As filed with the Securities and Exchange Commission on August 1, 2006

Registration No. 333-135138

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

FORM SB-2
AMENDMENT NO. 1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

STARMED GROUP, INC.
(Name of small business issuer in its charter)

NEVADA 2834 52-2220728
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

2029 CENTURY PARK EAST
SUITE 1112
LOS ANGELES, CALIFORNIA 90067
(310) 226-2555

(Address and telephone number of principal executive offices)

SAME AS ABOVE

(Address of principal place of business or intended principal place of business)

MR. HERMAN RAPPAPORT
STARMED GROUP, INC.
2029 CENTURY PARK EAST
SUITE 1112
LOS ANGELES, CALIFORNIA 90067
(310) 226-2555

(Name, address and telephone number of agent for service)

with a copy to:
STEVEN I. WEINBERGER, ESQ.
SCHNEIDER WEINBERGER & BEILLY LLP
2200 CORPORATE BOULEVARD N.W.
SUITE 210
BOCA RATON, FLORIDA 33431
TELEPHONE (561) 362-9595
TELECOPIER (561) 362-9612

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.

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

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

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

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

CALCULATION OF REGISTRATION FEE

Title of each class Proposed maximum Proposed maximum Amount of
of securities to Dollar Amount offering price per aggregate offering registration
be registered to be registered unit price (1) fee
- ------------------------ ---------------- ------------------ ------------------ -------------

Common stock, par
value $.01(2)......... 14,148,075 $0.13 $ 1,833,522 $ 196

Common stock, par
value $.01(3) ........ 250,000 $0.25 $ 62,500 $ 7

Common stock, par
value $0.01(4) ....... 10,298,075 $1.00 $10,298,075 $1,102
------
TOTAL $1,305(5)
------

(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933 based on the average of the high
and low sale price of the common stock as reported on the OTC Bulletin Board on
July 20, 2006.

(2) Includes 13,292,000 shares of our common stock which are presently
outstanding, and 856,075 shares of common stock we are obligated to issue as
liquidated damages under the terms of a unit offering.

(3) Includes 250,000 shares of common stock issuable upon the exercise of
outstanding common stock purchase warrants with an exercise price of $0.25 per
share.

(4) Includes 9,692,000 shares of common stock issuable upon the exercise of
outstanding common stock purchase warrants with an exercise price of $1.00 per
share, and 856,075 shares of common stock underlying common stock purchase
warrants with an exercise price of $1.00 per share which we are obligated to
issue as liquidated damages under the terms of the unit offering.

(5) Paid on June 19, 2006.

Pursuant to Rule 416, there are also being registered such additional
number of shares as may be issuable as a result of the anti-dilution provisions
of the warrants. Rule 416, however, does not apply to additional shares which
may be issued as a result of the reset provisions in the warrants.

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

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED AUGUST __, 2006

PRELIMINARY PROSPECTUS

STARMED GROUP, INC.

24,696,150 shares of Common Stock

This prospectus relates to periodic offers and sales of 24,696,150 shares
of our common stock by the selling security holders, which consists of:

- 14,148,075 shares of our common stock, including 856,075 shares
which are issuable as liquidated damages under the terms of a prior
private offering of units, and

- 10,548,075 shares issuable upon the exercise of common stock
purchase warrants, including 856,075 warrants issuable as liquidated
damages under the terms of a prior private offering of units, with
exercise prices ranging from $0.25 to $1.00 per share.

We will not receive any proceeds from the sale of the shares by the
selling security holders. The shares of common stock are being offered for sale
by the selling security holders at prices established on the OTC Bulletin Board
during the term of this offering. There are no minimum purchase requirements.
These prices will fluctuate based on the demand for the shares of common stock.

For a description of the plan of distribution of these shares, please see
page 53 of this prospectus.

Our common stock is quoted on the OTC Bulletin Board under the symbol
"SMEG." The last reported sale price for our common stock occurred on July 20,
2006 at a price of $.13 per share.

--------------------

Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 4 of this prospectus to read about the risks of
investing in our common stock.

--------------------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

--------------------

The date of this Prospectus is _______, 2006

PROSPECTUS SUMMARY

BUSINESS OVERVIEW

StarMed Group, Inc. is engaged in two businesses:

- we are developing a network of StarMed Wellness Centers that offer
preventative, traditional medical and alternative treatments
directed towards achieving "total wellness," and

- we market a line of proprietary over-the-counter vitamins, minerals
and other supplements under the StarMed and SierraMed brand names.

Historically our operations were devoted to formulating and marketing a
line of over-the-counter, alternative medicinal products. All of our revenues
for fiscal 2005 were from the sale of our products or royalties related to our
products. Our natural medicinal products are intended to address the effects of
various conditions, including arthritis, aging eyesight, obesity and irritable
bowel syndrome. We also market a proprietary starch blocker designed for weight
loss and maintenance and we have licensed various formulations of our
proprietary starch blocker product to third parties. We currently market our
medicinal products, directly to consumers, over the Internet.

However, severe competition in the medicinal product market and the loss
of a significant distribution outlet in 2005 resulted in a significant reduction
in our product sales. Therefore, in 2005, our management made a strategic
decision to redirect our efforts to the development and establishment of a
network of StarMed Wellness Centers. StarMed Wellness Centers will focus on
promoting general wellness by addressing the underlying causes of a variety of
chronic diseases such as obesity and stress. Our long-term goal is to develop a
network of StarMed Wellness Centers each of which will provide clients a full
range of preventative, traditional medical and alternative treatments directed
towards achieving "total wellness." Our StarMed Wellness Centers concept is
founded on our belief that traditional Western medicines and treatments may be
enhanced by complementing their use with preventative medicine techniques and
the use of alternative medicinals to address the underlying causes of certain
illnesses. We believe that addressing these underlying causes is necessary for
good health maintenance and longevity. Our management includes affiliated
physicians who have devoted significant time, and pooled their collective
experience, to develop our StarMed Wellness Center concept.

We envision that each StarMed Wellness Center will expand the traditional
Western medical treatments, medicines and services provided by an existing
medical clinic to include preventative and alternative healthcare services. We
are developing two models for the operation of the wellness center. In one
model, we will establish a wellness center on behalf of a medical clinic, which
will operate as a participant in the StarMed Wellness Center network under the
supervision of the clinic's existing medical director. Under this model, we will
provide management services to the portion of the medical clinic's practice that
is devoted to wellness in exchange for a management fee. In the second model, we
will affiliate with a physician practice to establish a wellness center that is
adjacent or in close proximity to a medical clinic. The physician practice may
or may not have any existing relationship with the medical clinic and will
supervise the physician services at the wellness center. Under this model, we
will provide management services to the physician practice in exchange for a
management fee.

In February 2006, we began operations at our first wellness center in
Encino, California. We opened our second wellness center in Buena Park,
California in May 2006 and a third wellness center is scheduled to be opened in
Santa Ana, California in July 2006. Another wellness center is proposed for
development in Kohala, Hawaii. Our ability to make these wellness centers
successful will depend on

several factors, including: identifying and entering into agreements with the
right physicians who are committed to the wellness concept and the services that
we offer at the wellness center; identifying and implementing the optimal
strategy for marketing our services given our limited funds; and being able to
raise additional capital to fund the opening, operations and marketing of
additional centers.

While we anticipate that our wellness centers will become a recurring
market for our medicinal products in the future, we do not expect that our
marketing of natural medicinal products will consume a significant portion of
our future operating resources, or that medicinal product sales will account for
a substantial portion of our future revenues.

Our first wellness center generated revenues of $2,753 during its first
quarter of operations ended March 31, 2006. Revenues from sales of medicinal
products were $6,204 and $2,220 for the year ended December 31, 2005 and the
three months ended March 31, 2006, respectively.

Our principal executive offices are located at 2029 Century Park East,
Suite 1112, Los Angeles, California 90067. Our telephone number at this location
is (310) 226-2555. Our web site is www.starmedgroup.com. The information which
appears on our web site is not part of this prospectus.

When used in this prospectus, the terms "StarMed Group," "StarMed," "we,"
"our," and "us" refers to StarMed Group, Inc., a Nevada corporation, and our
subsidiaries.

THE OFFERING

This prospectus relates to periodic offers and sales of 24,696,150 shares
of our common stock by the selling security holders, consisting of 14,148,075
shares of our common stock which are presently outstanding or which we are
contractually obligated to issue, and 10,548,075 shares issuable upon the
exercise of common stock purchase warrants which are presently outstanding or
which we are contractually obligated to issue. We will not receive any proceeds
from the sale of the shares by the selling security holders.

COMMON STOCK

Shares Outstanding Prior to this Offering: 22,418,424 shares at July 26, 2006

Shares to be Outstanding Following this 33,822,574 shares, including
Offering: 856,075 shares of common stock
issuable as liquidated damages and
assuming the exercise of warrants
to purchase 10,548,075 shares, the
resale of all of which is covered
by this prospectus

Shares Reserved for Future Issuance: 19,698,075 shares, consisting of
10,548,075 shares upon exercise of
warrants the resale of which is
covered by this prospectus,
5,500,000 shares issuable in the
event that incentive milestones are
reached by management, 1,000,000
shares upon the exercise of
outstanding options, and 2,650,000
shares reserved for issuance under
our equity compensation plan(s)

Trading Symbol (OTCBB): SMEG

SELECTED FINANCIAL INFORMATION

The following summary of our financial information for the years ended
December 31, 2005 and 2004 has been derived from, and should be read in
conjunction with, our audited financial statements included elsewhere in this
prospectus.

STATEMENT OF OPERATIONS DATA

YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED THREE MONTHS ENDED -----------------------------
MARCH 31, 2006 MARCH 31, 2005 2005 2004
------------------ ------------------ ----------- ------------
(UNAUDITED) (UNAUDITED) (RESTATED) (RESTATED)

Sales ...................... $ 4,770 $ 6,204 $ 23,775 $ 1,742,351
Cost of sales .............. 1,595 4,707 (29,493) (1,405,861)
Gross profit ............... 3,175 1,497 (5,718) 336,490
Revenue from royalties ..... - 11,445 24,486 104,776
Total net revenues ......... 3,175 12,942 18,768 441,266
Total expenses ............. 1,099,207 103,960 660,021 534,858
Loss from operations ....... (1,096,032) (91,018) (641,253) (93,592)
Net loss ................... $ (1,043,921) $ (196,948) $ (805,910) $ (79,155)
Basic and diluted net
income (loss) per
common share .............. $ (.05) $ (.02) $ (0.08) $ (0.01)
Basic and diluted
weighted average common
shares outstanding ........ 21,407,036 8,865,313 10,348,651 7,050,753

BALANCE SHEET DATA

MARCH 31, 2006 DECEMBER 31, 2005
-------------- -----------------
(UNAUDITED) (RESTATED)

Working capital .................. $ 1,236,184 $ 1,227,347
Total current assets ............. $ 1,372,046 $ 1,602,605
Total assets ..................... $ 1,400,817 $ 1,628,634
Total current liabilities ........ $ 135,862 $ 375,258
Total liabilities ................ $ 135,862 $ 375,258
Total stockholders' equity ....... $ 1,264,955 $ 1,253,376

RISK FACTORS

An investment in our common stock involves a significant degree of risk.
You should not invest in our common stock unless you can afford to lose your
entire investment. You should consider carefully the following risk factors and
other information in this prospectus before deciding to invest in our common
stock.

WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT. WE ANTICIPATE CONTINUING
LOSSES MAY RESULT IN SIGNIFICANT LIQUIDITY AND CASH FLOW PROBLEMS.

Our total net revenues declined substantially in fiscal 2005 as compared
to fiscal 2004 and our net loss for fiscal 2005 was $805,910 as compared to a
net loss of $79,155 for fiscal 2004. For the three months ended March 31, 2006,
our net loss was $1,043,921 compared to our net loss of $196,948 for the three
months ended March 31, 2005. While a significant portion of our net loss for the
first quarter of 2006 was a result of expenses relating to our capital raising
efforts and one-time compensation expenses relating to a consulting agreement
paid with our stock and a stock option grant, it also included increased

operating expenses relating to the opening of our first wellness center, and
revenues of $4,770. While at March 31, 2006 we had approximately $872,929 of
cash on hand, we do not presently generate sufficient revenues to fund our
ongoing operations. As a result our continued existence is dependent upon, among
other things, our ability to raise capital and to market and sell our services
successfully. Depending on our ongoing evaluation of cash needs, we may need to
raise additional debt or equity capital within the next 12 months to provide
funding for ongoing and future operations. No assurances can be given that we
will be successful in obtaining additional capital, or that such capital will be
available on terms acceptable to us. If we are not able to significantly
increase our revenues during fiscal 2006 to a level which funds our ongoing
operations, or to continue to raise working capital as needed, we may be unable
to continue to implement our wellness center business model or operate our
company as presently planned. Any liquidity or cash flow problems which could
arise in those events would force us to curtail some or all of our operations.

WE ARE TRANSITIONING OUR BUSINESS MODEL AND HAVE A LIMITED OPERATING HISTORY
UPON WHICH YOU CAN EVALUATE OUR COMPANY.

Although our company has existed since December 1962, we have only a
limited operating history in alternative medicine on which you can base an
evaluation of our business and prospects. Moreover, we are transitioning the
focus of our business away from a product-oriented marketing company to
service-oriented wellness centers. We are still relatively early in our
development and we face substantial risks, uncertainties, expenses and
difficulties. To address these risks and uncertainties, we must do the
following:

- Establish our initial StarMed Wellness Center and confirm its
efficacy in a commercial setting;

- Develop a number of wellness clinics and expand our reactive medical
services.

- Expand into new areas;

- Establish and enhance our name recognition;

- Continue to expand our products to meet the changing requirements of
our customers;

- Provide superior customer service;

- Remain attractive to our commercial partners;

- Respond to competitive developments; and

- Attract, integrate, retain and motivate qualified personnel.

We may be unable to accomplish one or more of these goals, which could
cause our business to suffer. In addition, accomplishing one or more of these
goals might be very expensive, which could harm our financial results.

WE WILL NEED ADDITIONAL FINANCING WHICH WE MAY NOT BE ABLE TO OBTAIN ON
ACCEPTABLE TERMS. IF WE ARE UNABLE TO RAISE ADDITIONAL CAPITAL AS NEEDED, OUR
CONTINUED OPERATIONS WILL BE ADVERSELY AFFECTED AND THE FUTURE GROWTH OF OUR
BUSINESS AND OPERATIONS WILL BE SEVERELY LIMITED.

Historically, our operations have been financed primarily through the
issuance of equity and debt. Because we have a history of losses and have never
generated sufficient revenue to fund our ongoing operations, we are dependent on
our continued ability to raise working capital through the issuance of equity or
debt to fund our present operations. Because we do not know if our revenues will
grow at a pace sufficient to fund our current operations, the continuation of
our operations and any future growth will depend upon our ability to raise
additional capital, possibly through the issuance of long-term or short-

term indebtedness or the issuance of our equity securities in private or public
transactions. The actual amount of our future capital requirements, however,
depends on a number of factors, including our ability to grow our revenues and
manage our business.

If we raise additional capital through the issuance of debt, this will
result in increased interest expense. If we raise additional funds through the
issuance of equity or convertible debt securities, the percentage ownership of
our company held by existing stockholders will be reduced and those stockholders
may experience significant dilution. In addition, new securities may contain
certain rights, preferences or privileges that are senior to those of our common
stock. There can be no assurance that acceptable financing can be obtained on
suitable terms, if at all. If we are unable to raise additional working capital
as needed, our ability to continue our current business will be adversely
affected and may be forced to curtail some or all of our operations.

OUR FUTURE PROFITABILITY WILL DEPEND UPON THE SUCCESS OF OUR EXISTING AND FUTURE
STARMED WELLNESS CENTERS, BUT THERE HAVE BEEN NO MARKET STUDIES OR OTHER
DETERMINATIONS AS TO THE EFFICACY OF OR CONSUMER DEMAND FOR OUR OPERATIONS.

Our future profitability will depend upon the success of our existing and
future StarMed Wellness Centers. However, the fusion of traditional Western
medical practice with alternative and preventative medical procedures and
techniques is a relatively new concept that has not as yet been tested. We have
performed no market studies to determine the demand for our proposed wellness
centers and there is no assurance that the concept will be well received by the
public or that demand for wellness center services can sustain our operations.
Lack of demand for our services could cause operating StarMed Wellness Centers
to cease operations.

THE SUCCESS OF OUR STARMED WELLNESS CENTERS WILL DEPEND ON MAINTAINING GOOD
RELATIONS WITH THE MEDICAL CLINICS OR PHYSICIANS WITH WHOM WE PARTNER AND THEIR
WILLINGNESS TO WORK WITH US IN PROMOTING THE SERVICES THAT WE OFFER. FAILURE TO
MAINTAIN GOOD RELATIONS WITH OUR MEDICAL CLINIC OR PHYSICIAN PARTNERS COULD
JEOPARDIZE OUR ABILITY TO CONTINUE OUR OPERATIONS AT THAT PARTICULAR CENTER AND
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS AND FINANCIAL RESULTS.

The success of our StarMed Wellness Centers will depend on maintaining
good relations with the medical clinics or physicians with whom we partner and
their willingness to work with us in promoting the services that we offer.
Failure to maintain good relations with our medical clinic or physician partners
could jeopardize our ability to continue our operations at that particular
center and could have a material adverse effect on our operations and financial
results.

Our first wellness center began operations in Encino, California, in
February 2006. While our recent marketing efforts have resulted in increased
customer interest and business, our biggest challenge has been the integration
of our personnel with our physician partner's personnel. If this difficulty in
integration cannot be worked out, we may need to relocate the facility to
another location within the same community or partner with a different
physician. If we can resolve our differences with our current physician partner,
we anticipate that our revenues from our wellness operations will increase as
our marketing and promotion efforts begin to generate more customers, but we
cannot provide assurance at this time as to whether such differences can be
resolved. If our differences cannot be resolved and either the parties agree to
terminate the agreement or one of the parties unilaterally terminates the
agreement, we believe that the adverse impact on us is primarily the wasted
time, effort and expense in opening and marketing the center. We do not believe
that the cost to move to, and continue operations at, another facility would be
incrementally significant.

REGULATORY AUTHORITIES COULD ASSERT THAT OUR PARTICIPATION IN A WELLNESS CENTER
FAILS TO COMPLY WITH THE FEDERAL STARK LAW AND STATE LAWS AFFECTING PHYSICIAN
REFERRALS. IN SUCH EVENT, WE COULD BE SUBJECT TO CIVIL PENALTIES AND COULD BE
REQUIRED TO RESTRUCTURE OR TERMINATE THE CONTRACTUAL ARRANGEMENTS.

The Federal Stark law and similar state laws have certain prohibitions
affecting physician self-referrals. These laws and interpretations vary from
state to state and are enforced by state courts and regulatory authorities, each
with broad discretion. As indicated elsewhere, we will enter into agreements
with existing medical centers and physician groups and we may, under the terms
of those agreements, provide management and administrative services to the
wellness centers in exchange for compensation. We may also enter into agreements
with medical centers to provide us with various services, including helping us
to develop and implement our marketing strategy, allowing us to use their name
to identify the location of a wellness center, and billing and collections, in
exchange for a percentage of the gross revenues from that center. Although we
will use our best efforts to attempt to structure our relationships with the
medical centers in a manner that we believe will keep us from violating these
laws, or in a manner that we believe does not trigger the law, Federal or state
regulatory authorities or other parties could assert that our agreements with
the medical centers or the physician groups violate these laws. Any such
conclusion could subject us to significant financial penalties which would
reduce the amount of working capital available to us for our ongoing operations.
We may also be required to abandon our current business model which could result
in our inability to continue as a going concern.

REGULATORY AUTHORITIES COULD ASSERT THAT OUR RELATIONSHIPS WITH THE MEDICAL
CENTERS FAIL TO COMPLY WITH THE ANTI-KICKBACK LAWS. IF SUCH A CLAIM WERE
SUCCESSFULLY ASSERTED, WE COULD BE SUBJECT TO CIVIL AND CRIMINAL PENALTIES AND
COULD BE REQUIRED TO RESTRUCTURE OR TERMINATE THE APPLICABLE CONTRACTUAL
ARRANGEMENTS. IF WE WERE SUBJECT TO PENALTIES OR ARE UNABLE TO SUCCESSFULLY
RESTRUCTURE THE RELATIONSHIPS TO COMPLY WITH THE ANTI-KICKBACK STATUTES IT WOULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

Our business model contemplates that we may receive fees under the
agreements with the medical centers for management and administrative services.
In certain situations, we may also pay a portion of our gross revenues to a
medical center in exchange for services they may provide to us, including
helping us to develop and implement our marketing strategy, allowing us to use
their name and doctors to associate our wellness center to the medical clinic,
and billing and collections. While we do not anticipate that we will ever be in
a position to make or influence referrals of patients or services reimbursed
under Medicare, Medicaid or other governmental programs, we could become subject
to compliance with the anti-kickback provisions of the Social Security Act (the
"Anti-Kickback Statute") which prohibits anyone from knowingly and willfully
soliciting or receiving any remuneration in return for referrals for items and
services reimbursable under most federal health care programs or offering or
paying any remuneration to induce a person to make referrals for items and
services reimbursable under most federal health care programs. Because the
provisions of the Anti-Kickback Statute are broadly worded and have been broadly
interpreted by federal courts, however, it is possible that the government could
take the position that, as a result of our relationships with the medical
centers, we will be subject, directly and indirectly, to the Anti-Kickback
Statute. Any such finding would make our current business model unfeasible and
we could be forced to cease all of our operations.

STATE REGULATORY AUTHORITIES MAY ASSERT THAT WE ARE ENGAGED IN THE CORPORATE
PRACTICE OF MEDICINE. IF SUCH A CLAIM WERE SUCCESSFULLY ASSERTED, WE COULD BE
SUBJECT TO CIVIL, AND PERHAPS CRIMINAL, PENALTIES AND COULD BE REQUIRED TO
RESTRUCTURE OR TERMINATE THE APPLICABLE CONTRACTUAL ARRANGEMENTS. OUR INABILITY
TO SUCCESSFULLY RESTRUCTURE OUR RELATIONSHIPS TO COMPLY WITH THESE STATUTES
COULD JEOPARDIZE OUR BUSINESS AND RESULTS OF OPERATIONS.

Our wellness centers are structured such that we will not have any
ownership interest in or exercise control over any portion of the wellness
center's operations that pursuant to state law requires physician supervision.
We will manage such portions of the wellness center on behalf of a medical
practice or physician group. In certain cases, Dr. Steven Rosenblatt, who is an
Executive Vice President for our company, will own, through his medical
professional corporation, a portion of certain StarMed Wellness Centers that is
required to be owned and supervised by a physician, and we will provide
management services to Dr. Rosenblatt's professional corporation in exchange for
a management fee. The reason for structuring our wellness centers as described
above is to address state laws prohibiting companies like ours from engaging in
the corporate practice of medicine. California and many other states in which we
may do business have corporate practice of medicine laws which prohibit
corporations or other artificial entities from exercising control over the
medical judgments or decisions of physicians. These laws and their
interpretations vary from state to state and are enforced by state courts and
regulatory authorities, each with broad discretion. We intend to structure our
agreements with the medical centers and physician groups in a manner that we
believe will keep us from engaging in the corporate practice of medicine or
exercising control over the medical judgments or decisions of the medical
centers or the physicians. Nevertheless, state regulatory authorities or other
parties could assert that our agreements violate these laws. We could then be
subject to regulatory actions and be forced to curtail some or all of our
operations, in which event our ability to continue as a going concern would be
in jeopardy.

REGULATORY AUTHORITIES MAY ASSERT THAT OUR AGREEMENTS WITH THE MEDICAL CENTERS
VIOLATE STATE FEE SPLITTING LAWS. OUR INABILITY TO SUCCESSFULLY RESTRUCTURE OUR
RELATIONSHIPS TO COMPLY WITH THESE STATUTES COULD JEOPARDIZE OUR BUSINESS AND
RESULTS OF OPERATIONS.

The laws of many states prohibit physicians from splitting fees with
non-physicians. These laws vary from state to state and are enforced by the
courts and by regulatory authorities with broad discretion. The relationships we
may have with a medical center or a physician group may raise issues in some
states with fee-splitting prohibitions. Although we will attempt to structure
our agreements with the medical centers and physician groups in a manner that
keeps us from violating prohibitions on fee-splitting, state regulatory
authorities or other parties may assert that the terms of the agreement
constitute fee-splitting, which could make the management agreement with the
medical center or physician group unenforceable. In addition, if such a claim
were successfully asserted, we could be subject to civil or criminal penalties,
and could be required to restructure or terminate the applicable contractual
arrangements. In such an event, our ability to generate revenues and continue as
a going concern could be in jeopardy.

WE MAY BE SUBJECT TO PROFESSIONAL LIABILITY RISKS WHICH COULD BE COSTLY AND
NEGATIVELY IMPACT OUR BUSINESS AND FINANCIAL RESULTS.

We may be subject to professional liability claims. Although there
currently are no known hazards associated with our wellness center services and
products when administered, provided or used properly, hazards may be discovered
in the future. We currently maintain general liability insurance with

coverage of $1 million. We do not maintain professional liability insurance on
our own behalf; however, the physicians with whom we partner do maintain medical
malpractice insurance. If we are unable to maintain insurance in the future at
an acceptable cost or at all or if our insurance or the insurance maintained by
our physician partners does not fully cover us, and a successful claim is made
against us, we will be exposed. Any claim made against us not fully covered by
insurance could be costly to defend against, result in a substantial damage
award against us and divert the attention of our management from our operations,
which could have an adverse effect on our financial performance.

IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY, OUR FINANCIAL PERFORMANCE COULD BE
HARMED.

We expect to grow primarily through the establishment of StarMed Wellness
Centers at existing medical clinics. Our growth is expected to place certain
pressures on our management, administrative, operational and financial
infrastructure. As we continue to grow our business, such growth could require
capital, systems development and human resources beyond current capacities. The
increase in the size of our operations may make it more difficult for us to
ensure that we execute our present businesses and future strategies. The failure
to manage our growth effectively could have a material adverse effect on our
financial condition and results of operations.

OUR MANAGEMENT GROUP OWNS OR CONTROLS A SIGNIFICANT NUMBER OF THE OUTSTANDING
SHARES OF OUR COMMON STOCK AND WILL CONTINUE TO HAVE SIGNIFICANT OWNERSHIP OF
OUR VOTING SECURITIES FOR THE FORESEEABLE FUTURE.

Our management currently beneficially owns or controls approximately 40.1%
of our issued and outstanding shares of common stock. As a result, these persons
will have the ability, acting as a group, to effectively control our affairs and
business, including the election of directors and subject to certain
limitations, approval or preclusion of fundamental corporate transactions. This
concentration of ownership of our common stock may:

- delay or prevent a change in the control;

- impede a merger, consolidation, takeover, or other transaction
involving our company; or

- discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of our company.

OUR MEDICINAL PRODUCTS ARE AND WILL CONTINUE TO BE SUBJECT TO GOVERNMENT
REGULATION.

The manufacturing, processing, formulating, packaging, labeling and
advertising of our products are subject to regulation by one or more federal
agencies, including the United States Food and Drug Administration, or FDA, the
Federal Trade Commission, or FTC, the Consumer Product Safety Commission, or
CPSC, the United States Department of Agriculture, or USDA and the Environmental
Protection Agency, or EPA. Our activities are also regulated by various agencies
of the states, localities and foreign countries to which our products may be
distributed and in which our products may be sold.

The composition and labeling of dietary supplements, which comprise a
significant majority of our products, is most actively regulated by the FDA
under the provisions of the Federal Food, Drug, and Cosmetic Act, or FFDC Act.
The FFDC Act, the Nutrition Labeling and Education Act of 1990, or NLEA, and the
Dietary Supplement Health and Education Act of 1994, or DSHEA, may all impact
our products. We may not be able to comply with these and similar laws, rules
and regulations, and there can

be no assurance that we will not in the future be subject to additional laws or
regulations administered by various regulatory authorities. In addition, there
can be no assurance that existing laws and regulations will not be repealed or
be subject to more stringent or unfavorable interpretation by applicable
regulatory authorities.

WE ARE DEPENDENT ON A THIRD-PARTY SUPPLIER FOR ONE OF OUR MEDICINAL PRODUCTS AND
IF WE ARE REQUIRED TO FIND ALTERNATIVE MANUFACTURERS FOR OUR OTHER PRODUCTS, OUR
BUSINESS MAY BE ADVERSELY AFFECTED.

As we develop more wellness centers, we intend to increase the marketing
of our starch blocker product and our other medicinal products through the
wellness centers. We are dependent upon one company to supply us with starch
blocker material that we use for our weight loss product. In the event we are
unable to procure starch blocker from this supplier, we may be unable to market
our starch blocker product. Revenues from this product were $23,775 for fiscal
2005 and $0 during the first quarter of 2006. Although we believe that most of
the key components required for the production of our other products are
currently available in sufficient production quantities from multiple sources,
they may not remain so readily available. It is possible that other components
required in the future may necessitate custom fabrication in accordance with
specifications developed or to be developed by us. Also, in the event that we,
or our contract manufacturer, is unable to develop or acquire components in a
timely fashion, we may encounter delays in fulfilling our product delivery
requirements and in the event we are required to engage one or more new
manufacturers, we may experience additional delays that could adversely affect
our production yields, revenues and net income.

PRODUCT LIABILITY CLAIMS COULD HURT OUR BUSINESS.

Our products consist of herbs, vitamins, minerals and other ingredients
that are classified as foods or dietary supplements and are not subject to
pre-market regulatory approval in the United States. We do not conduct or
sponsor clinical studies of our products. As a marketer of dietary and
nutritional supplements and other products that are ingested by consumers or
applied to their bodies, we could be subjected to various product liability
claims. We maintain general liability insurance with coverage of $1 million. We
do not yet maintain product liability insurance on our own behalf; however, we
are named as additional insured to the extent of $1 million under the product
liability policies carried by our product manufacturers. It is possible that
widespread product liability claims and the resulting adverse publicity could
negatively affect our business; that our general liability insurance or our
manufacturer's product liability insurance may fail to cover future product
liability claims so we could be required to pay monetary damages which could
harm our business; and that we may become required to pay higher premiums and
accept higher deductibles in order to secure adequate insurance coverage in the
future.

WE ARE DEPENDENT UPON THE CONTINUED SERVICES OF OUR CHIEF EXECUTIVE OFFICER AND
OTHER SENIOR MANAGEMENT. IF WE WERE TO LOSE THE SERVICES OF ONE OR MORE OF THESE
INDIVIDUALS OUR ABILTY TO IMPLEMENT OUR BUSINESS MODEL WOULD BE ADVSERLY
AFFECTED.

The operations and future success of our company is dependent upon the
continued efforts and services of Mr. Herman Rappaport, our CEO, as well as
other members of our management. While we are a party to an employment agreement
with Mr. Rappaport, if for any reason he should be unable to continue to be
primarily responsible for our day to day business operations, our ability to
effectively implement our business model and establish and operate wellness
centers would be materially adversely affected. We cannot assure you that we
would be able to replace Mr. Rappaport's services on a timely fashion, if at
all, in which event we would be unable to continue our operations as presently
conducted nor would we be able to effectively implement our business model.

THE EXERCISE OF OUR OUTSTANDING WARRANTS WILL BE DILUTIVE TO OUR EXISTING
STOCKHOLDERS.

As of August 4, 2006 we had outstanding or we were contractually obligated
to issue common stock purchase warrants to purchase a total of 10,548,075 shares
of our common stock at prices ranging between $0.25 to $1.00 per share. We have
included the shares of our common stock underlying these warrants in the
registration statement of which this prospectus is a part. The exercise of these
warrants may materially adversely affect the market price of our common stock
and will have a dilutive effect on our existing stockholders.

CERTAIN OF OUR OUTSTANDING WARRANTS CONTAIN CASHLESS EXERCISE PROVISIONS WHICH
MEANS WE WILL NOT RECEIVE ANY CASH PROCEEDS UPON THEIR EXERCISE.

In December 2005, we issued five year common stock purchase warrants to
purchase an aggregate of 250,000 shares of our common stock with an exercise
price of $0.40 per share in connection with the sale of a 10% senior secured
convertible promissory note. The exercise price of these warrants was
subsequently reduced to $0.25 per share according to their terms following our
unit offering between December 2005 and January 2006. These warrants are
exercisable on a cashless basis which means that the holders, rather than paying
the exercise price in cash, may surrender a number of warrants equal to the
exercise price of the warrants being exercised. The utilization of this cashless
exercise feature will deprive us of additional capital that might otherwise be
obtained if the warrants did not contain a cashless feature.

WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN
THE ABSENCE OF WHICH, STOCKHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST
INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS.

Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has
resulted in the adoption of various corporate governance measures designed to
promote the integrity of the corporate management and the securities markets.
Some of these measures have been adopted in response to legal requirements.
Others have been adopted by companies in response to the requirements of
national securities exchanges, such as the NYSE or The Nasdaq Stock Market, on
which their securities are listed. Among the corporate governance measures that
are required under the rules of national securities exchanges and Nasdaq are
those that address board of directors' independence, audit committee oversight,
and the adoption of a code of ethics. Although we have adopted a Code of
Business Conduct and Ethics, we have not yet adopted any of these other
corporate governance measures and, since our securities are not yet listed on a
national securities exchange or Nasdaq, we are not required to do so. We have
not adopted corporate governance measures such as an audit or other independent
committees of our board of directors as we presently only have one independent
director. If we expand our board membership in future periods to include
additional independent directors, we may seek to establish an audit and other
committees of our board of directors. It is possible that if we were to adopt
some or all of these corporate governance measures, stockholders would benefit
from somewhat greater assurances that internal corporate decisions were being
made by disinterested directors and that policies had been implemented to define
responsible conduct. For example, in the absence of audit, nominating and
compensation committees comprised of at least a majority of independent
directors, decisions concerning matters such as compensation packages to our
senior officers and recommendations for director nominees may be made by a
majority of directors who have an interest in the outcome of the matters being
decided. Prospective investors should bear in mind our current lack of corporate
governance measures in formulating their investment decisions.

PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS MAY DELAY OR PREVENT A
TAKEOVER WHICH MAY NOT BE IN THE BEST INTERESTS OF OUR STOCKHOLDERS.

Provisions of our certificate of incorporation and bylaws may be deemed to
have anti-takeover effects, which include when and by whom special meetings of
our stockholders may be called, and may delay, defer or prevent a takeover
attempt. In addition, certain provisions of Nevada law also may be deemed to
have certain anti-takeover effects which include that control of shares acquired
in excess of certain specified thresholds will not possess any voting rights
unless these voting rights are approved by a majority of a corporation's
disinterested stockholders.

In addition, our articles of incorporation authorize the issuance of up to
25,000,000 shares of preferred stock with such rights and preferences as may be
determined by our board of directors. Our board of directors may, without
stockholder approval, issue preferred stock with dividends, liquidation,
conversion or voting rights that could adversely affect the voting power or
other rights of our common stockholders.

THE ADJUSTMENT PROVISIONS IN AGREEMENTS ENTERED INTO FOR THE SALE OF OUR
SECURITIES COULD REQUIRE US TO ISSUE ADDITIONAL SHARES IN THE EVENT WE SELL
STOCK AT LESS THAN $0.25 PER SHARE.

In connection with the sale of 10% senior secured convertible promissory
notes in June 2005 we issued five year common stock purchase warrants to
purchase an aggregate of 250,000 shares of our common stock which initially had
an exercise price of $0.40 per share. These warrants contain a provision which
requires an adjustment to the exercise price in the event we issue shares of our
common stock or securities convertible into common stock at a price less than
the prevailing exercise price. As a result of the subsequent unit offering of
our securities, the exercise price of these warrants has been reduced to $0.25
per share. Additionally, under the terms of our unit offering of securities in
December 2005 and January 2006 in which we issued an aggregate of 9,442,000
shares of our common stock and five year common stock purchase warrants for an
additional 9,442,000 shares of common stock with an exercise price of $1.00 per
share, we agreed that for one year following the date of issuance we will issue
additional shares of our common stock to purchasers of the units to protect them
against dilution in the event that we issue shares of our common stock during
such one-year period at less than $.25 per share. In addition, for a one year
period following the date of issuance and continuing until the warrants expire,
the exercise price is subject to "weighted-average" anti-dilution protection for
subsequent issuances of common stock or securities convertible into common stock
at less than the then current warrant exercise price, excluding certain
issuances unrelated to capital raising transactions. These terms could require
us to issue a significant, but presently undeterminable, number of additional
shares of our common stock if we issue additional securities below an effective
price of $0.25 per share. Any additional issuances will be dilutive to our
shareholders.

UNDER THE TERMS OF OUR MOST RECENT UNIT OFFERING RELATING TO THE SHARES AND
WARRANTS TO BE REGISTERED UNDER THIS REGISTRATION STATEMENT, WE ARE LATE IN
FILING THE REGISTRATION STATEMENT WITH THE S.E.C., AND WE ARE THEREFORE SUBJECT
TO LIQUIDATED DAMAGES AND WILL CONTINUE TO BE SUBJECT TO LIQUIDATED DAMAGES
UNTIL THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

We agreed to file a registration statement with the SEC on or before March
20, 2006 covering the shares of common stock, including the shares underlying
the warrants, issued in the December 2005 - January 2006 offering so as to
permit the resale thereof. This prospectus is part of that registration
statement. We have agreed to use our best efforts to ensure that the
registration statement is declared effective by the SEC by June 3, 2006. If we
fail to meet these deadlines, or if once the registration statement is declared
effective it does not remain so for 30 consecutive days, then the number of
shares of our common stock included in the units sold to the investors in this
offering and the number of shares of our common stock issuable upon the exercise
of the warrants included in the units will be automatically increased by 2% for
each 30 day period in which these time frames are not met. We agreed to keep the
registration statement effective until the later of the third anniversary of the
first date on which no warrants remain unexercised or unexpired, or the date on

which all shares of our common stock included in the units can be sold without
restrictions under Rule 144 of the Securities Act. As of August 4, 2006, we are
required to issue an additional 856,075 shares of common stock, together with
warrants to purchase an additional 856,075 shares, as liquidated damages
pursuant to the provisions of the subscription agreements with our investors,
and we will be required to issue additional shares as liquidated damages until
such time that this registration statement becomes effective.

IF THE SELLING SECURITY HOLDERS ALL ELECT TO SELL THEIR SHARES OF OUR COMMON
STOCK AT THE SAME TIME, THE MARKET PRICE OF OUR SHARES MAY DECREASE.

It is possible that the selling security holders will offer all of the
shares for sale. Further because it is possible that a significant number of
shares of our common stock could be sold at the same time hereunder, the sales,
or the possibility thereof, may have a depressive effect on the market price for
our common stock.

OUR COMMON STOCK IS CURRENTLY QUOTED ON THE OTCBB, BUT TRADING IN OUR STOCK IS
LIMITED. BECAUSE OUR STOCK CURRENTLY TRADES BELOW $5.00 PER SHARE, AND IS QUOTED
ON THE OTC BULLETIN BOARD, OUR STOCK IS CONSIDERED A "PENNY STOCK," WHICH CAN
ADVERSELY AFFECT ITS LIQUIDITY.

The market for our common stock is extremely limited and there are no
assurances an active market for our common stock will ever develop. Accordingly,
purchasers of our common stock cannot be assured any liquidity in their
investment. In addition, the trading price of our common stock is currently
below $5.00 per share and we do not anticipate that it will be above $5.00 per
share in the foreseeable future. Because the trading price of our common stock
is less than $5.00 per share, our common stock is considered a "penny stock,"
and trading in our common stock is subject to the requirements of Rule 15g-9
under the Securities Exchange Act of 1934 (the "Securities Exchange Act"). Under
this rule, broker/dealers who recommend low-priced securities to persons other
than established customers and accredited investors must satisfy special sales
practice requirements. SEC regulations also require additional disclosure in
connection with any trades involving a "penny stock," including the delivery,
prior to any penny stock transaction, of a disclosure schedule explaining the
penny stock market and its associated risks. These requirements severely limit
the liquidity of our securities in the secondary market because few broker or
dealers are likely to undertake these compliance activities.

ASSUMING AN ESTABLISHED MARKET FOR OUR SECURITIES DEVELOPS, IT MAY BE
PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A
LIMITED OPERATING HISTORY AND LACK OF REVENUES AND PROFITS, WHICH COULD LEAD TO
WIDE FLUCTUATIONS IN OUR SHARE PRICE. WE MAY HAVE ONLY A SMALL AND THINLY TRADED
PUBLIC FLOAT.

The market for our common stock is highly sporadic. Assuming an
established market for our securities develops, that market may be characterized
by significant price volatility when compared to seasoned issuers, and we expect
that our share price will continue to be more volatile than a seasoned issuer
for the indefinite future. The volatility in our share price may be attributable
to a number of factors.

First, we may have relatively few common shares outstanding in the "public
float" as compared to our overall capitalization. In addition, there is
currently only a limited market for our securities, and if an established market
develops, the common stock may be sporadically or thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event that a large number of our
securities are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price. Secondly, we are a speculative or "risky" investment due to our
limited operating history and lack of profits to date, lack of capital to
execute our business plan, and uncertainty of future market acceptance for our
products. As a consequence of this enhanced risk, more risk-adverse investors
may, under the fear of losing all or most of their investment in the event of
negative news or lack of progress, be more inclined to sell their shares on the
market more quickly and at greater discounts than would be the case with the
stock of a seasoned issuer.

The following factors may add to the volatility in the price of our
securities:

- actual or anticipated variations in our quarterly or annual
operating results;

- acceptance of our products; announcements of changes in our
operations, distribution or development programs;

- our capital commitments; and

- additions or departures of our key personnel.

Many of these factors are beyond our control and may decrease the market
price of our securities, regardless of our operating performance. We cannot make
any predictions or projections as to what the prevailing market price for our
securities will be at any time, including as to whether our securities will
sustain the price you may purchase our securities, or as to what effect that the
sale of shares or the availability of securities for sale at any time will have
on the prevailing market price.

Further, in the past, plaintiffs have often initiated securities class
action litigation against a company following periods of volatility in the
market price of its securities. We may in the future be the target of similar
litigation. Securities litigation could result in substantial costs and
liabilities and could divert management's attention and resources.

SHARES AVAILABLE FOR FUTURE ISSUANCE COULD CAUSE THE MARKET PRICE OF OUR SHARES
TO FALL.

As of August 4, 2006 we had common stock purchase warrants to purchase a
total of 10,548,075 shares of our common stock outstanding or issuable at prices
ranging between $0.25 to $1.00 per share. In addition, we have reserved
5,500,000 shares of our common stock for possible future issuance to members of
our management in the event certain incentive milestones are reached and
3,650,000 shares of our common stock reserved for future issuance under our 2004
Equity Compensation Plan (including 1,000,000 option shares previously granted).
We have included the shares of our common stock underlying these warrants in the
registration statement of which this prospectus is a part. The exercise of these
warrants and the possible future issuance of these additional shares may
materially adversely affect the market price of our common stock and will have a
dilutive effect on our existing stockholders.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this prospectus contain or may contain
forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements were based on various factors and were derived
utilizing numerous assumptions and other factors that could cause our actual
results to differ materially from those in the forward-looking statements. These
factors include, but are not limited to, our ability to implement our business
plan, our ability to raise sufficient capital as needed, the market acceptance
of our wellness centers, economic, political and market conditions and
fluctuations, government and industry regulation, interest rate risk, U.S.
competition, and other factors. Most of these factors are difficult to predict
accurately and are generally beyond our control. You should consider the areas
of risk described in connection with any forward-looking statements that may be
made herein. Readers are cautioned not to place undue reliance on these
forward-looking statements and readers should carefully review this prospectus
in its entirety, including the risks described in "Risk Factors." Except for our
ongoing obligations to disclose material information under the Federal
securities laws, we undertake no obligation to release publicly any revisions to
any forward-looking statements, to report events or to report the occurrence of
unanticipated events. These forward-looking statements speak only as of the date
of this prospectus, and you should not rely on these statements without also
considering the risks and uncertainties associated with these statements and our
business.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Since April 7, 2005 our common stock is quoted on the OTCBB under the
symbol SMEG. The reported high and low sales prices for the common stock as
reported on the OTCBB are shown below for the periods indicated. The quotations
reflect inter-dealer prices, without retail mark-up, markdown or commission, and
may not represent actual transactions.

High Low
Fiscal 2005

April 7, 2005 through June 30, 2005............ $ 1.10 $ 0.55
July 1, 2005 through September 30, 2005........ $ 0.95 $ 0.35
October 1, 2005 through December 31, 2005...... $ 0.51 $ 0.35

Fiscal 2006

January 1, 2006 through March 31, 2006......... $ 0.35 $ 0.13
April 1, 2006 through June 30, 2006............ $ 0.30 $ 0.13

The last reported sale price of our common stock as reported on the OTCBB
occurred on July 20, 2006 at a price of $.13 per share. As of July 26, 2006,
there were approximately 962 record owners of our common stock.

DIVIDEND POLICY

We have never paid cash dividends on our common stock. We currently expect
to retain future earnings, if any, to finance the growth and development of our
business. Under Nevada law, we are prohibited from paying dividends if the
distribution would result in our company not being able to pay its debts as they
become due in the usual course of business or if our total assets would be less
than the sum of our total liabilities plus the amount that would be needed, were
we to be dissolved at the time of distribution, to satisfy the preferential
rights upon dissolution of stockholders whose preferential rights are superior
to those receiving the distribution.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table sets forth securities authorized for issuance under
equity compensation plans, including individual compensation arrangements, by us
under our 2004 Equity Compensation Plan and any other compensation plans not
approved by our stockholders as of December 31, 2005.

Number of securities
remaining available for
Number of securities to be Weighted average exercise future issuance under
issued upon exercise of price of outstanding equity compensation plans
outstanding options, options, warrants and (excluding securities
warrants and rights rights reflected in column
(a) (b) (a))
-------------------------- ------------------------- -------------------------

Plans approved by stockholders

2004 Equity Compensation Plan(1)..... 0 -- 650,000

Plans not approved by stockholders... 0 n/a n/a

(1) In February 2006 our board of directors and the holder of a majority of
our outstanding common stock approved an increase of 3,000,000 shares which are
available for issuance under our 2004 Equity Compensation Plan bringing the
total available under the plan to 4,050,000 shares, of which 400,000 shares have
been awarded and 1,000,000 shares are subject to an option grant made in
February 2006.

USE OF PROCEEDS

We will not receive any proceeds upon the sale of shares by the selling
security holders. Any proceeds that we receive from the exercise of the
outstanding warrants will be used by us for general working capital. The actual
allocation of proceeds realized from the exercise of these securities will
depend upon the amount and timing of such exercises, our operating revenues and
cash position at such time and our working capital requirements. There can be no
assurances that any of the outstanding warrants will be exercised.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following analysis of our results of operations and financial
condition should be read in conjunction with the accompanying consolidated
financial statements for the three months ended March 31, 2006
(unaudited)(restated) and 2005 (unaudited)(restated) and the years ended
December 31, 2005 (restated) and 2004 (restated) including the notes thereto
appearing elsewhere in this prospectus.

OVERVIEW

StarMedGroup, Inc. is engaged in two businesses: (1) we are developing a
network of StarMed Wellness Centers that offer preventative, traditional medical
and alternative treatments directed towards achieving "total wellness," and (2)
we market a line of proprietary over-the-counter vitamins, minerals and other
supplements under the StarMed and SierraMed brand names.

Historically our operations were devoted to formulating and marketing a
line of over-the-counter, alternative medicinal products. All of our revenues
for fiscal 2005 were from the sale of our products or royalties related to our
products. Our natural medicinal products are intended to address the effects of
conditions including arthritis, aging eyesight, obesity and irritable bowel
syndrome. We also market a proprietary starch blocker designed for weight loss
and maintenance and we have licensed various formulations of our proprietary
starch blocker product to third parties. We currently market our medicinal
products, directly to consumers, over the Internet.

However, severe competition in the medicinal product market and the loss
of a significant distribution outlet in 2005 resulted in a significant reduction
in our product sales. Therefore, in 2005, our management made a strategic
decision to redirect our efforts to the development and establishment of a
network of StarMed Wellness Centers. StarMed Wellness Centers will focus on
promoting general wellness by addressing the underlying causes of a variety of
chronic diseases such as obesity and stress. Our long-term goal is to develop a
network of StarMed Wellness Centers each of which will provide clients a full
range of preventative, traditional medical and alternative treatments directed
towards achieving "total wellness." Our StarMed Wellness Centers concept is
founded on our belief that traditional Western medicines and treatments may be
enhanced by complementing their use with preventative medicine techniques and
the use of alternative medicinals to address the underlying causes of certain
illnesses. We believe that addressing these underlying causes is necessary for
good health maintenance and longevity. Our management and affiliated physicians
have devoted significant time, and pooled their collective experience, to
develop our StarMed Wellness Center concept.

We envision that each StarMed Wellness Center will expand the traditional
Western medical treatments, medicines and services provided by an existing
medical clinic to include preventative and alternative healthcare services. We
are developing two models for the operation of the wellness center. In one
model, we will establish a wellness center on behalf of a medical clinic, which
will operate as a participant in the StarMed Wellness Center network under the
supervision of the clinic's existing medical director. Under this model, we will
provide management services to the portion of the medical clinic's practice that
is devoted to wellness in exchange for a management fee that would be based on
the wellness center's gross revenues. The medical director is responsible for
supervising and providing all the physician services, and we are responsible for
providing various services, including marketing, employing the non-physician
staff, billing and collection, and providing the space for the wellness center
operations. Our wellness center in Encino, California is structured based on
this model.

In the second model, we will affiliate with a physician practice to
establish a wellness center that is adjacent or in close proximity to a medical
clinic. The physician practice may or may not have any existing relationship
with the medical clinic and will supervise the physician services at the
wellness center. We use this model with medical clinics that believe in the
value of the services that are offered at the wellness center but do not want
the responsibility for overseeing the medical services offered at the wellness
center. Under this model, we will enter into an agreement with a physician
practice to own the portion of the wellness center that requires physician
supervision, and we will own the portion of the wellness center that does not
require physician supervision. We would provide management services to the
physician practice in exchange for a management fee that would be based on a
percentage of the wellness center's gross revenues. The physician practice is
responsible for supervising and providing the physician services, and we are
responsible for marketing, employing the non-physician staff, billing and
collection, leasing the wellness center space, and providing the services that
do not require physician supervision. We would also enter into an agreement with
the adjacent medical clinic to provide us with various services, including
marketing services and a license to use their name as part of the wellness
center's name (e.g., "StarMed Wellness Center at Hana Medical"), in exchange for
a percentage of the wellness center's gross revenues. Our wellness center in
Buena Park and the wellness center to be opened in Santa Ana, California, are
based on this model. In both those centers, the professional corporation owned
by Dr. Steven Rosenblatt, our Executive Vice President, is the physician
practice that will be providing the medical services. Please see the Certain
Relationships and Related Transactions section below for a description of our
agreement with Dr. Rosenblatt's corporation.

In February 2006, we began operations at our first wellness center in
Encino, California. We opened our second wellness center in Buena Park,
California in May 2006, and we plan to open our third wellness center in Santa
Ana, California in July 2006. We are also in discussions with two other medical
clinics to open two other wellness centers in the third quarter of 2006. Another
wellness center is proposed for development in Kohala, Hawaii. Our ability to
make these wellness centers successful will depend on several factors,
including: identifying and entering into agreements with the right physicians
who are committed to the wellness concept and the services that we offer at the
wellness center; identifying and implementing the optimal strategy for marketing
our services given our limited funds; and being able to raise additional capital
to fund the opening, operations and marketing of additional centers.

We intend to market our medicinal products to our wellness center
customers. While we anticipate that our wellness centers will become a recurring
market for our medicinal products in the future, we do not expect that our
marketing of natural medicinal products will consume a significant portion of
our future operating resources, or that medicinal product sales will account for
a substantial portion of our future revenues.

CRITICAL ACCOUNTING POLICIES

A summary of significant accounting policies is included in Note 2 to the
audited consolidated financial statements included elsewhere in this prospectus.
We believe that the application of these policies on a consistent basis enables
our company to provide useful and reliable financial information about the
company's operating results and financial condition.

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 the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.

RECENT ACCOUNTING PRONOUNCEMENTS

On January 1, 2006, we adopted the fair value recognition provisions of
SFAS No. 123(R), Share-Based Payment. Prior to January 1, 2006, we accounted
for share-based payments under the recognition and measurement provisions of APB
Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations, as permitted by FASB Statement No. 123, Accounting for Stock
Based Compensation. In accordance with APB 25, no compensation cost was required
to be recognized for options granted that had an exercise price equal to the
market value of the underlying common stock on the date of grant. The Company
adopted FAS 123R using the modified prospective transition method. Under this
method, compensation cost recognized in the quarter ended March 31, 2006
includes: a) compensation cost for all share-based payments granted prior to,
but not yet vested as of January 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of FAS 123, and b)
compensation cost for all share-based payments granted subsequent to January 1,
2006, based on the grant-date fair value estimated in accordance with the
provisions of FAS 123R. Since no stock options were granted to employees prior
to December 31, 2005, the results for prior periods have not been restated.

In November 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4" ("SFAS 151"), which is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. SFAS
151 requires that abnormal amounts of idle facility expense, freight, handling
costs and wasted material be recognized as current period charges. The Statement
also requires that the allocation of fixed production overhead be based on the
normal capacity of the production facilities. The effect of this Statement on
our financial position or results of operations has been determined to have no
impact.

In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 153, "Exchange of Nonmonetary
Assets, an amendment of APB Opinion No. 29" ("SFAS 153"). The guidance in APB
Opinion No. 29, "Accounting for Nonmonetary Transactions" is based on the
principle that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged. The guidance in that Opinion, however,
included certain exceptions to that principle. SFAS 153 amends Opinion 29 to
eliminate the exception for nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result of the
exchange. The provisions of SFAS 153 shall be effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The effect
of this Statement on our financial position or results of operations has been
determined to have no impact.

In April 2005, the FASB issued Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations", which clarifies that an entity is
required to recognize a liability for the fair value of a conditional asset
retirement obligation when incurred if the liability's fair value can be
reasonably estimated. The fair value of a liability for the conditional asset
retirement obligation should be recognized when incurred, which is generally
upon acquisition, construction, or development and (or) through the normal
operation of the asset. Uncertainty about the timing and (or) method of
settlement of a conditional asset retirement obligation should be factored into
the measurement of the liability when sufficient information exists.
Interpretation No. 47 is effective no later than the end of fiscal years
beginning after December 15, 2005. The effect of this Statement on our financial
position or results of operations has been determined to have no impact.

In May 2005, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 154, "Accounting Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3"
(SFAS154). This Statement replaces APB Opinion No. 20, "Accounting Changes," and
FASB Statement No. 3, "Reporting Accounting Changes in Interim Financial
Statements," and changes the requirements for the accounting for and reporting
of a change in accounting principle. This Statement requires retrospective
application to financial statements of prior periods for changes in accounting
principle. This Statement is effective January 1, 2006. The effect of this
Statement on our financial position or results of operations has been determined
to have no impact.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2006 AS COMPARED TO THE THREE MONTHS ENDED MARCH
31, 2005

Three months Three months Increase/ Increase/
ended ended (Decrease) (Decrease)
March 31, 2006 March 31, 2005 $ 2006 vs 2005 % 2006 vs 2005
-------------- -------------- -------------- --------------
(unaudited) (unaudited)

Sales.......................... $ 4,770 $ 6,204 $ (1,434) (23.11)
Revenue from royalties......... 0 11,445 (11,445) (100.00)
-------------- ------------- -------------- -------------
Total net revenues........ $ 4,770 17,649 (12,879) (72.97)
Professional fees......... 262,322 14,967 247,355 1652.67
Compensation.............. 709,094 58,113 650,981 1120.20
Rent...................... 23,869 14,898 8,971 60.22
Accounting fees........... 47,556 4,519 43,037 952.36
Office.................... 27,901 3,356 24,545 731.38
Insurance................. 6,220 5,085 1,135 22.32
Advertising, marketing
and Promotion............ 16,249 565 15,684 2775.93
Depreciation.............. 2,324 2,324 0 0.00
Travel.................... 3,672 133 3,539 2660.90
Total expenses....... 1,099,207 103,960 995,247 957.34

(Loss) from operations......... (1,096,032) (91,018) (1,005,014) (1104.19)

Total other income (expense)... 52,111 (930) 51,181 5503
Net (loss)..................... $ (1,043,921) $ (196,948) $ (846,973) 430.05
============== ============= ============== =============

NM = not meaningful
19

Total Net Revenues

Total revenues for the three months ended March 31, 2006 were $4,770 as
compared to $17,649 for the three months ended March 31, 2005, a decrease of
$12,879, or approximately 74%.

Revenues from the sale of products declined to $4,770 during the first
quarter of 2006 compared to $6,204 during the same period in 2005. Several
factors contributed to the decrease in sales of our products. First, we have
diverted our limited resources from marketing efforts to the implementation of
plans to open wellness centers. In redirecting our efforts to the opening of
wellness centers, we made the decision not to expend a substantial amount of our
funds into advertising, marketing and promotion of our products. In the future,
as we grow our number of wellness centers, we intend to grow the market for our
products through direct sales to our wellness center customers. We will also be
seeking new distribution channels and partners for our products here in the U.S.
and overseas and will continue to market and sell our products through the
Internet.

Revenues from royalty payments was $0 during the first quarter of 2006
compared to $11,445 for the same quarter of 2005. The decrease in revenues from
royalties was the result of the loss of a distribution channel for our weight
loss product. L. Perrigo Company, the principal distributor for our weight loss
products in the U.S., orally notified us in 2005 that it will cease to
distribute our weight loss products.

We generated sales of $2,287 from services and $466 from products at our
first wellness center in Encino, California, which began operations in February
2006. While our recent marketing efforts have resulted in increased customer
interest and business, our biggest challenge has been the integration of our
personnel with our physician partner's personnel. If this difficulty in
integration cannot be worked out, we may need to relocate the facility to
another location within the same community or partner with a different
physician. If we can resolve our differences with our current physician partner,
we anticipate that our revenues from our wellness operations will increase as
our marketing and promotion efforts begin to generate more customers.

We also expect revenues to increase as we open additional wellness
centers. We opened our second wellness center in May 2006 and a third wellness
center will be opened in July 2006. We are in discussions with two other medical
facilities for the opening of two other wellness centers during the third
quarter of 2006. We are dependent, however, on our ability to raise additional
capital to fund the opening of additional centers. It is also critical that we
identify and partner with physician partners who are committed to the wellness
concept and the services that we offer at the wellness center. At this time, we
cannot predict future revenue from or performance of our wellness centers.

Total Expenses

We reported total expenses of $1,099,207 for the three months ended March
31, 2006 as compared to $103,960 for the three months ended March 31, 2005, an
increase of $995,247, or approximately 957%. The increase was the result of the
following:

-- an increase of $650,981, or 1120%, in compensation expenses as a
result of: (i) a one-time stock compensation expense of $400,500 in connection
with the issuance of 2,225,000 shares of our common stock valued at $0.18 per
share on March 16, 2006 to the placement agent and its designees in connection
with our recent capital raising efforts completed during the first quarter of
2006 and consulting services; (ii) the charge of $220,000 to compensation
expense for the stock option granted to Herman Rappaport during the first
quarter of 2006, and (iii) the hiring of personnel to staff our first wellness
center and to develop our wellness center network and the addition of staff in
our corporate office;

-- an increase of $247,355, or approximately 1652%, in professional
fees, and an increase of $43,037, or 952%, in accounting fees, primarily in
connection with our ongoing capital raising efforts;

-- an increase of $33,516, or 184%, in rent and office expenses,
primarily as a result of the lease of new space for our first wellness center
and the purchase of supply and equipment for that center, as well the increase
in monthly rent for our corporate office;

-- an increase of $1,135, or 22%, in insurance expense which reflects
an increase in health and general liability insurance premiums;

-- an increase of $15,684, or approximately 2776%, in advertising,
marketing and promotional expenses, primarily in connection with the opening of
our first wellness center; and

-- an increase of $3,539, or approximately 2660%, in travel expenses,
primarily in connection with our ongoing capital raising efforts.

We anticipate that our total general, selling and administrative expenses
will continue to increase as we develop, open and maintain new wellness centers.
We are not able to predict at this time the amount of increase in total general,
selling and administrative expenses that will be attributable to the wellness
centers, nor can we predict whether such increases will ultimately be offset by
increased revenues from the wellness centers.

Total Other Income (Expense)

We reported total other income of $52,111 for the three months ended March
31, 2006 compared to total other expense of $930 during the three months ended
March 31, 2005, an increase of $51,181, or 5503%. The increase was the result
of: (i) interest income of $7,866 in the first quarter of 2006 reflecting the
cash balances resulting from the gross proceeds of $2,360,000 from a private
equity financing conducted between December 2005 and February 2006 that resulted
in the sale of an aggregate of 9,442,000 units of our common stock; and (ii) a
gain of $44,245 from forgiveness of debt.

We also reported interest expense of $0 for the three months ended March
31, 2006 as compared to interest expense of $930 for the three months ended
March 31, 2005. Interest expense represents interest payable on our corporate
credit cards which now are paid in full at due date.

FISCAL YEAR ENDED DECEMBER 31, 2005 AS COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 2004

Increase/ Increase/
Fiscal year ended Fiscal Year Ended (Decrease) (Decrease)
December 31, 2005 December 31, 2004 $ 2005 vs 2004 % 2005 vs 2004
----------------- ----------------- -------------- --------------
(restated)

Sales............................ $ 23,775 $1,742,351 $ (1,718,576) (98.6)%
Revenue from royalties........... 24,486 104,776 (80,290) (76.6)%
--------- ---------- ------------ ------
Total net revenues.......... $ 18,768 $ 441,266 $ (422,498) (95.7)%

Professional fees........... 185,563 39,131 146,432 374%
Compensation................ 278,857 240,555 38,302 15.9%
Rent........................ 68,211 59,417 8,794 14.8%
Accounting fees............. 41,724 36,195 5,529 15.3%
Office...................... 37,762 57,120 (19,358) (33.9)%
Insurance................... 23,776 18,028 5,748 31.9%
Advertising, marketing and
Promotion................ 11,136 46,212 (35,076) (75.9)%
Depreciation................ 9,296 9,297 (1) NM
Travel...................... 3,696 988 2,708 274%
Donations................... 0 27,915 (27,915) (100)%
Total expenses......... 660,021 534,858 125,163 23.4%

(Loss) from operations........... (641,253) (93,592) 547,661 591%
--------- ---------- ------------ ------
Total other income (expense)..... (58,807) 15,337 73,907 382%
Net (loss)....................... $(805,910) $ (79,155) $ 726,755 918%
========= ========== ============ ======

NM = not meaningful

Total Net Revenues

We generated revenues in fiscal 2005 and fiscal 2004 from both the sales
of natural, over-the-counter, alternative medicinal products and royalties from
formulas for herbal health products. During fiscal 2005 sales of medicinal
products declined approximately 98.6% to $23,775 from $1,742,351 in fiscal 2004.
The substantial portion of revenues for the year ended December 31, 2004
resulted from product sales of our proprietary starch blocker product to NHTC,
Inc., and revenues from sales of other products were not meaningful. This
substantial decline in sales of medicinal products is primarily the result of
decreased demand for our products from our principal customer during fiscal
2005. This customer has advised us that it has changed its internal strategy and
it is unknown when, if ever, that it will resume purchasing product from our
company at historical levels. The decrease in sales of our medicinal products in
fiscal 2005 as compared to fiscal 2004 is also the result of the diversion of
our limited resources from marketing efforts to the finalization of plans to
open our initial wellness center.

Our cost of sales of our medicinal products was approximately 124% of
sales for fiscal 2005 as compared to approximately 81% for fiscal 2004. This
increase in cost of sales as a percentage of sales is attributable to a decrease
in sales of our proprietary starch blocker product to NHTC which carried higher
margins.

Revenue from royalties declined $80,290, or approximately 76.6%, for
fiscal 2005 as compared to fiscal 2004. This decline in revenue from royalties
is attributable to a decline in net sales of the products which are licensed to
the third party.

As described elsewhere herein, we do not presently anticipate that in
fiscal 2006 our sales of alternative medicinal products or revenues from
royalties for formulas of herbal health products will ever reach the levels
reported in prior periods. As we have yet to generate any revenues from our
wellness centers, we are unable to predict the amount of such revenues, if any,
during fiscal 2006.

Total Expenses

Total expenses for fiscal 2005 increased $125,163, or approximately 23.4%
from fiscal 2004. The primary component of the increase for fiscal 2005 is an
increase of $146,432, or approximately 374%, in professional fees from fiscal
2004. This increase reflects legal fees related to our capital raising efforts
during the year as well as consulting fees related to the development of our
wellness center business model. The increases in total expenses for fiscal 2005
also included an increase of $38,302, or approximately 15.9%, in compensation
expense as well as increases in rent, accounting fees and travel expenses. These
increases were partially offset by a decrease of $19,358, or approximately 33.4%
in office expense and a decrease of $35,076, or approximately 75.9%, in
advertising, marketing and promotional expenses. The decrease in office expense
reflects our efforts to eliminate non-essential costs during the transition of
our business model and the decrease in advertising, marketing and promotional
expenses reflects a focus away from product sales.

We anticipate that our operating expenses will increase significantly
during fiscal 2006 with the February 2006 opening of our Encino Medical Wellness
Center, the May 2006 opening of our StarMed Wellness Center in Buena Park,
California, the July 2006 opening of our StarMed Wellness Center in Buena Park,
California, and the opening of additional centers during fiscal 2006. We
anticipate that these increased operating expenses will be offset by revenues
from these centers; however, if a particular wellness center does not generate
sufficient revenue to pay its operating expenses we will be obligated to fund
any deficiency from our working capital. Such an event could significantly
increase operating expenses without corresponding revenue and adversely affect
our results of operations in future periods.

Total Other Income (Expense)

We had total other income of $15,337 in fiscal 2004, and total other
expense of $58,807 in 2005, a change of $73,907, or 382%. Included in the total
other loss for 2005 are:

- other income of $1,222 which represented interest income, and

- a gain of $28,805 on decrease in fair value of stock price guarantee
obligation which was related to the settlement of a dispute and the cancellation
of a $467,255 note payable.

In fiscal 2004, we recognized a gain on forgiveness of debt of $20,722.
The increase in total other expenses for fiscal 2005 also included an increase
of $83,449, or approximately 155%, in interest expense. Interest expense in
fiscal 2005 included $85,543 of interest related to the 10% senior secured
convertible promissory note with the balance attributable to credit card
interest, while interest expense in fiscal 2004 included credit card interest.
The 10% senior secured convertible note was satisfied in November 2005. We
anticipate that interest expense for fiscal 2006 will lower than fiscal 2005.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate funds to support its
current and future operations, satisfy its obligations and otherwise operate on
an ongoing basis. At March 31, 2006, we had cash on hand of $872,929 as compared
to cash on hand of $72,708 at March 31, 2005 and as compared to the December 31,
2005 cash balance of $1,019,259. At March 31, 2006 our working capital was
$1,236,184 as compared to working capital of $1,227,347 at December 31, 2005.
The increase in working capital is primarily attributable to an increase in cash
which was provided by capital raising activities in December 2005 and the first
quarter of 2006 which are described below.

Net cash used in operating activities for fiscal 2005 was $574,592 as
compared to $156,091 for fiscal 2004, an increase of $ 418,501. The increase is
primarily the result of our increased loss, and increases in depreciation and
amortization, a one-time gain related to a stock price guarantee, stock issued
for compensation and accounts payable, which were offset by decreases in
accounts receivable, inventory, deferred tax assets, accrued expenses and income
tax payable. Net cash used in operating activities for the quarterly period
ended March 31, 2006 was $317,830 as compared to $62,287 for the same period in
2005, an increase of $255,543. The increase is primarily the result of our
increased loss and a one-time settlement of $215,000 paid to Citadel Management
Group, Inc.

Net cash provided by financing activities for fiscal 2005 was $1,521,143
as compared to net cash used in financing activities of $18,489 for fiscal 2004.
The change for fiscal 2005 reflects proceeds received from our capital raising
transactions, net of repayment of a $500,000 principal amount secured note and
payments related to a capital lease. Net cash provided by financing activities
for the first quarter of 2006 was $171,500 as compared to net cash used in
financing activities of $3,776 for the first quarter of 2005. The change for the
first quarter of 2006 reflects proceeds received from our capital raising
transactions. In the first quarter of 2006, we raised $435,000 in proceeds from
the sale of our securities.

Our operating expenses at our Encino wellness center were $39,744 during
the quarterly period ending March 31, 2006, including $9,989 for compensation
expenses, $7,528 for rent and parking, $12,510 for office expenses, and $9,717
for advertising and promotion. We anticipate incurring substantially similar
operating expenses at the Encino wellness center for future quarters. With the
opening of two additional wellness centers in Orange County, California, we
expect that our expenses for each of those centers, including compensation,
rent, office, and advertising and promotion expenses, will be substantially the
same as the expenses in Encino. In addition, under our agreement with Dr. Steven
Rosenblatt's professional corporation regarding the two centers in Orange
County, we will be providing a revolving credit line to the professional
corporation to allow it to fund its operating expenses during the start-up phase
for those centers. Interest on the revolving credit line will be based on the
applicable federal rate. (A description of the management services agreement
with Dr. Rosenblatt's professional corporation is contained elsewhere in this
prospectus.) The professional corporation's operating expenses will primarily
consist of compensation to physicians engaged or employed by it to perform the
medical services at each of the wellness centers. As we continue to grow, we may
also need to hire additional employees for our corporate office.

Based on our current plan of operations, our working capital is sufficient
to satisfy our current obligations and fund our ongoing expenses for another
seven to twelve months, depending on various factors, including the ability of
our wellness centers to generate sufficient revenues to sustain operations. As
we continue to develop additional wellness centers and as our operations grow,
it is likely that we will need to raise additional working capital. Other than
cash on hand and available borrowings under our corporate credit cards that
could provide us up to $21,000 on an unsecured basis, of which approximately
$9,682 was outstanding at March 31, 2006, we do not have any other external
sources of working capital.

Implementation of our business plan, including the development of a
network of wellness centers, funding ongoing operations and satisfying debt
obligations as they become due, will require substantial additional capital.
Until such time, if any, as our wellness center operations generate sufficient
revenues to sustain operations, we will likely continue to fund operations
through the sale of equity or debt securities, or a combination of both. If we
are unable to secure additional working capital, as needed, our ability to open
wellness centers, grow revenues, meet operating and financing obligations as
they become due, and continue business and operations, could be in jeopardy.

RECENT CAPITAL RAISING TRANSACTIONS

10% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE

On June 28, 2005, we sold a 10% senior secured convertible promissory note
in the aggregate principal amount of $500,000 and a common stock purchase
warrant to purchase 250,000 shares of our common stock for an aggregate purchase
price of $490,000. The purchaser was an accredited investor and the transaction
was exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act") in reliance on an exemption provided under Section 4(2) of the
act. The warrant entitles the holder to purchase up to 250,000 shares of our
common stock until June 28, 2010 at an exercise price of $.25 per share, subject
to adjustment. The terms of this transaction are described elsewhere in this
prospectus under "Selling Security Holders - Background of the Transaction." In
November 2005 this note was satisfied in full utilizing a portion of the
proceeds from the unit offering described below.

UNIT OFFERING

Between December 2005 and January 2006, we sold an aggregate of 9,442,000
units of our securities to 99 accredited investors in an offering exempt from
registration under the Securities Act in reliance on exemptions provided by
Section 4(2) and Rule 506 of Regulation D of the Securities Act. Each unit was
sold for a purchase price of $.25, and consisted of one share of our common
stock and one redeemable five year common stock purchase warrant, exercisable at
$1.00 per share, which resulted in the issuance by us of an aggregate of
9,442,000 shares of common stock and common stock purchase warrants to purchase
an additional 9,442,000 shares of our common stock. We received gross proceeds
of $2,360,500. The terms of this transaction are described elsewhere in this
prospectus under "Selling Security Holders - Background of the Transaction."

OUR BUSINESS

OVERVIEW

We are engaged in two businesses:

- we are developing a network of StarMed Wellness Centers that offer
preventative, traditional medical and alternative treatments
directed towards achieving "total wellness," and

- we market a line of proprietary over-the-counter vitamins, minerals
and other supplements under the StarMed and SierraMed brand names.

Historically our operations were devoted to formulating and marketing a
line of over-the-counter, alternative medicinal products. All of our revenues
for fiscal 2005 were from the sale of our products or royalties related to our
products. Our natural medicinal products are intended to address the effects of
conditions including arthritis, aging eyesight, obesity and irritable bowel
syndrome. We also market a proprietary starch blocker designed for weight loss
and maintenance and we have licensed various formulations of our proprietary
starch blocker product to third parties. We currently market our medicinal
products, directly to consumers, over the Internet.

However, severe competition in the medicinal product market and the loss
of a significant distribution outlet whose revenues accounted for a substantial
portion of our 2004 revenues have resulted in a significant reduction in our
product sales. Therefore, during fiscal 2005 our management made a strategic
decision and redirected our efforts to the development and establishment of a
network of StarMed Wellness Centers.

StarMed Wellness Centers will focus on promoting general wellness by
addressing the underlying causes of a variety of chronic diseases such as
obesity and stress. Our long-term goal is to expand the number of clinics with
which we contract to develop a network of StarMed Wellness Centers each of which
will provide clients a full range of preventative, traditional medical and
alternative treatments directed towards achieving "total wellness." Our StarMed
Wellness Centers concept is founded on our belief that traditional Western
medicines and treatments may be enhanced by complementing their use with
preventative medicine techniques and the use of alternative medicinals to
address the underlying causes of certain illnesses. We believe that addressing
these underlying causes is necessary for good health maintenance and longevity.
Our management and affiliated physicians have devoted significant time, and
pooled their collective experience, to develop our StarMed Wellness Center
concept.

We intend to market our medical products to our wellness center customers.
While we anticipate that our wellness centers will become a recurring market for
our medicinal products in the future, we do not expect that our marketing of
natural medicinal products will consume a significant portion of our future
operating resources, or that medicinal product sales will account for a
substantial portion of our future revenues.

OUR STARMED WELLNESS CENTER BUSINESS MODEL

GENERAL

Over the course of the last few years, our management has evaluated
proactive and reactive traditional and alternative medical treatments and
procedures, medical equipment and devices, and medicinal products that we
believe would be most appropriate in a clinical setting offering both
traditional and alternative practices. We believe that the StarMed Wellness
Center business plan is the first business model that envisions expansion into a
national chain of wellness centers to be staffed by medical doctors whose
practices will be complemented by preventative medicine and total wellness
services. We are convinced that the incidence and severity of certain medical
conditions, such as diabetes and heart disease, could be reduced by addressing
underlying circumstances that contribute to those conditions, such as stress and
obesity. These conditions are recognized by the StarMed Wellness program as
among those in need of preventative care, whereas most traditional medical
practices do not devote the time or have the understanding to address these and
other underlying causes of poor health.

We have assembled a Board of Directors that includes physicians who share
our vision of integrating preventative and Western medicines through the
treatment of existing illnesses with Western medicines, and the promotion of
overall health and wellness through the incorporation of alternative medical
products and techniques in the treatment of chronic illnesses. Each of these
affiliated physicians is trained in Western medicine and is or was on the
medical or teaching staffs of Cedars-Sinai Medical Center, UCLA Medical School
or other similarly-statured institution. These members of our Board of
Directors, some of whom are also officers of our company, include:

- Dr. Steven Rosenblatt. Dr. Rosenblatt, a practicing physician, who
is also our Executive Vice President and serves as President of our Sierra
Medicinals, Inc. subsidiary. Dr. Rosenblatt's initial efforts on our behalf were
directed to the research and formulation of medicinal supplements for the
growing aging population. Dr. Rosenblatt is responsible for developing and
internally proving the efficacy of the StarMed Wellness Center concept.
Recognizing the increasing danger to American health of obesity, Dr. Rosenblatt
co-authored the Harper Collins book, The Starch Blocker Diet, for weight loss,
with well-known science writer Cameron Stauth, presently in its sixth printing,
with a paperback edition printed in February 2005. Since the book's publication,
he has appeared nationwide, as well as internationally in Europe, China and
Australia, on over 400 radio, TV talk show and print media interviews as well as
product conventions, as a medical authority on weight loss and wellness.

- Dr. Hector Rodriquez. Dr. Rodriguez, who is also a Vice President of
our company, is a Clinical Professor of Medicine at UCLA and practicing medical
specialist. Dr. Rodriquez has appeared on Spanish television answering call-in
health questions. The Starch Blocker Diet has been translated into Spanish under
the guidance of Dr. Rodriquez, who presides over our Hispanic market operations.

- Dr. August Reader. Dr. Reader, who also serves as a per diem
consultant to us, is a neuro-ophthalmologist and, as our former medical
director, originated our product for aging eyesight. He is a well-known medical
authority and lecturer in the United States, Japan and elsewhere on integrated
medicine.

- Dr. Avner Manzoor-Mandel. Dr. Manzoor-Mandel, who is also a Vice
President of our company, holds medical degrees from Pahlavi University and the
University of Maryland. He is a member of the American College of Cosmetic
Surgery and the College of Obstetrics and Gynecology. For the past 20 years he
has been in private practice in Los Angeles.

- Dr. Joel Feinstein, F.A.C.S. Dr. Feinstein, who is also a Vice
President of our company, holds degrees from Penn State University, M.S. in
Physiology, and M.D. from Downstate Medical Center, Brooklyn, N.Y. Dr. Feinstein
is gastroenterologist consultant to Cedars-Sinai Medical Center and a consultant
on Colon Cancer as well as Associate Clinical Professor of Medicine at UCLA, and
a member of the Education Committee, American Cancer Society, Los Angeles. Dr.
Feinstein has appeared as a medical authority on numerous conferences including
that of moderator at the World Congress of Gastroenterology. Dr. Feinstein is a
practicing physician and specialist in gastroenterology.

- Dr. Seymour Levine. Dr. Levine is an advisor to us on rheumatology.
Dr. Levine is in private practice of rheumatology and is the Clinical Chief of
Rheumatology at Cedars-Sinai Medical Center. Dr. Levine graduated from and
completed his residency at the Johns Hopkins University. Dr. Levine is a member
of the President's Task Force on Health Care Reform, founding member and past
president of Managed Care Providers at Cedars-Sinai Care in Los Angeles. His
professional affiliations include Diplomate American Board of Internal
Medicines, American Board of Rheumatology and American Medical Association.

We believe that their unique experience and ties to these institutions
will enable them to guide us in understanding new directions in conventional and
alternative methods and how we can incorporate those methods into our products
and services.

OPERATIONS AND SERVICES

In order to avoid the brick and mortar costs of building StarMed Wellness
Centers, we have determined to form strategic alliances through contractual
arrangements with existing medical clinics to provide preventative and
alternative treatments and techniques that would complement the medical services
offered at the medical clinic. The services to be provided at each StarMed
Wellness Center will be negotiated with the medical clinic prior to entering
into an agreement for our services, will vary depending upon the particular
needs of each prospective wellness center, and will draw upon factors including
community needs.

The medical operations of each wellness center will be supervised by one
or more licensed physicians and other qualified personnel, and, typically, will
be open to the public 10 hours per day, six days per week. Each StarMed Wellness
Center will offer some or all of the following services:

- Dietician review and consultation;

- Weight loss and diabetes management services;

- Physical exercise consultation;

- Physical therapy;

- Anti-aging treatments;

- Acupuncture treatments;

- Doctor prescribed and personalized vitamin, mineral and herbal
regimens;

- Skin rejuvenation and cosmetology services;

- Female hormone therapy;

- Pain management;

- Food allergy diagnosis and treatment; and

- Genome testing.

RELATIONSHIP WITH MEDICAL CLINICS

Depending upon applicable state and local regulatory requirements and
limitations, we anticipate that our services will be provided under a variety of
relationships with medical clinics. We are developing two models for the
operation of the wellness centers. In one model, we will establish a wellness
center on behalf of a medical clinic, which will operate as a participant in the
StarMed Wellness Center network under the supervision of the clinic's existing
medical director. Under this model, we will provide management services to the
portion of the medical clinic's practice that is devoted to wellness in exchange
for a management fee that would be based on the wellness center's gross
revenues. The medical director is responsible for supervising and providing all
the physician services, and we are responsible for providing various services,
including marketing, employing the non-physician staff, billing and collection,
and providing the space for the wellness center operations.

In the second model, we will affiliate with a physician practice to
establish a wellness center that is adjacent or in close proximity to a medical
clinic. The physician practice may or may not have any existing relationship
with the medical clinic and will supervise the physician services at the
wellness center. We use this model with medical clinics that believe in the
value of the services that are offered at the wellness center but do not want
the responsibility for overseeing the medical services offered at the wellness
center. Under this model, we will enter into an agreement with a physician
practice to own the portion of the wellness center that requires physician
supervision, and we will own the portion of the wellness center that does not
require physician supervision. We would provide management services to the
physician practice in exchange for a management fee that would be based on a
percentage of the wellness center's gross revenues. The physician practice is
responsible for supervising and providing the physician services, and we are
responsible for marketing, employing the non-physician staff, billing and
collection, leasing the wellness center space, and providing the services that
do not require physician supervision. We would also enter into an agreement with
the adjacent medical clinic to provide us with various services, including
helping us to develop and implement our marketing strategy, giving us a license
to use their name as part of the wellness center's name (e.g., "StarMed Wellness
Center at Hana Medical"), and billing and collections, in exchange for a
percentage of the gross revenues from that center.

Depending upon the particular structure of the relationship with the
medical clinic, we expect to generate revenues through a variety of means,
including management fees, fees for non-physician services such as aesthetician
services, consulting fees, and the sale of our products.

Our wellness center in Encino, California is structured based on the first
model. Our agreement with the Encino Surgical Medical Center requires us to pay
the salaries for the non-physician staff, marketing and promotion expenses, the
lease for the wellness center facility, and office expenses relating to the
wellness center operations. The medical director for the wellness center is
entitled to receive one third of the revenues collected from medical services
provided by the medical director, plus an additional 20% of the gross receipts
from the products sold and other medical services provided at the wellness
center.

Our wellness centers in Buena Park and Santa Ana, California, are based on
the second model. In both those centers, the professional corporation owned by
Dr. Steven Rosenblatt, our Executive Vice President, is the physician practice
that will be providing the medical services. (Please see the Certain
Relationships and Related Transactions section below for a description of our
agreement with Dr. Rosenblatt's corporation.) Under both of these arrangements,
we are required to pay the salaries for the non-physician staff, marketing and
promotion expenses, the lease for the wellness center facility, and office
expenses relating to the wellness center operations. Dr. Rosenblatt's
professional corporation would be responsible for his own expenses, including
the expense of engaging or employing physicians. The professional corporation is
entitled to receive a percentage of the revenues collected from medical services
provided by Dr. Rosenblatt or any physician engaged or employed by him, and we
are entitled to receive the remainder of the revenues, as well as all of the
revenues from the portion of the wellness center that does not require physician
supervision. Initially, the portion of the revenues that Dr. Rosenblatt's
professional corporation will be entitled to receive from the medical services
shall be 5%, but this percentage shall be re-evaluated on a quarterly basis to
ensure that both we and the professional corporation are covering our respective
direct expenses. In addition, as consideration for their providing marketing
services and the license to use the medical clinic's name, we will pay the
medical clinics a percentage of the gross revenues from all the services and
products provided at the respective wellness center.

MARKET

The primary market for our StarMed Wellness Centers is today's aging baby
boomers and others seeking to look and feel better, as well as slow their aging
process. We believe that wellness has universal appeal. Everyone wants to live
longer, and in good health. People today are better educated and are demanding
more effective medicine that is affordable and safe, without dangerous side
effects. StarMed Wellness Centers will be designed to appeal to clients at all
income levels. If and to the extent that the enhanced services to be offered at
our wellness centers become reimbursable under third party insurance
reimbursement guidelines, we expect that the number of persons who will be
attracted to StarMed Wellness Centers will also increase.

While our initial focus is in the California and Hawaiian markets, we
believe that the StarMed Wellness Center concept is amenable to national
expansion, with services priced to be affordable to all income levels. We
believe the business model is flexible to permit expansion to serve the needs of
more affluent clients or changed to serve regional needs. Informal discussions
indicate that hotels may be interested in offering StarMed's wellness services
to their guests. Management also believes that international expansion of
wellness centers will present attractive opportunities. Although individual
destination-oriented spas are becoming widespread, we are aware of no similar
doctor-managed facilities, focused on preventative medicine and total health.

OUR MEDICINAL PRODUCTS

The diversion of our limited financial and management resources away from
product sales and marketing activities, and towards the development of our
wellness center business model, coupled with severe competition in the
marketplace for medicinal products, contributed to a significant decrease in
revenues from product sales during the first half of 2005. While we anticipate
that our wellness centers will become a recurring market for our medicinal
products in the future, we do not expect that our marketing of natural medicinal
products will consume a significant portion of our future operating resources,
or that medicinal product sales will account for a substantial portion of our
future revenues.

PRODUCTS

We engage in the development, formulation and marketing of natural,
over-the-counter, alternative medicinal products, and other aspects of the
natural alternative medicinal market. Our line of over-the-counter medicinal
products is currently marketed by us over the Internet. Our natural medicinal
products are intended to address the effects of conditions including arthritis,
aging eyesight, obesity and irritable bowel syndrome. Our product line includes:

- Sierra Sight D and Sierra Sight W, blends of natural medicinals
formulated to help combat the effects of aging eyesight;

- SierraMed JT Penetrating Cream, a topical cream that penetrates the
skin and reaches deep into joints to relieve symptoms associated with arthritis;

- Sierra Colon IB, a blend of 20 Chinese herbs and minerals designed
to help reduce symptoms related to irritable bowel syndrome; and

- Sierra Slim, a proprietary weight loss supplement based upon a
patented (owned by Pharmachem Laboratories) starch blocker known as Phase 2TM.

MANUFACTURING

Our medicinal products are formulated on our behalf by Herman Rappaport
and Dr. Steven Rosenblatt, based upon research published in authoritative
journals. Our products are manufactured to our formulated specifications by a
third party manufacturer. Our current manufacturer, American Supplement
Technologies of Tempe, Arizona, is a full service contract manufacturer of
dietary supplements, and maintains product liability insurance on which we are
named as an additional insured. American Supplement Technologies manufactures
our medicinal products on a purchase order basis. We have no long-term
commitments with any manufacturer, although we believe that there are numerous
sources of production for our products. During the production process, private
labels containing the "SierraMed" or "StarMed" brand names are affixed to our
medicinal products by the manufacturer.

Raw materials contained in our medicinal products include vitamins,
minerals and herbal supplements. Raw materials are available from a variety of
sources, on a purchase order basis, and we do not believe that we are dependent
upon any one source for these materials. Our primary supplier of Phase2 starch
blocker material is Pharmachem Labs in New Jersey.

We maintain general liability insurance with coverage of $1,000,000. We do
not yet maintain product liability insurance on our own behalf; however, we are
named as an additional insured to the extent of $1,000,000 under the product
liability policy carried by our product manufacturer. We intend to obtain
product liability insurance at such time and with such coverage limits as we are
required to

maintain, consistent with our financial condition. However, until that time, we
are subject to product liability claims that, if successful, could result in a
substantial judgment being rendered against us. The public perception
surrounding a product liability claim, even if unsuccessful, could materially
and adversely affect our reputation and sales.

MARKETING

We currently market our alternative medicinal products directly, over the
Internet on our website at www.sierramed.com. For fiscal 2005 and fiscal 2004,
sales made from our web site were $12,160 and $40,000, respectively. We offer
customers who purchase products from our web site a 30-day money back guarantee,
less shipping costs.

We have an agreement with Natural Health Trends Corporation under which
a subsidiary of Natural Health Trends, Lexxus International, Inc., was granted
the exclusive right to market a version of our starch blocker product formulated
specifically for Natural Health Trends in network or multilevel marketing to
international sources. For the years ended December 31, 2005 and 2004, Lexxus
International paid us $0 and $1,688,373, respectively, under the agreement. We
do not expect our agreement with Lexxus International to materially contribute
to our revenues in 2006.

FUTURE PRODUCT SALES

We intend to offer our products in conjunction with the operation of our
StarMed Wellness Centers. We believe that, as our operations expand, StarMed
Wellness Centers will become a "captive" market for our medicinal products. We
also believe that there is a large market for our products in Latin-speaking
markets, and we intend to pursue that market under the direction of Dr. Hector
Rodriguez, our Vice President and a director. We will be seeking new
distribution channels and partners for our products here in the U.S. and
overseas and will continue to market and sell our products through the Internet.

RESEARCH AND DEVELOPMENT

For the fiscal years ended December 31, 2005 and 2004, we expended $0 and
$80,629, respectively, for company-sponsored research and development
activities.

COMPETITION

Our StarMed Wellness Centers will experience competition from individual
and group medical practitioners and others schooled in alternative medicinal
products and techniques, including Western medical doctors, herbalists,
acupuncturists and others. Many of these individuals and groups have
significantly greater operating histories and resources than we do. However, we
believe that until such time as others are able to research and develop a
similar business model, our wellness centers will be the only existing centers
designed to focus on preventative medicine through the incorporation of
physician-directed, traditional Western medical treatments and techniques and
alternative medical practices.

We believe that the market for natural, alternative medicinal products is
increasing, but we expect to encounter intense competition from other
manufacturers and marketers of vitamins, supplements, neutraceutical products
and over-the-counter medicinal products. Many of our competitors have
significantly greater financial resources and substantially longer operating
histories than we do. We may never become a competitive factor in the market for
medicinal products. Among our competitors in the medicinal product market are
Thorne Research, Douglas Labs, Jarrow Formulas, Twinlab, KAL, Herbalife, Allergy
Research Group and Weider Nutrition International, Inc.

We believe that we will distinguish ourselves from our competitors in the
medicinal products marketplace because:

- Our products have been developed and are supported by the expertise of
our affiliated physicians;

- Our wellness centers will serve as a "captive" audience for our
over-the-counter, alternative medicinal products; and

- Our wellness center physicians will identify and prescribe a regimen of
medicinal products tailored to the needs of the individual client.

INTELLECTUAL PROPERTY

We own the registered trademark "Products that work from Doctors who
care". We have a pending service mark application for the "StarMed Wellness
Centers" name and logo.

It is our experience that patents for medicinal supplements are of limited
value because nominal changes in ingredients and/or in formulation will often
invalidate the patent. Therefore, we have not patented or otherwise filed for
protection of the formulae for our medicinal products. We rely upon
confidentiality agreements and common law trade secret protections in order to
prevent others from improperly using our proprietary information. However, our
medicinal products consist of natural ingredients that are readily available,
and there is no assurance that others will not independently develop their own
products using similar formulations to those comprising our products, or that
others will not develop more effective formulations to address the conditions
that our products are meant to treat.

GOVERNMENT REGULATION

REGULATIONS RELATED TO OUR PRODUCTS

The manufacturing, processing, formulating, packaging, labeling and
advertising of our products are subject to regulation by one or more federal
agencies, including the United States Food and Drug Administration, or FDA, the
Federal Trade Commission, or FTC, the Consumer Product Safety Commission, or
CPSC, the United States Department of Agriculture, or USDA, and the
Environmental Protection Agency, or EPA. Our activities are also regulated by
various agencies of the states, localities and foreign countries to which our
products may be distributed and in which our products may be sold.

The composition and labeling of dietary supplements, which comprise a
significant majority of our medicinal products, is most actively regulated by
the FDA under the provisions of the Federal Food, Drug, and Cosmetic Act, or
FFDC Act. The FFDC Act, the Nutrition Labeling and Education Act of 1990, or
NLEA, and the Dietary Supplement Health and Education Act of 1994, or DSHEA, may
all impact our products.

To our knowledge, the manufacture and sale of our natural medicinal
products do not require filings with or approvals, licenses or permits from any
regulatory authority. However, product claims are regulated by the Federal Food
and Drug Administration and we are required to state on our product labels that:
"These statements have not been evaluated by the Food and Drug Administration.
This product is not intended to diagnose, treat, cure or prevent any disease."
We believe that all advertising and marketing of medicinal products in the
United States is being performed in strict compliance with applicable U.S.
government regulations. We are not marketing or manufacturing any of our
products in any foreign country at present, and therefore, we are not required
to comply with any foreign regulations.

REGULATIONS RELATED TO THE STARMED WELLNESS CENTERS

Our business model for the establishment of a network of branded StarMed
Wellness Centers will be subject to substantial federal, state and local
government health care laws and regulations. The terms of agreements we may
enter into with medical centers joining the StarMed Wellness Center network will
vary from center to center based upon that particular center's needs. We will
strive to ensure that each agreement complies with all applicable state and
federal laws; however, as a result of the complexity of the various rules and
regulations we cannot assure you that we will be successful in every instance.
In addition, laws and regulations are constantly changing and may impose
additional requirements on these operations. These changes could have the effect
of impeding our ability to do business with the medical centers which are
participating in the StarMed Wellness Center network or reduce our ability to
implement our business model.

Corporate Practice of Medicine

Our wellness centers are structured such that we will not have any
ownership interest in or exercise control over any portion of the wellness
center's operations that pursuant to state law requires physician supervision.
California and certain other states in which we may do business have corporate
practice of medicine laws which prohibit non-physicians from exercising control
over the medical judgments or decisions of physicians. These laws and their
interpretations vary from state to state and are enforced by state courts and
regulatory authorities, each with broad discretion. Under the terms of our
agreements, we may provide management services to the StarMed Wellness Center in
exchange for a management fee. In certain cases, Dr. Steven Rosenblatt, who is
an Executive Vice President for our company, will own the physician-supervised
portion of a wellness center through his professional corporation and we will
manage the center on behalf of Dr. Rosenblatt in exchange for a management fee.
The reason for structuring our wellness centers as described above is to address
state laws prohibiting companies like ours from engaging in the corporate
practice of medicine or exercising control over the medical judgments or
decisions of the practices or the physicians. Nevertheless, state regulatory
authorities or other parties could assert that our agreements violate these
laws.

Fee-Splitting

Many states prohibit a physician from splitting with a referral source the
fees generated from physician services. Other states have a broader prohibition
against any splitting of a physician's fees, regardless of whether the other
party is a referral source. In most states, it is not considered to be
fee-splitting when the payment made to the physician is reasonable reimbursement
for services rendered on the physician's behalf. We may enter into agreement
with medical centers under which we will be reimbursed by physicians on whose
behalf we may provide management services. The compensation provisions of the
management services agreements we may enter into will be designed to comply with
applicable state laws relating to fee-splitting. There can be no certainty,
however, that if challenged, we will be found to be in compliance with each
state's fee-splitting laws. A determination in any state that we are engaged in
any unlawful fee-splitting arrangement could render any agreement between us and
a medical center located in such state unenforceable or subject to modification
in a manner adverse to our interests.

Anti-Kickback Statute

The anti-kickback provisions of the Social Security Act (the
"Anti-Kickback Statute") prohibit anyone from knowingly and willfully soliciting
or receiving any remuneration in return for referrals for items and services
reimbursable under most federal health care programs or offering or paying any
remuneration to induce a person to make referrals for items and services
reimbursable under most federal

health care programs. The prohibited remuneration may be paid directly or
indirectly, overtly or covertly, in cash or in kind.

Violation of the Anti-Kickback Statute is a felony, and criminal
conviction results in a fine of not more than $25,000, imprisonment for not more
than five years, or both. Further, the Secretary of the Department of Health and
Human Services has the authority to exclude violators from all federal health
care programs and/or impose civil monetary penalties of $50,000 for each
violation and assess damages of not more than three times the total amount of
remuneration offered, paid, solicited or received.

As the result of a congressional mandate, the Office of the Inspector
General of the Department of Health & Human Services promulgated regulations
specifying certain payment practices which the Office of Inspector General
determined to be at minimal risk for abuse. The Office of Inspector General
named these payment practices "safe harbors." If a payment arrangement fits
within a safe harbor, it will be deemed not to violate the Anti-Kickback
Statute. Merely because a payment arrangement does not comply with all of the
elements of any safe harbor, however, does not mean that the parties to the
payment arrangement are violating the Anti-Kickback Statute.

We may receive fees under agreements with medical centers for management
and administrative services. In certain situations, we may also pay a portion of
our gross revenues to a medical center in exchange for services they may provide
to us, including helping us to develop and implement our marketing strategy,
allowing us to use their name and doctors to associate our wellness center to
the medical clinic, and billing and collections. We will seek to enter into
agreements with the medical centers which are structured in a manner that will
not violate the Anti-Kickback Statute. Nevertheless, because the provisions of
the Anti-Kickback Statute are broadly worded and have been broadly interpreted
by Federal courts, we cannot guarantee that a regulator would not conclude that
our arrangements with the medical clinics and physician groups constitute
prohibited remuneration.

Many states have laws that prohibit payment of kickbacks in return for the
referral of patients. Some of these laws apply only to services reimbursable
under state Medicaid programs. However, a number of these laws apply to all
health care services in the state, regardless of the source of payment for the
service. Based on court and administrative interpretation of federal
anti-kickback laws, we believe that these laws prohibit payments to referral
sources where a purpose for payment is for the referral. However, the laws in
most states regarding kickbacks have been subjected to limited judicial and
regulatory interpretation. Therefore, no assurances can be given that our
activities will be found to be in compliance.

Stark Law

Section 1877 of Title 18 of the Social Security Act, commonly referred to
as the "Stark Law," prohibits a physician from making a referral to an entity
for the furnishing of Medicare-covered "designated health services" if the
physician or an immediate family member of the physician has a "financial
relationship" with that entity. Sanctions for prohibited referrals include
denial of Medicare payment, and civil money penalties of up to $15,000 for each
service ordered. Designated health services furnished pursuant to a referral
that is prohibited by the Stark Law are not covered by Medicare and payments
improperly collected must be promptly refunded. At least some of the states in
which we may do business also have prohibitions on physician self-referrals that
are similar to the Stark Law. These laws and interpretations vary from state to
state and are enforced by state courts and regulatory authorities, each with
broad discretion. Although we will attempt to structure our agreements with the
medical centers in a manner that avoids violating these laws, or in a manner
that we believe does not trigger the law, state regulatory authorities or other
parties could assert that our agreement with a medical center violates these
laws, which could subject us to civil penalties and require us to terminate the
particular agreement.

HIPAA

Numerous state, federal and international laws and regulations govern the
collection, dissemination, use and confidentiality of patient-identifiable
health information, including the federal Health Insurance Portability and
Accountability Act of 1996 and related rules, or HIPAA. The scope of services we
may perform for a particular medical center may include the collection, use,
maintenance and transmission of patient information in ways that may or will be
subject to many of these laws and regulations. HIPAA applies to covered
entities, which include most healthcare providers and health plans. HIPAA also
requires covered entities to bind contractors to compliance with certain
burdensome HIPAA requirements. Other federal and state laws restricting the use
and protecting the privacy of patient information may also apply to us, either
directly or indirectly.

The three rules that were promulgated pursuant to HIPAA that could most
significantly affect our business are the Standards for Electronic Transactions,
or Transactions Rule; the Standards for Privacy of Individually Identifiable
Health Information, or Privacy Rule; and the Health Insurance Reform Security
Standards, or Security Rule. The HIPAA Transactions Rule establishes format and
data content standards for eight of the most common healthcare transactions. If
we perform billing and collection services for the wellness center we may be
engaging in one of more of these standard transactions and will be required to
conduct those transactions in compliance with the required standards. The HIPAA
Privacy Rule restricts the use and disclosure of patient information and
requires entities to safeguard that information and to provide certain rights to
individuals with respect to that information. The HIPAA Security Rule
establishes elaborate requirements for safeguarding patient information
transmitted or stored electronically. We may be required to make costly system
purchases and modifications to comply with the HIPAA requirements that will be
imposed on us.

Federal and state consumer protection laws are being applied increasingly
by the Federal Trade Commission and state attorneys general to regulate the
collection, use and disclosure of personal or patient information, through
websites or otherwise, and to regulate the presentation of website content.
Courts may also adopt the standards for fair information practices promulgated
by the Federal Trade Commission, which concern consumer notice, choice, security
and access.

Numerous other federal and state laws protect the confidentiality of
private information. These laws in many cases are not preempted by HIPAA and may
be subject to varying interpretations by courts and government agencies,
creating complex compliance issues for us and potentially exposing us to
additional expenses, adverse publicity and liability.

New health information standards, whether implemented pursuant to HIPAA,
congressional action or otherwise, could have a significant effect on the manner
in which we will be required to handle health care related data, and the cost of
complying with these standards could be significant. If we do not properly
comply with existing or new laws and regulations related to patient health
information we could be subject to criminal or civil sanctions.

False and Other Improper Claims

The federal government is authorized to impose criminal, civil and
administrative penalties and/or exclusions on any health care provider and its
officers, directors, and in certain limited circumstances, its owners, that file
a false claim or a pattern of claims based on a code that the provider has
reason to know will result in greater payments than appropriate, claims for
items or services not

medically necessary, or for the offer, solicitation, payment or receipt of
anything of value (direct or indirect, overt or covert, in cash or in kind),
that is intended to induce the referral of federal health care program patients
or the ordering of items or services reimbursable under those programs or the
recommendation of, or the arranging for, the provision of items or services
reimbursable under Medicare and Medicaid. Civil monetary penalties can also be
imposed if a person "arranges or contracts" with a person excluded from a
federally funded health care program, if they knew or should have known such
person was excluded from reimbursement from Medicare or Medicaid. Criminal
penalties are also available in the case of claims filed with private insurers
if the government can show that the claims constitute mail fraud, wire fraud,
health care fraud, theft or embezzlement in connection with health care or false
statements relating to health care matters. While the criminal statutes are
generally reserved for instances evincing an obviously fraudulent intent, the
criminal and administrative penalty statutes are being applied by the government
in an increasingly broad range of circumstances. The government has taken the
position, for example, that a pattern of claiming reimbursement for unnecessary
services violates these statutes if the claimant should have known that the
services were unnecessary. The government has also taken the position that
claiming reimbursement for services that are substandard is a violation of these
statutes if the claimant should have known that the care was substandard. The
government, in cases of suspected fraud, can freeze the assets of a health care
provider and in the case of a federal health care offense can order the
forfeiture of assets that constitute or are derived from proceeds traceable to
the offense.

We will conduct our business in a manner so that any billing activities we
undertake on behalf of a StarMed Wellness Centers will be in material compliance
with these laws, but there can be no assurance that our activities will not be
challenged or scrutinized by government authorities.

EMPLOYEES

As of May 31, 2006, we had seven full-time employees, including our
executive officers, one part-time employee, and two consultants. None of our
employees are covered by collective bargaining agreements, and we believe our
relationships with our employees to be good.

OUR HISTORY

We were incorporated in Nevada on August 13, 1981, under the name Port
Star Industries, Inc. We were organized to succeed to the properties, rights and
obligations of Port Star Industries, Inc., a publicly-held North Carolina
corporation formed on November 3, 1961 under the name of Riverside Homes, Inc.
("Port Star North Carolina").

At the time of our formation, Port Star North Carolina had no assets,
liabilities or operations. In order to change the domicile of Port Star North
Carolina to Nevada:

- Port Star North Carolina caused our formation under the laws of
Nevada, with an authorized capitalization that "mirrored" the authorized
capitalization of Port Star North Carolina, and

- issued to each stockholder of Port Star North Carolina a number of
shares of our common stock equal to such stockholder's share ownership of Port
Star North Carolina.

Port Star North Carolina conducted no operations subsequent to the
reincorporation, and was administratively dissolved in 1988. We remained
inactive until March 20, 1984, and from 1984 to 1985, we engaged in real estate
development. Real estate operations ceased in 1985.

On January 10, 2000, we changed our name to StarMed Group, Inc. On July
27, 2001, we acquired Sierra Medicinals, Inc., an Arizona corporation
incorporated in March 2000, in a share exchange whereby we issued a total of
469,792 shares of common stock for all of the issued and outstanding shares of
Sierra Medicinals, Inc. Mr. Rappaport, either directly or through his family
trust, was a majority stockholder of Sierra Medicinals, Inc. We now operate
Sierra Medicinals, Inc. as our wholly owned subsidiary.

On September 10, 2003, we formed Vet Medicinals, Inc. as a wholly owned
subsidiary under the laws of the State of Nevada. Vet Medicinals, Inc. is
currently inactive.

PROPERTY

Our corporate offices are presently located in leased office space at 2029
Century Park East, Suite 1112, Los Angeles, California 90067. Effective January
1, 2006, we entered into a three year lease for office space. The lease provides
for annual rental of $68,211, payable monthly, to the unaffiliated landlord. We
believe that such space is currently sufficient for our needs.

LEGAL PROCEEDINGS

We are not a party to any pending legal proceedings and, to our knowledge,
none of our officers, directors or principal stockholders are party to any legal
proceeding in which they have an interest adverse to us.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

NAME AGE POSITIONS
- ------------------------ --- --------------------------------------

Herman H. Rappaport 89 President, CEO, Acting Chief Financial
Officer and director
Dr. Steven L. Rosenblatt 60 Executive Vice President and director
Dr. Hector Rodriguez 62 Vice President and director
Dr. Avner Manzoor-Mandel 59 Vice President and director
Dr. Joel Feinstein 60 Vice President and director
Dr. Seymour Levine 63 Director

HERMAN H. RAPPAPORT, B.Ch.E. Mr. Rappaport has served as our President,
CEO and member of our Board of Director since inception. Mr. Rappaport also
serves as our Acting Chief Financial Officer. Mr. Rappaport received his degree
from the University of the City of New York in 1939. During the last seven years
Mr. Rappaport has studied medical systems and products in Russia, China as well
as in the United States including two winters in St. Petersburg and Moscow as
well as trips to Beijing and Shanghai to study natural medicine. Mr. Rappaport
was, at one time, the largest national builder of McDonald drive-ins,
coast-to-coast.

Mr. Rappaport served as a member of two Advisory Boards on Foreign
Trade for the United States Department of Commerce from 1983 to 1996 and prior
to that time, served as a member for two terms on the Mass Transportation
Commission of the United States Department of Transportation. Mr. Rappaport was
the founder and President of the public, non-profit Press, Education, Government
Foundation for improved communications between the media and government and
hosted conferences at the Annenberg School of Communications, University of
Southern California on alternative energy, air

rights and others. He also served on the Economic Development Board of the City
of Los Angeles. Mr. Rappaport was with the Manhattan Project, at Columbia
University, as a consultant to General Electric and director of the Mass
Spectrometer Physics Laboratory at Oak Ridge, Tennessee.

DR. STEVEN L. ROSENBLATT, M.D., Ph.D., L.Ac. Dr. Rosenblatt has served as
our Executive Vice President and a member of our Board of Directors since
February 2000. Dr. Rosenblatt holds a Ph.D, from the University of California at
Los Angeles, and an M.D. from the School of Medicine, St. George University. He
is a founder and past president of the California Acupuncture College, and
founder and director of the UCLA Acupuncture Clinic of UCLA School of Medicine.
Dr. Rosenblatt is a former director of the Complementary Medicine Program of
Cedars-Sinai Medical Center and was, until 2004, a member of the National
Accreditation Commission for Oriental Medicine under the U.S. Department of
Education. Dr. Rosenblatt has conducted and been a participant in numerous
medical conferences of the subject of herbal medicines and has been in private
practice in Los Angeles for 10 years, and has been a leader in the field of
acupuncture and oriental medicine for over 30 years.

DR. HECTOR RODRIGUEZ, M.D., Ph.D. Dr. Rodriguez has served as a Vice
President and member of our Board of Directors since February 2000. Dr.
Rodriguez received an M.D. from the Universidad Nacional of Bogota, Colombia and
a Ph.D. from University of California at San Francisco with post graduate work
at Washington University School of Medicine, St. Louis, Missouri. His
certifications include The American Board of Internal Medicine, Nephrology
Subspecialty, and is licensed in Illinois, Missouri, and California where he has
practiced medicine for the past 23 years.

DR. AVNER MANZOOR-MANDEL, M.D. Dr. Manzoor-Mandel has served as a Vice
President and member of our Board of Directors since February 2000. Dr.
Manzoor-Mandel holds medical degrees from Pahlavi University and the University
of Maryland. He is a member of the American College of Cosmetic Surgery and the
College of Obstetrics and Gynecology. For the past 20 years he engaged in the
private practice of medicine in Los Angeles.

DR. JOEL FEINSTEIN, M.D., F.A.C.S. Dr. Feinstein has served as a Vice
President and member of our Board of Directors since February 2000. For the past
20 years, Dr. Feinstein has been engaged in the private practice of medicine and
is a specialist in gastroenterology. Dr. Feinstein holds degrees from Penn State
University, M.S. in Physiology, and an M.D. from Downstate Medical Center,
Brooklyn, New York Dr. Feinstein is Gastroenterologist Consultant to
Cedars-Sinai Medical Center and a Consultant on Colon Cancer as well as
Associate Clinical Professor of Medicine at UCLA. and a member of the Education
Committee, American Cancer Society, Los Angeles. Dr. Feinstein has appeared as a
medical authority on numerous conferences including that of moderator at the
World Congress of Gastroenterology.

DR. SEYMOUR LEVINE. Dr. Levine has been a member of our Board of Directors
since June 2002 and is an advisor to us on rheumatology. Dr. Levine has engaged
in the private practice of Rheumatology and currently serves as the Clinical
Chief of Rheumatology at Cedars-Sinai Medical Center. Dr. Levine graduated from
and completed his residency at the Johns Hopkins University. Dr. Levine is a
member of the President's Task Force on Health Care Reform, and founding member
and past president of Managed Care Providers at Cedars-Sinai Care in Los
Angeles. His professional affiliations include Diplomate American Board of
Internal Medicines, American Board of Rheumatology and American Medical
Association.

COMMITTEES OF THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE MATTERS

Committees of the Board. The board of directors has not yet established an
audit committee, nominating committee or compensation committee, and the
functions of these committees are currently

performed by the entire board of directors. We are not currently subject to any
law, rule or regulation requiring that we establish or maintain committees of
the board of directors. We may establish an audit, nominating and/or
compensation committee in the future if the board determines it to be advisable
or we are otherwise required to do so by applicable law, rule or regulation.

Board of Directors Independence. Our board of directors consists of six
members. None of the members of our board of directors is "independent" within
the meaning of rules and regulations of the SEC or any self-regulatory
organization. We are not currently subject to any law, rule or regulation
requiring that all or any portion of our board of directors include
"independent" directors.

Audit Committee; Audit Committee Financial Expert. We do not yet have an
audit committee and no member of our board of directors is an "audit committee
financial expert" within the meaning of Item 401(e) of Regulation S-B. In
general, an "audit committee financial expert" is an individual member of the
audit committee (board of directors) who:

- understands generally accepted accounting principles and financial
statements,

- is able to assess the general application of such principles in
connection with accounting for estimates, accruals and reserves,

- has experience preparing, auditing, analyzing or evaluating financial
statements comparable to the breadth and complexity to our financial
statements,

- understands internal controls over financial reporting, and

- understands audit committee functions.

Code of Ethics. In December 2004 we adopted a Code of Business Conduct and
Ethics applicable to our Chief Executive Officer, principal financial and
accounting officers and persons performing similar functions. A code of ethics
is a written standard designed to deter wrongdoing and to promote

- honest and ethical conduct,

- full, fair, accurate, timely and understandable disclosure in
regulatory filings and public statements,

- compliance with applicable laws, rules and regulations,

- the prompt reporting of any violation of the code, and

- accountability for adherence to the code.

A copy of our Code of Business Conduct and Ethics has been filed with the
Securities and Exchange Commission as an exhibit to the Form 10-K for fiscal
2005 of which this prospectus is a part. We will provide a copy, without charge,
to any person desiring a copy of the Code of Business Conduct and Ethics, by
written request to us at 2029 Century Park East, Suite 1112, Los Angeles,
California 90067.

DIRECTOR COMPENSATION

Members of our Board of Directors do not receive cash compensation for
their services as directors but are reimbursed for their reasonable expenses for
attending board and board committee meetings. In addition, from time-to-time,
board members have been awarded shares of common stock in appreciation for their
time devoted to our business.

EMPLOYMENT AGREEMENTS

In June 2005 we entered into a three-year employment agreement with Herman
Rappaport under which Mr. Rappaport serves as our President, Chief Executive
Officer and Acting Chief Financial Officer. Under the terms of the agreement we
pay Mr. Rappaport a base salary at the rate of $90,000 per annum. He is also
entitled to receive stock in an amount to be determined by the Board of
Directors prior to June 2007. Mr. Rappaport is entitled to two weeks annual
vacation, reimbursement for business expenses and participation in executive
employment benefit plans. The agreement also contains customary confidentiality
and indemnification provisions. We may terminate the agreement upon his death or
disability, or for "cause" which includes a material breach of any material
provision of the agreement, any act by him in violation of our Code of Business
Conduct and Ethics, fraud or conviction of a felony.

In June 2005 we also entered into a two-year employment agreement with Dr.
Steven Rosenblatt under which Dr. Rosenblatt serves as our Executive Vice
President. Under the terms of the agreement we pay Dr. Rosenblatt a base salary
at the rate of $90,000 per annum, as well as $1,000 per day for training of
providers and staff when he is not acting as a medical provider. Since March 1,
2006, Dr. Rosenblatt's salary has been increased to $135,000 per year. Dr.
Rosenblatt is also entitled to bonuses at our discretion. The agreement provides
that we are entitled to receive 6% of all book advances earned by Dr.
Rosenblatt. He is entitled to two weeks annual vacation, reimbursement for
business expenses and participation in executive employment benefit plans. The
agreement also contains customary confidentiality and indemnification
provisions. We may terminate the agreement upon his death or disability, or for
"cause" which includes a material breach of any material provision of the
agreement, any act by him in violation of the Business Practices Policy and
Employees Outside Business Interests Policy, fraud or conviction of a felony.

MANAGEMENT SERVICES AGREEMENT

Dr. Rosenblatt has also formed a medical professional corporation that
will own and operate the portion of certain StarMed Wellness Centers that is
required to be owned and supervised by a physician. For each such center, we
will enter into a management services agreement to provide management services
to Dr. Rosenblatt's professional corporation in exchange for a management fee
based on a percentage of gross revenues. Our management services agreement with
Dr. Rosenblatt's professional corporation is described in more detail below
under the Certain Relationships and Related Transactions section below.

MANAGEMENT INCENTIVES

We have reserved up to 5,500,000 shares of our common stock to members of
our management upon the attainment of specified milestones as follows:

- 2,000,000 shares upon opening of five new StarMed Wellness Centers
prior to the expiration of two years from February 2006,

- 1,000,000 shares upon opening of 10 new StarMed Wellness Centers
prior to the expiration of four years from February 2006, and

- 2,500,000 shares following the first fiscal year in which we do not
report a loss in our audited financial statements as may be
reflected in our Annual Report on Form 10-KSB.

If any of these milestones are met, at the time of issuance of securities
we will recognize compensation expense equal to the fair market value of our
common stock on the date of issuance.

EXECUTIVE COMPENSATION

CASH COMPENSATION

The following table summarizes all compensation recorded by us in each of
the last three fiscal years for our Chief Executive Officer and each other
executive officers serving as such (the "Named Executive Officers") whose annual
compensation exceeded $100,000.

Annual Compensation Long-term Compensation
------------------------------------- -------------------------------------------------
Awards Payouts
------------------------ -----------------------
Restricted
Other Annual Stock Securities All Other
Name and Principal Fiscal Salary Bonus Compensation Awards Underlying LTIP Compensation
Position Year ($) ($) ($) ($) Options (#) Payouts ($)
- ----------------------- ------ ------- ----- ------------ ---------- ----------- ------- ------------

Herman Rappaport (1)... 2005 $89,904 $0 $0 $ 9,500 0 $0 $0
2004 $90,192 $0 $0 $ 0 0 $0 $0
2003 $18,000 $0 $0 $ 5,000 0 $0 $0

(1) Mr. Rappaport has served as our president and CEO since inception. In
fiscal 2003 Mr. Rappaport was granted 500,000 shares of our common stock valued
at $5,000 as additional compensation. In fiscal 2005 we issued him an aggregate
of 950,000 shares of our common stock valued at $9,500 as additional
compensation.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning individual grants of
options made during fiscal 2005 to the Named Executive Officers.

PERCENT OF TOTAL
NUMBER OF SHARES OPTIONS GRANTED TO
UNDERLYING OPTIONS EMPLOYEES IN FISCAL EXERCISE OR BASE
NAME GRANTED (#) YEAR PRICE ($/SH) EXPIRATION DATE
- ----------------------- ------------------ ------------------- ---------------- ---------------

Herman Rappaport, CEO.. -0- -- -- --

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES

NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT DECEMBER 31,
SHARES 2005 2005
ACQUIRED VALUE ----------------------------------- -----------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISEABLE EXERCISABLE UNEXERCISEABLE
- ----------------------- ----------- -------- ----------- -------------- ----------- --------------

Herman Rappaport CEO... -0- -- -0- -0- -0- -0-

2004 EQUITY COMPENSATION PLAN

In fiscal 2004 we established our 2004 Equity Compensation Plan. The
original Plan was approved by our board of directors and a majority of our
shareholders. The purpose of the Plan is to enable us to attract and retain
top-quality employees, officers, directors and consultants and to provide such
employees, officers, directors and consultants with an incentive to enhance
stockholder returns. The Plan provides for the grant to our directors, officers,
employees and consultants of stock-based awards and options to purchase shares
of our common stock. All of our executive officers, directors and employees

are be eligible to participate in the Plan. We have funded the Plan with
4,050,000 shares of our common stock (including an increase of 3,000,000 shares
authorized by our board of directors and Mr. Rappaport as the holder of a
majority of our outstanding common stock in February 2006). In February 2006 we
granted Mr. Rappaport an option under the Plan to purchase 1,000,000 shares of
our common stock at an exercise price of $0.35 per share. As of March 31, 2006,
there were no other options granted under the Plan. In addition, as of March 31,
2006, 400,000 shares in stock awards have been issued under the Plan, and
2,650,000 shares remained available for issuance.

The Plan is administered by our Board of Directors, which may delegate its
duties in whole or in part to any subcommittee solely consisting of at least two
individuals who are non-employee directors within the meaning of Rule 16b-3
under the Securities Exchange Act and outside directors within the meaning of
Section 162(m) of the Internal Revenue Code of 1986 (the "IRS Code"). The Board
has the authority to interpret our stock incentive plan, to establish, amend and
rescind any rules and regulations relating to our Plan and to make any other
determinations that it deems necessary or desirable for the administration of
our Plan. Any decision of the Board or a compensation committee of the Board in
the interpretation and administration of our Plan lies within its sole and
absolute discretion and is final, conclusive and binding on all parties
concerned, including participants in our Plan and their beneficiaries or
successors.

Stock options granted under our Plan may be non-qualified or incentive
stock options for federal income tax purposes. The Board will set option
exercise prices and terms and will determine the time at which stock options
will be exercisable. However, the term of a stock option may not exceed 10
years. The Board may also grant options that are intended to be incentive stock
options, which comply with Section 422 of the IRS Code. Fair market value is
defined as the closing price of the shares as reported on the grant date as
quoted on the OTC Bulletin Board. The Board also has the authority to grant
stock-based awards, which may consist of awards of common stock, restricted
stock and awards that are valued in whole or in part by reference to, or are
otherwise based on the fair market value of, shares of common stock. Stock-based
awards may be granted on a stand-alone basis or in addition to any other awards
granted under our Plan. The Board determines the form of stock-based awards and
the conditions on which they may be dependent. The conditions may include the
right to receive one or more shares of common stock or the equivalent value in
cash upon the completion of a specified period of service or the occurrence of
an event or the attainment of performance objectives. The Board also determines
the participants to whom stock-based awards may be made, the timing of those
awards, the number of shares to be awarded, whether those other stock-based
awards will be settled in cash, stock or a combination of cash and stock and all
other terms of those awards.

Stock options and restricted stock awards are not transferable or
assignable, except for estate planning purposes. In the event of any stock
dividend or split, reorganization, recapitalization, merger, consolidation,
spin-off, combination or exchange of stock or other corporate exchange or any
distribution to stockholders other than regular cash dividends, the Board may,
in its sole discretion, make a substitution or adjustment to the number or kind
of stock issued or reserved for issuance under our Plan under outstanding awards
and the term, including option price, of those awards.

Except as otherwise provided in a stock award agreement, in the event of
our change in control or a change of control of our company, the Board may, in
its sole discretion, accelerate a stock award, cause us to make a cash payment
in exchange for a stock award or require the issuance of a substitute stock
award.

LIMITATION ON LIABILITY

Under our bylaws, as amended, our directors, officers and employees shall
be indemnified by us so long as he or she acted in good faith and in a manner
her or she reasonably believed to be in or not to be opposed to our best
interests, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.

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

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We owed Dr. Steven Rosenblatt and Mr. Herman Rappaport, directors,
officers and stockholders of our company, an aggregate of $55,597 and $42,344 in
expense reimbursements as of December 31, 2005 and 2004, respectively. This
balance is included in accrued liabilities on the consolidated balance sheet as
of December 31, 2005 and 2004 and as of March 31, 2006 and 2005.

On January 5, 2005, we issued 1,600,000 shares of our common stock to the
following related parties, as consideration for services rendered, valued at
$.01 per share:

Herman Rappaport 750,000 shares
Dr. Steven L. Rosenblatt 750,000 shares
Dr. Hector Rodriguez 10,000 shares
Dr. Joel Feinstein 10,000 shares
Dr. Avner Manzoor-Mandel 10,000 shares
Dr. Seymour Levine 10,000 shares
Susan Nowak 60,000 shares

Mr. Rappaport and Drs. Rosenblatt, Rodriguez, Feinstein, Manzoor-Mandel
and Levine are members of our Board of Directors and Ms. Nowak is an employee of
our company.

On January 31, 2005, we issued 400,000 shares of our common stock to the
following related parties, as consideration for services rendered, valued at
$.01 per share:

Herman Rappaport 200,000 shares
Dr. Steven L. Rosenblatt 200,000 shares

Dr. Rosenblatt has formed a medical professional corporation that will own
and operate the portion of certain StarMed Wellness Centers that is required to
be owned and supervised by a physician. For each such center, we will enter into
a management services agreement to provide management services to Dr.
Rosenblatt's professional corporation in exchange for a management fee based on
a percentage of gross revenues, which percentage shall be reviewed on a
quarterly basis and adjusted, as necessary, to ensure that both the company and
Dr. Rosenblatt's professional corporation are being paid their costs. Initially,
the management fee shall be 95% for each center. Under the agreement, we will
also enter into a revolving credit agreement with Dr. Rosenblatt's professional
corporation in order to allow the professional corporation to cover its direct
costs during the start-up phase of a wellness center to be covered by the
management services agreement. Interest on the revolving credit line will be
based on the applicable federal rate.

On June 1, 2006, we entered into a Joint Venture Agreement with All Back
and Joint Care Medical Group, a medical professional corporation in with Dr.
Rosenblatt serves as medical director and performs medical services. Under the
agreement, we provide a hyperbaric chamber for use at the All Back and Joint
Care facility. Gross revenues from the joint venture shall be distributed 50% to
us and 50% to All Back and Joint Care Medical Group.

PRINCIPAL STOCKHOLDERS

At July 26, 2006 we had 22,418,424 shares of our common stock issued and
outstanding. The following table sets forth information regarding the beneficial
ownership of our common stock as of July 26, 2006 by:

- each person known by us to be the beneficial owner of more than 5% of
our common stock;

- each of our directors;

- each of our executive officers; and

- our executive officers, directors and director nominees as a group.

Unless otherwise indicated, the business address of each person listed is
in care of 2029 Century Park East, Suite 1112, Los Angeles, California 90067.
The percentages in the table have been calculated on the basis of treating as
outstanding for a particular person, all shares of our common stock outstanding
on that date and all shares of our common stock issuable to that holder in the
event of exercise of outstanding options, warrants, rights or conversion
privileges owned by that person at that date which are exercisable within 60
days of that date. Except as otherwise indicated, the persons listed below have
sole voting and investment power with respect to all shares of our common stock
owned by them, except to the extent that power may be shared with a spouse.

Except as otherwise indicated in the notes to the following table, the
table does not give effect to the issuance of up to:

- 10,548,075 shares upon exercise of warrants the resale of which is
covered by this prospectus;

- 5,500,000 shares in the event that incentive milestones are reached by
management;

- 1,000,000 shares upon exercise of outstanding options; and

- 2,650,000 shares reserved for issuance under our equity compensation
plan(s).

AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- --------------------------------- -------------------- --------

Herman Rappaport(1) ............. 7,395,489 31.6%
Dr. Steven L. Rosenblatt(2) ..... 1,675,000 7.5%
Dr. Hector Rodriguez ............ 100,000 *
Dr. Avner Manzoor-Mandel(3) ..... 100,000 *
Dr. Joel Feinstein(4) ........... 100,000 *
Dr. Seymour Levine .............. 20,000 *
Officers and directors as a group
(six persons)(1,2,3 and 4) .... 9,390,489 40.1%

* represents less than 1%

(1) The number of shares beneficially owned by Mr. Rappaport includes
3,110,489 shares of our common stock held by Herman and Rhoda Rappaport Joint
Living Trust, Susan Harris Trustee, 1,000,000 shares of our common stock
issuable upon the exercise of an option with a ten-year term granted to Mr.
Rappaport in February 2006 which are exercisable at $0.35 per share and
1,625,000 shares of our common stock that are subject to a voting proxy granted
by Paradigm Media Ventures, Inc. and Tomahawk Trading Corp. in favor of Mr.
Rappaport. See "Selling Security Holders - Background of the Transaction;
Consulting Agreement with Paradigm Media Ventures, Inc." appearing later in this
prospectus. The number of shares beneficially owned by Mr. Rappaport excludes
100,000 shares of our common stock owned by the daughter of Mr. Rappaport, the
beneficial ownership of which is disclaimed by Mr. Rappaport.

(2) Dr. Rosenblatt's address is 11600 Wilshire Boulevard, Suite 412, Los
Angeles, California 90025.

(3) The number of shares beneficially owned by Dr. Manzoor-Mandell includes
67,547 shares of our common stock held by Carmelina, LLC, a company wholly owned
by Dr. Manzoor-Mandel.

(4) The number of shares beneficially owned by Dr. Feinstein includes 90,000
shares of our common stock held jointly with his spouse.

LOCK-UP AGREEMENTS

Each of our officers and directors has entered into a lock-up agreement
with Joseph Stevens & Company, Inc., who acted as placement agent in our 2005
Unit Offering, agreeing not to sell any of our securities owned or thereafter
acquired by them, through the exercise of options or otherwise, for a period of
12 months from the effective date of the registration statement of which this
prospectus is a part. These lock-up agreements automatically terminate if,
commencing 180-days after the date of this prospectus, the 20-day average
closing bid price of our common stock exceeds $.50 per share.

DESCRIPTION OF SECURITIES

We are authorized to issue 100,000,000 shares of common stock, par value
$.01 per share, and 25,000,000 shares of preferred stock, par value $.01 per
share. At July 26, 2006 we had 22,418,424 shares of common stock and no shares
of preferred stock issued and outstanding.

COMMON STOCK

The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders, including the election of
directors. There is no right to cumulate votes in the election of directors. The
holders of common stock are entitled to any dividends that may be declared by
the board of directors out of funds legally available for payment of dividends
subject to the prior rights of holders of preferred stock and any contractual
restrictions we have against the payment of dividends on common stock. In the
event of our liquidation or dissolution, holders of common stock are entitled to
share ratably in all assets remaining after payment of liabilities and the
liquidation preferences of any outstanding shares of preferred stock. Holders of
common stock have no preemptive rights and have no right to convert their common
stock into any other securities.

PREFERRED STOCK

We are authorized to issue 25,000,000 shares of $.01 par value preferred
stock in one or more series with such designations, voting powers, if any,
preferences and relative, participating, optional or other special rights, and
such qualifications, limitations and restrictions, as are determined by
resolution of our board of directors. The issuance of preferred stock may have
the effect of delaying, deferring or preventing a change in control of our
company without further action by stockholders and could adversely

affect the rights and powers, including voting rights, of the holders of common
stock. In certain circumstances, the issuance of preferred stock could depress
the market price of the common stock.

COMMON STOCK PURCHASE WARRANTS

At August 4, 2006 we had common stock purchase warrants outstanding or
which we are contractually obligated to issue for an aggregate of 10,548,075
shares of our common stock, of which:

- warrants to purchase 250,000 shares, exercisable until September 2010,
at a price of $.25 per share, subject to adjustment, were issued to the
purchaser of $500,000 principal amount 10% senior secured convertible
promissory note; and

- five year common stock purchase warrants to purchase 10,298,075 shares,
exercisable at a price of $1.00 per share, subject to adjustment, were
issued or issuable to purchasers of our units from December 2005 to
January 2006.

TRANSFER AGENT

Our transfer agent is Integrity Stock Transfer, 2920 North Green Valley
Road, Building 5, Suite 527, Henderson, Nevada 89014, and its telephone number
is 702-317-7757.

SELLING SECURITY HOLDERS

This prospectus relates to periodic offers and sales of 24,696,150 shares
of our common stock by the selling security holders listed below and their
pledgees, donees and other successors in interest, which includes:

- 13,292,000 shares of our common stock which are presently outstanding,
plus an additional 856,075 shares to be issued as liquidated damages pursuant to
the terms of the unit offering, and

- 9,692,000 shares issuable upon the exercise of common stock purchase
warrants with exercise prices ranging from $0.25 to $1.00 per share, plus an
additional 856,075 shares underlying warrants to be issued as liquidated damages
pursuant to the terms of the unit offering.

BACKGROUND OF THE TRANSACTIONS

10% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE

We have the right to redeem the warrant at a redemption price of $.05 per
underlying share if the average closing price of our common stock on the OTC
Bulletin Board is at least $1.50 per share for 20 consecutive trading days
immediately preceding the date on which we provide a redemption notice and there
is an effective registration statement covering resale of the shares issuable
upon exercise of the warrant. This prospectus is part of that registration
statement. The warrant contains a cashless exercise provision whereby the holder
may exercise the warrant without the payment of cash, by surrendering a number
of underlying shares of common stock to be determined based upon a formula
described in the warrant. The exercise price of the warrant is subject to
adjustment in the event we issue shares of our

common stock or securities convertible into common stock, at a price that is
lower than the then prevailing exercise price of the warrant. In view of our
sale of units in the unit offering described below, the exercise price of the
warrant to purchase 250,000 shares was reduced to $0.25 per share.

Joseph Stevens & Company, Inc. acted as placement agent for us and we paid
that firm a fee equal to 8% of the face amount of the note, or $40,000. We
received net proceeds of approximately $438,650 after payment of fees and
expenses of the transaction. We used the net proceeds for working capital.

The outstanding principal amount of the note was payable on or before the
earlier of June 28, 2006 or the date on which we sold any of debt or equity
securities in one or more financing transactions resulting in gross proceeds to
us of at least $1,000,000. The note was payable with interest at the rate of 10%
per annum, and was convertible at the option of the holder into shares of our
common stock. In order to secure our obligations under the note, the note was
collateralized by a general security interest in all of our assets, a guaranty
of our obligations by our subsidiary and a pledge of the shares we own in our
subsidiary. The note also contained various negative covenants designed to
protect the noteholder's interest in repayment of the note and preservation of
the collateral securing the note.

This note was satisfied in full in November 2005 utilizing proceeds from
our unit offering described below, and upon such satisfaction the collateral was
released.

UNIT OFFERING

Between December 2005 and January 2006, we sold an aggregate of 9,442,000
units of our securities to 99 accredited investors in an offering exempt from
registration under the Securities Act in reliance on exemptions provided by
Section 4(2) and Rule 506 of Regulation D of the Securities Act. Each unit was
sold for a purchase price of $0.25, and consisted of one share of our common
stock and one redeemable five year common stock purchase warrant, exercisable at
$1.00 per share, which resulted in the issuance by us of an aggregate of
9,442,000 shares of common stock and common stock purchase warrants to purchase
an additional 9,442,000 shares of our common stock. We received gross proceeds
of $2,360,500.

Subject to certain conditions, we may require warrant holders to exercise
or forfeit their warrants, provided that the closing price for our common stock
is at least $1.50 per share for 20 consecutive trading days and trading volume
in our common stock exceeds 150,000 shares per day for each trading day during
such 20 day period.

For one year following the date of issuance, we are obligated to issue
additional shares of our common stock to purchasers of the units to protect them
against dilution in the event that we issue shares of our common stock during
such one-year period at less than $.25 per share. In addition, for a one year
period following the date of issuance and continuing until the warrants expire,
the exercise price is subject to "weighted-average" anti-dilution protection for
subsequent issuances of common stock or securities convertible into common stock
at less than the then current warrant exercise price, excluding certain
issuances unrelated to capital raising transactions.

Joseph Stevens & Company, Inc. acted as placement agent for us in this
offering. As compensation for their services we paid Joseph Stevens & Company,
Inc. a commission equal to 10% of the gross proceeds ($236,500) and a
non-accountable expense allowance equal to 3% of the gross proceeds ($70,815),
and issued Joseph Stevens & Company, Inc. or its designees an aggregate of
2,225,000 shares of our common stock. We used the net proceeds from this
offering to pay the $500,000 principal amount of the 10% senior secured
convertible promissory note described above, plus accrued interest, and intend
to use the remainder of the proceeds to establish StarMed Wellness Centers and
for general working capital. Under certain circumstances, we have also agreed
that at any time that any warrants issued in that offering are exercised, we
will pay the placement agent a cash fee, payable on the day of the exercise,
equal to 5% of the gross proceeds received by us upon such exercise. This
additional fee will reduce the proceeds to us from the exercise of any of these
warrants.

We agreed to file a registration statement with the SEC on or before March
20, 2006 covering the shares of common stock, including the shares underlying
the warrants, issued in this offering so as to permit the resale thereof. This
prospectus is part of that registration statement. We also agreed to use our
best efforts to ensure that the registration statement is declared effective by
the SEC by June 3, 2006. If we fail to meet these deadlines, or if once the
registration statement is declared effective it does not remain so for 30
consecutive days, then the number of shares of our common stock included in the
units sold to the investors in this offering and the number of shares of our
common stock issuable upon the exercise of the warrants included in the units
will be automatically increased by 2% for each 30 day period in which these time
frames are not met. We agreed to keep the registration statement effective until
the later of the third anniversary of the first date on which no warrants remain
unexercised or unexpired, or the date on which all shares of our common stock
included in the units can be sold without restrictions under Rule 144 of the
Securities Act.

The registration statement of which is prospectus is a part was first
filed by us with the SEC on June 19, 2006. Because we were late in the initial
filing the registration statement and the registration statement was not
effective by June 3, 2006, as of August 4, 2006, we are required to issue an
additional 856,075 shares of our common stock and common stock purchase warrants
to purchase an additional 856,075 shares. These penalty shares of common stock,
including the common stock underlying the additional warrants, are included in
the registration statement of which this prospectus forms a part.

We have granted Joseph Stevens & Company, Inc. a two year exclusive right
of first refusal to manage any private or public offering of debt or equity
securities we may undertake.

CONSULTING AGREEMENT WITH PARADIGM MEDIA VENTURES, INC.

On September 8, 2005, we entered into a two-year consulting agreement with
Paradigm Media Ventures, Inc. Under the agreement, Paradigm has agreed to
provide such business consulting services to us as we may reasonably request,
including developing a business plan, developing a strategy for attracting
bridge funding, potential lenders and investors in general, and identifying
merger and acquisitions candidates, joint venture candidates and corporate
partners. As consideration for its services, we paid Paradigm a consulting fee
of $49,000 and issued Paradigm 1,625,000 shares of our common stock, which
shares were subsequently divided equally between Paradigm and Tomahawk Trading
Corp. We also agreed to include the shares we issued to Paradigm (including the
shares now held by Tomahawk) in the registration statement of which this
prospectus is part. Under the terms of the agreement, Paradigm agreed not to
sell more than 406,250 of such shares per quarter. The shares issuable to
Paradigm and Tomahawk are also subject to a voting proxy in favor of Herman
Rappaport.

SELLING SECURITY HOLDERS

The following table sets forth:

- the name of each selling security holder,

- the number of shares owned, and

- the number of shares being registered for resale by the selling
security holder.

We may amend or supplement this prospectus from time to time to update the
disclosure set forth in this prospectus. All of the securities owned by the
selling security holders may be offered hereby. Because the selling security
holders may sell some or all of the securities owned by them, and because there
are currently no agreements, arrangements or understandings with respect to the
sale of any of the securities, no estimate can be given as to the number of
securities that will be held by the selling security holders upon termination of
any offering made hereby. If all the securities offered hereby are sold, the
selling security holders will not own any securities after the offering.

Percent of
Amount of outstanding
Amount of shares shares owned shares to be
Name of Selling Security owned prior to Amount of shares after the owned after
Holder offering to be offered offering the offering
- ----------------------------------- ---------------- ---------------- ------------ ------------

Wayne K. Adams .................... 436,267 436,267 (1) 0 *
Bryan Becker ...................... 109,067 109,067 (1) 0 *
David Becker ...................... 109,067 109,067 (1) *
Ben Elm Inc. ...................... 305,387 305,387 (1)(13) 0 *
Bradley Family Trust, Rick and
Melissa Bradley Trustees ........ 87,253 87,253 (1) 0 *
Robert A. Briskey ................. 349,013 349,013 (1) *
Roy M. Cappadona .................. 43,627 43,627 (1) *
Robert H. Cockram ................. 43,627 43,627 (1) 0 *
Scott A. Daws and Jennifer Mary
Daws JTWROS ..................... 130,880 130,880 (1) *
Brad DeHaan ....................... 174,507 174,507 (1) 0 *
Joseph De Marco ................... 305,387 305,387 (1) 0 *
Raymond De Marco .................. 261,760 261,760 (1) 0 *
Roger Erickson .................... 218,133 218,133 (1) 0 *
William L. Fekas and Nancy B.
Fekas JTWROS .................... 95,979 95,979 (1) 0 *
Flushing 4424 Supermarket Court ... 87,253 87,253 (1)(5) *
William L. Fox and Lynne Fox
JTWROS .......................... 436,267 436,267 (1) 0 *
Steve R. Hunt ..................... 130,880 130,880 (1) 0 *
Miles Hyde ........................ 87,253 87,253 (1) 0 *
Arthur S. James Jr. ............... 52,352 52,352 (1) 0 *
Robert Kantor ..................... 218,133 218,133 (1) 0 *
John Koch ......................... 174,507 174,507 (1) 0 *
Robert L. Lamberg ................. 87,253 87,253 (1) 0 *
David Bruce Laughton .............. 87,253 87,253 (1) 0 *
Larry D. Lehman ................... 87,253 87,253 (1) 0 *
Barry Lind Revocable Trust U A
Dated 12/19/89, Barry J Lind
Trustee ......................... 872,533 872,533 (1) 0 *
Kim Mai (12) ...................... 43,627 43,627 (1) 0 *
Paul Martin ....................... 349,013 349,013 (1) 0 *
J. Kevin McCrary .................. 87,253 87,253 (1) 0 *
Michael Morley .................... 87,253 87,253 (1) 0 *
MSB Family Trust
Michael Blechman Trustee,
D/T/D 6/25/93 ................... 654,400 654,400 (1) 0 *
James M. Mulryan and Maureen
Mulryan JTWROS .................. 87,253 87,253 (1) 0 *

Michael O'Brien ................... 436,267 436,267 (1) 0 *
Jon D. Packer ..................... 523,520 523,520 (1) 0 *
Dr. Maheshkumar Patel ............. 130,880 130,880 (1) 0 *
Stuart J. Ratner .................. 43,627 43,627 (1) 0 *
Rebecca Sanor ..................... 69,803 69,803 (1) 0 *
Gary A.. Shangold ................. 87,253 87,253 (1) 0 *
Kim H. Sides ...................... 87,253 87,253 (1) 0 *
Lawrence M. Silver ................ 436,267 436,267 (1) 0 *
Ezzat N. Slaieh and Shadi
E. Slaieh JTWROS ................ 523,520 523,520 (1) 0 *
David Smith ....................... 43,627 43,627 (1) 0 *
Jon Spielman ...................... 87,253 87,253 (1) 0 *
Lewis H. Steves and Judith P.
Steves JTWROS ................... 87,253 87,253 (1) 0 *
Forrest D. Thompson ............... 87,253 87,253 (1) 0 *
William S Tyrrell ................. 436,267 436,267 (1) 0 *
Thomas Wiles ...................... 43,627 43,627 (1) *
Tad Wilson ........................ 130,880 130,880 (1) 0 *
Alan J. Young ..................... 436,267 436,267 (1) 0 *
David Abraham ..................... 174,507 174,507 (1) 0 *
Richard A. Ackner ................. 436,267 436,267 (1) 0 *
Carroll Adams ..................... 139,605 139,605 (1) 0 *
Todd C. Anderson .................. 43,627 43,627 (1) 0 *
Bryan Arakelian ................... 87,253 87,253 (1) 0 *
Paul J. Bargiel PC Employees
Pension Plan and Trust
DTD 6/1/1986 .................... 218,133 218,133 (1)(6) 0 *
David Benadum ..................... 218,133 218,133 (1) 0 *
John J. Bender .................... 87,253 87,253 (1) 0 *
Paul F. Berlin .................... 218,133 218,133 (1) 0 *
David W. Bodiford ................. 43,627 43,627 (1) 0 *
William J. Borchardt .............. 87,253 87,253 (1) 0 *
Elliot Braun ...................... 218,133 218,133 (1) 0 *
Bill Cox .......................... 87,253 87,253 (1) 0 *
Louis J. Delbono .................. 87,253 87,253 (1) 0 *
Michael Doherty ................... 87,253 87,253 (1) 0 *
Sherida Downer and Paul Downer
JTWROS .......................... 174,507 174,507 (1) 0 *
Flagship Mortgage Company ......... 87,253 87,253 (1)(7) 0 *
Michael C. Geiger ................. 174,507 174,507 (1) 0 *
Dr. Bryce Goman ................... 43,627 43,627 (1) 0 *
Gummersbach LTD. .................. 436,267 436,267 (1)(8) 0 *
Dr. Mark T. Hellner ............... 872,533 872,533 (1) 0 *
Douglas J. Jacobson ............... 130,880 130,880 (1) 0 *
Jay B. Jennings and Beverly
Jennings JTWROS ................. 87,253 87,253 (1) 0 *
John Kagan ...................... 43,627 43,627 (1) 0 *
Stephen N. Kitchens and Martha M.
Kitchens JTWROS ................. 436,267 436,267 (1) 0 *
Indy S. Kullar .................... 174,507 174,507 (1) 0 *
James A. Lambert and Laura
Lambert JTWROS. ................. 218,133 218,133 (1) 0 *

David O. Lind ..................... 218,133 218,133 (1) 0 *
Robert L. Lunday .................. 87,253 87,253 (1) 0 *
Steven Main ....................... 130,880 130,880 (1) 0 *
Michael Mc Cormack ................ 87,253 87,253 (1) 0 *
Dr. John McPhail .................. 130,880 130,880 (1) 0 *
Med-Ex Medical Inc. ............... 122,155 122,155 (1)(9) 0 *
Enrico Monaco ..................... 87,253 87,253 (1) 0 *
David P Nichols ................... 87,253 87,253 (1) 0 *
Gary Palmer and Barbara Palmer
JTWROS .......................... 21,813 21,813 (1) *
Dr. Bayard L. Powell .............. 43,627 43,627 (1) 0 *
Paul Sallwasser and Teri
Sallwasser JTWROS ............... 305,387 305,387 (1) 0 *
Gary Rob Slabaugh and Terese E.
Slabaugh JTWROS ................. 87,253 87,253 (1) 0 *
Charles D Stadterman .............. 87,253 87,253 (1) 0 *
Dr. Olen Wilson ................... 218,133 218,133 (1) 0 *
Jonathan H. Witherspoon ........... 174,507 174,507 (1) 0 *
Leland Zimmerman .................. 26,176 26,176 (1) 0 *
John R. Durant .................... 218,133 218,133 (1) 0 *
Riyazh Jinnah ..................... 872,533 872,533 (1) 0 *
Gary Kitchell ..................... 1,308,800 1,308,800 (1) 0 *
Stanley F. Sides and Lynn M Sides
JTWROS .......................... 174,507 174,507 (1) 0 *
Richard S. Simms II and Cynthia
Simms JTWROS .................... 130,880 130,880 (1) 0 *
Brad Thurman ...................... 872,533 872,533 (1) 0 *
Lauren Banjany .................... 30,000 30,000 (2)(4) 0 *
Salvatore Clark ................... 5,000 5,000 (2)(4) 0 *
Kris Destefano .................... 30,000 30,000 (2)(4) 0 *
Kristina Fasullo .................. 20,000 20,000 (2)(4) 0 *
Alan Ferraro ...................... 34,875 34,875 (2)(4) 0 *
Deborah Francis ................... 5,000 5,000 (2)(4) 0 *
William Christopher Frasco ........ 42,500 42,500 (2)(4) 0 *
El Hadji S Gueye .................. 50,000 50,000 (2)(4) 0 *
Scott Levine ...................... 16,500 16,500 (2)(4) 0 *
Michele Markowitz ................. 204,100 204,100 (2)(4) *
Caeron A. McClintock .............. 41,250 41,250 (2)(4) 0 *
Matthew Menies .................... 12,500 12,500 (2)(4) 0 *
Fabio Migliaccio .................. 55,000 55,000 (2)(4) 0 *
Amanda Miller ..................... 10,000 10,000 (2)(4) 0 *
Denise Mormile-Miglino ............ 7,750 7,750 (2)(4) *
Michael Mullen .................... 34,875 34,875 (2)(4) 0 *
Anthony. S. Mundy ................. 57,500 57,500 (2)(4) 0 *
Peter Orthos ...................... 50,000 50,000 (2)(4) 0 *
Alexandra Orthos and Peter Orthos
JTWROS .......................... 557,800 557,800 (2)(4) *
George Paxinos .................... 52,500 52,500 (2)(4) 0 *
Robert Petrozzo ................... 255,000 255,000 (2)(4) 0 *
Patricia Sorbara .................. 204,100 204,100 (2)(4) 0 *
Robert Soto ....................... 175,000 175,000 (2)(4) 0 *
Evan S. Taub ...................... 20,000 20,000 (2)(4) 0 *
Louis John Ventre ................. 42,500 42,500 (2)(4) 0 *
Jeffrey Blake Woolf ............... 157,500 157,500 (2)(4) 0 *
Michael J. Zoitas ................. 53,750 53,750 (2)(4) *
Romajo Partners LP f/b/o Seymour
Kessler ......................... 250,000 250,000 (3)(10) *
Paradigm Media Ventures Inc. ...... 812,500 812,500 (2)(11)
Tomahawk Trading Corp. ............ 812,500 812,500 (2)(14)
----------
24,696,150

* Less than 1%.

(1) One-half of the amounts shown in the column consists of outstanding common
stock and one-half represents shares issuable upon exercise of currently
exercisable purchase warrants.

(2) Consists of outstanding common stock.

(3) Consists of shares issuable upon exercise of currently exercisable
purchase warrants.

(4) Except for the individuals named at the end of this footnote, Selling
Security Holder is an affiliate of Joseph Stevens & Co., a registered
broker-dealer. Joseph Stevens & Co. received the shares as compensation for
services rendered to us in connection our private placement of units described
elsewhere in this prospectus. The Selling Security Holder was designated by
Joseph Stevens & Co. to receive the shares listed in this column. Accordingly,
such shares are restricted in accordance with Rule 2710(g)(1) of the NASD
Conduct Rules. Alan Ferraro, Denise Morile-Migino, Michael Mullen, Michael J.
Zoitas, Salvatore Clark and Jeffrey Blake Woolf are no longer affiliated with
Joseph Stevens & Co.

(5) Mr. Carlos Castillo has voting and dispositive control over securities
held by Flushing 4424 Supermarket Court.

(6) Paul J. Bargiel has voting and dispositive control over securities held by
the Paul J. Bargiel PC Employees Pension Plan and Trust.

(7) Mr. Brian Shannon has voting and dispositive control over securities held
by Flagship Mortgage Company.

(8) Peter Bubenzer has voting and dispositive control over securities held by
Gummersbach LTD.

(9) Messrs. William S. Arata and Craig Akers have voting and dispositive
control over securities held by Med-Ex Medical Inc.

(10) Dr. Seymour Kessler has voting and dispositive control over securities
held by Romajo Partners LP.

(11) Mr. George Haralampoudis has dispositive control over securities held by
Paradigm Media Ventures, Inc. Mr. Herman Rappaport has voting control over these
shares held by Paradigm Media Ventures, Inc. See Consulting Agreement with
Paradigm Media Ventures, Inc. appearing earlier in this section.

(12) The amount of shares owned prior to and after the offering excludes 20,000
shares of our common stock held by The Mai Family Trust for which Kim Mai
disclaims beneficial ownership interest.

(13) Mr. Yamin Elmakias has dispositive control over securities held by Ben Elm
Inc.

(14) Mr. Terry Taylor has dispositive control over securities held by Tomahawk
Trading Corp. Mr. Herman Rappaport has voting control over these shares held by
Tomahawk Trading Corp. These shares constitute half of the shares that were
originally issued to Paradigm Media Ventures, Inc. See Consulting Agreement with
Paradigm Media Ventures, Inc. appearing earlier in this section.

Except as noted above, we are advised that none of the selling security
holders are broker-dealers or affiliates of broker-dealers. Each selling
security holder has advised us that they have not entered into any written or
oral agreements, understandings or arrangements with any underwriter or
broker-dealer regarding the sale of the shares covered by this prospectus. None
of the selling security holders has, or within the past three years has had, any
position, office or other material relationship with us or any of our
predecessors or affiliates, other than as described previously in this section.

We have agreed to pay all of the costs and expenses, incentives to the
issuance, offer, sale and delivery of the shares, including all fees and
expenses in preparing, filing and printing the registration statement and
prospectus and related exhibits, amendments and supplements thereto and mailing
of those items. We will not pay selling commissions and expenses associated with
any sale by the selling security holders.

PLAN OF DISTRIBUTION

GENERAL

Each selling security holder and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on OTC Bulletin Board or any other stock exchange, market or
trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. A selling security holder may
use any one or more of the following methods when selling shares:

- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;

- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

- an exchange distribution in accordance with the rules of the applicable
exchange;

- privately negotiated transactions;

- settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;

- broker-dealers may agree with the selling security holders to sell a
specified number of such shares at a stipulated price per share;

- a combination of any such methods of sale;

- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise; or

- any other method permitted pursuant to applicable law.

The selling security holders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the selling security holders may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling security holders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated, but, except as set forth in a supplement to this
prospectus, in the case of an agency transaction not in excess of a customary
brokerage commission in compliance with NASDR Rule 2440; and in the case of a
principal transaction a markup or markdown in compliance with NASDR IM-2440.

The shares of common stock issued to those selling shareholders who, as
indicated in the Selling Shareholder table above, received such shares as part
of compensation pursuant to a placement agency agreement between us and Joseph
Stevens & Co., are restricted in accordance with Rule 2710(g)(1) of the NASD
Conduct Rules. Accordingly, those selling shareholders shall not directly or
indirectly offer, sell, agree to offer or sell, transfer, assign, pledge,
hypothecate or subject to hedging, short sale, derivative, put or call
transaction such shares for a period of 180 days after the effective date of
this registration statement.

In connection with the sale of the common stock or interests therein, the
selling security holders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
security holders may also sell shares of the common stock short and deliver
these securities to close out their short positions, or loan or pledge the
common stock to broker-dealers that in turn may sell these securities. The
selling security holders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

The selling security holders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.

We are required to pay certain fees and expenses incurred by us incident
to the registration of the shares. We have agreed to indemnify the selling
security holders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.

To the extent that selling security holders are deemed to be
"underwriters" within the meaning of the Securities Act, they may be subject to
the prospectus delivery requirements of the Securities Act. Each selling
security holder has advised us that they have not entered into any written or
oral agreements, understandings or arrangements with any underwriter or
broker-dealer regarding the sale of the resale shares. There is no underwriter
or coordinating broker acting in connection with the proposed sale of the shares
covered by this prospectus by the selling security holders.

We have agreed to keep this prospectus effective until the later of the
third anniversary of the first date on which no warrants sold in our unit
offering described elsewhere in this prospectus remain unexercised or unexpired
or the date on which all shares of our common stock included in those units can

be sold without restrictions under Rule 144 of the Securities Act. The shares
will be sold only through registered or licensed brokers or dealers if required
under applicable state securities laws. In addition, in certain states, the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

Under applicable rules and regulations under the Securities Exchange Act,
any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to the common
stock for the applicable restricted period, as defined in Regulation M, prior to
the commencement of the distribution. In addition, the selling security holders
will be subject to applicable provisions of the Securities Exchange Act and the
rules and regulations thereunder, including Regulation M, which may limit the
timing of purchases and sales of shares of the common stock by the selling
security holders or any other person. We will make copies of this prospectus
available to the selling security holders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale.

We will use our best efforts to file one or more post-effective amendments
to the registration statement of which this prospectus is a part to describe any
material information with respect to the plan of distribution not previously
disclosed in this prospectus or any material change to such information in this
prospectus. This may include, to the extent required under the Securities Act,
that a supplemental prospectus be filed, disclosing:

- the name of any broker-dealers;

- the number of common shares involved;

- the price at which the common shares are to be sold;

- the commissions paid or discounts or concessions allowed to
broker-dealers, where applicable;

- that broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, as
supplemented; and

- any other facts material to the transaction.

SHARES ELIGIBLE FOR FUTURE SALE

At July 26, 2008, we had 22,418,424 shares of common stock issued and
outstanding, of which 20,196,789 shares are "restricted securities." Of this
amount, 13,292,000 shares were included in the registration statement of which
this prospectus is a part and will be freely tradable shares by persons other
than our affiliates, as defined under Rule 144 under the Securities Act, upon
the effective date of the registration statement of which this prospectus is a
part so long as we keep this prospectus current. In addition, the registration
statement of which this prospectus is a part also registers 856,075 shares of
common stock which we are contractually obligated to issue as a penalty under
our unit offering, together with 10,548,075 shares of our common stock issuable
upon the exercise of warrants which are outstanding or which we are
contractually obligated to issue. Upon the exercise of those securities in
accordance with their respective terms, the underlying shares will be freely
tradable by persons other than our affiliates provided that this prospectus is
current.

In general, under Rule 144, as currently in effect, a person, or persons
whose shares are aggregated, who owns shares that were purchased from us, or any
affiliate, at least one year previously, including a person who may be deemed
our affiliate, is entitled to sell within any three month period, a number of
shares of our common stock that does not exceed the greater of 1% of the then
outstanding shares of our common stock.

Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us. Any
person who is not deemed to have been our affiliate at any time during the 90
days preceding a sale, and who owns shares within the definition of "restricted
securities" under Rule 144 under the Securities Act that were purchased from us,
or any affiliate, at least two years previously, is entitled to sell such shares
under Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.

Future sales of restricted common stock under Rule 144 or otherwise or of
the shares that we are registering under this prospectus could negatively impact
the market price of our common stock. We are unable to estimate the number of
shares that may be sold in the future by our existing stockholders or the
effect, if any, that sales of shares by such stockholders will have on the
market price of our common stock prevailing from time to time. Sales of
substantial amounts of our common stock by existing stockholders could adversely
affect prevailing market prices.

LEGAL MATTERS

The validity of the securities offered by this prospectus will be passed
upon for us by Schneider Weinberger & Beilly LLP.

EXPERTS

Our financial statements as of and for the years ended December 31, 2005
and 2004 included in this prospectus have been audited by Mendoza Berger &
Company, LLP, independent registered public accounting firm, as indicated in
their report with respect thereto, and have been so included in reliance upon
the report of such firm given on their authority as experts in accounting and
auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC the registration statement on Form SB-2 under
the Securities Act for the common stock offered by this prospectus. This
prospectus, which is a part of the registration statement, does not contain all
of the information in the registration statement and the exhibits filed with it,
portions of which have been omitted as permitted by SEC rules and regulations.
For further information concerning us and the securities offered by this
prospectus, we refer to the registration statement and to the exhibits filed
with it. Statements contained in this prospectus as to the content of any
contract or other document referred to are not necessarily complete. In each
instance, we refer you to the copy of the contracts and/or other documents filed
as exhibits to the registration statement.

We file annual and special reports and other information with the SEC.
Certain of our SEC filings are available over the Internet at the SEC's web site
at http://www.sec.gov. You may also read and copy any document we file with the
SEC at its public reference facilities:

Public Reference Room Office
100 F Street, N.E.
Room 1580
Washington, D.C. 20549

You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. Callers in the United States can also call
1-202-551-8090 for further information on the operations of the public reference
facilities.

STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED)

TABLE OF CONTENTS

Consolidated Balance Sheets..................................................F-2

Consolidated Statements of Operations........................................F-4

Consolidated Statement of Shareholders' Equity (Deficit).....................F-5

Consolidated Statements of Cash Flows........................................F-6

Notes to Consolidated Financial Statements...................................F-7

F-1

STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

March 31, December 31,
2006 2005
----------- -----------
(Restated) (Restated)

ASSETS

Current assets:

Cash .......................................... $ 872,929 $ 1,019,259
Accounts receivable ........................... 4,261 7,489
Inventory ..................................... 21,403 22,110
Prepaid expenses .............................. 473,453 548,730
Deferred financing costs ...................... - 5,017
----------- -----------

Total current assets .......................... 1,372,046 1,602,605
----------- -----------

Equipment and furniture:

Office furniture and computers ................ 65,063 65,063
Accumulated depreciation ...................... (42,058) (39,734)
----------- -----------

Total equipment and furniture ................. 23,005 25,329
----------- -----------

Deferred tax assets ................................ - -
Deposits ........................................... 5,766 700
----------- -----------

Total assets .................................. $ 1,400,817 $ 1,628,634
=========== ===========

See accompanying notes to consolidated financial statements.

F-2

STARMED GROUP, INC. AND SUBSIDIARY
CONSLIDATED BALANCE SHEETS
(UNAUDITED) (con't.)

March 31, December 31,
2006 2005
----------- -----------
(Restated) (Restated)

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:

Accounts payable .............................. $ 67,794 $ 44,910
Accrued expenses .............................. 55,845 54,580
Income tax payable ............................ 9,314 9,359
Note payable .................................. - 259,245
Capital lease obligation ...................... 2,909 7,164
----------- -----------

Total current liabilities ..................... 135,862 375,258
----------- -----------

Commitments ........................................ - -

Shareholders' equity (deficit):
Preferred stock (par value $0.01) 25,000,000
shares authorized, no shares issued and
outstanding at March 31, 2006 and
December 31, 2005, respectively ............. - -
Common stock (par value $0.01) 100,000,000
shares authorized; 22,418,424 and 18,453,424
shares issued and outstanding at March 31,
2006 and December 31, 2005, respectively .... 224,184 184,534
Additional paid in capital .................. 3,184,416 2,168,566
Accumulated deficit ................................ (2,143,645) (1,099,724)
----------- -----------

Total shareholders' equity (deficit) ............... 1,264,955 1,253,376
----------- -----------

Total liabilities and shareholders' equity ......... $ 1,400,817 $ 1,628,634
=========== ===========

See accompanying notes to consolidated financial statements.

F-3

STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

FOR THE THREE MONTHS ENDED
MARCH 31,
2006 2005
------------ ------------

Sales ............................................ $ 4,770 $ 6,204
Revenues from royalties .......................... - 11,445
------------ ------------

Total revenues .............................. 4,770 17,649

Cost of sales .................................... 1,595 4,707
------------ ------------

Gross profit (loss) .............................. 3,175 12,942
------------ ------------

General, selling and administrative expenses:
Compensation ................................ 709,094 58,113
Professional fees ........................... 262,322 14,967
Accounting fees ............................. 47,556 4,519
Office ...................................... 27,901 3,356
Rent ........................................ 23,869 14,898
Insurance ................................... 6,220 5,085
Advertising, marketing and promotion ........ 16,249 565
Depreciation ................................ 2,324 2,324
Travel ...................................... 3,672 133
------------ ------------
Total general, selling and
administrative expenses ................. 1,099,207 103,960
------------ ------------

Income (loss) from operations .................... (1,096,032) (91,018)
------------ ------------

Interest expense ................................. - (930)
Interest Income .................................. 7,866 -
Gain on debt forgiveness of debt ................. 44,245 -
------------ ------------

Income (loss) before income taxes ................ (1,043,921) (91,948)
(Benefit) provision for income taxes ............. - (105,000)
------------ ------------

Net income (loss) ................................ $ (1,043,921) $ (196,948)
============ ============

Net income (loss) per share - basic .............. $ (0.05) $ (0.02)
============ ============

Net income (loss) per share - diluted ............ $ (0.05) $ (0.02)
============ ============
Weighted average number of shares
outstanding - basic ............................. 21,407,036 8,865,313
============ ============
Weighted average number of shares
outstanding - diluted ........................... 21,407,036 8,865,313
============ ============

See accompanying notes to consolidated financial statements.

F-4

STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)

PREFERRED STOCK COMMON STOCK
NUMBER OF PAR VALUE NUMBER OF PAR VALUE PAID IN ACCUMULATED
SHARES ($0.01) SHARES ($0.01) CAPITAL DEFICIT TOTAL
--------- --------- ---------- --------- ------------ ------------ ------------

Balance at December 31, 2005
(unaudited) (restated)........ - $ - 18,453,424 $ 184,534 $ 2,168,566 $(1,099,724) $ 1,253,376

Common shares issued for
Cash during first Quarter 2006 - - 1,740,000 17,400 417,600 - 435,000

Common shares issued for
Services provided ............ - - 2,225,000 22,250 378,250 - 400,500

Stock options issued
as compensation .............. - - - - 220,000 - 220,000

Net Loss ..................... - - - - - (1,043,921) (1,043,921)
--------- --------- ---------- --------- ----------- ----------- ------------

Balance at March 31, 2006
(restated) ................... - - 22,418,424 $ 224,184 $ 3,184,416 $(2,143,645) $ 1,264,955
========= ========= ========== ========= =========== =========== ============

See accompanying notes to consolidated financial statements.

F-5

STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

March 31, March 31,
2006 2005
----------- -----------

Cash flows from operating activities:
Net income (loss) ................................ $(1,043,921) $ (196,948)
----------- -----------

Adjustments to reconcile net income (loss) to
net cash:
Depreciation ..................................... 2,324 2,324
Deferred Tax Assets .............................. - 105,000
Shares Issued for Services ....................... 400,500 20,200
Stock Options issued as compensation ............... 220,000
Operating assets: .................................. -
Accounts Receivable .............................. 3,228 3,612
Decrease in Inventory ............................ 707 1,954
Prepaid expenses ................................. 75,277 68
(Decrease) Increase in Deposit ................... (5,066) 250
Increase (decrease) in deferred financing costs .. 5,017 -
Increase in Accounts Payable ....................... 22,884 1,253
Accrued expenses ................................. 1,265 -
Decrease in Income tax payable ..................... (45) -
----------- -----------

Net Cash Used by Operating Activities .............. (317,830) (62,287)
----------- -----------

Cash flows from financing activities:
Capital lease payments ............................. (4,255) (3,776)
Repayment of Note payable .......................... (259,245)
Cash received from issuance of common stock ........ 435,000
----------- -----------

Net cash provided (used) by financing activities ... 171,500 (3,776)
----------- -----------

Net increase (decrease) in cash .................... (146,330) (66,063)

Cash, beginning of period .......................... 1,019,259 72,708
----------- -----------

Cash, end of period ................................ $ 872,929 $ 6,645
=========== ===========

Supplemental information on non-cash and financing
activities
Stock issued for compensation and services ......... $ 400,500 $ 20,200
=========== ===========
Stock options issued for compensation .............. $ 220,000 $ -
=========== ===========
Supplemental cash flow information
Cash paid for interest ............................. $ - $ 930
=========== ===========
Cash paid for income taxes ......................... $ - $ -
=========== ===========

See accompanying notes to consolidated financial statements.

F-6

STARMED GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED)

1. HISTORY AND ORGANIZATION OF THE COMPANY;
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

The Company was incorporated in Nevada on August 13, 1981, under the name Port
Star Industries, Inc. and was organized to succeed to the properties, rights and
obligations of Port Star Industries, Inc., a publicly-held North Carolina
corporation formed on November 3, 1961 under the name of Riverside Homes, Inc.
("Port Star North Carolina").

At the time of our formation, Port Star North Carolina had no assets,
liabilities or operations. In order to change the domicile of Port Star North
Carolina to Nevada:

o Port Star North Carolina caused the Company's formation under the laws of
Nevada, with an authorized capitalization that "mirrored" the authorized
capitalization of Port Star North Carolina, and

o Issued to each stockholder of Port Star North Carolina a number of shares
of our common stock equal to such stockholder's share ownership of Port Star
North Carolina.

At the time of the reincorporation, Herman Rappaport, the founder, president and
chief executive officer was the principal stockholder of Port Star North
Carolina. Port Star North Carolina conducted no operations subsequent to the
reincorporation, and was administratively dissolved in 1988.

The Company engaged in no material operations from the time of its formation in
1981, and, in 1985, Nevada revoked the charter for failing to file required
reports.

On January 10, 2000, the Company revived its Nevada charter and changed its name
to StarMed Group, Inc. At the time of the revival, the Company had no assets or
liabilities, and Mr. Rappaport continued as our majority stockholder, either
directly or through his family trust.

On July 27, 2001, the Company acquired Sierra Medicinals, Inc., an Arizona
corporation incorporated in March 2000, in a share exchange whereby the Company
issued a total of 469,792 shares of common stock for all of the issued and
outstanding shares of Sierra Medicinals, Inc. Mr. Rappaport, either directly or
through his family trust, was a majority stockholder of Sierra Medicinals, Inc.
and now operates Sierra Medicinals, Inc. as a wholly owned subsidiary.

On September 10, 2003, the Company formed Vet Medicinals, Inc. as a wholly owned
subsidiary under the laws of the State of Nevada. Vet Medicinals, Inc. is
currently inactive.

The Company is engaged in two businesses: (1) it is developing a network of
StarMed Wellness Centers that will offer preventative, traditional medical and
alternative treatments directed towards achieving "total wellness," and (2) it
markets a line of over-the-counter, alternative medicinal products.
Historically, the Company's operations were devoted to formulating and marketing
a line of over-the-counter, alternative medicinal products. Severe competition
in the medicinal product market and the loss of a significant distribution
outlet whose revenues accounted for a substantial portion of the Company's 2004
revenues resulted in a significant reduction in the Company's product sales.
Therefore, during fiscal 2005 the Company's management made a strategic decision
and redirected its efforts to the development and establishment of a network of
StarMed Wellness Centers.

F-7

STARMED GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED)

BASIS FOR PRESENTATION

The financial information included herein is unaudited, however, such
information reflects all adjustments (consisting solely of normal occurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods. The results of operations for the
three months ended March 31, 2006 are not necessarily indicative of the results
to be expected for the full year.

RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

In connection with the preparation of audit of the December 31, 2005 audit of
the Company's consolidated financial statements and letters of comment received
from the Securities Exchange Commission, we determined that there were errors in
accounting treatment and reported amounts in our previously filed consolidated
financial statements. As a result, we determined to restate our consolidated
financial statements for the three months ended March 31, 2006 and 2005.

In connection with the restatement, we are designing internal procedures and
controls for purposes of the preparation and certification of our consolidated
financial statements going forward. In this process, we identified certain
errors in accounting determinations and judgments, which have been reflected in
the restated consolidated financial statements.

These restated consolidated financial statements include adjustments related to
the following:

Common Stock issued for Cancellation of Contract in Exchange for Accounts
Payable: During the year ended December 31, 2004, the Company issued
10,000 shares of common stock to a vendor in settlement of accounts
payable. At the time of the transaction, the shares of common stock were
valued at $2.08 per share. Management has since decided that the best fair
value on the date of issuance of the shares of common stock was $0.01. In
addition the Company will recognize $20,722 Gain on forgiveness of debt
during the year ended December 31, 2004. The December 31, 2004
consolidated financial statements filed with the December 31, 2005
consolidated financial statements have been restated to reflect these
adjustments.

The above adjustment did not affect previously reported cash balances as of
March 31, 2006 and December 31, 2005. The following tables present the effect of
the restatement adjustment by financial statement line item for the Consolidated
Balance Sheets, Statements of Operations, and Statements of Cash Flows.

F-8

STARMED GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED)

Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005

As of March 31, 2006 As of December 31, 2005
------------------------------------ ------------------------------------
AS AS
PREVIOUSLY AS PREVIOUSLY AS
REPORTED ADJUSTMENTS RESTATED REPORTED ADJUSTMENTS RESTATED
---------- ----------- ---------- ---------- ----------- ----------

ASSETS

Current assets:
Cash .......................................... 872,929 - 872,929 1,019,259 - 1,019,259
Accounts receivable ........................... 4,261 - 4,261 7,489 - 7,489
Inventory ..................................... 21,403 - 21,403 22,110 - 22,110
Prepaid expenses .............................. 473,453 - 473,453 548,730 - 548,730
Deferred financing costs ...................... - - - 5,017 - 5,017
Total current assets .............................. 1,372,046 - 1,372,046 1,602,605 - 1,602,605

Equipment and furniture:
Office furniture and computers ................ 65,063 - 65,063 65,063 - 65,063
Accumulated depreciation ...................... (42,058) - (42,058) (39,734) - (39,734)
Total equipment and furniture ................. 23,005 - 23,005 25,329 - 25,329

Deferred tax asset ................................ - - - - - -
Other asset ....................................... 5,766 - 5,766 700 - 700

Total Assets ...................................... 1,400,817 - 1,400,817 1,628,634 - 1,628,634

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable .............................. 67,794 - 67,794 44,910 - 44,910
Accrued expenses .............................. 55,845 - 55,845 54,580 - 54,580
Income tax payable ............................ 9,314 - 9,314 9,359 - 9,359
Note payable .................................. - - - 259,245 - 259,245
Capital lease obligation-current portion ...... 2,909 - 2,909 7,164 - 7,164
Total current liabilities ......................... 135,862 - 135,862 375,258 - 375,258

Long term debt:
Capital lease obligation-less current portion . - - - - - -
Total long term debt .............................. - - - - - -

Total Liabilities ................................. 135,862 - 135,862 375,258 - 375,258

Commitments and Contingencies

Shareholders' equity:
Preferred stock (par value $0.01) 25,000,000
shares authorized; 0 shares issued and
outstanding at March 31, 2006 and December
31, 2005, respectively ...................... - - - - - -
Common stock (par value $0.01) 100,000,000
shares authorized; 22,418,424 and 18,453,424
shares issued and outstanding at March 31,
2006 and December 31, 2005, respectively .... 224,184 - 224,184 184,534 - 184,534
Additional paid in capital .................... 3,205,138 (20,722) 3,184,416 2,189,288 (20,722) 2,168,566
Accumulated deficit ........................... (2,164,367) 20,722 (2,143,645) (1,120,446) 20,722 (1,099,724)
Total shareholders' equity (deficit) .............. 1,264,955 - 1,264,955 1,253,376 - 1,253,376

Total liabilities and shareholders' equity ........ 1,400,817 - 1,400,817 1,628,634 - 1,628,634

F-9

STARMED GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED)

Consolidated Statements of Operations for three months ended March 31, 2006 and
2005

For Period Ending March 31,
---------------------------------------------------------------------------
2006 2005
------------------------------------ ------------------------------------
AS AS
PREVIOUSLY AS PREVIOUSLY AS
REPORTED ADJUSTMENTS RESTATED REPORTED ADJUSTMENTS RESTATED
---------- ----------- ---------- ---------- ----------- ----------

Sales ............................................. 4,770 - 4,770 6,204 - 6,204
Revenues from royalties ........................... - - - 11,445 - 11,445
Total Revenues .................................... 4,770 - 4,770 17,649 - 17,649

Cost of sales ..................................... 1,595 - 1,595 4,707 - 4,707

Gross profit(loss) ................................ 3,175 - 3,175 12,942 - 12,942

Professional fees ................................. 262,322 - 262,322 14,967 - 14,967
Compensation ...................................... 709,094 - 709,094 58,113 - 58,113
Rent .............................................. 23,869 - 23,869 14,898 - 14,898
Accounting fees ................................... 47,556 - 47,556 4,519 - 4,519
Office ............................................ 27,901 - 27,901 3,356 - 3,356
Insurance ......................................... 6,220 - 6,220 5,085 - 5,085
Advertising, marketing and promotion .............. 16,249 - 16,249 565 - 565
Depreciation ...................................... 2,324 - 2,324 2,324 - 2,324
Travel ............................................ 3,672 - 3,672 133 - 133
Donations ......................................... - - - - - -
Total expenses .................................... 1,099,207 - 1,099,207 103,960 - 103,960

Loss from operations .............................. (1,096,032) - (1,096,032) (91,018) - (91,018)

Other income and (expense):
Other income ...................................... 7,866 - 7,866 (930) - (930)
Gain on decrease in fair value of stock ........... -
Guarantee obligation .............................. - - - - - -
Gain on forgiveness of debt ....................... 44,245 - 44,245 - - -
Interest obligation ............................... - - - - -
Total other income (expense) ...................... 52,111 - 52,111 (930) - (930)

Loss before income taxes .......................... (1,043,921) - (1,043,921) (91,948) - (91,948)
Provision for income taxes ........................ - - - (105,000) - (105,000)

Net loss .......................................... (1,043,921) - (1,043,921) (196,948) - (196,948)

Net loss per share-basic .......................... (0.05) - (0.05) (0.02) - (0.02)

Net loss per share-diluted ........................ (0.05) - (0.05) (0.02) - (0.02)

Weighted average of number
of shares outstanding-basic ....................... 21,407,036 - 21,407,036 8,865,313 - 8,865,313

Weighted average of number
of shares outstanding-diluted ..................... 21,407,036 - 21,407,036 8,865,313 - 8,865,313

F-10

STARMED GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED)

Consolidated Statements of Cash Flows for the three months ended March 31, 2006
and 2005

For the three months ended March 31,
---------------------------------------------------------------------------
2006 2005
------------------------------------ ------------------------------------
AS AS
PREVIOUSLY AS PREVIOUSLY AS
REPORTED ADJUSTMENTS RESTATED REPORTED ADJUSTMENTS RESTATED
---------- ----------- ---------- ---------- ----------- ----------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ....................................... (1,043,921) - (1,043,921) (196,948) - (196,948)
Adjustments to reconcile net loss to net cash ..... -
Depreciation and amortization .................. 2,324 - 2,324 2,324 - 2,324
Deferred tax asset ................................ - - - 105,000 - 105,000
Shares issued for services, net ................ 400,500 - 400,500 20,200 - 20,200
Stock Options issued as compensation .............. 220,000 - 220,000 - - -
Donation of inventory .......................... - - - - - -
Gain on reduction of stock price guarantee ..... - - - - - -
Gain on forgiveness of debt .................... - - - - - -
(Increase) decrease in operating assets ........... -
Accounts receivable ............................ 3,228 - 3,228 3,612 - 3,612
Inventory ...................................... 707 - 707 1,954 - 1,954
Prepaid expenses ............................... 75,277 - 75,277 68 - 68
(Decrease) Increase in Deposit .................... (5,066) - (5,066) 250 - 250
Increase (decrease) in deferred financing costs ... 5,017 - 5,017 - - -
Increase (decrease) in operating liabilities ...... -
Accounts payable ............................... 22,884 - 22,884 1,253 - 1,253
Accrued expenses ............................... 1,265 - 1,265 - - -
Income tax payable ............................. (45) - (45) - - -
Net cash provided by (used in) operating activities (317,830) - (317,830) (62,287) - (62,287)

CASH FLOWS FROM FINANCING ACTIVITIES
Capital lease payments ......................... (4,255) - (4,255) (3,776) - (3,776)
Repayment of note payable ...................... (259,245) - (259,245) - - -
Cash received from issuance of common stock ....... 435,000 - 435,000 - - -
Net cash provided by (used in) financing activities 171,500 - 171,500 (3,776) - (3,776)

Net increase (decrease) in cash ................... (146,330) - (146,330) (66,063) - (66,063)
Cash, beginning of period ......................... 1,019,259 - 1,019,259 72,708 - 72,708
Cash, end of period ............................... 872,929 - 872,929 6,645 - 6,645

Supplemental Information on Non-Cash Investing
and Financing Activities
Stock issued for compensation and services ..... 400,500 - 400,500 20,200 - 20,200
Stock issued for compensation .................. 220,000 - 220,000 - - -

Supplemental Cash Flow Information
Cash paid during year for:
Payments of interest ........................... - - - 930 - 930
Income taxes ................................... - - - - - -
Stock issued in exchange for accounts payable .. - - - - - -

F-11

STARMED GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED)

The accompanying consolidated financial statements do not include footnotes and
certain financial presentations normally required under generally accepted
accounting principles; and therefore, should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2005.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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

REVENUE RECOGNITION

The Company has adopted SEC Staff Accounting Bulletin No. 101 "Revenue
Recognition in Financial Statements" (SAB 101) and accordingly recognizes
revenue upon shipment of the product to customers, upon fulfillment of
acceptance terms, if any, when no significant contractual obligations remain and
collection of the related receivable is reasonably assured. Our sales of
products allow customers a 30-day money back guarantee, less shipping costs, for
unused products. The Company has adopted SFAS 48 "Revenue Recognition When Right
of Return Exists" for the website sales and records revenue net of a provision
for estimated product returns.

USE OF ESTIMATES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments consist principally of cash, payables and accrued
expenses. The estimated fair value of these instruments approximate their
carrying value.

INVENTORY

The Company contracts a third party to process and package its formulated herbal
products. The Company accounts for its inventory of finished goods on a
first-in, first-out basis or market, if it should be lower.

EQUIPMENT AND FURNITURE

Equipment and furniture is stated at cost and depreciated using the
straight-line method over the estimated useful life of the assets, which is
seven years. The Company has acquired its computers under a capital lease.

INCOME TAXES

Deferred income taxes are reported using the liability method. Deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.

F-12

STARMED GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED)

STOCK BASED COMPENSATION

On January 1, 2006, the Company adopted the fair value recognition provisions of
SFAS No. 123( R ), Share-Based Payment. Prior to January 1, 2006, the Company
accounted for share-based payments under the recognition and measurement
provisions of APB Opinion NO. 25, Accounting for Stock Issued to Employees, and
related Interpretations, as permitted by FASB Statement No. 123, Accounting for
Stock Based Compensation. In accordance with APB 25, no compensation cost was
required to be recognized for options granted that had an exercise price equal
to the market value of the underlying common stock on the date of grant.

The Company adopted FAS 123R using the modified prospective transition method.
Under this method, compensation cost recognized in the quarter ended March 31,
2006 includes: a) compensation cost for all share-based payments granted prior
to, but not yet vested as of January 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of FAS 123, and b)
compensation cost for all share-based payments granted subsequent to January 1,
2006, based on the grant-date fair value estimated in accordance with the
provisions of FAS 123R. Since no stock options were granted to employees prior
to December 31, 2005, the results for prior periods have not been restated.

As disclosed in Note 5, the Company issued 1,000,000 stock options to Herman
Rappaport, an officer of the Company. The stock options were valued on the date
of grant. The weighted average fair value of each option was $0.22. The fair
value of the options were measured using the Black Scholes option pricing model.
The model used the following assumptions: exercise price $0.35, weighted average
life of options five years, risk free interest rate 4.50%, and average dividend
yield of 0.00%. The Company charged $220,000 to compensation expense during the
three months ended March 31,2006

ADVERTISING COSTS

The Company expenses advertising costs as incurred. For the three months ending
March 31, 2006 and 2005, the Company incurred advertising expense of $16,249 and
$565, respectively.

LOSS PER SHARE

In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128 "Earnings Per Share" which requires the Company to present basic and
diluted earnings per share, for all periods presented. The computation of loss
per common share (basic and diluted) is based on the weighted average number of
shares actually outstanding during the period.

RECLASSIFICATIONS

Certain amounts in the prior period presented have been reclassified to conform
to the current period financial statement presentation. These reclassifications
have no effect on previously reported accumulated deficit.

3. CORPORATE CREDIT CARD

The Company has available up to $21,000 from two unsecured corporate credit
cards. The Company had an outstanding balance of $9,682 as of March 31, 2006,
which is included in accounts payable. The Company intends to pay off all
outstanding credit balances on a monthly basis.

4. DEBT

F-13

STARMED GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED)

shares of common stock valued at the bid price on the date of payment. At that
time, there was no public market for the Company's common stock. The Company's
liability associated with the guarantee and option clause of the agreement of
$288,050 was included in accrued expenses on the accompanying consolidated
balance sheet at March 31, 2005.

The Company adopted accounting provisions of EITF 00-19, "Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock". Based on this pronouncement, in 2005 the Company reduced
the $288,050 liability included in accrued expenses to $259,245 which resulted
in a gain of $28,805. This gain resulted from the reduction in the guarantee
obligation based on the stock price changing from 1 to 35 cents at December 31,
2005.

On February 7, 2006, the Company entered into a settlement agreement with the
creditor pursuant to which the 2003 agreement was rescinded and cancelled, the
Company paid the creditor $215,000, the indebtedness was cancelled. The
remaining balance of notes payable was included in Gain on forgiveness of debt
of $44,245.

5. CAPITAL STOCK

Between November 2005 and January 2006, the Company sold an aggregate of
9,442,000 units of our securities to 99 accredited investors in an offering
exempt from registration under the Securities Act in reliance on exemptions
provided by Section 4(2) and Rule 506 of Regulation D of the Securities Act.
Each unit was sold for a purchase price of $0.25, and consisted of one share of
our common stock and one redeemable five year common stock purchase warrant,
exercisable at $1.00 per share, which resulted in the issuance by us of an
aggregate of 9,442,000 shares of common stock and common stock purchase warrants
to purchase an additional 9,442,000 shares of our common stock. Gross proceeds
were $2,360,500. Included in the total of 9,442,000 units are 1,740,000 units of
securities sold on January 17, 2006, which resulted in gross proceeds of
$435,000.

For one year following the date of issuance, the Company is obligated to issue
additional shares of Company common stock to purchasers of the units to protect
them against dilution in the event that we issue shares of our common stock
during such one-year period at less than $.25 per share. In addition, for a one
year period following the date of issuance and continuing until the warrants
expire, the exercise price is subject to "weighted-average" anti-dilution
protection for subsequent issuances of common stock or securities convertible
into common stock at less than the then current warrant exercise price,
excluding certain issuances unrelated to capital raising transactions. The
warrants also contain customary anti-dilution adjustments in the event of stock
splits, reorganizations and similar corporate events.

Joseph Stevens & Company, Inc. acted as placement agent for us in this offering.
As compensation for their services we paid Joseph Stevens & Company, Inc.
commissions equal to 10% of the gross proceeds of the offering ($236,500) and a
non-accountable expense allowance equal to 3% of the gross proceeds ($70,815),
and issued Joseph Stevens & Company, Inc. or its designees an aggregate of
2,225,000 shares of our common stock. (The shares of common stock were valued at
$400,500.) We are using the net proceeds from this offering to establish
additional StarMed Wellness Centers and for general working capital. The Company
agreed to file a registration statement with the Securities and Exchange
Commission covering the shares of common stock, including the shares underlying
the warrants, issued in this offering so as to permit the public resale of such
shares (see Note 8).

F-14

STARMED GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(UNAUDITED)

2004 EQUITY COMPENSATION PLAN

In fiscal 2004 the Company established our 2004 Equity Compensation Plan. The
original Plan was approved by our board of directors and a majority of our
shareholders. The purpose of the Plan is to enable the Company to attract and
retain top-quality employees, officers, directors and consultants and to provide
such employees, officers, directors and consultants with an incentive to enhance
stockholder returns. The Plan provides for the grant to Company directors,
officers, employees and consultants of stock based awards and options to
purchase shares of our common stock. All of our executive officers, directors
and employees are be eligible to participate in the Plan. The plan is funded
with 4,050,000 shares of Company common stock (including an increase of
3,000,000 shares authorized by the board of directors and a majority of our
shareholders in February 2006). In February 2006, our Board of Directors granted
Herman Rappaport an option to purchase 1,000,000 common shares at an exercise
price of $.35. As of March 31, 2006, there were no other options granted under
the Plan. In addition, as of March 31, 2006, 400,000 shares in stock awards have
been issued under the Plan, and 2,650,000 shares remained available for
issuance.

6. INCOME TAXES

The Company had available unused federal and state operating loss carry-forwards
of approximately $1,490,000 at December 31, 2005 that may be applied against
future taxable income. SFAS No. 109 requires a valuation allowance to be
recorded when it is more likely than not that some or all of the deferred tax
assets will not be realized. As of March 31, 2006 the Company has determined
that the net operating losses likely will not be utilized. Accordingly, the
Company has increased the valuation allowance to 100% of all deferred tax
assets.

7. RELATED PARTY TRANSACTIONS

The Company owes two shareholders a total of $55,962 and $42,344 in expense
reimbursements as of March 31, 2006 and 2005, respectively. These amounts are
included in accrued expenses.

8. COMMITMENTS AND CONTINGENCIES

OFFICE LEASE

REGISTRATION STATEMENT

Between November 2005 and February 2006, the Company sold an aggregate of
9,442,000 units of the Company's securities to 99 accredited investors in an
offering exempt from registration under the Securities Act in reliance on
exemptions provided by Section 4(2) and Rule 506 of Regulation D of the
Securities Act of 1933 (as amended, the "Securities Act"). The Company has
agreed to file a registration statement with the Securities and Exchange
Commission covering the shares of common stock, including the shares underlying
the warrants, issued in this offering so as to permit the resale thereof. If the
Company fails to file the registration statement on a timely basis or it is not
declared effective within this time frame, or if once the registration statement
is declared effective it does not remain so for 30 consecutive days, then the
number of shares of our common stock included in the units sold to the investors
in the offering and the number of shares of our common stock issuable upon the
exercise of the warrants included in the units will be automatically increased
by 2% for each 30 day period in which these time frames are not met. This
penalty provision was triggered as of March 20, 2006, and as a result, the
Company will be subject to the penalty until it is able to fulfill the
conditions with respect to the registration statement. The Company intends to
file the registration statement prior to the end of May 2006, but it can provide
no assurances as to when the registration statement will become effective.

F-15

STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2005 AND 2004

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm ....................F-17

Consolidated Balance Sheets.................................................F-18

Consolidated Statements of Operations.......................................F-19

Consolidated Statement of Shareholders' Equity (Deficit)....................F-20

Consolidated Statements of Cash Flows.......................................F-21

Notes to Consolidated Financial Statements..................................F-22

F-16

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Starmed Group, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheets of Starmed Group,
Inc. and its subsidiary, as of December 31, 2005 and 2004, and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for the years then ended. 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 audits to obtain reasonable assurance about whether the
consolidated 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 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, revised
as described in Note 1, present fairly, in all material respects, the financial
position of Starmed Group, Inc. and its subsidiary as of December 31, 2005 and
2004, and the results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.

As discussed in Note 1 to the consolidated financial statements, the Company's
additional paid in capital, accumulated deficit, and net loss previously
reported as of and for the years ended December 31, 2005 and 2004 previously
reported as $2,189,288, $(1,120,446) and $(805,910), and $109,646, $(314,536),
and $(99,877), respectively, should have been reported as $2,168,566,
$(1,099,724), and $(805,910), and $88,924, $(293,814), and $(79,155),
respectively. This discovery was made subsequent to the issuance of the
consolidated financial statements. The consolidated financial statements have
been restated to reflect this correction.

MENDOZA BERGER & COMPANY, LLP

Irvine, California
February 17, 2006, except for Notes 1 and 5,
as to which the date is July 19, 2006

F-17

STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2005 AND 2004
_______________________________________________________________________________________________

ASSETS
2005 2004
----------- -----------
(Restated) (Restated)

Current assets:
Cash ..................................................... $ 1,019,259 $ 72,708
Accounts receivable ...................................... 7,489 16,561
Inventory ................................................ 22,110 32,970
Prepaid expenses ......................................... 553,747 2,113
----------- -----------

Total current assets ................................. 1,602,605 124,352

Equipment and furniture:
Office furniture and computers ......................... 65,063 65,063
Accumulated depreciation ............................... (39,734) (30,438)
----------- -----------

Total equipment and furniture ........................ 25,329 34,625
----------- -----------

Deferred tax asset ....................................... - 105,000
Other assets ............................................. 700 5,266
----------- -----------

Total assets ......................................... $ 1,628,634 $ 269,243
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable ......................................... $ 44,910 $ 21,381
Accrued expenses ......................................... 313,825 334,105
Income tax payable ....................................... 9,359 25,400
Capital lease obligation - current portion ............... 7,164 15,808
----------- -----------

Total current liabilities ............................ 375,258 396,694

Long term debt:

Capital lease obligation - less current portion .......... - 6,875
----------- -----------

Total long term debt ................................. - 6,875
----------- -----------

Total liabilities .................................... 375,258 403,569

Commitments and Contingencies .............................. - -

Shareholders' equity:
Preferred stock (par value $0.01) 25,000,000 shares
authorized; 0 shares issued and outstanding at
December 31, 2005 and 2004, respectively ............... - -
Common stock (par value $0.01) 100,000,000 shares
authorized; 18,453,424 and 7,056,424 shares issued and
outstanding at December 31, 2005 and 2004, respectively 184,534 70,564
Additional paid in capital ............................... 2,168,566 88,924
Accumulated deficit ...................................... (1,099,724) (293,814)
----------- -----------

Total shareholders' equity (deficit) ................. 1,253,376 (134,326)
----------- -----------

Total liabilities and shareholders' equity ........... $ 1,628,634 $ 269,243
=========== ===========

The accompanying notes are an integral part of these financial statements

F-18

STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
_______________________________________________________________________________________________

2005 2004
------------ ------------
(Restated)

Sales .................................................... $ 23,775 $ 1,742,351
Cost of sales ............................................ (29,493) (1,405,861)
------------ ------------

Gross (loss) profit ...................................... (5,718) 336,490

Revenue from royalties ................................... 24,486 104,776
------------ ------------

Total net revenues .................................. 18,768 441,266
------------ ------------

Professional fees ........................................ 185,563 39,131
Compensation ............................................. 278,857 240,555
Rent ..................................................... 68,211 59,417
Accounting fees .......................................... 41,724 36,195
Office ................................................... 37,762 57,120
Insurance ................................................ 23,776 18,028
Advertising, marketing and promotion ..................... 11,136 46,212
Depreciation ............................................. 9,296 9,297
Travel ................................................... 3,696 988
Donations ................................................ - 27,915
------------ ------------

Total expenses ...................................... 660,021 534,858
------------ ------------

Loss from operations ..................................... (641,253) (93,592)

Other income and (expense)
- --------------------------
Other income ............................................. 1,222 -
Gain on decrease in fair value of stock price guarantee
obligation .............................................. 28,805 -
Gain on forgiveness of debt .............................. - 20,722
Interest expense ......................................... (88,834) (5,385)
------------ ------------
Total other income (expense) ........................ (58,807) (15,337)
------------ ------------
Loss before income taxes ................................. (700,060) (78,255)
Provision for income taxes ............................... (105,850) (900)
------------ ------------

Net loss ................................................. $ (805,910) $ (79,155)
============ ============

Net loss per share - basic ............................... $ (0.08) $ (0.01)
============ ============

Net loss per share - diluted ............................. $ (0.08) $ (0.01)
============ ============

Weighted average number of shares outstanding - basic .... 10,348,651 7,050,753
============ ============

Weighted average number of shares outstanding - diluted .. 10,348,651 7,050,753
============ ============

The accompanying notes are an integral part of these financial statements

F-19

STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
_______________________________________________________________________________________________________

PREFERRED STOCK COMMON STOCK
----------------- ---------------------
NUMBER PAR VALUE NUMBER PAR VALUE
OF $0.01 PER OF $0.01 PER PAID IN ACCUMULATED
SHARES SHARE SHARES SHARE CAPITAL DEFICIT TOTAL
------ --------- ---------- --------- ----------- ----------- -----------

Balance at
December 31, 2003 . - $ - 6,936,424 $ 69,364 $ 88,924 $ (214,659) $ (56,371)

Common shares issued
for services in
January 2004,
valued at $0.01
per share ......... - - 110,000 1,100 - - 1,100

Common shares issued
for cancellation of
contract in
exchange for
accounts payable in
March 2004, valued
at $2.08 per share
(restated) ........ - - 10,000 100 - - 100

Net loss ........... - - - - - (79,155) (79,155)
------ --------- ---------- --------- ----------- ----------- -----------

Balance at
December 31, 2004
(restated) ........ - - 7,056,424 70,564 88,924 (293,814) (134,326)

Common shares issued
for services during
2005 .............. - - 2,070,000 20,700 - - 20,700

Issuance of warrants - - - - 67,500 - 67,500

Common shares issued
for services to be
provided .......... - - 1,625,000 16,250 552,500 - 568,750

Common shares issued
for cash .......... - - 7,702,000 77,020 1,459,642 - 1,536,662

Net loss ........... - - - - - (805,910) (805,910)
------ --------- ---------- --------- ----------- ----------- -----------

Balance at
December 31, 2005
(restated) ........ - $ - 18,453,424 $ 184,534 $ 2,168,566 $(1,099,724) $ 1,253,376
====== ========= ========== ========= =========== =========== ===========

The accompanying notes are an integral part of these financial statements

F-20

STARMED GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
_______________________________________________________________________________________________

2005 2004
----------- -----------
(Restated)

Cash flows from operating activities:
Net loss .............................................. $ (805,910) $ (79,155)
Adjustments to reconcile net (loss) to net cash:
Depreciation and amortization.......................... 65,611 9,297
Shares issued for compensation and services, net....... 517,973 1,100
Donation of inventory ................................. - 27,915
Gain on reduction of stock price guarantee ............ 28,805 -
Gain on forgiveness of debt ........................... - (20,722)
(Increase) decease in operating assets:
Accounts receivable ................................... 9,072 3,653
Inventory ............................................. 10,860 (15,392)
Prepaid expenses ...................................... (497,777) 3,833
Deferred tax assets ................................... 105,000 1,047
Other assets .......................................... 4,566 -
Increase (decrease) in operating liabilities:
Accounts payable ...................................... 23,529 (91,324)
Accrued expenses ...................................... (20,280) (21,743)
Income tax payable .................................... (16,041) 25,400
----------- -----------

Net cash provided by (used in) operating activities ...... (574,592) (156,091)
----------- -----------

Cash flows from financing activities:
Proceeds from note payable and warrants ............... 500,000 -
Repayment of note payable ............................. (500,000) -
Capital lease ......................................... (15,519) (18,489)
Common stock issued for cash .......................... 1,536,662 -
----------- -----------

Net cash provided by (used in) financing activities ...... 1,521,143 (18,489)
----------- -----------

Net increase (decrease) in cash .......................... 946,551 (174,580)

Cash, beginning of period ................................ 72,708 247,288
----------- -----------

Cash, end of period ...................................... $ 1,019,259 $ 72,708
=========== ===========

SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING
AND FINANCING ACTIVITIES:

Stock issued for compensation and services ............ $ 20,700 $ 1,100
=========== ===========

Stock issued for future services....................... $ 568,750 $ -
=========== ===========

Warrants issued ....................................... $ 67,500 $ -
=========== ===========

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid during the year for:

Payments of interest .................................. $ 1,392 $ 5,385
=========== ===========

Income taxes .......................................... $ 16,481 $ -
=========== ===========

Stock issued in exchange for accounts payable ......... $ - $ 100
=========== ===========

The accompanying notes are an integral part of these financial statements

F-21

STARMED GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

1. HISTORY AND ORGANIZATION OF THE COMPANY;
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------

The Company was incorporated in Nevada on August 13, 1981, under the name
Port Star Industries, Inc. and was organized to succeed to the properties,
rights and obligations of Port Star Industries, Inc., a publicly-held
North Carolina corporation formed on November 3, 1961 under the name of
Riverside Homes, Inc. ("Port Star North Carolina").

At the time of our formation, Port Star North Carolina had no assets,
liabilities or operations. In order to change the domicile of Port Star
North Carolina to Nevada:

o Port Star North Carolina caused the Company's formation under the laws
of Nevada, with an authorized capitalization that "mirrored" the
authorized capitalization of Port Star North Carolina, and

o Issued to each stockholder of Port Star North Carolina a number of
shares of our common stock equal to such stockholder's share ownership
of Port Star North Carolina.

At the time of the reincorporation, Herman Rappaport, the founder,
president and chief executive officer was the principal stockholder of
Port Star North Carolina. Port Star North Carolina conducted no operations
subsequent to the reincorporation, and was administratively dissolved in
1988.

The Company remained inactive until March 20, 1984, when the stockholders
voted to acquire Energy Dynamics, Inc., and changed its name to Energy
Dynamics, Inc. However, on March 20, 1985, the acquisition was rescinded
due to non-performance by Energy Dynamics. At this time, the Company
changed its name to Heathercliff Group Inc., and from 1984 to 1985,
engaged in real estate development. Real estate operations ceased in 1985,
and, later that year, Nevada revoked the charter for failing to file
required reports.

On January 10, 2000, the Company revived its Nevada charter and changed
its name to StarMed Group, Inc. At the time of the revival, the Company
had no assets or liabilities, and Mr. Rappaport continued as our majority
stockholder, either directly or through his family trust.

On July 27, 2001, the Company acquired Sierra Medicinals, Inc., an Arizona
corporation incorporated in March 2000, in a share exchange whereby the
Company issued a total of 469,792 shares of common stock for all of the
issued and outstanding shares of Sierra Medicinals, Inc. Mr. Rappaport,
either directly or through his family trust, was a majority stockholder of
Sierra Medicinals, Inc. and now operates Sierra Medicinals, Inc. as a
wholly owned subsidiary.

On September 10, 2003, the Company formed Vet Medicinals, Inc. as a wholly
owned subsidiary under the laws of the State of Nevada. Vet Medicinals,
Inc. is currently inactive.

F-22

The Company is engaged in two businesses: (1) it is developing a network
of StarMed Wellness Centers that will offer preventative, traditional
medical and alternative treatments directed towards achieving "total
wellness," and (2) it markets a line of over-the-counter, alternative
medicinal products. Historically, the Company's operations were devoted to
formulating and marketing a line of over-the-counter, alternative
medicinal products. Severe competition in the medicinal product market and
the loss of a significant distribution outlet whose revenues accounted for
a substantial portion of the Company's 2004 revenues have resulted in a
significant reduction in the Company's product sales. Therefore, during
fiscal 2005 the Company's management made a strategic decision and
redirected its efforts to the development and establishment of a network
of StarMed Wellness Centers.

RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------

In connection with the preparation of audit of the December 31, 2005 audit
of the Company's consolidated financial statements and letters of comment
received from the Securities Exchange Commission, we determined that there
were errors in accounting treatment and reported amounts in our previously
filed consolidated financial statements. As a result, we determined to
restate our consolidated financial statements for the years ended December
31, 2005 and 2004.

In connection with the restatement, we are designing internal procedures
and controls for purposes of the preparation and certification of our
consolidated financial statements going forward. In this process, we
identified certain errors in accounting determinations and judgments,
which have been reflected in the restated consolidated financial
statements.

These restated consolidated financial statements include adjustments
related to the following:

The above adjustment did not affect previously reported cash balances as
of December 31, 2005 or 2004. The following table presents the effect of
the restatement adjustment by financial statement line item for the
Consolidated Balance Sheets, Statements of Operations, and Statements of
Cash Flows.

F-23

Consolidated Balance Sheets as of December 31, 2005 and 2004

As of December 31,
---------------------------------------------------------------------------
2005 2004
------------------------------------ ------------------------------------
AS AS
PREVIOUSLY AS PREVIOUSLY AS
REPORTED ADJUSTMENTS RESTATED REPORTED ADJUSTMENTS RESTATED
---------- ----------- ---------- ---------- ----------- ----------

ASSETS

Current assets:

Cash .......................................... 1,019,259 - 1,019,259 72,708 - 72,708
Accounts receivable ........................... 7,489 - 7,489 16,561 - 16,561
Inventory ..................................... 22,110 - 22,110 32,970 - 32,970
Prepaid expenses .............................. 553,747 - 553,747 2,113 - 2,113
Total current assets .............................. 1,602,605 - 1,602,605 124,352 - 124,352

Equipment and furniture:

Office furniture and computers ................ 65,063 - 65,063 65,063 - 65,063
Accumulated depreciation ...................... (39,734) - (39,734) (30,438) - (30,438)
Total equipment and furniture ................. 25,329 - 25,329 34,625 - 34,625

Deferred tax asset ................................ - - - 105,000 - 105,000
Other asset ....................................... 700 - 700 5,266 - 5,266

Total Assets ...................................... 1,628,634 - 1,628,634 269,243 - 269,243

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:

Accounts payable .............................. 44,910 - 44,910 21,381 - 21,381
Accrued expenses .............................. 313,825 - 313,825 334,105 - 334,105
Income tax payable ............................ 9,359 - 9,359 25,400 - 25,400
Capital lease obligation-current portion ...... 7,164 - 7,164 15,808 - 15,808
Total current liabilities ......................... 375,258 - 375,258 396,694 - 396,694

Long term debt:

Capital lease obligation-less current portion . - - - 6,875 - 6,875
Total long term debt .............................. - - - 6,875 - 6,875

Total Liabilities ................................. 375,258 - 375,258 403,569 - 403,569

Commitments and Contingencies

Shareholders' equity:

Preferred stock (par value $0.01) 25,000,000
shares authorized; 0 shares issued and
outstanding at December 31, 2005 and 2004,
respectively ................................ - - - - - -
Common stock (par value $0.01) 100,000,000
shares authorized; 18,453,424 and 7,056,424
shares issued and outstanding at December 31,
2005 and 2004, respectively ................. 184,534 - 184,534 70,564 - 70,564
Additional paid in capital .................... 2,189,288 (20,722) 2,168,566 109,646 (20,722) 88,924
Accumulated deficit ........................... (1,120,446) 20,722 (1,099,724) (314,536) 20,722 (293,814)
Total shareholders' equity (deficit) .............. 1,253,376 - 1,253,376 (134,326) - (134,326)

Total liabilities and shareholders' equity ........ 1,628,634 - 1,628,634 269,243 - 269,243

F-24

Consolidated Statements of Operations for the years ended December 31,
2005 and 2004

For the year ended December 31,
---------------------------------------------------------------------------
2005 2004
------------------------------------ ------------------------------------
AS AS
PREVIOUSLY AS PREVIOUSLY AS
REPORTED ADJUSTMENTS RESTATED REPORTED ADJUSTMENTS RESTATED
---------- ----------- ---------- ---------- ----------- ----------

Sales ............................................. 23,775 - 23,775 1,742,351 - 1,742,351
Cost of Sales ..................................... (29,493) - (29,493) (1,405,861) - (1,405,861)
Gross (loss) profit ............................... (5,718) - (5,718) 336,490 - 336,490

Revenue from royalties ............................ 24,486 - 24,486 104,776 - 104,776

Total net revenues .............................. 18,768 - 18,768 441,266 - 441,266

Professional fees ................................. 185,563 - 185,563 39,131 - 39,131
Compensation ...................................... 278,857 - 278,857 240,555 - 240,555
Rent .............................................. 68,211 - 68,211 59,417 - 59,417
Accounting fees ................................... 41,724 - 41,724 36,195 - 36,195
Office ............................................ 37,762 - 37,762 57,120 - 57,120
Insurance ......................................... 23,776 - 23,776 18,028 - 18,028
Advertising, marketing and promotion .............. 11,136 - 11,136 46,212 - 46,212
Depreciation ...................................... 9,296 - 9,296 9,297 - 9,297
Travel ............................................ 3,696 - 3,696 988 - 988
Donations ......................................... - - - 27,915 - 27,915

Total expenses .................................. 660,021 - 660,021 534,858 - 534,858

Loss from operations .............................. (641,253) - (641,253) (93,592) - (93,592)

Other income and (expense):
Other income .................................... 1,222 - 1,222 - - -
Gain on decrease in fair value of stock ......... -
guarantee obligation ............................ 28,805 - 28,805 - - -
Gain on forgiveness of debt ..................... - - - - 20,722 20,722
Interest obligation ............................. (88,834) - (88,834) (5,385) - (5,385)

Total other income (expense) ...................... (58,807) - (58,807) (5,385) 20,722 15,337

Loss before income taxes .......................... (700,060) - (700,060) (98,977) 20,722 (78,255)
Provision for income taxes ........................ (105,850) - (105,850) (900) - (900)

Net loss .......................................... (805,910) - (805,910) (99,877) 20,722 (79,155)

Net loss per share-basic .......................... (0.08) - (0.08) (0.01) - (0.01)

Net loss per share-diluted ........................ 0.08 - 0.08 (0.01) - (0.01)

Weighted average of number
of shares outstanding-basic ..................... 10,348,651 - 10,348,651 7,050,753 - 7,050,753

Weighted average of number
of shares outstanding-diluted ................... 10,348,651 - 10,348,651 7,050,753 - 7,050,753

F-25

Consolidated Statements of Cash Flows for the years ended December 31,
2005 and 2004

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ....................................... (805,910) - (805,910) (99,877) 20,722 (79,155)
Adjustments to reconcile net loss to net cash ..... -
Depreciation and amortization .................. 65,611 - 65,611 9,297 - 9,297
Shares issued for services, net ................ 517,973 - 517,973 1,100 - 1,100
Donation of inventory .......................... - - - 27,915 - 27,915
Gain on reduction of stock price guarantee ..... 28,805 - 28,805 - - -
Gain on forgiveness of debt .................... - - - - (20,722) (20,722)
(Increase) decrease in operating assets ........... -
Accounts receivable ............................ 9,072 - 9,072 3,653 - 3,653
Inventory ...................................... 10,860 - 10,860 (15,392) - (15,392)
Prepaid expenses ............................... (497,777) - (497,777) 3,833 - 3,833
Deferred tax assets ............................ 105,000 - 105,000 1,047 - 1,047
Other assets ................................... 4,566 - 4,566 - - -
Increase (decrease) in operating liabilities ...... -
Accounts payable ............................... 23,529 - 23,529 (91,324) - (91,324)
Accrued expenses ............................... (20,280) - (20,280) (21,743) - (21,743)
Income tax payable ............................. (16,041) - (16,041) 25,400 - 25,400
Net cash provided by (used in) operating activities (574,592) - (574,592) (156,091) - (156,091)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from not payable warrants ............. 500,000 - 500,000 - - -
Repayment of note payabe ....................... (500,000) - (500,000) - - -
Capital lease .................................. (15,519) - (15,519) (18,489) - (18,489)
Common stock issued for cash ................... 1,536,662 - 1,536,662 - - -
Net cash provided by (used in) financing activities 1,521,143 - 1,521,143 (18,489) - (18,489)

Net increase (decrease) in cash ................... 946,551 - 946,551 (174,580) - (174,580)
Cash, beginning of period ......................... 72,708 - 72,708 247,288 - 247,288
Cash, end of period ............................... 1,019,259 - 1,019,259 72,708 - 72,708

Supplemental Information on Non-Cash Investing
and Financing Activities

Stock issued for compensation and services ..... 20,700 - 20,700 1,100 - 1,100
Stock issued for future services ............... 568,750 - 568,750 - - -
Warrants issued ................................ 67,500 - 67,500 - - -

Supplemental Cash Flow Information
Cash paid during year for:
Payments of interest ........................... 1,392 - 1,392 5,385 - 5,385
Income taxes ................................... 16,481 - 16,481 - - -
Stock issued in exchange for accounts payable .. - - - 20,822 (20,722) 100

F-26

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------

PRINCIPLES OF CONSOLIDATION
---------------------------

The consolidated financial statements include the financial statements of
the Company and its wholly-owned subsidiary, Sierra Medicinals, Inc. All
significant intercompany balances and transactions have been eliminated in
consolidation.

REVENUE RECOGNITION
-------------------

During 2005 and 2004, the Company had sales of approximately $12,160 and
$40,000, respectively, to customers through the Company's website. These
sales allow customers a 30-day money back guarantee, less shipping costs,
for unused products. The Company has adopted SFAS 48 "Revenue Recognition
When Right of Return Exists" for the website sales and records revenue net
of a provision for estimated product returns.

USE OF ESTIMATES
----------------

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

FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------

Financial instruments consist principally of cash, payables and accrued
expenses. The estimated fair value of these instruments approximate their
carrying value.

F-27

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
------------------------------------------

INVENTORY
---------

The Company contracts a third party to process and package its formulated
herbal products. The Company accounts for its inventory of finished goods
on a first-in, first-out basis or market, if it should be lower.

During the years ended December 31, 2005 and 2004, the Company disposed of
expired inventory totaling $0 and $27,915 through donations to a
not-for-profit organization, respectively.

EQUIPMENT AND FURNITURE
-----------------------

Equipment and furniture is stated at cost and depreciated using the
straight-line method over the estimated useful life of the assets, which
is seven years. The Company has acquired its computers under a capital
lease.

INCOME TAXES
------------

Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of
assets and liabilities and their tax bases.

Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.

ADVERTISING COSTS
-----------------

The Company expenses advertising costs as incurred. For the years ended
December 31, 2005 and 2004, the Company incurred advertising expense of
$11,136 and $46,212, respectively.

EARNINGS PER SHARE
------------------

In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128 "Earnings Per Share" which requires the Company to present
basic and diluted earnings per share, for all periods presented. The
computation of loss per common share (basic and diluted) is based on the
weighted average number of shares actually outstanding during the period.

F-28

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
------------------------------------------

CONCENTRATIONS
--------------

During 2005 internet customers accounted for 51% of sales and in 2004, a
single customer accounted for 97% of sales.

During 2005 and 2004, products purchased from a manufacturer accounted for
approximately 100% and 96% of purchases, respectively.

RECLASSIFICATIONS
-----------------

Certain amounts in the prior period presented have been reclassified to
conform to the current period financial statement presentation. These
reclassifications have no effect on previously reported accumulated
deficit.

3. CORPORATE CREDIT CARD
---------------------

The Company has available up to $21,000 on an unsecured corporate credit
card. The minimum payment due was $331 as of December 31, 2005. The
Company had an outstanding balance of $9,946 as of December 31, 2005,
which is included in accounts payable.

4. DEBT
----

On July 23, 2003, the Company entered into an agreement for the
cancellation of the note payable in the amount of $467,255 including
accrued interest through July 23, 2003, in exchange for the issuance
82,300 restricted shares of common stock. The agreement includes a
guarantee and option whereby the Company guarantees a market price of
$3.50 per share in the event of the future sale of the shares by the
related shareholder in the form of either cash or additional shares of
common stock valued at the bid price on the date of payment. Currently
there is no public market for the Company's common stock. The Company's
liability associated with the guarantee and option clause of the agreement
of $288,050 is included in accrued expenses on the accompanying
consolidated balance sheet at December 31, 2004.

The Company adopted accounting provisions of EITF 00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock. Based on this pronouncement, in 2005 the Company
reduced the $288,050 liability included in accrued expenses to $259,245
which resulted in a gain of $28,805. This gain resulted from the reduction
in the guarantee obligation based on the stock price changing from 1 to 35
cents at December 31, 2005.

F-29

4. DEBT (Continued)
----

CAPITAL LEASE
-------------

The Company has a five-year lease on computers. The monthly payment is
$1,473 per month. The Company will acquire the computers for $1 at the end
of the lease. The Company has calculated the present value of the
computers assuming a 12% interest rate as $62,575 and has capitalized that
value for depreciation. The balance of the capital lease obligation was
$7,164 and $22,683 at December 31, 2005 and 2004, respectively.

The equipment under capital lease is as follows:

DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------

Computers ......................... $ 65,063 $ 65,063
Less: accumulated depreciation .... (39,734) (30,438)
--------- ---------

$ 25,329 $ 34,625
========= =========

The Company had depreciation expense of $9,296 and $9,297 for the years
ending December 31, 2005 and 2004, respectively.

Minimum future minimum lease payments under the capital lease as of
December 31, 2005 are as follows:

FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
2006 $ 7,366
--------

Total minimum lease payments ...................... 7,366
Less: amount representing interest ................ 202
--------

Present value of total minimum lease payments ..... 7,164
Less: current portion ............................. 7,164
--------

Long term portion ................................. $ -
========

NOTES PAYABLE
-------------

On June 28, 2005, the Company issued a $500,000 10% senior secured
convertible promissory note and a stock purchase warrant for a total of
$490,000 as part of a private offering. Principal and interest are
convertible at the holder's option upon an event of default into shares of
the Company's common stock at a price per share that is equal to seventy
percent (70%) of the lower of: (i) the ten (10) day average of the closing
bid price of the Company's common stock on the day prior to the date of
conversion of this note or (ii) the closing bid price of the Company's

F-30

4. DEBT (Continued)
----

NOTES PAYABLE (Continued)
-------------

common stock on the day prior to the date of conversion. Principal and
interest are due upon the earlier of: (a) June 28, 2006 or (b) the date
upon which the Company sells any of its equity or debt securities in a
financing transaction, or a series of financings, with gross proceeds
equal to one million dollars ($1,000,000) or more. The note has certain
financial and restrictive covenants. The Company is also required to
reserve a sufficient number of shares of common stock to be issuable upon
conversion of this note and exercise of the warrants.

The stock purchase warrant entitles the holder to purchase, at an exercise
price per share equal to $.40 per share, up to 250,000 shares of the
Company's common stock. The exercise price is subject to an adjustment
related to any dividends, subdivisions, combinations, or issuances of
shares at a discounted price.

The fair value of the stock purchase warrants was approximately $67,500 or
$0.27 per warrant and was determined using the Black Scholes pricing
model. The factors used were the warrant exercise price of $0.25 per
share, the 5 year life of the warrants, volatility measure of 135.8%, a
dividend rate of 0% and a risk free interest rate of 3.76%. The warrant
can be exercised in whole or in part and expires on June 28, 2010. No
warrants were exercised as of September 30, 2005. The Company's
obligations to the note holder is collateralized by a security interest in
all of the Company's assets. A placement fee totaling $40,000 was deducted
from the proceeds of the offering. The Company is expensing this fee over
the life of the note.

In accordance with APB No. 14, "Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants", the Company has allocated the
proceeds received in the private offering to the warrant and the note
based on their relative fair market values at the time of issuance. The
proceeds allocated to the warrant, $67,500, were accounted for as
additional paid-in capital. This resulted in the note being discounted by
$77,500. The discount consists of $67,500 related to the warrants and the
discount of $10,000 related to the promissory note. The Company is
expensing this discount over the life of the note and charged the
remaining discount in December 2005 to interest expense.

In mid December 2005, the debt was paid off from the proceeds of a
3,302,000 share common stock offering in December 9, 2005, which raised
$825,000 in cash.

5. CAPITAL STOCK
-------------

In June 2002, the Company issued 200,000 warrants with an exercise price
of $0.10 and 75,000 warrants with an exercise price of $0.01 per share.
The warrants had a life of 2 years and were scheduled to expire in June
2004.

On January 13, 2004, the Company issued 110,000 common shares for services
rendered valued at $1,100.

F-31

5. CAPITAL STOCK (Continued)
-------------

On March 16, 2004, the Company issued 10,000 common shares in exchange for
accounts payable of $20,822. The shares were valued at $0.01 per share or
$100 and the Company recognized a gain on forgiveness of debt of $20,722.

During the nine months ended September 30, 2005, the Company issued
2,070,000 common shares for services valued at $20,700.

The Company issued 1,625,000 shares effective October 5, 2005 for services
to be provided over a two-year period. The transaction was accounted for
in accordance with Statement of Financial Accounting Standards Board 123R
as applied to Accounting for Transactions with Other Than Employees. That
pronouncement requires the transactions be valued at the fair value of the
equity instrument received. The value on October 5, 2005 was thirty five
cents a share for which the excess of thirty four cents per share over the
one cent a share par value was accounted for as both a prepaid asset to be
amortized over the life of the agreement and a credit to the Paid in
Capital.

On November 12, 2005, the Company issued 4,400,000 common shares for cash.

On December 9, 2005, the Company issued 3,302,000 common shares for cash.

In connection with the December 9, 2005 common stock offering, each unit
was sold for a purchase price of $.25, and consisted of one share of the
Company's common stock and one redeemable five year common stock purchase
warrant, exercisable at $1.00 per share, which resulted in the issuance of
an aggregate of 3,302,000 shares of common stock and common stock purchase
warrants to purchase an additional 3,302,000 shares of our common stock.

As compensation for services the placement agent received a commission
equal to 10% of the gross proceeds from the offering ($82,500) and a
non-accountable expense allowance equal to 3% of the gross proceeds
($24,765), and the Company agreed to issue common stock for each $1.00 in
gross proceeds (a total of 165,000 shares of common stock). The Company
has agreed to file a registration statement with the Securities and
Exchange Commission covering the shares of common stock, including the
shares underlying the warrants, issued in this offering to permit their
resale.

2004 Equity Compensation Plan
-----------------------------

In fiscal 2004 the Company established our 2004 Equity Compensation Plan.
The original Plan was approved by our board of directors and a majority of
our shareholders. The purpose of the Plan is to enable the Company to
attract and retain top-quality employees, officers, directors and
consultants and to provide such employees, officers, directors and
consultants with an incentive to enhance stockholder returns. The Plan
provides for the grant to Company directors, officers, employees and
consultants of stock based awards and options to purchase up shares of our
common stock. All of our executive officers, directors and employees are
be eligible to participate in the Plan. The plan is funded with 4,050,000
shares of Company common stock (including an increase of 3,000,000 shares
authorized by the board of directors in February 2006). At December 31,
2005 no options were issued under the Plan, but 400,000 shares in stock
awards were issued under the Plan, and 3,650,000 shares remain available
for issuance under the Plan.

F-32

5. CAPITAL STOCK (Continued)
-------------

The Plan is administered by the Board of Directors, which may delegate its
duties in whole or in part to any subcommittee solely consisting of at
least two individuals who are non-employee directors within the meaning of
Rule 16b-3 under the Securities Exchange Act and outside directors within
the meaning of Section 162(m) of the Internal Revenue Code of 1986 (the
"IRS Code"). The Board has the authority to interpret the stock incentive
plan, to establish, amend and rescind any rules and regulations relating
to our Plan and to make any other determinations that it deems necessary
or desirable for the administration of our Plan. Any decision of the Board
or a compensation committee of the Board in the interpretation and
administration of the Plan lies within its sole and absolute discretion
and is final, conclusive and binding on all parties concerned, including
plan participants and their beneficiaries or successors.

Stock options granted under the Plan may be non-qualified or incentive
stock options for federal income tax purposes. The Board will set option
exercise prices and terms and will determine the time at which stock
options will be exercisable. However, the term of a stock option may not
exceed ten years.

The Board may also grant options that are intended to be incentive stock
options, which comply with Section 422 of the IRS Code. Fair market value
is defined as the closing price of the shares as reported on the grant
date as quoted on the OTC Bulletin Board. The Board also has the authority
to grant stock-based awards, which may consist of awards of common stock,
restricted stock and awards that are valued in whole or in part by
reference to, or are otherwise based on the fair market value of, shares
of common stock. Stock-based awards may be granted on a stand-alone basis
or in addition to any other awards granted under our Plan. The Board
determines the form of stock-based awards and the conditions on which they
may be dependent. The conditions may include the right to receive one or
more shares of common stock or the equivalent value in cash upon the
completion of a specified period of service or the occurrence of an event
or the attainment of performance objectives. The Board also determines the
participants to whom stock-based awards may be made, the timing of those
awards, the number of shares to be awarded, whether those other
stock-based awards will be settled in cash, stock or a combination of cash
and stock and all other terms of those awards.

Stock options and restricted stock awards are not transferable or
assignable, except for estate planning purposes. In the event of any stock
dividend or split, reorganization, recapitalization, merger,
consolidation, spin-off, combination or exchange of stock or other
corporate exchange or any distribution to stockholders other than regular
cash dividends, the Board may, in its sole discretion, make a substitution
or adjustment to the number or kind of stock issued or reserved for
issuance under our Plan under outstanding awards and the term, including
option price, of those awards.

Except as otherwise provided in a stock award agreement, in the event of
our change in control or a change of control of our company, the Board
may, in its sole discretion, accelerate a stock award, cause us to make a
cash payment in exchange for a stock award or require the issuance of a
substitute stock award.

Description of Securities
-------------------------

The Company is authorized to issue 100,000,000 shares of common stock, par
value $.01 per share, and 25,000,000 shares of preferred stock, par value
$.01 per share. At February 17, 2006 we had 20,193,424 shares of common
stock and no shares of preferred stock issued and outstanding.

F-33

5. CAPITAL STOCK (Continued)
-------------

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

The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders, including the election of
directors. There is no right to cumulate votes in the election of
directors. The holders of common stock are entitled to any dividends that
may be declared by the board of directors out of funds legally available
for payment of dividends subject to the prior rights of holders of
preferred stock and any contractual restrictions we have against the
payment of dividends on common stock. In the event of our liquidation or
dissolution, holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities and the liquidation
preferences of any outstanding shares of preferred stock. Holders of
common stock have no preemptive rights and have no right to convert their
common stock into any other securities.

Preferred Stock
---------------

The Company is also authorized to issue 25,000,000 shares of $.01 par
value preferred stock in one or more series with such designations, voting
powers, if any, preferences and relative, participating, optional or other
special rights, and such qualifications, limitations and restrictions, as
are determined by resolution of our board of directors. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of our company without further action by stockholders
and could adversely affect the rights and powers, including voting rights,
of the holders of common stock. In certain circumstances, the issuance of
preferred stock could depress the market price of the common stock.

Common Stock Purchase Warrants
------------------------------

At January 31, 2006 the Company had common stock purchase warrants
outstanding to purchase an aggregate of 9,692,000 shares of our common
stock, of which:

o warrants to purchase 250,000 shares, exercisable until September 2010,
at a price of $.25 per share, subject to adjustment, were issued to the
purchaser of $500,000 principal amount 10% senior secured convertible
promissory note; and

o five year common stock purchase warrants to purchase 9,442,000 shares,
exercisable at a price of $1.00 per share, subject to adjustment, were
issued to purchasers of our units from December 2005 to January 2006.

Between December 2005 and January 2006, the Company sold an aggregate of
9,442,000 units of our securities to 99 accredited investors in an
offering exempt from registration under the Securities Act in reliance on
exemptions provided by Section 4(2) and Rule 506 of Regulation D of the
Securities Act. Each unit was sold for a purchase price of $0.25, and
consisted of one share of our common stock and one redeemable five year
common stock purchase warrant, exercisable at $1.00 per share, which
resulted in the issuance by us of an aggregate of 9,442,000 shares of
common stock and common stock purchase warrants to purchase an additional
9,442,000 shares of our common stock. Gross proceeds were received of
$2,360,500.

F-34

5. CAPITAL STOCK (Continued)
-------------

Subject to certain conditions, the Company may require warrant holders to
exercise or forfeit their warrants, provided that the closing price for
our common stock is at least $1.50 per share for 20 consecutive trading
days and trading volume in our common stock exceeds 150,000 shares per day
for each trading day during such 20 day period.

For one year following the date of issuance, the Company is obligated to
issue additional shares of Company common stock to purchasers of the units
to protect them against dilution in the event that we issue shares of our
common stock during such one-year period at less than $.25 per share. In
addition, for a one year period following the date of issuance and
continuing until the warrants expire, the exercise price is subject to
"weighted-average" anti-dilution protection for subsequent issuances of
common stock or securities convertible into common stock at less than the
then current warrant exercise price, excluding certain issuances unrelated
to capital raising transactions.

6. INCOME TAXES
------------

Reconciliation of the differences between the statutory tax and the
effective income tax are as follows:

DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------

Federal statutory tax ............. (34.00%) (34.00%)
State taxes, net of federal tax ... (5.83%) (5.83%)
Valuation allowance ............... 54.32% 39.83%
------ ------

Effective income tax rate ......... 14.49% -
====== ======

The effective income tax rate differs from the federal statutory rate
primarily due to permanent timing differences and net operating loss carry
forwards.

The Company had available unused federal and state operating loss
carry-forwards of approximately $1,490,000 at December 31, 2005 that may
be applied against future taxable income.

F-35

6. INCOME TAXES (Continued)
------------

SFAS No. 109 requires a valuation allowance to be recorded when it is more
likely than not that some or all of the deferred tax assets will not be
realized. As of December 31, 2005 the Company has determined that the net
operating losses likely will not be utilized. Accordingly, the Company has
increased the valuation allowance to 100% of all deferred tax assets.

The (provision) benefit for income taxes consists of the following as of
December 31:

2005 2004
--------- ---------
Current:

Federal .............................. $ - $ -
State ................................ (850) (900)
--------- ---------

- (900)

Deferred:

Federal .............................. 380,500 34,000
State ................................ 68,500 5,000
--------- ---------

Total (provision) benefit before
valuation allowance .................. 448,150 38,100

Change in valuation allowance .......... (554,000) (39,000)
--------- ---------

Total provision ........................ $(105,850) $ (900)
========= =========

The components of the net deferred income tax asset are as follows as of
December 31:

2005 2004
--------- ---------

Deferred income tax assets:
Net operating loss carryforward ...... $ 593,000 $ 144,000
--------- ---------

593,000 144,000
--------- ---------

Deferred income tax asset, net
before valuation allowance ........... 593,000 144,000
Less: valuation allowance .............. (593,000) (39,000)
--------- ---------
Deferred income tax asset, net
$ - $ 105,000
========= =========

F-36

7. OFFICE LEASE
------------

The Company entered into a twelve month lease for office space commencing
November 1, 2003 that expired in October 31, 2004 and was extended for an
additional year until December 31, 2005. The Company extended the lease
for office space for three years commencing January 1, 2006 and expiring
December 31, 2008. Rent expenses incurred for the years ended December 31,
2005 and 2004 was $68,211 and $59,417, respectively. Future minimum rental
payments under the office lease are $66,314.

8. RELATED PARTY TRANSACTIONS
--------------------------

The Company owes two shareholders a total of $55,962 and $42,344 in
expense reimbursements as of December 31, 2005 and 2004, respectively.

Employment Agreements
---------------------

In June 2005 the Company entered into a three-year employment agreement
with Herman Rappaport under which Mr. Rappaport serves as our President,
Chief Executive Officer and Acting Chief Financial Officer. Under the
terms of the agreement Mr. Rappaport is paid a base salary at the rate of
$90,000 a year. Because of the Company's need for capital to help develop
its expansion program and because of the Executive's confidence in the
future of the Company, he has agreed to receive a salary which is
substantially less than appropriate for such President and Chief Executive
services. "In lieu of additional cash, the Executive shall receive stock
in amount to be determined by the Board of Directors within Two (2) years
from the date of this agreement.

In June 2005 the Company also entered into a two-year employment agreement
with Dr. Steven Rosenblatt under which Dr. Rosenblatt serves as Executive
Vice President. Under the terms of the agreement Dr. Rosenblatt is paid a
base salary at the rate of $90,000 per year, as well as $1,000 per day for
training of providers and staff when he is not acting as a medical
provider. Also, Dr. Rosenblatt is to receive one third (1/3) of all
revenue resulting from medical services performed by him at the Wellness
Centers. Dr. Rosenblatt is continuing his private medical practice.
However, if requested by Mr. Rappaport, Dr. Rosenblatt is prepared to
reduce that time spent in his personal practice and is to receive
additional remuneration if such additional time is required by StarMed.
The agreement provides that we are entitled to receive 6% of all book
advances earned by Dr. Rosenblatt.

Both Mr. Rappaport and Dr. Rosenblatt are entitled to two weeks annual
vacation, reimbursement for business expenses and participation in
executive employment benefit plans. The agreement also contains customary
confidentiality and indemnification provisions. The Company may terminate
the agreement upon death or disability, or for "cause" which includes a
material breach of any material provision of the agreement, any act in
violation of our Code of Business Conduct and Ethics, fraud or conviction
of a felony.

9. COMMITMENTS AND CONTINGENCIES
-----------------------------

Management Incentives
---------------------

The Company has reserved up to 5,500,000 shares of common stock to members
of management upon the attainment of specified milestones as follows:

F-37

9. COMMITMENTS AND CONTINGENCIES (Continued)
-----------------------------

o 2,000,000 shares upon opening of five new StarMed Wellness Centers
prior to the expiration of two years from February 2006,

o 1,000,000 shares upon opening of 10 new StarMed Wellness Centers prior
to the expiration of four years from February 2006, and

o 2,500,000 shares following the first fiscal year in which the Company
does not report a loss in the audited financial statements as may be
reflected in the Annual Report on Form 10-KSB.

If any of these milestones are met, at the time of issuance of securities
the Company will recognize compensation expense equal to the fair market
value of its common stock on the date of issuance.

Dr. Minehart, as part of the agreement with Encino Wellness Center, is to
receive one third of revenues received for medical services performed
personally by him on Wellness patients. In addition, the Encino Center is
to receive twenty percent of gross proceeds for all other procedures and
products received by the Encino Wellness Center. This agreement may be
terminated by either party under inability to perform.

The Encino Wellness Center is to receive a minimum of $2,310 per month for
rent expense. There is no similar minimum contingency for Hawaii.

Management Incentives - Reservation of Shares
---------------------------------------------

Upon the opening of five new StarMed Wellness Centers, Management shall
receive two million (2,000,000) shares of common stock; upon the opening
of ten (10) new StarMed Wellness Centers, management shall receive one
million (1,000,000) shares of Common Stock; the first fiscal year in which
the Company does not report a loss on its audited financial statements
included in its Annual Report Form 10-KSB, management shall receive two
million five hundred thousand shares of common stock.

10. SUBSEQUENT EVENTS
-----------------

On January 17, 2006, the Company sold an aggregate of 1,740,000 units of
securities. Each unit was sold for a purchase price of $.25, and consisted
of one share of common stock and one redeemable five year common stock
purchase warrant, exercisable at $1.00 per share, which resulted in the
issuance by us of an aggregate of 1,740,000 shares of common stock and
common stock purchase warrants to purchase an additional 1,740,000 shares
of our common stock. The gross proceeds received were $435,000.

Subject to certain conditions, from the date the warrants are issued until
30 days prior to the expiration date of the warrants, the Company may
require warrant holders to exercise or forfeit their warrants, provided
that (i) the closing price for our common stock is at least $1.50 per
share for 20 consecutive trading days and (ii) trading volume in our
common stock exceeds 150,000 shares per day for each trading day during
such twenty day period. For one year following the date of issuance, the
Company is obligated to issue additional shares of our common stock to
purchasers of the units, to protect them against dilution, in the event
that we issue shares of our common stock during such one-year period at
less than $.25 per share. In addition, the warrants contain customary
anti-dilution adjustments in the event of stock splits and
reorganizations, as well as in the event we issue shares of our common
stock at a price of less than the warrant exercise price.

F-38

10. SUBSEQUENT EVENTS (Continued)
-----------------

The placement agent received as compensation for their services a
commission equal to 10% of the gross proceeds from the closing ($43,500)
and a non-accountable expense allowance equal to 3% of the gross proceeds
of this closing ($13,050). The Company agreed to issue to the placement
agent two shares of our common stock for each $1.00 in gross proceeds (a
total of 870,000 shares of our common stock in this closing). The Company
agreed to file a registration statement with the Securities and Exchange
Commission covering the shares of common stock, including the shares
underlying the warrants, issued in this offering so as to permit the
resale.

On February 7, 2006, StarMed entered into a Mutual Rescission, Settlement
and Release Agreement (the "Rescission Agreement") with Citadel Capital
Management Group, Inc. ("Citadel") and James H. Donell, in his capacity as
a receiver for Citadel ("Donell"). The purposes of the Rescission
Agreement are to (a) rescind an Agreement for the Sale of Capital Stock
dated as of July 23, 2003 and (b) restate the terms of a Cancellation,
Settlement and Release Agreement dated July 23, 2003 (collectively, the
"2003 Agreements").

Under the 2003 Agreements, StarMed, Citadel and Donell settled certain
disputes that had arisen in connection with a $400,000 loan from Citadel
to StarMed (the "Indebtedness") by canceling the Indebtedness and issuing
82,300 shares of StarMed common stock to Citadel (the "Shares"). In the
event Citadel is unable to resell the Shares for at least $3.50 per share,
StarMed agreed to pay Citadel the deficiency.

Under the Rescission Agreement:

o The 2003 Agreements were rescinded and cancelled;

o StarMed paid Citadel $215,000;

o The Indebtedness was cancelled;

o Citadel returned the shares to StarMed; and

o The parties exchanged general releases.

On February 16, 2006, the Board of Directors authorized an increase in the
number of shares covered by the Company's 2004 Equity Compensation Plan
from 1,050,000 shares to 4,050,000 shares. The other terms and conditions
of the 2004 Equity Compensation Plan remain unchanged.

F-39

No dealer, sales representative or any other person has been authorized to give
any information or to make any representations other than those contained in
this prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the company or any of the
underwriters. This prospectus does not constitute an offer of any securities
other than those to which it relates or an offer to sell, or a solicitation of
any offer to buy, to any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
the information set forth herein is correct as of any time subsequent to the
date hereof.

TABLE OF CONTENTS

Page
----

Prospectus Summary..................................................... 2
Risk Factors........................................................... 4
Cautionary Statements Regarding Forward-Looking Information............ 15
Market for Common Equity and Related Stockholder Matters............... 15
Use of Proceeds........................................................ 16
Management's Discussion and Analysis or Plan of Operation.............. 16
Our Business........................................................... 25
Management............................................................. 37
Certain Relationships and Related Transactions......................... 43
Principal Stockholders................................................. 44
Description of Securities.............................................. 45
Selling Security Holders............................................... 46
Plan of Distribution .................................................. 53
Shares Eligible for Future Sale........................................ 55
Legal Matters.......................................................... 56
Experts................................................................ 56
Additional Information................................................. 56
Financial Statements................................................... F-1

STARMED GROUP, INC.

PROSPECTUS

________________, 2006

24,696,150 Shares of Common Stock

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Nevada Revised Statutes allows us to indemnify each of our officers
and directors who are made a party to a proceeding if:

(a) the officer or director conducted himself or herself in good faith;

(b) his or her conduct was in our best interests, or if the conduct was
not in an official capacity, that the conduct was not opposed to our best
interests; and

(c) in the case of a criminal proceeding, he or she had no reasonable
cause to believe that his or her conduct was unlawful. We may not indemnify our
officers or directors in connection with a proceeding by or in our right, where
the officer or director was adjudged liable to us, or in any other proceeding,
where our officer or director are found to have derived an improper personal
benefit.

Our by-laws require us to indemnify directors and officers against, to the
fullest extent permitted by law, liabilities which they may incur under the
circumstances described above.

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

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses payable by StarMed Group in connection with the
distribution of the securities being registered are as follows:

SEC Registration and Filing Fee.............................. $ 1,305
Legal Fees and Expenses*..................................... $ 25,000
Accounting Fees and Expenses*................................ $ 5,000
Financial Printing*.......................................... $ 3,000
Transfer Agent Fees*......................................... $ 1,000
Blue Sky Fees and Expenses*.................................. $ 0
Miscellaneous*............................................... $ 2,640
--------
TOTAL....................................................... $ 37,945

* Estimated

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

Following are all issuances of securities by the small business issuer
during the past three years which were not registered under the Securities Act
of 1933, as amended (the "Securities Act"). In each of these issuances the
recipient represented that he was acquiring the shares for investment purposes
only, and not with a view towards distribution or resale except in compliance
with applicable securities laws. No general solicitation or advertising was used
in connection with any transaction, and the certificate evidencing the
securities that were issued contained a legend restricting their transferability
absent registration under the Securities Act or the availability of an
applicable exemption therefrom. Unless specifically set forth below, no
underwriter participated in the transaction and no commissions were paid in
connection with the transactions.

II-1

On September 25, 2003, we issued 804,381 shares of our common stock to
four recipients for services rendered and also as retainer fees valued at
$8,044. The recipients were sophisticated investors who had such knowledge and
experience in business matters that they were capable of evaluating the merits
and risks of the prospective investment in our securities. The recipients had
access to business and financial information concerning our company. The
securities were issued in reliance on an exemption from registration provided by
Section 4(2) of the Securities Act.

On December 31, 2003, we issued an aggregate of 1,000,000 shares of our
common stock valued at $10,000 to Mr. Rappaport (500,000 shares) and Dr.
Rosenblatt (500,000 shares), executive officers and directors, as compensation
for services rendered to us. The recipients were accredited investors and the
securities were issued in reliance on an exemption from registration provided by
Section 4(2) of the Securities Act.

On December 31, 2003 we also issued an aggregate of 67,359 shares of our
common stock valued at approximately $674 to Drs. Rodriguez (22,453 shares),
Feinstein (22,453 shares) and Manzoor-Mandel (22,453 shares), our directors, as
compensation for their services to us. The recipients were accredited investors
and the securities were issued in reliance on an exemption from registration
provided by Section 4(2) of the Securities Act.

On December 31, 2003 we also issued 20,000 shares of our common stock to
one recipient for services rendered valued at approximately $200. The recipient
was a sophisticated investor who had such knowledge and experience in business
matters that he was capable of evaluating the merits and risks of the
prospective investment in our securities. The recipient had access to business
and financial information concerning our company. The securities were issued in
reliance on an exemption from registration provided by Section 4(2) of the
Securities Act.

On January 13, 2004, we issued 110,000 shares of our common stock to one
recipient for services rendered valued at $1,110. The recipient was a
sophisticated investor who had such knowledge and experience in business matters
that he was capable of evaluating the merits and risks of the prospective
investment in our securities. The recipient had access to business and financial
information concerning our company. The securities were issued in reliance on an
exemption from registration provided by Section 4(2) of the Securities Act.

On March 16, 2004, we issued 10,000 shares of our common stock to one
recipient in exchange for settlement of accounts payable of $20,822. The
recipient was a sophisticated investor who had such knowledge and experience in
business matters that he was capable of evaluating the merits and risks of the
prospective investment in our securities. The recipient had access to business
and financial information concerning our company. The securities were issued in
reliance on an exemption from registration provided by Section 4(2) of the
Securities Act.

In January 2005 we issued an aggregate of 2,000,000 shares of our common
stock to our CEO, members of our board of directors and an employee as
compensation for services rendered which were valued at $20,000. The recipients
were accredited or sophisticated investors who had such knowledge and experience
in business matters that they were capable of evaluating the merits and risks of
the prospective investment in our securities. The recipients had access to
business and financial information concerning our company.

II-2

In September 2005, we issued 1,625,000 shares of our common stock valued
at $16,250 to an accredited investor as partial compensation for services
rendered to us. The issuance of the shares was exempt from registration in
reliance on an exemption provided by Section 4(2) of the Securities Act.

Between December 2005 and February 2006, we sold an aggregate of 9,442,000
units of our securities to 99 accredited investors in an offering exempt from
registration under the Securities Act in reliance on exemptions provided by
Section 4(2) and Rule 506 of Regulation D of the Securities Act. Each unit was
sold for a purchase price of $.25, and consisted of one share of our common
stock and one redeemable five year common stock purchase warrant, exercisable at
$1.00 per share, which resulted in the issuance by us of an aggregate of
9,442,000 shares of common stock and common stock purchase warrants to purchase
an additional 9,442,000 shares of our common stock. We received gross proceeds
of $2,360,500. Joseph Stevens & Company, Inc. acted as placement agent for us in
this offering. As compensation for their services we paid Joseph Stevens &
Company, Inc. commissions equal to 10% of the gross proceeds ($236,500) and a
non-accountable expense allowance equal to 3% of the gross proceeds ($70,815),
and issued Joseph Stevens & Company, Inc. or its designees an aggregate of
2,225,000 shares of our common stock. We used a portion of the net proceeds from
this offering satisfy certain debt obligations and for general working capital,
and we plan to use the remaining proceeds to establish additional StarMed
Wellness Centers and for general working capital.

Under the terms of the above-described offering, we agreed to file a
registration statement with the SEC on or before March 20, 2006 covering the
shares and warrants, and to use our best efforts to ensure that the registration
statement is declared effective by the SEC by June 3, 2006. Because we were late
in filing the registration statement and in causing the registration statement
to be effective, as of August 4, 2006, we are required to issue an additional
856,075 common shares and warrants to purchase an additional 856,075 warrant
shares as liquidated damages, or 2% of the shares being registered for each 30
day period in which these deadlines were not met.

ITEM 27. EXHIBITS.

2.1 Certificate of Merger of StarMed Group, Inc. (1)
3.1 Articles of Incorporation of Port Star Industries, Inc. (1)
3.2 Amendment to the Articles of Incorporation of Port Star, Industries,
Inc.(1)
3.3 Amendment to the Articles of Incorporation of Energy Dynamics, Inc. (1)
3.4 Amendment to the Articles of Incorporation of StarMed, Inc. (Arizona)(1)
3.5 Certificate of Revival of StarMed Group, Inc. (Nevada)(1)
3.6 Certificate of Reinstatement of Heathercliff Group, Inc. (1)
3.7 Certificate of Amendment to Articles of Incorporation (7)
3.8 Bylaws (1)
4.1 Common Stock Purchase Warrant Issued to Romajo Partners LP (7)
4.2 Form of Common Stock Purchase Warrant Issued in Connection with Private
Offering of Units (7)
5.1 Opinion of Schneider, Weinberger & Beilly LLP*
10.1 Memorandum of Understanding with Natural Health Trends Corporation (3)
10.2 Lease for principal executive offices (7)
10.3 Consultant Agreement with Paradigm Media Ventures, Inc. (4)
10.4 Agreement with Encino Wellness Center (5)
10.5 Agreement with Kohala Clinic (6)
10.6 2004 Equity Compensation Plan (2)
10.7 Employment Agreement with Herman Rappaport, as amended (7)
10.8 Employment Agreement with Steven L. Rosenblatt (7)
10.9 Stock Option Agreement with Herman Rappaport (8)
10.10 Form of Management Services Agreement with Steven L. Rosenblatt (9)
10.11 Services Agreement with Management Services Unlimited (10)
10.12 Services Agreement with Mothers and Daughters Center (11)
10.13 Joint Venture Agreement with All Back and Joint Care Medical Group (12)
14.1 Code of Business Conduct and Ethics (7)
21.1 Subsidiaries of the registrant (7)
23.1 Consent of Mendoza Berger & Company, LLP*
23.2 Consent of Schneider Weinberger & Beilly LLP (included in Exhibit 5)*

II-3

* Filed herewith.

(1) Incorporated by reference to the corresponding exhibits as filed in the
Form 10-SB, as amended, as initially filed with the SEC on September 11,
2001.
(2) Incorporated by reference to the Definitive Information Statement on
Schedule 14C as filed on December 15, 2004.
(3) Incorporated by reference to Exhibit 10.2 as filed with the Annual Report
on Form 10-KSB for the year ended December 31, 2005.
(4) Incorporated by reference to Exhibit 10.1 as filed with the Quarterly
Report on Form 10-QSB for the period ended September 30, 2005.
(5) Incorporated by reference to Exhibit 10.2 as filed with the Quarterly
Report on Form 10-QSB for the period ended September 30, 2005.
(6) Incorporated by reference to Exhibit 10.3 as filed with the Quarterly
Report on Form 10-QSB for the period ended September 30, 2005.
(7) Incorporated by reference to the corresponding exhibits as filed with the
Annual Report on Form 10-KSB for the year ended December 31, 2005.
(8) Incorporated by reference to Exhibit 10.5 as filed with the Form 8-K on
June 6, 2006.
(9) Incorporated by reference to Exhibit 10.1 as filed with the Form 8-K on
June 6, 2006.
(10) Incorporated by reference to Exhibit 10.2 as filed with the Form 8-K on
June 6,, 2006.
(11) Incorporated by reference to Exhibit 10.4 as filed with the Form 8-K on
June 6, 2006.
(12) Incorporated by reference to Exhibit 10.6 as filed with the Form 8-K on
June 6, 2006

ITEM 28. UNDERTAKINGS.

The small business issuer will:

(1) File, during any period in which it offers or sales securities, a
post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and

(iii) Include any additional or changed material information to the
plan of distribution.

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at then end of the offering.

II-4

(4) For determining liability of the undersigned small business issuer
under the Securities Act to any purchaser in the initial distribution of the
securities, the undersigned small business issuer undertakes that in a primary
offering of securities of the undersigned small business issuer pursuant to this
registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned small
business issuer will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser:

i. Any preliminary prospectus or prospectus of the undersigned
small business issuer relating to the offering required to be filed pursuant to
Rule 424;

ii. Any free writing prospectus relating to the offering prepared
by or on behalf of the undersigned small business issuer or used or referred to
by the undersigned small business issuer; The portion of any other free writing
prospectus relating to the offering containing material information about the
undersigned small business issuer or its securities provided by or on behalf of
the undersigned small business issuer;

iii. Any other communication that is an offer in the offering made
by the undersigned small business issuer to the purchaser;

iv. Any other communication that is an offer in the offering made
by the undersigned small business issuer to the purchaser.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.

II-5

SIGNATURES

In accordance with the Securities Act of 1933, the registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
of filing on Form SB-2 and authorized this registration statement to be signed
on its behalf by the undersigned, in the City of Los Angeles, State of
California on August 1, 2006.

StarMed Group, Inc.

By: /s/ Herman Rappaport
------------------------------------
Herman Rappaport, Chief Executive Officer,
President, Acting Chief Financial Officer and
Director, principal executive officer and
principal accounting officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date
- ------------------------ ------------------------------------- --------------

/s/ Herman Rappaport President, Chief Executive Officer, August 1, 2006
- ------------------------ Acting Chief Financial Officer
Herman Rappaport director, principal executive officer
and principal accounting officer

/s/ Steven L. Rosenblatt Executive Vice President and director August 1, 2006
- ------------------------
Dr. Steven L. Rosenblatt

/s/ Hector Rodgriguez Vice President and director August 1, 2006
- ------------------------
Dr. Hector Rodgriguez

/s/ Avner Manzoor-Mandel Vice President and director August 1, 2006
- ------------------------
Dr. Avner Manzoor-Mandel

/s/ Joel Feinstein Vice President and director August 1, 2006
- ------------------------
Dr. Joel Feinstein

/s/ Seymour Levine Director August 1, 2006
- ------------------------
Dr. Seymour Levine