Biostem, Inc. Form 10K

BIOSTEM, INC.

(Formerly National Parking Systems, Inc.)

AUDITED FINANCIAL STATEMENTS

FOR THE THREE YEARS ENDED DECEMBER 31, 2006

(2005 and 2004 Restated)

CONTENTS
__________________________________________________________________________________________

	Page
Reports of Independent Registered Public Accounting Firm	F 1

Consolidated Balance Sheets	F 5

Consolidated Statements of Operations	F 6

Consolidated Statements of Cash Flows	F 7

Consolidated Statement of Stockholders’ Deficit	F 8

Notes to Consolidated Financial Statements	F 9

MEYLER & COMPANY, LLC

CERTIFIED PUBLIC ACCOUNTANTS

ONE ARIN PARK

1715 HIGHWAY 35

MIDDLETOWN, NJ07748

Report of Independent Registered Public Accounting Firm

To the Board of Directors and
Stockholders of Biostem, Inc.

We have audited the accompanying consolidated balance sheets of Biostem, Inc. as of December 31, 2006 and 2005 (restated), and the related consolidated statements of income, stockholders’ deficit, and cash flows for each of the years in the three-year period ended December 31, 2006 (2005 and 2004 restated). 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 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 financial position of Biostem, Inc. as of December 31, 2006 and 2005 (restated), and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2006 (2005 and 2004 restated) in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note A, the accompanying 2004 and 2005 consolidated financial statements have been restated.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the consolidated financial statements, the Company has incurred net losses of $2,051,539 in 2006, $7,857,124 in 2005 and $5,200,418 in 2004, has negative working capital of $1,338,517, and a stockholders’ deficit of $1,242,540 at December 31, 2006, and there are existing uncertain conditions the Company faces relative to its ability to obtain capital and operate successfully. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note C. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Biostem Inc.’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 28, 2007 expressed an unqualified opinion on management’s assessment of internal control over financial reporting and an adverse opinion on the effectiveness of internal control over financial reporting due to material weaknesses.

/s/ Meyler & Company, LLC

Middletown, NJ

March 28, 2007

F-1

MEYLER & COMPANY, LLC

CERTIFIED PUBLIC ACCOUNTANTS

ONE ARIN PARK

1715 HIGHWAY 35

MIDDLETOWN, NJ 07748

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Biostem, Inc.

We have audited management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting, that Biostem, Inc. did not maintain effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (COSO). Biostem’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weaknesses have been identified and included in management’s assessment:

The Company’s financial and accounting organization was not adequate to support our financial accounting and reporting needs. Specifically, the Company did not maintain a sufficient number of personnel with an appropriate level of accounting knowledge commensurate with the Company’s financial reporting requirements and in fact, none of the Company’s personnel have significant technical and reporting experience. The lack of a sufficient number of personnel with an appropriate level of accounting knowledge contributed to the control deficiencies noted in items 2 through 5 below.

F-2

The Company did not maintain an Audit Committee, Compensation Committee, Code of Conduct or Ethics and/or a “whistle-blower” hotline. The Company does not currently have an independent Audit Committee to provide oversight of the Company’s financial statements. Additionally, the Company does not currently have an independent Compensation Committee to provide oversight of executive compensation, a Code of Conduct and Ethics for senior management or employees, or a “whistle-blower” hotline to anonymously report suspicious activity.

The Company does not maintain effective controls against the risk of fraud. Specifically, an inadequate number of controls exist to ensure that safeguarding of the Company’s assets and to address potential fraud; the Company has not completed a fraud risk assessment; neither a Code of Conduct or Ethics has been implemented for the Company’s senior management; the Company does not have an internal control department; and as stated above, no “whistle-blower” policy or hotline is in effect.

The Company places an overwhelming amount of reliance on manual controls. In connection with management’s review of accounting procedures as of December 31, 2006, it was determined that 94% of controls were manual and that those manual controls were conducted infrequently, i.e. either monthly, quarterly, annually or on an unscheduled basis.

5.	Additional material weaknesses are present in the Company’s control framework, including that:

·	Cash is not adequately secured prior to depositing such cash in the bank;

·	Contracts are not properly executed before work under such contracts begin;

·	No controls exist to ensure that all revenue, accounts receivable and cash receipt transactions have been posted to the correct account or recorded in the prior period;

·	No controls exist to ensure that all expense, accounts payable and cash disbursement transactions have been posted to the correct account or recorded in the proper period;

·	No controls exist to ensure that fixed assets accounted for physically exist;

·	No controls exist to ensure that purchases have been properly approved or goods/services rendered; and

·	An inadequate number of employees has created issues regarding those employees separation of duties and job functions

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2006 consolidated financial statements, and this report does not affect our report dated March 28, 2007 on those consolidated financial statements.

In addition to the above material weaknesses identified by the Company, we identified the following specific misstatements which were subsequently corrected in the consolidated financial statements:

·	Revenues relating to certain booting contracts were initially not recorded by the Company.

·	Certain operating expenses were paid in cash without supporting documentation.

·	Amounts paid to the President of the Company were initially recorded as advances rather than as Compensation expense.

·	The Company restated its financial statements for the years ended December 31, 2005 and 2004 to account for beneficial conversion features on the senior and junior debentures.

In our opinion, management’s assessment that Biostem, Inc did not maintain effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Biostem, Inc. has not maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

F-3

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Biostem, Inc. and our report dated March 28, 2007 expressed an unqualified opinion with an explanatory paragraph regarding the Company’s ability to continue as a going concern.

/s/ Meyler & Company, LLC

Middletown, NJ

March 28, 2007

F-4

BIOSTEM, INC.

(Formerly National Parking Systems, Inc.)

CONSOLIDATED BALANCE SHEETS

	December 31,
	2006	2005
		(Restated)

CURRENT ASSETS
Cash	$	10,163
Accounts receivable		56,012	$	20,706
Prepaid consulting fees				67,500
Advance receivable-related party				911
Total Current Assets	$	66,175		89,117

EQUIPMENT, net of accumulated depreciation
of $21,520 and $10,649		30,030		39,351


COVENANT NOT TO COMPETE, net of amortization
of $339,053 and $163,913		152,697		316,613
Total Assets	$	248,902	$	445,081

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES
Bank overdraft				$	5,356
Accounts Payable	$	125,207			27,581
Notes payable to an individual, unsecured		893			4,693
Accounts payable to related parties		1,389
Current portion of long-term debt		584,618			458,904
Accrued expenses		692,585			358,769
Total Current Liabilities		1,404,692			855,303

LONG-TERM DEBT
Loans payable, net of current portion		86,750			120,567

STOCKHOLDERS' DEFICIT
Preferred stock, par value $0.001 authorized
10,000,000 shares, none issued and outstanding
Common stock authorized 300,000,000
shares: par value $0.001: issued
and outstanding 175,218,044
shares at December 31, 2006 and 2005		175,218			175,218
Additional paid-in capital		13,773,172			12,433,384
Accumulated deficit		(15,190,930	)		(13,139,391	)
Total Stockholders' Deficit		(1,242,540	)		(530,789	)

Total Liabilities and Stockholders' Deficit	$	248,902		$	445,081

See accompanying notes to financial statements.

F-5

BIOSTEM, INC.

(Formerly National Parking Systems, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2006			2005			2004
				(Restated)			(Restated)

NET SALES	$	1,762,241		$	1,085,057		$	317,595

COSTS AND EXPENSES
Compensation and benefits		737,974			576,986			80,216
Professional and consulting fees		451,827			707,210			12,385
Depreciation and amortization		174,787			173,915			11,871
Lot lease expense		527,863			158,994			49,226
Interest expense		1,392,390			6,960,806			5,182,355
Rent expense		19,010			17,361			15,109
Other operating expenses		509,929			346,909			166,851
Total Costs and Expenses		3,813,780			8,942,181			5,518,013

LOSS BEFORE PROVISION FOR INCOME TAXES	$	(2,051,539	)	$	(7,857,124	)	$	(5,200,418	)

PROVISION FOR INCOME TAXES		-			-			-

NET LOSS	$	(2,051,539	)	$	(7,857,124	)	$	(5,200,418	)

NET LOSS PER COMMON SHARE
(BASIC AND DILUTED)	$	(0.01	)	$	(0.05	)	$	(0.03	)

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING		175,218,044			173,909,523			161,700,044

See accompanying notes to financial statements.

F-6

BIOSTEM, INC.

(Formerly National Parking Systems, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2006			2005			2004
				(Restated)			(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,051,539	)	$	(7,857,124	)	$	(5,200,418	)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization		174,787			173,915			11,871
Amortization of prepaid consulting fees		67,500			22,500
Stock and warrants issued for services					302,700
Beneficial conversion feature		1,339,788			6,917,122			5,177,589
Change in operating assets and liabilities:
Accounts receivable		(35,306	)		(17,061	)		6,074
Accounts payable		97,626			24,096			3,485
Accrued expenses		333,815			396,903			4,766
Net cash provided by (used in) operating activities		(73,329	)		(36,949	)		3,367

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(1,550	)		(10,000	)
Net cash used in investing activities		(1,550	)		(10,000	)

CASH FLOWS FROM FINANCING ACTIVITIES
Related party advance		2,301
Payments on notes payable to related parties					(30,000	)		(9,638	)
Proceeds from senior debenture		132,500			135,000
Payments on debt		(40,603	)		(61,954	)		(13,625	)
Loan from individual		(3,800	)		(6,007	)		29,000
Net cash provided by used in financing activities		90,398			37,039			5,737

INCREASE (DECREASE) IN CASH		15,519			(9,910	)		9,104

CASH (OVERDRAFT), BEGINNING OF PERIOD		(5,356	)		4,554			(4,550	)

CASH (OVERDRAFT), END OF PERIOD	$	10,163		$	(5,356	)	$	4,554

SUPPLEMENTAL CASH FLOW INFORMATION:
Issuance of notes/loans for equipment							$	40,000
Issuance of notes/loans for covenant-not-to-compete								491,750
Notes payable to related parties								(30,000	)
Notes payable for equipment								(40,000	)
Senior Secured Convertible Note								(275,000	)
Junior Convertible Debenture								(86,750	)
Note payable for non-compete-agreement								(100,000	)

NON-CASH EXPENDITURES
Issuance of 1,500,000 shares of common stock
for prepaid consulting fees					90,000
Issuance of 1,000,000 warrants in connection
with merger agreement					42,900

See accompanying notes to financial statements.

F-7

BIOSTEM, INC.

(Formerly National Parking Systems, Inc.)

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

(Restated)

							Additional						Total
	Common Stock						Paid in			Accumulated			Stockholders'
	Shares			Amount			Capital			Deficit			Deficit

Issuance of shares to stockholders		4,000		$	4,000		$	(3,000	)				$	1,000
Net income for year ended
December 31, 2002										$	7,071			7,071
Balance, December 31, 2002		4,000			4,000			(3,000	)		7,071			8,071

Reverse merger (Note A)
Exchange of shares		(4,000	)		(4,000	)	$	4,000
Outstanding common stock of
BioStem, Inc.		1,200,000,000			1,200,000			747,611			(1,947,611	)
Redemption of shares at merger		(1,199,699,956	)		(1,199,700	)		1,199,700
Capitalization of prior losses								(1,908,186	)		1,908,186
Issuance of shares on merger		161,400,000			161,400			(161,400	)
Net loss for year ended
December 31, 2003											(49,495	)		(49,495	)
Balance, December 31, 2003		161,700,044			161,700			(121,275	)		(81,849	)		(41,424	)

Additional capital contributed
by stockholders								37,866						37,866
Beneficial conversion factor associated								5,177,589						5,177,589
with convertible debenture
Net loss for year ended
December 31, 2004											(5,200,418	)		(5,200,418	)
Balance, December 31, 2004		161,700,044			161,700			5,094,180			(5,282,267	)		(26,387	)

Issuance of stock for services		12,018,000			12,018			290,682						302,700
Issuance of stock for services		1,500,000			1,500			88,500						90,000
Issuance of warrants for services								42,900						42,900
Beneficial conversion factor associated
with convertible debenture								6,917,122						6,917,122
Net loss for year ended
December 31, 2005											(7,857,124	)		(7,857,124	)
Balance, December 31, 2005		175,218,044			175,218			12,433,384			(13,139,391	)		(530,789	)

Beneficial conversion factor associated
with convertible debenture								1,339,788						1,339,788
Net loss for year ended
December 31, 2006											(2,051,539	)		(2,051,539	)
Balance, December 31, 2006		175,218,044		$	175,218		$	13,773,172		$	(15,190,930	)	$	(1,242,540	)

See accompanying notes to financial statements.

F-8

BIOSTEM

(Formerly National Parking Systems, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006

NOTE A - RESTATMENTS

The Company’s consolidated financial statements for the years ended December 31, 2005 and 2004 have been restated to record the effects of the beneficial conversion features on the Senior and Junior Debentures and to reclassify warrants issued in 2005 from Accrued expenses to Additional paid-in capital. The effects of the restatements are presented in the following table:

	December 31, 2005						December 31, 2004
	As			As			As			As
	Reported			Restated			Reported			Restated
Accrued Expenses		401,669			358,769			4,766			4,766
Additional Paid-in Capital		295,773			12,433,384			37,866			5,094,180
Accumulated Deficit		(1,044,680	)		(13,139,391	)		(104,678	)		(5,282,267	)

Interest Expense		43,684			6,960,806			4,766			5,182,355
Net Loss		(940,002	)		(7,857,124	)		(22,829	)		(5,200,418	)

Loss Per Share		(0.01	)		(0.05	)		(0.01	)		(0.03	)

The restatements related to the beneficial conversion features results in an increase in $6,917,122 and $5,177,589 in Interest expense and Additional paid-in capital in 2005 and 2004, respectively (See also Note J). The restatement related to the warrants results in a $42,900 decrease in Accrued liabilities and corresponding increase in Additional paid-in capital in 2005.

The Statement of Stockholders’ Deficit has been retrospectively restated to give effect to the stock split which occurred October 20, 2005. Additionally, the weighted average shares outstanding for the year ended December 31, 2004 were restated from 173,700,044 to 161,700,044 to reflect a typographic error.

NOTE B - MERGER AGREEMENT

Merger Agreement

On November 22, 2005, the Company entered into an Agreement and Plan of Merger with Cryobanks International Inc., a Delaware corporation ("Cryobanks"). Pursuant to the Merger Agreement, shares of common stock, warrants and preferred stock of Cryobanks which are issued and outstanding immediately prior to the effective date of the merger will be converted into the right to receive common stock of the Company. Pursuant to the merger, Cryobanks will be merged with and into BioStem Acquisition Company, Inc., a to be formed subsidiary of the Company and a Delaware corporation ("Acquisition Company") and Cryobanks shall be dissolved. The closing date of the merger is the business day after satisfaction or waiver of the conditions set forth below. (“Closing Date”)

Pursuant to the Merger Agreement, the aggregate number of shares of the Company issued and outstanding immediately prior to the closing shall be no more than 15,650,000 shares of common stock, and there shall be no more than 2,000,000 warrants outstanding which shall have an exercise price of $1.00 per share.

Among other conditions described in the Merger Agreement, a material condition to the effectiveness and closing of the merger is the successful completion of a financing by Cryobanks which results in net proceeds to Cryobanks of at least $10,000,000 pursuant to a Private Placement, which attempts to sell 10,000,000 shares of Cryobanks preferred stock to investors at $1.00 per share and warrants to purchase 3,000,000 shares of Cryobanks common stock, exercisable at $1.10 per share, on or before the closing date of the merger. The preferred shares issued by Cryobanks in such financing will be convertible into one share of the Company for each share of preferred stock issued to such investors. These Company shares (which are in addition to the 120,000,000 shares issued to the holders of Cryobanks common stock and warrants), and

F-9

NOTE B - MERGER AGREEMENT (Continued)

Merger Agreement (Continued)

2,000,000 shares which are issuable upon conversion of $2,000,000 of debt of Cryobanks, will not be subject to any restriction or lock-up, and will be registered for resale by the Company through a registration statement.

Cryobanks has an agreement with the holder of its Series A Preferred Stock, of which there are 7,000,000 shares outstanding, that fifty percent of the proceeds of the above financing will be used to redeem the Series A Preferred Stock at a redemption price of $1.00 per share, up to $10.0 million of gross proceeds, and 100% of gross proceeds in excess of $10.0 million will be used to redeem the balance of such shares of Series A Preferred Stock.

The boards of directors of both the Company and Cryobanks have approved and the majority shareholders of both companies have consented to the merger agreement.

The Merger Agreement stated that the agreement would terminate if the merger was not consummated by March 1, 2006, or by the mutual written consent of the Company and Cryobanks, or for any other reason as described in the Merger Agreement. Such agreement has been extended until March 31, 2007.

Pursuant to the terms of the Merger Agreement, the Company will divest itself of its two operating subsidiaries, and will have no more than $25,000 of accrued but unpaid liabilities on the effective date of the merger. On the effective date of the merger, Cryobanks will merge with and into the Acquisition Company, which will become the surviving corporation in the merger. All of the outstanding shares of Series A Preferred, Series B Preferred Stock and warrants of Cryobanks will be converted into shares of common stock of the Company at an exchange ratio of 0.852578, unless such Series A Preferred Stock, Series B Preferred Stock and warrants are issued pursuant to the planned Private Placement. The total amount of shares to be issued in connection with the conversion of the Series A Preferred Stock, Series B Preferred Stock and warrants shall total 120,000,000 shares of the Company's common stock, and the exchange ratio shall be adjusted if any shares of the Company's common stock are issued prior to the closing, by dividing 120,000,000 by the sum of the then outstanding shares of the Company's common stock and warrants.

Shareholders of Cryobanks who dissent to the Merger are entitled to receive payment for their shares in lieu of shares of the Company.

All warrants to purchase shares of Cryobanks common stock which are outstanding prior to the Merger will be assumed by the Company as provided in the Merger Agreement.

Upon the closing of the merger, the Company will issue 120,000,000 shares of its common stock to the shareholders of Cryobanks, and the board of directors of Cryobanks will be appointed to the Company's board, and the current members of the Company's board will resign. On the effective date of the merger, immediately prior to the merger, the Company will have 15,650,000 shares of common stock outstanding, and warrants to purchase 2,000,000 shares of common stock with an exercise price of $1.00 per share. All other shares currently outstanding shares (159,150,044 shares) will be cancelled in exchange for the transfer by the Company of all of the common stock of its current two operating subsidiaries to those shareholders canceling shares.

Subsequent to the Merger, the Company and Cryobanks will cause to be filed a registration statement on Form S-4 registering the issuance of the 120,000,000 shares to the Cryobanks shareholders. Notwithstanding this registration, all of the 120,000,000 shares so issued shall be subject to a one year restriction against transfer, except for approximately 91,879,402 shares held by the majority shareholder of Cryobanks, which will be subject to a six-month restriction.

F-10

NOTE B - MERGER AGREEMENT (Continued)

Agreement to Purchase Subsidiaries and Cancel Shares

On November 22, 2005, the Chief Executive Officer, Marc Ebersole, and Directors, Scott Schweber and Christine Ebersole (the "Management Shareholders"), entered into an Agreement to Purchase Subsidiaries and Cancel Shares ("Spin-off Agreement"), with certain shareholders who hold Senior and Junior debentures with the Company (together with the Management Shareholders, the "Security Holders" as described below.) Pursuant to the Spin-off Agreement, the Security Holders agreed to cancel the shares of the Company's common stock which they held in return for the transfer to them of the Company's two wholly owned subsidiaries, ABS Holding Company (“ABS”) and BH Holding Company, Inc. (“BH”). Pursuant to the Spin-off Agreement, each Security Holder will receive one share of both ABS and BH for each four shares of the Company which they hold and the Company will then cancel each share of the Company's common stock which they held.

Additionally, pursuant to the Agreement to Purchase Subsidiaries and Cancel Shares, Hyde, to which the Company currently owes $552,500 ($420,000 at December 31, 2005) in connection with a Senior Debenture, agreed to release the Company from any obligations under the Senior Debenture and in exchange for such release, ABS and BH would both assume 50% of the then outstanding under the Senior Debenture.

The Spin-off Agreement is to be effective on the day following the closing of the merger with Cryobanks.

Pursuant to the Spin-off Agreement, the following Security Holders agreed to cancel share amounts as follows:

Marc Ebersole	122,000,000 shares
Christine Ebersole	4,000,000 shares
Scott A. Schweber	4,000,000 shares
The Morpheus Trust	5,460,018 shares
Livingston Investments	6,200,000 shares
The Gateway Real Estate
Investment Trust	5,090,026 shares
Burton Partners, LLC	6,200,000 shares
Picasso, LLC	6,200,000 shares

Total	159,150,044 shares

Assuming the closing of the merger and the subsequent closing of the Spin-off Agreement, the Company will no longer have any interest in the operations of ABS and B&H, and the shareholders of Cryobanks will become the majority shareholders of the Company.

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

BioStem, Inc. (formerly National Parking Systems, Inc.) (the “Company”) presently provides parking and valet services to establishments and booting services to parking garages and lots in Atlanta, Georgia through its wholly owned subsidiaries: BH Holding Company, Inc., which owns J&K Parking, Inc., and ABS Holding Company, Inc. BH Holding Company, Inc. and ABS Holding Company, Inc. are Nevada Corporations and J&K Parking, Inc. is a Georgia Corporation. All of these companies were under the common control of one individual prior to the reverse merger.

F-11

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reverse Merger

On January 13, 2005, the Company entered into a stock exchange agreement with Cascade Mountain Mining Company, Inc. (“Cascade”) which subsequently changed its name to National Parking Systems, Inc, and then BioStem, Inc. whereby Cascade issued 40,350,000 shares of its common stock to acquire BioStem, Inc. Additionally, Cascade authorized a 1 for 4,000 reverse split of its common stock prior to the merger. In connection with the merger, BioStem, Inc. became a wholly owned subsidiary of Cascade. Prior to the merger, Cascade was a non-operating “shell” corporation. Pursuant to Securities and Exchange Commission rules, the merger of a private operating company, BioStem, Inc., into a non-operating public shell corporation, with nominal net assets, is considered a capital transaction. At the time of the merger, the officers and directors of Cascade resigned and were replaced with the officers and directors of BioStem, Inc. For financial statement presentation, the merger has been reflected in the financial statements as though it occurred on December 31, 2004. The historical financial statements prior to December 31, 2004 are those of BioStem, Inc. Since the merger is a recapitalization and not a business combination, pro forma information is not presented.

Going Concern

As shown in the accompanying financial statements, the Company has incurred net losses of $2,051,539 in 2006, $7,857,124 in 2005 and $5,200,418 in 2004, has negative working capital of $1,338,517, and a stockholders’ deficit of $1,242,540 at December 31, 2006. Management’s plans include the raising of capital through the equity markets to fund future operations, seeking additional acquisitions, the generating of revenue through its business, and the merger with Cryobanks International Inc. as discussed in Note G. Failure to raise adequate capital and generate adequate sales revenues could result in the Company having to curtail or cease operations. Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. However, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

Consolidated Financial Statements

The consolidated financial statements include the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

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

Cash Equivalents

For purposes of reporting cash flows, cash equivalents include investment instruments purchased with an original maturity of three months or less.

F-12

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Values of Financial Instruments

The Company uses financial instruments in the normal course of business. The carrying values of cash, accounts receivable, advance receivable, bank overdraft, accounts payable and accrued expenses approximate their fair value due to the short-term maturities of these assets and liabilities. The carrying values of notes payable and loans payable approximate their fair value based upon management’s estimates using the best available information.

Property and Equipment and Depreciation

Property and equipment is stated at cost and is depreciated using the straight line method over the estimated useful lives of the respective assets. Routine maintenance, repairs and replacement costs are expensed as incurred and improvements that extend the useful life of the assets are capitalized. When property and equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized in operations.

Net Loss Per Common Share

The Company computes per share amounts in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings per Share”. SFAS No. 128 requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the income (loss) available to Common Stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of Common Stock and Common Stock equivalents outstanding during the periods.

Although there were common stock equivalents outstanding at December 31, 2006, they were not included in the calculation of earnings per share because they would have been considered antidilutive.

Revenue Recognition Policy

Revenue is recognized for the valet and parking establishments when the service is performed. Cash is collected immediately and deposited in the bank the next day. In connection with the booting services, revenue is recognized when the service is performed

Stock-Based Compensation

The Company accounts for employee stock based compensation and stock issued for services using the fair value method. In accordance with SFAS No. 123R, the measurement date of shares issued for services is the date at which the counterparty’s performance is complete.

The Company accounts for stock issued for services using the fair value method. In accordance with Emerging Issues Task Force (“EITF”) 96-18, the measurement date of shares issued for services is the date at which the counterparty’s performance is complete.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeded the fair value of the assets.

F-13

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

The Company utilizes SFAS No. 109, Accounting for Income Taxes. Under this method, the Company recognizes a deferred tax liability or asset for temporary differences between the tax basis of an asset or liability and the related amount reported on the financial statements.

Beneficial Conversion Features

The Company follows EITF 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”, and EITF 98-5, “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios” in accounting for beneficial conversion features associated with its convertible debentures. A beneficial conversion feature is computed as the difference between the effective conversion price and the fair value of the stock at the commitment date multiplied by the number of shares which the security is convertible.

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation 48, “Accounting for Income Tax Uncertainties” (“FIN 48”). FIN 48 defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. Recently issued literature also provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. FIN 48 also includes guidance concerning accounting for income tax uncertainties in interim periods and increases the level of disclosures associated with any recorded income tax uncertainties. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company expects to adopt the provisions of FIN 48 beginning in the first quarter of 2007. The Company is currently in the process of determining the impact, if any, of adopting the provisions of FIN 48 on its financial position, results of operations and liquidity.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which defines fair value, establishes a framework for measuring fair value under other accounting pronouncements that permit or require fair value measurements, changes the methods used to measure fair value and expands disclosures about fair value measurements. In particular, disclosures are required to provide information on the extent to which fair value is used to measure assets and liabilities; the inputs used to develop measurements; and the effect of certain of the measurements on earnings (or changes in net assets). SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Early adoption, as of the beginning of an entity’s fiscal year, is also permitted, provided interim financial statements have not yet been issued. The Company expects to adopt the provisions of FIN 48 beginning in the first quarter of 2008. The Company is currently evaluating the potential impact, if any, that the adoption of SFAS No. 157 will have on its consolidated financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB No. 108”). SAB No. 108 provides guidance on how prior year misstatements should be considered when quantifying misstatements in the current year financial statements. SAB No. 108 requires registrants to quantify misstatements using both a balance sheet and an income statement approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative

and qualitative factors are considered, is material. SAB No. 108 does not change the guidance in SAB No. 99, “Materiality,” when evaluating the materiality of misstatements. SAB No. 108 is effective for fiscal years ending after November 15, 2006. Upon initial application, SAB No. 108 permits a one-time cumulative effect adjustment to beginning retained earnings. The Company adopted SAB No. 108 for the fiscal year ended December 31, 2006. Adoption of SAB No. 108 did not have a material impact on the consolidated financial statements.

F-14

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (Continued)

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 allows entities to measure at fair value many financial instruments and certain other assets and liabilities that are not otherwise required to be measured at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We have not determined what impact, if any, that adoption will have on our results of operations, cash flows or financial position.

NOTE D - EQUIPMENT

Equipment at December 31, 2006 and 2005 is as follows:

			Average
	2006	2005	Useful Life
Automobile	$15,000	$ 15,000	3
Booting equipment	26,550	25,000	10
Valet equipment	10,000	10,000	3
	51,550	50,000
Less: accumulated depreciation	(21,520)	(10,649)
	$30,030	$ 39,351

Depreciation expense of $10,871, $9,999 and $650 is included within Depreciation and amortization expense on the Statement of Operations for the years ended December 31, 2006, 2005 and 2004, respectively.

NOTE E - COVENANT-NOT-TO-COMPETE

On November 4, 2004 and prior to the reverse merger, Mr. Marc Ebersole, the Chief Executive Officer of National Parking Systems, Inc. formed two corporations: (1) BH Holding Company, Inc. (BH) and (2) ABS Holding Company, Inc. (ABS). Each company had 500 common shares outstanding.

On November 4, 2004, BH acquired J&K Parking, Inc. d/b/a B&H Parking. Mr. Ebersole, who owned 50% of B&H Parking, merged his interest in BH for a $30,000 promissory note for assets and a three year covenant not to compete. Since the company had no other assets, the value was placed on the covenant not to compete. BH acquired the other 50% from Mr. Ebersole’s partner for $200,000. Of this amount, $175,000 was loaned under the Senior Secured Convertible Debenture and the Company issued an additional $25,000 promissory note to Mr. Ebersole’s partner. No value was placed on the customer lists, the only other asset since the contracts were not binding on either party and were considered month to month.

On November 4, 2004, ABS acquired the assets of Blue Sky Parking, Inc. for $200,000. Blue Sky was primarily in the booting business. A value of $25,000 was placed on the booting equipment which was deemed to be the fair market value at date of acquisition. A payment of $100,000 was made from borrowings under the Senior Secured Convertible Promissory Note and ABS issued a $100,000 promissory note to the former owners. The purchase price of $200,000 contained a non-compete agreement. Blue Sky had two informal booting contracts and one was cancelled prior to acquisition. The other agreement was on a month to month basis.

The share exchange agreement exchanges all of the outstanding common stock of BH and ABS for 130,000,000 shares of National Parking Systems’, Inc. common stock. The share exchange agreement

F-15

NOTE E - COVENANT-NOT-TO-COMPETE (Continued)

contained a non-compete agreement. Additionally, the right to receive preferred stock of BH and ABS was exchanged for 31,000,000 shares of National Parking Systems’, Inc. common stock and a Junior Convertible Debenture in the amount of $86,750. These share exchange agreements contained non-compete agreements with the owners of the acquired business.

The following is a summary of the covenants not to compete at December 31, 2005 and 2004 :

	2006			2005
Covenants not to compete	$	491,750		$	491,750
Less: accumulated amortization		(339,053	)		(175,137	)
	$	152,697		$	316,613

Amortization expense of $163,916, $163,916 and $11,221 is included within Depreciation and amortization expense on the Statement of Operations for the years ended December 31, 2006, 2005 and 2004, respectively. Estimated amortization for 2007 is $152,697.

NOTE F - RELATED PARTY TRANSACTIONS

In connection with the original merger, the Company issued a $30,000 note to the President and Chief Executive Officer, who was also the majority owner of one of the companies acquired, for a non-compete agreement. The note is payable at the rate of $900 per month commencing December 1, 2004 with a final balloon payment due on November 1, 2005. The note is unsecured and bears interest at the rate of 18% per annum. During 2005, this amount was repaid. The President, at December 31, 2005, has an outstanding advance from the Company of $911 and a balance due from the company of $1,389 at December 31, 2006.

Professional and consulting fees in 2006 and 2005 to Hyde Investments, Ltd. (“Hyde”) and London Finance Group, Ltd. (“London”) which are under common control, amounted to $240,000 and $582,900 and interest of $48,122 and $41,455 was also incurred to Hyde in 2006 and 2005.

NOTE G - LONG-TERM DEBT

December 31,
	2006		2005
Installment loan payable, dated November 2, 2004, for equipment assumed
in the merger. The loan is secured by a vehicle and is payable at $464
per month including interest of 6%.	$	2,882	$	8,832

Note payable, dated November 2, 2004, in connection with the merger to a
former shareholder for $100,000 for a 3 year non-compete agreement.
The note is unsecured, non-interest bearing, and is payable in 36 months
at $2,778 per month.		29,236		63,889

Senior Secured Convertible Debenture dated October 15, 2004, maturing
October 15, 2005 to include advances not to exceed $1,000,000 with
an interest rate of 10% per annum secured by all of the Company’s
assets extended until December 31, 2007 under terms of “Agreement to
Extend Senior Convertible Debenture”. (See Note J - Commitments
and Contingencies)		552,500		420,000

F-16

NOTE G - LONG-TERM DEBT (Continued)

December 31,
	2006			2005
Junior Convertible Debentures in the amount of $86,750 due January 31,
2010. The Debentures are non-interest bearing and are convertible into
the Company’s common stock. (See also Note J - Commitments
and Contingencies)		86,750			86,750
		671,368			579,471
Less: current portion		(584,618	)		(458,904	)

Long-term portion	$	86,750		$	120,567

NOTE H - INCOME TAXES

The principal types of differences, which are measured at current tax rates, are net operating loss carry forwards. At December 31, 2006 and 2005, these differences resulted in a deferred tax asset of approximately $652,000 and $328,000, respectively. SFAS No. 109 requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Since realization is not assured, the Company has recorded a valuation allowance for the entire deferred tax asset, and the accompanying financial statements do not reflect any net asset for deferred taxes at December 31, 2006 and, 2005.

The Company’s net operating loss carry forwards amounted to approximately $1,917,000 and $980,000 at December 31, 2006 and 2005 respectively, which will expire through 2021.

NOTE I - STOCKHOLDERS’ DEFICIT

The Company’s certificate of incorporation was amended January 4, 2005 to change the name of the company from Cascade Mountain Mining Company, Inc. to National Parking, Inc. Additionally, a 1 to 4,000 reverse stock split was effected. The financial statements give effect to these transactions.

In connection with the reverse merger, 161,400,000 shares of the Company’s common stock were issued to acquire National Parking, Inc.

In July 2005, the Company issued 12,000,000 shares under an approved S-8 stock plan to consultants for services rendered in connection with the Company’s reverse merger. The shares were valued at $0.25 per share. Accordingly, stock for services in the amount of $300,000 was recorded and included in professional and consulting fees expense.

In October 2005, the Company issued 18,000 shares of common stock to attorneys in consideration for legal services rendered to the Company. The shares were valued at $0.15 per share. Accordingly, stock for services in the amount of $2,700 was recorded and included in professional and consulting fees expense.

The Company affected a 4:1 forward stock split for shareholders of record as of October 20, 2005. All tabular data and EPS have been adjusted.

In November 2005, the Company issued 1,500,000 shares of common stock to consultants. The shares were valued at $0.06 per share. Accordingly, stock for services in the amount of $90,000 was recorded, of which $67,500 was recorded in Prepaid consulting fees and $22,500 was recorded in professional and consulting fees expense. The Prepaid consulting fees are being amortized over the life of the consulting agreement.

F-17

NOTE J - COMMITMENTS AND CONTINGENCIES

Senior Secured Convertible Debenture

On October, 15, 2004, the Company issued a Senior Secured Convertible Debenture which allows for the Company to borrow up to $1,000,000. $552,500 and $420,000 were outstanding at December 31, 2006 and 2005, respectively. The Debenture was due October 15, 2005; however, the due date of the Senior Debenture was extended by Hyde and the Company. As a result of the extension, the due date was extended to December 31, 2007. The Debenture bears interest at the rate of 10% per annum, and has a general security lien against all of the Company’s assets. The Debenture, including accrued interest, is convertible into the Company’s common stock at the lesser of a) 30% of the average of the three lowest closing prices in the twenty (20) trading days immediately preceding the conversion date or, b) $0.10 (pre-split). The Debenture contains restrictions on the issuance of additional shares of preferred or common stock, payment of dividends, or issuance of additional debentures without the consent of a majority of the Senior Convertible Debenture holders and is personally guaranteed by the Company’s CEO.

The Company computed a beneficial conversion feature of $7,980,815, which consisted of $5,177,589, $1,463,438, and $1,339,788 in 2004, 2005, and 2006, respectively. This feature was determined by subtracting the effective conversion price of from the fair value of the Company’s stock at the dates of issuance, multiplied by the shares which the debenture is convertible according to the debenture agreements. The entire beneficial conversion is included in Interest Expense as the debenture is immediately convertible into common stock.

Junior Convertible Debenture

In connection with the merger, the Company issued $86,750 in 5 year Junior Convertible Debentures dated January 13, 2005. The Debentures are due January 31, 2010 and are non-interest bearing. The holder of the Debentures is entitled to convert the Debentures into common stock of the Company at the lesser of a) 30% of the average of the three lowest closing prices in the twenty (20) trading days immediately preceding the conversion date or, b) $0.10 (pre-split).

The Company computed a beneficial conversion feature of $5,453,684 for the year ended December 31, 2005. This feature was determined by subtracting the effective conversion price of from the fair value of the Company’s stock at the dates of issuance, multiplied by the shares which the debenture is convertible according to the debenture agreements. The entire beneficial conversion is included in Interest Expense as the debenture is immediately convertible into common stock.

Warrant Agreements

In connection with the merger, the Company, on January 5, 2005, issued a warrant to London for 1,000,000 shares of the Company’s common stock at an exercise price of $0.10 per share (pre-split). The warrants vest immediately and expire January 5, 2009. The warrants have participating rights should the Company file a registration statement with the Securities and Exchange Commission. The Company recorded $42,900 in professional and consulting fees, which represents the fair value of the warrants at the time services were performed.

The Company entered into a consulting agreement with Vijay Alimchandani, dba Financial Systems International (“Financial”), on November 11, 2005 which lasted until June 30, 2006. In connection with this agreement, the Company gave Financial a warrant to purchase 500,000 shares of common stock at an exercise price of $1.00 per share. The warrants vested immediately and expire November 1, 2010. Since the Company did not complete the merger with Cryobanks by June 30, 2006, the Company has the right to purchase the warrant, along with the 1,500,000 shares issued to consultants in November of 2005 (see Note I), for $1,000. No expense was recorded for the warrants since they were determined to have no value at the time services were performed.

F-18

NOTE J - COMMITMENTS AND CONTINGENCIES (CONTINUED)

Consulting Agreement

The Company, on January 5, 2005, entered into a 2 year consulting agreement with London for services relating to mergers, acquisitions, and the establishment of investment banking relationships. Under the terms of the consulting arrangement, the Company is to a) pay a non-refundable retainer of $5,000 per month, b) issue 3,000,000 shares of the Company’s common stock to be registered as promptly as possible but no later than the date the Company files its first registration statement, c) pay a fee of 10% of the consideration paid for any acquisition or sale by the Company and d) reimburse London for reasonable travel expenses. Additionally, the Company would issue to London a warrant to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $0.10 per share (pre-split). The common stock issuable upon exercise will be registered at the Company’s expense. The warrants vest immediately.

On November 23, 2005, the Company amended the London agreement to reduce the number of warrants to be issued from 4,000,000 post 4:1 forward split shares to 1,500,000 post 4:1 forward split shares, and increased the exercise price of those warrants from $0.025 to $1.00 per share. Additionally, the fee was increased to $20,000 per month and the expiration date extended to January 31, 2009. As of December 31, 2006 and 2005 the Company has accrued $480,000 and $240,000 respectively as consulting expense related to this agreement.

Employment Agreement

The Company, on December 1, 2004, entered into a 3 year employment agreement with the President and Chief Executive Officer. The agreement allows for an annual salary of $120,000 plus health benefits and an auto allowance.

Lease Agreement

On February 13, 2004, the Company entered into a 5 year lease agreement for its corporate headquarters. Rent expense was $19,010, $17,361, and $15,109 for the years ended December 31, 2006, 2005, and 2004, respectively.

The Company also has various equipment leases for surveillance cameras and automated parking stations.

License Agreements

On January 2, 2006, the Company entered into two separate three year license agreements to provide valet and other parking services at two locations in the Atlanta area. These agreements, with a 60 day cancellation clause, call for annual rental payments by the Company of $354,000 ($29,500 monthly) in exchange for managing, monitoring, and collection of all fees for the “work of the properties”. Lot rental expense including late fees as $356,000 for the year ended December 31, 2006.

The minimum annual rental payments for the agreements described above are as follows:

	2007		2008		2009		2010		Total
Rent Agreements	$	18,047	$	18,770	$	4,738		-	$	41,555
Equipment Leases		19,645		19,645		12,818	$	990		53,098
License Agreements		354,000		354,000		-		-		708,000
	$	391,692	$	392,415	$	17,556	$	990	$	802,653

F-19

NOTE K - CONCENTRATIONS

For the year ended December 31, 2006, approximately 23% of the Company’s sales were with one lot and approximately 51% were with three lots.

NOTE L - SEGMENT INFORMATION

The Company’s two reportable segments are Parking and Booting. In evaluating these segments, the Company analyzes Sales, Income (Loss) Before Depreciation, Amortization and Interest, and Net Income (Loss). The following summarizes the Company’s reportable segments.

	Parking			Booting			Corporate/ Eliminations			Total
2006
Net Sales		1,340,292			421,949			-			1,762,241
Income (Loss) Before Depreciation,
Amortization and Interest Expense		(185,358	)		97,232			(396,236	)		(484,362	)
Depreciation and Amortization		(105,583	)		(65,872	)		(3,332	)		(174,787	)
Interest Expense		(4,480	)		-			(1,387,910	)		(1,392,390	)
Net Loss		(295,421	)		31,360			(1,787,478	)		(2,051,539	)
Total Assets		157,999			207,290			(116,387	)		248,902

2005
Net Sales		676,622			408,435			-			1,085,057
Income (Loss) Before Depreciation,
Amortization and Interest Expense		(60,577	)		97,834			(759,660	)		(722,403	)
Depreciation and Amortization		(105,584	)		(65,832	)		(2,499	)		(173,915	)
Interest Expense		(2,295	)		(37	)		(6,958,474	)		(6,960,806	)
Net Loss		(168,456	)		31,965			(7,720,633	)		(7,857,124	)
Total Assets		225,812			208,945			10,324			445,081

2004

Net Sales		267,355			50,240			-			317,595
Income (Loss) Before Depreciation,
Amortization and Interest Expense		(11,187	)		6,885			(1,890	)		(6,192	)
Depreciation and Amortization		(6,360	)		(5,511	)		-			(11,871	)
Interest Expense		-			-			(5,182,355	)		(5,182,355	)
Net Loss		(17,547	)		1,374			(5,184,245	)		(5,200,418	)
Total Assets		315,857			213,132			-			528,989

NOTE M - SUBSEQUENT EVENTS

The Company has entered into a vehicle lease agreement effective January 12, 2007. The agreement calls for annual rental payments by the company of $14,205 ($1,184 monthly) for a total of forty-seven months.

The Company has borrowed an additional $40,000 under the Senior Convertible debenture subsequent to December 31, 2006 bringing the total outstanding to $592,500.

F-20

NOTE M - SUBSEQUENT EVENTS (Continued)

The Company has borrowed $5,000 under a business credit line issued by the Bank of America. The annual percentage rate on this credit line is 18.24%.

NOTE N- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following summarizes the unaudited quarterly financial information of the Company:

	12/31/06			9/30/06			6/30/06			3/31/06			Total
Net Sales		527,535			405,058			434,077			395,571			1,762,241
Net Loss		(741,666	)		(278,727	)		(501,544	)		(529,602	)		(2,051,539	)

Loss Per Share		(0.01	)		(0.01	)		(0.01	)		(0.01	)		(0.01	)


		12/31/05			9/30/05			6/30/05			3/31/05			Total
Net Sales		303,740			291,939			287,720			201,658			1,085,057
Net Loss		(1,617,504	)		(407,655	)		(101,402	)		(5,730,563	)		(7,857,124	)
Loss Per Share		(0.01	)		(0.01	)		(0.01	)		(0.03	)		(0.05	)

Nevada	95-4886474
State or other jurisdiction of	(I.R.S. Employer
incorporation or organization	Identification No.)

Item 1.	Business.	4

Item 1A.	Risk Factors.	19

Item 1B.	Unresolved Staff Comments.	31

Item 2.	Properties.	31

Item 3.	Legal Proceedings.	31

Item 4.	Submission of Matters to a Vote of Security Holders.	32

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	33

Item 6.	Selected Financial Data.	34

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation.	35

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	39

Item 8.	Financial Statements and Supplementary Data.	39

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	41

Item 9A.	Controls and Procedures.	41

Item 9B.	Other Information.	44

Item 10.	Directors, Executive Officers and Corporate Governance.	45

Item 11.	Executive Compensation	47

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	52

Item 13.	Certain Relationships, Related Transactions, and Director Independence.	52

Item 14.	Principal Accountant Fees and Services	53

Item 13.	Exhibits, Financial Statement Schedules	54

Signatures		57

o	Marc Ebersole 122,000,000 shares
o	Christine Ebersole 4,000,000 shares
o	Scott A. Schweber 4,000,000 shares
o	The Morpheus Trust 5,460,018 shares
o	Livingston Investments 6,200,000 shares
o	The Gateway Real Estate Investment Trust 5,090,026 shares
o	Burton Partners, LLC 6,200,000 shares
o	Picasso, LLC 6,200,000 shares

(1)	actual or anticipated variations in our results of operations;
(2)	our ability or inability to generate new revenues;
(3)	the number of shares in our public float;
(4)	increased competition; and
(5)	conditions and trends in the parking and vehicle immobilization industries.

Quarter Ended	High	Low

December 31, 2006	3.40	1.40
September 30, 2006	3.00	1.50
June 30, 2006	4.50	1.25
March 31, 2006	6.80	3.76


December 31, 2005(1)	3.40	0.01
September 30, 2005	0.66	0.38
June 30, 2005	1.00	0.60
March 31, 2005(1)	1.25	0.31


	Year Ended December 31,
	2002			2003			2004			2005			2006

Consolidated Statements of Income Data:
Revenues	$	2,661		$	-0-		$	317,595		$	1,085,057		$ 1,762,241
Costs and expenses:
Cost of revenues
General and administrative expenses		1,336			1,163,215			168,807			1,634,466		1,911,461
Interest expense					19,434			5,182,355			6,960,806		1,392,390
Other expenses		22,560			129,300			166,851			346,909		509,929
Total costs and expenses		23,896			1,311,949			5,518,013			8,942,181		3,813,780
Net income (loss)	$	21,235		$	(1,311,949	)	$	(5,200,418	)	$	(7,857,124	)	$ (2,051,539)
Net income (loss) per share (basic and diluted)	$	(0.00	)	$	(0.01	)	$	(0.03	)	$	(0.05	)	$ (0.01)

	As of December 31,
	2002		2003 2004						2005			2006
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities	$	5,201	$	10,630		$	9,110		$	89,117		$	66,175
Total assets		5,201		10,630			28,989			445,081			248,902
Total current liabilities		1,000		52,054			395,778			855,303			1,404,692
Total long-term liabilities		- 0 -		- 0 -			159,598			120,567			86,750
Total stockholders’ equity (deficit)	$	5,201	$	(41,424	)	$	(26,387	)	$	(530,789	)	$	(1,242,540

(1)		Our financial and accounting organization was not adequate to support our financial accounting and reporting needs. Specifically, we did not maintain a sufficient number of personnel with an appropriate level of accounting knowledge commensurate with our financial reporting requirements and in fact, none of our personnel have significant technical and reporting experience. The lack of a sufficient number of personnel with an appropriate level of accounting knowledge contributed to the control deficiencies noted in items 2 through 5 below.
(2)		We do not maintain an Audit Committee, Compensation Committee, Code of Conduct or Ethics and/or a “whistle-blower” hotline. We do not currently have an independent Audit Committee to provide oversight of our financial statements. Additionally, we do not currently have an independent Compensation Committee to provide oversight of executive compensation, a Code of Conduct and Ethics for our senior management or employees, or a “whistle-blower” hotline to anonymously report suspicious activity.
(3)		We do not maintain effective controls against the risk of fraud. Specifically, an inadequate number of controls exist to ensure that safeguarding of our assets and to address potential fraud; we have not completed a fraud risk assessment; neither a Code of Conduct or Ethics has been implemented for our senior management; we do not have an internal control department; and as stated above, no “whistle-blower” policy or hotline is in effect.
(4)		We place an overwhelming amount of reliance on manual controls. In connection with our management’s review of accounting procedures as of December 31, 2006, it was determined that 94% of our controls were manual and that those manual controls were conducted infrequently, i.e. either monthly, quarterly, annually or on an unscheduled basis.

(5)	Additional material weaknesses are present in our control framework, including that:
	· Cash is not adequately secured prior to depositing such cash in the bank;
	· Contracts are not properly executed before work under such contracts begin;
	· No controls exist to ensure that all revenue, accounts receivable and cash receipt transactions have been posted to the correct account or recorded in the prior period;
	· No controls exist to ensure that all expense, accounts payable and cash disbursement transactions have been posted to the correct account or recorded in the proper period;
	· No controls exist to ensure that fixed assets accounted for physically exist;
	· No controls exist to ensure that purchases have been properly approved or goods/services rendered; and
	· An inadequate number of employees has created issues regarding those employees separation of duties and job functions

Name	Age	Position

Marc Ebersole	49	Chief Executive Officer, President, Treasurer, Secretary and Director



Christine Ebersole	37	Director

Scott Schweber	46	Director

							Other
							Annual		Total
Name & Principal					Bonus		Compen-		Compen-
Position	Year		Salary($)		($)		sation		sation

Marc Ebersole (1)(2)		2006(1)	$	58,808	$	17,400	$	-0-	$	76,208
CEO, President		2005(1)	$	125,000	$	18,600	$	17,400	$	161,000
CFO (Principal Accounting		2004	$	-0-	$	- 0 -	$	- 0-	$	- 0 -
Officer), Secretary,
Treasurer, and Director

Christine Ebersole		2006	$	46,870	$	-0-	$	-0-	$	46,870
Director

Scott Schweber		2006	$	-0-	$	-0-	$	-0-	$	-0-
Director

Ari Kaplan(2)		2004	$	-0-	$	-0 -	$	- 0 -	$	- 0 -
Former CEO and
Former Director

Wayne Daley(3)		2004	$	56,000	$	- 0 -	$	- 0 -	$	- 0 -
Former CEO,
Former President
and Former Director

Name	No. of shares	Percentage(1)

Marc Ebersole	122,000,000	69.6%

Christine Ebersole	4,000,000	2.3%

Scott Schweber	4,000,000	2.3%

All the officers	130,000,000	74.2%
and Directors
as a group (3 persons)

Exhibit No.	Description

2.1(1)	Agreement and Plan of Merger

2.2(1)	Subsidiary Transfer Agreement

2.3(+)	First Amendment to Agreement and Plan of Merger

2.4(5)	Second Amendment to Agreement and Plan of Merger

10.1(2)	Stock Exchange Agreement

10.2(2)	Junior Convertible Debenture - The Morpheus Trust

10.3(2)	Junior Convertible Debenture - The Gateway Real Estate Investment Trust

10.4(2)	Junior Convertible Debenture - Picasso, LLC

10.5(2)	Junior Convertible Debenture - Burton Partners, LLC

10.6(2)	Junior Convertible Debenture - Livingston Investments, Ltd.

10.7(2)	Senior Secured Debenture with Hyde Investments, Ltd.

10.8(2)	Security Agreement

10.9(2)	Marc Ebersole's Employment Agreement

10.10(2)	Marc Ebersole's Covenant Not To Compete

10.11(2)	Consulting Agreement

10.12(2)	Warrant Agreement

10.13(3)	Addendum to Stock Exchange Agreement

10.14(3)	General Release and Settlement Agreement

10.15(4)	Consulting Agreement with Financial Systems International

10.16(4)	Warrant Agreement with Financial Systems International

10.17(4)	Agreement to Extend Senior Secured Convertible Debenture with Hyde

10.18(1)	Amendment to Consulting Agreement

10.19(6)	Third Amendment to Agreement and Plan of Merger

10.20(7)	Letter of Intent between Cryobanks and Samarium

10.21(7)	Amendment to Senior Debenture

10.22(8)	Fourth Amendment and Plan of Merger with Cryobanks

31.1*	Certificate of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*	Certificate of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002