font size=2 face="serif">2007&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
    <td align=right nowrap>&nbsp;</td>
    <td width="4%" align=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=2 face="serif">2006&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font> </td>
    <td width="2%" align=right nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap>&nbsp;</td>
    <td align=left nowrap><font size=2 face="serif">Warrants</font> </td>
    <td width="4%" align=right nowrap>&nbsp;</td>
    <td width="18%" align=right nowrap><font size=2 face="serif">5,541,250</font> </td>
    <td align=right nowrap>&nbsp;</td>
    <td width="4%" align=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size="2">10,576,709</font> </font></td>
    <td width="2%" align=right nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap>&nbsp;</td>
    <td align=left nowrap><font size=2 face="serif">Stock
        options</font> </td>
    <td width="4%" align=right nowrap>&nbsp;</td>
    <td width="18%" align=right nowrap><font size=2 face="serif">7,965,000</font> </td>
    <td align=right nowrap>&nbsp;</td>
    <td width="4%" align=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size="2">6,136,666</font> </font></td>
    <td width="2%" align=right nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap>&nbsp;</td>
    <td align=left nowrap><font size=2 face="serif">Convertible
        notes</font> </td>
    <td width="4%" align=right nowrap>&nbsp;</td>
    <td width="18%" align=right nowrap><font size=2 face="serif">9,583,750</font> </td>
    <td align=right nowrap>&nbsp;</td>
    <td width="4%" align=right nowrap>&nbsp;</td>
    <td align=right nowrap><font size=2 face="serif">9,792,500</font> </td>
    <td width="2%" align=right nowrap>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="2%" align=left nowrap>&nbsp;</td>
    <td align=left nowrap><font size=2 face="serif">Total</font> </td>
    <td width="4%" align=right nowrap>&nbsp;</td>
    <td width="18%" align=right nowrap><font size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23,090,000</font> </td>
    <td width="2%" align=right nowrap>&nbsp;</td>
    <td width="4%" align=right nowrap>&nbsp;</td>
    <td width="10%" align=right nowrap><font size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26,505,874</font> </td>
    <td width="2%" align=right nowrap>&nbsp;</td>
  </tr>
</table>
<BR>

<P align="center">
<FONT size=2 face="serif">F-26</FONT></P>

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

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


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>
<P align="left">
<B><FONT size=2 face="serif">9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; INCOME TAXES</FONT></B></P>
<P align="left">
<FONT size=2 face="serif">A reconciliation of the provision (benefit) for income taxes with amounts determined by applying
statutory U.S. income tax rate to income taxes is as follows: </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD width="2%" rowspan="5" align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:solid black 1px">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:solid black 1px"><FONT size=2 face="serif">2007</FONT> </TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:solid black 1px">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:solid black 1px"><FONT size=2 face="serif">2006</FONT> </TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">US Federal Statutory tax
        at 34%</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="8%" align=right nowrap><FONT size=2 face="serif">(939,733</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="8%" align=right nowrap><FONT size=2 face="serif">(1,453,500</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">State Taxes, net of federal
        benefit</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(295,000</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD width="6%">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">(405,000</FONT> </TD>
    <TD align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD 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">1,234,733</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="6%">&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">1,858,508</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD 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">$</FONT> </TD>
    <TD align=center nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">$</FONT> </TD>
    <TD align=center nowrap style="border-bottom:3px double #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">Due to losses incurred for the years ended December 31, 2007 and 2006, 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, 2007 and 2006:</FONT>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR>
    <TD width="2%" rowspan="8">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><div style="border-bottom:1px solid #000000"> &nbsp;</div></TD>
    <TD align=right nowrap><div style="border-bottom:1px solid #000000"><FONT size=2 face="serif">2007</FONT></div> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD align=left nowrap><div style="border-bottom:1px solid #000000"> &nbsp;</div></TD>
    <TD align=right nowrap><div style="border-bottom:1px solid #000000"><FONT size=2 face="serif">2006</FONT></div> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Net operating loss carried
        forward</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">7,148,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif">5,846,086</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Depreciable assets</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="6%">&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>
  </TR>
  <TR valign="bottom">
    <TD 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=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="6%">&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>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Valuation Allowance</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">7,148,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="6%">&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>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Deferred tax assets</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(7,148,000</FONT> </TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(5,920,480</FONT> </TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">$</FONT> </TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">-</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">$</FONT> </TD>
    <TD align=center 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>
</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, 2007 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, 2007, the Company has federal and state net operating losses of approximately $17,800,000 that expire from 2022 to 2027. </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>
<P align="left">
<B><FONT size=2 face="serif">10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; SUBSEQUENT EVENTS: </FONT></B><BR>
<BR>
<I><FONT size=2 face="serif">Issue of Unsecured convertible debentures</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">The Company raised $50,000 on January 29, 2008 and $200,000 on February 11, 2008 by issuing unsecured convertible debentures (&#147;Debentures&#148;) expiring on March 31, 2008 carrying an interest rate of 18% per annum.
The Debentures provide that interest is payable in the shares of the Company's common stock. </FONT></P>
<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 the OTCBB for the five consecutive trading days preceding the issuance
date.</FONT></P>
<P align="left">
<FONT size=2 face="serif">The Company is obligated to issue 45,441 shares of common stock as payment of interest on these Debentures. The Debenture holders have the right to convert their Debenture into fully paid non-</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-27</FONT></P>

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


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<P align="left">
<FONT size=2 face="serif">assessable shares of common stock at $0.40 and for
every two shares converted receive one warrant to purchase one (1) share of
common stock at an exercise price of $0.60 exercisable for two (2) years after
the  conversion date and to purchase one (1) share of  common stock
at an exercise price of $0.80 exercisable for three (3) years after the conversion
date.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Accounts Receivable Purchase Agreement</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">On March 1, 2008, the Company entered into an Accounts Receivable Purchase Agreement (the &#147;Purchase Agreement&#148;) with Horizon International Investments LLC (the "Purchaser"), pursuant to which the Company has
agreed to sell certain of its accounts receivable to the purchaser on a weekly basis during the one-year term of the Purchase Agreement for a purchase price equal to eighty per cent (80%) of the outstanding balance of the accounts receivable
purchased. The aggregate amount of the purchase prices paid for accounts receivable, less amounts collected by the purchaser, may not at any time exceed the sum of $650,000. Upon payment of a purchased account receivable, the purchaser will be
reimbursed for the purchase price of the account receivable, together with a commission. The balance of any payments will be remitted to the Company. The commissions are equal to a percentage of the original outstanding balance of the relevant
account receivable. The actual percentage is a function of the number of days elapsed from the date of the purchase of the account receivable to the date of payment. The percentages range from 1.65% for accounts receivable paid within 30 days after
the date of purchase up to 4.95% for those paid more than 75, but less than 90, days after the date of purchase. If a purchased account receivable has not been paid within 90 days, an additional commission of 1% is added for each additional 15-day
period until payment is made. If an account receivable has not been paid within 120 days after the date of purchase, the Company is required to repurchase that account receivable for a price equal to the sum of the purchase price originally paid by
the purchaser, plus a commission in the amount of 6.95% of the original outstanding balance of the account receivable.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Appointment of Director on Board</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">On February 22, 2008, the Board of Directors appointed Ameet Shah to fill a vacancy on the Board. Mr. Shah,  is the Managing Partner of Mosaic Capital Advisors and the Mosaic Private Equity family of funds. The Mosaic funds
hold 18% convertible debentures in the aggregate principal amount of $1,733,500. These debentures are convertible into an aggregate of 4,333,750 shares of common stock of the Company. In addition, these funds hold 6,039,172 outstanding shares of
common stock and warrants to purchase an aggregate of 4,333,750 shares of common stock of the Company.</FONT></P>
<P align="left">
<I><FONT size=2 face="serif">Consolidation of Portland, Oregon Pharmacies</FONT></I></P>
<P align="left">
<FONT size=2 face="serif">Subsequent to year end the Company has consolidated
the operations of  two pharmacies located in Portland, Oregon. This consolidation
will allow the Company to further leverage our existing infrastructure and is
expected to result in a reduction of costs. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; RESTATEMENT AND RECLASSIFICATION OF CERTAIN EQUITY ACCOUNTS </FONT></B></P>
<P align="left">
<FONT size=2 face="serif">The Company executed two debt-extinguishment transactions
in calendar year 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</FONT></P>
<P align="center">
<FONT size=2 face="serif">F-28</FONT></P>

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


<div style="border-bottom:1px solid #000000">
  <div 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, 2007 AND 2006 </font> </div>
</div>
<br><br>

<P align="left">
<FONT size=2 face="serif">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>
<P align="center">
<FONT size=2 face="serif">F-29</FONT></P>

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


<P align="left">
<B><FONT size=2 face="serif">ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">No events occurred requiring disclosure under Item 304(b) of Regulation S-B.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On April 5, 2006, Squar, Milner, Reehl &amp; Williamson, LLP (the &#147;</FONT><I><FONT size=2 face="serif">Squar Milner</FONT></I><FONT size=2 face="serif">&#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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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: 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;</FONT><I><FONT size=2 face="serif">GAAP</FONT></I><FONT size=2
face="serif">&#148;) that is necessary to (i) prevent errors in financial reporting and related disclosures and (ii) otherwise comply with accounting pronouncements. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">ITEM 8A(T) &#150; CONTROLS AND PROCEDURES </FONT></B></P>
<P align="left">
<B><FONT size=2 face="serif">Evaluation of Disclosure Controls and Procedures </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The Company&#146;s management, under the supervision and with the participation of the Chief Executive Officer and
the Chief Financial Officer, evaluated the effectiveness of the design and
operation of the Company&#146;s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of December 31, 2007. Based on that evaluation and the material weaknesses noted below, management concluded that the disclosure
controls and procedures were not effective as of December 31, 2007. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Management&#146;s Annual Report on Internal Control over Financial Reporting </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The Company&#146;s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). The Company&#146;s
internal control system is a process designed by, or under the supervision of, the Company&#146;s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company&#146;s board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (U.S.
GAAP). </FONT></P>
<P align="center">
<FONT size=2 face="serif">51</FONT></P>

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

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


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The Company&#146;s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures are being made
only in accordance with the authorization of its management and directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company&#146;s assets that could have a
material effect on its consolidated financial statements. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Management assessed the effectiveness of the Company&#146;s internal control over financial reporting as of December 31, 2007. In making this assessment, the Company used the control criteria
framework of the Committee of Sponsoring Organizations of the Treadway Commission published in its report entitled Internal Control &#151; Integrated Framework. As a result of its assessment, management identified a material weakness in the
Company&#146;s internal control over financial reporting. Based on the weakness identified as described below, management concluded that the Company&#146;s internal control over financial reporting was not effective as of December 31, 2007.
</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that, there is a reasonable possibility that a material misstatement of
the Company&#146;s annual or interim financial statements will not be prevented or detected on a timely basis. As a result of its assessment, management identified the following material weaknesses in internal control over financial reporting as of
December 31, 2007: </FONT></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
there were internal controls and procedures in place that relate to financial
reporting and the prevention  and detection of material misstatements, these
controls did not meet the required documentation and effectiveness requirements
under the Sarbanes-Oxley Act (&#147;</FONT><I><FONT size=2 face="serif">SOX</FONT></I><FONT size=2 face="serif">&#148;)
and  therefore, management could not certify that these controls were correctly
implemented. As a result, it was management&#146;s opinion that the lack of documentation
did warrant a material weakness in the financial reporting process.</FONT></P>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">This annual report does not include an attestation report of the Company&#146;s registered public accounting firm regarding internal control over financial reporting. Management&#146;s report
was not subject to attestation by the Company&#146;s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management&#146;s report in this annual report.
</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD width="49%" align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">/s/ Robert DelVecchio</FONT>	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Chief Executive Officer</FONT>	</TD>
</TR>
<TR>
	<TD colspan=3>&nbsp;	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">/s/ Haresh Sheth</FONT>	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Chief Financial Officer</FONT>	</TD>
</TR>

<TR valign="bottom">

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

<B><FONT size=2 face="serif">Remediation of Material Weakness</FONT></B>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During 2008, the Company will implement the following remediation activities to materially improve, or are reasonably likely to improve, the Company&#146;s internal control over financial
reporting: </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Utilize external consultants to assist in the implementation and design of policies and procedures to meet the required documentation and effectiveness requirements under the Sarbanes-Oxley Act (&#147;SOX&#148;) and adequately address the
lack of segregation of duties within the financial reporting process. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Even with these changes, due to the increasing number and complexity of pronouncements, emerging issues and releases, and reporting requirements and regulations, we expect there will continue
to be some risk related to financial disclosures. We believe that such risks have been reasonably mitigated following our implementation of the Sarbanes-Oxley Act requirements in late 2007 and our remediation </FONT></P>

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

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


<P align="left">
<FONT size=2 face="serif">plans that will be implemented during 2008. However, the process of identifying risk areas and implementing financial disclosure controls and internal controls over financial reporting required under the Sarbanes-Oxley Act
continues to be complex and subject to significant judgment and may result in the identification in the future of areas where we may need additional resources. Additionally, due to the complexity and judgment involved in this process, we cannot
guarantee we may not find or have pointed out to us either by internal or external resources, or by our auditors following the implementation of the external auditor requirement for their independent assessment of our controls, additional areas
needing improvement or resulting in a future assessment that our controls are or have become ineffective as a result of overlooked or newly created significant deficiencies or unmitigated risks. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Changes in Internal Control Over Financial Reporting </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During
the quarter ended December 31, 2007, there were no changes in internal control
that materially affected or are reasonably likely to materially affect, the Company&#146;s
internal control  over financial reporting.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">ITEM 8B &#150; OTHER INFORMATION</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The following disclosure would have otherwise been filed on Form 8-K under the heading
&#147;Item 2.03 - Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant&#148; and &#147;Item 3.02 &#150; Unregistered Sales of Equity Securities.&#148; </FONT></P>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As
of December 31, 2007, we are obligated under the terms of previous debentures
that matured and were renewed, to issue an aggregate of 1,444,124 shares of our
common stock as payment of interest.</FONT></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During the fiscal year ended December 31, 2007 and December 31,
2006, we entered into convertible loan agreements in the aggregate principal
amount of $1,488,000 at interest rates ranging from 12% to 15% per annum. As of
December 31, 2007, the principal amount of $1,063,000 is outstanding. Pursuant
to the terms of these agreements, the note holder 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 our common stock determined at a
conversion price equal to the rolling seven (7) trading day weighted average
closing bid price for our common stock on the OTCBB (or such other equivalent
market on which the Company's common stock is quoted) calculated as of the
trading day immediately preceding the date the conversion right is exercised.
The agreements provide that the conversion price shall not be less than $0.40 or
more than $0.80 and the note holder shall be entitled to piggyback registration
rights upon exercise of this conversion right.</FONT></P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During
the three months ended December 31, 2007, we issued unsecured convertible debentures
carrying an interest rate of 18% per annum and raised total proceeds of $ 950,000.
The debentures  mature on March 31, 2008. The debentures provide that all the
interest is payable solely in the shares of our common stock on the issuance
date. As of December 31, 2007, we are obligated to issue  260,570 shares of common
stock as payment of total interest on the debentures. 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. The debenture holders have the right to convert their debenture into fully
paid non-assessable shares of our common stock  at $0.40. Upon any conversion
of the debentures, the debenture holders will also be issued Common Stock Purchase
Class A Warrants to purchase one (1) share of  common stock at an exercise
price of $0.60 exercisable for two (2) years after  the conversion date and Common
Stock Purchase Class B Warrants to purchase one (1) share of  common
stock at an exercise price of $0.80 exercisable for three (3) years. One Class
A Warrant and one Class B Warrant will be issued for each  two shares of common
stock issued upon conversion of the debentures.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">PART III</FONT></B></P>
<P align="left">
<B><FONT size=2 face="serif">ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE &nbsp;ACT </FONT></B></P>
<P align="left">
<B><FONT size=2 face="serif">Directors and Executive Officers</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The
following information sets forth the names of our directors and named executive
officers, their ages and their present positions with the Company as of March
13, 2008.
</FONT></P>
<table width="50%" style="border:1px solid #000000" align="center" cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td width="3%" align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Name</font> <br>
        <br></td>
    <td width="3%" align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Age</font> <br>
        <br></td>
    <td width="3%" align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td width="3%" align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Position(s)
        and Office(s) Held</font> <br>
                <br></td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Robert
        DelVecchio</font> </td>
    <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">43</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=left 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 nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">James
        Manfredonia</font> </td>
    <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">46</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Director</font> </td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Richard
        Falcone</font> </td>
    <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">54</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Director</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Ameet
        Shah</font> </td>
    <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">35</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Director</font> </td>
  </tr>
  <tr valign="bottom" bgcolor="#E5FFFF">
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">Haresh
        Sheth</font> </td>
    <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;"><font size=2 face="serif">58</font> </td>
    <td align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</td>
    <td align=left 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 nowrap>&nbsp;</td>
    <td align=left nowrap><font size=2 face="serif">John Eric Mutter</font> </td>
    <td align=center nowrap style="border-left:1px solid #000000;">&nbsp;</td>
    <td align=center nowrap><font size=2 face="serif">49</font> </td>
    <td align=left nowrap>&nbsp;</td>
    <td align=center nowrap style="border-left:1px solid #000000;">&nbsp;</td>
    <td align=left nowrap><font size=2 face="serif">Chief Technology Officer</font> </td>
  </tr>
</table>
<BR>
<P align="center">
<FONT size=2 face="serif">53 </FONT></P>

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<PAGE><br>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif">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 previously 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 FINRA.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif">James Manfredonia. </FONT></B><FONT size=2 face="serif">Mr. Manfredonia was appointed to our board of directors 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif">Richard Falcone. </FONT></B><FONT size=2 face="serif">Mr. Falcone was appointed to our board of directors 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif">Ameet Shah. </FONT></B><FONT size=2 face="serif">Mr. Shah was appointed to our board of directors in February 2008. Mr. Shah is currently the Managing Partner of Mosaic Capital Advisors and
the Mosaic Private Equity family of funds. Prior to starting Mosaic Capital, a principal investment firm about 10 years ago, Mr. Shah worked with HSBC Asset Management Limited in various roles in Hong Kong, London and New York. He subsequently moved
to Salomon Brothers in Hong Kong and joined the investment team that oversaw the Salomon Brothers Asia Growth Fund in 1997-1998. Mr. Shah serves on the Board of three emerging US companies &#150; Advanced Financial Applications, Real Time
Radiography and Invalt Inc; and he also serves as a Conflict Review Board Member for the Sigma Opportunity Fund in New York. In 2006, Mr. Shah founded the Astonfield Group of Companies. Astonfield Renewable Resources Limited was set up to develop
clean energy projects in India. It currently builds, operates and owns a portfolio of solar, biomass and biogas projects in India. Mr. Shah is an Economics graduate of Fitzwilliam College, University of Cambridge.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif">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><FONT size=2 face="serif"> </FONT><FONT size=2 face="serif">Chief Financial Officer. Mr. Sheth was appointed to the board of directors of Assured Pharmacy, Inc. in September 2005. Since 1991, Mr. Sheth has acted as
President of Janus Finance Corporation, an asset based finance company and since 2005 Mr. Sheth has acted as President of Woodfield Capital Services Inc., an investment company. From 2004 until 2006, Mr. Sheth served as group financial officer and
director of Mosaic Capital Advisors LLC.</FONT><B><FONT size=2 face="serif"> </FONT></B><FONT size=2 face="serif">Mr. Sheth is a graduate of West Virginia University where he earned an engineering degree.</FONT><B><FONT size=2 face="serif">
</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT size=2 face="serif">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 </FONT></P>
<P align="center">
<FONT size=2 face="serif">54</FONT></P>

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


<P align="left">
<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">Audit Committee</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We do not have a separately-designated standing audit committee. The entire board of directors performs the functions of an audit committee, but no written charter governs the actions of the
board of directors when performing the functions of that would generally be performed by an audit committee. The board of directors approves the selection of our independent accountants and meets and interacts with the independent accountants to
discuss issues related to financial reporting. In addition, the board of directors reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results,
considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Richard Falcone is an audit committee financial expert and is independent, as the term is used under Rule 4200(a)(15) of the Nasdaq Marketplace Rules, even though such definition does not
currently apply to us because we are not listed on Nasdaq.</FONT><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">For the fiscal year ending December 31, 2007, the board of directors: </FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reviewed and discussed the audited financial statements with management, and</FONT></P>
<P align="center">
<FONT size=2 face="serif">55</FONT></P>

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<PAGE><br>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reviewed
and discussed the written disclosures and the letter from our independent auditors on the matters
relating to the auditor's independence.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Based upon the board of directors&#146; review and discussion of the matters above, the board of directors authorized inclusion of the audited financial statements for the year ended December
31, 2007 to be included in this Annual Report on Form 10-KSB and filed with the Securities and Exchange Commission. </FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Section 16(a) Beneficial Ownership Reporting Compliance</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file
with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to
furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended December 31, 2006, the
following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended December 31, 2007: Mr. DelVecchio filed a late Form 4 and Form 5, Mr. Mutter filed a late Form 4
and Mosaic Capital failed to file a Form 4. </FONT><B><FONT size=2 face="serif"> </FONT></B></P>
<P align="left">
<B><FONT size=2 face="serif">Code of Ethics</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We adopted a Code of Ethics that applies to our officers, employees and directors, including our principal executive officers, principal financial officers and principal accounting officers.
The Code of Ethics sets forth written standards that are designed to deter wrongdoing and to promote:</FONT></P>

<div align=left>
<UL>
<LI><P>
<FONT size=2 face="serif">Honest and ethical conduct, including the ethical handling of actual or apparent
conflicts</FONT> <FONT size=2 face="serif">of interest between personal and professional relationships;</FONT></P></LI>
<LI><P>
<FONT size=2 face="serif">Full, fair, accurate, timely and understandable disclosure in reports and
documents that</FONT> <FONT size=2 face="serif">we file with, or submit to, the SEC and
in other public communications made by us;</FONT></P></LI>
<LI><P>
<FONT size=2 face="serif">Compliance with applicable governmental laws, rules and regulations;</FONT></P></LI>
<LI><P>
<FONT size=2 face="serif">The prompt internal reporting of violations of the code to an appropriate person or</FONT> <FONT size=2 face="serif">persons identified in the code of ethics; and</FONT></P></LI>
<LI><P>
<FONT size=2 face="serif">Accountability for adherence to the Code of Ethics.</FONT></P></LI>
</UL>
</div>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">A copy of our Code of Ethics is attached as an exhibit to this Annual Report on Form 10-KSB.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">ITEM 10 - EXECUTIVE COMPENSATION</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The table below summarizes all compensation awarded to, earned by, or paid to our former or current named executive officers for the fiscal years ended 2007 and 2006. </FONT></P>
<P align="center">
<FONT size=2 face="serif">56</FONT></P>

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<PAGE><br>


<P align="center">
<FONT size=2 face="serif">SUMMARY COMPENSATION TABLE</FONT></P>
<TABLE width="100%" style="border:1px solid #000000;" cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Non-Equity</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Name</FONT> </TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Stock</FONT> </TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif"> Option</FONT></TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Incentive</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Nonqualified</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">and</FONT> </TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Awards</FONT> </TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif"> Awards</FONT></TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Plan</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Deferred</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">All Other</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="1%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Principal</FONT> </TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap colspan=2>&nbsp;<FONT size=2 face="serif">Salary</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Bonus</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">(4</FONT>) </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Compensation </FONT> </TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Compensation </FONT></TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Compensation</FONT></TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Total</FONT> </TD>
    <TD width="1%" align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Position</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Year</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</TD>
    <TD colspan="2" align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">($)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">($)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">($)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">($)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">($)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Earnings
        ($)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">($)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">($)</FONT> </TD>
    <TD width="1%" align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Robert DelVecchio </FONT><SUP><FONT size=2 face="serif">(1)</FONT></SUP> </TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">2007</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">165,224</FONT> </TD>
    <TD align=left nowrap><SUP><FONT size=2 face="serif">(5)</FONT></SUP> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap>&nbsp; &nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">5,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">170,224</FONT> </TD>
    <TD width="1%" align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">CEO &amp; Former CFO</FONT> </TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">2006</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">150,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">128,860</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">278,860</FONT> </TD>
    <TD width="1%" align=center nowrap>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Haresh Sheth </FONT><SUP><FONT size=2 face="serif">(2)</FONT></SUP> </TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">2007</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">165,224</FONT> </TD>
    <TD align=left nowrap><SUP><FONT size=2 face="serif">(6)</FONT></SUP> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">5,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">170,224</FONT> </TD>
    <TD width="1%" align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">CFO &amp; Former COO</FONT> </TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">2006</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">110,577</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">283,333</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">393,910</FONT> </TD>
    <TD width="1%" align=center nowrap>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">John Eric Mutter </FONT><SUP><FONT size=2 face="serif">(3)</FONT></SUP> </TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">2007</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">193,000</FONT> </TD>
    <TD align=left nowrap><SUP><FONT size=2 face="serif">(7)</FONT></SUP> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">21,426</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">214,426</FONT> </TD>
    <TD width="1%" align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">CTO &amp; Former COO</FONT> </TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">2006</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap><FONT size=2 face="serif">185,000</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD style="border-left:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">185,000</FONT> </TD>
    <TD width="1%" align=center nowrap>&nbsp;</TD>
  </TR>
</TABLE>
<div style="border-bottom:1px solid #000000; width:100px">&nbsp;<BR>
</div>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
  <TD nowrap valign=top>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Mr. DelVecchio resigned as our Chief Financial Officer on December 15, 2006.</FONT>	</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)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<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>	</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)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<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>	</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)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">The amounts reflect the compensation expense in accordance with FAS 123(R) of these option awards. The assumptions used to determine the fair value of the option awards for fiscal years ended December 31,
2006 and 2007 are set forth in Note 6 of our audited consolidated financial statements included in this Annual Report on Form 10-KSB. Our named executive officers will not realize the value of these awards in cash unless and until these awards are
exercised and the underlying shares subsequently sold.</FONT>	</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)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">The amount includes salary adjustments during the year ended December 31, 2007. Mr. DelVecchio&#146;s current salary is $175,000 per annum.</FONT>	</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)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">The amount includes salary adjustments during the year ended December 31, 2007. Mr. Sheth&#146;s current salary is $175,000 per annum.</FONT>	</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">(7)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">The amount includes a salary increase during the year ended December 31, 2007. Mr. Mutter&#146;s current salary is $209,000 per annum.</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR></TABLE>
<P align="left">
<B><FONT size=2 face="serif">Employment Agreements</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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
entitled to a base salary of $150,000 subject to adjustment from time to time. During fiscal year ended December 31, 2007, Mr. DelVecchio&#146;s salary was adjusted upwards and downwards and he is currently paid a base salary of $175,000. 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 $0.60 per share. These options
became fully vested and exercisable </FONT></P>
<P align="center">
<FONT size=2 face="serif">57</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">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 $128,860 in bonus compensation. The employment agreement grants Mr. DelVecchio demand and piggyback
registration rights covering the shares underlying the options.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On
May 1, 2006, we entered into an employment agreement with Mr. Sheth. As provided
in the employment agreement, Mr. Sheth is entitled to a base salary of $150,000
per annum subject to adjustment from time to time. During fiscal year ended December
31, 2007, Mr. Sheth&#146;s salary was adjusted upwards and downwards and he is currently paid a base salary of $175,000. 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 $0.60 per share, half of which vested on September 29, 2006 and the other half vested on September
29, 2007. 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; The employment agreement grants Mr. Sheth demand and
piggyback registration rights covering the shares underlying the options.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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>
<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>
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    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD colspan="9" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">OPTION
          AWARDS</FONT></B> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD colspan="7" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">STOCK
          AWARDS</FONT></B> </TD>
  </TR>
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    <TD align=left nowrap><FONT size=2 face="serif">Equity</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Equity</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Incentive</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Incentive</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Plan</FONT> </TD>
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    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Awards:</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Market or</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Equity</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">of</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Payout</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Incentive</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Value of</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Unearned</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Unearned</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Units</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Shares,</FONT> </TD>
  </TR>
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    <TD align=left nowrap>&nbsp;</TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Number of</FONT> </TD>
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    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Units or</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Securities</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Securities</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Securities</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">of</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Stock</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Other</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Other</FONT> </TD>
  </TR>
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    <TD align=left nowrap>&nbsp;</TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Underlying</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Underlying</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Underlying</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Stock That</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">That</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Rights</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Rights</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Unexercised</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Unexercised</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Unexercised</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Option</FONT></TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Option</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Have</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Have</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">That Have</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">That</FONT> </TD>
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    <TD align=left nowrap>&nbsp;</TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Options</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Options</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Unearned</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Exercise</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif"> Expiration</FONT></TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Not</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Not</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Not</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Have Not</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">(#)</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">(#)</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Options</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Price</FONT> </TD>
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    <TD align=left nowrap><FONT size=2 face="serif">Date</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Vested</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Vested</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Vested</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Vested</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Name</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Exercisable</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Unexercisable</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left 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>
    <TD align=left 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>
    <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;"><FONT size=2 face="serif">(#)</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left 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>
    <TD align=left 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>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(#)</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <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=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">5,000,000<SUP>(1)</SUP></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">-</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">-</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">0.60</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">09/19/2015</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">-</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">-</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">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=19>&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=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">1,133,334<SUP>(2)</SUP></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">-</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">-</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">0.60</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">05/01/2016</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">-</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">-</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">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=19>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">John
        Eric Mutter</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">250,000<SUP>(3)</SUP></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">-</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">-</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">0.60</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">08/29/2008</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">-</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">-</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">-</FONT> </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" bgcolor="#E5FFFF">
    <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;"><FONT size=2 face="serif">500,000<SUP>(4)</SUP></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">250,000<SUP>(5)</SUP></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">-</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">0.60</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">01/31/2010</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">-</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">-</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">-</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
</TABLE>
<BR>
<P align="center">
<FONT size=2 face="serif">58 </FONT></P>

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

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


<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">These options were fully vested upon issuance.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Half of these option vested on September 29, 2006 and the other half vested on September 29, 2007.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">These options vested in three equal tranches over three years, with the first tranche vesting on the date of grant.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Half these options vested on February 20, 2007 and the other half vested on February 20, 2008.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">These options will vest on February 20, 2009.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<P align="left">
<B><FONT size=2 face="serif">Compensation of Directors</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The table below summarizes all compensation of our directors as of December 31, 2007.</FONT></P>
<div style="border-bottom:1px solid #000000">
  <div align="center"><b><font size=2 face="serif">DIRECTOR
    COMPENSATION</font></b> </div>
</div><br>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Name</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Fees</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">Non-Equity</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">Non-Qualified</FONT> </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 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(2)</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">($)</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">($)</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 valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Robert
        DelVecchio </FONT><SUP><FONT size=2 face="serif">(1)</FONT></SUP> </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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Haresh
        Sheth </FONT><SUP><FONT size=2 face="serif">(1)</FONT></SUP> </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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <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>
<div style="border-bottom:1px solid #000000; width:100px">&nbsp;<BR>
</div>
<TABLE border=0 cellspacing=0 cellpadding=0>

<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Please refer to the summary compensation table for executive compensation
with respect to the named individual. All fees earned or paid in cash and stock options awards granted to the named individuals were earned in connection with their employment agreement as executive officers. The named individuals received
no compensation for their service as members of our board of directors.</FONT>	</TD>
</TR>

<TR valign="top"><TD colspan=2>&nbsp;</TD>
</TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We only compensate outside directors for their service as members of our board of directors. Outside directors are entitled to a flat fee of $1,500 for each board meeting attended in person and
we make discretionary grants of stock awards in consideration for their services from time to time. During fiscal year ended December 31, 2007, we did not pay our outside directors any flat fees and issued a total of 300,000 shares of our common
stock to our outside directors.</FONT></P>
<P align="left">
<B><FONT size=2 face="serif">Indemnification for Securities Act Liabilities</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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>
<P align="center">
<FONT size=2 face="serif">59</FONT></P>

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

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


<P align="left">
<B><FONT size=2 face="serif">ITEM 11- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 March 28, 2008 by (i) each stockholder beneficially owning more than 5% of the
outstanding shares of our common stock, (ii) each director, (iii) each named executive officer, and (iv) all executive officers and directors as a group. On March 28, 2008, there were 54,263,085 shares of our common stock issued and outstanding.
</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As used in the table below, 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 March 28, 2008. 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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="20%" align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp; &nbsp; &nbsp;<B><FONT size=2 face="serif">Name
          and address</FONT></B> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap colspan=2><B><FONT size=2 face="serif">Amount of</FONT></B> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="8%" align=center nowrap><B><FONT size=2 face="serif">Percent</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="20%" align=left nowrap><B><FONT size=2 face="serif">Title of class</FONT></B> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp; &nbsp;<B><FONT size=2 face="serif">of beneficial
          owner</FONT></B> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=center nowrap colspan=2><B><FONT size=2 face="serif">beneficial</FONT></B> </TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD width="8%" align=center nowrap><B><FONT size=2 face="serif">of class*</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="20%" 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 align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap colspan=2 style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">ownership</FONT></B><B><SUP><FONT size=2 face="serif">(1)</FONT></SUP></B> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap colspan=4 style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Executive
          Officers &amp; Directors:</FONT></B> </TD>
    <TD width="10%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width="20%" align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Common</FONT> </TD>
    <TD width="2%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Robert
        DelVecchio</FONT> </TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="10%" align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">7,349,371</FONT> </TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;"><SUP><FONT size=2 face="serif">(1)</FONT></SUP> </TD>
    <TD width="4%" align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">12.1%</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width="20%" align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Common</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">James
        Manfredonia</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="10%" align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">500,000</FONT> </TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">*</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="20%" align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Common</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Richard
        Falcone</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="10%" align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">500,000</FONT> </TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">*</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width="20%" align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Common</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Haresh
        Sheth</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="10%" align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">5,217,365</FONT> </TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;"><SUP><FONT size=2 face="serif">(2)</FONT></SUP> </TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">8.9%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="20%" align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Common</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">John
        Eric Mutter</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="10%" align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">1,075,000</FONT> </TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;"><SUP><FONT size=2 face="serif">(3)</FONT></SUP> </TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">1.9%</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width="20%" align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Common</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Ameet
        Shah</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="10%" align=right nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">16,734,314</FONT> </TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">,</FONT><SUP><FONT size=2 face="serif">(4)</FONT></SUP> </TD>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">25.7%</FONT> </TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="20%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD width="20%" align=center nowrap><B><FONT size=2 face="serif">Total of
          All Directors and Executive</FONT></B> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="10%" align=right nowrap><FONT size=2 face="serif">31,376, 050</FONT> </TD>
    <TD width="4%" align=left nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD width="8%" align=center nowrap><FONT size=2 face="serif">40.9%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="20%" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Officers:</FONT></B> </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 width="10%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap colspan=4 style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">More
          Than 5% Beneficial Owners:</FONT></B> </TD>
    <TD width="10%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width="20%" align=left nowrap><FONT size=2 face="serif">Common</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Mosaic Capital Advisors,
        LLC</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="10%" align=right nowrap><FONT size=2 face="serif">16,734,314</FONT> </TD>
    <TD width="4%" align=left nowrap><SUP><FONT size=2 face="serif">(5)</FONT></SUP> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD width="8%" align=center nowrap><FONT size=2 face="serif">25.7%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD width="20%" align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">545 Fifth Avenue, Suite 709</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width="20%" 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;"><FONT size=2 face="serif">New
        York, NY 10017</FONT> </TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="10%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="4%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD width="8%" align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
</TABLE>
<div style="border-bottom:1px solid #000000; width:100px">&nbsp;<BR>
</div>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
  <TD nowrap valign=top><FONT size=2 face="serif">*</FONT></TD>
  <TD><FONT size=2 face="serif">Indicates less than one percent.</FONT></TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Represents (i) 5,000,000 shares issuable upon exercise of options held by Mr. DelVecchio, (ii) 638,500 shares held by Brockington Securities, Inc. (&#147;</FONT><I><FONT size=2 face="serif">Brockington</FONT></I><FONT size=2 face="serif">&#148;), (iii) 350,000 shares issuable upon exercise of warrants held by Brockington, (iii) 625,000 shares issuable upon the conversion of a convertible debenture held by Brockington, 625,000 shares issuable upon exercise of
warrants to be issued to Brockington upon the conversion of the convertible debenture and 110,871 shares to be issued as payment of interest on the convertible debenture as of March 31, 2008. Mr. DelVecchio is the President and Chief Executive
Officer of Brockington.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Represents (i) 1,133,334 shares issuable upon the exercise of options held by Mr. Sheth, (ii) 570,652 shares held by Woodfield Capital Services Inc. (&#147;</FONT><I><FONT size=2
face="serif">Woodfield</FONT></I><FONT size=2 face="serif">&#148;), (ii) 187,500 shares issuable</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<P align="center">
<FONT size=2 face="serif">60</FONT></P>

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

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


<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
<TD>&nbsp;</TD>	<TD width=100%>
<FONT size=2 face="serif">upon exercise of warrants held by Woodfield, (iii) 875,000 shares issuable upon the conversion of a convertible debenture held by Woodfield, 875,000 shares issuable upon exercise of warrants held by
Woodfield upon the conversion of its convertible debenture and 143,287 shares to be issued as payment of interest on the convertible debenture as of March 31, 2008, (iv) 375,000 shares held by Janus Finance Corporation (&#147;</FONT><I><FONT
 size=2 face="serif">Janus Finance</FONT></I><FONT size=2 face="serif">&#148;), (v) 187,500 shares issuable upon exercise of warrants held by Janus Finance, (vi) 28,125 shares held by Janus Financial Services Inc
(&#147;</FONT><I><FONT size=2 face="serif">Janus Financial</FONT></I><FONT size=2 face="serif">&#148;), (vii) 566,666 shares issuable upon exercise of options held by Janus Financial and (viii) 125,000 shares issuable
upon the conversion of the convertible debenture held by Janus Financial, 125,000 shares issuable upon exercise of warrant to be issued to Janus Financial upon the conversion of its convertible debenture and 25,301 shares to be issued as payment of
interest on the convertible debenture as of March 31, 2008. Mr. Sheth is the President of Woodfield, Janus Finance and Janus Financial.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Includes 750,000 shares issuable upon options held by Mr. Mutter.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Represents (i) 2,500,000 shares held by Mosaic Financial Services, LLC (&#147;</FONT><I><FONT size=2 face="serif">MFS</FONT></I><FONT size=2 face="serif">&#148;), a wholly
owned subsidiary of Mosaic Capital Advisors, LLC (&#147;</FONT><I><FONT size=2 face="serif">MCA</FONT></I><FONT size=2 face="serif">&#148;) and (ii) 3,493,731 shares held by four funds (the &#147;</FONT><I><FONT
 size=2 face="serif">MCA Funds</FONT></I><FONT size=2 face="serif">&#148;) for which MCA is the financial advisor and MPE General Partner, LLC (&#147;</FONT><I><FONT size=2
face="serif">GP</FONT></I><FONT size=2 face="serif">&#148;) is the general partner,
1,625,000 shares issuable upon the exercise of warrants held by the MCA Funds,
4,333,750 shares issuable upon the conversion of convertible debentures held
by the MCA Funds, 4,333,750 shares issuable upon exercise of warrants held by
the MCA Funds upon the conversion of convertible debentures and 448,083 shares
to be issued as payment of interest on the convertible debenture as of March
31, 2008. Mr. Shah and Mr. Sadowsky own MCA and GP and their power to vote or
direct the vote of the aforementioned shares is indirect. Mr. Shah disclaims
beneficial ownership of these shares except to the extent of his pecuniary interest
in the shares.</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Represents (i) 2,500,000 shares held by Mosaic Financial Services, LLC (&#147;</FONT><I><FONT size=2 face="serif">MFS</FONT></I><FONT size=2 face="serif">&#148;),
a wholly owned subsidiary of MCA and (ii) 3,493,731 shares held by the MCA Funds
for which MCA is the financial advisor and GP is the general partner, 1,625,000
shares issuable upon the exercise of warrants held by the MCA Funds, 4,333,750
shares issuable upon the conversion of convertible debentures held by the MCA
Funds, 4,333,750 shares issuable upon exercise of warrants held by the MCA Funds
upon the conversion of convertible debentures and 448,083 shares to be issued
as payment of interest on the convertible debenture as of March 31, 2008. Mr.
Shah and Mr. Sadowsky own MCA and GP and their power to vote or direct the vote
of aforementioned shares is indirect.</FONT></TD>
</TR>
</TABLE>
<P align="left"><B><FONT size=2 face="serif">Securities Authorized for Issuance Under Equity Compensation Plans</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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,
2007.</FONT></P>
<P align="center">
<FONT size=2 face="serif">61</FONT>
<HR noshade width="100%" size=4>

<P STYLE="page-break-before:always"></P>
<PAGE><br>
<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=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">A</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">B</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">C</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <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><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <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><B><FONT size=2 face="serif">securities remaining</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">available for future</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">securities to be</FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">issuance under</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">issued upon</FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">Weighted-average </FONT></B> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">equity</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">exercise of</FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">exercise price of</FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">compensation plans</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">outstanding</FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">outstanding</FONT></B> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">(excluding</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">options, warrants </FONT></B> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">options, warrants </FONT></B></TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><B><FONT size=2 face="serif">securities reflected</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">Plan
          Category</FONT></B> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">and
          rights</FONT></B> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">and
          right</FONT></B> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left 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=center colspan=7>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD width="24%" align=left nowrap><FONT size=2 face="serif">Equity</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD width="24%" align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="24%" align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="24%" align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">compensation plans</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">5,520,613</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">approved by</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>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">security
        holders</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>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Equity</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>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">compensation plans</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">9,915,000</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;<FONT size=2 face="serif">$0.60</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">9,915,000</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">not approved by</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>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">security
        holders</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>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Total</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">9,915,000</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;<FONT size=2 face="serif">$0.60</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">15,435,613</FONT> </TD>
  </TR>
</TABLE>
<BR>
<P align="left">
<B><FONT size=2 face="serif">ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our policy is to enter into transactions with related parties on terms that, on the whole, are no more favorable, or no less favorable, than those available from unaffiliated
third parties. Based on our experience in the business sectors in which we operate and the terms of our transactions with unaffiliated third parties, we believe that all of the transactions described below met this policy standard at the time they
occurred.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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 $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 $0.60 exercisable for 12
months after the conversion date and one (1) share of common stock at an exercise
price of $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 $1,375,000. 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">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Brockington
Securities, Inc. (&#147;Brockington&#148;) purchased $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. These Debentures were renewed during 2007 and we are obligated to issue 183,738 shares of our common stock as payment of interest as of December 31, 2007.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Woodfield
Capital Services Inc. (&#147;Woodfield&#148;) purchased $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. These Debentures were renewed during 2007 and we are obligated to issue 242,935 shares of our common stock as payment of interest as of December 31, 2007.</FONT></P>
<P align="center">
<FONT size=2 face="serif">62</FONT></P>

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

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


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Janus
Financial Services Inc. (&#147;Janus&#148;) purchased $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. These Debentures were renewed during 2007 and we are obligated to issue 39,130 shares of common stock as payment of interest as of December 31, 2007.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In 2007, the Mosaic group purchased $950,000 in Debentures and we are obligated to issue 260,570 shares as payment of interest as of December 31, 2007. In addition, the Mosaic group renewed previously acquired debentures in the principal amount
of $533,500 and we are obligated to issue 142,072 shares of common stock as payment of interest as of December 31, 2007.</FONT></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&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 width="100%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Number of</FONT></B> </TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Percentage</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD align=right nowrap></TD>
    <TD align=center nowrap></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">shares</FONT></B> </TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">of shares</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD align=right nowrap></TD>
    <TD align=center nowrap></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">outstanding</FONT></B> </TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">outstanding</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD align=right nowrap></TD>
    <TD align=center nowrap></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">prior to</FONT></B> </TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">and held by</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Market</FONT></B> </TD>
    <TD align=right nowrap></TD>
    <TD align=center nowrap></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">transaction</FONT></B> </TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">persons </FONT></B> </TD>
    <TD align=right nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">price of a</FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Market</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">and held by</FONT></B> </TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">other than</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">share of</FONT></B> </TD>
    <TD align=right nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">price of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Holder of</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Number of </FONT></B> </TD>
    <TD align=left nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">persons</FONT></B></TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">holders of </FONT></B> </TD>
    <TD align=left nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">common</FONT></B></TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">share of</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">convertible</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">shares</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">other than</FONT></B> </TD>
    <TD></TD>
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">convertible</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">stock at</FONT></B> </TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">common</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">debenture</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">outstanding</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">holders of</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">Securities</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">debentures </FONT></B> </TD>
    <TD align=left nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">the time of</FONT></B></TD>
    <TD align=left nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">stock as of </FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap><B><FONT size=2 face="serif">Date of</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">and</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">prior to </FONT></B> </TD>
    <TD align=right nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">convertible</FONT></B></TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">issued in</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">issued in</FONT></B> </TD>
    <TD></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">the</FONT></B> </TD>
    <TD align=center nowrap></TD>
    <TD align=center nowrap><B><FONT size=2 face="serif">November</FONT></B></TD>
  </TR>
  <TR valign="bottom">
    <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;"><p><font size=1>&nbsp;</font></p></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">affiliates</FONT></B> </TD>
    <TD style="border-bottom:1px solid #000000;"><p><font size=1>&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=right nowrap style="border-bottom:1px solid #000000;"><p><font size=1>&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">debentures</FONT></B></TD>
    <TD style="border-bottom:1px solid #000000;"><p><font size=1>&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;"><p><font size=1>&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;"><p><font size=1>&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=right nowrap style="border-bottom:1px solid #000000;"><p><font size=1>&nbsp;</font></TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">15,
          2007</FONT></B> </TD>
  </TR>
  <TR>
    <TD colspan=15></TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">February 26, 2004</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Brockington</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">57,606,041</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">57,606,041</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">500,000 shares of</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0.9%</FONT> </TD>
    <TD width="2%">&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.64</FONT> </TD>
    <TD width="2%" align=right nowrap><FONT size=2 face="serif"></FONT> </TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.25</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <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;"><FONT size=2 face="serif">Securities,
        Inc. </FONT><SUP><FONT size=2 face="serif">(1)</FONT></SUP> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</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;">&nbsp;</TD>
    <TD align=center 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>
    <TD align=right nowrap 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 nowrap><FONT size=2 face="serif">June 30, 2004</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Mosaic</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">63,157,391</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">62,657,391</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">125,000 shares of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0.3%</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.64</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif"></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>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Partners Fund </FONT><SUP><FONT size=2 face="serif">(2)</FONT></SUP> </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">common stock and</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</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 purchase</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</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">62,500 shares at an</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</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">exercise price of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</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=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>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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;"><FONT size=2 face="serif">$0.60
        per share</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=15 style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">June 17, 2004</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Brockington</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">63,157,391</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">62,657,391</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Warrants to purchase</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0.6%</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.64</FONT> </TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0.25</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Securities, Inc. </FONT><SUP><FONT size=2 face="serif">(1)</FONT></SUP> </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">350,000 shares of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</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">common stock at an</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</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">exercise price of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <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=center 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>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">$0.60
        per share</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=15 style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">June 30, 2004</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Brockington</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">64,107,391</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">63,482,391</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">150,000 shares of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">0.2%</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.63</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif"></FONT> </TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.25</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=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Securities,
        Inc. </FONT><SUP><FONT size=2 face="serif">(1)</FONT></SUP> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</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;">&nbsp;</TD>
    <TD align=center 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>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=15 style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">June 3, 2005</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Mosaic Partners</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">35,716,428</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">34,941,428</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">312,500 shares of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">1.3%</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.36</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif"></FONT> </TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.25</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Fund and</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">common stock and</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Mosaic Partners</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 purchase</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Fund LP </FONT><SUP><FONT size=2 face="serif">(2)</FONT></SUP> </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">156,250 shares of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</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">common stock at an</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</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">exercise price of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <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=center 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>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">$0.60
        per share</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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>
    <TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=15 style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">September 16, 2005</FONT> </TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Mosaic Partners</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">42,020,094</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">40,932,594</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">250,000 shares of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">3.7%</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.41</FONT> </TD>
    <TD align=right nowrap><FONT size=2 face="serif"></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>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Fund and Mosaic</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">common stock and</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Partners Fund LP</FONT><SUP><FONT size=2 face="serif">(2)</FONT></SUP> </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 purchase</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</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">125,000 shares of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</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">common stock at an</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</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">exercise price of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</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=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>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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;"><FONT size=2 face="serif">$0.60
        per shares</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=15 style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">October 24, 2005</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Mosaic Financial</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">47,205,634</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">45,118,134</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">2,500,000 shares of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">5.5%</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.39</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;<FONT size=2 face="serif">$0.25</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <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;"><FONT size=2 face="serif">Services
        LLC </FONT><SUP><FONT size=2 face="serif">(2)</FONT></SUP> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">common
        stock </FONT><SUP><FONT size=2 face="serif">(3)</FONT></SUP> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=15 style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">August 7, 2006</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Mosaic Private</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">46,041,471</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">41,453,971</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">4,500,000 shares of</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">11.8%</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap><FONT size=2 face="serif">$0.31</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;<FONT size=2 face="serif">$0.25</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Equity III Limited,</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">common stock and</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=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Mosaic 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 purchase</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=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Equity US LP&#151;</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">2,250,000 shares of</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=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Series B, Mosaic</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">common stock at an</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=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Private Equity</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">exercise price of</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=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">US LP&#151;Series E</FONT><SUP><FONT size=2 face="serif">(2) </FONT></SUP><FONT size=2 face="serif">,</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">$0.60 per shares</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=center nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Janus Finance</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Corporation </FONT><SUP><FONT size=2 face="serif">(3)</FONT></SUP><FONT size=2 face="serif">,</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Woodfield Capital</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Services Inc. </FONT><SUP><FONT size=2 face="serif">(3) </FONT></SUP><FONT size=2 face="serif">and</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">Jyotsna P. Shah</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=center nowrap>&nbsp;</TD>
    <TD>&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 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;"><FONT size=2 face="serif">Revocable
        Trust</FONT> </TD>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center 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>
    <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=center 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>
    <TD style="border-bottom:1px solid #000000;">&nbsp;</TD>
    <TD align=center nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
  </TR>
</TABLE>
<BR>
<P align="center">
<FONT size=2 face="serif">63 </FONT></P>

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

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

<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Robert DelVecchio, our Chief Executive Officer and a member of our board of directors, is the President and Chief Executive Officer of Brockington Securities, Inc. On September 9, 2005, Mr. DelVecchio was granted options to
purchase 5,000,000 shares of our common stock at an exercise price of $0.60 per share.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
<TD nowrap valign=top><SUP><FONT face="serif">(2)</FONT></SUP>&nbsp; &nbsp; &nbsp; </TD>	<TD width=100%>
<FONT size=2 face="serif">Ameet Shah, a member of our board of directors owns Mosaic Capital Advisors, LLC (&#147;</FONT><I><FONT size=2 face="serif">MCA</FONT></I><FONT size=2 face="serif">&#148;)
and Mosaic Financial Services LLC, a wholly owned subsidiary of MCA. MCA is the
financial advisor of Mosaic Partners Fund, Mosaic Partners Fund LP, Mosaic Private
Equity III Limited, Mosaic Private Equity US LP-Series B and MPE General Partner
LLC is the general partner of the aforementioned funds.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Issued in connection with conversion of outstanding indebtedness.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Haresh Sheth, our Chief Financial Officer and a member
of our board of directors, is the President of Woodfield Capital Services Inc.
and the President of Janus Finance Corporation. On May 1, 2006, Mr. Sheth was
granted options to purchase 1,133,334 shares of our common stock at an exercise
price of $0.60 per share.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<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 </font></b><b><sup><font size=2 face="serif">(1)</font></sup></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" bgcolor="#E5FFFF">
    <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>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>During
    the fiscal year ended December 31, 2007 and December 31, 2006, we entered
    into convertible loan agreements in the aggregate principal amount of $1,488,000
    at interest rates ranging from 12% to 15% per annum. As of December 31, 2007,
    the principal amount of $1,063,000 is outstanding. Pursuant to the terms
    of these agreements, the note holder 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 our common stock determined at a conversion
    price equal to the rolling seven (7) trading day weighted average closing
    bid price for our common stock on the OTCBB (or such other equivalent market
    on which the Company&#146;s common stock is quoted) calculated as of the
    trading day immediately preceding the date the conversion right is exercised.
    The agreements provide that the conversion price shall not be less than $0.40
    or more than $0.80 and the note holder shall be entitled to piggyback registration
    rights upon exercise of this conversion right. </font></p>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>Brockington
    entered into a convertible loan agreement with us in the principal amount
    of $243,000. As of December 31, 2007, the outstanding principal is $193,000
    and accrued interest of $11,316.</font></p>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>Haresh
    Sheth entered into a convertible loan agreement with us in the aggregate
    principal amount of $200,000. As of December 31, 2007, the principal has
    been paid in full and there is outstanding accrued interest of $3,954. </font></p>
<P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2>Woodfield
    entered into a convertible loan agreement with us in the principal amount
    of $150,000. As of December 31, 2007, the outstanding principal is $150,000
    and accrued interest of $8,585.</font></P>
<P align="center">
<FONT size=2 face="serif">64</FONT></P>

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


<P align="left">
<B><FONT size=2 face="serif">ITEM 13 &#150; EXHIBITS </FONT></B></P>

<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
  <TD width="8%" valign=top nowrap><U><FONT size=2 face="serif">Exhibit</FONT></U><FONT size=2 face="serif">&nbsp; </FONT></TD>
  <TD WIDTH="100%" VALIGN="TOP"><U><FONT size=2 face="serif">Description</FONT></U></TD>
</TR>
<TR>
  <TD width="8%" valign=top nowrap>&nbsp;</TD>
  <TD WIDTH="100%" VALIGN="TOP">&nbsp;</TD>
</TR>
<TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">3.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Amended and Restated Certificate of Incorporation of eRXSYS, Inc., dated as of December 14, 2004 </FONT><SUP><FONT size=2 face="serif">(1)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">3.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">By-laws, as amended, of Surforama.com, Inc., dated as of July 15, 2003</FONT><SUP><FONT size=2 face="serif">(1)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Sample Share Certificate </FONT><SUP><FONT size=2 face="serif">(1)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">License Agreement, dated as of March 19, 2002, by and among RTIN Holdings, Inc., Safe Med Systems, Inc., Safescript Pharmacies, Inc. and RxSystems, Inc. </FONT><SUP><FONT size=2 face="serif">(2)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.2</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Assignment of Agreement for License Agreement, dated as of May 27, 2003, by and between RxSystems, Inc. and Surforama.com, Inc. </FONT><SUP><FONT size=2 face="serif">(2)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Amendment to the License Agreement, dated as of June 30, 2003, by and between Surforama.com, Inc. and RTIN Holdings, Inc. </FONT><SUP><FONT size=2 face="serif">(3)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.4</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Second Amendment to License Agreement, dated as of September 25, 2003, by and between eRXSYS, Inc. (formerly Surforama.com, Inc.) and RTIN Holdings, Inc. </FONT><SUP><FONT size=2 face="serif">(4)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Agreement of Payment Pursuant to Assignment of License, dated as of June 30, 2003, by and between Surforama.com, Inc. and David Parker </FONT><SUP><FONT size=2
face="serif">(3)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Cancellation of Debt and Assignment Agreement for CMSA of Fresno, CA, dated as of November 27, 2003, between eRXSYS, Inc. and David Parker </FONT><SUP><FONT size=2
face="serif">(5)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Amendment to Cancellation of Debt and Assignment Agreement for CMSA of Fresno, CA, dated as of February 16, 2004, by and between eRXSYS, Inc. and David Parker </FONT><SUP><FONT size=2
face="serif">(5)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Termination and Settlement Agreement, dated as of February 1, 2005, by and between eRXSYS, Inc. and David B. Parker </FONT><SUP><FONT size=2 face="serif">(6)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.9&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Settlement Agreement, dated as of February 1, 2005, by and between eRXSYS, Inc. and Ronald Folse </FONT><SUP><FONT size=2 face="serif">(6)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.10&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Termination and Settlement Agreement, dated as of February 1, 2005, by and between eRXSYS, Inc. and A.J. LaSota </FONT><SUP><FONT size=2 face="serif">(6)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Joint Venture Agreement, dated as of April 24, 2003, by and between eRXSYS, Inc. and TPG Partners, L.L.C.</FONT><SUP><FONT size=2 face="serif">(5)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.12&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">First Amended Shareholders Agreement and Bylaws of Safescript Northwest, Inc., dated as of April 7, 2004, by and among Safescript Northwest, Inc., TAPG, L.L.C. and eRXSYS, Inc. </FONT><SUP><FONT
 size=2 face="serif">(7)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.13&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Promissory Note of eRXSYS, INC. in the amount of $150,000, dated as of December 21, 2004, to Robert James, Inc. </FONT><SUP><FONT size=2 face="serif">(8)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.14&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Loan and Security Agreement, dated as of January 27, 2005, by and between eRXSYS, Inc. and TAPG LLC </FONT><SUP><FONT size=2 face="serif">(8)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.15&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Secured Promissory Note of eRXSYS, INC. in the amount of $50,000, dated as of February 11, 2005, to VVPH </FONT><SUP><FONT size=2 face="serif">(8)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.16&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Secured Promissory Note of eRXSYS, Inc. in the amount of $50,000, dated as of February 10, 2005, to Steven Rosner</FONT><SUP><FONT size=2 face="serif">(8)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.17&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Secured Promissory Note of eRXSYS, Inc. in the amount of $90,000, dated as of February 16, 2005, to Steven Rosner</FONT><SUP><FONT size=2 face="serif">(8)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.18&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Promissory Note of of eRXSYS, Inc. in the amount of $50,000, dated as of March 11, 2005, to Weil Consulting Corporation</FONT><SUP><FONT size=2 face="serif">(8)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.19&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD WIDTH="100%" VALIGN="TOP">
<FONT size=2 face="serif">Accounts Receivable Servicing Agreement by and between Mosaic Financial LLC and eRXSYS, Inc. </FONT><SUP><FONT size=2 face="serif">(8)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<P align="center">
<FONT size=2 face="serif">65</FONT></P>

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

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


<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.20&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Line of Credit Agreement by and between Mosaic Financial Services LLC and eRXSYS, Inc. </FONT><SUP><FONT size=2 face="serif">(8)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.21&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Line of Credit Agreement, dated as of October 31, 2005, by and between Mosaic Financial Services, LLC and eRXSYS, Inc.</FONT><SUP><FONT size=2 face="serif">(9)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.22&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Settlement Agreement and Mutual Release, dated as of June 10, 2005, by and among eRXSYS, Inc. (fka Surforama.com, Inc.), Safescript Pharmacies, Inc. (fka RTIN Holdings, Inc.) and Safe Med Systems, Inc. </FONT><SUP><FONT size=2 face="serif">(14)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.23&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Employment Agreement, dated as of September 2005, by and between eRXSYS, Inc. and Robert DelVecchio </FONT><SUP><FONT size=2 face="serif">(9)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.24&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Employment Agreement, dated as of May 1, 2006, by and between Assured Pharmacy, Inc., and Haresh Sheth </FONT><SUP><FONT size=2 face="serif">(10)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.25&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Purchase Agreement of Ownership Interests, dated as of December 12, 2006, by and between Assured Pharmacy, Inc. and TPG, L.L.C. </FONT><SUP><FONT size=2 face="serif">(11)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.26&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Form of 18% Unsecured Convertible Debenture of Assured Pharmacy, Inc. </FONT><SUP><FONT size=2 face="serif">(12)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.27&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">License Agreement by and between Network Technology, Inc., and eRXSYS, Inc. </FONT><SUP><FONT size=2 face="serif">(13)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">10.28&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Accounts Receivable Purchase Agreement, dated as of March 1, 2008, by and between Horizon International Investments LLC and Assured Pharmacy, Inc. </FONT><SUP><FONT size=2 face="serif">(15)</FONT></SUP>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR>
<TR>
  <TD valign=top nowrap><FONT size=2 face="serif">14.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
  <TD><FONT size=2 face="serif">Code of Ethics*</FONT> </TD>
</TR>
<TR>
  <TD valign=top nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">21.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">List of Subsidiaries*</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">31.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Certification of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d- 14(a), promulgated under the Securities and Exchange Act of 1934, as amended.*</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">31.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Certification of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended.*</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">32.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).*</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="8%" valign=top nowrap>
<FONT size=2 face="serif">32.2&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).*</FONT>	</TD>
</TR>
</TABLE>
<P align="center">
<FONT size=2 face="serif"></FONT></P>
<div style="border-bottom:1px solid #000000; width:100px">&nbsp;</div>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
	<TD width="5%" valign=top nowrap>
<FONT size=2 face="serif">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Incorporated by reference to the registration statement filed on Form SB-2 on December 15, 2004</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="5%" valign=top nowrap>
<FONT size=2 face="serif">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Incorporated by reference to Current Report on Form 8-K filed May 28, 2003</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="5%" valign=top nowrap>
<FONT size=2 face="serif">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Incorporated by reference to Current Report on Form 8-K filed July 21, 2003</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="5%" valign=top nowrap>
<FONT size=2 face="serif">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Incorporated by reference to Quarterly Report on Form 10-QSB for the three month period ended August 31, 2003 and filed on October 20, 2003</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="5%" valign=top nowrap>
<FONT size=2 face="serif">(5)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Incorporated by reference to Annual Report on Form 10-KSB/A for the year ended November 30, 2003 filed on March 23, 2004</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="5%" valign=top nowrap>
<FONT size=2 face="serif">(6)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Incorporated by reference to Current Report on Form 8-K filed February 7, 2005</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="5%" valign=top nowrap>
<FONT size=2 face="serif">(7)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Incorporated by reference to Current Report on Form 8-K filed April 21, 2004</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="5%" valign=top nowrap>
<FONT size=2 face="serif">(8)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Incorporated by reference from Annual Report on Form 10-KSB for the year ended December 31, 2004 and filed on April 15, 2005</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD width="5%" valign=top nowrap>
<FONT size=2 face="serif">(9)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD>
<FONT size=2 face="serif">Incorporated by reference to Quarterly Report on Form 10-QSB for the quarter ended September 30, 2004 and filed on November 14, 2005</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<P align="center">
<FONT size=2 face="serif">66</FONT></P>

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

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


<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="5%" valign="top"><FONT size=2 face="serif">(10)</FONT></td>
    <td valign="top"><FONT size=2 face="serif">Incorporated by reference to Current Report
      on Form 8-K filed May 8, 2006 </FONT></td>
  </tr>
  <tr>
    <td width="5%" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td width="5%" valign="top"><FONT size=2 face="serif">(11)</FONT></td>
    <td valign="top"><FONT size=2 face="serif">Incorporated by reference to Current Report
      on Form 8-K filed December 18, 2006 </FONT></td>
  </tr>
  <tr>
    <td width="5%" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td width="5%" valign="top"><FONT size=2 face="serif">(12)</FONT></td>
    <td valign="top"><FONT size=2 face="serif">Incorporated by reference to amendment no.
      4 to the registration statement filed on Form SB-2 on November 28, 2007 </FONT></td>
  </tr>
  <tr>
    <td width="5%" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td width="5%" valign="top"><FONT size=2 face="serif">(13)</FONT></td>
    <td valign="top"><FONT size=2 face="serif">Incorporated by reference to Current Report
        on Form 8-K filed March 23, 2004</FONT></td>
  </tr>
  <tr>
    <td width="5%" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td width="5%" valign="top"><FONT size=2 face="serif">(14)</FONT></td>
    <td valign="top"><FONT size=2 face="serif">Incorporated by reference to Current
        Report on Form 8-K filed July 5, 2005</FONT></td>
  </tr>
  <tr>
    <td width="5%" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td width="5%" valign="top"><FONT size=2 face="serif">(15)</FONT></td>
    <td valign="top"><FONT size=2 face="serif">Incorporated by reference to
      Current Report on Form 8-K filed March 6, 2008 </FONT></td>
  </tr>
  <tr>
    <td width="5%" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td width="5%" valign="top"><FONT size=2 face="serif">*</FONT></td>
    <td valign="top"><FONT size=2 face="serif">Filed herewith</FONT></td>
  </tr>
</table>

<P align="left">
<B><FONT size=2 face="serif">ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We incurred the following fees to our auditors for services rendered during the fiscal year ended December 31, 2007 and 2006: </FONT></P>
<TABLE width="75%" border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=left nowrap><B><U><FONT size=2 face="serif">Summary:</FONT></U></B> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD colspan="2" align=center nowrap>&nbsp; &nbsp;<B><U><FONT size=2 face="serif">2007</FONT></U></B> </TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align=center nowrap>&nbsp; &nbsp;<B><U><FONT size=2 face="serif">2006</FONT></U></B> </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp;</TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Audit fees</FONT><SUP><FONT size=2 face="serif">(1)</FONT></SUP> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="6%" align=right nowrap><FONT size=2 face="serif">228,412</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="6%" align=right nowrap><FONT size=2 face="serif">201,262</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Audit related fees</FONT><SUP><FONT size=2 face="serif">(2)</FONT></SUP> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=right nowrap>&nbsp;</TD>
    <TD width="6%" align=right nowrap><FONT size=2 face="serif">-</FONT> </TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="6%" align=right nowrap><FONT size=2 face="serif">146,000</FONT> </TD>
  </TR>
  <TR valign="bottom" bgcolor="#E5FFFF">
    <TD align=left nowrap><FONT size=2 face="serif">Tax fees</FONT><SUP><FONT size=2 face="serif">(3)</FONT></SUP> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="6%" align=right nowrap><FONT size=2 face="serif">10,650</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="6%" align=right nowrap><FONT size=2 face="serif">23,000</FONT> </TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left nowrap><FONT size=2 face="serif">Other
      fees</FONT><SUP><FONT size=2 face="serif">(4)</FONT></SUP> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="6%" align=right nowrap><FONT size=2 face="serif">11,400</FONT> </TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%" align=left nowrap><FONT size=2 face="serif">$</FONT> </TD>
    <TD width="6%" align=right nowrap><FONT size=2 face="serif">31,000</FONT> </TD>
  </TR>
</TABLE>
<div style="border-bottom:1px solid #000000; width:100px">&nbsp;<BR>
</div>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Amount represents fees paid for professional services for the audit of our consolidated annual financial statements and review of our interim consolidated financial statements included in quarterly reports and services that
are normally provided by our auditors in connection with statutory and regulatory filings or engagements.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Amount represents fees paid for professional services for assurance and related services by our auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported
under item 1.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Amount represents fees paid for professional services for preparation of corporate returns.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Amount represents the aggregate fees billed by our auditors for all other non-audit services, such as attending meetings and other miscellaneous financial consulting.</FONT>	</TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<P align="center">
<FONT size=2 face="serif">67</FONT></P>

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

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


<P align="center">
<B><FONT size=2 face="serif">SIGNATURES</FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. </FONT></P>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="30%"><P align="left"><B><FONT size=2 face="serif">ASSURED PHARMACY,
            INC.</FONT></B> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td style="border-bottom:1px solid #000000"><FONT size=2 face="serif">/s/
        Robert DelVecchio</FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><FONT size=2 face="serif">Robert DelVecchio </FONT><BR>
        <FONT size=2 face="serif">Chief Executive Officer </FONT><BR>
        <FONT size=2 face="serif">(Principal Executive Officer) </FONT><BR>
        <FONT size=2 face="serif">Date: March 31, 2008 </FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td style="border-bottom:1px solid #000000"><FONT size=2 face="serif">/s/
        Haresh Seth</FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><FONT size=2 face="serif">Haresh Sheth </FONT><BR>
        <FONT size=2 face="serif">Chief Financial Officer </FONT><BR>
        <FONT size=2 face="serif">(Principal Accounting Officer) </FONT><BR>
        <FONT size=2 face="serif">Date: March 31, 2008 </FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Pursuant
        to the requirements of the Securities and Exchange Act of 1934, this
        report has been signed below by the following persons on behalf of the
        Registrant and in the capacities and on the dates indicated. </FONT></td>
  </tr>
  <tr>
    <td width="30%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td style="border-bottom:1px solid #000000"><FONT size=2 face="serif">/s/
        Robert DelVecchio</FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>
        <FONT size=2 face="serif">Robert DelVecchio </FONT><BR>
        <FONT size=2 face="serif">Chief Executive Officer and Director</FONT><BR>
        <FONT size=2 face="serif">Date: March 31, 2008 </FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td style="border-bottom:1px solid #000000"><FONT size=2 face="serif">/s/
        Haresh Seth</FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><FONT size=2 face="serif">Haresh Sheth </FONT><BR>
        <FONT size=2 face="serif">Chief Financial Officer and Director</FONT><BR>
        <FONT size=2 face="serif">Date: March 31, 2008 </FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td style="border-bottom:1px solid #000000"><FONT size=2 face="serif">/s/
        Richard Falcone</FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><FONT size=2 face="serif">Richard Falcone </FONT><BR>
        <FONT size=2 face="serif">Director </FONT><BR>
        <FONT size=2 face="serif">Date: March 31, 2008 </FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>

  <tr>
    <td style="border-bottom:1px solid #000000"><FONT size=2 face="serif">/s/
        Ameet Shah</FONT><B><FONT size=2 face="serif"></FONT></B></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><FONT size=2 face="serif">Ameet Shah </FONT><BR>
        <FONT size=2 face="serif">Director </FONT><BR>
        <FONT size=2 face="serif">Date: March 31, 2008 </FONT></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>

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end
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14.1
<SEQUENCE>3
<FILENAME>c52928_ex14-1.htm
<TEXT>

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<P align="right"><font size=2>Exhibit 14.1 </font></P>
<P align="center"><FONT face="serif">CODE OF BUSINESS CONDUCT AND ETHICS </FONT><BR>
  <FONT face="serif">OF </FONT><BR>
  <FONT face="serif">ASSURED PHARMACY, INC. </FONT><BR>
  <FONT face="serif">___________________ </FONT></P>
<P align="justify">
<FONT face="serif">Effective Date:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; March
28, 2008</FONT></P>
<P align="center">
<FONT face="serif">INTRODUCTION </FONT></P>
<P align="justify">
<FONT face="serif">ASSURED</FONT><FONT size=2 face="serif"> </FONT><FONT face="serif">PHARMACY,</FONT><FONT size=2 face="serif"> </FONT><FONT face="serif">INC. expects that directors, officers, employees, team members and contract staff members will
conduct themselves ethically and properly as a matter of course and comply with the guidelines set forth below.</FONT></P>
<P align="justify">
<FONT face="serif">This Code of Business Conduct and Ethics (this "Code") is prepared, in large part, due to the requirements of the Sarbanes-Oxley Act of 2002 and rules of New York Stock Exchange, NASD Stock Market and/or any exchange upon which
the Company's stock may be traded and is applicable to Assured Pharmacy, Inc. and all direct and indirect U.S. subsidiaries (hereinafter referred to collectively as the "Company"). Directors, officers and employees of foreign subsidiaries are also
expected to act properly and consistent with country-specific guidelines developed for such subsidiaries.</FONT></P>
<P align="justify">
<FONT face="serif">This Code exists to provide the Company's directors, officers, employees, team members, contract staff members as well as shareholders, suppliers and members of the general public with an official statement as to how the Company
conducts itself internally and in the marketplace and certain standards that the Company shall require of its directors, and officers. </FONT></P>
<P align="justify">
<FONT face="serif">The Company's Compliance Officer on the Effective Date of this Code is Haresh Sheth, and the term "Compliance Officer", as used in this Code, refers to the Company's current Compliance Officer and any subsequent person appointed
to that office.</FONT></P>
<P align="justify">
<FONT face="serif">PURPOSE </FONT></P>
<P align="justify">
<FONT face="serif">This Code is intended to provide a codification of standards that is reasonably designed to deter wrongdoing and to promote the following:</FONT></P>
<UL style="margin-left:20px">
<LI>
<P align="justify"><FONT face="serif">Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;</FONT></P></LI>
<LI>
<P align="justify"><FONT face="serif">Full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by the Company;</FONT></P></LI>
<LI>
<P align="justify"><FONT face="serif">Compliance with applicable governmental laws, rules and regulations;</FONT></P></LI>
<LI>
<P align="justify"><FONT face="serif">The prompt internal reporting to an appropriate person or persons identified in this Code for violations of this Code; and</FONT></P></LI>
</UL>

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



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


<ul style="margin-left:20px">
  <li><FONT face="serif" align="justify">Accountability for adherence to this Code.</FONT></li>
</ul>
<P align="justify">
<FONT face="serif">SCOPE </FONT></P>
<P align="justify">
<FONT face="serif">This Code applies to the Company's Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Controller and persons performing similar functions (the &#147;Executive Officers&#148;) as well as to all directors of
the Company. As used herein, the term "employees" shall be deemed to include each of the foregoing persons unless specifically stated otherwise or unless the context clearly indicates otherwise.</FONT></P>
<P align="justify">
<FONT face="serif">POLICY PROVISIONS </FONT></P>
<P align="justify">
<FONT face="serif">Under this Code, all directors and Executive Officers are expected to conduct business for the Company in the full spirit of honest and lawful behavior and shall not cause another director, Executive Officer, employee or
non-employee to act otherwise, either through inducement or coercion.</FONT></P>
<P align="justify">
<FONT face="serif">I. </FONT><U><FONT face="serif">Conflicts of Interest and Other Matters</FONT></U></P>
<P align="justify">
<FONT face="serif">Conflicts of interest may arise when an employee's position or responsibilities with the Company present an opportunity for personal gain apart from the normal compensation provided through employment. The following guidelines are
provided:</FONT></P>
<P align="justify">
<FONT face="serif">A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Protection and Proper Use of Company Funds and Assets</FONT></I></P>
<P align="justify">
<FONT face="serif">The assets of the Company are much more than its properties, facilities, equipment, corporate funds and computer systems; they include technologies and concepts, business strategies and plans, as well as information about its
business. These assets may not be improperly used and/or used to provide personal benefits for employees. In addition, employees may not provide outside persons with assets of the Company for the employee's personal gain or in such a manner as to be
detrimental to the Company. Employees should protect the Company's assets and ensure their efficient and proper use. Theft, carelessness and waste have a direct impact on the Company's profitability. All Company assets should be used for legitimate
business purposes.</FONT></P>
<P align="justify">
<FONT face="serif">B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Confidential Information</FONT></I></P>
<P align="justify">
<FONT face="serif">As part of an employee's job, he/she may have access to confidential information about the Company, its employees, agents, contractors, customers, suppliers and competitors. Unless released to the public by management, this
information should not be disclosed to fellow employees who did not have a business need to know or to non-employees for any reason, except in accordance with established corporate procedures. Confidential information of this sort includes, but is
not limited to, information or data on operations, business strategies and growth, business relationships, current or future personnel, processes, systems, procedures and financial information.</FONT></P>
<P align="center">
<FONT size=2 face="serif">2</FONT></P>

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



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


<P align="justify">
<FONT face="serif">C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Outside Financial Interests Influencing an Employee's Decisions or Actions</FONT></I></P>
<P align="justify">
<FONT face="serif">Employees should avoid any outside financial interest that might influence their decisions or actions on matters involving the Company or its businesses or property. Such interests include, among other things: (i) a significant
personal or immediate family interest in an enterprise that has significant business relations with the Company; or (ii) an enterprise or contract with a supplier, service-provider or any other company or entity where the employee or a member of the
immediate family of the employee is a principal or financial beneficiary. All such interests should be disclosed by the employee to the Company's Compliance Officer.</FONT></P>
<P align="justify">
<FONT face="serif">D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Outside Activities Having Negative Impact On Job Performance</FONT></I></P>
<P align="justify">
<FONT face="serif">Employees should avoid outside employment or activities that would have a negative impact on their job performance with the Company, or which are likely to conflict with their job or their obligations to the Company.</FONT></P>
<P align="justify">
<FONT face="serif">E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Business Opportunities; Competitive Interests; Corporate Opportunities</FONT></I></P>
<P align="justify">
<FONT face="serif">No employee may enter into any contract or arrangement, own any interest or be a director, officer, employee or consultant in or for an entity which enters into any contract or arrangement (except for the ownership of
non-controlling interests in publicly-traded entities) with the Company for the providing of services to the Company unless and until the material facts as to the relationship or interest and the contract or transaction are fully disclosed to the
Company's Compliance Officer and, if approved by the Company, the Company's Compliance Officer shall provide written confirmation of the approval of said contract or transaction.</FONT></P>
<P align="justify">
<FONT face="serif">Employees owe a duty to the Company to advance its legitimate interests when the opportunity arises to do so. Employees should refrain from and shall be prohibited from: (i) taking for themselves or for their personal benefit
opportunities that could advance the interests of the Company or benefit the Company when such opportunities are discovered through the use of Company property, information or position; (ii) using Company property, information or position for
personal gain; or (iii) competing with the Company.</FONT></P>
<P align="justify">
<FONT face="serif">II.&nbsp;&nbsp;&nbsp; </FONT><U><FONT face="serif">Dealing With Suppliers, Customers And Other Employees</FONT></U></P>
<P align="justify">
<FONT face="serif">The Company obtains and keeps its business because of the quality of its operations. Conducting business, however, with other employees, suppliers and customers can pose ethical or even legal problems. The following guidelines are
intended to help all employees make the appropriate decision in potentially difficult situations.</FONT></P>
<P align="justify">
<FONT face="serif">A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Bribes and Kickbacks</FONT></I></P>
<P align="justify">
<FONT face="serif">No employee of the Company may ever accept or pay bribes, kickbacks or other types of unusual payments from or to any organization or individual seeking to do business with, doing business with or competing with the
Company.</FONT></P>
<P align="center">
<FONT size=2 face="serif">3</FONT></P>

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



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


<P align="justify">
<FONT face="serif">B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Gifts</FONT></I></P>
<P align="justify">
<FONT face="serif">Employees may accept gifts or entertainment of nominal value as part of the normal business process if public knowledge of the employee's acceptance could cause the Company no conceivable embarrassment. Even a nominal gift and/or
entertainment should not be accepted if it might appear to an observer that the gift and/or entertainment would influence the employee's business decisions. The term "nominal value" applies to the amount of the gift and/or its frequency; i.e.,
frequent gifts, even if of nominal value, are unacceptable. The term "entertainment" includes, but is not limited to, meals, charitable and sporting events, parties, plays and concerts. If you have any questions about the acceptance of entertainment
or gifts, ask the Company's Compliance Officer for advice.</FONT></P>
<P align="justify">
<FONT face="serif">C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Travel and Entertainment Expenses</FONT></I></P>
<P align="justify">
<FONT face="serif">Employees must comply with the Company's policy on travel and entertainment expenses as set forth in the Company's policies and procedures, as the same may be amended or supplemented from time to time.</FONT></P>
<P align="justify">
<FONT face="serif">D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Relations with Government Personnel</FONT></I></P>
<P align="justify">
<FONT face="serif">The Company will not offer, give or reimburse expenses for entertainment or gratuities (including transportation, meals at business meetings or tickets to sporting or other events) to government officials or employees who are
prohibited from receiving such by applicable government regulations.</FONT></P>
<P align="justify">
<FONT face="serif">E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Payments to Agents, Consultants, Distributors, Contractors</FONT></I></P>
<P align="justify">
<FONT face="serif">Agreements with agents, sales representatives, distributors, contractors and consultants should be in writing and should clearly and accurately set forth the services to be performed, the basis for earning the commission or fee
involved and the applicable rate or fee. Payments should be reasonable in amount and not excessive in light of the practice in the trade and commensurate with the value of services rendered.</FONT></P>
<P align="justify">
<FONT face="serif">F.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Fair Dealing</FONT></I></P>
<P align="justify">
<FONT face="serif">Each employee should endeavor to deal fairly with the Company's customers, suppliers, competitors and other employees.</FONT></P>
<P align="justify">
<FONT face="serif">III.&nbsp;&nbsp; </FONT><U><FONT face="serif">Books and Records</FONT></U></P>
<P align="justify">
<FONT face="serif">False or misleading entries shall not be made in any reports, ledgers, books or records of the Company nor shall any misrepresentation be made regarding the content thereof. No employee may engage in an arrangement that in any way
may be interpreted or construed as misstating or otherwise concealing the nature or purpose of any entries in the books and records of the Company. No payment or receipt on behalf of the Company may be approved or made with the intention or
understanding that any part of the payment or</FONT></P>
<P align="center">
<FONT size=2 face="serif">4</FONT></P>

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



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


<P align="justify">
<FONT face="serif">receipt is to be used for a purpose other than that described in the documents supporting the transaction.</FONT></P>
<P align="justify">
<FONT face="serif">IV. &nbsp;&nbsp;</FONT><U><FONT face="serif">Competitive Practices</FONT></U></P>
<P align="justify">
<FONT face="serif">In business, it is inevitable that the Company and its competitors will meet and talk from time to time; this is neither against the law nor to be avoided. What will not be tolerated is collaboration with competitors in violation
of the law on such things as pricing, production, marketing, inventories, product development, sales territories and goals, market studies and proprietary or confidential information.</FONT></P>
<P align="justify">
<FONT face="serif">As a vigorous competitor in the marketplace, the Company seeks economic knowledge about its competitors; however, it will not engage in illegal acts to acquire a competitor's trade secrets, financial data, information about
company facilities, technical developments or operations.</FONT></P>
<P align="justify">
<FONT face="serif">V.&nbsp;&nbsp;&nbsp;&nbsp;</FONT><U><FONT face="serif">Political
Activities &amp; Contributions</FONT></U></P>
<P align="justify">
<FONT face="serif">The Company encourages each of its employees to be good citizens and to participate in the political process. Employees should, however, be aware that: (1) federal law and the statutes of some states in the U.S. prohibit the
Company from contributing, directly or indirectly, to political candidates, political parties or party officials; and (2) employees who participate in partisan political activities should ensure that they do not leave the impression that they speak
or act for the Company.</FONT></P>
<P align="justify">
<FONT face="serif">VI.&nbsp;&nbsp; </FONT><U><FONT face="serif">Compliance with Laws, Rules and Regulations</FONT></U></P>
<P align="justify">
<FONT face="serif">The Company proactively promotes compliance by all employees with applicable laws, rules and regulations of any governmental unit, agency or divisions thereof and the rules and regulations of the New York Stock Exchange, The NASD
Stock Market and/or any exchange upon which the Company's stock may be traded. The Company requires its employees to abide by the provisions of applicable law on trading on inside information and all employees of the Company are directed to refrain
from trading in the Company's stock based on inside information. The Company requires its employees to abide by applicable law and the Company's procedures with respect to periods of time within which all or some cross-section of the Company's
employees will be prevented from trading in the Company' stock. The Company requires its employees to abide by applicable law and the Company's policies with respect to disclosures of material non-public information (Regulation FD).</FONT></P>
<P align="justify">
<FONT face="serif">VII.&nbsp;&nbsp; </FONT><U><FONT face="serif">Protection of Employees from Reprisal for Whistleblowing  ("Whistleblowing Policy")</FONT></U></P>
<P align="justify">
<FONT face="serif">A.</FONT><I><FONT face="serif">&nbsp;&nbsp;&nbsp; Purpose</FONT></I></P>
<P align="justify">
<FONT face="serif">To encourage employees to report Alleged Wrongful Conduct, as defined in this Whistleblowing Policy.</FONT></P>
<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>


<P align="justify">
<FONT face="serif">To prohibit supervisory personnel from taking Adverse Personnel Action (as that term is defined in Exhibit A) against a Company employee as a result of the employee's good faith disclosure of Alleged Wrongful Conduct to a
Designated Company Officer (as that term is defined in Exhibit A) or Director or to the Company's Audit Committee. An employee who discloses and subsequently suffers an Adverse Personnel Action as a result is subject to the protection of this
Whistleblowing Policy.</FONT></P>
<P align="justify">
<FONT face="serif">B</FONT><I><FONT face="serif">.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Applicability</FONT></I></P>
<P align="justify">
<FONT face="serif">All employees of the Company who disclose Alleged Wrongful Conduct, as defined in this Whistleblowing Policy, and, who, as a result of the disclosure, are subject to an Adverse Personnel Action.</FONT></P>
<P align="justify">
<FONT face="serif">C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Whistleblowing Policy</FONT></I></P>
<P align="justify">
<FONT face="serif">All employees of the Company are encouraged to promptly report Alleged Wrongful Conduct. No Adverse Personnel Action may be taken against a Company employee in Knowing Retaliation for any lawful disclosure of information to a
Designated Company Officer or Director or to the Company's Audit Committee, which information the employee in good faith believes evidences: (i) a violation of any law; (ii) fraudulent or criminal conduct or activities; (iii) questionable accounting
or auditing matters or matters; (iv) misappropriation of Company funds; or (v) violations of provisions of this Code (such matters being collectively referred to herein as "Alleged Wrongful Conduct").</FONT></P>
<P align="justify">
<FONT face="serif">No supervisor, officer, director, department head or any other employee with authority to make or materially influence significant personnel decisions shall take or recommend an Adverse Personnel Action against an employee in
Knowing Retaliation for disclosing Alleged Wrongful Conduct to a Designated Company Officer or Director or to the Company's Audit Committee.</FONT></P>
<P align="justify">
<FONT face="serif">D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Definitions</FONT></I></P>
<P align="justify">
<FONT face="serif">In addition to other terms as defined above, the terms set forth on </FONT><U><FONT face="serif">Exhibit A</FONT></U><FONT face="serif">, attached hereto, shall have the meanings set forth thereon for purposes of this
Whistleblowing Policy.</FONT></P>
<P align="justify">
<FONT face="serif">E.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Making a Disclosure</FONT></I></P>
<P align="justify">
<FONT face="serif">An employee who becomes aware of Alleged Wrongful Conduct is encouraged to make a Disclosure to a Designated Company Officer or Director or to the Company's Audit Committee as soon as possible.</FONT></P>
<P align="justify">
<FONT face="serif">F.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Legitimate Employment Action</FONT></I></P>
<P align="justify">
<FONT face="serif">This Whistleblowing Policy may not be used as a defense by an employee against whom an Adverse Personnel Action has been taken for legitimate reasons or cause. It shall not be a violation of this Whistleblowing Policy to take
Adverse Personnel Action against an</FONT></P>
<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>


<P align="justify">
<FONT face="serif">employee whose conduct or performance warrants that action separate and apart from the employee making a disclosure.</FONT></P>
<P align="justify">
<FONT face="serif">G.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Whistleblowing Statutes</FONT></I></P>
<P align="justify">
<FONT face="serif">An employee's protection under this Whistleblowing Policy is in addition to any protections such employee may have pursuant to any applicable state or federal law and this Whistleblowing Policy shall not be construed as limiting
any of such protections.</FONT></P>
<P align="justify">
<FONT face="serif">VIII.&nbsp;&nbsp; </FONT><U><FONT face="serif">Audit Committee
Procedures - Receipt, Retention and Treatment of Complaints Regarding Accounting,
Internal Accounting Controls or Auditing Matters</FONT></U></P>
<P align="justify">
<FONT face="serif">Pursuant to the requirements of the Sarbanes-Oxley Act of 2002, the Company's Audit Committee (and in absence of an Audit Committee, the Company&#146;s Board of Directors) has established the following procedures for the receipt,
retention and treatment of complaints by Company employees regarding the Company's accounting, internal accounting controls or auditing matters.</FONT></P>
<P align="justify">
<FONT face="serif">A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Purpose</FONT></I></P>
<P align="justify">
<FONT face="serif">To promote and encourage Company employees to report complaints, problems or questionable practices relative to accounting, internal accounting controls or auditing matters (collectively referred to herein as "Accounting
Concerns").</FONT></P>
<P align="justify">
<FONT face="serif">B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Applicability</FONT></I></P>
<P align="justify">
<FONT face="serif">All employees of the Company.</FONT></P>
<P align="justify">
<FONT face="serif">C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Procedures</FONT></I></P>
<P align="justify">
<FONT face="serif">Any Company employee who has, knows of or has reason to know or suspect the existence of any Accounting Concern is encouraged to report such Accounting Concern, promptly and in writing, to the Company's Compliance Officer and the
Audit Committee (and in the absence of the Audit Committee, the Company&#146;s Board of Directors) at the following address:</FONT></P>
<P align="justify">
<FONT face="serif">Compliance Officer</FONT><BR>
<FONT face="serif">Assured Pharmacy, Inc. </FONT><BR>
<FONT face="serif">17935 Sky Park Circle, Suite F</FONT><BR>
<FONT face="serif">Irvine, CA 85016 </FONT></P>
<P align="justify">
<FONT face="serif">with a copy to:</FONT></P>
<P align="justify">
<FONT face="serif">Chairman of the Board of Directors</FONT><BR>
<FONT face="serif">Assured Pharmacy, Inc. </FONT><BR>
<FONT face="serif">17935 Sky Park Circle, Suite F </FONT><BR>
<FONT face="serif">Irvine, CA 85016 </FONT></P>
<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>


<P align="justify">
<FONT face="serif">Submissions by Company employees of Accounting Concerns may be signed by the employee or may be anonymous. Submissions by Company employees of Accounting Concerns should be sufficiently detailed so as to provide the necessary
information to the Company's Audit Committee as to the nature of the Accounting Concerns, the violation or potential violation of any federal or state law or regulation or the nature of any questionable accounting or auditing practice or matter.
Company employees are encouraged to include as much factual data as possible in any submissions of Accounting Concerns and Company employees shall not utilize the submission of an Accounting Concern for the sole purpose of harassing another Company
employee or officer. Submissions by Company employees of Accounting Concerns shall be copied by the Compliance Officer's Administrative Assistant and retained in a file entitled "Accounting Concerns Report File" to be kept separate from the files of
the Company's Accounting Department.</FONT></P>
<P align="justify">
<FONT face="serif">The Chairman of the Audit Committee (or in the absence of an Audit Committee, the Chairman of the Board of Directors) shall review and investigate or cause to be investigated each submission by Company employees of Accounting
Concerns that suggests any violation of Company policies, violation of any federal or state laws or regulations or any questionable accounting or auditing practice or matter. The Chairman of the Audit Committee (or in the absence of an Audit
Committee, the Chairman of the Board of Directors) may utilize the services of the Company's outside legal counsel in any such investigations. In the event the Chairman of the Audit Committee (or in the absence of an Audit Committee, the Chairman of
the Board of Directors) shall determine that any Accounting Concern is of sufficient veracity and significance so as to mandate any action by the Company, the Chairman of the Audit Committee (or in the absence of an Audit Committee, the Chairman of
the Board of Directors) shall report the Accounting Concern to the Audit Committee and, if necessary, to the Company's Board of Directors with a recommendation as to specific action to be taken. In extreme cases where an Accounting Concern has been
reported that involves a violation or potential violation of federal or state laws or regulations and the Chairman of the Audit Committee (or in the absence of an Audit Committee, the Chairman of the Board of Directors) has determined that such
report is accurate or that sufficient evidence exists to create a significant concern as to whether such violation has occurred or will occur, the Chairman of the Audit Committee (or in the absence of an Audit Committee, the Chairman of the Board of
Directors) may report such Accounting Concern to the appropriate government authority.</FONT></P>
<P align="justify">
<FONT face="serif">D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Protections</FONT></I></P>
<P align="justify">
<FONT face="serif">Company employees who submit reports of Accounting Concerns shall be entitled to the protection of the Whistleblowing Policy set forth above.</FONT></P>
<P align="justify">
<FONT face="serif">IX.&nbsp;&nbsp; </FONT><U><FONT face="serif">Public Company Reporting</FONT></U></P>
<P align="justify">
<FONT face="serif">As a public company, it is important that the Company's filings with the SEC and other public disclosures of information be complete, fair, accurate and timely. An employee, officer or director of the Company may be called upon to
provide necessary information to ensure that the Company's public reports are complete, fair and accurate. The</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="justify">
<FONT face="serif">Company expects each Company employee, officer and director to take this responsibility seriously and to provide prompt, complete, fair and accurate responses to inquiries with respect to the Company&#146;s public disclosure
requirements. With respect to the Company&#146;s employees, officers and directors who may be participating in the preparation of reports, information, press releases, forms or other information to be publicly disclosed through filings with the SEC
or as mandated by the SEC, such employees, officers and directors are expected to use their diligent efforts to ensure that such reports, press releases, forms or other information are complete, fair, accurate and timely.</FONT></P>
<P align="justify">
<FONT face="serif">X.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><U><FONT face="serif">Compliance and Discipline</FONT></U></P>
<P align="justify">
<FONT face="serif">All Company employees are required to comply with this Code. Employees are expected to report violations of this Code and assist the Company, when necessary, in investigating violations. All department heads, managers and
supervisors are charged with the responsibility of supervising their employees in accordance with this Code.</FONT></P>
<P align="justify">
<FONT face="serif">Failure to comply with this Code will result in disciplinary action that may include suspension, termination, referral for criminal prosecution and/or reimbursement to the Company for any losses or damages resulting from the
violation. The Company reserves the right to terminate any employee immediately for a single violation of this Code.</FONT></P>
<P align="justify">
<FONT face="serif">All employees of the Company may be asked from to time to reaffirm their understanding of and willingness to comply with this Code by signing an appropriate certificate (see Appendix A).</FONT></P>
<P align="justify">
<FONT face="serif">XI.&nbsp;&nbsp;&nbsp;&nbsp;</FONT><U><FONT face="serif">Adoption,
Amendment and Waiver</FONT></U></P>
<P align="justify">
<FONT face="serif">A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Adoption and Amendment</FONT></I></P>
<P align="justify">
<FONT face="serif">This Code has been adopted by the Company&#146;s Board of Directors and may be changed, altered or amended at any time. The interpretation of any matter with respect to this Code by the Board of Directors shall be final and
binding.</FONT></P>
<P align="justify">
<FONT face="serif">B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><I><FONT face="serif">Waiver</FONT></I></P>
<P align="justify">
<FONT face="serif">Waivers of the provisions of this Code may be granted or withheld from time to time by the Company in its sole discretion. Waivers are only effective if set forth in writing after full disclosure of the facts and circumstances
surrounding the waiver. Waivers for the benefit of directors and executive officers must be approved by the Board of Directors and will be publicly disclosed by the Company. All other waivers may be approved by the Compliance Officer and may be
publicly disclosed by the Company.</FONT></P>
<P align="justify">
<FONT face="serif">NO EMPLOYMENT CONTRACT</FONT></P>
<P align="justify">
<FONT face="serif">Nothing contained herein shall be construed as limiting the Company&#146;s right to terminate an employee immediately for any reason. This Code does not provide any guarantees of</FONT></P>
<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="justify">
<FONT face="serif">continued employment, nor does it constitute an employment contract between the Company and any employee.</FONT></P>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</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="justify">
<FONT face="serif">APPENDIX A</FONT></P>
<P align="center">
<FONT face="serif">EMPLOYEE STATEMENT</FONT></P>
<P align="justify">
<FONT face="serif">I acknowledge having received a copy of the Company's Code of Business Conduct and Ethics. I have read it completely and I understand that the Code applies to me. I understand the Code does not constitute an employment contract
and I agree to comply fully with each of the provisions of the Code, including such changes to the Code as the Company may announce from time to time. I have reviewed with my department head or the Compliance Officer any matters concerning ownership
or other activities which are required to be disclosed to the Company by the Code.</FONT></P>
<TABLE width="92%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
  <TD colspan="2" align=left nowrap>
<FONT face="serif">Employee Name</FONT>  </TD>
  <TD width=97% align=left nowrap><div style="border-bottom:1px solid #000000"> &nbsp;</div></TD>
</TR>
<TR valign="bottom">
  <TD colspan="2" align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD colspan="2" align=left nowrap>
<FONT face="serif">Employee Signature</FONT>  </TD>
  <TD align=left nowrap><div style="border-bottom:1px solid #000000"> &nbsp;</div></TD>
</TR>
<TR valign="bottom">
  <TD colspan="2" align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD width=3% align=left nowrap>
<FONT face="serif">Date</FONT>  </TD>
  <TD width=0% align=left nowrap><div style="border-bottom:1px solid #000000"> &nbsp;</div></TD>
  <TD align=left nowrap><div style="border-bottom:1px solid #000000"> &nbsp;</div></TD>
</TR>
</TABLE>
<BR>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</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="center">
<FONT face="serif">EXHIBIT A</FONT></P>
<P align="center">
<FONT face="serif">DEFINED TERMS -- WHISTLEBLOWING POLICY</FONT></P>
<P align="justify">
<FONT face="serif">1. "Adverse Personnel Action": an employment-related act or decision or a failure to take appropriate action by a supervisor or higher level authority which affects an employee negatively as follows:</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
  <TD nowrap valign=top>
<FONT face="serif">(a)&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="justify"><FONT face="serif">Termination of employment;</FONT></P>  </TD>
</TR>
<TR>
  <TD nowrap valign=top>
<FONT face="serif">(b)&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="justify"><FONT face="serif">Demotion;</FONT></P>  </TD>
</TR>
<TR>
  <TD nowrap valign=top>
<FONT face="serif">(c)&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="justify"><FONT face="serif">Suspension;</FONT></P>  </TD>
</TR>
<TR>
  <TD nowrap valign=top>
<FONT face="serif">(d)&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="justify"><FONT face="serif">Written reprimand;</FONT></P>  </TD>
</TR>
<TR>
  <TD nowrap valign=top>
<FONT face="serif">(e)&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="justify"><FONT face="serif">Retaliatory investigation;</FONT></P>  </TD>
</TR>
<TR>
  <TD nowrap valign=top>
<FONT face="serif">(f)&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="justify"><FONT face="serif">Decision not to promote;</FONT></P>  </TD>
</TR>
<TR>
  <TD nowrap valign=top>
<FONT face="serif">(g)&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="justify"><FONT face="serif">Receipt of an unwarranted performance rating;</FONT></P>  </TD>
</TR>
<TR>
  <TD nowrap valign=top>
<FONT face="serif">(h)&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="justify"><FONT face="serif">Withholding of appropriate salary adjustments;</FONT></P>  </TD>
</TR>
<TR>
  <TD nowrap valign=top>
<FONT face="serif">(i)&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="justify"><FONT face="serif">Elimination of the employees' position, absent an overall reduction in work force, reorganization, or a decrease in or lack of sufficient funding, monies, or work load; or</FONT></P>  </TD>
</TR>
<TR>
  <TD nowrap valign=top>
<FONT face="serif">(j)&nbsp;&nbsp;</FONT></TD>
  <TD>
<P align="justify"><FONT face="serif">Denial of awards, grants, leaves or benefits for which the employee is then eligible.</FONT></P>  </TD>
</TR>
</TABLE>
<P align="justify">
<FONT face="serif">2. "Disclosure": oral or written report by an employee to a Designated Company Officer or Director or to the Company's Audit Committee of Alleged Wrongful Conduct.</FONT></P>
<P align="justify">
<FONT face="serif">3. "Knowing Retaliation": An Adverse Personnel Action taken by a supervisor or other authority against an employee where such employee's prior disclosure of Alleged Wrongful Conduct is a direct or indirect reason or basis for the
Adverse Personnel Action.</FONT></P>
<P align="justify">
<FONT face="serif">4. "Designated Company Officer or Director": The Company's Compliance Officer, any executive officer of the Company of the level of Senior Vice President or above and any member of the Company's Board of Directors.</FONT></P>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</P>
<P align="justify">&nbsp;</P>
<P align="center"><FONT size=2 face="serif">12</FONT></P>
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<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>4
<FILENAME>c52928_ex21-1.htm
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<p align="right"><font size=2>Exhibit 21.1 </font></p>
<p align="center"><b><u>Subsidiaries of Assured Pharmacy, Inc.</u></b></p>
<table width="100%" border="0" cellpadding="0" cellspacing="0">
    <tr>
      <td width="60%" valign="bottom" nowrap><p><u>Subsidiary Name</u></p></td>
      <td valign="bottom" nowrap><p><u>State or Other <br>
        Jurisdiction of<br>
      Incorporation</u></p></td>
    </tr>
    <tr>
      <td width="60%" valign="bottom" nowrap bgcolor="#E5FFFF"><p>Assured Pharmacy DME, Corp.</p></td>
      <td nowrap bgcolor="#E5FFFF"><p>Nevada</p></td>
    </tr>
    <tr>
      <td width="60%" valign="bottom" nowrap><p>Assured Pharmacy Gresham, Inc.</p></td>
      <td nowrap><p>Nevada</p></td>
    </tr>
    <tr>
      <td width="60%" valign="bottom" nowrap bgcolor="#E5FFFF"><p>Assured Pharmacy Irvine, Inc.</p></td>
      <td nowrap bgcolor="#E5FFFF"><p>Nevada</p></td>
    </tr>
    <tr>
      <td width="60%" valign="bottom" nowrap><p>Assured Pharmacy Los Angeles 1, Inc.</p></td>
      <td nowrap><p>Nevada</p></td>
    </tr>
    <tr>
      <td width="60%" valign="bottom" nowrap bgcolor="#E5FFFF"><p>Assured Pharmacy Plus, Corp.</p></td>
      <td nowrap bgcolor="#E5FFFF"><p>Nevada</p></td>
    </tr>
    <tr>
      <td width="60%" valign="bottom" nowrap><p>Assured Pharmacies, Inc.</p></td>
      <td nowrap><p>Louisiana</p></td>
    </tr>
    <tr>
      <td width="60%" valign="bottom" nowrap bgcolor="#E5FFFF"><p>Assured Pharmacies Northwest, Inc.</p></td>
      <td nowrap bgcolor="#E5FFFF"><p>Nevada</p></td>
    </tr>
    <tr>
      <td width="60%" valign="bottom"><p>Assured Pharmacy Las Vegas, Inc.</p></td>
      <td><p>Nevada</p></td>
    </tr>
    <tr>
      <td width="60%" valign="bottom" bgcolor="#E5FFFF"><p>Assured Pharmacy Henderson, Inc.</p></td>
      <td bgcolor="#E5FFFF"><p>Nevada</p></td>
    </tr>
</table>
<p>&nbsp;</p>
  <p>&nbsp;</p>
  <p>&nbsp;</p>
  <hr noshade size=4>
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<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>5
<FILENAME>c52928_ex31-1.htm
<TEXT>

<HTML>
<HEAD>
   <TITLE> -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing</TITLE>
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<P align="right">
<FONT size=2 face="serif">Exhibit 31.1</FONT></P>


<P align="center">
<B><FONT size=2 face="serif">CERTIFICATION</FONT></B></P>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD><FONT size=2 face="serif">I, Robert DelVecchio, certify that:</FONT></TD>
</TR>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">I have reviewed this Annual Report on Form 10-KSB for the year ended December 31, 2007 of Assured Pharmacy, Inc.
(the &#147;registrant&#148;);</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a015(f) and 15d-15(f)) for the registrant and have:</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Disclosed in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s fourth fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant&#146;s internal control over financial reporting.</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">The registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of the
registrant&#146;s board of directors (or persons performing the equivalent functions):</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant&#146;s ability to record, process,
summarize and report financial information; and</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting.</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">Date: March 31, 2008</FONT></TD>
	<TD>&nbsp;	</TD>
	<TD width="49%" align=left nowrap>
<U><FONT size=2 face="serif">/s/ Robert DelVecchio&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></U></TD>
</TR>
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	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Robert DelVecchio, Chief Executive Officer</FONT></TD>
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<TYPE>EX-31.2
<SEQUENCE>6
<FILENAME>c52928_ex31-2.htm
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<P align="right">
<FONT size=2 face="serif">Exhibit 31.2</FONT></P>
<P align="center">
<FONT size=2 face="serif">CERTIFICATION</FONT></P>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
  <TD nowrap valign=top>&nbsp;</TD>
  <TD><FONT size=2 face="serif">I, Haresh Sheth, certify that:</FONT></TD>
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  <TD>&nbsp;</TD>
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	<TD nowrap valign=top>
<FONT size=2 face="serif">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">I have reviewed this Annual Report on Form 10-KSB for the year ended December 31, 2007 of Assured Pharmacy, Inc. (the &#147;registrant&#148;);</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over
financial reporting (as defined in Exchange Act Rules 13a015(f) and 15d-15(f)) for the registrant and have:</FONT></TD>
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<FONT size=2 face="serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
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<FONT size=2 face="serif">Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;</FONT></TD>
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<TR><TD colspan=2>&nbsp;</TD></TR><TR>
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<FONT size=2 face="serif">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and</FONT></TD>
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<TR><TD colspan=2>&nbsp;</TD></TR><TR>
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<FONT size=2 face="serif">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Disclosed in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s fourth fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the registrant&#146;s internal control over financial reporting;</FONT></TD>
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<TR><TD colspan=2>&nbsp;</TD></TR>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">The registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of the
registrant&#146;s board of directors (or persons performing the equivalent functions):</FONT></TD>
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<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
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<FONT size=2 face="serif">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant&#146;s ability to record, process,
summarize and report financial information; and</FONT></TD>
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<TR><TD colspan=2>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting.</FONT></TD>
</TR>
<TR><TD colspan=2>&nbsp;</TD></TR></TABLE>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="serif">Date: March 31, 2008</FONT></TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<U><FONT size=2 face="serif">/s/ Haresh Sheth&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></U></TD>
</TR>
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	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Haresh Sheth, Chief Financial Officer</FONT></TD>
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<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>7
<FILENAME>c52928_ex32-1.htm
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<P align="right">
<B><FONT size=2 face="serif">Exhibit 32.1</FONT></B></P>
<P align="center">
<B><FONT size=2 face="serif">CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO</FONT></B><BR>
<B><FONT size=2 face="serif">SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In connection with the Annual Report of Assured Pharmacy, Inc. (the &#147;Company&#148;) on Form 10-KSB for the year ended December 31, 2007 filed with the Securities and Exchange
Commission (the &#147;Report&#148;), I, Robert DelVecchio, Chief Executive Officer of the Company, certify, pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: </FONT></P>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
  <TD nowrap valign=top>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
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<FONT size=2 face="serif">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and</FONT></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)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for
the periods presented.</FONT></TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR></TABLE>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
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	<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">Date:&nbsp;&nbsp;March 31, 2008</FONT>	</TD>
	<TD>&nbsp;	</TD>
	<TD width="49%" align=left nowrap>
<U><FONT size=2 face="serif">/s/ Robert DelVecchio&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U>	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Robert DelVecchio</FONT>	</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Chief Executive Officer 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">Assured Pharmacy, Inc.</FONT>	</TD>
</TR>
</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. </FONT><FONT size=2 face="serif">A signed original of this written statement required by Section 906 has been provided
to Assured Pharmacy, Inc. and will be retained by Assured Pharmacy, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.</FONT><FONT size=2 face="serif"> </FONT></P>


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<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>8
<FILENAME>c52928_ex32-2.htm
<TEXT>

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<P align="right">
<B><FONT size=2 face="serif">Exhibit 32.2</FONT></B></P>

<P align="center">
<B><FONT size=2 face="serif">CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO</FONT></B><BR>
<B><FONT size=2 face="serif">SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 </FONT></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In connection with the Annual Report of Assured Pharmacy, Inc. (the &#147;Company&#148;) on Form 10-KSB for the year ended December 31, 2007 filed with the Securities and Exchange
Commission (the &#147;Report&#148;), I, Haresh Sheth, Chief Financial Officer of the Company, certify, pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: </FONT></P>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
  <TD nowrap valign=top>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </TD>
	<TD nowrap valign=top>
<FONT size=2 face="serif">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">The Report fully complies with the requirements of Section 13(a) of the Securities E
xchange Act of 1934; and</FONT></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)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
	<TD width=100%>
<FONT size=2 face="serif">The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for
the periods presented.</FONT></TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR></TABLE>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">Date:&nbsp;&nbsp;March 31, 2008</FONT></TD>
	<TD>&nbsp;	</TD>
	<TD width="49%" align=left nowrap>
<U><FONT size=2 face="serif">/s/ Haresh Sheth&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></U></TD>
</TR>
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	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Haresh Sheth</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;	</TD>
	<TD>&nbsp;	</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Chief Financial Officer 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">Assured Pharmacy, Inc.</FONT></TD>
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</TABLE>
<BR>
<P align="left">
<FONT size=2 face="serif">This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. </FONT><FONT size=2 face="serif">A signed original of this written statement required by Section 906 has been provided
to Assured Pharmacy, Inc. and will be retained by Assured Pharmacy, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.</FONT><FONT size=2 face="serif"> </FONT></P>


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