MRU HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED

JUNE 30, 2006 (AUDITED), THE SIX MONTHS ENDED JUNE 30, 2005 (AUDITED), AND THE YEAR ENDED DECEMBER 31, 2004 (AUDITED)

F-1

MRU HOLDINGS, INC. AND SUBSIDIARIES

JUNE 30, 2006 AND 2005, AND DECEMBER 31, 2004

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)

FOR THE YEAR ENDED JUNE 30, 2006, SIX MONTHS ENDED JUNE 30, 2005, AND YEAR ENDED DECEMBER 31, 2004

Report of Independent Registered Accounting Firm		F-3

Consolidated Balance Sheets as of June 30, 2006 and 2005(Audited)		F-4

Consolidated Statements of Operations for the Year Ended June 30, 2006 (Audited), Six Months Ended June 30, 2005 (Audited), and Year Ended December 31, 2004 (Audited)		F-5

Consolidated Statements of Cash Flows for the Year Ended June 30, 2006 (Audited), Six Months Ended June 30, 2005 (Audited), and Year Ended December 31, 2004 (Audited)		F-6

Consolidated Statement of Changes in Stockholders Equity/(Deficit) from January 1, 2004 through June 30, 2006 (Audited)		F-7

Notes to Consolidated Financial Statements		F-8

F-2

BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.

Certified Public Accountants

High Ridge Commons

Suites 400-403

200 Haddonfield Berlin Road

Gibbsboro, New Jersey 08026

(856) 346-2828 Fax (856) 346-2882

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

MRU Holdings, Inc.

New York, New York

We have audited the accompanying consolidated balance sheets of MRU Holdings, Inc. and Subsidiaries (the “Company) as of June 30, 2006 and 2005 and the related consolidated statements of operations, consolidated changes in stockholders’ equity (deficit), and consolidated cash flows for the year ended June 30, 2006, the six months ended June 30, 2005 and the year ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We have conducted our audits in accordance with standards established by 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MRU Holdings, Inc. and Subsidiaries as of June 30, 2006 and 2005 and the results of their consolidated operations, changes in stockholders’ equity (deficit) and cash flows for the year ended June 30, 2006, the six months ended June 30, 2005 and the year ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 15 to the financial statements, the accompanying financial statements have been restated.

BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.

BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.

Certified Public Accountants

Gibbsboro, New Jersey

September 28, 2006, except for Note 15 which is as of February 8, 2007

MEMBER OF:

AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

CENTER FOR PUBLIC COMPANY AUDIT FIRMS (CPCAF)

NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

FLORIDA STATE BOARD OF ACCOUNTANCY

F-3

MRU HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED AUDITED BALANCE SHEETS

JUNE 30, 2006 AND JUNE 30, 2005

ASSETS
	2006			2005
	(Restated)			(Restated)
CURRENT ASSETS:
Cash and cash equivalents	$	17,899,504		$	6,894,522
Restricted cash		2,975,430			-
Accounts receivable		4,167			20,246
Private student loans receivable, held for sale, lower of cost of market		39,564,367			158,479
Valuation reserve - private student loans receivable		(814,631	)		-
Collateral deposit - student loans		0			250,000
Prepaid expenses and other current assets		388,477			133,540
Total Current Assets		60,017,314			7,456,787

Fixed assets, net of depreciation		537,131			273,073

OTHER ASSETS:
Security deposits		30,248			392,963
Intangible assets, net of amortization		98,960			0
Investment in Achiever Fund I, LLC		120,000			0
Deferred financing fees, net of amortization		1,930,854			177,820
Total Other Assets		2,180,062			570,783

TOTAL ASSETS	$	62,734,507		$	8,300,643


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable	$	1,410,865		$	577,478
Accrued expenses		870,571			170,775
Accrued payroll		161,609			225,644
Notes payable - Doral Bank FSB NY		806,182			0
Notes payable - Merrill Lynch		17,863,560			0
Total Current Liabilities		21,112,787			973,897

LONG-TERM LIABILITIES:
Notes payable - Nomura Credit & Capital		18,732,264			0

Deferred origination fee revenue		1,327,273			7,388
Total Long-term Liabilities		20,059,537			7,388

Total Liabilities		41,172,324			981,285

STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, Series A, $.001 par value; 25,000,000 shares authorized
0 and 3,250,006 shares issued and outstanding as of 06/30/2006 and 06/30/2005		0			3,250
Preferred Stock, Series B, $.001 par value; 25,000,000 shares authorized
7,631,580 and 0 shares issued and outstanding as of 06/30/2006 and 06/30/2005		7,632			0
Common Stock, $.001 par value; 200,000,000 shares authorized, 17,593,565
and 13,664,502 issued and outstanding as of 06/30/2006 and 06/30/2005		17,593			13,664
Additional paid-in capital		35,775,538			6,426,066
Additional paid-in capital - options		7,518,079			0
Additional paid-in capital - Series A beneficial conversion feature		6,334,174			6,175,000
Additional paid-in capital - Series B beneficial conversion feature		10,847,759			0
Additional paid-in capital - warrants		10,369,549			7,382,068
Accumulated deficit		(49,308,141	)		(12,680,690	)
Total Stockholders' Equity (Deficit)		21,562,183			7,319,358

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)	$	62,734,507		$	8,300,643

The accompanying notes are an integral part of these consolidated financial statements.

F-4

MRU HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED JUNE 30, 2006 (AUDITED), SIX MONTHS ENDED JUNE 30, 2005 (AUDITED),
AND YEAR ENDED DECEMBER 31, 2004 (AUDITED)

	Year			Six Months			Year
	Ended			Ended			Ended
	June 30,			June 30,			December 31,
	2006			2005			2004
	(Audited)			(Audited)			(Audited)
	(Restated)			(Restated)
OPERATING REVENUE:
Referral income - consolidation student loans	$	0		$	238,175		$	0
Referral income - private student loans		1,889			881			8,177
Loan portfolio interest income - private student loans		1,206,160			297			0
Origination fee revenue - private student loans		9,526			0			0
Late payment fee revenue - private student loans		494			0			0
License income		26,423			0			0
Total Operating Revenue		1,244,492			239,353			8,177

COST OF REVENUES
Referral marketing costs - consolidation student loans		23,300			189,725			0
Referral marketing costs - private student loans		348,822			0			0
Facility interest and origination bank costs		1,078,202			10,185			0
Valuation reserve - private student loans		814,631			0			0
Consulting and hosting		53,775			0			0
Servicing and custodial costs		82,625			25,070			0
Total Cost of Revenues		2,401,355			224,980			0

GROSS PROFIT/(LOSS)		(1,156,863	)		14,373			8,177

OPERATING EXPENSES
Corporate general and administrative expenses		9,609,122			1,104,701			774,122
Sales and marketing expenses		7,447,426			791,261			312,301
Operations expenses		2,522,738			257,307			35,687
Technology development		1,466,705			855,132			158,646
Legal expenses		590,513			791,011			475,984
Other operating expenses		661,255			247,807			98,894
Depreciation and amortization		1,969,858			70,595			13,782
Total Operating Expenses		24,267,617			4,117,814			1,869,416

OPERATING (LOSS)		(25,424,480	)		(4,103,441	)		(1,861,239	)

OTHER INCOME/(EXPENSE)
Interest income		428,201			83,398			13,931
Interest expense		(23,501	)		(67,905	)		(22,133	)
Other non-operating income/(expense)		30,868			16,785			(1,992	)
Total Other Income/(Expense)		435,568			32,278			(10,194	)

NET (LOSS) BEFORE PROVISION FOR INCOME TAXES		(24,988,912	)		(4,071,163	)		(1,871,433	)
Provision for income taxes		0			0			0

NET (LOSS)	$	(24,988,912	)	$	(4,071,163	)	$	(1,871,433	)

LESS PREFERRED STOCK DIVIDEND		(11,606,683	)		(6,175,000	)		0

(LOSS) APPLICABLE TO COMMON SHARES	$	(36,595,595	)	$	(10,246,163	)	$	(1,871,433	)

NET (LOSS) PER BASIC AND DILUTED SHARES	$	(2.42	)	$	(0.75	)	$	(0.14	)

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING		15,100,652			13,608,511			13,209,331

The accompanying notes are an integral part of these consolidated financial statements.

F-5

MRU HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED JUNE 30, 2006 (AUDITED), SIX MONTHS ENDED JUNE 30, 2005 (AUDITED),
AND THE YEAR ENDED DECEMBER 31, 2004 (AUDITED)

	2006			2005			2004

CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)	$	(36,595,595	)	$	(10,246,163	)	$	(1,871,433	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		1,969,858			70,595			13,782
Series A Preferred Stock Dividend		758,924			6,175,000			-
Series B Preferred Stock Dividend		10,847,759			-			-
Increase in stock options outstanding		7,814,692			0			0
(Increase) in tax provision valuation stock options outstanding		(2,656,995	)		0			0
Increase in valuation reserve - private student loans		814,631			0			0

Changes in assets and liabilities
Decrease/(Increase) in accounts receivable		16,079			(20,246	)		0
(Increase) in restricted cash		(2,975,430	)
Decrease/(increase) in collateral deposit - student loans		250,000			(250,000	)		0
(Increase) in prepaid expenses and other current assets		(254,937	)		41,016			(180,032	)
Decrease/(increase) in security deposits		362,715			(386,938	)		0
(Increase) in student loans receivable, held for sale		(39,405,888	)		(158,479	)		0
Increase in accounts payable and accrued expenses		1,039,898			165,584			458,482
(Decrease)/Increase in accrued payroll		(64,035	)		225,644			0
Increase in deferred origination fee revenue		1,319,885			7,388			0

Total adjustments		(20,162,845	)		5,869,564			292,232

Net cash (used in) operating activities		(56,758,440	)		(4,376,599	)		(1,579,201	)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets and intangible assets		(573,977	)		(247,867	)		(70,409	)
(Increase) in investment in Achiever Fund I LLC		(120,000	)		0			0

Net cash (used in) investing activities		(693,977	)		(247,867	)		(70,409	)

CASH FLOWS FROM FINANCING ACTIVITES
Increase in advances - originating loan program agreements		37,624,454			0			0
(Decrease) due to repayments - originating loan program agreements		(36,818,272	)		0			0
Increase in advances - Nomura Credit and Capital credit facility		19,286,667			0			0
(Decrease) due to repayments - Nomura Credit and Capital credit facility		(554,403	)		0			0

Increase in advances - Merrill Lynch credit facility		17,920,204			0			0
(Decrease) due to repayments - Merrill Lynch credit facility		(56,644	)		0			0
Proceeds from bridge loan		0			0			750,000
Proceeds from sale of stock and equity, net of expenses		0			0			2,548,438
Proceeds from conversion of warrants		406,356			107,760			0
Reduction in stock options outstanding due to exercise		(296,613	)		0			0
Proceeds from conversion of options		646,500			0			0
Increase in deferred tax due to stock options outstanding		2,656,995			0			0
Costs associated with Series A convertible preferred issuance		0			(534,899	)		0
Gross proceeds from sale of Series A convertible preferred issuance		0			10,503,750			0
(Increase) in deferred financing fees		(525,000	)		(206,500	)		0
Costs associated with Series B convertible preferred issuance		(832,845	)		0			0
Gross proceeds from sale of Series B convertible preferred issuance		29,000,000			0			0

Net cash provided by financing activities		68,457,399			9,870,111			3,298,438

NET INCREASE IN CASH AND CASH EQUIVALENTS		11,004,982			5,245,645			1,648,828

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		6,894,522			1,648,877			49

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	17,899,504		$	6,894,522		$	1,648,877

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

CASH PAID DURING THE PERIOD FOR:
Interest expense	$	23,501		$	67,786		$	67,786

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
Issuance of common stock for conversion of bridge loan	$	0		$	0		$	750,000

Issuance of preferred stock in conversion of dividends payable	$	522,381		$	0		$	0

Accrued Series A and B stock dividends	$	599,750		$	121,086		$	0

Issuance of warrants	$	2,987,481		$	7,382,068		$	0

Preferred stock converted to common shares	$	3,448		$	0		$	0

The accompanying notes are an integral part of these consolidated financial statements.

F-6

MRU HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEAR ENDED JUNE 30, 2006 (AUDITED) AND SIX MONTHS ENDED JUNE 30, 2005 (AUDITED)

AND THE YEAR ENDED DECEMBER 31, 2004 (AUDITED)

																	Additional			Additional			Additional		Additional		Additional
	Series A Preferred Stock						Series B Preferred Stock				Common Stock						Paid-In			Paid-In Capital			Paid-In Capital		Paid-In Capital		Paid-In Capital		Accumulated
	Shares			Amount			Shares		Amount		Shares			Amount			Capital			- Options			- Warrants		- Series A Ben Conv		- Series B Ben Conv		(Deficit)			Total
																									(Restated)		(Restated)		(Restated)


Balance, December 31, 2003		900,000		$	900			0	$	0		10,300,000		$	10,300		$	438,800		$	0		$	0						($442,008	)	$	7,992

Additional capital contribution																		30,450														$	30,450

Net (loss) for the six months ended
June 30, 2004 before effects of reverse merger																														(200,889	)		($200,889	)

Subtotal-June 30, 2004		900,000		$	900			0	$	0		10,300,000		$	10,300		$	469,250		$	0		$	0	$	0	$	0		($642,897	)		($162,447	)

Effects of Reverse Merger
Elimination of Iempower equity		(900,000	)		(900	)						(10,300,000	)		(10,300	)		(469,250	)														($480,450	)
Distribution of Pacific Technology equity to Iempower holders												6,863,433			6,863			439,790														$	446,653
Assumption of Pacific Technology liabilities by Iempower holders												466,519			466			29,894														$	30,360
Remaining equity in Pacific Technology (now MRU Holdings, Inc.)												3,600,000			3,600																	$	3,600

Issuance of shares in conversion
of bridge loan and accrued interest												468,750			469			749,531														$	750,000

Common stock issued for cash, July 2004 - net of expenses												2,150,000			2,150			2,455,674														$	2,457,824

Common stock issued for cash, October 2004												37,500			38			59,962														$	60,000

Net (loss) for the period July 1, 2004 to December 31, 2004																														(1,670,544	)		($1,670,544	)

Balance, December 31, 2004		0		$	0			0	$	0		13,586,202		$	13,586		$	3,734,851		$	0		$	0	$	0	$	0		($2,313,441	)	$	1,434,996

Issuance of Series A preferred stock, February 2005		3,250,006		$	3,250													2,583,533						7,382,068		6,175,000				($6,175,000	)	$	9,968,851

Exercise of warrants at $2.00 per share												40,000			40			79,960														$	80,000

Exercise of warrants at $1.60 per share												7,100			7			12,153														$	12,160

Exercise of warrants at $0.50 per share												31,200			31			15,569														$	15,600

Net (loss) for the six months
ended June 30, 2005																														(4,192,249	)		($4,192,249	)

Balance, June 30, 2005		3,250,006		$	3,250			0	$	0		13,664,502		$	13,664		$	6,426,066		$	0		$	7,382,068	$	6,175,000	$	0		($12,680,690	)	$	7,319,358


Exercise of warrants at $2.00 per share												145,709			146			291,273														$	291,419

Exercise of warrants at $1.60 per share												46,050			46			73,634														$	73,680

Exercise of warrants at $0.99 per share												21,060			21			20,927														$	20,948

Exercise of warrants at $0.50 per share												37,021			37			18,473														$	18,510

Exercise of warrants at $0.02 per share												89,950			90			1,709														$	1,799

Exercise of options at $3.07 per share												16,250			16			83,984			(34,113	)										$	49,887

Exercise of options at $3.00 per share												50,000			50			224,950			(75,000	)										$	150,000

Exercise of options at $2.00 per share												75,000			75			337,425			(187,500	)										$	150,000

Issuance of Series A preferred stock dividend		198,017			198													137,573								159,174				(191,029	)	$	105,916

Conversion of Series A preferred stock, January 2006		(3,448,023	)		(3,448	)						3,448,023			3,448																	$	0

Issuance of Series B preferred stock, net of expenses, May 2006								7,631,580		7,632								28,159,524										10,516,318		(10,516,318	)	$	28,167,156

Accrue Series B preferred stock dividend																												331,441		(931,191	)		($599,750	)

Accrue warrants issued to Merrill Lynch																								2,987,481								$	2,987,481

Accrue FAS123R stock option expense																					7,814,692											$	7,814,692

Net (loss) for the year ended June 30, 2006
																														(24,988,912	)		($24,988,912	)

Balance, June 30, 2006		0		$	0			7,631,580	$	7,632		17,593,565		$	17,593		$	35,775,538		$	7,518,079		$	10,369,549	$	6,334,174	$	10,847,759		($49,308,140	)	$	21,562,183

The accompanying notes are an integral part of these consolidated financial statements.

F-7

MRU HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2006 AND 2005 AND DECEMBER 31, 2004

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

The Company was incorporated in Delaware on March 2, 2000 as Dr. Protein.Com, Inc. and on March 7, 2003 changed its name to Pacific Technology, Inc. On July 6, 2004 the Company changed its name to MRU Holdings, Inc. On May 20, 2005 the Board of Directors of the Company approved a change in the Company’s year end from December 31^st to June 30^th.

On September 20, 2005, the 2005 Annual Meeting of Stockholders was held at the principal offices of the Company. At the Annual Meeting the Company’s stockholders voted on, and approved by requisite stockholder vote, the following matters: 1) the election of six directors to the Company’s Board of Directors, 2) Adoption of the 2005 Consultant Incentive Plan, 3) Adoption of an Amendment and Restatement to the 2004 Omnibus Incentive Plan, and 4) Approval of an Amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock from 50,000,000 shares to 200,000,000 shares and the number of authorized shares of preferred stock from 5,000,000 shares to 25,000,000.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all its wholly owned subsidiaries. All intercompany accounts and transactions were eliminated in consolidation.

Use of Estimates

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

Revenue Recognition

The Company records its revenue on the accrual basis, whereby revenue is recognized when earned and expenses recognized when incurred.

The Company recognizes referral income from referring consolidation and private student loan requests to other lenders when payments are received from referral partners, since referral partners only remit payments for those borrowers after the referred borrowers have completed the loan process. As of June 30, 2006, the Company has terminated all referral agreements to consolidation and private lenders and will only be paid in the future for referral income from previously referred borrowers funded by other lenders.

Interest income on student loans receivable is recognized in accordance with SFAS 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases”.

The Company follows SFAS 91for the revenue recognition of origination fee revenue, whereby loan origination fees are deferred and recognized over the life of the loan as an adjustment of yield (interest income).

F-8

Costs of Revenues

The Company includes as costs of revenues all direct costs related to the production of the various revenue streams of the Company’s business.

For the year ended June 30, 2006, the Company incurred $1,078,202 in credit facility interest costs related to the collateralization of its private student loan portfolios and originating bank costs, $348,822 in referral marketing costs related to the generation of the Company’s private student loans, $82,626 in student loan servicing and custodial costs, $53,775 in consulting and hosting costs for the scholarship search product, and $23,300 in referral marketing costs related to referring consolidation loan borrowers to other lenders.

For the six months ended June 30, 2005, the Company incurred $189,725 in referral marketing costs related to referring consolidation loan borrowers to other lenders, $25,070 in student loan servicing and custodial costs, and $10,185 in originating bank costs.

For the year ended December 31, 2004, the Company incurred no costs of revenues.

Valuation Reserve - Student Loan Receivables

The Company’s private student loans receivable portfolios are held for sale, valued at the lower of cost or market. The valuation reserve represents management’s estimate of possible losses on the Company’s analysis of its portfolio. This evaluation process is subject to numerous estimates and judgments.

In determining the adequacy of the valuation reserve for the private student loans receivable portfolio, the Company considers several factors including: 2003 United States Department of Education’s cohort default rates for Title IV post-secondary educational institutions (adjusted for particular characteristics of individual borrowers including the university attended, program of study, academic progress in the current or prior program of study, and current or prior employment history), portfolio loan performance of those loans in repayment versus those in nonpayment status, and portfolio delinquency and default performance. Should any of these factors change, the estimates made by management would also change, which in turn would impact the level of the Company’s future valuation reserve process.

The valuation reserve is maintained at a level management believes is adequate to provide for estimated possible credit losses inherent in the student loans receivable portfolio. This evaluation is inherently subjective because it requires estimates that may be susceptible to significant changes.

For the fiscal year ended June 30, 2006, the Company recorded $814,631 as a valuation reserve for its private student loans receivable. There was no valuation reserve established for the fiscal year ended June 30, 2005 as the Company had no expectation of a valuation reserve using our valuation reserve process at that time.

The Company places a private student loan receivable on nonaccrual status and charges off the loan when the collection of principal and/or interest is 180 days past due or if the Company learns of an event or circumstance, which in the Company’s judgment causes the loan to have a high probability of nonpayment, even before the collection of principal and/or interest is 180 days past due. The Company’s third party servicer works with borrowers who have temporarily ceased making full payments due to hardship of other factors, according to a schedule approved by the third party servicer that is consistent with established loan program servicing procedures and policies. Loan granted deferment or forbearance will move off principal and/or interest repayment, although these loans will continue to accrue interest. The Company is motivated to work with the servicer in identifying borrowers who may be delinquent on their loans due to misinformation (students frequently change addresses) or availing the student borrower deferment or forbearance. The Company wishes to actively manage its servicing and collection process for two principal reasons: to assist student borrowers maintain their credit ratings and to keep the Company’s valuation reserve as low as possible.

An analysis of the Company’s valuation reserve is presented in the following table for the three months and fiscal year ended June 30, 2006:

F-9

	Three Months		Fiscal Year
	Ending 6/30/06		Ending 6/30/06

Balance at beginning of period	$	0	$	0
Valuation reserve increase/(decrease)
Federally insured loans		0		0
Private student loans		814,631		814,631
Total valuation reserve change		814,631		814,631

Charge-offs, net of recoveries
Federally insured loans		0		0
Private student loans		0		0
Net charge-offs		0		0

Balance at end of period	$	814,631	$	814,631

Private student loan valuation reserve as a
percentage of the private student loans
receivable portfolio				2.06	%

The Company has no loans on nonaccrual status through June 30, 2006.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalent balances at financial institutions that are insured by the Federal Deposit Insurance Corporation up to $100,000. At June 30, 2006 and 2005, the Company’s uninsured cash balances were $19,782,730 and $6,805,965, respectively.

Included in cash and cash equivalents are restricted cash deposits that are not available to the Company for working capital purposes. At June 30, 2006 and 2005, the Company’s restricted cash balances were $2,975,430 and $0, respectively.

Collateral Deposit - Student Loans

On May 5, 2005, the Company entered into a loan purchase and sale agreement with Webbank, a Utah state chartered financial institution, which required the Company to post $250,000 as a collateral deposit in an interest-bearing account with Webbank. The deposit was returned to the Company as part of the termination of the loan purchase and sale agreement with Webbank in November 2005.

Security Deposits

As of June 30, 2006 and June 30, 2005, the Company had $30,248 and $392,963 respectively in security deposits held and controlled by other parties to secure lease agreements the Company has for office space and facilities in New York City.

Fixed Assets

Fixed assets are stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful life of the assets.

Computer network equipment	3 Years
Leasehold improvements	3 Years
Furniture and fixtures	3 Years

F-10

Investment in Achiever Fund I, LLC

On April 18, 2006, the Company entered into a definitive agreement with a consortium of European financial institutions with significant experience in consumer lending and specialty financial products to support the launch and origination of Preprime™ student loans. These private student loans address the market of post-secondary school borrowers who are currently unable to meet traditional private student loan underwriting criteria, e.g. thin or no credit history, insufficient earnings history, etc. The Company will be both the managing member (through its Achiever Funding LLC affiliate) and a minority investor in the Achiever Fund I LLC. As of December 31, 2006, the Company’s investment percentage in these affiliates was less than five (5%) percent.

The Company has not consolidated these affiliates within its financial statements per FASB Interpretation 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 requires consolidation by business entities of variable interest entities, which have one or more of the following characteristics (the Company’s application of the facts of the agreement to FIN 46 requirements are noted after each):

1. The equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including the equity holders. (The agreement anticipated the need for more than the initial funding for each member up to a limit of $26M. The Company is limited to $1M in potential equity investment in this agreement.)

2. The equity investors lack one or more of the following essential characteristics of a controlling financial interest:

a. The direct or indirect ability to make decisions about the entity’s activities through voting rights or similar rights. (Achiever Fund I, LLC is controlled by a board of directors with voting rights held by the equity investors).

b. The obligation to absorb the expected losses of the entity (Gains and losses are allocated to members based on their respective investments).

c. The right to receive the expected residual return of the entity (Residual interests are returned to the members in a pro rata distribution based on their respective percentage interests)

3. The equity investors have voting rights that are not proportionate to their economic interests, and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. (Voting Rights: The agreement requires the unanimous vote of the members; under Delaware law, managers who are also members have the same rights and powers of other members unless the operating agreement provides otherwise. Entity Activities: Achiever Fund I, LLC provide student loans to unrelated third parties and thereby generates profits which are allocated to the members in proportion to their respective percentage interests.)

The Company accounts for this investment at the lower of cost or fair value, which is the Company’s investment basis (cost), per EITF 03-16, Accounting for Investments in Limited Liability Companies.

Income Taxes

The income tax benefit is computed on the pretax income (loss) based on the current tax law. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates.

Advertising

The Company expenses the costs associated with advertising and marketing as incurred. Advertising and marketing expenses, included in the statements of operations for the year ended June 30, 2006, the six months ended June 30, 2005, and the year ended December 31, 2004 were $7,447,426, $124,504, and $16,030, respectively.

Reclassification

Certain amounts in the June 30, 2005 and December 31, 2004 financial statements have been reclassified to conform to the June 30, 2006 presentation. There was no effect on net loss for the periods

F-11

Note that the Company revised its Statement of Changes in Stockholders’ Equity through June 30, 2005 to delete all references to the former public company (Pacific Technology, Inc.), the accounting acquiree, and to present only the equity of the former private company (Iempower, Inc.), the accounting acquirer in the reverse merger that transpired.

(Loss) Per Share of Common Stock

Historical net (loss) per common share is computed using the weighted average number of shares of common stock outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants.

The following is a reconciliation of the computation for basic and diluted EPS for the year ended June 30, 2006, the six months ended June 30, 2005, and the year ended December 31, 2004:

Net (loss)	$	(36,595,595	)	$	(10,246,163	)	$	(1,871,433	)

Weighted-average common stock
Outstanding (Basic)		15,100,652			13,608,511			13,209,331

Weighted-average common stock
equivalents:
Stock options		-			-			-
Warrants		-			-			-

Weighted-average common stock
outstanding (Diluted)		15,100,652			13,608,511			13,209,331

For June 30, 2006 and 2005 and for December 31, 2004, warrants (15,604,968, and 11,357,856, and 3,214,727, respectively) were not included in the computation of diluted EPS because their inclusion would have been antidilutive. For June 30, 2006 and 2005 and for December 31, 2004, options (4,320,485, and 1,500,000, and 478,750, respectively) were not included in the computation of diluted EPS because their inclusion would have been antidilutive.

Financial Instruments Disclosures of Fair Value

Statement of Financial Accounting Standard 107, Disclosures about Fair Value of Financial Instruments, (FAS 107), requires entities to disclose the fair value of all (recognized and unrecognized) financial instruments that is practicable to estimate, including liabilities. The estimates of fair value of financial instruments are summarized as follows:

Carrying amounts approximate fair value

	June		June
	30, 2006		30, 2005

Cash	$	17,899,504	$	6,894,522
Restricted cash		2,975,430		0
Accounts Receivable		4,167		20,246
Collateral deposit - student loans		0		250,000
Investment in Achiever Fund I, LLC		120,000		0
Accounts Payable		1,410,865		577,478
Notes Payable - Doral Bank		806,182		0
Notes Payable - Merrill Lynch		17,863,560		0
Notes Payable - Nomura		18,732,264		0

F-12

Fair values approximate carrying values because of the short time until realization. The fair value of the Investment in Achiever Fund I, LLC was valued at cost since this entity only began to originate student loans during June, 2006.

Assets with fair values exceeding carrying amounts

	June 30, 2006
	Carrying Value		Fair Value
Private student loans receivable, held for sale	$	39,564,367	$	42,869,602

	June 30, 2005
	Carrying Value		Fair Value
Private student loan receivable, held for sale	$	158,479	$	176,014

The Company determined the fair value of its student loans receivable through a net present value analysis. The Company collates data from a variety of public and private sources, including the United States Department of Education, individual colleges and universities, academic research studies, the Company’s internal research and survey efforts as well as the data from credit bureaus and other credit grantors. This Company’s net present value analysis considered the following: the 2003 United States Department of Education’s cohort default rates for Title IV post-secondary educational institutions (adjusted for particular characteristics of individual borrowers including the university attended, program of study, academic progress in the current or prior program of study, and current or prior employment history), and individual loan basis of valuation, and estimated prepayment assumptions. As of June 30, 2006, the approximate 8% increase in fair value over the carrying value, which is the Company’s cost, results from this net present value modeling of future cash flows from the borrowers servicing these loans tempered by all of the above factors.

Stock Based Compensation

At June 30, 2006, the Company had two stock-based compensation plans, the revised 2004 Omnibus Incentive Plan and the 2005 Consultant Incentive Plan, both of which were registered with the Securities and Exchange Commission in November, 2005. During the quarter ended December 31, 2005, the Company adopted the Financial Accounting Standards Board (FASB) Statement 123(R), Share-Based Payments (FAS 123R). FAS 123R requires compensation expense, measured as the fair value at the grant date, related to share-based payment transactions to be recognized in the financial statements over the period that an employee provides service in exchange for the award.

The Company recognized $7,814,692 in stock based compensation expense for the year ended June 30, 2006.

Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. This interpretation is effective for fiscal years beginning after December 15, 2006. Consistent with the requirements of FIN 48, the Company will adopt this pronouncement on July 1, 2007. The Company is currently evaluating the provisions of FIN 48 and has not yet determined the impact, if any, on the Company’s consolidated financial statements.

In March 2006, the FASB issued SFAS 156, Accounting for the Servicing of Financial Assets, an amendment of FASB Statement 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS 156). SFAS 140 requires that all separately recognized servicing assets and liabilities be initially measured at fair value, if practicable, and requires entities to elect either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of SFAS 140 for subsequent measurement. SFAS 156 will be effective for the Company beginning in the first quarter of fiscal 2007. The adoption of SFAS 156 is not expected to have any material impact on the Company’s consolidated financial condition or results of operations.

F-13

In February 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statement 133 Accounting for Derivative Instruments and Hedging Activities and FASB Statement 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS 155). SFAS 155 will be effective for the Company beginning in the first quarter of fiscal 2007. SFAS 155 permits interests in hybrid financial instruments that contain an embedded derivative, which would otherwise require bifurcation, to be accounted for as a single financial instrument at fair value, with changes in fair value to be recognized in earnings. This election is permitted on an instrument-by-instrument basis for all hybrid financial instruments held, obtained, or issued as of the adoption date. The adoption of SFAS 155 is not expected to have any material impact on the Company’s consolidated financial condition or results of operations.

NOTE 3 - STUDENT LOAN RECEIVABLES, HELD FOR SALE

Student loan receivables are private student loans made to post-secondary and/or graduate students pursuing degree programs from selective colleges and universities in the United States of America and abroad. Private student loans are not guaranteed by any governmental entity and are unsecured consumer debt. Interest accrues on these loans from date of advance, with the interest rate dependent on the student borrower’s choice of repayment option (deferred, interest payment only, and principal and interest payment). Once these loans begin to service, borrower payments are applied to interest and principal consistent with the effective interest rate method per SFAS 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases. Origination fee revenue is recognized, if applicable, over the principal servicing life of the loan, also per SFAS 91.

The Company values its student loan receivables at the lower of cost or market. The Company determines the fair market value of its student loans receivable through a net present value analysis of its student loan portfolios on an individual loan basis. This process is described in Note 2, Financial Instruments Disclosures of Fair Value for private student loans receivable. The Company intends to sell or securitize student loans receivable at a time indefinite, such action is largely dependent on the Company’s ability to originate and/or hold similar student loans receivable to bundle for sale or securitization.

MRU Lending, Inc. and MRU Funding SPV, Inc. have loan purchase agreements with Doral Bank Federal Savings Bank New York, an affiliate of the Doral Financial Corporation. Through November 30, 2005, MRU Lending, Inc. had a loan purchase agreement with Webbank, a Utah state chartered financial institution and a wholly owned subsidiary of WebFinancial Corporation.

The Doral-MRU Lending loan program is secured by a $1 million ninety-day certificate of deposit held by MRU Lending at Doral Bank, with assignment rights to Doral Bank. The Doral-MRU Funding SPV loan program is secured by a $1 million ninety-day certificate of deposit held by MRU Funding SPV at Doral Bank, with assignment rights to Doral Bank.

Through June 30, 2006, the Company purchased the following private student loan volumes through its various subsidiary loan programs:

o	The Doral-MRU Lending loan program purchased approximately $18.3 million in private student loans.

o	The Doral-MRU Funding SPV loan program purchased approximately $18.4 million in private student loans.

o	The Webbank-MRU Lending loan program purchased approximately $1.5 million in private student loans.

F-14

The Company has retained servicing rights on the loans purchased under its various subsidiary loan programs and has outsourced the servicing function to a third party, who remits funds collected to us along with monthly activity reports.

NOTE 4 - FIXED ASSETS

Fixed assets consisted of the following at June 30, 2006 and 2005:

	2006			2005

Computer network equipment	$	691,872		$	302,803
Furniture and fixtures		57,912			21,994
Leasehold improvements		5,884			5,884
		755,668			330,681
Less: accumulated depreciation		(218,537	)		(57,608	)

Total fixed assets	$	537,131		$	273,073

Depreciation expense for the year ended June 30, 2006 and the six months ended June 30, 2005 was $160,930 and $41,915, respectively.

NOTE 5 - INTANGIBLE ASSETS

The Company acquired a scholarship resource database in July, 2005. After identification of tangible assets in this asset purchase, the Company paid and assigned a valuation of $148,440 to this intangible asset. The Company is amortizing this asset over a three year useful life. As of June 30, 2006, the book value of this intangible asset, net of $49,480 accumulated amortization, was $98,960.

NOTE 6 - PROVISION FOR INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due. Deferred taxes related to differences between the basis of assets and liabilities for financial and income tax reporting will either be taxable or deductible when the assets or liabilities are recovered or settled. The difference between the basis of assets and liabilities for financial and income tax reporting are not material; therefore, the provision for income taxes from operations consist of income taxes currently payable.

The nature of the timing differences generating the deferred tax asset is the accumulated net operating loss carry forwards that can be applied towards mitigating future tax liabilities of the Company. The Company has established a valuation account at the full value of the tax deferred asset.

There was no provision for income taxes for the year ended June 30, 2006, for the six months ended June 30, 2005, and the year ended December 31, 2004

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s consolidated tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statements carrying amounts of assets and liabilities and their respective tax bases.

F-15

The Company’s deferred tax asset, for which the Company has set aside a valuation allowance at an equal amount, is due to the expected tax benefit of the Company’s net operating losses. To date, the Company’s operations have not generated any federal, state, or local taxes beyond the minimum filing requirements, which cannot and have not been mitigated by operating loss carryforwards. The Company does not have an effective tax rate due to the Company’s lack of taxable profits to date.

	2006			2005			2004

Deferred tax assets	$	8,496,230		$	1,951,707		$	192,629
Less: valuation allowance		(8,496,230	)		(1,951,707	)		(192,629	)

Totals	$	-		$	-		$	-

At June 30, 2006 and 2005 and December 31, 2004, the Company had accumulated net operating loss deficits of $32,561,269, $7,572,357, and $3,501,194, respectively, available to offset future taxable income through 2026. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the operating losses in future periods. The Company’s beneficial conversion features for the Series A and B Convertible Preferred Stock increase the Company’s accumulated deficit but does not contribute to net operating losses that can be used to offset future taxable income.

Following is the Company’s approximated schedule of net operating loss carry forwards:

December 31, 2000	$	1,495,761
December 31, 2003	$	134,000
December 31, 2004	$	1,871,433
June 30, 2005	$	4,071,163
June 30, 2006	$	24,988,912

NOTE 7 - STOCKHOLDERS’ EQUITY

Common Stock

There were 200,000,000 and 50,000,000 shares of common stock authorized, with 17,593,565 and 13,664,502 shares issued and outstanding at June 30, 2006 and 2005, respectively. The par value for the common stock is $.001 per share.

The following details the common stock transactions for the year ended June 30, 2006:

	○	145,709 warrants were exercised at a price of $2.00/warrant
	○	46,050 warrants were exercised at a price of $1.60/warrant

	○	21,060 warrants were exercised at a price of $0.99/warrant
	○	37,021 warrants were exercised at a price of $0.50/warrant

	○	89,950 warrants were exercised at a price of $0.02/warrant
	○	16,250 employee options were exercised at a price of $3.07/option

	○	50,000 employee options were exercised at a price of $3.00/option
	○	75,000 employee options were exercised at a price of $2.00/option

○

765,479 and 2,682,544 shares of Preferred Series A were voluntarily and manditorily converted to common, respectively

F-16

The following details the common stock transactions for the six months ended June 30, 2005:

	○	40,000 warrants were exercised at a price of $2.00/warrant
	○	7,100 warrants were exercised at a price of $1.60/warrant

○

31,200 warrants were exercised at a price of $0.50/warrant

Series A Convertible Preferred Stock

There were 25,000,000 and 5,000,000 shares of Series A Convertible Preferred Stock authorized, with 0 and 3,250,006 issued and outstanding as of June 30, 2006 and 2005, respectively. The par value for the preferred shares is $0.001 per share.

On January 27, 2005, the Company filed a Designation of Powers, Preferences and Rights of Series A Convertible Preferred Stock, par value $0.001 per share (the Certificate of Designation) with the Secretary of State of the State of Delaware. Pursuant thereto, the Company authorized 4,500,000 shares of its preferred stock to be designated as Series A Convertible Preferred Stock and issued or offered at a purchase price equal to $3.50 per share. A total of 3,250,006 shares of the Series A Convertible Preferred Stock have been sold by the Company in the private placement transaction

The Series A Convertible Preferred Stock was convertible at any time into common stock of the Company at a price of $3.50 per share subject to adjustment for future stock issuances, splits, dividends, and recapitalizations. For the first year of issuance, cumulative dividends of 7% per annum were payable quarterly in additional shares of Series A Convertible Preferred Stock. The Series A Convertible Preferred Stock has no voting rights except on certain defaults in the Company’s payment of dividends and as otherwise required by law.

The Company issued 198,017 shares of Series A Convertible Preferred Stock as a dividend.

On January 12, 2006, the Board of the Directors of the Company approved and authorized the mandatory conversion of the Series A Convertible Preferred Stock into the Company’s Common Stock whereas the market price of the Company’s Common Stock had exceeded $4.025 (115% of the $3.50 conversion price, as required by the Certificate of Designation of Powers, Preferences, and Rights of the Series A Convertible Preferred Stock) for twenty of the thirty most recent consecutive trading days, with the thirtieth day period concluding on January 12, 2006. There were 3,448,023 shares of Series A Convertible Preferred Stock converted to common stock.

For the fiscal year ended June 30, 2006 and June 30, 2005, the additional paid-in capital account for the beneficial conversion feature for the Series A Convertible Preferred Stock was $6,334,174 and $6,175,000, respectively. Since the Company has no issued and outstanding shares of Series A Convertible Preferred Stock as of June 30, 2006, there will be no additional beneficial conversion feature to record for this issuance.

Series B Convertible Preferred Private Placement

On December 30, 2005, the controlling Series A Convertible Preferred Stockholders approved an amendment and restatement of the Company’s Certificate of Incorporation, to be effective on or about February 13, 2006, creating 12,000,000 shares of Series B Convertible Preferred Stock with a $0.001 par value and a $3.80 purchase price. The power, preferences, and rights of the Series B Convertible Preferred Stock set forth in the Amended and Restated Certificate of Incorporation include voting rights, dividends, liquidation preference, conversion rights, protective provisions, redemption, election of board of directors, and right of first refusal in any offerings of Series A Convertible Preferred Stock or Common Stock.

On January 5, 2006, the Company agreed to issue 6,578,948 shares of the Series B Convertible Preferred Stock at $3.80 per share to various funds of Battery Ventures and Merrill Lynch Institutional Management Equity Partners. The transaction closed on February 13, 2006. Proceeds of the financing will be used to advance the Company’s growth in the private student loan market.

F-17

On January 20, 2006, the Company received $5 million in proceeds from bridge promissory notes due to various funds of Battery Ventures and Merrill Lynch Institutional Management Equity Partners, bearing interest at six (6%) percent per annum based on a 365 day year. The outstanding balance of these notes, together with accrued and unpaid interest thereon, shall be due and payable no later than the earlier of (a) April 15, 2006 or (b) the closing date of the private placement of Series B Convertible Preferred Stock to which the Company receives gross proceeds of at least $25 million. These notes were retired with accrued interest on February 13, 2006.

On May 8, 2006, the Company agreed to issue an additional 1,052,632 shares of the Series B Convertible Preferred Stock at $3.80 per share to LBI Group, Inc. and Keane Capital V, LLC. Proceeds of the financing will be used to continue the Company’s growth in the private student loan market.

All Series B Convertible Preferred Stock certificates were issued as of May 8, 2006.

As of June 30, 2006, the Series B Convertible Preferred Stock issued has not been registered with the Securities and Exchange Commission.

For the fiscal year ended June 30, 2006, the additional paid-in capital account for the beneficial conversion feature for the Series B Convertible Preferred Stock was $10,847,759. The Company will continue to recognize additional beneficial conversion feature to record for this issuance if dividends and/or additional issuances are recorded or issued.

Stock Options

Under the amended 2004 Omnibus Incentive Plan (OIP), the Company may grant incentive stock options pursuant to Section 422 of the Internal Revenue Code (ISOs), non-qualified stock options (NQOs), restricted common stock, restricted common stock units, performance grants, unrestricted common stock, or stock appreciation rights grants to its officers, directors, and employees and NQOs, restricted common stock, restricted common stock units, unrestricted common stock, or stock appreciation rights to its consultants or third party service providers.

The Compensation Committee administers the OIP. The Compensation Committee has the complete authority and discretion to determine the terms of OIP grants.

The weighted-average fair value of these grants, calculated using the Black-Scholes valuation method under the assumptions indicated below, was $2.34 in 2006, $2.30 in 2005, and $3.34 in 2004.

The key assumptions for the Black-Scholes valuation method include the expected term of the option, stock price volatility, risk-free interest rate, dividend yield, forfeiture rate, and exercise price. Many of these assumptions are judgmental and highly sensitive. Following is a table of the key weighted average assumptions used in the valuation calculations for the options granted in the years ended December 31, 2004, June 30, 2005, and June 30, 2006, and a discussion of our methodology for developing each of the assumption used in the valuation model.

	Jun-2006			Jun-2005			Dec-2004
Expected term		6.5 yrs			6.5 yrs			6.5 yrs
Expected volatility		26	%		73	%		39	%
Risk-free interest rate		4.698	%		4.211	%		4.360	%
Dividend yield		0	%		0	%		0	%

Expected Term. This is the period of time over which the options granted are expected to remain outstanding. Options granted have a maximum term of ten years. The Company lacks sufficient historical exercise data that it may rely on to determine expected term for the grants issued through June 30, 2006. Therefore the Company relied on the simplified method for expected term as defined by the SEC Staff Accounting Bulletin 107 (SAB 107), where expected term equals the sum of the vesting term and the original contractual term, which is then divided by two. The Company has noted that the simplified method for estimating expected term is only available for option grants through December 31, 2007, when the SEC anticipates more detailed information should be available to the Company. An increase in the expected term will increase share-based compensation expense.

F-18

Expected Volatility. Actual changes in the market value of our stock are used to calculate the volatility assumption. The Company calculated daily market value changes during the period that the grant was issued to determine volatility, which was then annualized. An increase in the expected volatility will increase share-based compensation expense.

Risk-Free Interest Rate. This is the ten-year US Treasury zero coupon bond interest rate posted at the date of grant having a term equal to the expected term of the option. An increase in the risk-free interest rate will increase share-based compensation expense.

Dividend Yield. This is the annual rate of dividends per share over the exercise price of the option. The Company has no history of paying a dividend, so this has been 0%. An increase in the dividend yield will increase share-based compensation expense.

Forfeiture Rate. This is the estimated percentage of options granted that are expected to be forfeited before becoming fully vested, i.e. service-based awards where the full award does not vest due non-completion of the service by the employee, director, or consultant. This percentage is derived from historical experience. An increase in the forfeiture rate will decrease compensation expense.

The following table summarizes the stock option activity for OIP the years ended June 30, 2006 and 2005:

	2006			2005
Options outstanding at beginning of year		1,500,000			1,430,000
Options granted		2,733,498			70,000
Options exercised		(141,250	)		0
Options forfeited or expired		(8,750	)		0
Options outstanding at year end		4,083,498			1,500,000
Exercisable options at year end		2,355,845			711,249

The following table summarizes the stock option activity for consultant NQO plan for the years ended June 30, 2006:

	2006
Options outstanding at beginning of year		0
Options granted		236,987
Options exercised		0
Options forfeited or expired		0
Options outstanding at year end		236,987
Exercisable options at year end		207,820

The following table summarizes information about stock options outstanding for the OIP at June 30, 2006:

F-19

Exercise			Weighted				Weighted
Price	Number		Average		Number		Average
Range	Outstanding		Remain. Life		Exercisable		Exer. Price

$0.01-$1.00		600,000		8.02		600,000	$	1.00
$1.01-$2.00		570,000		8.27		514,581	$	1.61
$2.01-$3.00		393,250		9.13		216,192	$	2.94
$3.01-$4.00		2,124,748		9.25		875,904	$	3.23
$4.01-$7.00		395,500		9.76		149,168	$	5.11

TOTAL		4,083,498				2,355,845	$	2.40

The following table summarizes information about stock options outstanding for the consultant NQO plan at June 30, 2006:

Exercise			Weighted				Weighted
Price	Number		Average		Number		Average
Range	Outstanding		Remain. Life		Exercisable		Exer. Price

$0.01-$1.00		0		0.00		0	$	0.00
$1.01-$2.00		25,000		8.08		8,333	$	2.00
$2.01-$3.00		0		0.00		0	$	0.00
$3.01-$4.00		108,500		9.30		96,000	$	3.64
$4.01-$7.00		103,487		8.84		103,847	$	4.67

TOTAL		236,987				207,820	$	4.09

Warrants

During 2004, the Company issued 3,079,447 common stock warrants related to the issuance of shares in the Company after the reverse merger of Iempower and Pacific Technology. The warrants vest upon grant date and expire three years from grant date. These warrants may be called by the Company if the Company’s common stock trades at or above $3.00 per share for twenty consecutive days before the Company exercises this call option. For warrant holders that do not elect to participate at the call, the Company will buy back their warrants at the par value of the underlying security, which for the Company’s common stock is $0.001 per share.

During 2004, no warrants were exercised.

In 2005, through June 30, 2005, the Company issued 227,500 common stock warrants to promoters of the Company’s offering of Series A Convertible Preferred Stock. The warrants vest upon grant date and expire five years from grant date.

In 2005, through June 30, 2005, the Company issued 7,999,449 common stock warrants to Nomura Credit and Capital, Inc. (Nomura). 6,545,004 warrants vested on February 4, 2005. 1,454,445 warrants vest on February 4, 2007. The warrants expire in ten (10) years or thirty (30) days after condition of uncured lender default. The exercise price for the warrants issued to Nomura is $3.50. The 1,454,445 warrant vesting can be accelerated due to the following events: a merger or consolidation of the Company with or into any Person in connection with which the holders of the Company’s Common Stock receive any consideration or distributions in respect to their holdings of the Company’s Common Stock; or a sale by the Company of all or substantially all of its assets; or the acquisition by any person or group of Persons of shares of the Company’s Common Stock from either the Company or one or more Common Stock holders of the Company in connection with the acquisition of the beneficial ownership of voting capital stock of the Company representing more than 40% of the total voting power of all outstanding shares of capital stock of the Company entitled to vote generally in elections of the board of directors. The number of shares and the exercise price for which these warrants are exercisable have anti-dilution protection for the following: issuance of common stock dividends payable in additional shares of common stock; or issuance of additional shares of common stock at a price that is less than the common stock warrant exercise price of $3.50; or any event that would have the effect of not fairly protecting the purchase rights represented by these warrants.

F-20

In 2005, through June 30, 2005, there were 40,000 warrants exercised at $2.00, 7,100 warrants exercised at $1.60, and 31,200 warrants exercised at $0.50.

In 2006, through June 30, 2006, 2,395,842 common stock warrants were issued to promoters and investors related to the private offering of the Company’s Series B Convertible Preferred Stock offering. The warrants vest on the grant date and have a term of five years.

In 2006, through June 30, 2006, the Company issued 1,895,188 common stock warrants to Merrill Lynch Bank USA (MLBUSA). The exercise price for 1,482,751 warrants is $3.50. These warrants have the following vesting schedule: 889,651 warrants were vested upon grant. 296,550 vest upon the first anniversary of the original issue date, and 296,550 vest upon the second anniversary of the original issue date. The exercise price for the remaining 412,437 warrants is $3.80. Both warrants have ten year terms. These warrants vest in full upon the second anniversary of the original issue date, assuming that MLBUSA has renewed its credit facility with MRU Funding SPV and that MRU Funding SPV is not in default of the credit facility. Both warrants contain anti-dilution provisions protecting the holder of these warrants from the Company issuing common stock dividends in kind, issuance of additional shares of common stock, issuances of stock purchase rights and convertible securities, or otherwise reorganize, reclassify, merge, consolidate or dispose of the assets of the Company.

In 2006, through June 30, 2006, there were 145,709 warrants exercised at $2.00, 46,050 warrants exercised at $1.60, 21,060 warrants exercised at $0.99, 37,021 warrants exercised at $0.50, and 89,950 warrants exercised at $0.02.

The Company has the following warrants outstanding for the purchase of its common stock:

Exercise	Expiration		June 30		June 30
Price	Date		2006		2005

$0.02		April 2009		0		89,950
$0.50		September 2006		0		37,021
$0.99		September 2006		64,747		75,800
$0.99		December 2006		808,539		818,646
$0.99		December 2007		530,603		530,603
$0.99		December 2008		530,607		530,607
$0.99		April 2009		22,740		22,740
$1.60		July 2007		100,000		101,000
$1.60		July 2009		361,850		405,350
$2.00		July 2007		374,481		512,115
$2.00		October 2007		0		7,075
$3.50		February 2007		7,999,449		7,999,449
$3.50		February 2010		227,500		227,500
$3.50		February 2016		1,482,751		0
$3.80		December 2010		159,000		0
$3.80		February 2011		2,480,264		0
$3.80		December 2016		412,437		0
$4.00		April 2010		50,000		0

TOTAL				15,604,968		11,357,856

Exercisable warrants				13,738,086		9,903,411
Weighted average exercise price			$	2.83	$	2.80

F-21

NOTE 8 - CREDIT LINE WITH UNIVERSAL FINANZ HOLDING AG

On, October 25, 2004 the Company entered into a commitment letter with Universal Finanz Holding AG (“Universal”) under which Universal offered to provide up to $50 million of credit support to be used as collateral security for the obligations of MRU Universal Guarantee Agency, Inc. (the “Guarantor”), a wholly owned subsidiary of the Company, as a guarantor of student loans and lines of credit arranged by the Company or banks and other financial institutions. Universal’s commitment is conditioned on the satisfaction of certain conditions including the execution of an agreement providing Universal the right to purchase up to 65% ownership interest in the Guarantor and pay the purchase price for such ownership interest by releasing the Guarantor from its obligation to repay an equal amount of its outstanding obligations to Universal.

As of June 30, 2006, June 30, 2005, and December 31, 2004, there were no amounts outstanding on the credit line with Universal Finanz Holding AG to any Company subsidiary or affiliate.

NOTE 9 - CREDIT LINE WITH NOMURA CREDIT & CAPITAL, INC.

On February 4, 2005, MRU Lending, Inc. (“MRU Lending”), a wholly-owned subsidiary of MRU Holdings, Inc. (“the Company”) entered into a credit agreement (the “Credit Agreement”), by and among Nomura Credit & Capital, Inc. as Agent (“Nomura”), a subsidiary of Nomura Holdings, Inc., and the institutions from time to time party thereto as lenders, pursuant to which the lenders have agreed to provide MRU Lending with a $165 million secured revolving credit facility for the origination and warehousing of private student loans. The loans under the Credit Agreement are secured by, among other things, a lien on all of the student loans financed under the Credit Agreement and any other student loans owned by MRU Lending and not otherwise released, together with a pledge of 100% of the capital stock of MRU Lending. The Credit Agreement contains terms and provisions (including representations, covenants and conditions) customary for transactions of this type. The Company paid $206,500 in deferred financing fees in association with the Credit Agreement. The Company recognized amortization expense associated with the financing fees of $68,832 for the year ended June 30, 2006 and $28,680 for the year ended June 30, 2005.

The Credit Agreement also provides for customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, breaches of certain representations and warranties, the bankruptcy of MRU Lending or MRU Lending Holdco LLC (MRU Lending’s direct parent and wholly-owned subsidiary of the Company), failure to maintain certain net worth ratios, a material adverse change in MRU Lending’s ability to originate student loans, and failure of the Company to indirectly own 100% of the outstanding capital stock of MRU Lending. The facility has a three year term. As a result of this transaction, Nomura was granted a warrant, subject to certain terms and conditions, to purchase common stock of the Company equal to 27.5% ownership interest in the Company on a diluted basis.

As of June 30, 2006, MRU Lending obtained approximately $19 million in financing against the Nomura line of credit by collateralization of loans originated through the loan programs with Doral Bank FSB New York and Webbank. Through purchases of defaulted loans by MRU Lending and repayment by MRU Lending to Nomura for prepayments and payments of scheduled principal loan payments by the borrowers to MRU Lending, the June 30, 2006 outstanding balance due Nomura by MRU Lending is approximately $18.7 million, which is due by February, 2008.

NOTE 10 - CREDIT LINE WITH MERRILL LYNCH BANK USA (MLBU)

On January 23, 2006, the Company’s private student lending subsidiary, MRU Funding SPV, Inc. (MRUF) entered into a definitive agreement with MLBU pursuant to which MLBU will provide MRUF with a $175 million revolving credit facility for the origination and warehousing of private student loans. This credit facility will enable the Company to expand the scope of its school lending program to over 3,700 programs of higher education. The facility has a one year term. As a result of this transaction, MLBU was granted a warrant, subject to certain terms and conditions, to purchase up to 4.9% of the Company’s Common Stock. This transaction closed in February 2006. The Company paid $525,000 in deferred financing fees in association with the Credit Agreement. The Company recognized amortization expense associated with the financing fees of $198,875 for the year ended June 30, 2006.

F-22

As of June 30, 2006, the MRUF obtained approximately $17.9 million in financing through the MLBU line of credit by collateralization of loans originated through the Doral Bank FSB New York-MRUF loan program.

NOTE 11 - LOAN PROGRAM AGREEMENTS

On July 25, 2005, MRU Lending, Inc. (“MRUL”), a wholly-owned subsidiary of the Company entered into a definitive agreement with Doral Bank NY, FSB (“the Bank”). The agreement provides for the Bank’s origination of private student loans to qualified applicants participating in MRUL’s private student loan program, the marketing of such program and solicitation and qualification of such applicants by MRUL or its affiliates and the sale by the Bank and purchase by MRUL of such student loans at par, i.e. no discount, and without recourse. The business purpose of the Loan Program and Loan Sale Agreements between MRUL and the Bank allow MRUL to purchase student loans originated by a Federal Savings Bank. There are legal and regulatory advantages to MRUL for purchasing loans originated by a Federal Savings Bank that are not otherwise available to MRUL. The agreement between MRUL and the Bank is evidenced by a Loan Program Agreement and a Loan Sale Agreement both dated July 25, 2005. The Agreements have a thirty-six (36) month term and are automatically renewable for up to two (2) successive terms of twelve (12) months.

The balance due to the Bank for origination of MRUL private student loans was $44,266 as of June 30, 2006.

On January 10, 2006, MRU Originations, Inc. (“MRUO”) and MRU Funding SPV, Inc. (“MRUF”), wholly-owned subsidiaries of the Company entered into definitive agreements with Doral Bank NY, FSB (“the Bank”). The agreement provides for the Bank’s origination of private student loans to qualified applicants participating in MRUO’s private student loan program, the marketing of such program and solicitation and qualification of such applicants by MRUO and the sale by the Bank and purchase by MRUF of such student loans at par, i.e. no discount, and without recourse. The business purpose of the Loan Program and Loan Sale Agreements between MRUO, MRUF, and the Bank allow MRUF to purchase student loans originated by a Federal Savings Bank. There are legal and regulatory advantages to MRUF for purchasing loans originated by a Federal Savings Bank that are not otherwise available to MRUF. The agreement between MRUO and the Bank is evidenced by a Loan Program Agreement dated January 10, 2006. The agreement between MRUF and the Bank is evidenced by a Loan Sale Agreement dated January 10, 2006. The Agreements have a thirty-six (36) month term and are automatically renewable for up to two (2) successive terms of twelve (12) months.

The balance due to the Bank for origination of MRUO private student loans was $761,916 as of June 30, 2006.

On May 5, 2005, MRU Lending, Inc. (“MRUL”), a wholly-owned subsidiary of the Company entered into a Loan Program agreement and a Loan Sale agreement with Webbank, a Utah state chartered financial institution. The agreements provide for Webbank’s origination of private student loans to qualified applicants participating in MRU Lending’s private student loan program, the marketing of such program and solicitation and qualification of such applicants by MRUL and the sale by Webbank and purchase by MRUL of such student loans at par, i.e. no discount, and without recourse. The agreements have thirty-six (36) month terms and each automatically renew for up to two (2) successive terms of twelve (12) months. MRUL and Webbank mutually agreed to terminate both the Loan Program agreement and the Loan Sale agreement effective November 30, 2005.

The Company has no balance due to Webbank for origination of loans as of June 30, 2006 and June 30, 2005.

F-23

NOTE 12 - PATENTS

The Company has a patent pending for a business method. This business method enables the company to provide customized financial products to consumers.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

Employment Agreements

The Company has three employment agreements with key management personnel. The following table summarizes the terms of the employee agreements the Company has with key management personnel:

NAME	TITLE	EXPIRATION DATE
Edwin J. McGuinn, Jr.	CEO	November 11, 2007
Raza Khan	President	April 1, 2009
Vishal Garg	CFO	April 1, 2009

Operating Leases

The Company leases office and other corporate space under leases with terms between one and four years. Monthly payments under the current leases range between $1,525 and $31,860. The Company is required to pay its pro-rata share of costs relating to certain of the leased facilities.

The following is a schedule by years of future minimum rental payments required under the operating leases which have an initial or remaining non-cancelable lease term in excess of one year as of December 31, 2006:

For the year ending June 30, 2006:

2007		539,015
2008		382,319
2009		159,299
2010		0

	$	1,080,633

NOTE 14 - RELATED PARTY TRANSACTIONS

The obligations of the Company under the ISID Finance of America, Inc. sub-lease are guaranteed by Edwin J. McGuinn, the Company’s Chief Executive Officer, in accordance with a Guaranty dated April 26, 2005 executed by Mr. McGuinn in favor of the Sub-landlord.

NOTE 15 - RESTATEMENT

The June 30, 2006 financial statements have been restated to give effect to the impact of EITF 98 - 5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, for the issuance of its Series A and Series B Convertible Preferred Stock.

The June 30, 2006 financial statements have been restated to recognize an additional preferred stock dividend of $17,181,933 for the effect of the beneficial conversion feature contained in its Series A and B Convertible Preferred Stock resulting from the difference in the issue price per share and the market price per share of the Company’s common stock on the commitment day for the issuance of this Preferred Stock. This change has increased the accumulated deficit for the period ended June 30, 2006 from $32,126,208 to $49,308,141, increased Additional Paid in Capital - Series A and B Beneficial Conversion Feature from $0 to $17,181,933, and increased net loss per basic and diluted share to $2.42 per share. The effect on total Stockholders’ Equity is zero.

F-24

Delaware		33-0954381
(State or Other Jurisdiction of		(IRS Employer
Incorporation or Organization)		Identification No.)


1114 Avenue of the Americas, 30^th Floor
New York, New York		10036
(Address of Principal Executive Offices)		(Zip Code)

	TOTAL		Current		1-3yrs		>3Yrs
Long Term Debt	$	0	$	0	$	0	$	0
Capital Lease Obligations	$	0	$	0	$	0	$	0
Operating Leases	$	1,500,000	$	557,000	$	996,000	$	0
Unconditional Purchase Obligations	$	0	$	0	$	0	$	0
Other Long-Term Obligations	$	0	$	0	$	0	$	0
TOTAL Contractual Cash Obligations	$	1,500,000	$	557,000	$	996,000	$	0

	TOTAL		Current		1-3yrs		>3yrs
Lines of Credit	$	36,600,000	$	0	$	36,600,000	$	0
Standby Letters of Credit	$	0	$	0	$	0	$	0
Guarantees	$	0	$	0	$	0	$	0
Standby Repurchase Obligations	$	0	$	0	$	0	$	0
Other Commercial Commitments	$	806,000	$	806,000	$	0	$	0
TOTAL Commercial Commitments	$	37,400,000	$	806,000	$	36,600,000	$	0

Exhibit No.	Description	Incorporated by Reference to Filings Indicated
3.1	Amended and Restated Certificate of Incorporation.	Appendix A to the Definitive Information Statement on Form 14C, filed with the SEC on January 23, 2006, File No. 000-33487.
3.2	By-laws.	Exhibit 3.4 to the Registration Statement on Form SB-2, filed with the SEC on August 10, 2001, File No. 333-67222.
10.1	Credit Agreement between MRU Lending, Inc. and Nomura Credit & Capital, Inc., dated February 4, 2005.	Exhibit 10.1 to Company’s Registration Statement on Form SB-2 filed with the SEC on March 22, 2005, File No. 333-123503.
10.2	Employment Agreement dated November 17, 2004 between the Company and Edwin J. McGuinn, Jr.	Exhibit 10 to Company’s Pre-Effective Amendment No. 1 to Form SB-2 filed with the SEC on November 18, 2004, File No. 333-118518.
10.3	Loan Program Agreement dated July 25, 2005 between MRU Lending, Inc. and Doral Bank NY FSB.	Exhibit 10.1 to Company’s Current Report on Form 8-K filed on July 29, 2005, File No. 000-33487.
10.4	Loan Sale Agreement dated July 25, 2005 between MRU Lending, Inc. and Doral Bank NY.	Exhibit 10.2 to Company’s Current Report on Form 8-K filed on July 29, 2005, File No. 000-33487.
10.5	Sublease between ISID Finance of America, Inc. and MRU Holdings, Inc. dated April 26, 2005.	Exhibit 10.1 to Company’s Current Report on From 8-K filed on May 18, 2005, File No. 000-33487.
10.6	Guaranty of Edwin McGuinn in favor of ISID Finance of America, Inc. dated April 26, 2005.	Exhibit 10.2 to Company’s Current Report on Form 8-K filed on May 18, 2005, File No. 000-33487.
10.7	Securities Purchase Agreement by and among MRU Holdings, Inc. and the purchasers of Series B Convertible Preferred Stock.	Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 6, 2006, File No. 000-33487.
10.8	Consent to Sublease of 1114 Trizechahn-Swig, L.L.C.	Exhibit 10.3 to Company’s Current Report on Form 8-K filed on May 18, 2005, File No. 000-33487.
10.9	Amended and Restated 2004 Ominibus Incentive Plan.	Appendix C to the Definitive Proxy Statement on Form 14A, filed with the SEC on September 7, 2005, File No. 000-33487.
10.10	2005 Consultant Incentive Plan.	Appendix B to the Definitive Proxy Statement on Form 14A, filed with the SEC on September 7, 2005, File No. 000-33487.
14.1	Code of Ethics.	Exhibit 14 to Company’s Annual Report on Form 10-KSB filed on March 22, 2005 (File No. 000-33487)
21.1	Subsidiaries of the Company	Exhibit 21 to Company’s Annual Report on Form 10-KSB filed on March 22, 2005 (File No. 000-33487)
23.1	Consent of Bagell, Josephs & Company, LLC	Exhibit 23(a) to Company’s Annual Report on Form 10-KSB filed on March 22, 2005 (File No. 000-33487)
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.*
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.*
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*


	MRU HOLDINGS, INC.

		/s/ Edwin J. McGuinn, Jr.
		By: Edwin J. McGuinn, Jr.
		Its: Chief Executive Officer




Date: February 9, 2007		/s/ Edwin J. McGuinn, Jr.
		By: Edwin J. McGuinn, Jr.
		Its: Chief Executive Officer and Director




Date: February 9, 2007		/s/ Vishal Garg
		By: Vishal Garg
		Its: Chief Financial Officer and Director




Date: February 9, 2007		/s/ Raza Khan
		By: Raza Khan
		Its: President and Director