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Dnaprint Genomics Inc – ‘SB-2’ on 4/10/06

On: Monday, 4/10/06, at 4:05pm ET · Accession #: 1231742-6-245 · File #: 333-133168

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/10/06  Dnaprint Genomics Inc             SB-2                   3:388K                                   Elite FP 1

Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: SB-2        Registration of Securities by a Small-Business       127±   564K 
                          Issuer                                                 
 2: EX-10.41    Material Contract                                     12±    55K 
 3: EX-23.2     Consent of Experts or Counsel                          1      5K

SB-2 — Registration of Securities by a Small-Business Issuer
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Dutchess Agreement Ellipsis La Jolla Offering, The Risk Factors Table of Contents The Offering Use of Proceeds
1	1st Page - Filing Submission
4	Table of Contents
"	The Offering
6	Dutchess Agreement
"	Risk Factors
11	Use of Proceeds
33	La Jolla
73	Ellipsis

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As Filed with the Securities and Exchange Commission on April 10, 2006

Registration No. ____________________

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

FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

DNAPrint Genomics, Inc.
-------------------------
(Name of small business issuer in its charter)

Utah 8731 59-2780520
--------- ---------- ----------
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
Organization) No.)

900 Cocoanut Avenue, Sarasota, FL 34236
Telephone: (941) 366-3400
(Address and telephone number of principal executive offices)

900 Cocoanut Avenue, Sarasota, FL 34236
Telephone: (941) 366-3400
(Address of principal place of business or intended principal place of business)

Richard Gabriel
Chief Executive and President
900 Cocoanut Avenue
Sarasota, FL 34236
(941) 366-3400
(Name, address and telephone number of agent for service)

Copy to:

Amy M. Trombly
1320 Centre Street, Suite 202
Newton, MA 02459
Phone:(617) 243-0060
Fax:(617) 243-0066

Approximate date of proposed sale to the public: as soon as practicable after
this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]

SB-2 2nd “Page” of 82 TOC 1st Previous Next ↓Bottom Just 2nd
[Enlarge/Download Table]

Proposed Proposed
Title of each class maximum maximum Amount of
of securities to be Amount to be offering price per Aggregate registration fee
registered registered (1) security (2) offering price
------------------- ------------- -------------------- --------------- -----------------
Common stock,
par value $.001 600,000,000 $0.022 $13,200,000 $1,412.40
per share
------------------- ------------- -------------------- --------------- -----------------
<FN>

(1) Pursuant to Rule 416(a) of the Securities Act of 1933, as amended, this
registration statement shall be deemed to cover additional securities that may be offered or
issued to prevent dilution resulting from stock splits, stock dividends or similar
transactions.

(2) The price of $0.022 per share, which was the average of the high and low prices of the
Registrant's common stock, as reported on the Over-The-Counter Bulletin Board on April 4,
2006 is set forth solely for purposes of calculating the registration fee pursuant to Rule
457(c) of the Securities Act of 1933, as amended.

The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

The information contained in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is declared effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

SB-2 3rd “Page” of 82 TOC 1st Previous Next ↓Bottom Just 3rd
PROSPECTUS

DNAPrint Genomics, Inc.
OFFERING UP TO 600,000,000 SHARES
OF COMMON STOCK

This prospectus relates to the resale of up to 600,000,000 shares of our
common stock by Dutchess Private Equities Fund, II, L.P. We are not selling
any securities in this offering and therefore will not receive any proceeds from
this offering. All costs associated with this registration will be borne
by us.

Our common stock is traded on the Over-The-Counter Bulletin Board under the
trading symbol "DNAG.OB" On April 4, 2006, the last reported sale price for our
common stock on the Over The Counter Bulletin Board was $.022 per share.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 4

You should rely only on the information provided in this prospectus or any
supplement to this prospectus and information incorporated by reference. We have
not authorized anyone else to provide you with different information. Neither
the delivery of this prospectus nor any distribution of the shares of common
stock pursuant to this prospectus shall, under any circumstances, create any
implication that there has been no change in our affairs since the date of this
prospectus.

Dutchess Private Equities Fund, II, L.P., Athena Capital Partners, Inc. and
any broker-dealers who act in connection with the sale of its shares may
be deemed to be "underwriters" within the meaning of the Securities Act.

Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. It is a criminal offense to make any
representation to the contrary.

Subject to Completion, The date of this prospectus is April 10, 2006.

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[Download Table]

TABLE OF CONTENTS
PROSPECTUS SUMMARY 1
RISK FACTORS 3
USE OF PROCEEDS 8
DETERMINATION OF OFFERING PRICE 8
DILUTION 8
SELLING SECURITY HOLDERS 9
PLAN OF DISTRIBUTION 9
LEGAL PROCEEDINGS 11
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 12
DESCRIPTION OF SECURITIES 13
INTEREST OF NAMED EXPERTS AND COUNSEL 14
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES 14
DESCRIPTION OF BUSINESS 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 27
DESCRIPTION OF PROPERTY 35
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 35
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 36
EXECUTIVE COMPENSATION 37
FINANCIAL STATEMENTS 39
INDEMNIFICATION OF DIRECTORS AND OFFICERS 71
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION 71
RECENT SALES OF UNREGISTERED SECURITIES 72

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this prospectus. Because it is a summary, it does not contain all
of the information you should consider before making an investment decision. You
should read the entire prospectus carefully, including the financial statements
and the notes relating to the financial statements.

The Company

We incorporated under the laws of the State of Utah on January 3, 1983 as
Lexington Energy, Inc. and subsequently changed our focus to human genome
sciences. We focus on the sale of genetic testing products and services. Our
products are targeted toward three distinct markets: pharmacogenomics, forensics
and consumer products.

The Offering

This prospectus relates to the resale of up to 600,000,000 shares of our common
stock by Dutchess Private Equities Fund II, L.P., which will obtain shares of
our common stock pursuant to an equity line transaction. This prospectus covers
the resale of our stock by the selling shareholder either in the open market or
to other investors through negotiated transactions.

Common stock offered 600,000,000 shares

Use of proceeds We will not receive any proceeds
from the sale by the selling
stockholder of our common
stock. See "Use of Proceeds."

Symbol for our common stock Our common stock trades on
The OTCBB Market under the
symbol "DNAG.OB"

How to Contact Us

Our business address is 900 Cocoanut Ave., Sarasota, Florida, 34236. Our
telephone number is (941) 366-3400. Our website is www.dnaprint.com. We do
not intend for our website to be incorporated into this prospectus.
----------------

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OUR CAPITAL STRUCTURE AND SHARES ELIGIBLE FOR FUTURE SALE

Shares of common stock outstanding as of March 31, 2006 (1)
339,538,062

(1) Assumes:

- No exercise of outstanding warrants to purchase an aggregate of
13,174,056
shares of our common stock at exercise prices ranging from $0.011 to
$0.192 per share and expiration dates between the years 2009 to 2011.

- No exercise of outstanding warrants to purchase an aggregate of 952,484
shares of our common stock at exercise prices ranging from $$0.242 to
$0.44 per share and expiration dates between the years 2008 to 2010.

- No exercise of outstanding warrants to purchase an aggregate of 109,826
shares of our common stock at exercise prices ranging from $$0.518 to
$0.656 per share and expiration dates during 2009.

- No exercise of outstanding warrants to purchase an aggregate of 3,735,000
shares of our common stock at an exercise price of $1.00 per share and an
expiration date during 2007.

- No exercise of options outstanding to purchase 65,911,112 shares of our
common stock
at exercise prices ranging from $0.0137 to $0.12 per share and expiration
dates between 2011 and 2015.

- No exercise of options outstanding to purchase 1,155,000 shares of our
common stock
at exercise prices ranging from $0.40 to $0.60 per share and expiration
dates between 2010 and 2015.

- No exercise of the $249,000 of convertible debt by La Jolla. Per the
agreement, La Jolla shall convert at least 5% of the face value of the debenture
each calendar month into our common shares unless there are no shares registered
for this debenture. The number of common stock shares into which this debenture
may be converted is equal to the dollar amount of the debenture being converted
multiplied by sixteen, minus the product of the conversion price multiplied by
fifteen times the dollar amount of the debenture being converted, and the entire
foregoing result shall be divided by the conversion price. The conversion price
is equal to the lesser of (i) $0.20 or (ii) 80% of the average of the five
lowest daily value weighted average price of our common stock during the twenty
trading days prior to La Jolla's election to convert. At March 31, 2006, the
convertible debt converts into 207,819,800 shares of our common stock.

- No exercise of the $330,000 convertible debt by Dutchess. The conversion
rate is the lesser of (i) 75% of the lowest closing bid price during the 15
trading days prior to the Conversion Date or (ii) $0.013. At March 31, 2006,
the convertible debt converts into 25,384,615 shares of our common stock.

- No exercise of the $330,000 convertible debt by Dutchess. The conversion
rate is the lesser of (i) 75% of the lowest closing bid price during the 15
trading days prior to the Conversion Date or (ii) $0.022. At March 31, 2006,
the convertible debt converts into 19,130,435 shares of our common stock.

- No exercise of the $330,000 convertible debt by Dutchess. The conversion
rate is $0.01. At March 31, 2006, the convertible debt converts into 33,000,000
shares of our common stock.

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DUTCHESS AGREEMENT

Effective September 28, 2004, we entered into an Investment Agreement and a
Registration Rights Agreement with Dutchess Private Equities Fund, II, L.P.
Pursuant to the Agreement, Dutchess committed to purchase our common stock up to
an aggregate purchase price of $35 million over a two-year period.

The Dutchess Agreement provides that, from time to time, we may deliver a notice
to Dutchess. Such notices will state the dollar amount of common stock that we
desire Dutchess to purchase subject to the limits in the Investment Agreement.
Upon receipt of a put notice, Dutchess is obligated to purchase from us during
the relevant pricing period shares having an aggregate purchase price equal to:
(i) the put amount set forth in the put notice or (ii) a minimum of 20% of the
aggregate trading volume of our common stock during the applicable pricing
period times the average of the two lowest closing bid prices of our common
stock during the specified pricing period. The maximum amount permitted pursuant
to any such notice is $600,000, and we can give approximately three such notices
per month. Dutchess is obliged to purchase the dollar amount of common stock set
forth in the notice at a purchase price equal to 96% of the average of the two
lowest closing bid prices of the common stock during the five trading days after
the notice.

The obligation of Dutchess to purchase under the Dutchess Agreement is
contingent upon us having an effective registration statement registering the
resale of the shares by Dutchess. In addition, we are not permitted to provide a
notice, and Dutchess is not obliged to purchase any shares, in the event that we
do not have sufficient authorized shares available for purchase to fulfill such
commitment.

We filed a Form S-2 registration statement that was declared effective by the
SEC on July 15, 2005 to register 350,000,000 shares of our common stock for
purposes of the Investment Agreement. We also filed a Form S-2 registration
statement that was declared effective by the SEC on May 17, 2005 to register
12,500,000 shares of our common stock for purposes of the Investment Agreement.
As of March 31, 2006, we have issued 165,794,892 shares and have raised
$3,672,355.

RISK FACTORS

Before deciding to invest in us or to maintain or increase your investment, you
should carefully consider the risks described below, in addition to other
available information. Each of the following risks could harm our business,
financial condition and results of operations. These risks could cause the
trading price of our common stock to decline and you could lose all or part of
your investment.

RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS

REGULATORY OVERSIGHT OF OUR PRODUCTS AND SERVICES MAY INCREASE OUR COSTS TO
MARKET OUR PRODUCTS AND SERVICES AND ADVERSELY AFFECT OUR ABILITY TO MARKET OUR
PRODUCTS AND SERVICES.

Currently, there is limited Food and Drug Administration, or FDA, regulation of
genetic tests. Within the field of personalized health and medicine,
governmental and other entities may enact patient privacy and healthcare laws
and regulations that may limit the generation and use of genomic variation data.
"Genomic variation data" is the information obtained when scientists search the
gene for differences across the entire human genome for changes and variations.

To the extent that FDA laws and regulations limit the use of our products and
services or impose additional costs on our customers, we may be unable to market
effectively our products and services and we may not generate sufficient revenue
to sustain our operations. Furthermore, we may be directly subject to
regulations as a provider of diagnostic information. A diagnosis is the
evaluation of a patient or a sample to determine what the status of the patient
might be. The information that results from this evaluation is called
`diagnostic information' and would include such information as height, weight,
sex, age, blood pressure, sugar levels and many other pieces of data.

The Secretary's Advisory Committee on Genetic Testing, an advisory panel to the
Secretary of the U.S. Department of Health and Human Services, has recommended
that the FDA expand its regulation of genetic testing to require FDA approval
for all new genetic tests and labeling of genetic tests. If the FDA adopts this
recommendation, it may require us, or our customers, to apply for FDA approval
as a prerequisite to marketing genetic tests that incorporate our intellectual
property. If the FDA were to deny any application of this kind, it could
adversely affect our business, and we may be unable to generate sufficient
revenue to sustain our operations.

To the extent that government regulations restrict the sale of our products and
services or impose other costs, we may be unable to provide our products and
services to our customers on terms sufficient to recover our expenses.

OUR SUCCESS WILL DEPEND, IN PART, ON HOW RAPIDLY THE PHARMACEUTICAL AND
BIOTECHNOLOGY INDUSTRY IMPLEMENTS GUIDANCE FROM THE U.S. DEPARTMENT OF HEALTH
AND THE FDA REGARDING A POTENTIAL EXPANSION OF REGULATION OF OUR INDUSTRY.
WITHOUT THIS IMPLEMENTATION BY THE PHARMACEUTICAL AND BIOTECHNOLOGY INDUSTRY, WE
MAY BE UNABLE TO MARKET EFFECTIVELY OUR TESTS AND SERVICES, AND WE MAY NOT
GENERATE SUFFICIENT REVENUE TO SUSTAIN OUR OPERATIONS.

On November 3, 2003, the FDA issued draft guidance that encouraged drug and
biologic developers to conduct pharmacogenomic tests during drug development and
clarified how the FDA will evaluate the resulting data. "Pharmacogenomic tests"
are clinical laboratory tests of all kinds to determine whether a drug is
working or not working on a patient that is experiencing a particular illness or
expressing a disease. It has only been recently that genetic scientists have
been able to link genetic testing to the performance of a drug. The term is
often used within the pharmaceutical industry to describe the testing of
individuals for their genetic influences on the effectiveness of a drug, or more
precisely, whether something in a person's genes that would either enhance or
prevent the treatment of that individual's disease with a particular drug.

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The FDA guidance provides specific criteria and recommendations on the
submission of pharmacogenomic data in connection with Investigational New Drug
Applications, New Drug Applications and Biological License Applications. Before
any company or individual can treat a single human patient with a new chemical
entity, often referred to as a NCE, or a new biological entity, referred to as a
NBE, scientists must first prove that the potential drug is safe within existing
treatment regimes. For example, new chemical entities used to treat cancer might
be allowed to be much more toxic to other cells in the body than would a
treatment for other less lethal diseases. Scientists file for permission to the
FDA to treat human patients and package all the information into an application
with the FDA called the `Investigational New Drug Application' or IND.

The draft FDA guidance includes information on the type of data needed and how
the FDA will or will not use such data in regulatory decisions. The FDA asked
for voluntary submissions of research information in order to gain experience as
the field of pharmacogenomics evolves. In addition, the FDA held a workshop in
November 2003 to discuss its draft guidance and stated that the agency plans in
the near future to issue final guidance on the co-development of a
pharmacogenomic test and drug. Our success will depend, in part, on how rapidly
the pharmaceutical and biotechnology industry implements the guidance and,
accordingly, the validity of our test and services as a basis for identifying
genomic variation and for correlating drug response with genomic variation.
Without this implementation by the pharmaceutical and biotechnology industry, we
may be unable to market effectively any test we may have as well as any of our
services, and we may not generate sufficient revenue to sustain our operations.

PUBLIC OPINION ON ETHICAL ISSUES RELATED TO THE CONFIDENTIALITY AND APPROPRIATE
USE OF GENETIC TESTING COULD REDUCE THE POTENTIAL MARKETS FOR OUR PRODUCTS AND
SERVICES, WHICH COULD PREVENT US FROM GENERATING SUFFICIENT REVENUE TO SUSTAIN
OUR OPERATIONS.

Public opinion on ethical issues related to the confidentiality and appropriate
use of genetic testing results may influence governmental authorities to call
for limits on, or regulation of the use of, genetic testing. In addition,
governmental authorities or other entities may call for limits on, or regulation
of the use of genetic testing or prohibit testing for genetic predisposition to
certain conditions, particularly for those that have no known cure. The
occurrence of any of these events could reduce the potential markets for our
products and services, which could prevent us from generating sufficient revenue
to sustain our operations.

For example, the FDA has approved a medication for use in African Americans
called BilDil that was developed by a pharmaceutical company called NitroMed.
Recently, articles have appeared accusing the FDA and NitroMed of `racial
discrimination' and claiming that no drugs should be developed using genetic
testing that might separate out individuals by `race, color or creed' without
regard to the benefit which might be caused for the African American patient.
According to such critics, the potential harm in the form of increased
discrimination far outweighs the benefits. Several noteworthy genetic scientists
have also voiced their opinions that our technology and technologies similar to
those developed by NitroMed and others are discriminating and should not be
developed or approved by the Federal, State or local governments.

IF WE DO NOT SUCCESSFULLY DISTINGUISH AND COMMERCIALIZE OUR PRODUCTS AND
SERVICES, WE WILL NOT ATTRACT A SUFFICIENT NUMBER OF CUSTOMERS. ACCORDINGLY, WE
MAY BE UNABLE TO COMPETE SUCCESSFULLY WITH OUR COMPETITORS OR GENERATE REVENUE
SIGNIFICANT ENOUGH TO SUSTAIN OUR OPERATIONS.

Numerous entities are attempting to identify genomic variation predictive of
specific diseases and drug response and to develop products and services based
on these discoveries. We face competition in these areas from pharmaceutical,
biotechnology and diagnostic companies, academic and research institutions and
government and other publicly-funded agencies, both in the United States and
abroad, most of which have substantially greater capital resources, research and
development staffs, facilities, manufacturing and marketing experience,
distribution channels and human resources than do we. Also, large
pharmaceutical companies have their own internal research and development
efforts that could surpass or eliminate our technology from the market. One of
our key competitors is PPGx, Inc., a leading international developer and
supplier of research-based pharmacogenomics services and products which recently
announced the launch of its GeneTrials(TM) Bioinformatics Platform.

Our competitors may discover, characterize or develop important technologies
applying genomics that are more effective than those technologies which we
develop. Additionally, these competitors may obtain regulatory approvals for
their drugs and diagnostics more rapidly than we do, which could limit our
ability to market effectively our products and services. If our patent
applications are not awarded or if our competitors in the field of genetic
research develop and receive approval of patents that supersede our
applications, we could be forced to cease the development of our products,
services and technologies.

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Some companies and governments are marketing or developing a number of databases
and informatics tools to assist participants in the healthcare industry and
academic researchers in the management and analysis of genomic data.
"Informatics tools" is a term used by scientists to describe software, computer
programs or mathematical programs that analyze data sets or collected
information that is stored in data files. Such computer programs can take an
apparently meaningless block of numbers that are recorded from a laboratory
experiment and evaluate trends, look for statistical relationships and group or
segregate the numbers according to their levels of importance to the scientist.
Our competitors have developed or plan to develop databases containing gene
sequence, genomic variation or other genomic information and are marketing or
plan to market their data to pharmaceutical and biotechnology companies or plan
to make freely available their databases.

WE ALSO FACE SERIOUS COMPETITION FROM COMPETITORS IN THE FORENSIC DNA TESTING
MARKET, CONSUMER DNA PRODUCTS MARKET AND THE CONTRACT SERVICES OUTSOURCING
MARKETS. AND IF WE ARE UNABLE TO COMPETE IN THESE MARKETS, WE WILL NOT GENERATE
REVENUES SIGNIFICANT ENOUGH TO SUSTAIN OUR OPERATIONS.

We remain skeptical that the consumer market for our products, which is mainly
supported by genealogy enthusiasts, will remain strong enough to justify
significant expenditures to develop new products. It is possible that the
application of genetic testing to genealogy is a passing fad and that public
interest in genetic genealogy testing will substantially decrease. If public
interest decreases, our revenues generated from our products sold to the
consumer market will likely decrease.

ALTHOUGH MANY OF OUR COMPETITORS USE SIMILAR TECHNOLOGIES, THEIR APPROACH TO
DATA ANALYSIS MIGHT BE COMPLETELY DIFFERENT AND MORE EFFICIENT THAN OURS. THIS
MAY CAUSE CONSUMERS TO CHOOSE OUR COMPETITOR'S PRODUCTS AND SERVICES OVER OURS
AND FORCE US TO CHANGE OUR PRODUCTS AND SERVICES TO THE MORE EFFICIENT FORM OF
DATA ANALYSIS OF OUR COMPETITORS.

We evaluate the mixture of genetic inheritance within individuals and relate
that information to biological information. Another approach to finding similar
information is to evaluate large groups of individuals in `pools' of DNA and
look for differences or similarities amongst the data. Our approach may prove to
be too cumbersome for the industry to adopt, and the industry may not want to
accept it because it is `too personal', meaning that overall `generic'
descriptors might be more immediately valuable to the industry than knowing
whether or not a single individual will respond favorably to a medication
treatment. The `pooled' approach is more often the approach that many
pharmaceutical companies and our competitors practice. Additionally, our
technology depends upon looking at individuals within a population pool and
therefore projecting the results of many individual samples upon a general
population that may not be clearly identified. Our competitors rely upon
self-reporting descriptors such as `African American', `Caucasian' or `Hispanic'
to pool their DNA samples. We do not presuppose the reported identity of an
individual but rather look at their inherited genetic markers that tell us what
group to associate them with. This approach may not be accepted by the industry
and a pooled method, although not as accurate, may become the standard. This
would significantly impact our ability to promote, sell, license of further
develop our products, services or technologies within any of our current
markets.

WE HAVE HAD LOSSES SINCE OUR INCEPTION WHICH MAY NEGATIVELY IMPACT OUR ABILITY
TO ACHIEVE OUR BUSINESS OBJECTIVES. WE MAY NEVER BE ABLE TO REDUCE THESE LOSSES,
WHICH WILL REQUIRE US TO SEEK ADDITIONAL DEBT OR EQUITY FINANCING THAT MAY NOT
BE AVAILABLE TO US.

We incorporated under the laws of the State of Utah on January 3, 1983 as
Lexington Energy, Inc. We have incurred losses and experienced negative
operating cash flow since our formation. For the year ended December 31, 2005,
we had a net loss of $8,715,852 and a working capital deficit of $7,577,917. We
expect to continue to incur significant expenses. Our operating expenses have
been and are expected to continue to outpace revenues and result in significant
losses in the near term. We may never be able to reduce these losses, which will
require us to seek additional debt or equity financing. If such financing is
available, you may experience significant additional dilution.

WE CONTINUE TO BE A DEVELOPMENTAL STAGE ENTERPRISE COMPANY AND WE DO NOT KNOW
WHEN OUR PHARMACOGENOMICS PRODUCTS WILL FINISH THEIR DEVELOPMENT.

We continue to devote substantially all of our efforts to establishing our
business products, and our principal operations have not commenced yet. We are
still in the research and development phase of our pharmacogenomics
product/services and have a few years prior to any of these products being
developed.

OUR INDEPENDENT AUDITORS HAVE EXPRESSED DOUBT ABOUT OUR ABILITY TO CONTINUE AS A
GOING CONCERN, WHICH MAY HINDER OUR ABILITY TO OBTAIN FUTURE FINANCING.

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In their report dated February 24, 2006, our independent registered public
accounting firm has expressed doubt about our ability to continue as a going
concern in our financial statements for the years ended December 31, 2005 and
2004. The auditors raised concerns about our ability to continue as a going
concern as a result of recurring losses from operations, a working capital
deficit, and our need for a significant amount of capital financing to proceed
with our business plan. Our ability to continue as a going concern is subject to
our ability to generate a profit and/or obtain necessary funding from outside
sources, including obtaining additional funding from the sale of our securities,
increasing sales or obtaining loans and grants from various financial
institutions where possible.

WE NEED IMMEDIATE FUNDS AND MAY NOT BE ABLE TO OBTAIN ANY ADDITIONAL FINANCING
IN THE AMOUNTS OR AT THE TIMES THAT WE MAY REQUIRE THE FINANCING. ADDITIONALLY
IF WE OBTAIN FINANCING, IT MAY NOT BE ON ACCEPTABLE TERMS. WE WILL HAVE TO
CURTAIL OUR BUSINESS IF WE CANNOT FIND ADEQUATE FUNDING.

We may need immediate funds and may not be able to obtain any additional
financing in the amounts or at the times that we may require the financing or,
if we do obtain any financing, that it would be on acceptable terms because of
the following:

- we have limited assets to pledge as security for the loan;

- we are in poor financial condition; and

- we may be viewed as a high market risk.

In addition, we have entered into an Investment Agreement with Dutchess Private
Equities Fund, II, L.P. Dutchess has committed to purchase our common stock on a
monthly basis up to an aggregate purchase price of $35 million over a two-year
period. The Dutchess Agreement requires us to put stock to Dutchess each time we
raise funds. If Dutchess were to sell the stock we put to them, it will likely
have a depressive effect on the market price of our common stock. This decrease
in our market price may hinder our ability to obtain necessary funding from
certain sources, including obtaining additional funding from the sale of our
securities or obtaining loans and grants from various financial institutions
where possible. Our failure to obtain sufficient additional financing could
result in the delay or abandonment of some or all of our development, expansion
and expenditures, which could harm our business and the value of our common
stock.

WE MAY NOT HAVE ADEQUATE PATENT PROTECTION AND CONFIDENTIALITY AGREEMENTS FOR
OUR PROPRIETARY TECHNOLOGY. IF WE DO NOT PROTECT OUR INTELLECTUAL PROPERTY
RIGHTS, THERE IS A RISK THAT THEY WILL BE INFRINGED UPON OR THAT OUR TECHNOLOGY
INFRINGES UPON ONE OF OUR COMPETITOR'S PATENTS. AS A RESULT, WE MAY EXPERIENCE A
LOSS OF REVENUE AND OUR OPERATIONS MAY BE MATERIALLY HARMED.

To the extent possible, we anticipate filing patent applications for protection
on future products that we develop. It is possible that patents we apply for may
not be issued and that any current or future patents will not afford us
commercially significant protection of our products or that we will not have
adequate resources to enforce our patents. Inasmuch as we intend to sell our
products in foreign markets, we also intend to seek foreign patent protection
for our products and technologies. The patent laws of other countries may differ
from those of the United States as to patentability of our products and
technologies, and the degree of protection afforded. Our products may infringe
on the patents of others, and we may not have the financial or other resources
necessary to successfully defend a claim of violation of proprietary rights. We
also rely on confidentiality and nondisclosure arrangements with our employees
and entities we do business with. These agreements may not provide us with
meaningful protection.

IF WE ARE UNABLE TO RETAIN THE SERVICES OF MESSRS. RICHARD GABRIEL, TONY
FRUDAKIS AND HECTOR GOMEZ, WE MAY NOT BE ABLE TO CONTINUE OPERATIONS.

Our success depends to a significant extent upon the continued service of Mr.
Richard Gabriel, our President and Chief Executive Officer, Dr. Tony Frudakis,
our Founder and Chief Scientific Officer, and Dr. Hector Gomez, our Chairman of
the Board and Chief Medical Officer. We have employment agreements in place with
Messrs. Gabriel, Frudakis, and Gomez. We do not maintain key-man insurance on
the lives of Messrs. Gabriel, Frudakis, and Gomez. If Messrs. Gabriel, Frudakis,
and Gomez were to resign, the loss could result in loss of sales, delays in new
product development and diversion of management resources, and we could face
high costs and substantial difficulty in hiring qualified successors and could
experience a loss in productivity while any such successor obtains the necessary
training and experience. In addition, in order to successfully implement and
manage our business plan, we are dependent upon, among other things,
successfully recruiting qualified personnel who are familiar with the specific
issues facing the deciphering of complex genetic traits. In particular, we must
hire and retain experienced management personnel to help us continue to grow and
manage our business, and skilled genetic technicians to further our research and
development efforts. Competition for qualified personnel is intense. If we do
not succeed in attracting new personnel or in retaining and motivating our
current personnel, our business could be harmed.

SB-2 10th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 10th
RISKS RELATING TO THIS OFFERING AND OUR COMMON STOCK

OUR COMMON STOCK IS SUBJECT TO "PENNY STOCK" RULES OF THE SEC AND THE TRADING
MARKET IN OUR STOCK IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR STOCK CUMBERSOME
AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the definition of a "penny stock," for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require:

- that a broker or dealer approve a person's account for transactions
in penny stocks; and

- the broker or dealer receive from the investor a written agreement
to the transaction, setting forth the identity and quantity of the
penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:

- obtain financial information and investment experience objectives of
the person; and

- make a reasonable determination that the transactions in penny
stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, which, in highlight form:

- sets forth the basis on which the broker or dealer made the
suitability determination; and

- that the broker or dealer received a signed, written agreement from
the investor prior to the transaction.

In addition, unless you have had an account with your brokerage firm for more
than one year, or you have previously bought three different penny stocks from
that firm, your brokerage firm must send you a written statement for you to sign
that accurately describes your financial situation, your investment experience,
and your investment goals, and that contains a statement of why your
firm decided that penny stocks are a suitable investment for you. The firm also
must get your written consent to buy the penny stock.

If penny stocks are sold to you in violation of federal or state securities
laws, you may be able to cancel your purchase and get your money back. If the
stocks are sold in a fraudulent manner, you may be able to sue the persons and
firms that caused the fraud for damages. If you have signed an arbitration
agreement, however, you may have to pursue your claim through arbitration.

WE MAY NOT HAVE SUFFICIENT SHARES AVAILABLE TO FULLY ACCESS THE EQUTIY LINE WITH
DUTCHESS AND MAY NEED TO SEEK ADDITIONAL CAPITAL TO MEET OUR WORKING CAPITAL
NEEDS.

We may only issue a put to Dutchess if we have registered the shares of common
stock. This prospectus is registering 600,000,000 shares of common stock
that we may issue pursuant to the equity line if the Registration Statement is
declared effective by the SEC. As of March 31 2006 we have already issued
165,794,892 shares pursuant to prior registration statements. We have assumed
that we will not issue more than 600,000,000 shares in addition to the
362,500,000 we already registered pursuant to the exercise of our put right
under the Investment Agreement, although the number of shares that we will
actually issue pursuant to that put right may be more than or less than
600,000,000, depending on the trading price of our common stock. On April 4,
2006, the closing price of our common stock was $0.022. Assuming we issue
puts only at $0.022, we would be able to access approximately $13 million of our
equity line pursuant to the Investment Agreement. We currently have no intent
to exercise the put right in a manner that would require us to register
more shares in addition to the 600,000,000 shares we are currently registering,
but if we were to exercise the put right in that manner, we would be required to
file a subsequent registration statement with the Securities and Exchange
Commission and for that registration statement to be deemed effective prior
to the issuance of any such additional shares.

SB-2 11th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 11th
If we can not raise sufficient funds pursuant to our Investment Agreement with
Dutchess, for our capital requirements, we will need to seek additional
funding which may not be available on terms acceptable to us or at
all.

DUTCHESS MAY SHORT SELL OUR STOCK DURING THE PERIODS WE ISSUE A PUT WHICH MAY
CAUSE OUR STOCK PRICE TO DECREASE.

Pursuant to the Investment Agreement, Dutchess has the right to short sell
the amount of stock we expect to issue to them during the period we issue a put.
If Dutchess actually sells our stock short, our stock price may decrease. If
our stock price decreases, you may lose some or all of your investment.

EXISTING STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM THE SALE OF
SECURITIES PURSUANT TO OUR INVESTMENT AGREEMENT WITH DUTCHESS.

The sale of shares pursuant to our Investment Agreement with Dutchess will have
a dilutive impact on our stockholders. As a result, our net income per share,
if any, could decrease in future periods, and the market price of our common
stock could decline. In addition, the lower our stock price at the time we
exercise our put option, the more shares we will have to issue to Dutchess to
draw down on the full equity line with Dutchess. If our stock price
decreases, then our existing stockholders would experience greater
dilution.

DUTCHESS WILL PAY LESS THAN THE THEN-PREVAILING MARKET PRICE OF OUR COMMON
STOCK, WHICH MAY CAUSE OUR STOCK PRICE TO DECLINE.

The common stock to be issued under our agreement with Dutchess will be
purchased at a 4% discount to the average of the two lowest closing bid prices
of our common stock during the five trading days after our notice to Dutchess of
our election to exercise our put right. These discounted sales could cause
the price of our common stock to decline and you may not be able to sell our
stock for more than you paid for it.

OUR STOCK PRICES HAVE BEEN VOLATILE AND THE FUTURE MARKET PRICE FOR OUR COMMON
STOCK IS LIKELY TO CONTINUE TO BE VOLATILE. FURTHER, THE LIMITED MARKET FOR OUR
SHARES WILL MAKE OUR PRICE MORE VOLATILE. THIS MAY MAKE IT DIFFICULT FOR YOU TO
SELL OUR COMMON STOCK FOR A POSITIVE RETURN ON YOUR INVESTMENT.

The public market for our common stock has historically been very volatile. Any
future market price for our shares is likely to continue to be very volatile.
This price volatility may make it more difficult for you to sell shares when you
want at prices you find attractive. We do not know of any one particular factor
that has caused volatility in our stock price. However, the stock market in
general has experienced extreme price and volume fluctuations that have often
been unrelated or disproportionate to the operating performance of companies.
Broad market factors and the investing public's negative perception of our
business may reduce our stock price, regardless of our operating performance.
Further, the market for our common stock is limited and a larger market may
never develop or be maintained. Market fluctuations and volatility, as well as
general economic, market and political conditions, could reduce our market
price. As a result, this may make it difficult or impossible for you to sell our
common stock.

USE OF PROCEEDS

This prospectus relates to shares of our common stock that may be offered and
sold from time to time by Dutchess. We will not receive proceeds from the sale
of shares of common stock in this offering. However, we will receive the
proceeds from the sale of shares of Common Stock to Dutchess under the
Investment Agreement. The purchase price of the shares purchased under the
Investment Agreement will be equal to 96% of the average of the two lowest
closing bid prices of our common stock for the five days immediately following
the date of our notice of election to exercise our put. For illustrative
purposes, we have set forth below our intended use of proceeds for the range of
net proceeds indicated below to be received under the Investment Agreement. The
Gross Proceeds represent the total dollar amount that Dutchess is obligated
to purchase. On April 4, 2006, the closing price of our common stock was
$0.022. Assuming we issue puts only at $0.022, we would be able to access
approximately $13 million of our equity line pursuant to the Investment
Agreement. Although the Investment Agreement allows us to access $35 million,
we have assumed proceeds of approximately $13 million based on the number of
shares we have registered and our recent stock price. The table assumes
estimated offering expenses of $25,000.

[Enlarge/Download Table]

Proceeds Proceeds
If 100% Sold If 50% Sold
------------- ------------
Gross Proceeds $13,200,000 $6,600,000
Estimated Expenses of the Offering $25,000 $25,000
Brokers fee $528,000 $264,000
------------- ------------
Net Proceeds $12,647,000 $6,311,000
============= ============

Priority Priority
------------- ------------

Working capital and general corporate expenses 1st $5,847,000 $1,011,000
Notes payable 2nd $3,800,000 $3,800,000
Expansion of internal operations and certifications 3rd $2,000,000 $1,000,000
Potential acquisition costs 4th $1,000,000 $500,000
------------- ------------
$12,647,000 $6,311,000
============= ============

Proceeds of the offering which are not immediately required for the purposes
described above will be invested in United States government securities,
short-term certificates of deposit, money market funds and other high-grade,
short-term interest-bearing investments.

DETERMINATION OF OFFERING PRICE

The selling stockholders may sell shares from time to time in negotiated
transactions, brokers transactions or a combination of such methods at market
prices prevailing at the time of the sale or at negotiated prices.

DILUTION

Our negative net tangible book value as of December 31, 2005 was $4,363,342 or
($0.018) per share of common stock. Net tangible book value is determined by
dividing our tangible book value (total tangible assets less total liabilities)
by the number of outstanding shares of our common stock. Since this offering is
being made solely by the selling stockholders and none of the proceeds will be
paid to us, our net tangible book value will be unaffected by this offering. Our
net tangible book value, will be impacted by the common stock to be issued to
Dutchess. The amount of dilution will depend on the offering price and number of
shares to be issued. The following example shows the dilution to new investors
at an offering price of $0.022 per share.

If we assume that we were to issue 100,000,000 shares of common stock to
Dutchess at an assumed offering price of $0.022 per share, less $88,000 of
offering expenses, our negative net tangible book value as of December 31, 2005
would have been $2,251,342, or ($0.006) per share. This represents an immediate
increase in net tangible book value to existing shareholders of $0.012 per share
and an immediate dilution to new shareholders of $0.028 per share.

Assumed public offering price per share $0.022
Net tangible book value per share before this offering ($0.018)
Net tangible book value after this offering ($2,251,342)
Net tangible book value per share after this offering ($0.007)
Dilution of net tangible book value per share to new
Investors $0.028

Increase in net tangible book value per share to existing
shareholders $0.012.

You should be aware that there is an inverse relationship between our stock
price and the number of shares to be issued under the Investment Agreement
to Dutchess. That is, as our stock price declines, we would be required
to issue a greater number of shares under the Investment Agreement for
a given advance. This inverse relationship is demonstrated by the table
below, which shows the number of shares to be issued under the Investment
Agreement at a price of $0.022 per share per share and 25%, 50% and 75%
discounts to that price.

SB-2 12th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 12th
[Enlarge/Download Table]

Offering price: $0.022 75% 50% 25% -
PURCHASE PRICE:(1) $0.0055 $0.0110 $0.0165 $0.0220
NO. OF SHARES:(2) 454,545,455 227,272,727 151,515,152 113,636,364
TOTAL OUTSTANDING:(3) 794,083,517 566,810,789 491,053,214 453,174,426
PERCENT OUTSTANDING:(4) 57% 40% 31% 25%
<FN>
(1) Represents market price.

(2) Represents the number of shares of common stock to be issued at the
prices set forth in the table to generate $2.5 million in gross proceeds.

(3) Represents the total number of shares of common stock outstanding
after the issuance of the shares, assuming no issuance of any other shares
of common stock.

(4) Represents the shares of common stock to be issued as a percentage of
the total number shares of common stock outstanding (assuming no exercise or
conversion of any options, warrants or other convertible securities).

SELLING SECURITY HOLDERS

Based upon information available to us as of April 5 , 2006, the following
table
sets forth the name of the selling stockholders, the number of shares owned, the
number of shares registered by this prospectus and the number of outstanding
shares that the selling stockholders will own after the sale of the registered
shares, assuming all of the shares are sold. The information provided in the
table and discussions below has been obtained from the selling stockholders. The
selling stockholders may have sold, transferred or otherwise disposed of, or may
sell, transfer or otherwise dispose of, at any time or from time to time since
the date on which it provided the information regarding the shares beneficially
owned, all or a portion of the shares of common stock beneficially owned in
transactions exempt from the registration requirements of the Securities Act of
1933. As used in this prospectus, "selling stockholder" includes donees,
pledgees, transferees or other successors-in-interest selling shares received
from the named selling stockholder as a gift, pledge, distribution or other
non-sale related transfer.

Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated
by the Commission under the Securities Exchange Act of 1934. Unless otherwise
noted, each person or group identified possesses sole voting and investment
power with respect to the shares, subject to community property laws where
applicable.

[Enlarge/Download Table]

Selling Stockholder Number of shares Number of Shares that may be Number of Shares
beneficially owned offered pursuant to Beneficially Owned
before offering this prospectus After Offering (1)

Dutchess Private Equities Fund, II, LP (2) 2,500,000 600,000,000 2,500,000
50 Commonwealth Ave.
Boston, MA 02116
<FN>
(1) Assumes all shares are sold pursuant to this Prospectus.

(2) Douglas Leighton has voting and dispositive powers over the shares owned
by Dutchess Private Equities Fund, II, LP. Mr. Leighton disclaims beneficial ownership of these securities.

PLAN OF DISTRIBUTION

The selling stockholder will act independently of us in making decisions with
respect to the timing, manner and size of each sale. The selling stockholders
may sell the shares from time to time:

- in transactions on the Over-the-Counter Bulletin Board or on any national
securities exchange or U.S. inter-dealer system of a registered national
securities association on which our common stock may be listed or quoted at the
time of sale; or
- in private transactions and transactions otherwise than on these exchanges or
systems or in the over-the-counter market; or

SB-2 13th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 13th
- at prices related to such prevailing market prices, or
- in negotiated transactions, or
- in a combination of such methods of sale; or
- any other method permitted by law.

The selling stockholder may effect such transactions by offering and selling
the shares directly to or through securities broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or the purchasers of the shares
for whom such broker-dealers may act as agent or to whom the selling
stockholders may sell as principal, or both, which compensation as to a
particular broker-dealer might be in excess of customary commissions.

Dutchess, Athena Capital Partners, Inc. and any broker-dealers who act in
connection with the sale of its shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any discounts, concessions or
commissions received by them and profit
on any resale of the shares as principal may be deemed to be underwriting
discounts, concessions and commissions under the Securities Act.

On or prior to the effectiveness of the registration statement to which this
prospectus is a part, we will advise the selling stockholders that they and any
securities broker-dealers or others who may be deemed to be statutory
underwriters will be governed by the prospectus delivery requirements under the
Securities Act. Under applicable rules and regulations under the Securities
Exchange Act, any person engaged in a distribution of any of the shares may not
simultaneously engage in market activities with respect to the common stock for
the applicable period under Regulation M prior to the commencement of such
distribution. In addition and without limiting the foregoing, the selling
security owners will be governed by the applicable provisions of the Securities
Exchange Act, and the rules and regulations thereunder, including without
limitation Rules 10b-5 and Regulation M, which provisions may limit the timing
of purchases and sales of any of the shares by the selling stockholders. All of
the foregoing may affect the marketability of our securities.

On or prior to the effectiveness of the registration statement to which this
prospectus is a part, we will advise the selling stockholders that the
anti-manipulation rules under the Securities Exchange Act may apply to sales of
shares in the market and to the activities of the selling security owners and
any of their affiliates. We have informed the selling stockholders that they may
not:

- engage in any stabilization activity in connection with any of the shares;
- bid for or purchase any of the shares or any rights to acquire the shares,
- attempt to induce any person to purchase any of the shares or rights to
acquire the shares other than as permitted under the Securities Exchange Act; or
- effect any sale or distribution of the shares until after the prospectus shall
have been appropriately amended or supplemented, if required, to describe the
terms of the sale or distribution.

We have informed the selling stockholder that it must effect all sales of
shares in broker's transactions, through broker-dealers acting as agents, in
transactions directly with market makers, or in privately negotiated
transactions where no broker or other third party, other than the purchaser, is
involved.

The selling stockholder may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any broker-dealers, and any profits
received on the resale of shares, may be deemed to be underwriting discounts and
commissions under the Securities Act if the broker-dealers purchase shares as
principal.

In the absence of the registration statement to which this prospectus is a part,
certain of the selling stockholder would be able to sell its shares only
pursuant to the limitations of Rule 144 promulgated under the Securities Act.

SB-2 14th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 14th
LEGAL PROCEEDINGS

On October 27, 2003, we filed suit in the Circuit Court of the Twelfth Judicial
Circuit of Florida in and for Sarasota County, Florida, Civil Division moving
for an emergency order requiring impoundment of any and all computers and
associated materials of one of our former employees. On October 28, 2003, the
Circuit Court Judge granted the order. The order was carried out on the same
day.

Our Complaint alleges that a former employee inappropriately took confidential
company materials and then disclosed or threatened to disclose the information.
The Complaint seeks return of the property, a permanent injunction against
further and future disclosures by the former employee, attorney's fees and
related costs.

On December 19, 2003, the former employee filed an Answer, Affirmative Defenses,
and Counterclaim with the Court generally denying the allegations of our claim.
In addition, the Defendant counterclaimed and sued us for breach of an
Employment Agreement, based on a purported failure to pay certain health
benefits, and stock options.

On January 9, 2004, the Court granted our Motion to Inspect, Examine and
Download Information from the Impounded Computer, subject to certain limitations
designed to protect the confidentiality of any information contained on the
computer. The Defendant withdrew his objection to our review of documents
downloaded from his seized home computer. Based upon our review of the documents
and report, we advised the Court that we believed these documents contained our
confidential, proprietary and trade secret information. At that time the Court
ordered a preliminary mediation to discuss resolution of the matter. We
participated in the mediation, but did not reach a resolution with the
Defendant. Therefore, we are proceeding with discovery.

On July 8, 2005, a former consultant of ours, Lonnie Bookbinder, filed suit in
the Circuit Court of the Twelfth Judicial Circuit of Florida in and for Sarasota
County, Florida, Civil Division. The complaint, styled Bookbinder v. DNAPrint
Genomics, Inc., Richard Gabriel, Hector Gomez and GenBiomics, LLC, names as
defendants us, along with two of our directors and a dissolved limited liability
company in which two of our directors were members. The complaint sought
damages arising out of services Mr. Bookbinder claims to have provided on our
behalf. We deny any liability to Mr. Bookbinder. We filed and prevailed on a
Motion to Dismiss the complaint because we believed it did not state a claim.
Plaintiff then filed an Amended Complaint. We have a Motion to Dismiss pending
on the same grounds as that previously filed. If our Motion to Dismiss is
unsuccessful, we intend to defend the litigation vigorously.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Our directors are elected at our annual meetings by a plurality of the shares
represented and our officers serve at the pleasure of the Board of Directors.
Our current officers and directors are:

[Download Table]

Name Age Position
---- --- --------
Tony Frudakis 38 Director, Secretary, Chief Scientific Officer
Richard Gabriel(1) 57 Director, Chief Executive Officer, President
Hector Gomez 66 Director, Chief Medical Officer
Monica Tamborini(1) 49 Chief Financial Officer, Chief Operating Officer
<FN>
(1) Monica Tamborini and Richard Gabriel are married.

Tony Frudakis, Ph.D. Dr. Frudakis, our founder, has been with us since our
inception. He has served in many capacities, including Chief Executive Officer
and President. Dr. Frudakis now serves as Chief Scientific Officer and is
responsible for executing research and development goals and objectives, under
the direction of the Board of Directors. As a member of the Board of Directors,
Dr. Frudakis also participates in strategic planning, concentrating on his field
of expertise, biologic and genomics science and innovation.

Prior to joining us, Dr. Frudakis founded GAFF biologic, our predecessor in
interest, in 1998. He served as its President and Chief Executive Officer.
Early in his career, Dr. Frudakis was a research scientist for Corixa
Corporation. While at Corixa he developed several new techniques for RNA
fingerprinting, managed and executed high-throughput gene discovery programs for
various cancers and was instrumental in the company's early success in
attracting research and development partners. In all, his work has resulted in a
patent portfolio for over 350 unique genes and 2 products.

Richard Gabriel. Mr. Gabriel joined us in 2002 as a member of our Board of
Directors. He continues in that capacity and in addition, in March of 2003, he
agreed to accept the position of Chief Executive Officer and President. In this
role, Mr. Gabriel is responsible for and oversees all aspects of the
organization and formulates and communicates strategic direction.

SB-2 15th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 15th
Prior to joining us, Mr. Gabriel consulted for several start-up companies while
working as a partner at Genbiomics, LLC and as head of Life Sciences Practice at
Semaphore, Inc. From 1998 until 2001, Mr. Gabriel served as Chief Executive
Officer and President of Calix Corporation, parent company to Pharm-Eco
Laboratories, Inc. He was one of five Core Team Members that set the overall
strategic direction for Pharm-Eco Laboratories, Inc. and helped guide
Pharm-Eco's high performance self-directed organization. He obtained his MBA
from Suffolk University's Executive MBA Program, Boston, Massachusetts in 1985
and his B.S. in Chemistry from Ohio Dominican College, Columbus, Ohio in 1978.

Hector Gomez MD, Ph.D. Dr. Gomez has served on our board of directors since
March 1, 2002 and serves as Chairman of the Board. In addition, in May of 2003,
Dr. Gomez agreed to join us as Chief Medical Officer. In this capacity, he is
responsible for overseeing and managing our efforts to commercialize our
pharmacogenomic products. Mr. Gomez is Chairman of the Audit Committee.

From 2001 to 2002, he was Chief Executive Officer of Zengen, Inc., a
biotechnology company. From 2000 to 2001, he was Chief Executive Officer of
Nutri Logics, Inc., a consumer products company. Prior to joining Nutri Logics,
from 1994 to 1999, he was Chief Executive Officer of Transcend Therapeutics, a
biotechnology company. Concurrent with these positions, since 1999, Dr. Gomez
has served as a Clinical Associate Professor of Pharmacology and Medicine at the
University of South Florida, College of Medicine (voluntary faculty). His
research career to date has focused on the clinical pharmacology of
Hypertension, Hypokalemia, Hyperglycemia, Hyperuricemia and Hypercholesteremia
drugs.

Monica Tamborini. In May of 2003, Ms. Tamborini joined us as Chief Financial
Officer and Chief Operating Officer. As our Chief Financial Officer, Ms.
Tamborini oversees and manages all accounting functions, including financial
reporting, as well as helping to obtain outside capital to fund our operations.
As Chief Operating Officer, she is responsible for seeing that operations run
efficiently and effectively and that we have the necessary personnel and
infrastructure required to execute the Board's strategic plan of operations.

Prior to joining us, Ms. Tamborini had served in controller and Chief Financial
Officer positions since 1988. From 1992 to 2001, she was Chief Financial
Officer for Calix Corp and its subsidiary Pharm-eco Laboratories. Ms. Tamborini
was also one of the five core team members for Pharm-eco Laboratories that set
the overall strategic direction of the company. Her main focus was operations
and finance. From 2001 through 2003, Ms. Tamborini was not employed.

Audit Committee

We do not have a separate Audit Committee. Our full board performs the
functions normally designated to an Audit Committee. Although we do not have an
Audit Committee, Ms. Tamborini has been designated by our Board of Directors as
our Audit Committee Financial Expert. Ms Tamborini, in the Board of Directors'
opinion, has the required experience to serve in this capacity. She has an
understanding of generally accepted accounting principles and financial
statements and has the ability to assess the general application of such
principles in connection with the accounting for estimates, accruals and
reserves. She also has over 20 years experience preparing and evaluating
financial statements that had a breadth and level of complexity of accounting
issues that are generally comparable to the breadth and complexity of issues
that can reasonably be expected to be raised by our financial statements. She
has an understanding of internal controls and procedures for financial reporting
and an understanding of audit committee functions. Because of her positions as
Chief Operating Officer and Chief Financial Officer, Ms. Tamborini is not
"independent" with respect to the Company.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 31, 2006 certain information
concerning beneficial ownership of shares of our stock and the approximate
percentage of shares of our stock owned by (i) each person known to us to own 5%
or more of the outstanding shares of stock, (ii) each director and executive
officer, and (iii) all directors and executive officers as a group.

[Enlarge/Download Table]

Name And Address Of Amount Of Percentage Of
Beneficial Owner(1) Beneficial Ownership Class (2)
-------------------- -------------------- -------------
Tony Frudakis 21,562,829(3) 6.02%
Richard Gabriel 23,000,000(4) 6.39%
Hector Gomez 19,886,000(5) 5.55%
Monica Tamborini 23,000,000(4) 6.39%
Directors and Officers
as a Group (4 persons) 64,448,829 16.23%
<FN>
(1) Unless otherwise noted, c/o DNAPrint genomics, Inc., 900 Cocoanut Avenue,
Sarasota, FL 34236.

(2) Percentage of ownership is based on 339,538,062 shares of common stock
outstanding on March 31, 2006.

(3) Represents 3,062,829 shares directly owned by Dr. Frudakis and 18,500,000
shares which may be acquired within 60 days by exercise of options.

(4) Represents 1,500,000 shares directly owned by Mr. Gabriel, 18,500,000 shares which Mr. Gabriel may acquire within
60 days by exercise of options, 1,000,000 shares directly owned by Ms. Tamborini, and 2,000,000 shares which Ms. Tamborini
may acquire within 60 days by exercise of options. Mr. Gabriel and Ms. Tamborini are married.

(5) Represents 1,256,000 shares directly owned by Dr. Gomez, and 18,630,000 shares which may be acquired within 60 days by
exercise of options.

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DESCRIPTION OF SECURITIES

AUTHORIZED CAPITAL

Our total number of our authorized shares of common stock is 1,500,000,000 with
a par value of $.01 per share. Additionally, we are authorized to issue
10,000,000 shares of Preferred Stock, of which 50,000 are designated Series A.

COMMON STOCK

The holders of the Common Stock are entitled to receive, when and as declared by
the Board of Directors, out of any assets of the Corporation legally available
therefore, such dividends as may be declared from time to time by the Board of
Directors.

Upon the liquidation, dissolution or winding up of the Corporation, either
voluntary or involuntary, the holders of Common Stock will be entitled to
receive the assets of the Corporation in accordance with the provisions of the
by laws. The common stock is not redeemable.

The holder of each share of Common Stock shall have the right to one vote, and
shall be entitled to notice of any stockholders meeting in accordance with the
Bylaws of the Corporation, and shall be entitled to vote upon such matters and
in such manner as may be provided by law. There shall be no cumulative voting.

PREFERRED STOCK

Each holder of a share of Series A preferred stock has the right to one vote for
each share of common stock into which such holder's shares of Series A preferred
stock could then be converted. The Series A preferred stock holders have the
right to convert on the first day of the month after the month in which a
registration statement (other than a registration statement on Form S-4, Form
S-8 or any successor form thereto) filed by DNAP with the Securities and
Exchange Commission becomes effective. The other conversion dates are the first
day of the fourth, seventh and a tenth month after the month in which such
registration statement becomes effective. If on any conversion date, the
conversion price would be less than $0.025 per share, we may elect to defer the
conversion date to the first day of the next month. If, on such deferred
conversion date, the conversion price would be less than $0.025 per share, we
may again defer the conversion date to the first day of the next month. Upon
such second deferred conversion date, the Series A preferred stock shall be
converted without further deferral. Such conversion shall be effected at our
office or any transfer agent for such stock, into such number of fully paid and
non-assessable shares of common stock as is determined by dividing the original
Series A preferred stock issue price by the conversion price applicable to such
share, determined as hereafter provided, in effect on the date the certificate
is surrendered for conversion. The conversion price is the lesser of (i) eighty
percent (80%) of the average of the five lowest daily volume weighted average
prices of our common stock during the twenty (20) trading days prior to the
conversion date, or (ii) eighty percent (80%) of the closing price of our common
stock on the trading day prior to the conversion date. Each share of Series A
preferred stock not previously converted shall automatically be converted,
without the payment of additional consideration, into shares of common stock at
the conversion price, as applicable, in effect on the date of and immediately
prior to the last conversion date described above. The liquidation value is $10
per share.

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INTEREST OF NAMED EXPERTS AND COUNSEL

No expert or counsel will receive a direct or indirect interest in the small
business issuer or was a promoter, underwriter, voting trustee, director,
officer, or employee of DNAPrint, Inc. Nor does any such expert or counsel have
any contingent based agreement with us or any other interest in or connection to
us.

DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES

Our Articles of Incorporation eliminate liability of our directors and officers
for breaches of fiduciary duties as directors and officers, except to the extent
otherwise required by the Utah Revised Statutes and except where the breach
involves intentional misconduct, fraud or a knowing violation of the law.

Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended ("Securities Act") may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable.

DESCRIPTION OF BUSINESS

HISTORY

We initially incorporated under the laws of the State of Utah on January 3,
1983 as Lexington Energy, Inc. and subsequently changed our focus to human
genome sciences. In connection with this change in focus, on July 15, 2000, we
acquired DNAPrint Genomics, Inc. through the issuance of 9,600,000 shares of our
common stock. After the acquisition, we focused on the discovery and
development of our TruLine products - TruSeq , SNiPscan and TruSpin . We
actively engaged in human identification analysis and used our proprietary
TruLine products to reduce the cost of producing a genetic profile to less than
50% of the standard price. Our strategy was to sell our proprietary reagent to
geneticists at universities, hospitals and commercial laboratories working on
genotyping projects. The reagent kit was designed to save researchers money in
reagent costs. Companies that sold the reagents, however, made advances in their
own reagents, which lowered the cost and ultimately negated the benefit of using
our products. The technology was thus abandoned.

In 2001, Dr. Tony Frudakis, our founder, teamed with other scientists to conduct
research to develop new genomics products with consumer, forensic and
pharmacogenomics applications. However, lack of funding limited the amount of
research conducted. We implemented cost cutting measures to conserve cash. In
spite of these hardships; we were able to continue our research and development
efforts on a reduced and limited basis throughout most of 2002 and 2003.

During 2002, our Board of Directors began a search for new leadership. After a
search for a new CEO/President, Mr. Richard Gabriel agreed to accept the
position without requiring immediate cash compensation. Because we did not have
cash available to pay Mr. Gabriel's salary, he agreed to enter into an
employment contract for one year that granted him 1,500,000 shares of our stock
in lieu of immediate cash compensation.

As CEO /President, Mr. Gabriel agreed to seek additional executive management,
particularly a Chief Financial Officer, a Chief Operating Officer and a Chief
Medical Officer and to locate a firm to represent us in raising investment
capital sufficient to build and sustain the business over the next 2-3 years.
Mr. Gabriel and the new management team successfully completed these goals.

Mr. Gabriel hired our Chief Financial Officer and Chief Operating Officer,
Monica Tamborini, and our Chief Medical Officer, Dr. Hector J. Gomez. In May of
2003, Mr. Gabriel also convinced Ms. Tamborini and Dr. Gomez to agree to work
initially without requiring immediate cash compensation. They agreed to enter
into employment contracts with us for one year in return for stock grants of
1,000,000 and 1,250,000 shares respectively.

With executive management in place, we next developed a strategic plan to
achieve our short term goal of securing financing and our longer term goals of
growth and stability. Where prior management saw partnering and licensing
arrangements as the way to success, new management's view was that growth would
occur with proven success. Management has emphasized demonstrating that our
current products are viable, and management believes the shortest path to that
goal is through concentrating our initial sales efforts on the consumer and
forensic markets. While we expect pharmacogenomics products to outperform other
market products in the long run, their introduction to market has a longer time
horizon and requires larger investments of time, personnel and capital before
they produce revenue and generate cash flow.

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Management sought investment bankers to represent us in our search for
financing. In April 2003, we engaged an investment banking firm to assist us in
our efforts to raise debt and/or equity capital. In December 2003, we
successfully agreed to place $8,000,000 of our securities over approximately a
20-month period. Prior to completing this transaction, we had received funds
from earlier private offerings. Together, these transactions gave us the
critically required capital to fund our ongoing operations until our new
financing was in place. In addition to the previously raised capital, management
sought additional capital to fund expansion and acquisitions. Along with our
investment bankers, we secured a commitment from Dutchess Private Equity
Partners, LLC for the sum of $35 Million over a 24-month period. We also
negotiated to acquire a stake in Biofrontera, a privately held German
Biotechnology company. Mr. Richard Gabriel and Ms. Monica Tamborini are common,
non-voting shareholders of less than 1% combined ownership in Biofrontera AG.
Mr. Gabriel was made aware of the opportunity to invest in Biofrontera AG and
presented it to our Board of Directors and was given instructions to proceed
with the investment opportunity.

Effective September 28, 2004, we agreed to acquire a majority interest in
Biofrontera AG over a 24-month period for a purchase price of 20 million Euros.
Prior to the closing of the transaction, however, we concluded that proceeding
with the proposed acquisition was not in our best interest. Therefore, we
terminated the Biofrontera agreement on February 18, 2005.

On July 8, 2005, we entered into an agreement to purchase, and simultaneously
closed upon the purchase of, an equity interest in Biofrontera. We purchased the
interest in Biofrontera from Technologie-Beteiligungs-Gesellschaft mbH, an
instrumentality of the German government. The securities purchased were shares
of Biofrontera's series A Preferred Stock, as well as certain debt instruments.
On August 8, 2005, we converted the securities purchased into Biofrontera's
common stock. We paid approximately 1.8 million Euros ($2.1 million) for our
interest in Biofrontera. On September 19, 2005, we paid an additional
98,245 Euros ($121,000) for an additional 98,145 shares of Biofrontera
common stock increasing our ownership of Biofrontera to approximately 18%. In
connection with the transaction, two of the members of our Board of Directors,
Richard Gabriel and Hector Gomez, were retained on the Biofrontera board. In
addition, to induce the shareholders of Biofrontera to consent to our investment
in Biofrontera, we entered into a put agreement with another Biofrontera
shareholder, Heidelberg Innovation. Pursuant to this agreement, if by December
31, 2005 Biofrontera had not completed an offering of debt securities for at
least 10 million Euro, Heidelberg Innovation could have required us to purchase
its ownership interest in Biofrontera of approximately 49% for 1.6 million Euro
(approximately $1.96 million). During September 2005, Biofrontera completed its
debt securities offering. Therefore, our put obligation to Heidelberg Innovation
was terminated. At that time, the board seat previously held by Hector Gomez was
filled by a representative of the debt securities group. In March 2006,
Biofrontera announced that it intends to undertake a public offering of equity
securities during 2006-2007.

We acquired Trace Genetics late in the second quarter of 2005. Trace Genetics
brought two new complementary technologies to our autosomal testing for
determining the percentage of a person's ancestry: Y-chromosome testing for
tracing ancestry by following the direct paternal line and mitochondrial
(mtDNA ) testing for the direct maternal line. Trace also maintains one of
the largest Native American mtDNA databanks in North America. Other similarly
large databases are controlled by groups such as the Sorensen
foundation, various Native American foundations and tribes, and some
Universities.

On October 12, 2005, we formed DNAPrint Pharmaceuticals, Inc., a wholly-owned
pharmaceutical subsidiary focused on personalized medicine.

On October 25, 2005, we acquired all of the stock of Kenna Technologies, Inc.
Kenna develops software and related technologies for building
computational models that mimic complex biological systems. We expect that
Kenna's computational models will become key components for our development of
more effective therapies and diagnostic products. In acquiring Kenna, we also
gain access to Kenna's BoneFusion and CellCycleFusion models, which simulate
bone remodeling processes and molecular pathways. These pathways are common
targets of current cancer therapies. We exchanged 1,500,000 shares of our common
stock for all the outstanding shares of Kenna. In addition, we hired certain key
employees of Kenna, including Drs. Barbara Handelin and Tandy Herren, who will
support the clinical development of our pharmacogenomics products with
simulations to help design optimal clinical trials.

On November 30, 2005, we acquired certain assets used in the drug and diagnostic
discovery business of Toronto-based Ellipsis Biotherapeutics Corporation. We
formed a wholly-owned Canadian company, also named Ellipsis Biotherapeutics
Corporation to operate these assets. Ellipsis performed contract SNP
genotyping for academic centers, hospitals, human health care corporations and
biotech companies. Its diverse services include human, plant and animal
analyses.

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The acquired assets consist of Ellipsis' operating assets, including genotyping
equipment, automated sample preparation devices, DNA preparation, measurement
and amplification technologies, laboratory equipment, computers and office
supplies related to these activities, the corporate premises, name and logo and
certain intellectual property and committed contracts. We anticipate that the
Ellipsis assets will assist with clinical genomics and genotyping. In
consideration for the Ellipsis assets, we issued 6,500,000 shares of our common
stock and assumed certain liabilities in the approximate amount of $600,000.
Dr. Laurence Rubin has agreed to continue managing the operations in Toronto.

RESEARCH AND DEVELOPMENT

The primary objective of our near term research and development efforts in
pharmacogenomics will be to expand our library of predictive drug response tests
to include multiple therapeutic areas including commonly used FDA approved drug
therapies. Although our products are diverse and address different market areas
and needs, the base technology is the same. Research in one area often provides
benefit to our other products.

In 2004, we conducted research for enhancements to DNAWitness . The research
included much needed sample collection for our eye and hair color studies. As a
result of our past research, in early June of 2004, we introduced a new tool to
our forensic customers. We compiled a volunteer photo database that we can use
to help investigators visualize the DNA donor. This new tool augments the
effectiveness of our product, DNAWitness . During the third quarter of 2004, we
completed work on our eye color service, RETINOME , and EURO-DNA , a service
that allows customers to determine their Northern European, Mediterranean,
Middle Eastern and Indo European ancestry and introduced them to the market.

We continue our research work on STATINOMETM and ace inhibitor projects. We
also, in conjunction with researchers at the Moffitt Cancer Center, continue
work on OVANOMETM and other identified cancer projects. We continue to evaluate
and analyze our preliminary results and to extend those results to other
patients' samples for Taxol, Statins, and Ace inhibitor work.
Our work in forensics is continuing to expand the physical descriptors that can
be derived from crime scene DNA samples. Our research also continued in hair
color, skin shade, and we carried on work to improve our recently introduced eye
color predictor model. Additionally, we continue to collect volunteer photo
database samples and will incorporate those new samples into our forensic photo
database array in the near future.

During 2005, we began our work on EPO with Beth Israel Deaconess Medical Center
and Dr. Arthur Sytkowski a director at Beth Israel. EPO is a glycoprotein
naturally made by the body to stimulate red blood cell production; the currently
marketed forms are manufactured using recombinant DNA technology and are used to
treat anemia or low blood cell count.

Also during 2005, we entered into an agreement with Dr. Mark Froimowitz to
develop a series of methylphenidate analogs or Ritalin-like compounds targeting
the clinical development of enhanced pharmaceuticals for the treatment of drug
addiction, attention deficit hyperactivity disorder and depression.

STRATEGIC ALLIANCES

Moffitt Cancer Center
-----------------------

During 2006, our OVANOME technology is under development with researchers at
the Moffitt Cancer Center in Tampa, Florida, and we are in the midst of
completing an initial 80 person trial under an approved Internal Review Board,
or IRB, which approves all clinical trial related work at the center. We are
also enrolling an additional 200 subjects to further validate and support the
data we obtained in our earlier trial.

Beth Israel Deaconess Medical Center License Agreement
------------------------------------------------------------

Effective April 4, 2005, we entered into a license agreement with Beth Israel
Deaconess Medical Center, a Massachusetts nonprofit corporation, to develop a
new, more potent and longer acting form of the anemia drug
Erythropoietin, or EPO.

EPO is a glycoprotein naturally made by the body to stimulate red blood cell
production. The currently marketed forms are manufactured using recombinant DNA
technology and are used to treat anemia or low blood cell count. Under the
agreement, Beth Israel has granted us an exclusive license to United States and
foreign patents related to certain forms of EPO. We have the right to develop,
use, market and sell products derived from the licensed patents.

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In exchange for the license, we paid Beth Israel a $25,000 signing fee and
agreed to make certain milestone payments linked to their progress in developing
marketable products from the licensed technology. The total of payments, if all
milestones are reached, is $2,150,000. The milestone payments are nonrefundable.
Up to $200,000 of this amount is creditable against future royalties. In
addition to the milestone payments, we must also pay Beth Israel an annual
royalty of 4% of the net sales of all products developed from the licensed
technology. A minimum royalty payment of $100,000 a year is due upon the
commencement of commercial sales in any territory worldwide.

Consulting Agreement with Dr. Arthur Sytkowski
---------------------------------------------------

On June 7, 2005, we entered into a consulting agreement with Dr. Arthur
Sytkowski, the Director of Beth Israel, to consult on the development of a new,
more potent and longer acting form of EPO. On September 1, 2005, we entered into
a new consulting agreement amending and restating the existing consulting
agreement. Under the amended consulting agreement, Dr. Sytkowski has agreed to
perform certain consulting services, including advising on medical, regulatory
and patent issues, training personnel and providing assistance with EPO
research and development. In exchange for the services, we will pay Dr.
Sytkowski $10,000 a month for twelve months, five annual incentive payments of
$25,000 each, and certain milestone payments linked to our progress under the
Beth Israel license in developing marketable products from the licensed
EPO technology. The total of all payments to Dr. Sytkowski under the
agreement, assuming all milestones are reached, is $370,000. The milestone
payments will be reduced - dollar for dollar - to the extent Dr. Sytkowski
receives payments from Beth Israel relating to the same milestone events under
the Beth Israel license.

Collaborative Research Agreement with Beth Israel
------------------------------------------------------

During late June 2005, we entered into a collaborative research agreement with
Beth Israel to provide three researchers to us to conduct certain research work
related to our EPO research. On August 15, 2005, this agreement was amended. The
total cost per the amended agreement is $352,192. We paid $176,096 during 2005
and the remaining $176,096 is due in 2006.

Consultant Agreement with Member of Our Scientific Advisory Board
-------------------------------------------------------------------------

During May 2005, we entered into a one-year agreement with our Scientific
Advisory Board member, to continue collaboration with us to develop commercial
tests for genetic ancestry and particular physical phenotypes. We have agreed to
compensate this consultant with quarterly payments of $4,000 and 2,500 shares of
our common stock. The term of this agreement is one year with automatic renewals
each year unless either party provides written notice of its intent not to renew
within thirty days prior to the annual anniversaries of this agreement. During
May 2005, we also entered into a license agreement with this consultant. This
license will remain in force in perpetuity as long as we are not in default of
the agreement. We agreed to provide the consultant with a number of shares of
our common stock equal to 2.5% of the net revenues derived from a product and
any subsequent versions of the products developed with his help.

License Agreement with Dr. Mark Froimowitz
-----------------------------------------------

On October 25, 2005, we entered into an exclusive licensing agreement with Dr.
Mark Froimowitz to develop a series of compounds targeting the clinical
development of enhanced pharmaceuticals for the treatment of drug
addiction, attention deficit hyperactivity disorder, or ADHD, and
depression. The licensed compounds are analogs of Ritalin, a well-known drug
used for treatment of ADHD. The analogs are designed specifically to have a
slow onset and increased half-life in the bloodstream, thus reducing a patient's
required daily dosage and the potential for drug abuse. We have the exclusive
right to develop, use, market and sell products derived from the licensed
compounds. We are obligated to pay the licensor a two percent quarterly royalty
fee on the net sales of products covered by the license. Minimum annual
maintenance fees of $25,000 are required for the license term, but will be
deducted from royalties. Additionally, the license requires progress
payments of up to $275,000 upon the successful development and approval of
licensed products. The license's initial five year term is supplemented by
options capable of extending the license term for up to twenty years.

License Agreement with Harvard Medical School
--------------------------------------------------

On January 24, 2006, we entered into an exclusive license agreement with Harvard
College through the Laboratory for Translational Research at Harvard Medical
School. The Harvard License provides for sponsored research and the clinical
development and commercialization of a diagnostic test targeting early
identification of the population at risk of developing vascular diabetic
complications. The research will be conducted under the supervision of Dr. Jose
Halperin. The sponsored research payments total approximately $2.5 million and
will be paid in quarterly installments of approximately $208,333 over
approximately three years.

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Under the Harvard License, we have the exclusive right to develop, market and
sell products and services derived from the research. We must pay the Licensor a
six percent royalty on the net sales of products and services covered by the
License and thirty percent of all non-royalty sublicense income. We are also
required to pay escalating minimum annual license maintenance fees totaling
$850,000 through January 1, 2012. We are obligated to make annual license
maintenance fees of $250,000 through the Harvard License term, but, beginning
January 1, 2013, the annual license fee of $250,000 is credited against royalty
payments. Additionally, we paid the Licensor previously incurred patent costs of
approximately $100,000 upon the execution of the License, and are responsible
for paying the costs associated with patent application, maintenance and
prosecution during the License term.

Research Sponsorship Agreement with Massachusetts College of Pharmacy and Health
--------------------------------------------------------------------------------
Sciences
--------

In January 2006, we entered into a research sponsorship agreement with the
Massachusetts College of Pharmacy and Health Sciences, under which Dr. Mark
Froimowitz will lead a research project that relates to the compounds that we
license from him. The area of research is the synthesis and testing of
monoamine transporter inhibitors as possible human medications for drug abuse,
for attention deficit hyperactivity disorder, and for depression. The specific
research covered by this agreement is the synthesis of quantities of compounds
sufficient for animal testing, including developing methods for the resolution
or chiral synthesis of compounds. We will pay a total of $300,000 to
Massachusetts College of Pharmacy and Health Sciences for this research work
which will be paid in monthly installments of $25,000 over one year. We will
acquire all intellectual property associated with the research results.

THE PHARMACOGENOMICS MARKET

A 1998 study of hospitalized patients published in the Journal of the American
Medical Association reported that in 1994, adverse drug reactions accounted for
more than 2.2 million serious cases and over 100,000 deaths, making adverse drug
reactions (ADRs) one of the leading causes of hospitalization and death in the
United States. As noted by Ross and Ginsburg in the American Journal of
Clinical Pathology, "As many as 20% to 40% of people receiving pharmaceutical
agents may be receiving the wrong drug."

Currently, there is no simple way to determine whether people will respond well,
badly, or not at all to a medication; therefore, pharmaceutical companies are
limited to developing drugs using a "one size fits all" system. This system
allows for the development of drugs to which the "average" patient will respond.
However, as the statistics above show, one size does not fit all, sometimes with
devastating results. As discussed at the March 11, 2006 American Society for
Clinical Pharmacology and Therapeutics Conference by Janet Woodcock, M.D. Deputy
Director of the FDA, the American medical system cannot afford to continue to
ignore the obvious variability in how individuals respond to most drugs. There
is increasing obligation for the pharmaceutical industry - and the regulatory
oversight agencies - to use all available knowledge and technologies to
accelerate the development of drugs that can be prescribed with better
understanding of which patients can safely take which medicines that also will
be effective treatment from them. Dr. Woodcock also said:

"At the FDA, we currently see only a trickle of applications containing
pharmacogenomic information, but we expect this trickle to become a flood over
the next five years. And this is only good news for patients and their families.
For the first time, physicians will have a chance to treat people as
individuals, not as members of a "population." We will also be able to treat
patients based on the actual biology of the disease--not just according to their
symptoms. People often have similar symptoms, but actually have very different
underlying diseases that need different treatments. The pharmacogenomics
revolution gives us a chance to sort this out and to treat people with the kind
of therapy that's appropriate for them, personally. This gives all of us the
chance to fulfill the promise of all the discovery and all the investment in
biological science that's been going on during the last 30 years. And it will
really help and enhance the health of all Americans."

Testing individuals to predict their genetic pre-disposition to drug response is
known as pharmacogenomics. The term comes from the words pharmacology and
genomics and is thus the intersection of pharmaceuticals and genetics.
Pharmacogenomics enables physicians to tailor drug therapies (formulation and
dosage) for individuals based on their genetic composition. By using predictive
response genetic testing, rates of therapeutic success (known as treatment
efficacy) are increased, and ADRs are decreased. Pharmacogenomics combines
traditional pharmaceutical sciences such as biochemistry with annotated
knowledge of genes, proteins and single nucleotide polymorphisms known as SNPs.
According to Human Genome Project Information, Pharmacogenomics
(www.ornl.gov/sci/techresources.Human_Genome/medicine/pharma.shtml),
-------------------------------------------------
Pharmacogenomics is anticipated to provide the following benefits:

1. More powerful medicines that are targeted to specific diseases. This
will maximize therapeutic effects and decrease damage to nearby healthy
cells.

2. Better, safer drugs the first time by analyzing a patient's genetic
code or important segments of the patient's code versus trial and error
prescribing based on reviewing the impact of a drug after a patient takes
it.

3. More accurate methods of determining appropriate drug doses not based
only on a patient's weight or body mass but also based on the patient's
metabolism. This will maximize the therapy's value and minimize the chance
for overdose.

4. Improvements in the drug discovery and approval process because trials
are targeted for specific genetic population groups providing a higher
chance of success. This can reduce costs of trials and risk of poor side
effects. Previously failed drug candidates might be revived if they can be
matched appropriately with a specific population.

5. Decreases in overall cost of health care because of reduced ADRs,
reduced failed drug trials, shortened FDA drug approval timeframes, limited
treatment duration because the drug is more effective, linked to early
detection and resulting in better preventative care.

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The major barrier to pharmacogenomics progress is complexity of the research
efforts that are still in early stages of finding gene variations that affect
drug response. Millions of SNPs must be potentially identified and analyzed to
see if they affect drug responsiveness. Additionally, many genes work in
combination and thus, understanding the impact of combinations of SNPs will be
critical. Unfortunately, this effort is also time consuming and expensive.

In November 2003, the FDA issued "Guidance for Industry Pharmacogenomic Data
Submissions." We believe that, in this guidance, the FDA offers support for
pharmaceutical companies developing drugs using genetic testing and genomic
research for drug approvals. Under the guidelines, if a genetic test is new or
is not widely accepted, then its use is `voluntary' to the drug's submission. If
a test is `validated and accepted' then the guidelines suggest its inclusion in
the submission. In both cases, our products and services can provide a valuable
tool for drug development. We can help identify patients who might not respond
favorably to a new medication, either by failure to gain the intended treatment
objective or by expression of an adverse reaction, and thus eliminate those
patients from the treatment or clinical trial. This testing could improve the
drug's efficacy statistics because there may be fewer non-responders in the
trial and reduce its toxicity profile because there would be fewer individuals
who have an adverse drug reaction. This testing may increase the likelihood
that the drug meets FDA requirements and gains market approval.

Our Pharmacogenomics Products

At the annual shareholder meeting in June 2005, Dr Hector J. Gomez, the Chairman
of our Board of Directors, announced that we will focus on leveraging our
expertise in DNA technology into the development of particular test/drug
combinations, called theranostics. Theranostics is defined as the
clinically-targeted integration of diagnostics and therapeutics according to
Current Drug discovery September 2002. We believe theranostics adds value to
the clinical trial process, improves the real-time treatment of disease, and
makes treatment more cost-effective.

In October 2005, we created a new subsidiary, DNAPrint Pharmaceuticals, to focus
on delivering diagnostic and theranostic products to the market in support of
pharmacogenomic opportunities. We are developing several Theranostics
Projects. The following table contains certain information on the status for
our diagnostic products that are in development as of February 28, 2006:

[Download Table]

THERANOSTICS INDICATION DEVELOPMENT STAGE
PT-401 . . . Anemia - Renal Failure Preclinical
PT-501 . . . ADHD Preclinical
PT-502 . . . Drug Addiction Preclinical
PT-503 . . . Depression Preclinical

PT-401 Anemia - Renal Failure: As announced on March 14, 2006, tests of our
Super EPO dimer in animal models of anemia showed that it was several times more
effective and longer acting than the currently available erythropoietin. In
vitro testing in cell cultures revealed significant positive biological
activity. In addition, in vivo testing in mice demonstrated robust stimulation
of red blood cell production. Further analytical testing showed unique
biochemical properties that distinguish it from currently marketed red blood
cell growth stimulating drugs.

PT-501 ADHD, PT-502 Drug Addiction, PT-501 Depression: In January 2006, we
entered into a Research Sponsorship Agreement with the Massachusetts College of
Pharmacy and Health Sciences for the potential development of compounds as
possible medications for drug abuse, attention deficit hyperactivity disorder
and depression.

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Our Diagnostic Projects

We currently have several diagnostic projects under development. The status as
of February 2006 is as follows:

[Download Table]

DIAGNOSTICS . INDICATION DEVELOPMENT STAGE

OVANOME . . . Ovarian Cancer Diagnostic Ph II
STATINOME . . Safety of Statins Diagnostic Ph II
DIABETES-CD59
Diabetic Complications Preclinical

Ovanome: During 2005, we began a study with Genomics Collaborative Division of
Seracare Life Sciences Inc. Samples have been received from them and used to
conduct a validation of the test. This has advanced the development and improved
the quality of the diagnostic test.

Statinome: During 2005, we began a study with Genomics Collaborative Division of
Seracare Life Sciences Inc. that also included the statinome program. Samples
have been received from them and used to conduct a validation of the test. An
abstract was presented at the last meeting of the American Society of Clinical
Pharmacology and Therapeutics (March, 10, 2006 in Baltimore). Also, a paper has
been prepared and submitted for publication.

Diabetes C59: On January 24, 2006, we entered into an exclusive license
agreement with Harvard College through the Laboratory for Translational Research
at Harvard Medical School. The Harvard License provides for sponsored research
and the clinical development and commercialization of a diagnostic test
targeting early identification of the population at risk of developing vascular
diabetic complications. The research will be conducted under the supervision of
Dr. Jose Halperin.

Our Growth Strategies in the Pharmacogenomic Market

By leveraging our proprietary technologies, we believe we are positioned to
serve the growing compliance and operational needs of pharmaceutical companies
and institutional researchers. We will continue to seek product and market
relationships that expand and enhance our ability to apply our technology to
existing medications or new medications, improving drug efficacy and reducing
patient side effects by better understanding the genetic makeup of individuals.
We believe the future of drug development and drug approval as outlined by
recent FDA writings will force the industry to recognize smaller market
opportunities with higher efficacy profiles and significantly reduced or
diminished side effects.

We will continue work on OVANOME(TM), a Taxol screening diagnostic test, and
STATINOME(TM), a test for the cardiac drug market, which are both currently
under development. Our OVANOME technology is under development with researchers
at the Moffitt Cancer Center in Tampa, Florida, and we are in the midst of
completing an initial 80 person trial under an approved Internal Review Board,
or IRB, which approves all clinical trial related work at the center. We are
also enrolling an additional 200 subjects to further validate and support the
data we obtained in our earlier trial. We will continue to explore joint venture
opportunities, particularly within the pharmacogenomic segment, in order to
potentially expand our position within the pharmaceutical market. A major goal
of our joint venture program is to seek opportunities for a drug pipeline
acquisition. Our recent licensing of a 'Super' Erythropoietin (EPO) molecule
from Beth Israel Deaconess Hospital is a step forward in that direction. We plan
to combine our ability to screen patients and track patient response to the
standard form of EPO when compared to our newer, 'Super EPO'. We believe this
will improve our clinical efficacy and reduce the unwanted side-effects of
standard EPO treatment for anemia.

THE FORENSICS MARKET

Testing DNA from a crime scene to create a physical profile is a new market
based on evolving technologies. Common hereditary traits such as skin
pigmentation, eye color, hair color, earlobe attachment and height can
theoretically be predicted through analysis of DNA sequences. We believe that we
are the first to use DNA gathered as evidence from a crime scene to successfully
predict the donor's continental genetic origin and linking that to our
photo-database gallery, providing law enforcement officers with a general
description of the donor.

There are approximately 1,200,000 reported incidents of violent crime (rape,
robbery, and aggravated assault) in the U.S. each year. In the vast majority of
violent crimes, DNA evidence is left at a crime scene or on a victim's body. Of
these 1.2 million reported incidents, only about 600,000 cases result in
arrests. Forensic DNA tests can enable a greater degree of success in
prosecuting violent criminals.

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Our Products for the Forensics Market

We created DNAWitness 2.5 for the forensics market. Law enforcement officers
use this testing service to determine genetic heritage from DNA samples obtained
from crime scenes, saving time and money by narrowing the list of potential
suspects. Current forensic DNA products in the market act like a fingerprint and
can only be used to match DNA specimens. To our knowledge, DNAWitness is the
first forensic product that provides predictive capability. DNAWitness provides
the percentage of genetic make up amongst the four possible groups of
Sub-Saharan African, Native American, East Asian, and European. When
appropriate, DNAWitness allows for a breakdown of the European ancestry into
four components: Northwestern European, Southeastern European, Middle Eastern
and South Asian. The results of these tests can be very useful for inferring
certain elements of physical appearance.

In 2005, DNAWitness was used in approximately 100 cases. The Louisiana Serial
Killer Case was one case where the use of DNA Witness was considered a major
contributor to identifying the killer who has since been convicted and
sentenced. This case was featured at an educational workshop for law enforcement
at the American Academy of Forensic Scientists in February 2006. Additionally,
DNAWitness received national attention when police made an arrest in a case
involving the double murder of two women in Napa, California, after narrowing
down a list of potential suspects. The test eliminated an entire group of
individuals who worked and lived in the Napa Valley area as potential suspects.
Initial DNAWitness 2.5 customers include medical examiner's offices, special
task forces, sheriffs' departments, and district attorney's offices from various
cities. Initial response from preliminary application of this forensics version
to various high profile criminal cases has been promising.

During July 2005, we expanded our DNAWitnessTM product suite which now includes:

DNAWitness 2.5 -- Tests crime scene DNA to assist detectives, forensic
scientists and medical examiners in corroborating eyewitness reports and
confirming suspect identities. DNAWitness 2.5 provides a BioGeographical
Ancestry report that includes a photo database for reference samples of
individuals. Reported ancestral origins are Sub-Saharan African, Native
American, East Asian and Indo-European.

EUROWitnessTM 1.0 -- Tests crime scene DNA to determine more specific geographic
origins if the test sample ancestry is 50% or more Indo-European. EUROWitness
1.0 provides a BioGeographical Ancestry report that includes relative
percentages of Northwest European, Southeast European, Middle Eastern or South
Asian.

RetinomeTM -- A predictive test for individual eye color from DNA. RETINOME
predicts eye color if the sample is 50% or greater European ancestry as to
whether eye color is blue, mostly blue, brown or mostly brown. A representative
eye photo database is also provided along with relevant photo database pictures
of the individual references.

STR-WitnessTM -- A genetic "matching" used as a bar code to track and report the
samples. STR-Witness is the same test used for determining an individual's
identity from an available DNA sample. Crime labs run this test to screen the
Federal Bureau of Investigation's Combined DNA Index System (CODIS) database for
possible matches.

DNAWitness-YTM -- A Y-chromosome test that determines the direct paternal
ancestral lineage from the male sex chromosome. DNAWitness-Y can be used as an
identification tool in cases where a mixture of male and female samples exists.

DNAWitness-MitoTM -- A mitochondrial DNA test that examines ancestral lineages
along the maternal line. DNAWitness-Mito can be used as an identification tool
when other DNA testing fails to yield results or the DNA sample is too
deteriorated.

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Growth Strategy in Forensics

We are investigating avenues to encourage federal, state and local governments,
crime laboratories and law enforcement agencies to use DNAWitness to help solve
cold cases, current serial killer cases and other violent crimes. By using
DNAWitness on a routine basis, witness information can be corroborated, and
where no witness is present, DNAWitness can provide a "fuzzy sketch" of the
persons who left evidence at a crime scene, possibly reducing the cost and delay
inherent to unguided investigation of a large pool of potential suspects

Our 2006 and 2007 plans include seeking American Society of Crime Laboratory
Directors or "ASCLD" accreditation of our laboratory for forensics work tied to
court testimony. Once accredited, either through acquisition of another forensic
operation or development of our own operation, we will also be able to offer
conventional DNA testing to our clients. Accreditation would allow us to capture
a greater portion of this market and to offer a full range of services to our
clients. We continue to go to trade shows to increase the awareness of our
products with the law enforcement community.

THE CONSUMER PRODUCTS MARKET

The consumer genealogy market is fueled by a natural desire to understand our
family lineage and our genetic heritage. The total world market is currently
estimated at $75 million and is expected to grow 5% annually. There is also a
market for paternity and other tests related to family lineage. We serve both of
these consumer markets through direct sales and independent distributors.

Our Products for the Consumer Product Market

We were one of the first companies to offer DNA tests that predict genetic
heritage for this market. Additionally, to the best of our knowledge, we offer
the only pan-chromosomal assay for genetic ancestry which provides information
on a person's maternal and paternal lineages.

Our genealogy product, ANCESTRYbyDNA 2.5, provides an inference of an
individual's genetic ancestry or heritage. ANCESTRYbyDNA 2.5 carefully selects
and analyzes certain genetic markers from the human genome which are more
prevalent in people from one continent versus another. Using complex
statistical algorithms, ANCESTRYbyDNA 2.5 can determine which of the major
bio-geographical ancestry groups, Sub-Saharan African, European, East Asian or
Native American, a person belongs. The genetic test can also determine the
relative percentages of these ancestry groups which are present in cases of
people of mixed background. We market this product to individuals or groups
interested in understanding their lineage or learning more about their genetic
ancestry.

We introduced EURO-DNA 1.0 in the marketplace in late 2004. The EURO-DNA 1.0
product measures European sub-ancestry. "European" ancestry, as determined by
ANCESTRYbyDNA 2.5, refers to a type of ancestry shared by people who derived
from the Middle East some 50,000 years ago and spread to occupy Europe, the
Middle East, parts of Eurasia and South Asia. EURO-DNA 1.0 breaks the European
ancestry into 4 groups, reporting individuals' ancestral percentages for each of
the following: Northwestern European, Southeastern European, Middle Eastern and
South Asian.

In June 2005, we acquired Trace Genetics, an identity genomics company located
in Richmond California. The company had three ancestry tests that were added to
our family of tests. They include:

1. "Ancestry Mito" mtDNA Test which traces the origin of the customer's
direct maternal line (mother's mother's mother). There are 30 major
maternal lineages (haplogroups) that have been identified worldwide.

2. Native American mtDNA test which tests the customer's mtDNA sequence
against the Native American mtDNA database to see if we can make any tribal
matches when the customer is one of 5 haplogroups that are Native American
in origin.

3. "Ancestry-Y" SNP which traces the origin of the customer's direct
paternal line (father's father's father). There are 18 major paternal
lineages (haplogroups) that have been identified worldwide. Two of the 18
haplogroups are found in Native American populations (Q, C). This test
includes these two haplogroups.

Growth Strategy in Consumer Products

We currently have seven distributors that sell our consumer products. We use
our distributors as well as Internet and paper-based publication advertising
(i.e. through Google and Family Tree magazine) to grow sales of our consumer
products. Our consumer sales volumes seem to increase when we are featured in
articles and television spots. We have been featured in multiple local and
national publications and television programs. We will continue to strive to get
the article and television spot coverage as well as pursue other avenues of
marketing. Our consistent sales come through our distributors. We will also
continue to pursue adding distributors to increase our sales volume of our
consumer products.

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THE CONTRACT SERVICE OUTSOURCING MARKET

Contract genotyping is the process of reading a genetic sequence and identifying
differences in the sequence letters. This information helps researchers
understand how human differences are expressed at the gene level. We provide
universities and drug discovery companies the ability to outsource some or all
of their research needs for genotyping. The pharmaceutical and drug discovery
segments of the outsourcing market continue to grow.

Our Genotyping Services

We provide services that range from sequencing and genotyping to the entire
process of SNP discovery to large industrial customers. Contract genotyping is
the process of reading a genetic sequence and identifying differences in the
sequence letters. For example, in comparing diseased tissue with normal tissue,
we are able to see the differences in the sequence letters. This information
helps researchers understand how human differences are expressed at the gene
level. They can then search for and develop preventative treatment and effective
therapeutic courses to alleviate disease symptoms.

A critical factor to the success of research and development of pharmacogenomics
assays is the ability to do high through-put genotyping. To this end, we
acquired certain assets from a Canadian company and formed our subsidiary
Ellipsis. Ellipsis has a Beckman-Coulter SNPstream that is capable of using a
new 48-plex system, which allows for greater capacity of SNP testing at less
cost. We currently have a total of three SNPstream machines enabling us to offer
testing services that can validate markers at high volumes, which is especially
useful in the later stages of drug and diagnostics development during large
clinical trials.

Ellipsis also has an Illumina Beadstation 500G system, which also runs very high
capacity analysis. The Illumina system is 50 to 100 times higher capacity but is
not as efficient from an expense perspective at lower numbers of SNPs making the
Illumina a more ideal research tool in screening whole genomes across hundreds
of thousands of SNPs.

These platforms enable us to do a variety of testing of DNA samples for
pharmacogenomic efforts as well as generating revenue from projects for academic
and business organizations. Ellipsis has extensive experience working with DNA
samples from a variety of sources and projects, including agricultural to human
disease applications.

In October 2005, we acquired Kenna Technologies. Kenna develops software and
related technologies for building computational models that mimic complex
biological systems. By acquiring Kenna, we also gained access to Kenna's
BoneFusion and CellCycleFusion models, which simulate bone remodeling processes
and molecular pathways. These pathways are common targets of current cancer
therapies. Utilizing these models may lead to shorter drug development timelines
and thus reduced costs as they help in the design of optimal clinical trials.
Computational models, developed with our proprietary methods test multiple
complex scenarios of dosing, patient factors, disease progression over time,
genetic variation in drug response and can provide insight into the potential
outcomes of long term treatments which are too costly to test in human studies.
We are currently using these models with respect to the PT-401 Super EPO project
and will use these and other models in our research and development of our
products. We also hired certain key employees of Kenna, including Drs. Barbara
Handelin and Tandy Herrin, who will support the clinical development of our
PT-401 with simulations to help design optimal clinical trials.

Growth Strategy for Contract Genotyping

We continue to pursue customers within the contract genotyping market. To date,
our customers have come to us either through client referrals or our general
website. In the future, we plan to concentrate our genotyping services on
specific diseases, including cancer, neurological disorders, and heart disease.
By concentrating on specific diseases, we hope to develop an expertise that will
attract customers in those areas requiring external assistance and additional
research capacity. Through this strategy, we will continue to build our
reputation as a reliable and cost effective supplier of high quality data.

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INTELLECTUAL PROPERTY

Trademarks

We regard our trademarks, copyrights, domain names, trade dress, trade
secrets, proprietary technologies, and similar intellectual property as
important to our success, and we rely on trademark, and copyright law,
trade-secret protection, and confidentiality and/or license agreements with our
employees, customers, partners, and others to protect our proprietary
rights. We have licensed in the past, and expect that we may license in the
future, certain of proprietary rights, technologies or copyrighted materials,
from third parties and we rely on those third parties to defend their
proprietary rights, copyrights and technologies.

We claim common law trademark rights to the marks DNAPrint, DNAWitness, EURO-DNA
and ANCESTRYbyDNA.

Patent Applications

We have filed claims for international and domestic patent protection. The
patents, if issued, will help ensure protection of our bioinformatics platforms,
analytical software, genome maps and genetic classifiers in forensic, consumer
products, and pharmacogenomics applications. The most significant patent
applications cover the bioinformatics platforms and genome maps. Other
applications describe the mathematical process of finding complex genetic
information and the actual processes that find the gene variants responsible for
specific complex genetic traits.

Four of our patent applications, 'CompositionsPigmentation', Single Patients,
Markers .Ancestry and 'CompositionsStatin', have entered National Phases and
are pending review and we believe, approval in the U.S. and designated
countries. The pigmentation patent is important because it includes the methods
and compositions for determining skin shade, eye color or any other pigmentation
application. Our Statin patent application includes the use of method for
determining a person's ability to respond favorably to a particular statin drug,
not the class as a whole. We may also obtain data to support our claim for all
statins and the use of our AIMs in the development of the assay.

As discoveries warrant, we will continue to apply for future additional patents.
Listed below are our current patent pending applications.

Pending Patent Applications

[Enlarge/Download Table]

Efficient Methods and Apparatus for High-Throughput Processing of Gene Sequence Data . US2003/0171875A1

Methods for the Identification of Genetic. . . . . . . . . . . . . . . . . . . . . . . US2003/0171878A1
Features for Complex Genetics Classifiers. . . . . . . . . . . . . . . . . . . . . WO 03/048318

Methods and Apparatus for use in Genetics Classification Including Classification Tree WO 03/048999
Analysis

Methods and Apparatus for use in Complex Genetics Classification . . . . . . . . . . . WO 03/048372
Based on Correspondence Analysis and Linear-Quadratic Analysis

Composition and Methods for the Inference. . . . . . . . . . . . . . . . . . . . . . . US10/156,995
Of Pigmentation Traits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US60/346,303
PCT/US02/16789
AU2002/312112
CA2,448,569
EP02739467.5
hk04109585.8
JP2003/500216

Compositions and Methods for Inferring . . . . . . . . . . . . . . . . . . . . . . . . US10/188,359
A Response to a Statin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PCT/US02/20847
AU2002/316485
CA2,486,789
EP02746794.3
JP2003/509083

Single Nucleotide Polymorphisms and Combinations Thereof Predictive of . . . . . . . . PCT/US02/38345
Paclitaxel Responsiveness in Cancer Patients . . . . . . . . . . . . . . . . . . . AU2002360452
CA2,468,312
EP02795709.1
HK05102575.4
JP2003-546736
US60/334,310
US60/410,363
US10/496,605

Compositions and Methods for Inferring Ancestry . . . . . . . . . . . . . . . . . . . US10/644,594
PCT/US03/26229
US11/356,729
US60/654,672

Methylphenidate Analogs and Methods of Use Thereof . . . . . . . . . . . . . . . . . . US11/256063
PCT/US2005/038030

Methods, Products and Treatments for Diabetes. . . . . . . . . . . . . . . . . . . . . US09/835752 (Granted)
US10/833,581
US10/870,342

Anti-Glycated CD59 Antibodies and Uses Thereof . . . . . . . . . . . . . . . . . . . . US2004/019392

Multiplex Assays for Inferring Ancestry. . . . . . . . . . . . . . . . . . . . . . . . 331832-000045/WO

Compositions and Methods for Inferring an Adverse Effect in Response to a Drug . . . . US05/41326

Markers and Methods for Accurate Estimates of Human Ancestry . . . . . . . . . . . . . AU2003265572
CA2,496,155
EP03788685.0
JP2005-502072
US60/404,357
US60/467,613
US10/644,594
US03/26229

Methods and Compositions for Inferring Eye Color . . . . . . . . . . . . . . . . . . . US60/544,788
US60,548,370
PCTUS05/04513

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COMPETITION

Numerous entities are attempting to identify genomic variation predictive of
specific diseases and drug response and to develop products and services based
on these discoveries. We face competition in these areas from pharmaceutical,
biotechnology and diagnostic companies, academic and research institutions and
government and other publicly-funded agencies, both in the United States and
abroad, most of which have substantially greater capital resources, research and
development staffs, facilities, manufacturing and marketing experience,
distribution channels and human resources than do we. Our key competitors
include, but are not limited to, PPGx, Inc., a leading international developer
and supplier of research-based pharmacogenomics services and products which
recently announced the launch of its GeneTrials(TM) Bioinformatics Platform.
Also, large pharmaceutical companies have their own internal research and
development efforts that could surpass or eliminate our technology from the
market.

These competitors may discover, characterize or develop important technologies
applying genomics before us or develop proprietary products and services that
are more effective than those technologies that we develop. Additionally, these
competitors may obtain regulatory approvals for their drugs and diagnostics more
rapidly than we or our customers do, any of which could limit our ability to
market effectively our products and services. If our patent applications are not
awarded or if our competitors in the field of genetic research develop and
receive approval of patents that supersede our applications, we could be forced
to cease the development of our products, services and technologies.

Some companies and governments are marketing or developing databases and
informatics tools to assist participants in the healthcare industry and academic
researchers in the management and analysis of genomic data. "Informatics tools"
is a term used by scientists to describe software, computer programs or
mathematical programs that analyze data sets or collected information that is
stored in data files. Such computer programs can take an apparently meaningless
block of numbers from a laboratory experiment and evaluate trends, look for
statistical relationships and group or segregate the numbers according to their
levels of importance to the scientist. They are tools to evaluate information.
Our competitors have developed or plan to develop databases containing gene
sequence, genomic variation or other genomic information and are marketing or
plan to market their data to pharmaceutical and biotechnology companies or plan
to make freely available their databases. These entities include, but are not
limited to:

- Genaissance Pharmaceuticals: a provider of pharmacogenomic support
services, including high-throughput sequencing, this company was recently
acquired by another company called Clinical Data, Inc.

- Evolutionary Bioinformatics: Bioinformatics and genomics consulting,
specializing in comparative genomics, functional genomics and model
organisms.

- deCODE Genetics: Advanced bioinformatics and high throughput
genotyping facility

- Celera Genomics: Drug discovery systems and services.

- Cellular Genomics: A biotechnology company focused on the discovery
and validation of novel drug targets.

- Correlogic Systems: Developing tools and processes for proteomic and
genomic-based clinical diagnostic systems and new drug discovery.

- Epoch Biosciences: Technologies useful in genetic research,
diagnostics, drug development, infectious disease detection, prenatal
testing and population screening to assess risk of disease or to predict
response to drugs.

- Eragen Biosciences: Designs, develops, and markets functional genomic
and drug/diagnostic discovery platform products, and technologies to the
pharmaceutical, biotechnology and agro-biology industries.

In addition, numerous pharmaceutical and biotechnology companies, either alone
or in collaboration with our competitors, are developing genomic research
programs that involve the use of information that can be found in these
databases.

Genomic technologies have undergone, and are expected to continue to undergo,
rapid and significant change. Our future success will depend in large part on
maintaining a competitive position in the genomics field. Others may rapidly
develop new technologies that may result in our test or technologies becoming
obsolete before we recover the expenses that we incur in connection with the
development of these products. Our developed proprietary products and services
could become obsolete if our competitors offer less expensive or more effective
drug discovery and development technologies, including technologies that may be
unrelated to genomics.

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We also compete in the forensic DNA testing market, consumer DNA products market
and contract services outsourcing market. We have introduced new products in
the last year and improved our flagship product, ANCESTRYbyDNA , part of the
consumer DNA market, by upgrading it from 76 marker sets to 175 marker sets.
Additionally, we have increased our ability to include DNA sampling from
Northern European, Middle Eastern, Mediterranean and IndoEuropean by introducing
EURO-DNA 1.0. However, sales have not improved as dramatically as expected
perhaps due to an increase in pricing from $199 to $219 for ANCESTRYbyDNA and
a combined price of $399 for inclusion of a EURO-DNA test along with the
ANCESTRYbyDNA test.

In the consumer market, which is mainly supported by genealogy enthusiasts, we
remain concerned that our potential reward from developing products will be
limited by a sudden lack of interest. Our competitors include companies like:

o Sorenson Genetics- One of the larger suppliers of paternity and
ancestry testing.

o DNA Testing Center, Inc. - A testing service for mitochondrial,
paternity and y chromosome testing for the consumer market and forensics
market as well.

Either of these firms or other companies could create a product that is
competitive to our products, and reduce our current sales volumes.

Similarly, we have competitors in the field of forensics that includes the
following companies and agencies:

o Orchid- The original inventors of Single Nucleotide
Polymorphismanalysis machines and SNP technologies through its Orchid
Cellmark division is considered one of the premier independent DNA testing
laboratories in forensics. This competitor not only has the scientific
background but the financial means and expertise to create a product that
directly competes with ours in the forensics market.

o FSS- A United Kingdom based firm that processes nearly 85% of the UK's
criminal DNA samples also has the ability to create a product that is
competitive to our products and is exploring entering the U.S. market.

o Bode Systems, A division of Choicepoint- A significant competitor
that, like FSS and Orchid has the ability to create and market a similar
product to ours and eliminate us from the forensics market.

o FBI, Quantico Laboratories- The Federal Bureau of Investigation (FBI)
has significant development resources and we believe they are contracting
with Orchid and others to develop identity tests that will help them
identify potential DNA donors from crime scene DNA. The bureau also invests
federal research money on its own research to develop testing processes and
procedures that it would approve for law enforcement.

o The National Institutes of Justice regularly provides grants to local
and state police crime laboratories and University researchers that are
competitive to our technology. We have applied for two grants and will
continue to apply but have been rejected. In each application, despite the
rejection, we have developed the proposed technology and brought it to the
forensics market.

Forensic DNA and consumer DNA technologies have undergone, and are expected to
continue to undergo, rapid and significant change. Our future success will
depend in large part on maintaining a competitive position in these fields.
Others may rapidly develop new technologies that may result in our tests or
technologies becoming obsolete before we recover the expenses that we incur in
connection with the development of these products. Our products and services
could become obsolete if our competitors offer less expensive or more effective
discovery and development technologies, including technologies that may be
unrelated to genomics.

Employees

As of March 31, 2006, we had twenty-one full-time employees. None of our
employees are represented by a labor union. We consider our relations with our
employees to be good. We plan to add additional staff as needed to handle all
phases of our business.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the
balance sheet as of December 31, 2005 and the financial statements as of and for
the years ended December 31, 2005 and 2004 included in this prospectus.

SUMMARY

Although we have been in existence for a number of years, management's efforts
to develop our business have not yet resulted in significant revenues. We have
chosen to focus on increasing sales volume in the consumer and forensic markets
while continuing to develop products for introduction to the pharmacogenomics
market. We intend to support research and development as a vital component of
our overall growth strategy. Until (i) potential customers are familiar with our
technology and products, which will come from continued research and development
and proven market use, and (ii) we introduce our pharmacogenomics products, it
is unlikely that we will generate significant revenue.
The following discussion of our historical financial results should be read
against this background.

REVENUES AND COST OF SALES

For the years ended December 31, 2005 and 2004, revenues were $1,275,503 and
$785,632, respectively. A $489,871 increase in revenues from the prior year is a
62% increase that was a result of the sales of our ANCESTRYbyDNA increasing
approximately $284,000, our paternity testing increasing approximately $79,000.
Our EURO-DNA 1.0 was introduced to the general public in the fourth quarter of
2004 and contributed approximately $127,000 of revenue over 2004. Additionally,
we recorded approximately $40,000 of revenues from our mtDNA product, $9,000 of
revenues from our DNAWitness-MitoTM and $23,000 of revenues from our
Y-chromosome products which were added to our product line when we acquired
Trace Genetics. We also had $17,000 of other revenue during 2005. These
increases in revenue were offset by a decrease in genotyping of $76,000 and
DNAWitness of $13,000.

In addition to the revenues recognized in the accompanying statement of
operations, we also have recorded deferred revenues of $195,018 as of December
31 2005. Deferred revenue resulted mainly from our ancestry client testing that
was not complete as of December 31, 2005. These amounts will be recognized as
revenue during 2006.

During 2005 compared to 2004, our sales of ANCESTRYbyDNATM increased
approximately $284,000. This is due to increased awareness and interest in
genealogy, increased advertising in several markets and increased press coverage
during 2005. When we introduced our version 2.5 of ANCESTRYbyDNATM during 2004,
we increased the pricing which has resulted in a lower volume of product sold,
but at a higher margin. The product is relatively new to the market, and we
believe sales will continue to fluctuate from period to period until we can
better determine through continued market research and time how and where to
best market and sell this product. We have found that news articles produce a
spike in volume, and we will continue to pursue this avenue of marketing during
2006. We introduced another ancestry product, EURO-DNATM 1.0, during late 2004,
which resulted in an increase in sales of approximately $127,000. Sales of our
ancestry products were generated through advertising in Family Tree, a genealogy
periodical, and through public exposure that we received during the year in
newspapers, magazines and television. In addition, sales were generated through
our various distributors and from our website www.ancestrybydna.com. During
2005, we entered into agreements with seven new distributors to sell our
ancestry products. One of our new distributors accounted for approximately
$234,000 of sales during 2005. During 2005, we acquired Trace Genetics, Inc.
which allowed us to introduce their products mtDNA and Y-chromosome product.
These products contributed to $63,000 of sales during 2005. These consumer
products are sold in similar markets as ANCESTRYbyDNATM and EURO-DNATM,
therefore our advertising campaigns for these products are similar to those for
our other consumer products.

Paternity testing sales are generated primarily through our various distributors
and from our website www.ancestrybydna.com. The majority of the $79,000 increase
in sales during 2005 compared to 2004 was from a distributor that was added
during the second quarter of 2004. Paternity testing is an add-on service, and
we expect revenues to continue to fluctuate in this market. While we have not
yet implemented a formal marketing and sales plan for this service, we continue
to perform market research and gather information in order to define and
implement a formal marketing strategy. One distributor accounted for
approximately $110,000 of our paternity sales during 2005. We do not expect
these revenues to continue during 2006 and are seeking to replace the potential
short-fall. We have been increasing our direct marketing and mail campaign for
our ANCESTRYbyDNA and DNAWitness products and services as well as the Trace
Genetics products and services to offset this potential decrease in paternity
sales.

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Genotyping sales were generated primarily through work with universities, with
one university being our major client of this service. The decrease of
genotyping services of approximately $76,000 during 2005 compared to the same
period in 2004 was the result of decreased service provided to one university.
To date, our genotyping service customers have come to us either through client
referrals or our general website. In the future, we plan to concentrate our
genotyping services on specific diseases, including cancer, neurological
disorders, and heart disease. By concentrating on specific diseases, we hope to
develop an expertise that will attract customers in those areas requiring
external assistance and additional research capacity. One university accounted
for approximately $159,000 of our genotyping sales during 2005.

As part of our on-going genotyping contract services work for one of our new
customers, we have offered to perform ANCESTRYbyDNA testing services on 284
children suffering from a disease known as ALL or Acute Lymphocyte Leukemia. We
expect to submit a manuscript for publication during 2006 under a joint
publication agreement. Following this early pre-screening, the ALL program will
test nearly 3,000 children afflicted with this disease in hopes that we will be
better able to help the research hospital determine the genetic markers that are
inherited and that may play a role in disease formation, advancement or
remission. Treatment protocols or treatment regimes include multiple drug
therapies and include, Taxol and Taxol like derivatives as well as other
chemotherapy treatments and protocols. It is too early to determine the
potential benefits to us, but we believe that the donation of our technology and
services is crucial to the development of better and improved treatments for
ALL. Currently, nearly 10-20% of the children afflicted with this disorder do
not survive beyond 18-24 months after diagnosis. We believe that our technology,
combined with the research hospital's other work and including the contracted
genotyping work performed by us for them, may help in reducing this dreadful
statistic.

We continue to market our DNAWitness products through marketing to various
agencies, our attendance at trade shows and through our relationships with Lynn
Peavey catalog, Orchid Biosciences, and ReliaGene Technologies. We continue to
seek to develop other distributors of our services and products. Our products,
DNAWitness 2.0, RETINOME, and EURO-Witness 1.0 have been featured in the Lynn
Peavey Company catalog and the Lynn Peavey Web site. We trained Lynn Peavey
Company personnel to establish and conduct seminars and training programs for
detectives, crime laboratory personnel and crime scene personnel on DNAWitness .
Similarly, we have trained nearly 2,000 forensic personnel that include
detectives, prosecutors and forensic scientists about our technology and its
use. We anticipate continuing to train personnel on the use of our technology
and products throughout 2006. The sales of our DNAWitness products decreased by
$13,000 during 2005. We believe that our forensic revenues will continue to
fluctuate because these are new products, and there are no similar products
being marketed. We intend to continue to research the markets and refine our
sales and marketing strategy for our forensic products. We have identified and
applied for several grants and submitted our technology for federal review for
applications that include human identification and terrorist tracking. We have
not had any grant funding of our research and development or deployment of our
technology into any of these applications during 2005. We believe that the
restraint of our sales in the forensics market does not originate from a lack of
desire to use the technology by the detective or the prosecutor but rather a
lack of funding for the increased staff that will be required to review cold
case files, open new investigations or identify missing persons from stored
human remains. We believe that the bulk of our investigative support will come
through local and regional police, fire and detective agencies that do not
require any federal funding to use our services and technology. We will however,
continue to pursue much larger applications for our technologies on a global
basis and will participate in several forensic and biometric venues during 2006
that offer us a broad platform exposure to the world market. We are also seeking
distributors of our products and services on a global basis applying our
technology wherever the need could arise. During 2005, we acquired Trace
Genetics, Inc. which allowed us to introduce DNAWitness-MitoTM which contributed
approximately $9,000 of sales during 2005.

In order to build consistent sales, we have begun to implement formal sales and
marketing plans, including advertising and promotional campaigns. Implementing
these plans results in increased expenses for personnel, advertising, promotion,
and the collateral materials associated with these programs. We plan to continue
to add to our advertising and presentation campaign during 2006, as cash flow
permits. Overall, our goal is to focus on increasing market awareness of all of
our products, particularly within the consumer and forensic markets.

Cost of sales increased $442,545 during 2005 compared to 2004. This was a
result of increased revenues during 2005 compared to 2004. The cost of sales as
a percentage of revenue was 75% for 2005 compared to 65% for 2004. The increase
in cost of sales as a percent of revenues is due to our refinement of our
estimate and allocation of research and development costs. Because of our small
sales volume, these results are not indicative of the margins that we expect to
attain if our long-term goals are achieved. We anticipate that as we gain
experience and can begin to take advantage of economies of scale through
increased revenues; our margins will stabilize and begin to track in line with
other companies in similar industries. However, in the near term, while we
continue to be a development stage enterprise, we expect that our margins will
continue to fluctuate.

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RESEARCH AND DEVELOPMENT EXPENSES

Our research and development costs consist of raw materials, laboratory
supplies, equipment expense, facilities costs and employment-related costs.
These R&D expenses were incurred in support of our currently available consumer
and forensics products and genotyping services and for our anticipated
pharmacogenomics products.

Research and development costs increased from $1,561,142 in 2004 to $2,122,383
in 2005, an increase of $561,241, or 36%. R&D costs on EPO, which began during
2005 was approximately $289,000 of costs during 2005. Also, we had an increase
spending of approximately $195,000 for R&D materials and approximately $259,000
for direct labor costs during 2005 compared to 2004. These increases in R&D
were offset by a decrease of approximately $200,000 of allocated costs to R&D as
a result from our refinement in estimates and allocation of research and
development costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Another significant component of our operating expenses is selling, general and
administrative expenses. These expenses resulted from (i) accounting and other
fees associated with being a public company and other regulatory compliance
activities, (ii) legal fees associated with our patent filings and maintenance,
a lawsuit against a former employee and preparation of our securities law
filings, (iii) selling and marketing costs to promote our products and (iv)
administrative and other salaries and expenses.

For the year ended December 31, 2005, selling, general and administrative
expenses increased $813,567, from $2,050,981 in 2004 to $2,864,548, in 2005.
Compared to 2004, compensation cost for our three top executives during 2005
declined by approximately $824,000. This decline occurred primarily because the
2004 amount included amortization of stock-based compensation costs for these
executives from a grant in a previous year. Because the relevant amortization
period ended in May 2004, the 2005 amount did not include any expense related to
the previous grants. This was offset by an increase of $46,000 for the annual
shareholders meeting costs, increase of $381,000 for legal expenses, increase of
approximately $260,000 for consulting services, increase of approximately
$82,000 for accounting fees and services and an increase of approximately
$628,000 of advertising, marketing materials and investor relations expense.
Additionally, we allocated approximately $200,000 less selling, general and
administrative costs to research and development during 2005 compared to 2004
which in effect increased our selling, general and administrative expenses.

INTEREST EXPENSE

During 2005, we recognized a decrease of $8,105 compared to 2004 in interest
expense. The decrease in interest expense is a result of a lower convertible
debenture balance during 2005 compared to 2004 as La Jolla exercised its
conversion rights during 2005.

INTEREST INCOME

During December 2004, we made a loan in Euros to a German company. We record
the interest on this loan each period, and any adjustments for the foreign
currency translation are included in foreign currency loss included on our
condensed consolidated statements of operations. This loan was paid off during
2005. We did not have any such loans during 2004.

INTRINSIC VALUE OF CONVERTIBLE DEBT AND NON-DETACHABLE WARRANTS AND DEBT
DISCOUNT AMORTIZATION

We recorded $250,000 related to the intrinsic value of the convertible feature
of the La Jolla debt. We also recorded a discount on notes payable of
$5,820,000 related to the four Dutchess notes including the two incentive
debentures. This $6,070,000 of debt discount is being amortized to interest
expense over the life of the notes and convertible debentures. During 2005, we
recorded $1,953,084 of expense. The majority of the remaining debt discount
will be expensed during 2006.

AMORTIZATION OF DEFERRED FINANCING FEES
During 2005, we recorded $187,005 of deferred financing fees related to the La
Jolla debenture and the four Dutchess notes. These deferred financing fees are
being amortized over the life of the notes. We also expensed $260,000 of
financing fees paid to Dutchess that did not have any basis allocable to the
fees, thus they were expensed. During 2005, we recorded an increase over the
same periods in 2004 of $310,301 of amortization which included the $260,000 of
directly expensed fees.

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LOSS ON DERIVATIVE CONTRACTS, NET
The balance sheet caption derivative liabilities consists of (a) embedded
conversion features bifurcated from the Dutchess notes and convertible
debentures and (b) all other convertible preferred stock, convertible debt and
outstanding warrants. Based on their own contract terms, the instruments
described in clause (b) are not considered to be derivatives, but because of the
embedded conversion feature of the Dutchess notes, we are required to record
such instruments at fair value as a derivative liability.

The following tabular presentation set forth information about the derivative
instruments at and for the year ended December 31, 2005:

[Enlarge/Download Table]

La Jolla
Dutchess Derivatives Convertible Preferred Stock Outstanding Warrants convertible debt Total
-------------------- --------------------------- -------------------- ---------------- ------------
Fair value adjustments,
income (loss): $ (2,595,695) $ 313,851 $ 292,794 (21,980) $(2,011,030)

These fair value adjustments affect our computation of income or loss, but they
are non-cash items.

The shares that were issued as incentive shares and are outstanding also fall
under the derivative criteria in accordance with EITF 00-19 and we had to record
at fair value the 1,250,000 and 2,500,000 shares of common stock issued as
incentive shares in the two Dutchess notes and record them as Redeemable
Instruments. At December 31, 2005, the 1,250,000 shares had been sold by
Dutchess, the 2,500,000 shares which were retained by Dutchess were valued at
$52,750, and a gain on derivatives was recorded of $400,125.

There were no such derivatives during 2004.

FOREIGN CURRENCY LOSS

During 2005, we recorded a foreign currency loss of $7,060 on a loan we made in
Euros. This loan was repaid during 2005. We did not have any foreign currency
transactions during 2004.

OTHER EXPENSES

Effective September 28, 2004, we entered into an Investment Agreement with
Biofrontera and the shareholders of Biofrontera to purchase certain Series B
preferred shares of Biofrontera. After discussions with Biofrontera, on February
18, 2005, we exercised our right to terminate the Biofrontera agreement. We
expensed $105,252 of costs that related to this transaction during 2005 and
$10,000 of costs for the same period related to another transaction that was not
completed. We expensed $293,007 of costs related to the Biofrontera transaction
during 2004.

Also during 2004, we paid $75,000 to George Frudakis (father of our Chief
Scientific Officer and a shareholder of the Company) to pay the principal of
approximately $45,000, accrued interest of approximately $4,000 and
approximately $26,000 was recorded as other expense on our Consolidated
Statements of Operations to satisfy in full any other claims related to his note
and funding agreement.

LIQUIDITY AND CAPITAL RESOURCES

General
-------

During 2005, our operating requirements generated negative cash flow from
operations as we continued to engage in testing and development of our products.
Our cash used by operating activities during 2005 was $3,605,877. We also had
principal payments on capital lease obligations of approximately $208,000 and
purchases of computers and equipment of approximately $124,000. The resulting
cash shortfall was financed primarily through the exercise of non-detachable
warrants and prepayment for future warrant exercises, a $250,000 ($235,000 of
cash after fee) convertible debenture from La Jolla, puts under our agreement
with Dutchess and $5,160,000 ($3,867,995 of cash after discount and fees) in
notes issued to Dutchess.

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Our consolidated financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplate the realization of assets and liquidation of
liabilities in the normal course of business. We have incurred losses since our
inception, and have experienced and continue to experience negative cash flows
from operations. In addition, we have a working capital deficiency of
approximately $7,577,917 (of which $6,981,306 was a derivative liability) at
December 31, 2005, and will continue to have ongoing requirements for
substantial additional capital investment to accomplish our business plan over
the next several years. Over the past few years, our operations have been funded
through related party funding, sales of common stock and preferred stock,
issuance of notes, put notices with Dutchess and the issuance of convertible
debentures and the exercise of non-detachable warrants. We continue to
experience some success generating operating revenues; however, we do not expect
our revenue stream to be sufficient to cover costs of operations in the
foreseeable future.

In the foreseeable future, we expect to receive funding from the minimum
conversions of the outstanding debenture into common stock, the related exercise
of the non-detachable warrants and the Dutchess agreement. We believe this
funding will be sufficient to cover our operating activities through 2006. If
our share price continues to remain weak, or if any number of adverse factors or
events occur, we will not have enough equity to complete future acquisitions or
possibly to continue operations beyond 2006. Management is adequately confident
that equity financing or debt will be available to fund our operations until
revenue streams are sufficient to fund operations; however, the terms and timing
of such equity or debt cannot be predicted.

We have issued securities, including convertible debentures and convertible
preferred stock, that convert into our common stock at a continuously adjustable
conversion price based on a discount on the trading price of our common stock.
In addition, our Investment Agreement with Dutchess requires us to sell our
common stock at a continuously adjustable conversion price at a discount to the
trading price of our common stock. As we draw down advances under the Investment
Agreement with Dutchess and more of our common stock is sold pursuant thereto,
the market price of our common stock could decrease significantly and make
further advances impractical or impossible during time periods in which we may
need to raise capital to fund our operations and market and sell our products
and services. In addition, the issuance of our common stock upon exercise or
conversion of our other securities may create a downward pressure on the market
price of our common stock.

FINANCINGS

La Jolla Cove Convertible Debenture and Warrants
------------------------------------------------------

On November 25, 2003, we closed on a $500,000, 8% convertible debenture with
non-detachable warrants with La Jolla Cove Investors, Inc. We pay interest on a
monthly basis with a principal balloon payment due on the extended maturity date
of November 25, 2007. Per the agreement, La Jolla shall convert at least 5% of
the face value of the debenture each calendar month into our common stock. The
number of common stock shares into which this debenture may be converted is
equal to the dollar amount of the debenture being converted multiplied by
sixteen, minus the product of the conversion price multiplied by fifteen times
the dollar amount of the debenture being converted, and the entire foregoing
result shall be divided by the conversion price. The conversion price is equal
to the lesser of (i) $0.20 or (ii) 80% of the average of the five lowest daily
value weighted average price of our common stock during the twenty trading days
prior to La Jolla's election to convert. We have the right to reject a
conversion if the stock price is below $0.50 per share. If we exercise this
right, we then are obligated to pay the portion of the debenture the conversion
notice was for plus applicable unpaid accrued interest and a premium equal to
10% of those amounts.

The non-detachable warrants must be exercised concurrently with the conversion
of debt to common stock by La Jolla. La Jolla has the right to exercise warrants
equaling fifteen times the dollar amount of the debenture being converted at an
exercise price of $1.00. If La Jolla does not convert at least 5% of the
warrants per month, then La Jolla will not be able to collect interest on the
debenture for that month. The warrants issued to La Jolla expire on November 25,
2007.

On February 18, 2004, the Convertible debenture and Warrant to Purchase Common
Stock agreements were amended. If La Jolla does not convert at least 5% of the
face value of the debenture and exercise at least 5% of the warrants in any
particular calendar month, La Jolla may wire to us $375,000 less the dollar
amount of warrants exercised in that month within five business days of the end
of the month. Should La Jolla fail to wire us such funds, La Jolla shall not be
entitled to collect interest on the debenture for that month. If breached more
than once, then we may terminate the agreements with La Jolla and the debenture
becomes due six months thereafter with accrued interest. For any month the
minimum payment was required to be paid and was not paid, La Jolla and we agreed
in writing for them to not fund the payment.

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On October 20, 2005, we amended the La Jolla convertible debenture and the
warrant granted to La Jolla to confirm that the warrant exercise price remained
at $1 per share after the twenty-to-one reverse stock split, the maturity date
of the debenture and the expiration date of the warrant was extended to November
25, 2007 and that when La Jolla exercised its option to add $250,000 in
principal to the convertible debenture that we granted to La Jolla the right to
purchase an additional 3,750,000 shares of our common stock under the warrant.

During 2005, La Jolla converted $189,000 of convertible debentures into our
common stock and exercised non-detachable warrants to purchase 1,467,000 shares
of our common stock.

Dutchess Investment Agreement
-------------------------------

On September 28, 2004, we entered into an Investment Agreement with Dutchess
Private Equities Fund, pursuant to which Dutchess has committed to purchase our
common stock up to an aggregate purchase price of $35 million over a two-year
period. The Dutchess Agreement provides that we from time to time may deliver a
notice to the Investor that will state the dollar amount of common stock that we
desire the Investor to purchase. The maximum amount permitted pursuant to any
such notice is $600,000, and we can give approximately three such notices per
month. Upon receipt of the notice, Dutchess is obliged to purchase the dollar
amount of common stock set forth in the notice at a purchase price equal to 96%
of the average of the two lowest closing bid prices of the common stock during
the five trading days after the notice. We are not permitted to provide a notice
to Dutchess, and Dutchess is not obliged to purchase any of our shares, in the
event that we do not have sufficient authorized shares available for purchase to
fulfill such commitment. In accordance with the two outstanding notes we issued
to Dutchess, we are required to use 100% of the proceeds from these puts as
payment on the notes.

In order to use our $35 million funding facility with Dutchess Equity Partners
to fund our operations and complete future acquisitions, we had to restructure
our capital. During our 2005 annual shareholders meeting, we received
shareholder approval for a reverse stock split. Pursuant to the reverse split,
every 20 shares of common stock issued and outstanding on July 12, 2005 was
combined into one share of our common stock. The number of shares outstanding
at July 12, 2005 after this reverse stock split was 63,442,890, and the number
of authorized shares remained at 1,500,000,000. During July 2005, we registered
350,000,000 shares to be used in conjunction with this Dutchess facility.
During March 2006, we expect to file a registration statement to register
additional shares for this Dutchess facility.

During 2005, we exercised put notices in accordance with our agreement and
received $1,802,651 of cash proceeds, net of $10,109 of cash stock issuance
costs for which we issued 78,912,356 shares of our common stock to Dutchess.
During 2005, proceeds totaling $1,559,991 from these puts were used to reduce
the notes payable outstanding with Dutchess.

Dutchess Notes
---------------

To fund the acquisition of the 18% equity interest in Biofrontera in 2005, we
entered into two notes with Dutchess. On June 30, 2005, we issued to Dutchess a
promissory note in the amount of $1,560,000 for a purchase price of $1,300,000.
This note was paid in full by the end of January 2006.

On August 1, 2005, we issued to Dutchess a second promissory note in the amount
of $840,000 for a purchase price of $700,000. This note was paid in full by the
end of February 2006.

In order to fund our current operations, we entered into two more notes with
Dutchess during October and December 2005. On October 21, 2005, we issued to
Dutchess a promissory note in the amount of $1,380,000 for a purchase price of
$1,150,000. The note is due and payable in full on December 31, 2006. Other
than the $230,000 discount inherent in the purchase price, the note is
non-interest-bearing. The note will be repaid using the proceeds of each put
notice delivered by us to Dutchess under the September 2004 Investment
Agreement.

On December 22, 2005, we issued to Dutchess a promissory note in the amount of
$1,380,000 for a purchase price of $1,150,000. The note is due and payable in
full on December 15, 2006. Other than the $230,000 discount inherent in the
purchase price, the note is non-interest-bearing. The note will be repaid using
the proceeds of each put notice delivered by us to Dutchess under the September
2004 Investment Agreement.
On March 6, 2006, we issued to Dutchess a promissory note in the amount of
$1,500,000 for a purchase price of $1,200,000. The note is due and payable in
full on March 6, 2007. Other than the $300,000 discount inherent in the purchase
price, the note is non-interest-bearing. The note will be repaid using the
proceeds of each put notice delivered by us to Dutchess under the September 2004
Investment Agreement.

In connection with the notes, we paid Dutchess a facility fee of $325,000 and
issued to Dutchess 3,750,000 shares of our common stock and convertible
debentures totaling $990,000. We also paid approximately $215,000 of fees to
Athena.

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Capital Expenditures
---------------------

During 2006, we anticipate continuing to develop the required infrastructure to
realize our 2006 operational growth plan, including acquiring or leasing
property, equipment and other operating assets.

We are actively seeking to acquire or lease a new building that has 5,000 to
10,000 square feet with additional expansion potential. We estimate that lease
costs will be between $15 and $25 per square foot. This does not include
leasehold improvements or other associated costs such as utilities, taxes and
maintenance. The initial build out of 7,000 square feet is estimated at
approximately $780,000, which includes laboratory, office and warehouse space.
Additional costs for equipment, furniture and fixtures are estimated at
approximately $257,000. Timing of the incurrence of the expense will depend upon
the length of time required to find the appropriate facility.

In addition, we anticipate that new laboratory and computer equipment will be
purchased during 2006. Computer purchases for programming, modeling and business
use are estimated at approximately $100,000 and scientific and business programs
and software at approximately $50,000. Capital expenditures for laboratory
equipment are estimated at approximately $250,000 during 2006.

It is our intent, during 2006, to increase our marketing and sales personnel.
Current plans are to add up to two personnel in these areas. As cash flow
permits, we plan on increasing our research staff through the addition of up to
two post doctors. The post doctors would be responsible for internal research
projects that will be directed by our Chief Scientific Officer. In addition, we
are considering increasing our programming staff in order to expedite our
research projects. Costs associated with the hiring process would include normal
expenditures including advertising costs and possible search fees from outside
consultants. For higher-level positions, additional interviews, sign on bonuses
and relocation expenses may also be incurred. Although this is our current
personnel hiring plan, conditions and other unforeseen factors could impact the
decision making process and as a result plans may change.

Commitments
-----------

Our significant cash commitments for 2006 and future years include:

- Payments of approximately $2,150,000 under the Beth Israel License
Agreement.

- Payments of approximately $176,096 under our collaborative research
agreement with Beth Israel.

- Payments of approximately $3,350,000 and annual payments of $250,000
under our License Agreement with Harvard Medical School.

- Payments of approximately $300,000 under our Research Sponsorship
Agreement with Massachusetts College of Pharmacy and Health Sciences.

- Payments of approximately $300,000 under our consulting agreement with
Dr. Arthur Sytkowski.

- Payments of approximately $375,000 under our License Agreement with
Dr. Mark Froimowitz.

Our ability to make these payments is dependent upon our continued ability to
raise capital under our Investment Agreement with Dutchess.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2005, we have no off-balance sheet arrangements.

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CRITICAL ACCOUNTING POLICIES AND RESULTS OF OPERATIONS

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that have a significant impact on the results we
report in our financial statements. Some of our accounting policies require us
to make difficult and subjective judgments, often as a result of the need to
make estimates of matters that are inherently uncertain. Actual results may
differ from these estimates under different assumptions or conditions. Below, we
discuss this further, as well as the estimates and judgments involved.

Asset Impairment
-----------------

We review our long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset exceeds its fair
value and may not be recoverable. In performing the review for recoverability,
we estimate the future cash flows expected to result from the use of the asset
and its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, an impairment loss is recognized. Otherwise, an impairment loss is
not recognized. Management estimates the fair value and the estimated future
cash flows expected. Any changes in these estimates could impact whether there
was impairment and the amount of the impairment. Since we are in the development
stage, we do not have much history to determine our estimated cash flows. If we
do not meet our targeted cash flows for our services and if the estimated
disposition of the equipment is lower, this could result in a write-down of our
equipment. Our equipment is very specialized equipment related to genomics
research, and there probably will not be a large demand for our used equipment.
The amount of our net fixed assets is the amount of the maximum risk if our
assumptions were not correct. Each year the assets will have higher depreciation
and the maximum risk will decrease correspondingly.

Allocation of Research and Development Costs
-------------------------------------------------

Prior to 2004, our research and development costs were derived by allocating
certain costs based on total labor effort. The percentage of total labor effort
expended on research and development was an estimate by management. During 2004,
we refined our process of allocating costs by identifying and directly expensing
certain costs related to research and development and allocating certain other
costs based on total labor effort that is estimated by management and employees.
With some of these costs, a percentage of a total purchase order price is
allocated to research and development. Also during 2004, we implemented a time
card process that gives us a more refined estimate of certain employees' time.
During 2005, as raw materials became significant, we began recording inventory
for our raw materials. As the raw materials are used, they are charged to
research and development expense based upon actual usage for research and
development. We continue to refine our process of identifying time associated
with research and development. These refinements to estimates could increase or
decrease our income statement expense categories of research and development,
cost of sales and selling, general and administrative. Over time we believe this
change in allocating costs will result in a lower allocation of administrative
costs to research and development. Also, as we hire employees, the department in
which the employee is hired will have a direct impact on the allocation of
administrative costs to research and development. For example if a person is
hired in research and development, the allocation to research and development
for other administrative costs will increase because labor effort percentage for
research and development will have increased. If a person is hired in
administration, the allocation to research and development for other
administrative costs will decrease because the labor effort percentage for
research and development will have decreased. Changes to these estimates could
have a significant impact on the accrual and related compensation expense and/or
deferred compensation.

Valuation of Intangible Assets
---------------------------------

Our intangible assets are reviewed annually for impairment or more frequently if
impairment indicators arise. This annual impairment test is performed in the
last quarter of each fiscal year. The impairment test requires a comparison of
the fair value of the Company to the amount of intangible assets recorded. If
this comparison reflects impairment, then the loss would be measured as the
excess of recorded intangible asset amount over its implied fair value.
Although management believes that the estimates and assumptions used are
reasonable, actual results could differ.

SB-2 38th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 38th
Estimation of Fair Market Value
-----------------------------------

We use the Black Scholes Option Model to determine fair market value in certain
instances (i.e. to value warrants and the intrinsic value of the convertible
debt and non-detachable warrants). The Black Scholes Option Model requires
estimated assumptions in its computation. We estimate the assumptions used in
each calculation based upon the transaction term and what we believe most
appropriately reflects the transaction. If different estimates of the
assumptions were used, it could result in different fair market value amounts
being calculated. Additionally, various methods can be used to determine the
fair market value of the warrant. If a different model were used besides the
Black Scholes Option Model, it could result in different fair market value
amounts being calculated.

Derivatives
-----------

We have reviewed our contracts and financial instruments to determine what
derivatives and embedded derivatives we may have. We have then reviewed these
derivatives and embedded derivatives to determine if they should be recorded as
equity or a derivative liability valued at fair value. Judgment is used to
apply the criteria of Statement of Financial Accounting Standards No. 133 and
Emerging Issues Task Force 00-19 to the derivatives. Also judgment and
estimates are required to determine the fair value of the derivative
liabilities. Although management believes that the estimates and assumptions
used are reasonable, actual results may differ from these estimates under
different assumptions or conditions.

DESCRIPTION OF PROPERTY

We currently lease an operating facility at 900 Cocoanut Avenue, Sarasota,
Florida. This lease expires May 31, 2006 with a three-month renewal option. The
lease requires monthly rent of approximately $5,765. The building consists of
approximately 4,000 square feet of laboratory and office space. We also lease
an operating facility at 4655 Meade St., Suite 300, Richmond, California. This
lease expires August 1, 2006. The lease requires monthly rent of approximately
$5,547 for approximately 3,000 square feet of laboratory and office space. We
also lease an operating facility at 700 Bay Street, Suite 2101, Toronto, Canada.
This lease expires April 30, 2008 and has a three-year renewal option. The
lease requires a monthly rent of approximately $6,300 CDN (approximately $5,355
USD) for approximately 2,800 square feet of laboratory and office space. All of
these facilities are in good condition.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Until August 2003, we leased our principal office from Pacific Atlantic
Corporation, a corporation controlled by George Frudakis, the father of Tony
Frudakis. On October 15, 2001, we signed a lease for this space. The lease ran
for 10 years at $5,333 per month plus increases annually based on increases in
the Consumer Price Index. In June of 2003, we renegotiated the lease. The new
two year operating lease expired on May 31, 2005 with an option to extend the
lease for one year and then an additional three months. The building was sold
to JSD Sarasota, LLC on August 26, 2003.

In connection with the renegotiation of the lease, we agreed to pay Mr. Frudakis
an amount equal to 6 months rent, payable in our common stock. On July 28,
2004, we issued 76,118 shares of our common stock in exchange for a charge
valued at $41,900 for renegotiating our building lease. These shares were issued
to Mr. Frudakis.

In February 2002, we entered into a funding agreement with 4 shareholders, one
of whom is Dr. Tony Frudakis, our Chief Scientific Officer and one of our
directors, and another of whom is George Frudakis, Dr. Frudakis' father. These
shareholders initially agreed to loan us $2,000,000 between March 2002 and
December 2002. These loans were to be repaid along with all accrued interest at
8% on January 31, 2003. In June 2002, we elected to satisfy $509,160 of these
notes through the issuance of 727,368 shares of our common stock.

During October 2002 the terms of this agreement were modified, effectively
terminating the participation of two of the shareholders. Pursuant to the
amended agreement, the remaining two shareholders (including Dr. Frudakis and
Mr. Frudakis) agreed to loan us $1,000,000 between December 2002 and December
2003. These loans were scheduled to mature, along with all accrued interest at
8%, on December 31, 2003. In the event of our default, the lenders' only remedy
is to require us to issue shares of our stock as consideration for satisfaction
of the debt. The number of shares to be issued for satisfaction of the debt will
be based on a price of $0.70 per share if the weighted average price of our
stock is $1.00 per share or above; alternatively if the weighted average price
of our shares is less than $1.00, the number of shares due will be calculated
using a 40% discount to the market price. Notwithstanding this, in no event
will the shares to be issued under this arrangement be based on a price of less
than $0.20 per share.

SB-2 39th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 39th
During 2004, we paid $75,000 to George Frudakis to pay the principal of
approximately $45,000, accrued interest of approximately $4,000 and
approximately $26,000 was recorded as other expense to satisfy in full any other
claims related to his note and funding agreement.

Also, during 2004, the note to Tony Frudakis was reduced by a $38,068 payment
made to him by making payments on his behalf to third parties. During late 2004,
Tony Frudakis and we agreed to extend the funding agreement with him under the
same terms until December 31, 2005 with an additional provision that if we are
in default of the note, then the only recourse to pay the note is with our
stock. During 2005, we reduced the note by $33,634 by making payments on his
behalf to third parties. This agreement was replaced by a notes payable
agreement with 8% annual interest and the interest and principal due on December
31, 2006. The provision permitting repayment of the note with our stock was
deleted. At December 31, 2005, our notes payable to Tony Frudakis have a
balance of $238,381.

On April 1, 2003, we terminated a consulting agreement with GenBiomics, LLC, a
company in which Mr. Gabriel and Dr. Gomez were members. The original consulting
agreement was signed on May 17, 2002. Since that time, Mr. Gabriel and Dr. Gomez
agreed to become officers and directors of the Company. As a result, the prior
consulting agreement was terminated. During 2003, we recorded consulting
expense related to this agreement of $10,000.

On December 28, 2004, we entered into a loan agreement with Biofrontera AG, a
German corporation whereby we loaned 140,000 euros to Biofrontera. This
converted to 193,426 US dollars at year end. At December 31, 2004 we recorded
the loan of $193,426 and accrued interest of $257 for a total receivable of
$193,683. This note has a 12 % annual interest rate. The Interest and principal
payments are due by December 31, 2005. During 2004, we had an investment
agreement with Biofrontera to acquire a portion of their company. During
February 2005, this investment agreement was terminated, however the loan
remains outstanding and the terms of the loan agreement remain in effect.
During the fourth quarter of 2005, this loan was paid in full.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is eligible for quotation on the OTC Bulletin Board. Set forth
below is a table summarizing the high and low bid quotations for our common
stock during its last two fiscal years.

Summary of Quarterly High & Low Price of Common Stock

[Download Table]

QUARTER HIGH BID LOW BID
------- -------- -------
1st Quarter 2004 1.400 0.720
2nd Quarter 2004 1.000 0.500
3rd Quarter 2004 0.600 0.013
4th Quarter 2004 0.400 0.100
1st Quarter 2005 0.260 0.020
2nd Quarter 2005 0.510 0.034
3rd Quarter 2005 0.202 0.013
4th Quarter 2005 0.044 0.002
1st Quarter 2006 0.034 0.017

The above table is based on Over-The-Counter quotations. These quotations
reflect inter-dealer prices, without retail mark-up, markdown or commissions,
and may not represent actual transaction.

As March 31, 2006 there were 1,012 owners of record of our common stock.

We have never paid any cash dividends. The payment of dividends, if any, in the
future is within the discretion of our Board of Directors, and will depend upon
our earnings, capital requirements and financial condition, and other relevant
factors. Management does not expect to declare dividends in the foreseeable
future.

SB-2 40th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 40th
EXECUTIVE COMPENSATION

The compensation and awards that have been earned by our executives are listed
below.

[Enlarge/Download Table]

SUMMARY COMPENSATION TABLE

Restricted
Stock All Other
Name and Principal Capacity Year Salary Awards(1) Compensation(2)
--------------------------- ---- ------ --------- ---------------
Richard Gabriel(3) 2003 $ -- $870,000(4) $444,808
Director, Chief Executive 2004 148,615(10) -- (56,646)
Officer , President 2005 205,203(10) -- --

Hector Gomez, M.D., Ph.D.(11) 2003 $ -- $725,000(5) $277,988
Director, Chairman of the 2004 74,678(10) -- 28,664
Board, Chief Medical Officer 2005 229,664(10) -- 20,000

Tony Frudakis, Ph.D.(6) 2003 $130,000 $870,000(7) $307,888
Chief Scientific Officer, 2004 183,010(10) -- (8,488)
Director, Secretary 2005 200,203(10) -- --

Monica Tamborini(8) 2003 $ -- $580,000(9) $257,372
Chief Financial Officer, 2004 130,132(10) -- 9,280
Chief Operations Officer 2005 63,606(10) -- --
<FN>

(1) The dollar value of the restricted stock is calculated by multiplying the
closing market price of our unrestricted stock on the date of grant, May 16,
2003, by the number of shares awarded as required in instructions to Item
402(b)(2)(iii)(C). For book purposes, the value is calculated by applying a 15%
discount on the closing price.

(2) Because the grantees can not sell their stock for cash to cover the tax
liability that will be due, we agreed to cover the tax liability associated with
the stock grant in cash by the date that the tax will be due by the grantee. The
table reflects amounts that were earned in 2003 and 2004, but paid in 2004 and
2005, respectively. The 2004 amounts also reflect an adjustment to this tax
liability for these executives. Dr. Gomez's 2003, 2004 and 2005 amounts include
$20,000 of additional compensation.

(3) Mr. Gabriel joined our Board of Directors during 2002 and became our Chief
Executive Officer and President in 2003.

(4) Calculated on 1,500,000 shares at a price of $0.58, the close price of the
stock on May 16, 2003, the date the award was granted by the Board of Directors.

(5) Calculated on 1,250,000 shares at a price of $0.58, the close price of the
stock on May 16, 2003, the date the award was granted by the Board of Directors.

(6) Dr. Frudakis has been with us since inception and has held many titles and
positions during that time including Chief Executive Officer, President and
Chief Financial Officer. Dr. Frudakis is currently our Chief Scientific Officer.

(7) Calculated on 1,500,000 shares at a price of $0.58, the close price of the
stock on May 16, 2003, the date the award was granted by the Board of Directors.

(8) Ms. Tamborini joined us in 2003.

(9) Calculated on 1,000,000 shares at a price of $0.58, the close price of the
stock on May 16, 2003, the date the award was granted by the Board of Directors.

(10) The executives deferred part of their 2004 salary. The deferred salary
amounts included in the 2004 amounts above were $54,170 for Mr. Gabriel, $29,231
for Mr. Gomez, $48,346 for Mr. Frudakis and $50,763 for Ms. Tamborini. The
executives deferred part of their 2005 salary. The deferred salary amounts
included in the 2005 amounts above were $75,000 for Mr. Gabriel, $66,000 for Mr.
Gomez, $60,000 for Mr. Frudakis and $18,375 for Ms. Tamborini.

(11) Dr. Gomez joined our Board of Directors during 2002 and became our Chief
Medical Officer in 2003.

SB-2 41st “Page” of 82 TOC 1st Previous Next ↓Bottom Just 41st
EMPLOYMENT AGREEMENTS

On May 8, 2001, we entered into an Employment Agreement with Tony Frudakis, our
Chief Scientific Officer. The Agreement runs for a term that commenced August
22, 2001 and expires August 22, 2005, subject to extension from year to year by
mutual agreement. Our Board of Directors may increase the salary from time to
time in its discretion. At January 1, 2006, his salary was increased to
$240,000 with $168,000 paid in cash and $72,000 deferred. The Employment
Agreement also permits the Board of Directors to pay discretionary bonuses or
other benefits to Dr. Frudakis. Upon termination of employment, the Agreement
prohibits Dr. Frudakis from competing with the Company for a period of two years
in the state of Florida. On November 30, 2001, we also entered into a
Performance Stock Agreement with Dr. Frudakis that requires us to grant him 1.5
million shares of our restricted stock upon achieving certain milestones. The
Board of Directors renegotiated the milestones in light of changes in our
operational strategy. Thereafter, Dr. Frudakis met the milestone and we granted
the stock in 2003.

In May 2003, we entered into one-year employment agreements with Richard
Gabriel, Hector Gomez, and Monica Tamborini. These agreements automatically
extend for unlimited successive one-year periods unless terminated in accordance
with the agreement. As consideration for the first year of employment, we agreed
to issue, at no cost to the executives, a total of 3,750,000 shares of our
common stock, and to pay the related federal and state income taxes they will
incur as a result of these stock grants. The Agreements prohibit them from
competing with us for a period of two years from the date of termination or
leaving our employ. At January 1, 2006, Richard Gabriel's annual salary is
$300,000 with $210,000 paid in cash and $90,000 deferred; Hector Gomez's annual
salary is $288,000 with $201,600 paid in cash and $86,400 deferred; and Monica
Tamborini's annual salary is $210,000 with $147,000 paid in cash and $63,000
deferred.

COMPENSATION OF DIRECTORS

On February 22, 2002, we entered into an agreement with Dr. Gomez when he joined
our board of directors. In consideration of Dr. Gomez' agreement to serve on the
Board of Directors, we granted him options to purchase 130,000 shares of our
stock at an exercise price of $0.60 per share. All of the options are vested at
December 31, 2005. In addition, we agreed to pay him a cash director's fee of
$20,000 per year through December 31, 2005. Other than described in this
paragraph, no other director receives any compensation for services as a
director. Directors are reimbursed for expenses to attend board meetings.

EMPLOYEE STOCK OPTIONS AND AWARDS

FISCAL 2005 YEAR-END OPTION VALUES

[Enlarge/Download Table]

Number of Securities Underlying
Unexercised Options at
December 31, 2005 Value of Unexercised
In-The-Money Options at
December 31, 2005 (1)
------------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---------------- ------------- ---------------- ------------- -------------
Richard Gabriel 18,500,000 - $ 61,500 -
Tony Frudakis 18,500,000 - $ 61,500 -
Hector Gomez 18,630,000 - $ 61,500 -
Monica Tamborini 2,000,000 - - -
<FN>
There were no options exercised during fiscal year 2005.

(1) The market price of our stock was $0.0211 at December 31, 2005.

SB-2 42nd “Page” of 82 TOC 1st Previous Next ↓Bottom Just 42nd
DNAPrint Genomics, Inc.
(A Development Stage Enterprise)

Consolidated
Financial Statements as of and
for various periods ended December 31, 2005
and 2004 and Independent Auditor's Report

SB-2 43rd “Page” of 82 TOC 1st Previous Next ↓Bottom Just 43rd
DNAPrint Genomics, Inc.
(A Development Stage Enterprise)

TABLE OF CONTENTS

[Download Table]

Page

Report of Independent Registered Public Accounting Firm F-1

Consolidated Financial Statements

Consolidated Balance Sheet as of December 31, 2005 F-2

Consolidated Statements of Operations for the years
ended December 31, 2005 and 2004, and for the period
December 10, 1998 (date of inception) to December 31, 2005 F-3

Consolidated Statements of Stockholders' Equity (Deficit)
for the period ended December 10, 1998 to December 31, 1999
and for the years ended December 31, 2000, 2001, 2002, 2003,
2004 and 2005 F-4

Consolidated Statements of Cash Flows for the years ended
December 31, 2005 and 2004 and for the period December 10, 1998
(date of inception) to December 31, 2005 F-13

Notes to Consolidated Financial Statements F-15

SB-2 44th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 44th
Report of Independent Registered Public Accounting Firm

Board of Directors
DNAPrint Genomics, Inc. and Subsidiaries
(A Development Stage Enterprise)
Sarasota, Florida

We have audited the accompanying consolidated balance sheet of DNAPrint
Genomics, Inc. and subsidiaries (a development stage enterprise) as of December
31, 2005 and the related consolidated statements of operations, changes in
stockholders' deficit, and cash flows for the years ended December 31, 2005 and
2004 and the period from December 10, 1998 (Date of Inception) through December
31, 2005. These consolidated financial statements are the responsibility of the
management of DNAPrint Genomics, Inc. and Subsidiaries. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits. The consolidated financial statements as of December 31, 2002 and for
the period December 10, 1998 (date of inception) through December 31, 2002 were
audited by other auditors whose report dated April 11, 2003 included an
explanatory paragraph regarding substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements for the
period December 10, 1998 (date of inception) through December 31, 2002 include
total sales and net loss of $270,938 and $6,849,650, respectively. Our opinion
on the consolidated statements of operations, changes in stockholders' equity,
and cash flows for the period December 10, 1998 (date of inception) through
December 31, 2005 insofar as it relates to amounts for periods through December
31, 2002 is based solely on the report of other auditors.

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

In our opinion, based on the audit and the report of other auditors on the
previous years' consolidated financial statements, the financial statements
referred to above present fairly, in all material respects, the consolidated
financial position of DNAPrint Genomics, Inc. and subsidiaries as of December
31, 2005 and the consolidated results of its operations and its cash flows for
the years ended December 31, 2005 and 2004 and the period from December 10, 1998
(Date of Inception) through December 31, 2005 in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note B, the Company
incurred a net loss of $8,715,852 during the year ended December 31, 2005 and
has an accumulated deficit of $29,078,617 from inception to December 31, 2005.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note B. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Pender Newkirk & Company

Pender Newkirk & Company LLP
Certified Public Accountants
Tampa, Florida
February 24, 2006

F-1

SB-2 45th “Page” of 82 TOC 1st Previous Next ↓Bottom Just 45th
DNAPrint Genomics, Inc.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2005

[Enlarge/Download Table]

ASSETS
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,806,646
Accounts receivable (net of allowance for doubtful accounts of $8,740) . . . . . . . . . 101,852
Inventory, raw material. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298,685
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,335
Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . . . . . 145,095
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,470,613
PROPERTY AND EQUIPMENT (net of accumulated depreciation and
amortization of $726,684). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,229,133
OTHER ASSETS:
Investment in Biofrontera. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,274,702
Goodwill and other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,958
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,703
Total Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,610,363
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,310,109
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,152,711
Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,889
Deferred Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,018
Accrued compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 749,654
Notes payable (net of discount of $3,332,374). . . . . . . . . . . . . . . . . . . . . . 267,635
Notes payable to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238,381
Capital lease obligation - current . . . . . . . . . . . . . . . . . . . . . . . . . . . 264,936
Derivative liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,981,306
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,048,530
Capital lease obligation - long-term . . . . . . . . . . . . . . . . . . . . . . . . . . 172,505
Convertible debentures - long-term (net of discount of $784,542) . . . . . . . . . . . . 126,458
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,347,493
Redeemable instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,750

Commitments (See Note J below) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -

STOCKHOLDERS' DEFICIT
Preferred stock, $.01 par value, 10,000,000 shares authorized,
of which 50,000 shares are designated as Series A
Series A convertible preferred stock, 50,000 shares authorized;
40,000 shares issued, 14,722 outstanding; $147,000 liquidation value . . . . . . . . . 147,000
Common stock, $.01 par value, 1,500,000,000 shares authorized;
236,213,848 shares issued and outstanding. . . . . . . . . . . . . . . . . . . . . . . 2,362,140
Common stock subscribed (559,876 shares) . . . . . . . . . . . . . . . . . . . . . . . . 5,599
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,022,934
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . (541)
Prepaid warrant exercises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000
Deferred stock compensation and consulting . . . . . . . . . . . . . . . . . . . . . . . (94,374)
Deficit incurred prior to development stage. . . . . . . . . . . . . . . . . . . . . . . (7,427,422)
Deficit accumulated during the development stage . . . . . . . . . . . . . . . . . . . . (29,078,617)
Total stockholders' deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,090,134)
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,310,109

<FN>
See notes to consolidated financial statements

F-2

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DNAPrint Genomics, Inc.
-----------------------
(A Development Stage Enterprise)
--------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Period
December 10, 1998
For the Year Ended For the Year Ended (date of inception)
December 31, 2005 December 31, 2004 to December 31, 2005
------------------ ------------------ ------------------

SALES $ 1,275,503 $ 785,632 $ 3,041,711

COST OF SALES 950,472 507,927 2,063,499

GROSS PROFIT 325,031 277,705 978,212

OTHER OPERATING EXPENSES:
Research and development 2,122,383 1,561,142 10,768,050
General and administrative 2,864,548 2,050,981 10,764,484
Total other operating expenses 4,986,931 3,612,123 21,532,534
------------------ ------------------ ------------------

LOSS FROM OPERATIONS (4,661,900) (3,334,418) (20,554,322)

OTHER INCOME (EXPENSES):
Interest expense (50,370) (58,475) (1,495,273)
Intrinsic value of convertible debt and
non-detachable warrants and debt discount amortization (1,953,084) - (2,453,084)
Interest income 15,974 15,974
Amortization of deferred financing fees (333,255) (22,954) (356,209)
Sale of option to Orchid Biosciences - - 353,090
Loss on disposal of investments - - (349,006)
Loss on derivative contracts, net (1,610,905) - (1,610,905)
Stock based settlement expense - - (152,437)
Foreign currency loss (7,060) - (7,060)
Other expenses (115,252) (319,135) (481,157)
Total other income (expenses) - net (4,053,952) (400,564) (6,536,067)
------------------ ------------------ ------------------

NET LOSS $ (8,715,852) $ (3,734,982) $ (27,090,389)

NET LOSS PER SHARE - Basic and Diluted $ (0.09) $ (0.11) $ (0.84)

SHARES USED IN COMPUTING NET LOSS PER SHARE - Basic and Diluted 93,531,222 35,373,731 32,353,028
<FN>
See notes to consolidated financial statements

F-3

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DNAPrint Genomics, Inc.
-----------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------------------------
(A Development Stage Enterprise)
--------------------------------

Preferred Stock Common Stock
Shares Amount Shares Amount
------------------ ------------------ ------------------ ------------------
BALANCES, DECEMBER 10, 1998 - $ - 1,470,050 $ 14,701
Stock issued for acquisition of DNAPrint
Genomics, Inc. (FL) in Pooling of Interests - - 9,600,000 96,000
Common stock issued for reorganization/court
order at $0.47 per share - - 6,250,000 62,500
Adjustment due to subsidiaries liquation in
bankruptcy - - - -
Net loss for the year ended December 31, 1999 - - - -
------------------ ------------------ ------------------ ------------------
BALANCES, DECEMBER 31, 1999 - - 17,320,050 173,201
Stock issued for advertising and marketing
services at $0.40 per share - - 400,000 4,000
Increases in stock issued for acquisition of
land at $1.33 per share - - 1,500,000 15,000
Net loss for the year ended December 31, 2000 - - - -
Unrealized loss on securities - - - -
Subscription receivable payments - - - -
Deferred stock compensation related to
stock option grants - - - -
Dividend paid in common stock of Heroes, Inc. - - - -
BALANCES, DECEMBER 31, 2000 - - 19,220,050 192,201
Common stock issuances: - - - -
Via 506 Private Placement at $1.00 per share - - 716,200 7,162
For consulting services at $1.00 per share - - 40,000 400
Through funding agreement with TBFI at $1.00 per share - - 390,831 3,908
From exercise of nonqualified stock options at
$1.22 per share - - 562,500 5,625
For bankruptcy settlements at $0..40 per share - - 534,788 5,348
Loss on investment - - - -
Recovery of subscription receivables - - - -
Deferred stock compensation related to
stock option grants - - - -
Amortization of deferred stock compensation - - - -
Net loss for the year ended December 31, 2001 - - - -
BALANCES, DECEMBER 31, 2001 - - 21,464,369 214,644
Common stock issuances:
Via 506 Private Placement at $0.36 per share - - 69,444 694
For consulting services at $0.80 per share - - 2,500 25
For consulting services at $1.26 per share - - 2,103 21
For consulting services at $1.34 per share - - 2,500 25
From exercise of nonqualified stock options
at $0.97 per share - - 127,778 1,278
From exercise of nonqualified stock options
at $1.18 per share - - 125,000 1,250
From exercise of employee stock options - - 47,249 472
For settlement of related party notes payable
at $1.26 per share - - 727,368 7,274
Per settlement agreement with TBFI - - - -
Deferred stock compensation related
to stock option grants - - - -
Amortization of deferred stock compensation - - - -
Net loss for the year ended December 31, 2002 - - - -
BALANCES, DECEMBER 31, 2002 - - 22,568,311 225,683
------------------ ------------------ ------------------ ------------------

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Additional Common Stock Deferred
Paid in Stock Subscription Prepaid Stock
Capital Subscribed Receivable Warrants Compensation
-------------- -------------- -------------- -------------- --------------
BALANCES, DECEMBER 10, 1998 $ 5,256,690 $ - $ - $ - $ -
Stock issued for acquisition of DNAPrint
Genomics, Inc. (FL) in Pooling of Interests 904,000 - (1,000,000) - -
Common stock issued for reorganization/court
order at $0.47 per share 2,874,980 - - - -
Adjustment due to subsidiaries liquation in bankruptcy - - - - -
Net loss for the year ended December 31, 1999 - - - - -
-------------- -------------- -------------- -------------- --------------
BALANCES, DECEMBER 31, 1999 9,035,670 - (1,000,000) - -
Stock issued for advertising and marketing
services at $0.40 per share 156,000 - - - -
Increases in stock issued for acquisition of land at
$1.33 per share 1,985,000 - - - -
Net loss for the year ended December 31, 2000 - - - - -
Unrealized loss on securities - - - - -
Subscription receivable payments - - 539,500 - -
Deferred stock compensation related
to stock option grants 731,450 - - - (731,450)
Dividend paid in common stock of Heroes, Inc. - - - - -
BALANCES, DECEMBER 31, 2000 11,908,120 - (460,500) - (731,450)
-------------- -------------- -------------- -------------- --------------
Common stock issuances: - - - - -
Via 506 Private Placement at $1.00 per share 709,038 - - - -
For consulting services at $1.00 per share 39,600 - - - -
Through funding agreement with TBFI at
$1.00 per share 386,923 - - - -
From exercise of nonqualified stock options
at $1.22 per share 681,250 - - - -
For bankruptcy settlements at $0.40 per share 208,568 - - - -
Loss on investment - - - - -
Recovery of subscription receivables - - 460,500 - -
Deferred stock compensation related to stock
option grants 22,100 - - - (22,100)
Amortization of deferred stock compensation - - - - 219,530
Net loss for the year ended December 31, 2001 - - - - -
-------------- -------------- -------------- -------------- --------------
BALANCES, DECEMBER 31, 2001 13,955,599 - - - (534,020)
Common stock issuances:
Via 506 Private Placement at $0.36 per share 24,306 - - - -
For consulting services at $0.80 per share 1,975 - - - -
For consulting services at $1.26 per share 2,628 - - - -
For consulting services at $1.34 per share 3,325 - - - -
From exercise of nonqualified stock options
at $0.97 per share 122,221 - - - -
From exercise of nonqualified stock options
at $1.18 per share 146,250 - - - -
From exercise of employee stock options (472) - - - -
For settlement of related party notes payable
at $1.26 per share 909,209 - - - -
Per settlement agreement with TBFI 34,200 - - - -
Deferred stock compensation related to
stock option grants 171,800 - - - (171,800)
Amortization of deferred stock compensation - - - - 269,694
Net loss for the year ended December 31, 2002 - - - - -
BALANCES, DECEMBER 31, 2002 15,371,041 - - - (436,126)
<FN>
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Deficit Deficit
incurred accumulated Accumulated
prior during the Other
development Comprehensive Comprehensive
stage stage Income Total
------------------ ------------------ ------------------ ------------------
BALANCES, DECEMBER 10, 1998 $ (7,427,422) $ (44,244,627) $ 222,443 $ (46,178,215)
Stock issued for acquisition of DNAPrint
Genomics, Inc. (FL) in Pooling of Interests - - - -
Common stock issued for reorganization/court
order at $0.47 per share - - - 2,937,480
Adjustment due to subsidiaries liquation in bankruptcy - 63,355,809 - 63,355,809
Net loss for the year ended December 31, 1999 - (20,061,513) - (20,061,513)
------------------ ------------------ ------------------ ------------------
BALANCES, DECEMBER 31, 1999 (7,427,422) (950,331) 222,443 53,561
Stock issued for advertising and marketing services
at $0.40 per share - - - 160,000
Increases in stock issued for acquisition of
land at $1.33 per share - - - 2,000,000
Net loss for the year ended December 31, 2000 - (191,789) - (191,789)
Unrealized loss on securities - - (197,298) (197,298)
Subscription receivable payments - - - 539,500
Deferred stock compensation related to stock
option grants - - - -
Dividend paid in common stock of Heroes, Inc. - (1,988,228) - (1,988,228)
------------------ ------------------ ------------------ ------------------
BALANCES, DECEMBER 31, 2000 (7,427,422) (3,130,348) 25,145 375,746
Common stock issuances:
Via 506 Private Placement at $1.00 per share - - - 716,200
For consulting services at $1.00 per share - - - 40,000
Through funding agreement with TBFI at $1.00 per share - - - 390,831
From exercise of nonqualified stock options at $1.22
per share - - - 686,875
For bankruptcy settlements at $0.40 per share - - - 213,916
Loss on investment - - (25,145) (25,145)
Recovery of subscription receivables - - - 460,500
Deferred stock compensation related to stock
option grants - - - -
Amortization of deferred stock compensation - - - 219,530
Net loss for the year ended December 31, 2001 - (2,593,906) - (2,593,906)
------------------ ------------------ ------------------ ------------------
BALANCES, DECEMBER 31, 2001 (7,427,422) (5,724,254) - 484,547
Common stock issuances:
Via 506 Private Placement at $0.36 per share - - - 25,000
For consulting services at $0.80 per share - - - 2,000
For consulting services at $1.26 per share - - - 2,649
For consulting services at $1.34 per share - - - 3,350
From exercise of nonqualified stock options at
$0.97 per share - - - 123,499
From exercise of nonqualified stock options at
$1.18 per share - - - 147,500
From exercise of employee stock options - - - -
For settlement of related party notes payable at
$1.26 per share - - - 916,483
Per settlement agreement with TBFI - - - 34,200
Deferred stock compensation related to
stock option grants - - - -
Amortization of deferred stock compensation - - - 269,694
Net loss for the year ended December 31, 2002 - (3,113,624) - (3,113,624)
BALANCES, DECEMBER 31, 2002 (7,427,422) (8,837,878) - (1,104,702)

<FN>
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Preferred Stock Common Stock
Shares Amount Shares Amount
-------------- -------------- -------------- --------------
Common stock issuances:
For settlement of related party notes payable and interest at $0.64 - - 865,399 8,654
For settlement of related party notes payable and interest at $0.64 - - 403,362 4,034
For settlement of related party notes payable and interest at $1.48 - - 135,502 1,355
For settlement of related party notes payable and interest at $1.44 - - 404,630 4,046
For consulting services at $0.60 per share - - 139,043 1,391
For consulting services at $.096 per share - - 16,686 167
For consulting and scientific advisory board services
at $1.47 per share - - 13,497 135
For scientific advisory board services at $.095 per share - - 5,000 50
For accounting services at $0.52 per share - - 4,208 42
For legal services at $1.35 per share - - 2,917 29
For legal services at $1.54 per share - - 3,539 35
For legal services at $1.28 per share - - 3,180 32
For legal services at $1.01 per share - - 2,990 30
For legal services at $0.97 per share - - 6,404 64
For consulting services at $0.63 per share - - 6,729 67
For legal services at $0.55 per share - - 42,196 422
For consulting services at $0.99 - - 32,608 326
From exercise of nonqualified stock options at $.058 per share - - 294,118 2,941
From exercise of nonqualified stock options at $2.70 per share - - 208,333 2,083
From exercise of nonqualified stock options at $2.20 per share - - 208,333 2,083
From exercise of nonqualified stock options at $1.44 per share - - 151,515 1,515
From exercise of nonqualified stock options at $1.22 per share - - 161,290 1,613
Via 506 private placement at $0.30 per share - - 33,333 333
Via 506 private placement at $0.29 per share - - 138,889 1,389
For settlement with TBFI. at $1.64 per share - - 238,183 2,382
Conversion of debt to common stock and exercise of
non-detachable warrants - - 104,737 1,048
Amortization of deferred stock compensation - - - -
Deferred stock compensation costs - - - -
Stock options cancelled - - - -
Common stock subscribed - - - -
Intrinsic value of convertible debt and warrants - - - -
Stock issuance costs - - - -
Warrants issued for stock issuance costs - - - -
Net loss for the year ended December 31, 2003 - - - -
-------------- -------------- -------------- --------------
BALANCES, DECEMBER 31, 2003 - - 26,194,932 261,949

Common stock issuances:
Stock issued that was subscribed in the prior year - - 5,768,315 57,683
For accrued expenses at $0.55 per share - - 76,118 761
For consulting services and accrued expenses at
$1.12 per share - - 250,000 2,500
For consulting services at $0.60 per share - - 2,500 25
For consulting services at $0.84 per share - - 2,500 25
For consulting services at $0.20 per share - - - -
For consulting services at $0.40 per share - - - -
For consulting services at $0.40 per share - - 9,771 98
Conversion of debt to common stock and exercise of
$20.00 per share non-detachable warrants - - 14,642,827 146,428
Exercise of options - - 9,250 93
Prepaid monies for future exercise of warrants - - - -
Preferred stock Series A issued to investors 40,000 400 - -
Stock options cancelled - - - -
Amortization of deferred stock compensation - - - -
Stock issuance costs - - - -
Warrants issued for stock issuance costs - - - -
Net loss for the year ended December 31, 2004 - - - -
BALANCE DECEMBER 31, 2004 40,000 400 46,956,213 469,562

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Additional Common Stock Deferred
Paid in Stock Subscription Prepaid Stock
Capital Subscribed Receivable Warrants Compensation
-------------- -------------- -------------- -------------- --------------
Common stock issuances:
For settlement of related party notes payable
and interest at $064 545,201 - - - -
For settlement of related party notes payable
and interest at $0.64 254,117 - - - -
For settlement of related party notes payable
and interest at $1.48 199,188 - - - -
For settlement of related party notes payable
and interest at $1.44 578,621 - - - -
For consulting services at $0.60 per share 82,035 - - - -
For consulting services at $0.95 per share 15,835 - - - -
For consulting and scientific advisory
board services at $1.47 per share 19,697 - - - -
For scientific advisory board services at $0.95
per share 4,700 - - - -
For accounting services at $0.52 per share 2,157 - - - -
For legal services at $1.35 per share 3,914 - - - -
For legal services at $1.54 per share 5,429 - - - -
For legal services at $1.28 per share 4,051 - - - -
For legal services at $1.01 per share 2,990 - - - -
For legal services at $0.97 per share 6,135 - - - -
For consulting services at $0.63 per share 4,155 - - - -
For legal services at $055 per share 22,583 - - - -
For consulting services at $0.99 31,977 - - - -
From exercise of nonqualified stock options at
$0.58 per share 167,647 - - - -
From exercise of nonqualified stock options at
$2.70 per share 560,417 - - - -
From exercise of nonqualified stock options at
$2.20 per share 456,250 - - - -
From exercise of nonqualified stock options at
$1.44 per share 216,667 - - - -
From exercise of nonqualified stock options at
$1.22 per share 195,161 - - - -
Via 506 private placement at $0.30 per share 9,667 - - - -
Via 506 private placement at $0.29 per share 38,611 - - - -
For settlement with TBFI. at $1.64 per share 388,238 - - - -
Conversion of debt to common stock and
exercise of non-detachable warrants 78,952 - - - -
Amortization of deferred stock compensation - - - - 1,378,637
Deferred stock compensation costs - - - - (1,848,750)
Stock options cancelled (170,883) - - - 170,883
Common stock subscribed 2,932,804 57,683 - - -
Intrinsic value of convertible debt and warrants 500,000 - - - -
Stock issuance costs (173,523) - - - -
Warrants issued for stock issuance costs 80,000 - - - -
Net loss for the year ended December 31, 2003 - - - - -
BALANCES, DECEMBER 31, 2003 22,433,834 57,683 - - (735,356)
Common stock issuances:
Stock issued that was subscribed in the prior year - (57,683) - - -
For accrued expenses at $0.55 per share 41,104 - - - -
For consulting services and accrued expenses
at $1.12 per share 277,500 - - - -
For consulting services at $0.60 per share 1,475 - - - -
For consulting services at $0.84 per share 2,075 - - - -
For consulting services at $0.20 per share 2,381 125 - - -
For consulting services at $0.40 per share 3,053 78 - - -
For consulting services at $0.40 per share 3,779 - - - -
Conversion of debt to common stock and
exercise of $20.00 per share non-detachable
warrants 4,329,067 4,505 - (90,000) -
Exercise of options (93) - - - -
Prepaid monies for future exercise of warrants - - - 345,000 -
Preferred stock Series A issued to investors 399,600 - - - -
Stock options cancelled (19,950) - - - 19,950
Amortization of deferred stock compensation - - - - 689,335
Stock issuance costs (489,335) - - - -
Warrants issued for stock issuance costs 197,633 - - - -
Net loss for the year ended December 31, 2004 - - - - -
-------------- -------------- -------------- -------------- --------------
BALANCE DECEMBER 31, 2004 27,182,123 4,708 - 255,000 (26,071)
<FN>
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Deficit Deficit
incurred accumulated Accumulated
prior during the Other
development Comprehensive Comprehensive
stage stage Income Total
------------- ------------- ------------- -------------
Common stock issuances:
For settlement of related party notes payable and interest at $064 - - - 553,855
For settlement of related party notes payable and interest at $0.64 - - - 258,151
For settlement of related party notes payable and interest at $1.48 - - - 200,543
For settlement of related party notes payable and interest at $1.44 - - - 582,667
For consulting services at $0.60 per share - - - 83,426
For consulting services at $0.96 per share - - - 16,002
For consulting and scientific advisory board services at $1.47 per share - - - 19,832
For scientific advisory board services at $0.95 per share - - - 4,750
For accounting services at $0.52 per share - - - 2,199
For legal services at $1.35 per share - - - 3,943
For legal services at $1.54 per share - - - 5,464
For legal services at $1.28 per share - - - 4,083
For legal services at $1.01 per share - - - 3,020
For legal services at $0.97 per share - - - 6,199
For consulting services at $0.63 per share - - - 4,222
For legal services at $0.55 per share - - - 23,005
For consulting services at $0.99 - - - 32,303
From exercise of nonqualified stock options at $0.58 per share - - - 170,588
From exercise of nonqualified stock options at $2.70 per share - - - 562,500
From exercise of nonqualified stock options at $2.20 per share - - - 458,333
From exercise of nonqualified stock options at $1.44 per share - - - 218,182
From exercise of nonqualified stock options at $1.22 per share - - - 196,774
Via 506 private placement at $0.30 per share - - - 10,000
Via 506 private placement at $0.29 per share - - - 40,000
For settlement with TBFI. at $1.64 per share - - - 390,620
Conversion of debt to common stock and exercise
of non-detachable warrants - - - 80,000
Amortization of deferred stock compensation - - - 1,378,637
Deferred stock compensation costs - - - (1,848,750)
Stock options cancelled - - - -
Common stock subscribed - - - 2,990,487
Intrinsic value of convertible debt and warrants - - - 500,000
Stock issuance costs - - - (173,523)
Warrants issued for stock issuance costs - - - 80,000
Net loss for the year ended December 31, 2003 - (7,789,905) - (7,789,905)
------------- ------------- ------------- -------------
BALANCES, DECEMBER 31, 2003 (7,427,422) (16,627,783) - (2,037,095)
Common stock issuances:
Stock issued that was subscribed in the prior year - - - -
For accrued expenses at $0.55 per share - - - 41,865
For consulting services and accrued expenses at $1.12 per share - - - 280,000
For consulting services at $0.60 per share - - - 1,500
For consulting services at $0.84 per share - - - 2,100
For consulting services at $0.20 per share - - - 2,506
For consulting services at $0.40 per share - - - 3,131
For consulting services at $0.40 per share - - - 3,877
Conversion of debt to common stock and
exercise of 20.00 per share non-detachable warrants - - - 4,390,000
Exercise of options - - - -
Prepaid monies for future exercise of warrants - - - 345,000
Preferred stock Series A issued to investors - - - 400,000
Stock options cancelled - - - -
Amortization of deferred stock compensation - - - 689,335
Stock issuance costs - - - (489,335)
Warrants issued for stock issuance costs - - - 197,633
Net loss for the year ended December 31, 2004 - (3,734,982) - (3,734,982)
------------- ------------- ------------- -------------
BALANCE DECEMBER 31, 2004 (7,427,422) (20,362,765) - 95,535
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Preferred Stock Common Stock
Shares Amount Shares Amount
-------------- -------------- -------------- --------------
Net loss for the year ended December 31, 2005 - - - -
Foreign currency translation losses - - - -
Comprehensive loss
Common stock issuances:
For stock that was issuable at prior year end - - 470,815 4,709
For shares issued for compensation at $.014 per share - - 2,928,043 29,280
For shares issued for investor relations services at $.017 per share - - 2,000,000 20,000
For shares issued for consulting at $.018 per share - - - -
For shares issued for consulting at $.021 per share - - 254,788 2,548
For shares issued for consulting at $.022 per share - - 454,966 4,550
For shares issued for investor relations services at $.060 per share - - 2,000,000 20,000
For shares issued for consulting at $.120 per share - - 24,315 243
For shares issued for consulting at $.203 per share - - 26,394 264
For Kenna Technologies, Inc. acquisition at $.015 - - 1,499,998 15,000
For assets acquired from Ellipsis Biotherapeutics, Inc. at $0.023 - - 6,500,000 65,000
For Trace Genetics, Inc. acquisition at $0.216 - - 1,250,000 12,500
For the conversion of preferred stock (25,278) (253) 2,499,364 24,994
Conversion of debt to common stock and exercise
of $1.00 per share non-detachable warrants - - 86,686,596 866,866
Dutchess shares issued through put agreement - - 78,912,356 789,124
Dutchess shares issued in conjunction with note - - 3,750,000 37,500
Amortization of deferred stock compensation and consulting - - - -
Stock issuance costs - - - -
Intrinsic value of convertible debt and warrants - - - -
Warrants issued for stock issuance costs - - - -
Warrants issued for Trace Genetics, Inc. acquisition - - - -
Warrants issued for consulting - - - -
Conversion feature of preferred stock reclassified
to a liability due to indeterminate shares from a derivative - - - -
Conversion feature of convertible debt reclassified
to a liability due to indeterminate shares from a derivative - - - -
Warrants outstanding classified as a liability due to
indeterminate shares from a derivative - - - -
BALANCE DECEMBER 31, 2005 14,722 $ 147 236,213,848 $ 2,362,140
============== ============== ============== ==============
<FN>
(Continued)

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Additional Common Stock Deferred
Paid in Stock Subscription Prepaid Stock
Capital Subscribed Receivable Warrants Compensation
-------------- -------------- -------------- -------------- --------------
Net loss for the year ended December 31, 2005 - - - - -
Foreign currency translation losses - - - - -
Comprehensive loss - - - - -
Common stock issuances: - - - - -
For stock that was issuable at prior yearend - (4,709) - - -
For shares issued for compensation at $.014 per share 12,590 - - - -
For shares issued for investor relations services at
$.017 per share 14,000 - - - (34,000)
For shares issued for consulting at $.018 per share 19 25 - - -
For shares issued for consulting at $.021 per share 2,856 25 - - -
For shares issued for consulting at $.022 per share 11,198 4,972 - - -
For shares issued for investor relations services
at $.060 per share 100,000 - - - (120,000)
For shares issued for consulting at $.120 per share 2,674 - - - -
For shares issued for consulting at $.203 per share 5,090 - - - -
For Kenna Technologies, Inc. acquisition at $.015 7,500 - - - -
For assets acquired from Ellipsis Biotherapeutics,
Inc. at $0.023 84,500 - - - -
For Trace Genetics, Inc. acquisition at $0.216 257,500 - - - -
For the conversion of preferred stock (24,741) - - - -
Conversion of debt to common stock and
exercise of $1.00 per share non-detachable warrants 2,156,556 578 - (135,000) -
Dutchess shares issued through put agreement 1,023,636 - - - -
Dutchess shares issued in conjunction with note (37,500) - - - -
Amortization of deferred stock compensation
and consulting - - - - 320,033
Stock issuance costs (404,246) - - - -
Intrinsic value of convertible debt and warrants 250,000 - - - -
Warrants issued for stock issuance costs 108,371 - - - -
Warrants issued for Trace Genetics, Inc. acquisition 48,283 - - - -
Warrants issued for consulting 139,030 - - - (234,336)
Conversion feature of preferred stock reclassified
to a liability due to indeterminate shares from a
derivative (513,347) - - - -
Conversion feature of convertible debt reclassified
to a liability due to indeterminate shares from a
derivative (54,590) - - - -
Warrants outstanding classified as a liability due
to indeterminate shares from a derivative (348,568) - - - -
BALANCE DECEMBER 31, 2005 $ 30,022,934 $ 5,599 $ - $ 120,000 $ (94,374)
============== ============== ============== ============== ==============
<FN>
(Continued)

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Deficit Deficit
incurred accumulated Accumulated
prior during the Other
development Comprehensive Comprehensive
stage stage Income Total
------------- ------------- ------------- -------------
Net loss for the year ended December 31, 2005 (8,715,852) (8,715,852)
Foreign currency translation losses - - (541) (541)
Comprehensive loss - - (8,716,393)
Common stock issuances: - -
For stock that was issuable at prior yearend - - - -
For shares issued for compensation at $.014 per share - - - 41,870
For shares issued for investor relations services
at $.017 per share - - - -
For shares issued for consulting at $.018 per share - - - 44
For shares issued for consulting at $.021 per share - - - 5,429
For shares issued for consulting at $.022 per share - - - 20,720
For shares issued for investor relations services
at $.060 per share - - - -
For shares issued for consulting at $.120 per share - - - 2,917
For shares issued for consulting at $.203 per share - - - 5,354
For Kenna Technologies, Inc. acquisition at $.015 - - - 22,500
For assets acquired from Ellipsis Biotherapeutics, Inc. at $0.023 - - - 149,500
For Trace Genetics, Inc. acquisition at $0.216 - - - 270,000
For the conversion of preferred stock - - - -
Conversion of debt to common stock and exercise of $1.00
per share non-detachable warrants - - - 2,889,000
Dutchess shares issued through put agreement - - - 1,812,760
Dutchess shares issued in conjunction with note - - - -
Amortization of deferred stock compensation and consulting - - 320,033
Stock issuance costs - - - (404,246)
Intrinsic value of convertible debt and warrants - - - 250,000
Warrants issued for stock issuance costs - - - 108,371
Warrants issued for Trace Genetics, Inc. acquisition - - - 48,283
Warrants issued for consulting - - - (95,306)
Conversion feature of preferred stock reclassified to a liability
due to indeterminate shares from a derivative - - - (513,347)
Conversion feature of convertible debt reclassified to a liability
due to indeterminate shares from a derivative - - - (54,590)
Warrants outstanding classified as a liability due to
indeterminate shares from a derivative - - - (348,568)
BALANCE DECEMBER 31, 2005 $ (7,427,422) $(29,078,617) $ (541) $ (4,090,134)
============= ============= ============= =============
<FN>
See notes to consolidated financial statement

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DNAPrint Genomics, Inc.
-----------------------
(A Development Stage Enterprise)
--------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Period
For the Year For the Year December 10, 1998
Ended Ended (Date of Inception)
December 31, December 31, through December
2005 2004 31, 2005
-------------- -------------- --------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,715,852) $ (3,734,982) $ (27,090,389)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 224,077 182,774 895,768
Provision for bad debts - - 11,738
Impairment of assets - - 254,434
Loss on disposal of investments - - 11,772
Loss on disposal of property and equipment - - 5,039
Loss on foreign currency transaction 7,060 - 7,060
Loss on derivative contracts, net 1,610,905 - 1,610,905
Amortization of deferred stock
compensation and consulting 320,033 689,335 1,672,823
Amortization of deferred compensation - 179,691 919,792
Amortization of deferred financing fees 333,255 22,954 356,209
Common stock issued for interest
expense on related party notes payable - - 1,300,378
Common stock issued for
reorganization/court order - - 343,000
Common stock issued for services 76,334 27,114 2,340,116
Common stock issued for bankruptcy settlement - - 28,080
Stock issued for settlement - - 152,437
Intrinsic value of convertible debt and non-detachable
warrants and amortization of debt discount 1,953,084 - 2,453,084
Stock-based compensation - - 1,943,906
Changes in operating assets and liabilities,
net of effect of acquisitions:
(Increase) decrease in receivables (10,651) (34,263) 259,736
(Increase) decrease in inventory (222,858) (65,279) (288,137)
Decrease (increase) in prepaid expenses
and other assets 41,094 (65,009) (1,072,093)
Increase in accounts payable, deferred
revenues and accrued liabilities 777,642 (966,760) 2,138,861
-------------- -------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (3,605,877) (3,764,425) (11,745,481)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (123,596) (56,969) (956,094)
Loan to Biofrontera - (193,683) (193,683)
Investment in Biofrontera (2,274,702) - (2,274,702)
Payoff of Biofrontera loan 202,380 - 202,380
Proceeds from disposal of property and equipment - - 10,100
Net bankruptcy adjustment - - 511,274
-------------- -------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (2,195,918) (250,652) (2,700,725)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - related party - - 1,487,036
Proceeds from settlement with Tampa Bay Financial - - 272,383
Advances from Tampa Bay Financial, net - - 384,581
Proceeds from issuance of common stock, net of issuance costs 4,463,225 4,348,718 10,782,415
Proceeds from issuance of Series A preferred stock,
net of stock issuance costs - 272,535 272,535
Prepayment for future warrant exercises (135,000) 255,000 120,000
Proceeds from convertible debenture and notes payable,
net of costs 4,102,995 - 4,602,995
Repayment of notes payable (1,559,991) - (1,559,991)
Repayment of notes payable, related parties (33,634) (83,009) (467,443)
Collections from stock subscriptions - - 836,960
Principal payments on capital lease obligations (207,629) (65,553) (478,559)
-------------- -------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,629,966 4,727,691 16,252,912
-------------- -------------- --------------
Effect of exchange rate changes on cash (60) - (60)
NET INCREASE IN CASH AND CASH EQUIVALENTS 828,111 712,614 1,806,646
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 978,535 265,921 -
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,806,646 $ 978,535 $ 1,806,646
============== ============== ==============
<FN>
(Continued)

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[Enlarge/Download Table]

For the Period
For the Year For the Year December 10, 1998
Ended Ended (Date of Inception)
December 31, December 31, through December
2005 2004 31, 2005
-------------- -------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Approximate Interest Paid $ 34,104 $ 40,366 $ 127,770
Income taxes paid $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Stock subscription receivable arising from acquisition
of DNAPrint Genomics, Inc. (Florida) $ - $ - $ 1,000,000
Common stock issued for related party notes payable $ - $ - $ 1,211,322
Unrealized loss on long-term investments $ - $ - $ (222,443)
Common stock issued for land subsequently swapped for
investment in Heroes, Inc $ - $ - $ 2,000,000
Dividend paid in stock of Heroes, Inc. $ - $ - $ (1,988,228)
Common stock issued for reorganization /court order arising
from conversion of claim to stock $ - $ - $ (2,905,500)
Conversion of Tampa Bay Financial advances to stock $ - $ - $ 453,331
Equipment leased under capital lease $ 217,500 $ 223,762 $ 701,167
Deferred compensation on grants of stock options $ - $ - $ 925,350
Deferred compensation reduced for stock options cancelled $ - $ (19,950) $ (190,833)
Stock to be issued for deferred compensation $ - $ - $ 2,588,250
Common stock issued for satisfaction of accrued expenses $ - $ 307,865 $ 307,865
Warrants issued for stock issuance costs, notes payable
fees and consulting $ 1,083,047 $ 197,633 $ 1,360,680
Debenture converted into common stock $ 189,000 $ 280,000 $ 499,000
Intrinsic value of convertible debt and
non-detachable warrants and debt discount $ 6,070,000 $ - $ 6,070,000
Acquisition of Trace Genetics, Inc, Kenna Technologies,
Inc. and the assets of Ellipsis Biotherapeutics, Inc. for
common stock and warrants $ 490,283 $ - $ 490,283
Preferred stock issued for satisfaction of accrued expenses $ 253 $ - $ 253
Preferred stock issued for satisfaction of accrued expenses $ $ 110,000 $ 110,000
Derivative liability for warrants, convertible feature of
preferred stock and convertible feature for certain
convertible debt reclassed from equity due to SFAS 133
derivative indeterminate shares $ 916,505 $ - $ 916,505
<FN>
See notes to consolidated financial statements

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DNAPrint Genomics, Inc.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations
----------------------

DNAPrint Genomics, Inc. ("DNAP Utah"), which was organized for the purpose of
investing in all forms of investments, was initially incorporated under the laws
of the State of Utah on January 3, 1983 as Lexington Energy, Inc, and
subsequently changed its focus to human genome sciences. In connection with this
change in focus, on July 15, 2000, DNAP Utah acquired DNAPrint Genomics, Inc. a
Florida corporation ("DNAP Florida") through the issuance of 9,600,000 shares of
its common stock which was accounted for as a pooling of interests. DNAP Florida
specializes in the research and development of genomic products and provides
scientific services and tests to the genealogy, forensic, pharmaceutical and
genetics markets. On June 17, 2005, we acquired Trace Genetics, Inc. ("Trace
Genetics"). DNAP Florida and Trace Genetics specialize in the research and
development of genomic products and provide scientific services and tests to the
genealogy, forensic, pharmaceutical and genetics markets. On October 12, 2005 we
formed DNAPrint Pharmaceuticals, Inc., a wholly-owned pharmaceutical subsidiary
focused on personalized medicine. On October 25, 2005, we acquired all of the
stock of Kenna Technologies, Inc. ("Kenna"). Kenna develops software and related
technologies for building computational models that mimic complex biological
systems. On November 30, 2005, we acquired certain assets of a Canadian company
which are used in our drug and diagnostic discovery business. We formed Ellipsis
Biotherapeutics Corporation ("Ellipsis") a Toronto-based corporation to acquire
these assets. As a result of these acquisitions, the accompanying consolidated
financial statements include the accounts of DNAP Utah and all of its
wholly-owned operating subsidiaries (collectively referred to as "we", "us",
"our"). All significant intercompany accounts and balances have been eliminated
in consolidation.

DNAPrint Genomics, Inc. has been and continues to be a development stage company
as described in Financial Accounting Standards Board Statement No. 7. We
continue to devote substantially all of our efforts in initiating and developing
our planned principal operations. While sales of our ancestry, forensic,
paternity services and our genotyping services are increasing, our
pharmacogenomics products are still in development.

Revenue Recognition
--------------------

In accordance with SEC Staff Accounting Bulletin Topic 13, revenues are
recognized when we have persuasive evidence an arrangement exists including a
fixed price, collection is reasonably assured, the services have been provided
and delivered to the customer and no additional performance is required by us.
We are currently providing ancestry, forensic, paternity and genotyping
services. Deferred revenue represents the unearned portion of payments received
in advance of our tests being completed and delivered to our customers. Our
services are performed at the request of our customers and after the
agreement/arrangement has been entered into, we do not generally give refunds to
our customer as we have begun to incur or incurred the costs associated with
that service. Our software program ADMIXMAP is currently for internal use solely
by our scientists and we do not generate revenue from any sales thereof.

Use of Estimates
------------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period.

Financial Instruments
----------------------

Our financial instruments include cash, receivables, current assets, current
liabilities and notes payables. We believe the estimated fair value of such
financial instruments at December 31, 2005 approximate their carrying value as
reflected in the consolidated balance sheets due to their short-term nature. It
is not practicable for us to estimate the fair value of our convertible
debentures as there are not currently any quoted market prices available. We are
in development stage and it is difficult to get debt financing. In addition,
these debentures have a convertible feature. Thus it is difficult to determine
the fair value. The carrying amount for these convertible debentures at December
31, 2005 is $911,000.

Accounts Receivable
--------------------

Accounts receivable consist of ancestry, forensic, and genotyping services to
our distributors and genotyping customers. We generally require prepayment for
ancestry services, and perform ongoing credit evaluations of our customers. We
record an allowance for doubtful accounts to allow for any amounts that may not
be recoverable, which is based on an analysis of our prior collection
experience, customer credit worthiness, and current economic trends. Based on
management's review of accounts receivable, an allowance for doubtful accounts
of $8,740 at December 31, 2005 is considered adequate. We determine receivables
to be past due based on the payment terms of original invoices.

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Concentrations of Credit Risk
--------------------------------

Financial instruments, which potentially subject us to significant
concentrations of credit risk, consist primarily of cash and receivables. With
respect to cash and cash equivalents, we maintained all of our cash and cash
equivalents in deposit accounts with three financial institutions in the United
States, which deposit accounts at times may exceed federally insured limits.
Generally, these deposits may be redeemed upon demand and, therefore, bear
minimal risk. At December 31, 2005, we had a receivable from a distributor which
was 18% and another receivable from a customer of 12% of our outstanding
accounts receivable balance. We also had sales of 21% and 12% to two customers
during 2005.

Inventory
---------

Inventories are stated at the lower of cost (first-in, first-out basis) or
market. At December 31, 2005, inventory consisted of $298,685 of raw material.

Property and Equipment
------------------------

Property and equipment are recorded at historical cost. Major additions are
capitalized, while minor additions and maintenance and repairs, which do not
extend the useful life of an asset, are charged to operations when incurred.
When property and equipment are sold or otherwise disposed of, the asset account
and related accumulated depreciation account are relieved, and any gain or loss
is included in operations. Depreciation is provided primarily using the
straight-line method over the assets' estimated useful lives of two to five
years. Amortization of leasehold improvements, included with depreciation, is
computed using the straight-line method over the estimated useful life of the
asset or the term of the lease, whichever is shorter. Estimated useful lives are
periodically reviewed and, where appropriate, changes are made prospectively.

Long Lived Assets
-------------------

We periodically review our long-lived assets for indications of impairment
whenever circumstances and situations change such that there is an indication
that the carrying amounts may not be recoverable. If the non-discounted future
cash flows of the enterprise are less than their carrying amount, their carrying
amounts are reduced to fair value and an impairment loss is recognized. There
was no impairment of long-lived assets during the year ended December 31, 2005
and 2004.

Research & Development
------------------------

Research and Development ("R&D") expenses are fully charged to the consolidated
statements of operations when incurred. We do not perform R&D for other
entities. We do have consulting arrangements which provides added depth to our
team. These arrangements are typically based upon a fee paid monthly or
quarterly. We also purchase samples that we use in our testing, and these
samples are expensed when purchased. Direct materials and laboratory supplies
are charged to R&D at the time they are used in R&D. Our R&D costs also include
salaries and related personnel expenses, equipment expenses and administrative
expenses that are allocated to R&D based upon personnel costs.

Income Taxes
-------------

Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective income
tax basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized as income in the
period that included the enactment date.

Valuation allowances have been established against our deferred tax assets due
to uncertainties in our ability to generate sufficient taxable income in future
periods to make realization of such assets more likely than not. We have not
recognized an income tax benefit for our operating losses generated during 2005
and 2004 based on uncertainties concerning our ability to generate taxable
income in future periods. There was no income tax receivable or payable at
December 31, 2005 and 2004. In future periods, tax benefits and related deferred
tax assets will be recognized when management considers realization of such
amounts to be more likely than not.

Statement of Cash Flows
--------------------------

For purposes of the statement of cash flows, we consider all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.

Advertising
-----------

Advertising costs, which approximated $202,105 and $24,585, respectively, for
the years ended December 31, 2005 and 2004, are expensed as they are incurred.

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Stock-Based Compensation
-------------------------

We account for equity instruments (except stock options) issued to employees for
services based on the fair value of the equity instruments issued and account
for equity instruments issued to non-employees based on the fair value of the
consideration received or the fair value of the equity instruments, whichever is
more reliably measurable. We recognize as expense the fair value of all
stock-based awards to employees on the date of grant and to non-employees based
upon the measurement date. The amount related to the value of the stock awards
is amortized on a straight-line basis over the required service periods.

For all stock option awards to employees and board of directors, we have elected
to apply the intrinsic value based method of accounting as prescribed by
Accounting Principles Board Opinion ("APB") No. 25 "Accounting for Stock Issued
to Employees" and related Interpretations. Under the intrinsic value based
method, compensation cost is the excess of the quoted market price of the stock
at grant date or other measurement date over the amount an employee must pay to
acquire the stock. The following table illustrates the effect on net loss and
loss per share as if the fair value based method of accounting had been applied
to stock-based employee compensation, as required by Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation"
and SFAS 148 "Accounting for Stock-Based Compensation - transition and
disclosure", an amendment of SFAS No. 123 for the years ended December 31, 2005
and 2004:

[Download Table]

2004 2005
------------ ------------
Net loss as reported $ 8,715,852 $ 3,734,982
Total stock-based employee compensation expenses
determined under fair value based method for all awards,
net of related tax effects 1,942,225 211,777
Pro forma net loss $10,658,077 $ 3,946,759
============ ============
Loss per share basic and diluted:
As reported $ 0.09 $ 0.11
============ ============
Pro forma $ 0.11 $ 0.11
============ ============

See Note I, for additional disclosure and discussion of our option plan and
option activity.

Derivative Financial Instruments
----------------------------------

We do not use derivative financial instruments to hedge exposures to cash flow
or market risks. However, our notes outstanding with Dutchess have certain
derivatives such as:

- embedded conversion features that are indexed to our common stock (if
we were to default on the notes)

- shares that were issued as incentive shares which are classified as
liabilities when physical or net-share settlement is not within our control
and

- embedded conversion features in the convertible debentures that are
indexed to our common stock

In such instances, net-cash settlement is assumed for financial accounting and
reporting, even when the terms of the underlying contracts do not provide for
net-cash settlement. Such financial instruments are initially recorded at fair
value and subsequently adjusted to fair value at the close of each reporting
period with any difference recorded as a gain or loss on derivatives in our
Statement of Operations. If any of the derivatives could potentially result in
our having indeterminable shares (i.e. from a conversion price that is indexed
to our stock), we then are required per Emerging Issues Task Force ("EITF")
00-19 Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock to classify all other convertible
preferred stock, convertible debt and outstanding warrants (that by their own
contract terms were not considered to be a derivative) at fair value as a
derivative liability. The initial entry to record the derivative liability for
these other convertible preferred stock, convertible debt and outstanding
warrants is offset to paid-in capital. At each subsequent reporting period, we
continue to record these instruments at fair value with any difference recorded
as a gain or loss on derivatives in our Statement of Operations until such time
as we do not have an instrument with indeterminate shares. Then these other
convertible preferred stock, convertible debt and warrants are reclassified at
fair value back to paid-in capital.

Redeemable Instruments
-----------------------

For any shares that were issued under an agreement whereby there are criteria
that potentially require net-cash settlement, those shares are recorded at fair
value as redeemable instruments. Each reporting period these redeemable
instruments are recorded at fair value with any differences being recorded as a
gain or loss on derivatives in our Statement of Operations.

Intangible Assets
------------------

Intangible assets are comprised of goodwill and other intangibles arising from
the Trace Genetics, Inc. acquisition and technology rights from Ellipsis and
Kenna acquisitions. We apply SFAS No. 142, Goodwill and Other Intangible Assets.
SFAS 142 addresses financial accounting and reporting for acquired goodwill and
other intangible assets. Goodwill consists of the excess of cost over the fair
value of net assets acquired in business combinations. SFAS 142 requires, among
other things, an annual impairment test for goodwill and intangible assets with
indefinite lives. Goodwill is not amortized; however the technology rights we
acquired are amortized using the straight-line method over their estimated
useful lives.

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Investments
-----------

We have an investment with less than a 20% ownership interest in a private
company over which we do not have the ability to exercise significant influence,
and the fair value of which is not readily determinable. This investment is
accounted for under the cost method.

Foreign Currency Translation
------------------------------

We have one subsidiary whose functional currency is the Canadian dollar. The
translation adjustments (which are based upon the exchange rate at the balance
sheet date for assets and liabilities and the weighted average rate for the
income statement) are recorded on our balance sheet in the accumulated
comprehensive loss section of our Stockholders' Deficit.

We had a loan receivable that was in Euros. This loan was paid in full during
2005. This loan was translated at the exchange rate in effect at each reporting
date. Any gain or loss from this foreign currency translation was included in
our Statement of Operations for that period.

Patent Costs

We incur costs to file and prosecute patent applications to protect our
intellectual property. Given that we are in our research and development stage,
currently the future benefit is unknown, and we are unable to discern if there
will be a future benefit related to the patents. Given that the future benefit
is unknown, the costs associated with the patent applications are typically
expensed in the periods incurred.

Recent Pronouncements
----------------------

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123 (revised 2004) ("SFAS 123(R)"), "Share-Based Payment." This statement
replaces SFAS No. 123 "Accounting for Stock-Based Compensation," and supersedes
APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS 123(R) will
require the fair value of all stock option awards issued to employees to be
recorded as an expense over the related vesting period. The statement also
requires the recognition of compensation expense for the fair value of any
unvested stock option awards outstanding at the date of adoption. The adoption
of SFAS 123(R) will impact us by requiring us to use the fair-value based method
of accounting for future and unvested employee stock transactions rather than
the intrinsic method we currently use. We adopted this SFAS as of January 1,
2006. The adoption of this SFAS does not have an impact on our financial
statements through December 31, 2005, but will increase the cost of equity
compensation by approximately $12,000 during 2006 related to 600,000 options
that are not vested at December 31, 2005. During 2006 the options will be valued
at fair value instead of the intrinsic value.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections" ("SFAS 154"). This statement replaces APB Opinion No. 20
"Accounting Changes" and FASB Statement No. 3 "Reporting Accounting Changes in
Interim Financial Statements". SFAS 154 applies to all voluntary changes in
accounting principle and to changes required by an accounting pronouncement in
the unusual instance that the pronouncement does not include specific transition
provisions. SFAS 154 requires retrospective application to prior periods'
financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the cumulative
effect of the change. When it is impracticable to determine the period-specific
effects of an accounting change on one or more individual prior periods
presented, this SFAS requires that the new accounting principle be applied to
the balances of assets and liabilities as of the beginning of the earliest
period for which retrospective application is practicable and that a
corresponding adjustment be made to the opening balance of equity or net assets
for that period rather than being reported in an income statement. When it is
impracticable to determine the cumulative effect of applying a change in
accounting principle to all prior periods, this SFAS requires that the new
accounting principle be applied as if it were adopted prospectively from the
earliest date practicable. We adopted this SFAS as of January 1, 2006. There is
no current impact on our financial statements with the adoption of this SFAS.

In February 2005, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments". This statement improves financial reporting by
eliminating the exemption from applying SFAS 133 to interests in securitized
financial assets so that similar instruments are accounted for similarly
regardless of the form of the instruments. This statement also improves
financial reporting by allowing a preparer to elect fair value measurement at
acquisition, at issuance, or when a previously recognized financial instrument
is subject to a remeasurement event, on an instrument-by-instrument basis, in
cases in which a derivative would otherwise have to be bifurcated. We are
required to adopt this SFAS 155 for all financial instruments acquired or issued
beginning January 1, 2007. We are reviewing this SFAS to determine the impact on
our hybrid financial instruments.

Net Loss Per Common Share
-----------------------------

Basic net loss per share is computed by dividing the net loss available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted net loss per share is computed by dividing the net
loss for the period by the weighted average number of common stock and common
stock equivalent shares outstanding during the period. Common stock equivalent
shares outstanding as of December 31, 2005 and 2004, which consist of employee
stock options, warrants, convertible debenture as well as the issuance of common
stock under compensation agreements, have been excluded from diluted net loss
per common share calculations because they are anti-dilutive. Accordingly, basic
and diluted net loss per share is identical as of December 31, 2005 and 2004 and
for the period December 10, 1998 to December 31, 2005. The shares used in
computing the net loss per share have been adjusted for the 20 for one reverse
stock split.

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The following table summarizes our potential common stock equivalents
outstanding at December 31, 2005 which may dilute future earnings per share.

[Download Table]

Convertible notes ** 417,045,130
Convertible preferred stock ** 8,959,348
Warrants and options 82,575,889
508,580,367

**The amount of shares the convertible notes and convertible preferred stock was
estimated using the conversion price at December 31, 2005. The conversion price
varies based upon the price of our common stock. The convertible notes include
the conversion of the Dutchess notes in accordance with SFAS 133 for derivative
instruments.

Reclassifications
-----------------

Certain minor reclassifications have been made in the 2004 financial statements
to conform to the classifications used in 2005.

NOTE B - GOING CONCERN

Our consolidated financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplate the realization of assets and liquidation of
liabilities in the normal course of business. We have incurred losses since our
inception, and have experienced and continue to experience negative cash flows
from operations. In addition, we have a working capital deficiency of
approximately $7,577,917 (of which $6,981,306 is from a derivative liability)
and deficit accumulated during the development stage of $29,078,617 at December
31, 2005, and will continue to have ongoing requirements for substantial
additional capital investment to accomplish our business plan over the next
several years. Over the past few years, our operations have been funded through
related party funding, sales of common and preferred stock, the issuance of
notes, put notices to Dutchess Private Equities Fund, II, L.P ("Dutchess"), the
issuance of convertible debentures and the conversion of the debenture into
common stock and the related exercise of non-detachable warrants.

We continue to experience some success generating operating revenues; however,
we do not expect our revenue stream to be sufficient to cover costs of
operations in the immediate future. We anticipate that the funding we expect to
receive from the put notices to Dutchess, the Dutchess notes which are paid with
the puts and the minimum conversions of the outstanding debenture into common
stock and the related exercise of the non-detachable warrants will fund our
operating activities through 2006. However, there can be no assurance the
minimum conversions of the outstanding debenture into common stock and the
related exercise of the non-detachable warrants will continue, and the put
notices to Dutchess will be funded or that we will have the cash flow to meet
our operating requirements. These factors, among others, indicate that we may be
unable to continue as a going concern for a reasonable period of time.

NOTE C - PROPERTY AND EQUIPMENT - NET

Property and equipment consists of the following at December 31, 2005:

[Download Table]

Leased equipment under capital lease $ 721,838
Furniture, fixtures and other equipment 1,062,252
Leasehold improvements 171,727
-------------
Subtotal 1,955,817
Less accumulated depreciation and amortization (726,684)
-------------
Property and equipment - net $ 1,229,133
=============

Accumulated depreciation and amortization includes $67,455 of accumulated
depreciation of leased equipment as of December 31, 2005.

Depreciation and amortization expense for the years ended December 31, 2005 and
2004 amounted to $222,626 and $182,774, respectively.

NOTE D - IDENTIFIABLE INTANGIBLE ASSETS

As of December 31, 2005, we had capitalized $57,582 of costs related to
technology rights we had acquired in conjunction with the Ellipsis and Kenna
acquisitions. We are amortizing the remaining unamortized technology rights over
a five-year life.

The technology rights at December 31, 2005 were as follows:

[Download Table]

Technology Rights $57,582
Accumulated Amortization (1,451)
--------
$56,131

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The amortization of the technology rights during 2005 was $1,451. The estimated
annual amortization expense is $11,516 for each for the next four years and
$10,067 for the fifth year. We have evaluated the technology rights for
impairment and believe there is no impairment of these technology rights at
December 31, 2005.

We have $269,827 of goodwill and intangibles recorded related to our acquisition
of Trace Genetics, Inc. As of December 31, 2005, we are in the process of
evaluating the intangibles acquired in the Trace Genetics, Inc. acquisition,
thus the purchase price allocation between goodwill and other intangibles has
not been finalized and is subject to change.

NOTE E - INCOME TAXES

We recognized losses for both financial and tax reporting purposes during each
of the periods in the accompanying statements of operations. Accordingly, no
provision for income taxes and/or deferred income taxes payable has been
provided for in the accompanying financial statements.

Since our acquisition of DNAP Florida, we have incurred net operating losses for
income tax purposes of approximately $26 million. These net operating loss carry
forwards expire in various years through the year ended December 31, 2025,
however because we have experienced changes in control and have incurred
significant operating losses, utilization of the income tax loss carry forwards
is not assured. As a result, the non-current deferred income tax asset arising
from these net operating loss carry forwards and from other temporary
differences is not recorded in the accompanying balance sheets because we
established a valuation allowance to fully reserve such assets due to the
uncertainty of our realization of this benefit.

It will be very difficult for the Company to use the $6.4 million net operating
loss related to 1999 because of our bankruptcy proceedings and changes in
control, and various other matters. It is included in the net operating loss
above and in the deferred tax asset recorded on our balance sheet with a full
valuation against it.

At December 31, 2005, our non-current net deferred income tax assets (assuming
an effective income tax rate of approximately 38%) consisted of the following:

[Download Table]

Non-current deferred income tax asset:
Net operating loss carry forwards $9,606,000
Bonus and deferred compensation accrual 264,000
Option expense 275,000
Research credit unused 208,000
Impairment of assets and fixed assets depreciation 121,000
Other 2,000
Total deferred income tax asset 10,476,000
------------
Less valuation allowance (10,476,000)
Net deferred income tax asset $ -
============

Differences between the federal benefit computed at a statutory rate and our
effective tax rate and provision are as follows for the years ended December 31,
2005 and 2004:

[Download Table]

2005 2004
------------ ------------
Statutory benefit $(2,962,000) $(1,269,000)
State tax benefit, net of federal effect (316,000) (136,000)
Increase in deferred income tax valuation allowance 2,002,000 1,398,000
Intrinsic value of convertible debt and non-detachable
warrants and discount on
convertible debt 735,000 -
Derivative losses, net 602,000 -
Non-deductible expenses 38,000 -
Other (99,000) 700
$ - $ -
============ ============

NOTE F - CONVERTIBLE DEBENTURE

La Jolla Convertible Debenture
---------------------------------

On November 25, 2003, we closed on a $500,000, 8% convertible debenture with
non-detachable warrants with La Jolla Cove Investors, Inc. ("La Jolla"). We pay
interest on a monthly basis with a principal balloon payment due on the extended
maturity date of November 25, 2007. Per the agreement, La Jolla shall convert at
least 5% of the face value of the debenture each calendar month into common
shares of the Company. The number of common stock shares into which this
debenture may be converted is equal to the dollar amount of the debenture being
converted multiplied by sixteen, minus the product of the conversion price
multiplied by fifteen times the dollar amount of the debenture being converted,
and the entire foregoing result shall be divided by the conversion price. The
conversion price is equal to the lesser of (i) $0.20 or (ii) 80% of the average
of the five lowest daily value weighted average price of our common stock during
the twenty trading days prior to La Jolla's election to convert. We have the
right to reject a conversion if the stock price is below $0.50 per share. If we
exercise this right, we then are obligated to pay the portion of the debenture
the conversion notice was for plus applicable unpaid accrued interest and a
premium equal to 10% of those amounts.

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Per the agreement, if La Jolla would be deemed the beneficial owner of more than
4.99% of the then outstanding share of our common stock, then La Jolla shall not
have the right to convert any portion of this debenture that would exceed 4.99%

On June 28, 2005, La Jolla exercised its right to increase its note by $250,000
with the same terms as the previous convertible debenture except the annual
interest rate is two percent. This convertible debenture has the same terms and
conditions as the initial La Jolla note. In accordance with EITF 00-19
"Accounting for Derivative Financial Instruments Indexed to and Potentially
Settled in a Company's Own Stock" the conversion feature of this debenture is
classified as equity. We recorded $250,000 for the intrinsic value associated
with the convertible debt and non-detachable warrants which was recorded as a
discount to the debt and capitalized $15,000 of deferred financing costs. The
debt discount and the deferred financing costs will be amortized to interest
expense over the two-year term of the note.

On October 20, 2005, we amended the La Jolla convertible debenture and the
warrant granted to La Jolla to confirm that the warrant exercise price remained
at $1 per share after the twenty-to-one reverse stock split, the maturity date
of the debenture and the expiration date of the warrant was extended to November
25, 2007 and that when La Jolla exercised its option to add $250,000 in
principal to the convertible debenture that we granted to La Jolla the right to
purchase an additional 3,750,000 shares of our common stock under the warrant.

During December 2004, La Jolla converted $280,000 of convertible debentures into
our common stock and exercised non-detachable warrants to purchase 210,000
shares of our common stock. During 2005, La Jolla converted $189,000 of
convertible debentures into our common stock and exercised non-detachable
warrants to purchase 1,467,000 shares of our common stock. See Note I below for
a further discussion of this conversion.

La Jolla converted additional debentures into common stock after yearend. See
Note N below for additional information on these conversions.

Dutchess June Note
--------------------

On June 30, 2005, we issued to Dutchess a promissory note in the amount of
$1,560,000 for a purchase price of $1,300,000. The note is due and payable in
full on January 30, 2006. Other than the $260,000 discount inherent in the
purchase price, the note is non-interest-bearing. The note will be repaid using
the proceeds of each put notice delivered by us to Dutchess under the September
2004 Investment Agreement (see Note L below). The required repayments under the
note increase if we raise additional capital during the term of the note (other
than capital raised under facilities in existence as of the date of the note).

In connection with the note, we paid Dutchess a facility fee of $65,000 and
issued to Dutchess 1,250,000 shares of restricted common stock as incentive
shares, which were registered in July. The value recorded for these shares was
$250,000 at June 30, 2005. These shares have been sold by Dutchess during the
fourth quarter. The $65,000 fee was expensed as there was no basis to record as
a discount. We also paid $52,000 of fees to Athena which were recorded as
deferred financing fees and are being amortized to interest expense over the
term of the note.

In accordance with EITF 00-19 "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in a Company's Own Stock", the proceeds from
this note were allocated to embedded derivative features indexed to the
Company's common stock which were the convertible feature if the note is in
default and the common stock issued as an incentive debenture. See Derivative
Liabilities and Redeemable Instruments, below. The resulting discount of
$1,560,000 to the debt instrument is being amortized to interest expense over
the term of this note using the effective method. Amortization during the year
ended December 31, 2005 amounted to $1,560,000 on this note. This note was paid
in full at December 31, 2005.

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Dutchess August Note
----------------------

On August 1, 2005, we issued to Dutchess a promissory note in the amount of
$840,000 for a purchase price of $700,000. The difference of $140,000 was
recorded as a discount on debt and will be amortized to interest expense over
the one-year term of the note. The note is due and payable in full on August 1,
2006. Other than the $140,000 discount inherent in the purchase price, the note
is non-interest-bearing. The note will be repaid using the proceeds of each put
notice delivered by us to Dutchess under the September 2004 Investment Agreement
(see Note L below). The required repayments under the note increase if we raise
additional capital during the term of the note (other than capital raised under
facilities in existence as of the date of the note).

In connection with the note, we paid Dutchess a facility fee of $65,000 and
issued 2.5 million shares of restricted common stock as incentive shares. The
value recorded for these shares was $225,000 at August 1, 2005 and $52,750 at
December 31, 2005 and is recorded as a Redeemable Instrument on our Balance
Sheet. The difference of $172,250 was recorded as a gain on derivative
contracts. The $65,000 fee was expensed to interest expense as there was no
basis to record as a discount. We also paid $28,000 of fees to Athena which were
recorded as deferred financing fees and are being amortized to interest expense
over the term of the note.

In accordance with EITF 00-19 "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in a Company's Own Stock", the proceeds from
this note were allocated to embedded derivative features indexed to the
Company's common stock which were the convertible feature if the note is in
default and the common stock issued as an incentive debenture. See Derivative
Liabilities and Redeemable Instruments, below. The resulting discount of
$840,000 to the debt instrument is being amortized to interest expense over the
term of this note using the effective method. Amortization during the year ended
December 31, 2005 amounted to $209,066 on this note.

We are required to register the 2.5 million shares of common stock issued to
Dutchess in conjunction with the August note in the next registration statement
that we file. If we do not, then we must issue 1.5 million additional shares for
each time we file a registration statement and do not register the initial 2.5
million shares.

If there is an event of default with either promissory note to Dutchess,
Dutchess has the right to convert the remaining principal at the lesser of (i)
fifty percent of the lowest closing bid price during the fifteen trading days
immediately preceding the maturity date or (ii) 100% of the lowest bid price for
the twenty trading days immediately preceding the maturity date. At December 31,
2005, there was no event of default.

Dutchess October Note
-----------------------

On October 21, 2005, we issued to Dutchess a promissory note in the amount of
$1,380,000 for a purchase price of $1,150,000. The difference of $230,000 was
recorded as a discount on debt and will be amortized to interest expense over
the one-year term of the note. The note is due and payable in full on December
31, 2006. Other than the $230,000 discount inherent in the purchase price, the
note is non-interest-bearing. The note will be repaid using the proceeds of each
put notice delivered by us to Dutchess under the September 2004 Investment
Agreement (see Note L below). The required repayments under the note increase if
we raise additional capital during the term of the note (other than capital
raised under facilities in existence as of the date of the note).

In connection with the note, we paid Dutchess a facility fee of $65,000 and
issued to Dutchess a non-interest bearing convertible debenture in the amount of
$330,000 payable on October 21, 2010. The shares of common stock underlying the
debenture carry piggyback registration rights. The debenture may be converted at
Dutchess' option at a conversion price equal to the lesser of 75% of the lowest
closing bid price during the 15 trading days prior to the conversion date or
$0.013. The $65,000 fee was expensed to interest expense as there was no basis
to record as a discount. We also paid $43,200 of fees to Athena which were
recorded as deferred financing fees and are being amortized to interest expense
over the term of the note.

In accordance with EITF 00-19 "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in a Company's Own Stock", the proceeds from
this note were allocated to embedded derivative features indexed to the
Company's common stock which were the convertible feature if the note is in
default and the convertible feature of the convertible debenture. See Derivative
Liabilities and Redeemable Instruments, below. The resulting discount of
$1,380,000 to the debt instrument and the $330,000 to the convertible debenture
is being amortized to interest expense over the term of this note using the
effective method. Amortization during the year ended December 31, 2005 amounted
to $47,275 on this note and $149 on the convertible debenture.

If there is an event of default with either promissory note to Dutchess,
Dutchess has the right to convert the remaining principal at the lesser of (i)
fifty percent of the lowest closing bid price during the fifteen trading days
immediately preceding the conversion date or (ii) 100% of the lowest bid price
for the twenty trading days immediately preceding the default date. At December
31, 2005, there was no event of default.

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Dutchess December Note
------------------------

On December 22, 2005, we issued to Dutchess a promissory note in the amount of
$1,380,000 for a purchase price of $1,150,000. The difference of $230,000 was
recorded as a discount on debt and will be amortized to interest expense over
the one-year term of the note. The note is due and payable in full on December
15, 2006. Other than the $230,000 discount inherent in the purchase price, the
note is non-interest-bearing. The note will be repaid using the proceeds of each
put notice delivered by us to Dutchess under the September 2004 Investment
Agreement (see Note L below). The required repayments under the note increase if
we raise additional capital during the term of the note (other than capital
raised under facilities in existence as of the date of the note).

In connection with the note, we paid Dutchess a facility fee of $65,000 and
issued to Dutchess a non-interest bearing convertible debenture in the amount of
$330,000 payable on December 15, 2010. The shares of common stock underlying the
debenture carry piggyback registration rights. The debenture may be converted at
Dutchess' option at a conversion price equal to the lesser of 75% of the lowest
closing bid price during the 15 trading days prior to the conversion date or
$0.022. The $65,000 fee was expensed to interest expense as there was no basis
to record as a discount. We also paid $43,400 of fees to Athena which were
recorded as deferred financing fees and are being amortized to interest expense
over the term of the note.

In accordance with EITF 00-19 "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in a Company's Own Stock", the proceeds from
this note were allocated to embedded derivative features indexed to the
Company's common stock which were the convertible feature if the note is in
default and the convertible feature of the convertible debenture. See Derivative
Liabilities and Redeemable Instruments, below. The resulting discount of
$1,380,000 to the debt instrument and the $330,000 to the convertible debenture
is being amortized to interest expense over the term of this note using the
effective method. Amortization during the year ended December 31, 2005 amounted
to $11,285 on this note and $114 on the convertible debenture.

If there is an event of default with either promissory note to Dutchess,
Dutchess has the right to convert the remaining principal at the lesser of (i)
fifty percent of the lowest closing bid price during the fifteen trading days
immediately preceding the maturity date or (ii) 100% of the lowest bid price for
the twenty trading days immediately preceding the conversion date. At December
31, 2005, there was no event of default.

Dutchess Security Agreement
-----------------------------

All of the Dutchess notes are secured by a security interest in substantially
all of our assets. In each of the Dutchess note agreements, at maturity, if
there is any unpaid amounts, Dutchess can exercise its right to increase the
outstanding amount by ten percent and an additional two and one-half percent per
month.

Line of Credit
----------------

During May 2005, we renewed our $50,000 line of credit for an additional year.
The interest rate is two percent over the Bank of America prime rate. At
December 31, 2005, we did not have any outstanding balance on this line of
credit.

Debt Maturities
----------------

The following is the debt maturities for the next five years for non-related
party debt:

[Download Table]

2006 $3,600,009
2007 251,000
2008 -
2009 -
2010 660,000
Total debt 4,511,009
-----------
Less discounts on debt (4,116,916)
Current portion (267,635)
Long term portion of debt $ 126,458
===========

NOTE G - NOTES PAYABLE TO RELATED PARTIES

At December 31, 2005, our notes payable to related parties is $238,381 owed to
our Chief Scientific Officer. The annual interest rate is 8% and is accrued
throughout the loan term. At December 31, 2005, we entered into a new note with
him whereby the accrued interest of $56,981 was included in the principal of the
note. Interest during 2006 will accrue at 8% and the accrued interest and note
is due in a lump sum payment on December 31, 2006. During 2005 and 2004, this
note was reduced by $33,634 and $38,068, respectively for payments made on his
behalf to third parties.

During 2004, the Company paid $75,000 to George Frudakis (father of our Chief
Scientific Officer and a shareholder of the Company) to pay the principal of
approximately $45,000, accrued interest of approximately $4,000 and
approximately $26,000 was recorded as other expense on our Consolidated
Statements of Operations to satisfy in full any other claims related to his note
and funding agreement.

NOTE H - DERIVATIVE LIABILITIES AND REDEEMABLE INSTRUMENTS

The balance sheet caption derivative liabilities consists of (a) embedded
conversion features bifurcated from the Dutchess notes and convertible
debentures and (b) the classification of all other convertible preferred stock,
convertible debt and outstanding warrants that on their own contract terms were
not considered to be a derivative but are required under EITF 00-19 to be
recorded at fair value as a derivative liability because the embedded conversion
feature of the Dutchess notes may potentially result in our having
indeterminable shares. At June 30, 2005, we reduced additional paid-in-capital
by $916,505 to reclass the other convertible preferred stock, convertible debt
and outstanding warrants from equity to a derivative liability based upon fair
value. At December 31, 2005, these embedded derivative financial instruments are
indexed to an aggregate of 410,770,130 shares of our common stock and the other
convertible preferred stock, convertible debt and outstanding warrants are
convertible into 31,144,125 shares of our common stock at December 31, 2005 and
are carried at fair value.

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Each Dutchess note has a conversion feature that can be triggered only if we
default on the note. This is because one of the default criteria in the notes is
that the registration statement for shares issued under the Dutchess Investment
Agreement does not remain effective for any reason. Under EITF 00-19, it is
deemed out of our control to maintain an effective registration statement;
therefore we have to assume that we could possibly default on these notes. At
the point of a default there is a conversion feature in the notes which then
results in our recording a derivative liability.

The incentive debentures as a part of the October and December Dutchess notes
agreements contain a conversion feature which indexes the exercise price to our
common stock. This results in indeterminate shares which require us to record
this conversion feature as a derivative liability.

The following tabular presentation set forth information about the derivative
instruments at and for the year ended December 31, 2005:

[Enlarge/Download Table]

Dutchess Convertible Outstanding La Jolla
Derivatives Preferred Stock Warrants convertible debt Total
----------- --------------- ----------- ---------------- -----------
Fair value $ 6,442,820 $ 189,042 $ 272,873 $ 76,571 $ 6,981,306

Fair value
adjustments,
income (loss) $(2,595,695) $ 313,851 $ 292,794 $ (21,980) $(2,011,030)

Fair value for option-based financial instruments is determined using the
Black-Scholes Valuation Model. Significant assumptions that were used for the
embedded conversion features on the Dutchess notes, other convertible debt and
warrants, included: conversion or strike prices ranging from $0.0045 - $0.52;
volatility factors ranging from 112% to 271%; terms remaining for all
instruments ranging from four months to five years; and risk free rates ranging
from 3.35% to 4.38%.

The shares that were issued as incentive shares and are outstanding also fall
under the derivative criteria in accordance with EITF 00-19 and we had to fair
value the 1,250,000 and 2,500,000 shares of common stock issued as incentive
shares under two of the Dutchess notes and record them as Redeemable
Instruments. At December 31, 2005, the 1,250,000 shares had been sold by
Dutchess and the 2,500,000 shares which were retained by Dutchess were valued at
$52,750. A gain on derivatives was recorded of $400,125 for the year ended
December 31, 2005 as the shares are fair valued at each reporting period and any
difference is recorded as a gain (or loss) on derivatives.

NOTE I - CERTAIN EQUITY TRANSACTIONS

Series A Convertible Stock
-----------------------------

During 2004, we amended our articles of incorporation to designate 50,000 shares
of our preferred stock as Series A preferred stock, $0.01 par value. The
liquidation value is $10 per share. Each share of Series A preferred stock shall
have the right to one vote for each share of common stock into which such
holder's shares of Series A preferred stock could then be converted. The Series
A preferred stock holders shall have the right to convert on the first day of
the month after the month in which a registration statement (other than a
registration statement on Form S-4, Form S-8 or any successor form thereto)
filed by us with the Securities and Exchange Commission becomes effective. The
other conversion dates shall be the first day of the fourth, seventh and tenth
months after the month in which such registration statement becomes effective.
If on any conversion date, the conversion price would be less than $0.025 per
share, we may elect to defer the conversion date to the first day of the next
month. If, on such deferred conversion date, the conversion price would be less
than $0.025 per share, we may again defer the conversion date to the first day
of the next month. Upon such second deferred conversion date, the Series A
preferred stock shall be converted without further deferral. Such conversion
shall be effected at our office or any transfer agent for such stock, into such
number of fully paid and nonassessable shares of common stock as is determined
by dividing the original Series A preferred stock issue price by the conversion
price applicable to such share, determined as hereafter provided, in effect on
the date the certificate is surrendered for conversion. The conversion price is
the lesser of (i) eighty percent (80%) of the average of the five lowest daily
volume weighted average prices of our common stock during the twenty (20)
trading days prior to the conversion date, or (ii) eighty percent (80%) of the
closing price of our common stock on the trading day prior to the conversion
date. Each share of Series A preferred stock not previously converted shall
automatically be converted, without the payment of additional consideration,
into shares of common stock at the conversion price, as applicable, in effect on
the date of and immediately prior to the last conversion date described above.

During 2004, we issued 40,000 shares of Series A preferred stock. We received
$272,535 of cash (net of $17,465 of stock issuance costs) and reduced an accrued
liability for $110,000 related to the issuance of these 40,000 shares.

During July 2005, preferred stock shareholders converted 24,000 shares of our
preferred stock into 1,538,462 shares of our common stock and on October 10,
2005, preferred stock shareholders converted 1,278 shares of our preferred stock
outstanding to 960,902 shares of our common stock.

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Common Stock
-------------

Reverse Stock Split
---------------------

At the 2005 annual shareholder meeting, the shareholders approved an amendment
to our Articles of Incorporation. Pursuant to this approval, the Board of
Directors amended our Articles of Incorporation so that each twenty shares of
our common stock issued and outstanding on July 12, 2005 were combined into one
share (or fraction thereof) of our common stock. All share data in these
financial statements have been restated to reflect this reverse stock split. We
continue to have 1,500,000,000 shares of authorized common stock.

Common Stock Issued for Stock Subscribed
---------------------------------------------

During 2005, we issued the 470,815 shares of our common stock that was issuable
at December 31, 2004. This included: 450,460 shares of our common stock issued
to La Jolla as part of our agreement with them; and 20,355 shares of our common
stock issued to a service provider in return for the services provided to us.

During 2004, we issued the 5,768,315 shares of our common stock that was
issuable at December 31, 2003. This included: 5,250,000 shares of our common
stock issued to four of our executive management in accordance with their
agreements with us; 515,456 shares of our common stock issued to La Jolla as
part of our agreement with them; and, 2,859 shares of our common stock issued to
two service providers in return for their services to us.

Conversion of Debenture and Exercise of Warrants
------------------------------------------------------

During 2005, La Jolla converted $189,000 of convertible debentures into our
common stock and exercised non-detachable warrants to purchase 1,467,000 shares
of our common stock. The combined transactions resulted in us receiving cash of
$2,537,580, net of $162,420 of cash stock issuance costs, decreasing the prepaid
warrant exercise amount by $135,000 and issuing 86,686,596 shares of our common
stock.

During 2004, La Jolla converted $280,000 of convertible debentures into our
common stock and exercised non-detachable warrants to purchase 4.2 million
shares of our common stock. The combined transaction resulted in us receiving
cash of $3,925,763 (net of $274,237 of cash stock issuance costs) and issuing
15,093,287 shares of our common stock of which 14,642,827 shares were issued at
December 31, 2004 and 450,460 shares were issued in early 2005.

Prepayment for Future Warrant Exercises
-------------------------------------------

At December 31, 2005, La Jolla had not converted at least 5% of the face value
of the debenture and exercised at least 5% of the warrants for the month of
September. In accordance with the La Jolla agreement, at December 31, 2005, we
had $120,000 recorded as prepaid warrant exercises for the future exercise of
warrants. We mutually agreed with La Jolla to waive the minimum exercise of at
least 5% of the warrants for the months of October - December 2005. During
February 2006, the prepaid warrant amount was reduced by $30,000 to $90,000.

At December 31, 2004, La Jolla had not converted at least 5% of the face value
of the debenture and exercised at least 5% of the warrants for the month of
December. In accordance with the La Jolla amended agreement, during December La
Jolla prepaid $255,000 for the future exercise of warrants.

Consulting Agreement with Scientific Advisory Board Member
----------------------------------------------------------------

During 2004, we issued 14,771 shares of our common stock in accordance with an
agreement with a consultant. Based upon the date the services were completed,
2,500 shares were valued at the quoted market price of $0.60, 2,500 shares were
valued at the quoted market price of $0.84 and 9,771 shares were valued at the
quoted market price of $0.40. As a result of this transaction, we recorded
approximately $14,000 of expense during the year 2004 for these shares. At
December 31, 2004, we had not issued additional 20,355 shares of our common
stock to this consultant. 7,827 of these shares were valued at the quoted market
price of $0.40 and 12,528 shares were valued at the quoted market price of $0.20
based upon the date the services were completed which resulted in us recording
$5,637 of expense during the third and fourth quarter of 2004 for these shares.
The 20,355 shares were issued during 2005.

During 2005, we recorded $8,368 of expense for shares of our common stock in
accordance with an agreement with a consultant. We paid this consultant a total
of 55,709 shares of which 50,709 shares were issued and 5,000 shares are
recorded in the stock subscribed equity account at December 31, 2005. This was
comprised of 2,500 shares at a quoted market price of $0.018 per share, 2,500
shares at a quoted market price of $0.021 per share, 24,315 shares at a quoted
market price of $0.12 per share and 26,394 shares at a quoted market price of
$0.203 per share.

Consulting Agreement with Marketing and Administrative Consultant
-----------------------------------------------------------------------

During 2005, we recorded $20,720 of consulting expense for a total of 952,019
shares of our common stock of which 454,966 were issued during 2005 and 497,053
were recorded in the stock subscribed equity account at December 31, 2005. These
shares had a quoted market price of $0.022 per share.

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Stock Bonus
------------

During 2005, we issued 2,928,043 shares of our common stock to an employee as a
sign on bonus. These shares were valued at $41,870 based upon the quoted fair
market value at the date of grant. The $41,870 was recorded as compensation
expense during 2005.

Dutchess Put Notices
----------------------

On September 28, 2004, we entered into an investment agreement with Dutchess,
pursuant to which Dutchess has committed to purchase our common stock up to an
aggregate purchase price of $35 million over a two-year period. The Dutchess
agreement provides that we from time to time may deliver a put notice to
Dutchess, and Dutchess is obliged to purchase the dollar amount of common stock
set forth in the notice. During 2005, we exercised put notices in accordance
with our agreement and received $1,802,651 of cash proceeds, net of $10,109 of
cash stock issuance costs for which we issued 78,912,356 shares of our common
stock to Dutchess. During 2005, proceeds totaling $1,559,991 from these puts
were used to reduce the notes payable outstanding with Dutchess.

Investor Relations Agreement
------------------------------

On August 19, 2005, we entered into an investor relations agreement with an
investor relations firm to increase investor awareness of our Company. For these
services, we paid $75,000 and issued 2 million shares of our common stock. The 2
million shares of common stock was valued at quoted market price for a value of
$120,000 which will be expensed to administrative expense over the three-month
term of the agreement. On November 21, 2005, we entered into another three-month
agreement with this firm. For these services, we paid $75,000 and issued 2
million shares of our common stock. The 2 million shares of common stock was
valued at quoted market price for a value of $34,000 which will be expensed to
administrative expense over the three-month term of the agreement. At December
31, 2005, $134,355 had been expensed with $19,645 recorded as deferred
consulting.

Warrants
--------

At December 31, 2005 we had warrants outstanding to purchase our common stock
with the following terms:

[Download Table]

# of Shares Exercise Price Expiration Date
----------- -------------- ---------------
3,765,000 $1.0000 11/24/2007
181,819 $0.4400 4/9/2008
17,075 $0.6560 3/31/2009
92,751 $0.5180 6/30/2009
21,029 $0.3340 9/30/2009
129,264 $0.2420 12/31/2009
313,079 $0.1920 12/31/2009
370,370 $0.2700 9/30/2010
232,883 $0.1380 3/31/2010
250,002 $0.4000 6/16/2010
546,427 $0.0878 6/30/2010
5,714,286 $0.0175 9/24/2010
2,697,545 $0.0159 12/31/2010
314,380 $0.0444 9/30/2010
1,263,867 $0.0176 12/31/2010
15,909,777
==========

During 2005, we granted a five-year warrant for 370,370 shares of our common
stock for consulting services performed. This warrant has an exercise price of
$0.27 and was valued at $139,030 based upon the Black-Scholes model. This was
expensed over the service period of the agreement. During 2005, we recorded
$139,030 of expense related to this warrant.

During 2005, warrants to purchase 5,055,102 shares of common stock were granted
to Athena as a fee for their services at a range of exercise prices from $0.0159
to 0.138 and expire five years from the grant date. These warrants were valued
at $108,371 based upon the Black-Scholes model. As of December 31, 2005, none of
these warrants were exercised. These were recorded as stock issuance costs.

During 2004, warrants to purchase 573,198 shares of common stock were granted to
Athena as a fee for their services at a range of exercise prices from $0.192 to
$0.656. The warrants expire five years from the grant date. These warrants were
valued at $197,633 based upon the Black-Scholes model. As of December 31, 2005,
none of these warrants were exercised. These were recorded as stock issuance
costs.

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Employee Stock Options and Awards
-------------------------------------

We have a stock option plan that provides for the granting of stock options and
awards to officers, and employees. The objectives of this plan include
attracting and retaining the best personnel, providing for additional
performance incentives, and promoting our success by providing employees the
opportunity to acquire common stock. On November 11, 2005, the Board of
Directors voted to amend the 2001 Scientist Stock Option Plan to increase the
options available under the plan to 77,630,000. Options are typically granted at
the fair market value of the stock price on the date of grant. The vesting of
each grant is determined by the Board of Directors at the time the options are
granted. The vesting period typically ranges from immediate vesting to vesting
over a four-year period and the options typically have an expiration term of ten
years.

A summary of the options granted to employees as of December 31, 2005 and 2004
and changes during the year are presented below:

[Download Table]

Weighted
Number of Average
Shares Exercise Price
---------- --------------
Outstanding at December 31, 2003 447,500 $0.300
Granted - -
Exercised (12,500) $0.260
Cancelled - -
---------- --------------
Outstanding at December 31, 2004 435,000 $0.300
Granted 67,242,362 0.046
Exercised -
Cancelled (1,011,250) $0.436
---------- --------------

Outstanding at December 31, 2005 66,666,112 $0.041
---------- --------------

Options exercisable at
December 31, 2005 66,066,112 $0.042
==========
Options available for grant
at December 31, 2005 12,493,535
==========

The weighted average fair value of options granted during 2005 was $0.032.

The fair value of options granted during 2005 was estimated on the dates of the
grants using the following approximate assumptions: dividend yield of 0%,
expected volatilities of 173% - 182%, risk-free interest rates of 2.71% - 4.46%,
and expected lives of four to 5 years. There were no options granted during
2004.

The following table summarizes the information about our stock options
outstanding at December 31, 2005:

[Enlarge/Download Table]

Options Outstanding Options Exercisable
------------------------------------------------------ ---------------------------
Weighted Average Weighted average Weighted
Exercise Number Remaining Contractual exercisable Number Average
Price Outstanding life (years) price Exercisable Exercise Price
------------- ----------- ----------------------- ---------------- ----------- --------------
$ 0.014-0.017 51,392,362 9.9 $ 0.017 51,392,362 $ 0.017
$ 0.021-0.120 14,118,750 9.9 $ 0.091 13,518,750 $ 0.094
$ 0.400-0.600 1,155,000 8.8 $ 0.509 1,155,000 $ 0.509
-----------
66,666,112 9.8 $ 0.041 66,066,112 $ 0.042
===========

NOTE J - OTHER COMMITMENTS AND CONTINGENCIES

Agreement with Investment Banking Firm
------------------------------------------

In April 2003, we engaged an investment-banking firm to assist us in our
long-term financial planning efforts, including our efforts to raise debt and/or
equity capital. Pursuant to the agreement, we have granted this firm, exclusive
authorization to act as our agent (on a best efforts basis) in substantially all
of our investment banking activities, which may include efforts to place various
securities (potentially through private and/or public transactions), and to
assist us in obtaining grant money from various governmental entities. As
consideration for such services, we have agreed to compensate this entity as
follows:

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- Upon closing of a transaction a fee of 6% of the aggregate dollar value
of the aggregate consideration paid by investors. The Dutchess deal has a fee of
4%.
- Upon closing of a transaction, warrants to purchase (at a nominal price)
shares of our common stock having a value equal to 4% of the aggregate
consideration paid by investors.
- Upon the receipt of any grant money, warrants to purchase (at a nominal
price) such number of shares of our common stock having a value of $35,000

In addition, we have agreed to compensate this entity for any merger and
acquisition services provided. In addition to billings on a time and expense
basis, this compensation shall include a success fee equal to a percentage of
any transaction value.

Beth Israel Deaconess Medical Center License Agreement
------------------------------------------------------------

Effective April 4, 2005, we entered into a license agreement with Beth Israel
Deaconess Medical Center ("Beth Israel"), a Massachusetts nonprofit corporation
to develop a new, more potent and longer acting form of the anemia drug
Erythropoietin ("EPO").

EPO is a glycoprotein naturally made by the body to stimulate red blood cell
production; the currently marketed forms are manufactured using recombinant DNA
technology and are used to treat anemia or low blood cell count. Under the
Agreement, Beth Israel has granted us an exclusive license to United States and
foreign patents related to certain forms of EPO. We have the right to develop,
use, market and sell products derived from the licensed patents.

In exchange for the license, we paid Beth Israel a $25,000 signing fee and
agreed to make certain milestone payments linked to their progress in developing
marketable products from the licensed technology. The total of payments, if all
milestones are reached, is $2,150,000. The milestone payments are nonrefundable.
Up to $200,000 of this amount is creditable against future royalties. In
addition to the milestone payments, we must also pay Beth Israel an annual
royalty of 4% of the net sales of all products developed from the licensed
technology. A minimum royalty payment of $100,000 a year is due upon the
commencement of commercial sales in any territory worldwide. At December 31,
2005, we had recorded the $25,000 as research and development costs.

Consulting Agreement with Dr. Arthur Sytkowski
---------------------------------------------------

On June 7, 2005, we entered into a consulting agreement with Dr. Arthur
Sytkowski, the Director of Beth Israel, to consult on the development of a new,
more potent and longer acting form of EPO. On September 1, 2005, we entered into
a new consulting agreement amending and restating the June 7, 2005 consulting
agreement. Under the amended consulting agreement, Dr. Sytkowski has agreed to
perform certain consulting services, including advising on medical, regulatory
and patent issues, training personnel and providing assistance with EPO research
and development. In exchange for the services, we will pay Dr. Sytkowski $10,000
a month for twelve months, five annual incentive payments of $25,000 each and
certain milestone payments linked to our progress under the Beth Israel license
in developing marketable products from the licensed EPO technology. The total of
all payments to Dr. Sytkowski under the agreement, assuming all milestones are
reached, is $370,000. The milestone payments will be reduced - dollar for dollar
- to the extent Dr. Sytkowski receives payments from Beth Israel relating to the
same milestone events under the Beth Israel license. At December 31, 2005, we
had recorded $70,000 as research and development costs.

Collaborative Research Agreement with Beth Israel
------------------------------------------------------

During late June, we entered into a collaborative research agreement with Beth
Israel to provide three researchers to us to conduct certain research work
related to our EPO research. On August 15, 2005, this agreement was amended. The
total cost per the amended agreement is $352,192. We have paid $176,096 and the
remaining $176,096 is due 180 days after the execution of the amendment.

Consultant Agreement with Member of Our Scientific Advisory Board
-------------------------------------------------------------------------

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License Agreement with Dr. Mark Froimowitz
-----------------------------------------------

On October 25, 2005, we entered into an exclusive licensing agreement with Dr.
Mark Froimowitz to develop a series of methylphenidate analogs or Ritalin-like
compounds targeting the clinical development of enhanced pharmaceuticals for the
treatment of drug addiction, attention deficit hyperactivity disorder ("ADHD"),
and depression. The licensed compounds are analogs of Ritalin, a well-known drug
used for treatment of ADHD. The analogs are designed specifically to have a slow
onset and increased half-life in the bloodstream, thus reducing a patient's
required daily dosage and the potential for drug abuse. We have the exclusive
right to develop, use, market and sell products derived from the licensed
compounds.

We are obligated to pay the licensor a two percent (2%) quarterly royalty fee on
the net sales of products covered by the license. Minimum annual maintenance
fees of $25,000 are required for the license term, but will be deducted from
royalties. Additionally, the license requires progress payments of up to
$275,000 upon the successful development and approval of licensed products. The
license's initial five (5) year term is supplemented by options capable of
extending the license term for up to twenty years.

Operating Lease Commitments
-----------------------------

Our operating facility lease for our Sarasota, Florida location expires on May
31, 2006 with an option to extend for three months and if we relocate by the end
of the extended term which is September 1, 2006 to anywhere in Sarasota or
Manatee counties, the landlord will pay up to $65,000 of our tenant relocation
expenses.

Our operating facility lease for our Richmond, California location expires
August 1, 2006.

Our operating facility lease for Toronto, Canada expires April 30, 2008. The
payments are $26,187 Canadian dollars plus common area maintenance amounts for
the next two years and $8,729 Canadian dollars plus common area maintenance
amounts during 2008. The conversion rate from Canadian dollars to US dollars at
December 31, 2005 is 0.858.

Rent expense amounted to $104,850 and $64,653 for the years ended December 31,
2005 and 2004, respectively.

Obligations under Capital Leases
-----------------------------------

We have capitalized rental obligations under leases of equipment. The
obligations, which mature in 2006 through 2008, represent the total present
value of future rental payments discounted at the interest rates implicit in the
leases. Future minimum lease payments under capital leases are:

[Download Table]

2006 $ 295,234
2007 168,657
2008 13,167
-----------
Total minimum lease payments 477,058
Less amount representing interest (39,617)
-----------
Present value of net minimum
lease payments 437,441
Less current portion (264,936)
-----------
$ 172,505
===========

During 2004, we purchased, through a capital lease, computer equipment. In order
to qualify for the lease; the financing company required a letter of credit. Our
bank issued a letter of credit of approximately $20,000 and required that we
purchase a certificate of deposit in the amount of the letter of credit. We
recorded the restricted certificate of deposit in other current assets at
December 31, 2005.

Scientific Advisory Board
---------------------------

Currently we have one Scientific Advisory Board member. For the services
performed by this member, we are committed to issue 2,500 shares of our common
stock each year through 2007. The other Scientific Advisory Board member
resigned during 2004.

During June 2002, we entered into a two-year agreement with this Scientific
Advisory Board member, to collaborate with us to develop a kit product that
could be used to infer Ancestry Admixture Ratios in human beings. We have agreed
to compensate the consultant with quarterly payments of $4,000 and 2,500 shares
of our common stock for the term of this contract. We have also agreed to
provide the consultant with a number of shares of our common stock equal to 2.5%
of the Net Revenues derived from a product developed with his help. The term of
this agreement is two years, and the parties may agree to renew it for
consecutive two-year terms.

Consulting Agreements
----------------------

Effective September 28, 2004, we have entered into a letter agreement with The
Wall Street Group, Inc. ("WSG"). Pursuant to the letter agreement, we have
retained WSG as financial public relations counsel. Under the letter agreement,
we will pay WSG a cash fee of $7,500 per month and will reimburse them for
reasonable and customary out-of-pocket expenses. In addition, we will grant an
affiliate of WSG a five-year option to purchase as many shares of our common
stock as could be purchased on the open market for $100,000 at the closing bid
price on September 24, 2004. Either party may terminate the agreement on 90 days
written notice. Unless terminated, the agreement will continue in force, and on
each anniversary of the agreement, we will grant WSG or its affiliate a similar
option to purchase our common stock at our then-current trading price.

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During 2005, we had 254,788 shares remaining in escrow with a consulting firm.
These shares were valued at $0.021 per share and the $5,376 was expensed to
consulting expense during 2005.

Litigation
----------

We are involved in certain legal action arising in the ordinary course of
business. We are defending these proceedings. While it is not feasible to
predict or determine the outcome of these matters, we do not anticipate that
these matters will have a material adverse effect on our business or on our
consolidated financial position or on our results of operations.

NOTE K - OTHER RELATED PARTY TRANSACTIONS

Rent negotiations
------------------

During the third quarter of 2004, we issued 1,522,364 shares of our common stock
to the father of a shareholder as payment for the $41,865 accrual we had
recorded at December 31, 2003 for renegotiating our lease during 2003.

Ellipsis
--------

At December 31, 2005, Ellipsis had a receivable of $5,727 from a company that is
owned by a director of Ellipsis. Also at December 31, 2005, we recorded a
receivable from a company owned by a director of Ellipsis for $47,333 and
processed all of our cash disbursements and receipts through that company. Once
we had established a cash account for Ellipsis in 2006, this receivable was paid
off during 2006.

NOTE L - ACQUISITIONS AND INVESTMENTS

Dutchess Agreement
-------------------

Effective September 28, 2004, entered into an Investment Agreement (the
"Dutchess Agreement") and a Registration Rights Agreement with Dutchess Private
Equities Fund, II, L.P., a Delaware limited partnership (the "Investor").
Pursuant to the Dutchess Agreement, the Investor has committed to purchase our
common stock up to an aggregate purchase price of $35 million over a two-year
period.

The Dutchess Agreement provides that we from time to time may deliver a notice
to the Investor. Such notices will state the dollar amount of common stock that
we desire the Investor to purchase. The maximum amount permitted pursuant to any
such notice is $600,000, and we can give approximately three such notices per
month. Upon receipt of the notice, the Investor is obliged to purchase the
dollar amount of common stock set forth in the notice at a purchase price equal
to 96% of the average of the two lowest closing bid prices of the common stock
during the five trading days after the notice.

The obligation of the Investor to purchase under the Dutchess Agreement is
contingent upon our filing and having declared effective a registration
statement registering the resale of the shares by the Investor. Simultaneously,
the parties entered into a Registration Rights Agreement requiring us to file
such a registration statement. In addition, we are not permitted to provide a
notice, and the Investor is not obliged to purchase any shares, in the event
that we do not have sufficient authorized shares available for purchase to
fulfill such commitment. Although it is dependent on the trading price of our
stock, it is very likely that we would have to obtain shareholder approval for
an increase in capitalization in order to take advantage of the full $35 million
facility.

Biofrontera Agreement
----------------------

On July 8, 2005, we entered into an agreement to purchase, and simultaneously
closed upon the purchase of, up to an 18% equity interest in Biofrontera AG
("Biofrontera"), a German company in the pharmaceutical business. We purchased
the interest in Biofrontera from Technologie-Beteiligungs-Gesellschaft mbH, an
instrumentality of the German government. The securities purchased were shares
of Biofrontera's series A Preferred Stock, as well as certain debt instruments.
On August 8, 2005, we converted the securities purchased into Biofrontera's
common stock.

We paid approximately 1.8 million Euros ($2.1 million) for 357,179 common stock
shares in Biofrontera. On September 19, 2005, we paid an additional 98,245 Euros
($121,000) for an additional 98,145 shares of Biofrontera common stock
increasing our ownership of Biofrontera to approximately 18%. In connection with
the transaction, two of the members of our Board of Directors, Richard Gabriel
and Hector Gomez, were retained on the Biofrontera board.

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In addition, to induce the shareholders of Biofrontera to consent to the
transaction, we entered into a put agreement with another Biofrontera
shareholder, Heidelberg Innovation. Pursuant to this agreement, if by December
31, 2005 Biofrontera does not complete its current offering of debt securities
for at least 10 million Euro, Heidelberg Innovation may require us to purchase
Heidelberg Innovation's ownership interest in Biofrontera of approximately 49%
for 1.6 million Euro (approximately $1.96 million). Biofrontera completed the
debt security offering during September 2005 raising 20 million Euros.
Therefore, the put obligation to Heidelberg Innovation has terminated. Each
Biofrontera bond may be converted into 6.1 shares of Biofrontera common stock if
Biofrontera completes a public offering, converting all the outstanding bonds to
shares. The Biofrontera bond is now trading at the Frankfurt exchange under the
symbol:

http://deutsche-boerse.com/dbag/dispatch/de/isg/gdb_navigation/home?module=In
Overview_Bond&wp=DE000A0E9649&foldertype=_Bond&wplist=DE000A0E9649&active=
overview&timespan=3m)

Trace Genetics Acquisition
----------------------------

On June 17, 2005, we entered into a stock purchase agreement to acquire all of
the stock of Trace Genetics, a California corporation that specializes in
genetic ancestry testing. Under the agreement, we issued 1,250,000 shares of our
common stock and granted warrants to purchase 250,000 shares of our common stock
to the prior Trace Genetics shareholders. The 1,250,000 shares were valued at
$270,000 based on quoted market price, and the warrants were valued at $48,283
based upon the Black Scholes option pricing model.

We included the results of Trace Genetics in our financial statements beginning
June 17, 2005 (the closing date of the transaction). The following table
summarizes the estimated fair values of the assets acquired and liabilities
assumed at the date of acquisition. We are in the process of evaluating the
intangibles purchased, thus the purchase price allocation has not been finalized
and is subject to change. The goodwill acquired is not deductible on our tax
return.

[Download Table]

Accounts receivable $ 19,650
Other current assets 15,760
Fixed assets 140,629
Goodwill and other intangibles 269,827
----------
Total assets acquired 445,866
----------
Accrued expenses and payables (85,326)
----------
Capital lease obligation (42,257)
----------
Total liabilities assumed (127,583)
----------
Total purchase price $ 318,283
==========

DNAPrint Pharmaceuticals, Inc. Formation
-------------------------------------------

On October 12, 2005 we formed DNAPrint Pharmaceuticals, Inc., a new wholly-owned
pharmaceutical subsidiary focused on personalized medicine. This wholly-owned
subsidiary is consolidated in our financial statements.

Kenna Technologies, Inc. Acquisition
---------------------------------------

On October 25, 2005, we acquired all of the stock of Kenna Technologies, Inc.
("Kenna"). Kenna develops software and related technologies for building
computational models that mimic complex biological systems. We expect that
Kenna's computational models will become key components for our development of
more effective therapies and diagnostic products. In acquiring Kenna, we also
gain access to Kenna's BoneFusion and CellCycleFusion models, which simulate
bone remodeling processes and molecular pathways. These pathways are common
targets of current cancer therapies. We exchanged 1,499,998 shares of our common
stock for all the outstanding shares of Kenna. The shares were valued at
$22,500.

We included the results of Kenna Technologies in our financial statements
beginning October 25, 2005 (the closing date of the transaction). The following
table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition.

[Download Table]

Other assets $ 4,533
Technology rights 32,638
Total assets acquired 37,171
Accrued expenses and payables (14,671)
Total purchase price $ 22,500
=========

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Ellipsis Biotherapeutics Corporation
--------------------------------------

On November 30, 2005, we acquired the assets of Ellipsis Biotherapeutics
Corporation (we also acquired the right to the name, so the seller has renamed
their company) and formed a company Ellipsis Biotherapeutics Corporation
("Ellipsis") where we placed these assets. Ellipsis is a Toronto-based company
that performs contract SNP genotyping for academic centers, hospitals, human
health care corporations and biotech companies. We exchanged 6,500,000 shares of
our common stock for all the assets acquired. The shares were valued at
$149,500.

We included the results of Ellipsis in our financial statements beginning
November 30, 2005 (the closing date of the transaction). The following table
summarizes the estimated fair values of the assets acquired and liabilities
assumed at the date of acquisition.

[Download Table]

Accounts receivable $ 27,895
Other current assets 76,835
Fixed assets 588,014
Technology rights 24,872
Total assets acquired 717,616
Accrued expenses and payables (376,522)
Deferred revenue (30,172)
Capital lease obligations (161,422)
Total liabilities assumed (568,116)
Total purchase price $ 149,500
==========

NOTE M - UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION FOR ACQUISITION

The following unaudited pro forma consolidated financial information presents
the combined results of our operations as if the acquisition had occurred on
January 1, 2004. The unaudited pro forma consolidated financial information is
not intended to represent or be indicative of the consolidated results of
operations that we would have reported had the acquisition been completed as of
the dates presented, and should not be taken as representative of our future
consolidated results of operations. Summarized unaudited pro forma consolidated
results were as follows:

[Download Table]

For the Period
December 10, 1998
For the year ended December 31, (Date of Inception)
to
2005 2004 December 31, 2005
--------------- --------------- ---------------
Revenues $ 1,690,202 $ 1,437,240 $ 4,108,018
Net loss $ (9,290,003) $ (4,696,973) $ (28,626,531)

Basic and
Diluted loss
per share $ (0.10) $ (0.11) $ (0.88)

For the year ended 2004, we excluded a $5,201,455 gain on assets that was
unrelated to our business that was included in the Ellipsis Biotherapeutics,
Corporation income statement.

NOTE N- SUBSEQUENT EVENTS

Conversion of Debenture and Exercise of Warrants
------------------------------------------------------

From year end to February 24, 2006, La Jolla converted $2,000 of convertible
debentures into our common stock and exercised non-detachable warrants to
purchase 30,000 shares of our common stock. This combined transaction resulted
in our reducing the prepayment for future exercises of warrants by $30,000. We
issued 2,909,090 shares of our common stock.

Dutchess Put Notices
----------------------

From January 1 to February 24, 2006, we exercised put notices in accordance with
our agreement with Dutchess and received $856,401 of cash proceeds for which we
issued 44,005,010 shares of our common stock to Dutchess. We used all of these
proceeds as principal payments on our note payable with Dutchess.

Conversion of Preferred Stock to Common Stock
---------------------------------------------------

On January 11, 2006, 14,700 shares of our preferred stock outstanding were
converted to 11,651,761 shares of our common stock.

F-32

License Agreement with Harvard Medical School
--------------------------------------------------

On January 24, 2006, we entered into an exclusive license agreement with Harvard
College. The license provides for sponsored research and the clinical
development and commercialization of a diagnostic test targeting early
identification of the population at risk of developing vascular diabetic
complications. The sponsored research payments total approximately $2.5 million
and will be paid in quarterly installments of approximately $208,333 over
approximately three years.

Under the license we have the exclusive right to develop market and sell
products and services derived from the research. We will owe royalties of six
percent on the net sales of products and services covered by this license and
thirty percent of all non-royalty sublicense income. We are also required to pay
escalating minimum annual license maintenance fees totaling $850,000 through
January 1, 2012. We are obligated to make annual license maintenance fees of
$250,000 through the license term, but, beginning January 1, 2013, the annual
license fee of $250,000 is credited against royalty payments. Additionally, we
are obligated to pay a fee of approximately $100,000 for previously incurred
patent costs and are responsible for paying the costs associated with patent
expenses during the license term.

Research Sponsorship Agreement
--------------------------------

Effective January 1, 2006, we entered into a research sponsorship agreement with
the Massachusetts College of Pharmacy and Health Sciences for sponsored research
in connection with the synthesis and testing of certain compounds as possible
human medications for drug abuse, attention deficit hyperactivity disorder, and
depression. We had previously licensed exclusive rights to the compounds from a
researcher on October 19, 2005 under an exclusive licensing agreement. The
sponsored research payments total $300,000 and will be paid in monthly
installments of $25,000 over one year. We will acquire all intellectual property
associated with the research results.

Investor Relations Agreement
------------------------------

On February 22, 2006, we entered into an investor relations agreement with an
investor relations firm to increase investor awareness of our Company. For these
services, we paid $75,000 and issued 2 million shares of our common stock. The 2
million shares of common stock was valued at quoted market price for a value of
$53,600 which will be expensed to administrative expense over the three-month
term of the agreement.

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INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article VII in our of Incorporation provides that we shall indemnify to
the fullest extent not prohibited by law any person who was or is a party or is
threatened to be made a party to any legal proceeding against all expenses
(including attorney's fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by the person in connection with such
proceeding. Any repeal or modification of this Article by the stockholders of
the corporation shall be prospective only and shall not adversely affect any
limitation on the personal liability of a director or officer of the corporation
for acts of omissions prior to such repeal or modification.

Article 7.1 of our By-Laws provides that we shall indemnify to the fullest
extent not prohibited by law any person who was or is a party or is threatened
to be made a party to any proceeding (as hereinafter defined) against all
expenses (including attorney's fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such proceeding.

Under the foregoing provisions of our Articles of Incorporation and By-Laws,
each person who is or was a director or officer shall be indemnified by us to
the full extent permitted or authorized by the General Corporation Law of
Nevada. Under such law, to the extent that such person is successful on the
merits of defense of a suit or proceeding brought against such person by reason
of the fact that such person is a director or officer of FTS Group, such person
shall be indemnified against expenses, including attorneys' fees, reasonably
incurred in connection with such action. If unsuccessful in defense of a
third-party civil suit or a criminal suit or if such a suit is settled, such a
person shall be indemnified under such law against both (1) expenses (including
attorneys' fees) and (2) judgments, fines and amounts paid in settlement if such
person acted in good faith and in a manner such person reasonably believed to be
in, or not opposed to, our best interests, and with respect to any criminal
action, had no reasonable cause to believe such person's conduct was unlawful.

Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth our expenses in connection with this registration
statement. All of these expenses are estimates, other than the fees and expenses
of legal counsel and filing fees payable to the Securities and Exchange
Commission.

[Download Table]

Filing Fee--Securities and Exchange Commission $ 1,200
Legal Expenses $ 13,800
Accounting Expenses $ 7,000
Blue Sky Fees and Expenses $ 1,000
Printing Expenses $ 1,000
Miscellaneous expenses $ 1,000
---------
Total: $ 25,000

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RECENT SALES OF UNREGISTERED SECURITIES

In April 2003, we engaged an investment-banking firm to assist us in our
long-term financial planning efforts, including our efforts to raise debt and/or
equity capital. Pursuant to the agreement, we granted this firm, for a period of
twelve months, exclusive authorization to act as our agent (on a best efforts
basis) in substantially all of our investment banking activities. As
consideration for such services, we have agreed to compensate this entity as
follows:

- A non-refundable retainer, payable in warrants to purchase our stock valued at
$80,000;

- A transaction fee equal to the greater of $165,000 or 6% of the aggregate
dollar value of the "Aggregate Consideration" paid by investors (provided
however that if the total raised is less than
$1,000,000, then the fee shall be 16.5% of the amount raised).

- Warrants to purchase (at a nominal price) shares of our common stock having a
value equal to 4% of the "Aggregate Consideration" paid by investors.

During the second quarter of 2003, we issued 188,909 (prior to the accounting
for the 20 for 1 reverse split, the shares issued were 3,778,170) shares of our
common stock. These shares were issued to three "sophisticated investors" in
transactions that we believe were exempt from registration under Rule 506
promulgated under the Securities Act of 1933. The offerings were not
underwritten.

During the second quarter of 2003, we entered into a consulting agreement on
June 1, 2003 with an individual for certain marketing services. For these
services the individual would be paid 250,000 (prior to the accounting for the
20 for 1 reverse split, the shares issued were 5,000,000) shares of our common
stock upon our acceptance of the services provided. On January 19, 2004, we
accepted the services that were provided and issued the 250,000 shares of our
common stock.

On July 14, 2003, we entered into an agreement with Sema4, Inc. dba Semaphore.
In the agreement, Semaphore agrees to provide consulting and support services
for investor relations and general counsel activities. Semaphore will bill us at
an agreed upon hourly rate for investor relation services and general counsel
activities. Semaphore agreed to defer, until financing is completed, 60% of the
general counsel fees and 50% of the investor relation fees. The deferred billing
may be converted to equity at Semaphore's choosing and at a 20% discount. The
value of the stock will be based on the past fifteen day moving average prior to
the date of the valuation which will be the date of the invoice.

During the third quarter of 2003, we issued 1,111,692 (prior to the accounting
for the 20 for 1 reverse split, the shares issued were 22,233,847) shares of our
common stock. These shares were issued to five "sophisticated investors" in
transactions that we believe were exempt from registration under Section 4(2)
and Rule 506 promulgated under the Securities Act of 1933. The offerings were
not underwritten.

On November 25, 2003, we closed on a $500,000, 8% convertible debenture with
non-detachable warrants of 375,000 (prior to the accounting for the 20 for 1
reverse split, the shares issued were 7,500,000) shares with La Jolla Cove
Investors, Inc. ("LJCI"). We pay interest on a monthly basis with a principal
balloon payment due on the maturity date of November 24, 2005. LJCI has the
right to convert the debenture and exercise the warrants after the first full
calendar month after the registration statement was filed (which was filed on
December 19, 2003). Per the agreement, LJCI shall convert at least 5% of the
face value of the debenture each calendar month into common shares of the
Company. The number of common stock shares into which this debenture may be
converted is equal to the dollar amount of the debenture being converted
multiplied by sixteen, minus the product of the conversion price multiplied by
fifteen times the dollar amount of the debenture being converted, and the entire
foregoing result shall be divided by the conversion price. The conversion price
is equal to the lesser of (i) $0.20 or (ii) 80% of the average of the five
lowest daily value weighted average price of our common stock during the twenty
trading days prior to LJCI's election to convert.

On February 18, 2004, the Convertible debenture and Warrant to Purchase Common
Stock agreements between the Company and LJCI were amended. If LJCI does not
convert at least 5% of the face value of the debenture and exercise at least 5%
of the warrants in any particular calendar month, LJCI may wire to us $375,000
less the dollar amount of warrants exercised in that month within five business
days of the end of the month. Should LJCI fail to wire DNAP such funds, LJCI
shall not be entitled to collect interest on the debenture for that month. If
breached more than once, than DNAP may terminate the agreements with LJCI and
the debenture becomes due six months thereafter with accrued interest.
During the fourth quarter of 2003, we issued 60,499 (prior to the accounting for
the 20 for 1 reverse split, the shares issued were 1,209,980) shares of our
common stock in exchange for services valued at approximately $66,104. These
shares were issued to four of our consultants who are "sophisticated investors".
We believe the transactions were exempt from registration under Rule 506
promulgated under the Securities Act of 1933. The offerings were not
underwritten.

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During the fourth quarter of 2003, LJCI converted $30,000 of convertible
debentures into our common stock and exercised 22,500 (prior to the accounting
for the 20 for 1 reverse split, the shares issued were 450,000) of the
non-detachable warrants.

During 2003, we issued stock in lieu of cash payment to several service
providers including legal, accounting and marketing services. The total number
of shares issued in lieu of cash was 72,162 (prior to the accounting for the 20
for 1 reverse split, the shares issued were 1,443,230) at a value of
approximately $52,135.

During the first quarter of 2004, we issued an additional 1,202 (prior to the
accounting for the 20 for 1 reverse split, the shares issued were 24,034) shares
of common stock to Semaphore with a value of approximately $1,300 and a discount
amount of approximately $300 for services that were provided during 2003.
During 2003, we issued stock under an ongoing agreement with a consultant who
provided us with certain marketing services. We received $500,000 in cash under
the option agreement and the consultant received approximately 1,023,590 (prior
to the accounting for the 20 for 1 reverse split, the shares issued were
20,471,793) shares at a fair market value of approximately $1,606,000. The
consultant is a "sophisticated investor".

Currently we have two Scientific Advisory Board members and one Board of
Consultant member. For the services performed by these three members, we are
committed to issue 2,500 (prior to the accounting for the 20 for 1 reverse
split, the shares issued were 50,000) shares of our common stock each year to
each member.

During the first quarter of 2004, we issued a total of 5,502,859 shares (prior
to the accounting for the 20 for 1 reverse split, the shares issued were
110,057,171) of our common stock, 252,859 shares (prior to the accounting for
the 20 for 1 reverse split, the shares issued were 5,057,171) in exchange for
services valued at approximately $282,238 and 5,250,000 shares (prior to the
accounting for the 20 for 1 reverse split, the shares issued were 105,000,000)
to four of our executives in exchange for their services to us, valued at
$1,827,000. These shares were issued to two of our consultants, an attorney
and four of our executives all of whom are accredited or "sophisticated
investors".

During the first quarter of 2004, we issued a total of 1,099,086 shares (prior
to the accounting for the 20 for 1 reverse split, the shares issued were
21,981,712) of our common stock in conjunction with the convertible debenture
and warrants with La Jolla who is a "sophisticated investor".
During the second quarter of 2004, we issued a total of 5,000 shares (prior to
the accounting for the 20 for 1 reverse split, the shares issued were 100,000)
of our common stock in exchange for services valued at approximately $3,600.
These shares were issued to a consultant, who is a "sophisticated investor".

During the second quarter of 2004, we issued a total of 1,607,611 shares (prior
to the accounting for the 20 for 1 reverse split, the shares issued were
32,152,226) of our common stock in conjunction with the convertible debenture
and warrants with La Jolla who is a "sophisticated investor".

During the third quarter of 2004, we issued a total of 9,771 shares (prior to
the accounting for the 20 for 1 reverse split, the shares issued were 195,418)
of our common stock in exchange for services valued at approximately $5,100.
These shares were issued to a consultant, who is a "sophisticated investor".

During the third quarter of 2004, we also issued 76,118 shares (prior to the
accounting for the 20 for 1 reverse split, the shares issued were 1,522,364) of
our common stock in exchange for a charge valued at $41,900 for renegotiating
our building lease. These shares were issued to an individual, who is a
"sophisticated investor".

During the third quarter of 2004, we issued a total of 4,468,727 shares (prior
to the accounting for the 20 for 1 reverse split, the shares issued were
88,374,544) of our common stock in conjunction with the convertible debenture
and warrants with La Jolla who is a "sophisticated investor".

During the fourth quarter of 2004, we issued a total of 7,917,863 shares (prior
to the accounting for the 20 for 1 reverse split, the shares issued were
158,357,255) of our common stock in conjunction with the convertible debenture
and warrants with La Jolla who is a "sophisticated investor".

During 2004, warrants to purchase 573,198 (prior to the accounting for the 20
for 1 reverse split, the shares issued were 11,463,960) shares of common stock
were granted to Athena as a fee for their services at an exercise prices of
$0.44. The warrants expire five years from the grant date.

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During the first quarter of 2005, we issued a total of 7,827 shares (prior to
the accounting for the 20 for 1 reverse split, the shares issued were 156,541)
of our common stock in exchange for services valued at approximately $3,131.
These shares were issued to a consultant, who is a "sophisticated investor".

During the first quarter of 2005, we issued a total of 4,832,818 shares (prior
to the accounting for the 20 for 1 reverse split, the shares issued were
96,656,361) of our common stock in conjunction with the convertible debenture
and warrants with La Jolla who is a "sophisticated investor".

During the second quarter of 2005, we issued a total of 36,844 (prior to the
accounting for the 20 for 1 reverse split, the shares issued were 736,870) of
our common stock in exchange for services valued at approximately $7,369.
These shares were issued to a consultant, who is a "sophisticated investor".

During the second quarter of 2005, we issued a total of 1,250,000 (prior to the
accounting for the 20 for 1 reverse split, the shares issued were 25,000,001) of
our common stock in conjunction with acquiring all the stock of Trace Genetics,
Inc. These shares were issued to the prior shareholders of Trace Genetics,
Inc., who are "sophisticated investors".

During the second quarter of 2005, we issued a total of 694,192 shares (prior to
the accounting for the 20 for 1 reverse split, the shares issued were
13,883,830) of our common stock in conjunction with the Investment Agreement
with Dutchess who is a "sophisticated investor".

During the second quarter of 2005, we issued a total of 6,684,355 shares (prior
to the accounting for the 20 for 1 reverse split, the shares issued were
133,687,099) of our common stock in conjunction with the convertible debenture
and warrants with La Jolla who is a "sophisticated investor".

During the third quarter of 2005, we issued a total of 26,394 shares of our
common stock in exchange for services valued at approximately $5,354. These
shares were issued to consultants, who are "sophisticated investors".

During the third quarter of 2005, we issued 2,000,000 shares of our common stock
as in exchange for services valued at approximately $120,000. These shares were
issued to an investor relations firm, who is a "sophisticated investor".

During the third quarter of 2005, we issued a total of 15,024,806 shares of our
common stock in conjunction with the Investment Agreement with Dutchess who is a
"sophisticated investor".

During the third quarter of 2005, we issued a total of 39,228,609 shares of our
common stock in conjunction with the convertible debenture and warrants with La
Jolla who is a "sophisticated investor".

During the fourth quarter of 2005, we issued a total of 63,193,359 shares of our
common stock in conjunction with the Investment Agreement with Dutchess who is a
"sophisticated investor".

During the fourth quarter of 2005, we issued a total of 35,940,814 shares of our
common stock in conjunction with the convertible debenture and warrants with La
Jolla who is a "sophisticated investor".

During the fourth quarter of 2005, we issued 960,902 shares of our common stock
to a preferred stock holder who converted his preferred stock shares to common
stock. He is a "sophisticated investor".

During the fourth quarter of 2005, we issued 6,500,000 shares of our common
stock to a corporation in conjunction with the Ellipsis Biotherapeutics
Corporation acquisition. The entity is a "sophisticated investor".

During the fourth quarter of 2005, we issued 2,928,043 shares of our common
stock to an individual for a sign on bonus. The individual is a "sophisticated
investor".

During the fourth quarter of 2005, we issued 2,000,000 shares of our common
stock to an entity for investor relations services. The entity is a
"sophisticated investor".

During the fourth quarter of 2005, we issued 454,966 shares of our common stock
to an individual for administrative services received. The individual is a
"sophisticated investor".

During the fourth quarter of 2005, we issued 1,499,998 shares of our common
stock to several individuals for the Kenna Technologies, Inc. acquisition. The
individuals are all "sophisticated investor".

During 2005, we granted a five-year warrant for 5,714,286 shares of our common
stock for consulting services performed. This warrant has an exercise price of
$0.0175 and was valued at $95,306 based upon the Black-Scholes model. This will
be expensed over the service period of the agreement.
During 2005, we granted a five-year warrant for 370,370 shares of our common
stock for consulting services performed. This warrant has an exercise price of
$0.27 and was valued at $139,030 based upon the Black-Scholes model. This was
expensed over the service period of the agreement.

During 2005, we granted options to employees for 67,242,362 shares of our common
stock at exercise prices ranging from $0.0174 to $0.60 per share.

During the January 2006, we issued a total of 9,091,510 shares of our common
stock in conjunction with the Investment Agreement with Dutchess who is a
"sophisticated investor".

During January 2006, we issued 11,651,671 shares of our common stock to a
preferred stock holder who converted his preferred stock shares to common stock.
He is a "sophisticated investor".

We believe all of the above transactions were exempt from registration under
Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder.
These offerings were not
underwritten.

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NUMBER DESCRIPTION
------ -----------
3.1 Restated Articles of Incorporation (included as exhibit 3.1 to the Form
10-KSB, filed March 29, 2006, and incorporated herein by reference).

3.2 Bylaws (included as exhibit 3.2 to the Form 10-KSB, filed March 29, 2006,
and incorporated herein by reference).

4.1 Form of Warrant agreement between the Company and Athena Capital Partners,
Inc. and certain partners (included as exhibit 10.33 to the Form 10-KSB filed
March 30, 2004, and incorporated herein by reference).

4.2 Securities Purchase Agreement between the Company and La Jolla Cove
Investors Inc. (included as Exhibit 10.29 to Form S-2, filed December 15, 2003,
and incorporated herein by reference).

4.3 Registration Rights Agreement between the Company and La Jolla Cove
Investors Inc. (included as Exhibit 10.29 to Form S-2, filed December 15, 2003,
and incorporated herein by reference).

4.4 Convertible Debenture Agreement between the Company and La Jolla Cove
Investors Inc. (included as Exhibit 10.29 to Form S-2, filed December 15, 2003,
and incorporated herein by reference).

4.5 Warrant Agreement between the Company and La Jolla Cove Investors Inc.
(included as Exhibit 10.29 to Form S-2, filed December 15, 2003, and
incorporated herein by reference).

4.6 Addendum to convertible debenture and warrant agreement between the Company
and La Jolla Cove Investors, Inc. (included as Exhibit 10.43 to Form 10-QSB
filed May 14, 2004, and incorporated herein by reference).

4.7 Investment Agreement between the Company and Dutchess Private Equities Fund,
II, L.P., dated September 28, 2004 (included as Exhibit 10.49 to Form 8-K, filed
October 4, 2004, and incorporated herein by reference).

4.8 Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, II, L.P., dated September 28, 2004 (included as Exhibit 10.50 to
Form 8-K, filed October 4, 2004, and incorporated herein by reference).

4.9 Investment Agreement between the Company and Biofrontera Pharmaceutical
GmbH, dated September 28, 2004 (included as Exhibit 10.47 to Form 8-K, filed
October 4, 2004, and incorporated herein by reference).

4.10 Stock Purchase Agreement between the Company and Trace Genetics, Inc, dated
June 17, 2005 (included as Exhibit 10.49 to Form S-2, filed July l5, 2005, and
incorporated herein by reference).

4.11 Purchase Agreement between the Company, tbg
Technologie-Beteiligungs-Gesellschaft mbH and Biofrontera AG (included as
Exhibit 10.50 to Form S-2, filed July 15, 2005, and incorporated herein by
reference).

4.12 Put Option Agreement between the Company, Heidelberg Innovation BioScience
Venture II GmbH & Co. KG and Heidelberg Innovation Parallel-Beteiligungs GmbH &
Co. KG a.A. (included as Exhibit 10.51 to Form S-2, filed July 15, 2005 and
incorporated herein by reference).

4.13 Asset Purchase Agreement dated November 8, 2005 between the Company and
Ellipsis Biotherapeutics Corporation. (included as Exhibit 10.1 to Amendment to
Form 8-K filed March 6, 2006, and incorporated herein by reference).

5.1* Opinion re: legality of Amy M. Trombly, Esq.

10.1 Supply & License Agreement (included as Exhibit 10.4 to the Form S-2 filed
December 15,2003, and incorporated herein by reference).

10.2 Agreement & Plan of exchange between the Company, Catalyst Communications,
Inc. and Shareholders, dated November 6, 2000 (included as exhibit 10.5 to the
Form 8-K filed November 6, 2000, and incorporated herein by reference).

10.3 Equipment Agreement between the company and Orchid Biosciences, Inc., dated
September 19, 2001 (included as Exhibit 10.6 to the Form 10-KSB, filed April 2,
2001, and incorporated herein by reference).

10.4 Purchase Agreement between the Company and Orchid Biosciences, Inc., dated
September 19, 2001 (included as Exhibit 10.7 to the Form 10-KSB, filed April 2,
2001, and incorporated herein by reference).

10.5 Option Agreement between the Company and Orchid Biosciences, Inc., dated
September 19, 2001 (included as Exhibit 10.10 to the Form 10-KSB, filed April 2,
2001, and incorporated herein by reference).

10.6 Equipment Lease Agreement between the Company and Orchid Biosciences, Inc.,
dated May 18, 2001 (included as Exhibit 10.11 to the Form 10-QSB, filed August
14, 2001, and incorporated herein by reference).

10.7 Funding Agreement dated February 22, 2002 among the Company Tony Frudakis,
George Frudakis, Carl Smith III, and Richard Craig Hall, dated February 22,2002
(included as Exhibit 10.16 to the Form 10-KSB, filed April 9, 2002, and
incorporated herein by reference).

10.8 Performance Stock Agreement between the Company and Tony Frudakis dated
November 30, 2001 (included as Exhibit 10.17 to the Form 10-KSB, filed April 9,
2002, and incorporated herein by reference)

10.9 Consulting Agreement between the Company and Mark Shriver dated June 12,
2002 (included as Exhibit 10.20 to the Form 10-QSB, filed August 14,2002, and
incorporated herein by reference).

10.10 Letter of Commitment from Mark Shriver to the Company's Scientific
Advisory Board (included as Exhibit 10.21 to the Form 10-QSB, filed August 14,
2002, and incorporated herein by reference).

10.11 Service Agreement between the Company and Altura LLC, dated April 15, 2002
(included as Exhibit 10.23 to the Form 10-QSB, filed August 14, 2002, and
incorporated herein by reference).

10.12 License Agreement between the Company and Penn State Research Foundation
(included as Exhibit 10.24 to the Form 10-QSB, filed August 14, 2002, and
incorporated herein by reference).

10.13 Amendment to Consulting Agreement between the Company and Genbiomics LLC
dated May 31, 2002, (included as Exhibit 10.27 to Form 10-QSB, filed August 14,
2002, and incorporated herein by reference).

10.14 Amendment to Consulting Agreement between the Company and Mark Shriver
(included as Exhibit 10.28 to Form 10-QSB, filed August 14, 2002, and
incorporated herein by reference).

10.15 Employment Agreement between the Company and Richard Gabriel, dated May
16, 2003 (included as Exhibit 10.1 to Form 10-QSB, filed August 14, 2003, and
incorporated herein by reference).

10.16 Employment Agreement between the Company and Monica Tamborini, dated May
16, 2003 (included as Exhibit 10.2 to Form 10-QSB, filed August 14, 2003, and
incorporated herein by reference).

10.17 Employment Agreement between the Company and Hector Gomez, dated May 16,
2003 (included as Exhibit 10.3 to Form 10-QSB, filed August 14, 2003, and
incorporated herein by reference).

10.18 Amendment to Funding Agreement between the Company and Tony Frudakis,
dated December 30, 2003 (included as Exhibit 10.42 to Form 10-KSB, filed March
30, 2004, and incorporated herein by reference).

10.19 Research Collaboration Agreement between the Company and the H. Lee
Moffitt Cancer Center and Research Institute, Inc. (included as Exhibit 10.44 to
Form 10-QSB file May 14, 2004, and incorporated herein by reference).

10.20 Joint Venture Framework Agreement between the Company and Biofrontera
Pharmaceutical GmbH (included as Exhibit 10.48 to Form 8-K, filed October 4,
2004, and incorporated herein by reference).

10.22 Letter Agreements between the Company and La Jolla Cove Investors Inc.
(included as Exhibit 10.29 to Form S-2, filed December 15, 2003, and
incorporated herein by reference).

10.23 Letter Agreement between the Company and The Wall Street Group, Inc.,
dated September 30, 2004 (included as Exhibit 10.44 to Form S-2/A, filed
December 30, 2004, and incorporated herein by reference).

10.24 Loan Agreement between the Company and Biofrontera AG (included as Exhibit
4.1 to Form 8-K date January 5, 2005, and incorporated herein by reference).

10.25 License Agreement between the Company and Beth Israel Deaconess Medical
Center, dated April 4, 2005 (included as Exhibit 10.1 to Form 8-K/A, filed May
5, 2005, and incorporated herein by reference).

10.26 Consulting Services Agreement between the Company and Dr. Arthur
Sytkowski, dated June 7, 2005 (included as Exhibit 10.1 to Form 8-K, filed June
13, 2005, and incorporated herein by reference).

10.27 Promissory Note issued by the Company to Dutchess Private Equities Fund
II, L.P. (included as Exhibit 10.51 to Form S-2, filed July 15, 2005, and
incorporated herein by reference).

10.28 Promissory Note issued by the Company to Dutchess Private Equities Fund
II, L.P. (included as Exhibit 10.1 to Form 10-QSB, filed August 15, 2005, and
incorporated herein by reference).

10.29 Financial Consulting Agreement between the Company and Market Pulse LLC
(included as Exhibit 10.1 to Form 10-QSB, filed November 14, 2005, and
incorporated herein by reference).

10.30 Consulting Services Agreement between the Company and Dr. Arthur J.
Sytkowski, dated September 1, 2005 (included as Exhibit 10.2 to Form 10-QSB
filed November 14, 2005, and incorporated herein by reference).

10.31 Stock Purchase Agreement between the Company and certain shareholders of
Kenna Technologies, Inc., dated October 25, 2005 (included as Exhibit 10.3 to
Form 10-QSB filed November 14, 2005, and incorporated herein by reference).

10.32 License Agreement between the Company and Mark Froimowitz, dated October
25, 2005 (included as Exhibit 10.4 to Form 10-QSB filed November 14, 2005, and
incorporated herein by reference).

10.33 Promissory Note issued by the Company to Dutchess Private Equities Fund,
L.P., dated November 18, 2005 (included as exhibit 10.33 to the Form 10-KSB
filed March 29, 2006, and incorporated herein by reference).

10.34 Financial Consulting Agreement between the Company and Market Pulse LLC
dated November 21, 2005 (included as exhibit 10.34 to the Form 10-KSB filed
March 29, 2006, and incorporated herein by reference).

10.35 Promissory Note issued by the Company to Dutchess Private Equities Fund
II, L.P., dated December 22, 2005. (included as exhibit 10.35 to the Form 10-KSB
filed March 29, 2006, and incorporated herein by reference).

10.36 Research Sponsorship and License Agreement between the Company and Harvard
College, dated January 19, 2006 (included as Exhibit 10.1 to Form 8-K filed
January 27, 2006, and incorporated herein by reference).

10.37 Research Sponsorship Agreement between the Company and Massachusetts
College of Pharmacy and Health Sciences dated January 31, 2006 (included as
exhibit 10.37 to the Form 10-KSB filed March 29, 2006, and incorporated herein
by reference).

10.38 Financial Consulting Agreement between the Company and Market Pulse LLC,
dated February 22, 2006 (included as exhibit 10.38 to the Form 10-KSB filed
March 29, 2006, and incorporated herein by reference).

10.39 Promissory Note dated issued by the Company to Dutchess Private Equities
Fund, L.P., dated March 13, 2006 (included as exhibit 10.39 to the Form 10-KSB
filed March 29, 2006, and incorporated herein by reference).

10.40 Security Agreement given by the Company in favor of Dutchess Private
Equities Fund, L.P., dated March 13, 2006 (included as exhibit 10.40 to the Form
10-KSB filed March 29, 2006, and incorporated herein by reference).

10.41 Placement Agent Agreement among the Company, Athena Capital Partners,
Inc. and Dutchess Private Equities Fund, L.P., a Delaware Limited Partnership
dated October 1, 2004.

23.1 Consent of Pender Newkirk & Company

23.*2 Consent of Amy M. Trombly, Esq. (incorporated in Exhibit 5.1)

----------------------
* To be filed by amendment.

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Undertakings

(a) The undersigned registrant hereby undertakes to:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act:

(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424 (b)( 230.424(b) of this chapter) if,
in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and

(iii)Include any additional changed material information on the plan of
distribution.

(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and as expressed in the Act and
is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred
or paid by a director, officer or controlling person of the small business
issuer in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the small business issuer will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.

(g) That for the purpose of determining any liability under the Securities
Act to any purchaser:

(1) If the small business issuer is relying on Rule 430B ( 230.430B of
this chapter):

(i) Each prospectus filed by the undersigned small business issuer
pursuant to Rule 424(b)(3)( 230.424(b)(3) of this chapter) shall be
deemed to be part of the registration statement as of the date the
filed prospectus was deemed part of and included in the registration
statement; and

(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) ( 230.424(b)(2), (b)(5), or (b)(7) of this chapter)
as part of a registration statement in reliance on Rule 430B relating
to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x)(
230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of
providing the information required by section 10(a) of the Securities
Act shall be deemed to be part of and included in the registration
statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of
sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and any
person that is at that date an underwriter, such date shall be deemed
to be a new effective date of the registration statement relating to
the securities in the registration statement to which that prospectus
relates, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. Provided,
however, that no statement made in a registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective
date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such
effective date; or

(iii) Each prospectus filed pursuant to Rule 424(b)( 230.424(b) of
this chapter)as part of a registration statement relating to an
offering, other than registration statements relying on Rule 430B or
other than prospectuses filed in reliance on Rule 430A ( 230.430A of
this chapter), shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part
of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any such
document immediately prior to such date of first use.

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SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the State of
Florida, on April 10, 2006.

DNAPrint Genomics, Inc.

By: /s/ Richard Gabriel
---------------------
Richard Gabriel
Chief Executive Officer

Signature Date

/s/ Richard Gabriel April 10, 2006
------------------------- ------------------
Richard Gabriel
Chief Executive Officer
Director

/s/ Monica Tamborini April 10, 2006
-------------------------- ------------------
Monica Tamborini
Chief Financial Officer
Chief Operating Officer

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘SB-2’ Filing	Date	First	Last	Other Filings

	12/31/25	63
	1/1/13	21	75
	1/1/12	21	75
	12/15/10	66
	10/21/10	65
	4/30/08	38	72
	11/25/07	34	64
	3/6/07	35
	1/1/07	61
	12/31/06	35	66	10KSB, DEF 14A
	12/15/06	35	66
	9/1/06	72
	8/1/06	38	72	8-K
	5/31/06	38	72
Filed on:	4/10/06	1	82
	4/4/06	2	11
	3/31/06	5	39	10QSB
	3/29/06	80		10KSB
	3/14/06	22
	3/13/06	80		8-K
	3/11/06	21
	3/6/06	35	80	10QSB/A, 8-K, 8-K/A
	2/28/06	22		8-K
	2/24/06	9	75
	2/22/06	75	80	8-K
	1/31/06	80		8-K
	1/30/06	64
	1/27/06	80		8-K
	1/24/06	20	75	8-K
	1/19/06	80
	1/11/06	75
	1/1/06	41	75
	12/31/05	8	75	10KSB
	12/22/05	35	80	8-K
	11/30/05	18	75
	11/24/05	77
	11/21/05	69	80	4, 8-K
	11/18/05	80		8-K
	11/14/05	80		10QSB
	11/11/05	70
	11/8/05	80		8-K
	10/25/05	18	80	8-K
	10/21/05	35	65
	10/20/05	35	64
	10/19/05	75
	10/12/05	18	74
	10/10/05	67
	9/19/05	18	73
	9/1/05	20	80	8-K
	8/22/05	41
	8/19/05	69		8-K
	8/15/05	20	80	10QSB
	8/8/05	18	73
	8/1/05	35	65
	7/15/05	6	80	S-2
	7/12/05	35	68
	7/8/05	14	73	8-K
	6/30/05	35	66	10QSB, 10QSB/A, 8-K
	6/28/05	34	64	8-K
	6/17/05	58	80	8-K
	6/13/05	80		8-K
	6/7/05	20	80	8-K
	5/31/05	38
	5/17/05	6		10KSB/A, S-2/A
	5/5/05	80		8-K/A
	4/4/05	19	80	8-K, 8-K/A
	2/18/05	18	33	8-K
	1/5/05	80		8-K
	12/31/04	9	72	10KSB, 10KSB/A, 10QSB/A, S-2/A
	12/30/04	80
	12/28/04	39
	10/4/04	80		8-K
	10/1/04	80
	9/30/04	80		10QSB, 10QSB/A
	9/28/04	6	80	8-K
	9/24/04	72
	7/28/04	38
	5/14/04	80		10QSB
	3/30/04	80		10KSB
	2/18/04	34	77
	1/19/04	77
	1/9/04	14
	1/1/04	75
	12/31/03	38	73	10KSB, 10KSB/A
	12/30/03	80
	12/19/03	14	77
	12/15/03	80		S-2
	11/25/03	34	77
	11/3/03	6
	10/28/03	14
	10/27/03	14
	8/26/03	38
	8/14/03	80
	7/14/03	77
	6/1/03	77
	5/16/03	40	80	3, 4, 4/A
	4/11/03	44
	4/1/03	39
	1/31/03	38
	12/31/02	43	49	10KSB, NT 10-K
	8/14/02	80		10QSB
	6/12/02	80
	5/31/02	80
	5/17/02	39
	4/15/02	80
	4/9/02	80		10KSB
	3/1/02	15		5
	2/22/02	41	80	3, 3/A, 4
	12/31/01	43	49	10KSB, 5, 5/A, NT 10-K
	11/30/01	41	80
	10/15/01	38
	9/19/01	80
	8/22/01	41
	8/14/01	80		10QSB
	5/18/01	80
	5/8/01	41
	4/2/01	80		10-K, 3, 4
	12/31/00	43	49	10-K, 5, 5/A, NT 10-K
	11/6/00	80		8-K12G3
	7/15/00	17	58
	12/31/99	43	49
	12/10/98	43	75
				List all Filings

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Filing Submission 0001231742-06-000245 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Dnaprint Genomics Inc – ‘SB-2’ on 4/10/06

On: Monday, 4/10/06, at 4:05pm ET · Accession #: 1231742-6-245 · File #: 333-133168

Previous ‘SB-2’: None · Next: ‘SB-2/A’ on 4/26/06 · Latest: ‘SB-2/A’ on 8/9/07

Registration of Securities by a Small-Business Issuer — Form SB-2Filing Table of Contents

SB-2 — Registration of Securities by a Small-Business IssuerDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents

SB-2 — Registration of Securities by a Small-Business Issuer
Document Table of Contents