Edgar Filing: BIOPHAN TECHNOLOGIES INC

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

FORM 10-K
-------------------------------------
(Mark One)

|X| Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934 for the fiscal year ended February 28, 2006. or

|_| Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the transition period from ________to__________.

Commission File Number 0-26057

BIOPHAN TECHNOLOGIES, INC.
-----------------------------------------------
(Name of small business issuer in its charter)

NEVADA 82-0507874
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)

150 LUCIUS GORDON DRIVE, SUITE 215
WEST HENRIETTA, NEW YORK 14586
--------------------------------------- ---------
(Address of principal executive offices) (Zip code)

(585) 214-2441
-------------------------
Issuer's telephone number

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities pursuant to Section 12(g) of the Exchange Act: Common Stock,
$.005 par value

Indicate by check whether the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes |_| No |X|

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes |_| No |X|

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

Indicate by check mark whether the registrant is an accelerated filer. (as
defined in Rule 12b-2 of the Act). |X|

Indicate by check mark whether the registrant is a shell company, as defined in
Rule 12b-2 of the Act. |_|

The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and asked price of such
common equity, as of the last business day of August 31, 2005 was $180,989,205.

The number of outstanding shares of the registrant's Common Stock, $.005 par
value, as of May 12, 2006 was 81,805,243 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Not applicable

TABLE OF CONTENTS

PART I

Item No. Page
-------- ----

1 Business
1A Risk Factors
1B Unresolved Staff Comments
2 Properties
3 Legal Proceedings
4 Submission of Matters to a Vote of Security Holders

PART II

5 Market for Registrant's Common Equity; Related Stockholder Matters and Issued
Purchases of Equity Securities
6 Selected Financial Data
7 Management's Discussion and Analysis of Financial Condition and Results of
Operations
7A Quantitative and Qualitative Disclosures About Market Risk
8 Financial Statements and Supplementary Data
9 Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
9A Controls and Procedures
9B Other Information

PART III

10 Directors and Executive Officers of the Registrant
11 Executive Compensation
12 Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
13 Certain Relationships and Related Transactions
14 Principal Accountant Fees and Services
15 Exhibits and Financial Statement Schedules

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains statements that are considered
forward-looking statements. Forward-looking statements give the Company's
current expectations and forecasts of future events. All statements other than
statements of current or historical fact contained in this annual report,
including statements regarding the Company's future financial position, business
strategy, budgets, projected costs and plans and objectives of management for
future operations, are forward-looking statements. The words "anticipate,"
"believe," "continue," "estimate," "expect," "intend," "may," "plan," and
similar expressions, as they relate to the Company, are intended to identify
forward-looking statements. These statements are based on the Company's current
plans, and the Company's actual future activities and results of operations may
be materially different from those set forth in the forward-looking statements.
These forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from the statements made. Any or
all of the forward-looking statements in this annual report may turn out to be
inaccurate. The Company has based these forward-looking statements largely on
its current expectations and projections about future events and financial
trends that it believes may affect its financial condition, results of
operations, business strategy and financial needs. The forward-looking
statements can be affected by inaccurate assumptions or by known or unknown
risks, uncertainties and assumptions. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events occurring
after the date hereof. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements contained in
this annual report.

PART I

ITEM 1. BUSINESS

Our primary mission is to develop and commercially exploit technologies for
improving the performance and the corresponding competitiveness of biomedical
devices manufactured by third party companies. We do not currently employ our
own manufacturing or distribution channels but rather rely on that of partner
companies. We develop technology protected by strong intellectual property
targeted at specific markets within the medical technology sector.

Our management team includes former executives from Johnson & Johnson and
Angiotech who have been involved in all aspects of the biomedical device
business, including new business development, engineering, research and product
development, project management, regulatory affairs, sales and marketing, and
intellectual property development.

We are affiliated with world renowned scientists and engineers, including
relationships with consultants, academia, and large and small companies. While
we currently employ only twenty-three direct employees (18 in the U.S. and five
in Europe), our extended enterprise includes approximately fifty professionals
with expertise in all of the critical areas needed to provide turnkey solutions
to our customers. We have licensed certain of our technology to Boston
Scientific Scimed, Inc. and have received a $5 million equity investment from
them as well as license fees and minimum royalties. We are developing our
biothermal power system in collaboration with the NASA Ames Center for
Nanotechnology.

We have, or are developing, enhanced technology for the following products/
market sectors:

Pacemakers, implantable cardio-defibrillators
Neurostimulators
Stents
Vena Cava Filters
Heart Valves
Cardiovascular Technologies
Guidewires and catheters
Drug pumps
Drug delivery systems
Power systems (batteries)

Our capabilities include making these devices both safe for use with MRI (many
medical devices are contraindicated for use with MRI) and image compatible with
MRI (many devices have imaging problems with MRI, such as visualizing stents for
in-stent restenosis, a technology which we have licensed to Boston Scientific
(NYSE: BSX). We are also developing improved contrast agents for use with MRI,
and we offer an MRI safe and image compatible motor for drug pumps and robotic
applications, which is currently being evaluated by a a major biomedical device
manufacturer. For implantable devices that rely on battery power, we are
developing longer lasting power systems that harness waste body heat instead of
relying on chemicals for power generation, as in conventional batteries. We are
developing proprietary controlled release drug delivery technology in our
Nanolution subsidiary. Through our cooperation with Myotech, LLC, we are helping
to develop a competitive ventricular assist device (VAD) called the MYO-VAD(TM),
which will be MRI compatible, due to its non-magnetic construction, and will
also offer several competitive features and advantages when compared to existing
VAD technology.

COMPANY BUSINESS

We are a technology development company with a strong market focus on solving
real-world technical challenges and limitations facing the medical device
industry. When selecting a market opportunity to address, we generate a wide
range of potential technical solutions. Each of the technical solutions that we
pursue is strongly protected by intellectual property to ensure that we have the
capability of effectively marketing our technologies. Whenever possible, we
attempt to create and patent multiple solutions for any given technology
challenge.

Our multiple solutions for stent imaging and for pacemaker safety are examples
of this approach. These solutions allow us to offer potential licensees an
opportunity for a sustainable competitive product advantage. This makes it much
more attractive for the manufacturer to make the necessary investments in
product development, regulatory approvals, and marketing, as well as pay
appropriate compensation for access to our technology. Our license to Boston
Scientific, closed in June, 2005, includes non-exclusive rights to our
technologies for making pacemakers, defibrillators, and neurostimulators safe
for use with MRI. This is a good example of how business strategy, to create a
new competitive advantage, convince an industry leading partner to license it
in, and attempt to move the industry to a new standard of excellence based on
our intellectual property.

This approach has resulted in the development of a range of core technologies,
and our presence in a number of different but related segments of the medical
device market. This offers the opportunity for a very efficient use of marketing
and sales personnel as sales efforts for our multiple solutions are directed to
large medical device and pharmaceutical companies, many of whom are prospects
for more than one of our technologies. We are aggressive in our development and
defense of our intellectual property assets and have an intellectual property
portfolio several times the size of many comparably sized companies.

Over the past twelve months, we have been acquiring and developing:

o Technology to improve vascular stents so they can be non-invasively
imaged with MRI to detect the presence of restenosis (blockage)
after implantation;

o Technology to enable an MRI image compatible vena cava filter ,
which allows non-invasively MR imaging of blood clots that may be
present and therefore pose a risk to removal of the device;

o Technology to enhance the MRI safety and MRI image compatibility of
pacemakers, cardio-defibrillators, neurostimulators, pain control
devices, pumps, and virtually any implanted or interventional device
which has elongated metal leads or metal components;

o A cardiac assist device technology designed to improve upon the
limitations of existing ventricular assist device (VAD) technology;

o Technologies to enable improved MRI contrast agents;

o Market opportunities for our MRI safe and image compatible ceramic
motor, the SQUIGGLE(TM) motor;

o A system for generating power for implantable devices from body
heat, in cooperation with NASA; and

o Technology to improve drug elution and drug delivery systems,
including providing "active release" using non-invasive or minimally
invasive activation.

Over the past five years, our work in these technology areas, including
development and accumulation of intellectual property, has allowed us to
demonstrate working solutions for many of the critical MRI safety and imaging
limitations associated with both implantable and interventional medical devices.
Over $12 billion worth of medical devices ship each year with these technical
limitations. We are continually demonstrating these solutions to medical
device manufacturers and are at various stages of discussion on the deployment
of these solutions into existing and new generations of medical devices.

OPERATIONS (SALES, MARKETING, R&D)

Over the past year we have accomplished

o Over $1 million in revenue from licensing, MRI testing, and
consulting to the industry, plus additional revenue not yet
recognized which will be booked in the next fiscal year;

o A relationship with the U.S. Food and Drug Administration (FDA)
which resulted in a Cooperative Research and Development Agreement
(CRADA) to help develop standards for making pacemakers,
defibrillators and neurostimulators safe with MRI;

o A license to Boston Scientific covering multiple uses for MRI safety
and image compatibility, and including over 70 of our 213
pending and issued patents. This license, has generated over $1
million in cash payments to date. Boston Scientific also invested $5
million in equity, at a premium over market of $3.02 per share;

o Designed a series of implantable devices including an MRI visible
vena cava filter and MRI visible stents;

o Refinements to our technology for MRI safe pacemaker and
neurostimulator leads and the filing of additional patents
incremental to our issued "anti-antenna" geometry patent;

o Developed a competitive cardiac assist device, the MYO-VAD(TM),
through our relationship with Myotech, LLC;

o Market opportunities for an MRI safe and image compatible ceramic
motor;

o Additional technologies for improving MRI contrast agents;

o Technology to improve drug elution and drug delivery systems (using
nanomagnetic particle technology)

o A relationship with NaturalNano (OTCBB: NNAN) for the exclusive use
of jointly developed technologies for extracting, separating and
characterizing halloysite nanotubes, useful for the delivery of
drugs and other agents for extended release; and

o Further development of the thin film nanotechnology contributing to
a system for generating power for implantable devices from body
heat, which we are co-developing with NASA

We have successfully demonstrated effective solutions for making devices which
use long metal wire leads, such as pacemakers, defibrillators, neurostimulators,
et al, safe for use with MRI. Our solutions address the problems of device
heating in pacemakers, defibrillators, and neurostimulators. Today,
approximately 3 million people have devices that cause them to be denied access
to MRI when needed, due to safety concerns and regulatory (FDA and other)
contraindications. We believe that if manufacturers of these devices incorporate
our solutions into their products, they can be made safe for use with MRI.

To manage the growing R&D and customer interactions in our organization, we have
expanded our staff to support these projects. Stephen H. Curry, Ph.D. joined
Biophan as President of Biophan's Nanolution subsidiary in April 2006. Dr.
Curry, formerly of Astra Zeneca, has served as Adjunct Professor of Pharmacology
and Physiology at the University of Rochester and is also a founding director of
PharmaNova, a specialty drug delivery and drug development company. Dr. Curry
brings broad pharmaceutical industry experience and extensive drug delivery
knowledge to Nanolution to help this subsidiary reach its next level of
development.

John Lanzafame, who previously held the position of President of Nanolution,
LLC, in addition to his role as Vice President, Business Development, was
promoted to Chief Operating Officer of Biophan in April 2006.

In addition, also in April 2006, Daniel G. Hullihen joined us as Director,
Business Development. Mr. Hullihen has significant industry experience with
Conmed Endoscopic Technologies, Bard Endoscopic Technologies, Novartis
Pharmaceuticals and STS Biopolymers / Angiotech Pharmaceuticals. Mr. Hullihen
will add to the sales and business development activities to help develop
relationships with potential commercialization partners.

We have retained additional technical consultants to augment our staff's
research and development efforts on the MRI safety and compatibility projects
and the biothermal battery project. Approximately 50 professionals, both full
time and part time, now constitute the Biophan scientific and engineering
organization.

We conduct our thin film coating research and development at Alfred University,
in coordination with Nanoset, LLC. To facilitate this, we have helped Alfred
construct a clean room facility to be used for our coating experiments and
sample preparation.

Dr. Frank Shellock, a recognized leader in MRI safety testing, joined the
Biophan's Scientific Advisory Board and has conducted testing and research with
Biophan' scientists and has co-authored a paper on MRI lead heating of pacing
leads with Robert Gray of Biophan.

We also added Mark E. Ladd, Ph.D., and Harald H. Quick, Ph.D. to our Scientific
Advisory Board.

Dr. Ladd is Professor and Director of Biomedical Imaging at the Institute for
Diagnostic and Interventional Radiology and Neuroradiology at the University
Hospital and Director of the International Research Center for Magnetic
Resonance in Medicine and Cognitive Science, both in Essen, Germany.
Additionally, he serves as Vice President for Research and Development of
MR-Innovation GmbH, also in Essen, Germany. His research interests are in MR
safety, MR-guided vascular interventions, MR elastography, MR angiography,
whole-body MR imaging, and high-field MR imaging.

Dr. Quick's research interests are in MR safety, MR-guided vascular
interventions, MR angiography, whole-body MR imaging, high-field MR imaging, and
radio frequency (RF) coil design. He is Associate Professor of Radiology and
Senior Physicist, at the Institute for Diagnostic and Interventional Radiology
at the Institute for Diagnostic and Interventional Radiology and Neuroradiology
at University Hospital, and is Founder, President and CEO of MR-Innovation GmbH,
all in Essen, Germany. Dr. Quick has conducted research with active MRI stents
and Biophan is currently cooperating with him and Dr. Christoph K. Naber of the
Department of Cardiology at University Hospital on an animal trial of a balloon
expanding coronary stent.

The addition of these distinguished scientists was initiated by Biophan Europe
and the Biophan Scientific Advisory Board to strengthen the scientific network
already in place. Their capabilities will be an inestimable resource for our
research and development endeavors in MRI safety and visualization of both
implantable devices and interventional surgical instruments.

Part of our strategic initiative for the current fiscal year will include
expanding our technology offerings to the companies with whom we are already in
discussions or collaborating. These arrangements may include payments for R&D,
licensing, equipment and materials purchases, and milestone payments, as well as
possible strategic investments.

Our business plan has our partners cover the costs for FDA approvals for
technologies / products. We supply solutions to the major biomedical device
manufacturers, who will incorporate our technology into their existing and
future product lines. It is the responsibility of these manufacturers to apply
for and receive FDA approval of their products.

PRODUCTS AND TECHNOLOGIES

PACEMAKERS, DEFIBRILLATORS, AND NEUROSTIMULATORS

One of the problems that have inhibited making MRI safe medical devices has been
confusion in the marketplace about exactly what would constitute an MRI safe
solution for pacemakers, defibrillators, and neurostimulators. This has been the
subject of active debate among scientists and manufacturers. Biophan has
identified critical issues about how/where heating occurs in tissue adjacent to
metal wire leads and electrodes, and Biophan has developed solutions for these
problems which are affordable modifications to these devices which we believe
resolve these problems even under the worst case conditions that a patient with
a device is likely to encounter when placed in an MRI machine.

In order to resolve the ambiguities regarding the methods by which devices are
measured, and to establish standards for reasonable safety thresholds, we
announced on May 2, 2006, that we have entered into a Cooperative Research and
Development Agreement (CRADA), with the US Food and Drug Administration (FDA) to
help improve patient safety in Magnetic Resonance Imaging (MRI) environments.
Under this (CRADA), Biophan will collaborate with the FDA's Science and
Engineering Laboratories in the Center for Devices and Radiological Health, to
help develop guidelines and standards for assessing the safety of cardiac
pacemaker and neurostimulation leads used in the MRI environment. We will
develop test methods and offer them to standards-setting groups. In addition we
will offer the methods to FDA reviewers as guidelines for testing for MR
compatibility.

We have successfully demonstrated effective solutions for making devices safe
for use with MRI, which apply to a number of devices which currently are
contraindicated for use with MRI, such as pacemakers, implantable
defibrillators, and neurostimulators. Many of these devices can experience
unsafe heating in an MRI field, and can experience potentially fatal induced
voltages which also present a safety concern. Today, approximately 3 million
people have devices that cause them to be denied access to MRI when needed, due
to safety concerns and regulatory contraindications. Our technologies are
designed to enable the manufacture of devices that are safe for use with MRI, in
order to eliminate the need to deny future device recipients' access to MRI.

Biophan has multiple solutions for resolving the heating of devices under MRI,
including pacemaker leads, defibrillator leads, and neurostimulator leads (such
as the deep brain stimulation systems used for the treatment of Parkinson's and
epilepsy). These solutions include an RF filter, licensed from Johns Hopkins
exclusively for implantable devices, which can reduce or eliminate lead heating.
Additionally, we have patented the use of "anti-antenna" geometries which alter
the way the devices are made to resolve the MRI safety limitations.

Since the issue of some of our patents in this area, we have publicly disclosed
our solutions and have demonstrated the feasibility of our approach to
prospective customers and industry experts. We have begun manufacturing
experimental prototypes of devices modified using our solutions, which we
believe will prove to be very cost effective for device manufacturers to
implement.

Our issued U.S. patent, 6,829,509, for anti-antenna geometries, in combination
with Johns Hopkins' U.S. patent 5,217,010, for which we hold an exclusive
license, and additional key patents in this area provide us a very strong
intellectual property position in the emerging area of MRI safe devices. These
patents apply to many devices which incorporate long wire leads, such as
pacemakers, implantable cardiac defibrillators, deep brain stimulators, pain
management devices, and others.

Our U.S. patent 6,829,509, and nine related patent applications, apply this
innovation to other devices such as stents, guidewires, and catheters. These
technologies address a large segment of the medical device market worldwide.

INTERVENTIONAL GUIDEWIRES AND CATHETERS

Additionally, there is an evolving multi-billion dollar field of medicine known
as minimally invasive surgery, which uses devices such as guidewires and
catheters to perform many procedures that previously required very invasive
surgery. Many procedures are now done in catheter labs equipped with X-ray or
fluoroscopy for imaging and guiding the procedures. X-ray and fluoroscopy do not
offer the advantages of soft tissue visualization or the absence of ionizing
radiation provided by MRI. Currently, the combined problems of device safety and
image compatibility of these devices in MRI have limited the use of MRI in this
rapidly growing area of medicine.

The desire and need for MRI is demonstrated by the advent of combined
interventional labs, which integrate X-ray devices for guiding devices into the
body, and MRI machines for evaluating progress and observing tissue and results.
For the past five years, Biophan has been actively engaged in solving the
complex problems associated with device safety and image compatibility with MRI.
With our solutions, the industry will have the opportunity to manufacture
devices that can be used with MRI, obviating the need for combined
interventional labs.

In addition to improving the safety of devices such as pacemakers and
neurostimulators, the large markets for interventional guidewires and catheters
are limited by both MRI safety and image compatibility. The MRI safety
limitations can be addressed using the same technologies used for pacemakers and
neurostimulators, while image compatibility can be addressed by other
technologies that we have developed and acquired.

One technology that we employ involves thin film nanomagnetic particle coatings,
developed by Nanoset, LLC in collaboration with Biophan. We have produced MRI
images showing an aluminum rod, otherwise invisible under MRI, but seen clearly
when an appropriate nanomagnetic coating is applied. An alternative approach,
using a miniature resonant circuit applied to a catheter, makes it easy to track
devices under MRI. These images are available on our website at www.biophan.com.
This capability is part of the suite of technologies that can help make MRI a
viable imaging modality for interventional diagnostics and surgery. These
technologies are covered by both issued and pending patents possessed
exclusively by Biophan for the medical device market.

STENTS AND VENA CAVA FILTERS

Stents are one of the largest market segments in the medical device arena. Drug
eluting stents have been extremely successful in the market as a result of their
ability to reduce restenosis that can occur after a stent is placed. Diagnosing
restenosis currently requires an interventional medical procedure which is
usually done under fluoroscopy, combined with the administration of contrast
agents which can result in allergic reactions. These procedures allow
determination of stent blockage, but require an interventional procedure to
image within the stent.

Currently marketed stents cannot be effectively imaged non-invasively using MRI
due to a blockage of signals caused by the Faraday Cage effect, in which the
stent blocks transmission of radio frequency (RF) fields necessary for imaging
with MRI. Biophan is working to implement a number of technologies to address
this problem by modifying the stent design, by adding a secondary structure, or
by applying a coating to the stent.

Biophan has, through both internal development and acquisition, acquired a broad
range of issued and pending patents protecting these technologies. We have
recently acquired the exclusive license for patents covering the use of resonant
circuits on products that are "collapsible," such as stents. Other technical
solutions include the use of thin film and thick film coatings to overcome the
Faraday Cage effect, and material and design constraints to enable the
construction of a stent that is transparent to MR imaging.

These technology solutions are also applicable to other medical devices,
including vena cava filters, heart valves, and many other types of implantable
devices.

We are currently involved in tests of both stents and vena cava filters,
including animal trials, to demonstrate the efficacy of these technologies to
our prospective customers.

In May, 2005, we signed a multi-million dollar licensing and equity agreement
with Boston Scientific, which includes the exclusive rights to a solution
developed by Dr. Andreas Melzer for making stents and vena cava filters visible
under MRI. During 2005 we also licensed in an additional solution for making
stents visible, developed by Drs. Buecker and Reubben. The Buecker/Reubben
technology can be licensed to other companies. We are in discussions with
several additional manufacturers. We believe that the ability to detect in-stent
restenosis and the presence of blood clots by non-invasive means, providing a
better characterization of stent, blockage, can have a substantial impact on the
market share among stent manufacturers.

CARDIAC ASSIST DEVICES

During 2005, we formed a cardiovascular device division, to support the
development of competitive devices in this rapidly growing market sector. In
addition, we executed an agreement with Myotech, LLC to acquire exclusive sales
and distribution rights for Myotech's MYO-VAD(TM) technology. This agreement
also provides us with a minority equity position in Myotech, with the option to
acquire a controlling position over time.

The MYO-VAD(TM) technology is a competitive cardiac assist device that provides
full systolic and diastolic support of both the left and right ventricle to
enable patients with heart failure to continue with full cardiac output. In
addition, the MYO-VAD(TM) design is totally non-blood contacting and can be
installed in three minutes, both of which provide significant enhancement when
compared to existing VAD technology.

The market for VAD's is forecast to be $7 billion. Virtually all of today's
VAD's contact circulating blood, which causes complications of clotting/stroke,
bleeding, and infection that studies show kill approximately half of the
patients who get these devices. The MYO-VAD(TM) device provides pressure on the
outside of the heart sufficient to pump it and without bruising, and it does not
touch circulating blood. As such, it mitigates the problems of bleeding,
clotting/stroke, and infection. Additionally, the MYO-VAD(TM) is the only VAD
which can restore full cardiac output to an arrested heart when the standard of
care (CPR, defibrillation, and drugs). There are many additional capabilities of
the planned iterations of this device, including enabling drug delivery and stem
cells direct to the myocardium, and eventually, a fully implantable artificial
heart. A detailed description of the Myotech MYO-VAD(TM) can be found on the
Biophan website at www.biophan.com.

We expect that it will take approximately three to four years to develop the
first Myotech device through clinical trials towards FDA approval. However, we
expect to sign an agreement with a distribution partner in the next 12 to 24
months, providing Myotech with the money required to cover both R&D costs and
clinical trials. By exercising our option to acquire a 51% or greater position,
we will be able to book the revenue from this transaction into Biophan,
generating positive cash flow. Once the product is approved for marketing we
will manufacture the product using an FDA approved factory, and ship to our
distribution partner. We anticipate revenues in excess of $100 million in
product sales to us as we supply the marketing and distribution partner with
product for resale.

There are multiple markets for the Myotech MYO-VAD(TM), including a fully
implantable version which we would subsequently develop for our marketing and
distribution partner.

MRI SAFE AND IMAGE COMPATIBLE MOTORS

We hold the exclusive marketing and distribution rights for the MRI safe
SQUIGGLE(TM) motor, a non-magnetic motor which does not move or heat up under
MRI. It is manufactured by New Scale Technologies, who are supplying the cell
phone market with miniature low power motors that are being readied for use to
drive optical zoom lenses in the next wave of cell phone differentiated camera
features. By tapping into this R&D we are enjoying a continuing access to
smaller and smaller and more power efficient motors which are also MRI safe and
image compatible. We anticipate selling additional demonstration units and
continuing to work with potential partners to identify new medical applications
for the SQUIGGLE (TM) motor.

MRI CONTRAST AGENTS

Nanoset, our technology partner, and Biophan are developing a tuned nanomagnetic
particle technology for making a competitive MRI contrast agent capable of
providing multiple MRI signatures. This competitive material could be attached
to different recognition molecules, permitting improved specificity and multiple
functionality as compared with existing agents. This work is still in the early
stages, but the market for MRI contrast agents is currently approaching $1
billion and is expected to grow with the expansion of MRI diagnostics. Our
intent is to partner with other companies and to license the technology to a
partner or partners with established distribution channels. We are developing
this technology in collaboration with scientists at Alfred University, and they
have recently installed new equipment which is being used to make nanomagnetic
particle materials for testing for our applications.

BIOTHERMAL POWER SOURCE

We hold a 51% interest in TE Bio, LLC, a company developing implantable power
systems that generate electricity from heat created by the human body, and not
by electrochemical means as with traditional batteries. Our feasibility studies
and modeling indicate that the amount of energy needed to power devices such as
pacemakers can be generated in an appropriate form factor. Further development
may yield sufficient power for neurostimulators, small drug pumps, and
biosensors, or to continuously charge a battery for devices such as implantable
defibrillators. We are working with NASA and several companies to develop this
technology. NASA is finalizing installation of a new reactor for testing
application of new nanomaterials, which is expected to be operational this
summer. The very thin nanolayers of thermal electric materials for generating
power are expected to improve the efficiency of power generation to a lower
temperature differential, or "Delta T," to one equivalent to what is found in
humans subcutaneously.

DRUG DELIVERY TECHNOLOGIES

As part of our research into nanomagnetic thin film particle coatings for
medical devices, we have initiated a parallel program to develop methods of
"tuning" the particles and coatings for specific responses to externally applied
magnetic fields. Working with Nanoset, we are developing the capability of
reloading the drug within a coated device, such as a stent, by attaching
nanomagnetic particles to a drug molecule to guide it to a device, such as a
stent, and to cause the drug to enter the coating for future drug release. By
attaching the nanomagnetic particle to a drug molecule, the drug can be made
non-active, in that it will not bind to tissue until released from the
nanomagnetic particle.

This innovation has broad applications in drug delivery and drug coatings.
Nanoset and Biophan have filed extensive patent applications on methods of
"active" drug elution and improvements on drug targeting and drug delivery.

In addition, Biophan is working with NaturalNano, Inc., another technology
partner, to develop naturally occurring nanomaterials, supplied by NaturalNano,
for medical applications including drug delivery and drug elution from device.
These materials, such as halloysite nanotubes, offer the promise of improved
elution profiles from a safe, cost-effective carrier.

Additional technical information, audio-visual presentations, white papers, and
access to many of our issued and pending patents can be found on our website at
www.biophan.com.

The equipment mentioned earlier in the contrast agent section is also being used
to make nanomagnetic particles which are used to effect the capabilities for
drug delivery. An additional drug delivery technology is being developed using
naturally occurring nanotubes extracted from halloysite clay. These nanotubes
are between 15 and 100 nanometers wide, and several thousand nanotubes long.
Using a proprietary loading capability of our technology partner, NaturalNano
(OTC: NNAN) we can load these tubes with drugs, allowing a slow elution of up to
several years. The nanotubes can then be put into polymers that can be coated
onto medical devices. We are developing technology for capping the tubes so that
they do not elute drugs until the caps are removed, which can be achieved both
by chemical or enzymatic means, or by using electromagnetic fields. By coating
the tubes with nanomagnetic particles, we believe that the tubes and caps can be
activated remotely by a specific resonant frequency, so that the drugs can be
released when needed.

This represents an important, new, and novel means of drug delivery in a market
which market researchers Frost & Sullivan have predicted represent a $40 billion
per annum emerging market.

In May, 2006, we announced the appointment of Stephen Curry, Ph.D. as President
of Nanolution, our drug delivery technology subsidiary. Dr. Curry was an R&D
manager at AstraZeneca, a leading pharmaceutical company. He has authored
textbooks and many papers on pharmakinetics, and will be working on developing
Nanolution's drug delivery technology to commercial level capability, for
licensing and use by medical device and pharmaceutical companies.

SALES AND MARKETING

The Company's business model consists of developing technologies and licensing
these technologies as well as, in some selective cases, providing critical
components (and in the case of the MYO-VAD(TM), a turnkey system) to medical
device manufacturers. We anticipate that products incorporating our technologies
will be developed through collaboration with external companies or partners, and
sold through companies with existing distribution channels. Our business plan
consists of entering into licensing and R&D agreements with our
development/marketing partners, generating revenue through license fees,
milestone payments, annual minimum royalty payments, and royalties on sales of
products.

We anticipate licensing income in advance of product sales to tie up rights for
each market segment and then ongoing royalties once these products are in the
market. Potential revenue streams above any negotiated minimum license payments
would likely commence six to nine months following approval by the FDA for
product shipments; however, a typical transaction may include upfront license
fees, milestone payments, and annual minimums.

The multiple technologies described above are marketed to a relatively small
number of large companies, such as Boston Scientific/Guidant, Johnson & Johnson,
Medtronic, St. Jude, Bard, Cook, and others.

This past year we created a new business division to pursue these customers for
licensing and distribution agreements. John Lanzafame, our COO, heads up this
group. Sales and Marketing is handled by COO John Lanzafame, and Business
Development Director Dan Hullihen, Michael Weiner, CEO, Jeff Helfer, VP
Engineering, Stuart MacDonald, VP R&D, Michael Friebe, Ph.D,, CEO of Biophan
Europe, and Andreas Melzer, MD, CTO of Biophan Europe, assisted by introductions
from outside consultants, shareholders, and friends of the firm. These
individuals are backed up by a marketing department set up to support multiple
product lines, conferences, trade shows, press releases, etc, which supports our
multiple initiatives and divisions.

By having this small central group representing all of our technologies,
including the Myotech MYO-VAD(TM), we achieve a substantial efficiency in
coverage. Whenever we visit a customer for a specific technology interest, we
request the opportunity to present to multiple groups our full range of
technologies. Because all of our technologies offer a combination of competitive
advantage and potential threat to our customers, this request is usually
accommodated. Additionally, Biophan's high profile in the industry, and trade
and financial press also helps make our customers, including high level
executives, aware of our capabilities.

Additionally, the exceptionally high number of patents we hold and continually
file come up on a regular basis as our customers and prospects perform
competitive "clearance analysis" to ensure they are not infringing anyone's
patents when they build in new features into their product line. It is not
possible to do a search of "MRI safe" and "pacemakers" and not instantly
recognize that Biophan and its licensors dominate this terrain, and have
extensive coverage of virtually every solution available for making devices both
safe and imageable for use with MRI. The same is true when searching the
Internet. Our aggressive intellectual property strategy benefits us in a number
of ways, including visibility to the engineering and legal organizations in
large companies who might otherwise not be aware of us.

We also are actively involved in trade and scientific conferences, as
presenters, exhibitors, attendees, and occasionally sponsors. We invested nearly
two years of effort in helping organize and sponsor the Society for Medical
Innovation and Technology (SMIT) 2006 Conference, and their first seminar on
MRI safety. SMIT blazed the trail in the development of interventional medicine
over the past fifteen years, and their members include many of the leading
surgeons and inventors, as well as manufacturers, worldwide. Biophan is proud to
be a sponsor of this conference, along with Boston Scientific and Johnson and
Johnson's Cordis division. We will have our key scientists, consultants, and
technical team at this conference, where we are giving multiple presentations,
where John Abele, the co-founder of Boston Scientific, is the keynote speaker,
and where the FDA is making presentations on the topic of MRI safety.

Because we are involved in assisting the medical device industry to deal with
the issues of MRI safety, and creating a momentum which we believe will lead to
one day having medical devices having the expectation of being MRI safe and
image compatible, this type of ongoing activity, visibility, and presence, as
well as being first and foremost at the U.S. Patent and Trademark Office, and
organizing and supporting our likeminded colleagues, the medical visionaries
such as Dr. Andreas Melzer, Drs. Harald Quick and Alan Ladd, and others, as they
blaze the trail toward a world of MRI safe medical devices, is a long haul
strategy which we believe will pay off for our shareholders for many years to
come.

Our license to Boston Scientific, in June 2005, which included not only stents,
vena cava filters, and RF ablation catheters, but also a non-exclusive license
for guidewires, catheters, pacemakers, defibrillators, and neurostimulators. The
subsequent acquisition by Boston Scientific of Guidant, and Advanced Bionics,
manufacturers of pacemakers, defibrillators, and neurostimulators, has caused
MRI safety to now be a hot topic with research and development underway in every
manufacturer we are aware of. As our solutions and patent coverage, are becoming
more clear, we are more and more sought after for presentations, discussion, and
proposals, and we have several underway.

Furthermore, as we present to the advanced technology and engineering groups of
these companies, they become aware of our other portfolio solutions. We recently
signed a development agreement with a majot manufacturer for the evaluation of
one of our MRI safe and image compatible technologies, but specific details,
including the company and the products covered have not been revealed due to
confidentiality.

This is another aspect of our sales and marketing strategy. We hold our
customer's confidences securely and give them confidence that by talking with
us, they are not sending signals to their competitors as to their plans for
their future products and capabilities. This allows us to be integrated into the
forward design teams of multiple products and programs, where each group is
striving in secret to be the first to market with a competitive advantage such
as MRI safety, and hopes to have a lead time advantage of months to years ahead
of their competitors and to use this to gain market share.

The success of this initiative is indicated by several requests from customers
for exclusive license for pacemakers, wherein we inform them that the best
potential opportunity might be a co-exclusive with another company for a first
to market advantage.

Because the industry has been debating for years the true nature of the problems
and the solutions of MRI safety, Biophan has been visible in the scientific
community, at conferences, and in the trade press, explaining the issues of the
flaw in the current measurement standards that can result in variances in
reported heating between 7 degrees centigrade and well over 30 degrees, just by
variations in the placement of the heat measuring probe, and the type of probe
used. This has now become generally accepted as an issue within the device
industry, and the standard we challenged as flawed is now under review by the
industry and the FDA.

Biophan further offered to fund research and development and MRI testing of
leads to help create a new set of standards for baseline measuring of the issues
of lead safety for pacemakers, defibrillators and neurostimulators, and we have
entered into a Cooperative Research and Development Agreement, or CRADA, with
the FDA to conduct studies and workshops with industry.

This provides us with a high profile exposure to the industry which has the
impact of making our staff and capabilities known to the industry. They are not
required to consider or use our solutions, and they are free to develop their
own, but it is an important benefit to us that they recognize the quality of our
work and the people we are working with. Hence, our announcements this year of
relationships with Boston Scientific, Siemens, the University of California
Biomedical Engineering Center, coming after our 2003 announcement of joint
development agreements with Boston Scientific and NASA, established important
credibility and visibility for Biophan which is integral to our long term
ability to be a solution provider to device manufacturers.

Additionally, our Biophan Europe division holds a majority interest in MR Comp,
providers of a sophisticated level of testing for MRI safety that is used by
many of the world's leading device manufacturers. This year MRI Comp's revenues
exceeded $300,000. Their customers include several of the largest medical device
manufacturers and involve a variety of products.

Because we market technology more so than products (which will change with the
Myotech MYO-VAD(TM) device), it has been essential to develop our long-term
credibility in the scientific and technical communities, as well as our broad
patent portfolio in the world's major patent offices.

As the years of seed work are now paying off, we will soon be expanding our
sales and marketing into more focused areas, and for this reason we recently
expanded our executive capabilities in the Nanolution drug delivery division,
with the hiring of Dr. Stephen Curry as President.

In the future, we may spin-off divisions into stand alone units allowing them to
expand their efforts, sales and marketing, technical capabilities, and brand
awareness, or in some cases we might sell these divisions or spin them out into
stand alone entities.

In the pharmaceutical arena many companies will work on multiple drugs including
their lead compound. The market accepts this approach. In the biomedical device
space most companies work on single platforms and are often managed toward a
sale. The Biophan model is different from most medical device companies, and
allows us to take a longer view, as we have with MRI safety. As the industry
realizes that we are effective at developing multiple products and technologies,
some of which spring forth as new operating companies, we believe this will
enhance our credibility and visibility and enhance our sales and marketing
efforts, while allowing us to continue to operate efficiently with a relatively
small sales and marketing department.

MARKETS

The global market for medical devices that could benefit from our MRI related
technologies, including both improved MRI safety and image compatibility, is
estimated to be in excess of US $12 billion. This number includes devices which
are currently contraindicated, such as pacemakers, implantable defibrillators,
and neurostimulators, as well as devices that have image compatibility
limitation, which includes stents, vena cava filters, guidewires, and catheters,
plus implantable artificial hips, knees, bones, and other prosthetics.

We have licensed our technology to Boston Scientific, on a non-exclusive basis
in many fields of use and exclusively in some fields of use, and we anticipate
that we will license our technology to one or more additional development
partners who would be responsible for developing commercial products, obtaining
necessary approvals, manufacturing, marketing, and distributing the products.
Our research for development partners is global; however, we cannot presently
identify or predict the precise target markets, distribution methods, or other
marketing efforts of our potential development partners.

The potential market for additional technologies which we have under development
is even larger. The total market for drug delivery technologies is estimated to
be U.S. $40 billion and the market for MRI contrast agents currently stands at
several hundred million dollars. The market for implantable batteries is $500
million.

We currently project our per annum revenue outlook in various product categories
for the fiscal year ending February 28, 2011 to be:

MRI Safety $ 40 million per annum
MRI Visualization, Stents, et al $100 million " "
Myotech MYO-VAD(TM) $100 million " "

We have not forecast revenues for our contrast agent, battery, or drug delivery
technologies.

LICENSING AND JOINT VENTURE STRATEGY

Our strategy is to license our technologies to companies, segmented by
technology and market. In some cases, we may also offer critical components and
capabilities needed to put our innovations into practice. Our licensing strategy
is to segment the market as finely as possible to maximize the royalty revenue
achievable by our technology. Our upfront negotiations with each customer
determine royalty rates for each market segment. Royalty rates are dependent
upon the strength of our patent coverage, the strength of the market advantage
provided by our technology, and the availability of other technology options to
solve a particular problem, as well as whether we grant an exclusive or
non-exclusive license. We believe it is very important to demonstrate the value
that we add to the product and how that added value will improve our customer's
position in the market, to achieve an acceptable royalty rate.

In situations where we possess several solutions to a problem, we expect that
the customer will wish to evaluate all of our technology options to determine
which is the best solution and whether or not it should license all of our
solutions. Those that are not licensed exclusively might be picked up by a
competitor, who can then claim a comparable advantage. Broader license grants
and stronger intellectual property positions can result in higher royalty rates.
To ensure the highest possible royalty rates, resulting in the best long term
benefit to our shareholders, we have aggressively patented and acquired
technology solutions in the multiple markets in which we are active. For each
company with whom we enter into discussions, we identify which market segments
they are interested in and which technologies they wish to license.

The degree of exclusivity is also a key parameter in determining license terms;
however, the decision to license exclusively or non-exclusively is dependent
upon multiple factors. In some markets, such as the pacemaker market, we have
elected not to pursue an exclusive license and instead to pursue multiple
manufacturers as potential licensees. We believe that all pacemakers should be
made to operate safely with MRI equipment, and it is our goal to eventually
provide a license to all pacemaker manufacturers. Ultimately, our strategy
related to exclusive versus non-exclusive licensing will be determined by market
segment, and will be dependent upon market need, market fragmentation,
competitive advantage, market position, and financial incentives offered by the
potential licensees.

BOSTON SCIENTIFIC LICENSE

On June 30, 2005, we entered into a licensing agreement with Boston Scientific
Scimed, Inc. The agreement provides Boston Scientific with the right to use
Biophan's MRI safety and image compatibility technology and other technologies
in a broad range of exclusive and non-exclusive product areas at royalty rates
of 3% to 5%, depending upon product category. The exclusive product area
includes vascular implants and the non-exclusive product area covers a broad
array of medical devices. Boston Scientific has the right to sub-license the
exclusive product areas to third parties, with Biophan and Boston Scientific to
share all proceeds from these parties. The agreement also provides for milestone
payments to Biophan for specific product areas which may be as high as millions
of dollars per product. In addition, the agreement required Boston Scientific to
make an initial upfront payment to Biophan of $750,000 (which will not be an
offset to future earned royalties), make annual minimum royalty and annual
earned royalty payments, and receive a right of first negotiation on new
technologies acquired by Biophan in the fields of MRI safety and image
compatibility. The initial payment of $750,000 was made on August 2, 2005, and
is being recognized as revenue over the following twelve months. In addition to
the license agreement, Boston Scientific entered into an agreement to invest $5
million in Biophan at a price per share of $3.02. The investment is based on a
stock price of Biophan, plus a 10% premium, calculated using the average closing
price of Biophan shares during the 30-day period prior to the date of funding.
This funding took place on August 2, 2005.

STRATEGIC RELATIONSHIPS

Leveraging strategic relationships is vital to our business plan. These
relationships will be key in bringing our technology to the market. We have
entered into non-disclosure agreements with a number of major manufacturers of
implanted biomedical and related devices. We are discussing with these companies
potential strategic relationships that may include joint development projects
and licensing agreements.

The transaction with Boston Scientific has provided a validation for our
technology that has resulted in increased interest and activity with other
manufacturers. It is our goal to one day see all biomedical devices become MRI
safe and image compatible, and we feel that the Boston Scientific agreement is
an important step towards that goal.

We previously declined two offers from a major pacemaker manufacturer for an
exclusive license to one of our patents, which our management and board of
directors felt was not equitable.

On November 30, 2005, we acquired a minority equity position in Myotech, LLC, a
privately held company that is developing the MYO-VAD(TM). The MYO-VAD(TM) is a
competitive cardiac assist device which has the potential to address most of the
limitations plaguing existing VAD's, which have a high incidence of blood clots,
bleeding and infection due to the fact that they contact flowing blood. The
MYO-VAD(TM) is totally non-blood contacting, and offers other important features
including the ability to be installed in less than three minutes, the ability to
be easily removed if the heart recovers and no longer requires support, and the
ability to be used as a drug delivery device to provide direct access to the
heart.

As part of the deal, we have an option to take a controlling position in Myotech
over time, and we will supply sales and marketing support in addition to the
funding to help complete development and preparation of this device for
commercialization.

On February 24, 2005, we acquired a 51% ownership interest in aMRIs GmbH (later
renamed Biophan Europe), a leading German-based developer of MRI safe and
image compatible technology solutions and biomedical devices. In connection with
that acquisition, we also acquired the exclusive license to fifteen issued and
pending patents covering imaging of devices such as stents and other vascular
implants, significantly expanding our intellectual property portfolio. The
purchase of the subsidiary and the patents was made for a total consideration of
$927,330 consisting of cash, a promissory note, and restricted stock.

The acquisition provides Biophan with innovative products, technologies, and
scientific expertise that extend Biophan's intellectual property portfolio of
medical solutions in the fast-growing marketplace of products and procedures
that are compatible with Magnetic Resonance Imaging (MRI).

Following the acquisition, Michael Friebe, Ph.D., was elected to our Board of
Directors and serves as Chief Executive Officer of Biophan Europe. Andreas
Melzer, M.D., joined our Scientific Advisory Board and serves as Biophan
Europe's Research Physician and Chief Research Officer leading many of our
medical device developments.

Dr. Friebe is a scientist and entrepreneur trained in MRI related physics at the
University of California at San Francisco, one of the world's leading biomedical
research centers, and at the University of Witten in Germany. He later started
and then sold NEUROMED AG, later renamed UMS NEUROMED after being acquired by
United Medical Systems (UMS), a publicly-traded German company. Dr. Friebe is a
well-regarded radiology/cardiology oriented entrepreneur with an extensive
business and customer network.

Dr. Melzer is a professor of applied biomedical engineering, Director and
Chairman of the Board at the Institute for Medical Technologies and Management
in Medicine INSITE med. at the University of Applied Sciences in Gelsenkirchen,
Germany. He also holds a clinical position as part-time staff radiologist at the
Department of Diagnostic and Interventional Radiology at St. Mary's Hospital
Buer in Gelsenkirchen, Germany. Dr. Melzer has over 15 years of experience in
the development of medical technology for laparo-endoscopic surgery,
interventional radiology, interventional and intraoperative MRI and MR
compatible robotics, surgical instrumentation, and Nitinol devices. He has
co-invented and patented some of the most exciting and important innovations in
imaging of medical devices under MRI and he continues to develop and invent. As
a practicing physician in radiology, Dr. Melzer has a unique understanding of
the needs of patients, the medical device community, the physicians conducting
procedures under MRI, and the scientific solutions that are possible. He has
co-invented more than 30 patents and has authored over 150 publications.
Additionally, Dr. Melzer is engaged as co-organizer, chairman, and invited
speaker of various medical conferences and is a board member of several medical
societies, as well as professional committees.

Among the Biophan Europe technology assets are an MRI-visible stent, a vena cava
filter which is in late-stage development, and a series of MRI-visible medical
devices in development. The Company's management and research staff provide
world-class intellectual expertise in the field of MRI compatibility, and have
been awarded several grants from government agencies to develop its
next-generation biomedical technology for MRI. Biophan Europe and its principals
have contractual and consulting agreements with many of the world's leading
biomedical device and MRI machine manufacturers.

Based on discussions underway with several manufacturers, we plan to expand the
use of the technologies we have developed to make a wider range of devices
compatible with MRI. These technologies can reduce radio frequency interference,
heating, and induced voltages. Since the beginning of fiscal 2005, we have
expanded our development and partnering activities related to these technologies
to include guidewires, stents, drug pumps, biopsy needles, and other prosthetic
and surgical devices where the lack of MRI compatibility negatively impacts
investigational and diagnostic procedures.

In June 2004, we acquired a 51% interest in TE Bio LLC, a company developing an
implantable biothermal battery using body heat gradients to power medical
devices such as pacemakers, defibrillators, and drug pumps. The biothermal
battery technology is based on a patented innovation in the utilization of
thermoelectric materials, using nanoscale-based, thin-film materials to convert
thermal energy produced naturally by the human body into electrical energy. The
resulting power can be used to "trickle charge" batteries for medium-power
devices such as defibrillators, or directly power low-energy devices like
pacemakers. It is enabled by advances in nanotechnology which provides the
ability to put thousands of small semi-conductor nodes that convert heat to
electricity in a space about the size of one or two postage stamps. Biophan is
committed to contribute $300,000 annually for a three-year period, and marketing
and management support to TE Bio, in exchange for Biophan's 51% interest. TE Bio
was founded by Biomed Solutions, LLC, an affiliate and the company from which
Biophan spun out in December 2000. The independent board members of Biophan
evaluated the technology and authorized the acquisition, after conclusion of a
third party feasibility study. NASA is now completing building a special reactor
for depositing nanomaterial on a thin-film substrate to test materials being
developed for this project.

Also in June 2004, we announced that we had acquired from New Scale
Technologies, Inc. the exclusive worldwide distribution rights for the medical
market for New Scale's ceramic SQUIGGLE(TM) motor, including the multi-billion
dollar drug delivery market. Developed to meet the growing demand for high
precision, low cost actuation devices, the motor is currently on the market and
is available for OEM integration today. The motor uses no metal wire windings
(one of the primary causes of image interference under MRI), is capable of both
linear and rotational movement, and can move forward and backwards several
inches in nanometer increments.

As part of the exclusive distribution agreement, Biophan will provide sales and
marketing to the medical device industry on behalf of New Scale and has also
made a $100,000 investment in the company for a 10% interest. We share gross
profit equally with New Scale Technologies for sales in the medical field, and
Biophan provides a $25,000 quarterly advance, reconcilable against current year
sales, which enables New Scale to further develop unique capabilities for the
medical market.

The motor offers several advantages for driving drug pumps, and other medical
applications. Using only four parts (other motors can have as many as 100
parts), it provides a unique combination of high reliability, flexibility, and
power consumption advantages and, due to its materials of construction, it is
compatible with MRI. The motor also has applications in MRI robotics and
cryogenics. The device is being evaluated by several device manufacturers for a
variety of MRI-related applications.

While we continue to offer solutions that will one day enable all biomedical
devices to be MRI safe and image compatible, we have expanded our focus to
provide additional, proprietary innovations to our customers. We continue to
maintain an in-depth dialogue with both research and development and business
development executives at many of the largest manufacturers of biomedical
devices. This interaction gives us a broad view of the short- and long-term
needs of these companies.

ACQUISITION OF INTELLECTUAL ASSETS

We currently have an overall estate of over 213 pending, issued, or allowed
patents, consisting of 50 issued U.S. patents, 116 U.S. patents pending, and 57
international patents or applications in process. These are inclusive of both
our patents and those licensed to us on an exclusive basis.

The technologies allowing visualization of implants have been developed at
Biophan and with technology partners under exclusive license, including
aMRIs/AMP Patents GmbH in Germany (via an exclusive license), Aachen Resonance
in Germany (via an exclusive license); and Nanoset, LLC in the U.S. (via an
exclusive license). The patents licensed as part of the Biophan Europe
acquisition provide fifteen issued and pending patents covering critical
capabilities needed by the medical industry as the use of MRI interventional
medicine and MRI diagnostics for examination of stents and other implants
becomes standard medical procedure.

On an ongoing basis, we are aggressively pursuing internal research and
development projects, as well as sourcing leading-edge providers of related
technologies. This includes the emphasis on MRI visualization, and also an
emphasis on improving the safety of MR imaging for patients with implanted
medical devices. Our recently announced relationship with Myotech, LLC, and
assessment of other cardiovascular technologies under review for potential
in-licensing, are all considered as elements of Biophan's IP strategy. To ensure
the continuing value of our intellectual assets, we intend to aggressively
defend our patents and licensed technology, both domestically and abroad.

INVESTOR RELATIONS

We expend a great deal of effort to keep our shareholders informed, and to bring
Biophan to the attention of new shareholders, institutional investors, and
potential strategic partners. Additionally, our efforts at widespread press
exposure have helped elevate the issue of MRI safety to national prominence, and
have helped increase the awareness of Biophan as an innovative small public
company. The over-the-counter market is generally not supported by the nation's
broker-dealer network, and it is essential for us to be visible so that
prospective shareholders can hear about us and review our public filings,
website, and company investor materials.

Additionally, because we provide technical solutions to several complex
limitations of medical devices, we find that attending conferences and issuing
press releases produces a wealth of awareness. Our high visibility and healthy
trading volume have brought several institutional investors into the Company, a
trend we expect to continue as we move forward with our plans to list on a major
U.S. stock exchange.

COMPANY HISTORY

We incorporated in the State of Idaho on August 1, 1968, under the name Idaho
Copper and Gold, Inc. On February 9, 1999, we amended our Articles of
Incorporation to change our name from Idaho Copper and Gold, Inc. to Idaho
Technical, Inc. On January 12, 2000, we formed a corporation in Nevada with the
intent to move our domicile to Nevada. On January 24, 2000, we implemented the
change of domicile to Nevada by filing Articles of Merger between the Idaho and
Nevada Corporations. On December 1, 2000, we amended our Articles of
Incorporation to change our name from Idaho Technical, Inc. to GreatBio
Technologies, Inc. and on July 19, 2001, we amended our Articles of
Incorporation to change our name from GreatBio Technologies, Inc. to Biophan
Technologies, Inc.

On December 1, 2000, we acquired LTR Antisense Technology, Inc., a New York
corporation, from Biomed Solutions, LLC (formerly Biophan, LLC), a New York
limited liability company, in a share for share exchange. As a result of the
exchange, LTR became a wholly owned subsidiary. The exchange was consummated
pursuant to and in accordance with an Exchange Agreement, dated December 1,
2000, and amended as of June 8, 2001, by and among the Company, LTR, and Biomed.
LTR owns several patents for proprietary HIV antisense gene therapy technology.

In connection with the exchange, we:

o issued 10,759,101 shares of common stock to Biomed in exchange for
all the issued shares of LTR; and

o issued an additional 10,759,101 shares of common stock to a group of
investors, consisting of Ed Cowle, H. Deworth Williams, and Geoff
Williams, for $175,000 in cash in order to provide initial working
capital.

Also on December 1, 2000, we acquired from Biomed intellectual property rights,
including a pending patent to the MRI compatible pacemaker technology, for a
future consideration of $500,000. The assignment was consummated pursuant to,
and in accordance with, a transfer agreement and a related assignment and
security agreement, dated December 1, 2000, and subsequently amended by and
between us and Biomed.

The assignment and the security agreement (i) assigned the rights to the
transferred MRI patents and subsequent improvements and (ii) provided the same
as collateral for the payment of the $500,000 liability under the transfer
agreement. Both the exchange agreement and the assignment and security agreement
contain provisions for the reversion of the technology to Biomed if:

o we become bankrupt or otherwise seek protection from creditors; or

o in the case of the MRI compatible technology, we fail to pay the
consideration therefor when due.

All of our obligations under the transfer agreement have been converted into
shares of our common stock and the security agreement has been terminated.

During 2001, we entered into a Cooperative Research and Development Agreement
(CRADA) with the National Institutes of Health and the University of Rochester
Cancer Center, wherein these organizations conduct research and development
associated with the antisense technology. This allowed us to put our full
resources into the development of the MRI safety improvements to biomedical
products. In 2002, we decided to discontinue research and development of the HIV
antisense technology, and the CRADA was terminated. While the technology holds
promise and has issued patents, we feel our most promising opportunity is in the
MRI safe solutions we have developed, and we intend to focus our research and
development activities on that technology. We may sell the HIV antisense patents
if an appropriate buyer can be identified.

EMPLOYEES

As of February 28, 2006, Biophan had 23 full-time employees (18 in the U.S. and
5 in Europe). The Company maintains compensation, benefits, equity participation
and work environment policies intended to assist in attracting and retaining
qualified personnel. Our success depends, in significant part, on the ability to
attract and retain such personnel. In addition, where appropriate, we have
contracts for the services of consultants.

AVAILABLE INFORMATION

Information about the Company's products and services, stockholder information,
press releases, and filings with the Securities and Exchange Commission (SEC)
can be found on the Company's website at www.biophan.com. The Company's annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and other SEC filings, and any amendments to such reports and filings, are
made available, free of charge, on the Investor Relations section of such
website as soon as reasonably practical after such material is filed with, or
furnished to, the SEC. Also, copies of the Company's Annual Report to
Stockholders and Proxy Statement, to be issued in connection with its 2006
Annual Meeting of Stockholders, will be made available, free of charge, upon
written request submitted to Biophan Technologies, Inc., c/o Investor Relations,
150 Lucius Gordon Drive, Suite 215, West Henrietta, New York 14568.

ITEM 1A. RISK FACTORS

In addition to the other information contained or incorporated by reference in
this Form 10-K, you should carefully consider the risks described below before
making an investment decision regarding our securities. If any of the following
risks actually occur, our business, financial condition and results of
operations could be harmed. In that case, the trading price of our securities
could decline and you could lose all or part of your investment. Additional
risks not presently known to us or that we currently deem immaterial may also
impair our business operations.

WE ARE A NEW BUSINESS WITH A LIMITED OPERATING HISTORY AND ARE NOT LIKELY TO
SUCCEED UNLESS WE CAN OVERCOME THE MANY OBSTACLES WE FACE.

We are an early-stage research and development company with limited prior
business operations and no material revenues to date. We are presently engaged
in the development of certain technologies for use with medical procedures and
biomedical devices. Because of our limited operating history, you may not have
adequate information on which you can base an evaluation of our business and
prospects. To date, our efforts have been devoted primarily to the following:

o organizational activities;

o developing a business plan;

o obtaining funding;

o conducting research and working toward the ultimate successful
development of our technologies;

o aggressively patenting our intellectual property;

o licensing technology from third parties related to our business; and

o marketing to major biomedical device manufacturers.

In order to establish ourselves in the medical device market, we are dependent
upon continued funding and the successful development and marketing of our
products. You should be aware of the increased risks, uncertainties,
difficulties, and expenses we face as a research and development company and
that an investment in our common stock may be worthless if our business fails.

IF WE ARE UNABLE TO GENERATE SUFFICIENT REVENUES IN THE FUTURE, WE MAY NOT BE
ABLE TO CONTINUE OUR BUSINESS.

We are still in our formative and development stage. As an investor, you should
be aware of the difficulties, delays, and expenses normally encountered by an
enterprise in its development stage, many of which are beyond our control,
including unanticipated research and developmental expenses, employment costs,
and administrative expenses. We cannot assure our investors that our proposed
business plans as described in this prospectus will materialize or prove
successful, or that we will ever be able to finalize development of our products
or operate profitably. If we cannot operate profitably, you could lose your
entire investment. As a result of the start-up nature of our business, initially
we expect to sustain substantial operating expenses without generating
significant revenues.

WE HAVE A HISTORY OF LOSSES AND A LARGE ACCUMULATED DEFICIT AND WE EXPECT FUTURE
LOSSES THAT MAY CAUSE OUR STOCK PRICE TO DECLINE.

For the fiscal years ended February 28, 2006, and 2005, and February 29, 2004,
we incurred net losses of $14,315,029, $5,793,547, and $3,718,570, respectively.
We expect to continue to incur losses as we spend additional capital to develop
and market our technologies and establish our infrastructure and organization to
support anticipated operations. We cannot be certain whether we will ever earn a
significant amount of revenues or profit, or, if we do, that we will be able to
continue earning such revenues or profit. Also, our current economic weakness
may limit our ability to develop and ultimately market our technologies. Any of
these factors could cause our stock price to decline and result in you losing a
portion or all of your investment.

OUR INABILITY TO RETAIN AND ATTRACT KEY PERSONNEL COULD ADVERSELY AFFECT OUR
BUSINESS.

We believe that our future success will depend on the abilities and continued
service of certain of our senior management and executive officers, particularly
our President and CEO and those persons involved in the research and development
of our products. If we are unable to retain the services of these persons, or if
we are unable to attract additional qualified employees, researchers, and
consultants, we may be unable to successfully finalize and eventually market our
medical devices and other products being developed, which will have a material
adverse effect on our business.

OUR RESEARCH AND DEVELOPMENT EFFORTS MAY NOT RESULT IN COMMERCIALLY VIABLE
PRODUCTS, WHICH COULD RESULT IN A DECLINE OF OUR STOCK PRICE AND A LOSS OF YOUR
INVESTMENT.

Our technologies are in the development stage. Further research and development
efforts will be required to develop these technologies to the point where they
can be incorporated into commercially viable or salable products. We have set
forth in this prospectus our proposed research and development program as it is
currently conceived. We cannot assure you, however, that this program will be
accomplished in the order or in the time frame set forth. We reserve the right
to modify the research and development program. We may not succeed in developing
commercially viable products from our technologies. Also, our research and
development efforts are aimed at technology that will enable certain medical
procedures and biomedical devices to become safe and compatible with MRI
diagnostics. If MRI diagnostics are replaced by the healthcare industry, our
technology and products, if any, may become obsolete. If we are not successful
in developing commercially viable products or if such products become obsolete,
our ability to generate revenues from our technologies will be severely limited.
This would result in the loss of all or part of your investment.

WE MAY NOT BE ABLE TO DEVELOP A MARKET FOR OUR TECHNOLOGY, WHICH WILL MOST
LIKELY CAUSE OUR STOCK PRICE TO DECLINE.

The demand and price for our technology and related products will be based upon
the existence of markets for the technology and products and the markets for
products of others, which may utilize our technology. The extent to which we may
gain a share of our intended markets will depend, in part, upon the cost
effectiveness and performance of our technology and products when compared to
alternative technologies, which may be conventional or heretofore unknown. If
the technology or products of other companies provide more cost-effective
alternatives or otherwise outperform our technology or products, the demand for
our technology or products may be adversely affected. Our success will be
dependent upon market acceptance of our technology and related products. Failure
of our technology to achieve and maintain meaningful levels of market acceptance
would materially and adversely affect our business, financial condition, results
of operations, and market penetration. This would likely cause our stock price
to decline.

IF WE ARE NOT ABLE TO COMPETE EFFECTIVELY IN THE COMPETITIVE MEDICAL DEVICE
INDUSTRY, OUR FUTURE GROWTH AND OPERATING RESULTS WILL SUFFER.

Our future success depends on our ability to compete effectively with
manufacturers of medical devices, including major manufacturers of pacemakers
and other implantable devices that may have internal development programs. We
are an early-stage research and development company engaged exclusively in
developing our initial technologies. Products using our technologies have not
yet been commercialized and we have generated no material revenue from
operations. As a result, we may have difficulty competing with larger,
established medical device companies. Most of our potential competitors will be
established, well-known companies that have:

o substantially greater financial, technical and marketing resources;

o larger customer bases;

o better name recognition;

o related product offerings; and

o larger marketing areas.

Companies such as Medtronic Incorporated, Guidant Corporation, St. Jude Medical,
Boston Scientific Corporation, and Johnson & Johnson are major, international
providers of active medical devices currently contraindicated for MRI. Because
these companies may possibly develop MRI safe solutions for their own product
lines, they may ultimately be in competition with us. These companies represent
a wide array of medical devices and products, technologies, and approaches. All
of these companies have more resources than we do and, therefore, a greater
opportunity to develop comparable products and bring those products to market
more efficiently than we can. If we do not compete effectively with current and
future competitors, our future growth and operating results will be adversely
affected.

WE MAY NOT BE ABLE TO OBTAIN NECESSARY GOVERNMENT APPROVAL TO MARKET OUR
TECHNOLOGY WHICH WILL MOST LIKELY CAUSE OUR STOCK PRICE TO DECLINE AND OUR
BUSINESS TO FAIL.

Our marketing partners must obtain the approval of the U.S. Food and Drug
Administration in order to market our MRI safe technology. If these approvals
are not obtained, or are significantly delayed, our ability to generate revenues
may be adversely affected and our development and marketing efforts inhibited.
This would most likely cause our stock price to decline and result in the loss
of all or part of your investment.

WE MAY NOT BE ABLE TO PROTECT OUR PROPRIETARY RIGHTS AND WE MAY INFRINGE THE
PROPRIETARY RIGHTS OF OTHERS. OUR INABILITY TO PROTECT OUR RIGHTS COULD IMPAIR
OUR BUSINESS AND CAUSE US TO INCUR SUBSTANTIAL EXPENSE TO ENFORCE OUR RIGHTS.

Proprietary rights are critically important to us. We have exclusive licenses to
four issued U.S. patents for MRI safety-related technology and multiple patents
pending. Biophan now holds or has been licensed to use and sublicense a total of
156 U.S. patents, licenses, or applications. This total includes 50 issued U.S.
patents, 8 recently-allowed applications that we expect to have issued as
patents in the near future, and 98 pending applications at various stages of
examination at the U.S. Patent and Trademark Office. In addition, there are 57
international patents pending. Although we intend to aggressively pursue
additional patent protection for our technologies as we continue to develop
them, we cannot assure you that any additional patents will be issued. Although
we will seek to defend our patents and to protect our other proprietary rights,
our actions may be inadequate to protect our patents and other proprietary
rights from infringement by others, or to prevent others from claiming
infringement by us of their patents and other proprietary rights.

Policing unauthorized use of our technology is difficult, and some foreign laws
do not provide the same level of protection as U.S. laws. Litigation may be
necessary in the future to enforce our intellectual property rights, to protect
our trade secrets or patents that we may obtain, or to determine the validity
and scope of the proprietary rights of others. Such litigation could result in
substantial costs and diversion of resources and have a material adverse effect
on our future operating results.

BECAUSE TWO OF OUR DIRECTORS ARE EQUITY OWNERS AND MANAGERS OF BIOMED SOLUTIONS,
LLC, A SIGNIFICANT SHAREHOLDER OF BIOPHAN, THERE MAY BE CONFLICTS OF INTEREST.

Michael L. Weiner, our President, CEO and director, is the Manager and a 24.3%
beneficial owner of Biomed, a company engaged in the business of identifying and
acquiring technologies in the biomedical field for exploitation. Mr. Weiner and
Ross Kenzie, also a director of Biophan, make up the Biomed Board of Members.
Biomed is a beneficial owner of 3.61% of our outstanding common stock. Mr.
Weiner is also the Manager and 42.3% equity member of Technology Innovations,
LLC, which is a 57% equity member of Biomed. Further, Mr. Weiner is on the board
of Nanoset, LLC, an entity owned in part by Biomed and with which we have
entered into a technology license agreement, and Myotech, LLC, an entity in
which Biomed is a 25% owner. Messrs Weiner and Kenzie are also on the Board of
NaturalNano, Inc., the principal owner of which is Technology Innovations, LLC.
NaturalNano has entered into a research and development agreement with us for
drug eluting technology.

Because of the nature of our business and the business of these other entities,
the relationships of Messrs. Weiner and Kenzie with these other entities may
give rise to conflicts of interest with respect to certain matters affecting us.
All potential conflicts may not be resolved in a manner that is favorable to us.
We believe it is impossible to predict the precise circumstances under which
future potential conflicts may arise and therefore intend to address potential
conflicts on a case-by-case basis. Under Nevada law, directors have a fiduciary
duty to act in good faith and with a view to the best interests of the
corporation.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Our headquarters are located at 150 Lucius Gordon Drive, Suite 215, West
Henrietta, NY 14586, in 4,000 square feet of office space leased from an
unrelated party. Current rentals are $5,262 per month and the lease expires in
January 2008. The coordination of our research and development projects and the
administration of our domestic subsidiary companies are directed from this
location. We believe that these facilities are adequate for our current and
anticipated future needs through the lease expiration date.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings and there are no material
legal proceedings pending with respect to our property, except as noted below.
We are not aware of any legal proceedings contemplated by any governmental
authorities involving either us or our property. None of our directors, officers
or affiliates is an adverse party in any legal proceedings involving us or our
subsidiaries, or has an interest in any proceeding which is adverse to us or our
subsidiaries.

The Company is pursuing legal claims against one of its former law firms and
certain of its attorneys. Review of the firm's work product and bills recently
revealed questions about the firm's billing practices and other activities. The
amount of potential damages has not yet been quantified. Also, the law firm has
asserted claims seeking payment of additional legal fees, which claims the
Company has denied. The litigation is in an early stage. While, as with any
legal proceedings, no assurance can be given as to ultimate outcome, management
believes that the outcome of the litigation will not have a material adverse
effect upon the Company's financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY; RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

Our common stock is listed on the OTC Bulletin Board under the symbol BIPH. The
following table sets forth, for the fiscal quarters indicated, the high and low
bid prices. These quotations reflect inter-dealer prices, without mark-up,
mark-down or commission, and may not represent actual transactions.

Quarter Ended High Low
------------- -------- --------
May 31, 2004 $ 1.33 $ 0.94
August 31, 2004 $ 1.31 $ 0.46
November 30, 2004 $ 1.22 $ 0.67
February 28, 2005 $ 1.56 $ 1.05
May 31, 2005 $ 3.50 $ 1.36
August 31, 2005 $ 3.13 $ 2.21
November 30, 2005 $ 2.63 $ 1.45
February 28, 2006 $ 1.98 $ 1.47

As of February 28, 2006, we had outstanding 81,805,243 shares of our common
stock which were held by 263 stockholders of record and approximately 9,300
beneficial stockholders.

DIVIDEND POLICY

We have never paid cash dividends and have no plans to do so in the foreseeable
future. Our future dividend policy will be determined by our Board of Directors
and will depend upon a number of factors, including our financial condition and
performance, our cash needs and expansion plans, income tax consequences, and
the restrictions that applicable laws and our credit arrangements then impose.

RECENT SALES OF UNREGISTERED SECURITIES

The following securities were issued or sold by Biophan during the year ended
February 28, 2006, without registration under the Securities Act of 1933, and
have not been previously reported on a quarterly report or Form 10-Q:

On January 24, 2006, we entered into a Line of Credit Agreement (the "Line of
Credit Agreement") with Biomed Solutions, LLC, a New York limited liability
company ("Biomed"), pursuant to which Biomed has committed to make advances to
us, in an aggregate amount of up to $5,000,000. Under the Line of Credit
Agreement, advances may be drawn down in such amounts and at such times as we
determine upon 15 days' prior notice to Biomed, except that we may not draw down
more than $1,500,000 in any 30-day period. As of April 19, 2006, we had borrowed
an aggregate of $3,200,000 under the Line of Credit Agreement. We are obligated
to utilize the entire credit facility. Amounts borrowed will bear interest at
the rate of 8% per annum and are convertible into shares of our Common Stock at
the rate of $1.46 per share. Any amounts drawn down and repaid may be reborrowed
at any time (subject to a requirement of 15 days' notice and the limitation that
not more than $1,500,000 may be drawn down during any 30-day period). Biomed's
obligation to lend to us under the Line of Credit Agreement expires on June 30,
2007, on which date the entire amount borrowed by us (and not converted into
shares of our Common Stock) becomes due and payable. Our obligations with
respect to borrowings under the credit facility are governed by a Convertible
Promissory Note issued by us to Biomed on January 24, 2006. In connection with
the establishment of the credit facility under the Line of Credit Agreement, on
January 24, 2006, we issued to Biomed a Stock Purchase Warrant (the "Warrant")
entitling Biomed to purchase up to 1,198,630 shares of our Common Stock at an
exercise price of $1.89 per share. Biomed's purchase rights under the Warrant
expire on January 23, 2011. The warrants and any shares issued upon exercise of
warrants or any election to convert outstanding debt are exempt from
registration pursuant to Sections 3(a) 9 and 4(2) of the Securities Act.

ITEM 6. SELECTED FINANCIAL DATA

The following table presents summarized financial information as of and for the
fiscal years ended February 28, 2002 through 2006. For comparative purposes,
certain reclassifications of previously reported operating data have been made.
The information is extracted from the consolidated financial statements
presented elsewhere in this Form 10-K and in previous filings and should be read
in conjunction therewith.

Year ended Year ended Year ended Year ended Year ended
February 28, February 28, February 29, February 28, February 28,
Operating Data: 2006 2005 2004 2003 2002
--------------- ------------ ------------ ------------ ------------ -----------

Revenues $ 1,044,861 $ -0- $ 75,000 $ -0- $ -0-
Research and development expenses 6,034,994 2,629,980 1,240,439 1,373,124 949,124
General and administrative expenses 8,286,687 3,337,185 1,911,003 1,792,593 2,248,065
Other income (expense) (1,038,209) 173,618 (642,128) (272,535) (508,728)
--------------- ------------ ------------ ------------ ------------ -----------
Net loss $(14,315,029) $ (5,793,547) (3,718,570) (3,438,252) (3,705,917)
============ ============ ============ ============ ===========
Loss per common share - basic and diluted $ (.19) $ (.08) $ (.08) $ (.11) $ (.14)
============ ============ ============ ============ ===========
Weighted average shares outstanding 77,014,450 69,263,893 44,017,010 31,731,051 27,000,962
============ ============ ============ ============ ===========

February 28, February 28, February 29, February 28, February 28,
Balance Sheet Data: 2006 2005 2004 2003 2002
--------------------- ------------ ------------ ------------ ------------ ------------

Current assets $ 1,857,994 $ 2,007,181 $ 2,077,307 $ 476,353 $ 672,823
Total assets 14,763,455 3,181,370 2,231,345 683,056 866,638
Current liabilities 3,105,986 1,462,103 254,058 796,187 645,389
Long-term liabilities -0- -0- -0- 83,333 -0-
Stockholders' equity (deficiency) 11,587,926 1,719,267 1,977,287 (196,464) 221,249
Working capital (1,247,992) 545,078 1,823,249 (319,834) 27,434

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion of our financial condition and results of operations
should be read in conjunction with the consolidated financial statements and
notes to the statements included in Item 8 of this Report. These disclosures
have been determined to be in accordance with United States' Generally Accepted
Accounting Principles (GAAP).

Executive Summary:

We are a technology development company with a strong focus on solving
real-world technical challenges facing the medical device industry. When
selecting a market opportunity to address, we generate a wide range of potential
technical solutions. Each of the technical solutions that we pursue is strongly
protected by intellectual property to ensure that we have the capability of
effectively marketing our technologies. Whenever possible, we attempt to develop
and patent multiple solutions for any given technology challenge. This is done
both to strengthen our position against competitors, and to be in a position to
offer multiple manufacturers alternative solutions, such as for MRI safety, or
stent visibility, as we introduce our technologies to the market.

This approach has resulted in the development of a range of core technologies,
and our presence in a number of different but related segments of the medical
device market. We are aggressive in the development and defense of our
intellectual property assets and have an intellectual property portfolio several
times the size of many comparably sized companies.

Our primary mission is to develop and commercially exploit technologies for
improving the performance, and the corresponding competitiveness, of biomedical
devices manufactured by third party companies. We do not currently employ our
own manufacturing or distribution channels but rather rely on relationships with
sub-contractors and/or partner companies. We develop technology protected by
strong intellectual property targeted at specific markets within the medical
technology sector.

Over the past year, we exceeded $1 million in revenue from licensing, MRI
testing, and consulting to the industry, plus additional revenue not yet
realized which will be recognized in the next fiscal year. Second, we have
established a relationship with the U.S. Food and Drug Administration (FDA),
which resulted in the announcement of a Cooperative Research and Development
Agreement (CRADA) to help develop standards for making pacemakers,
defibrillators and neurostimulators safe with MRI.

Third, we have developed a series of technologies improving upon implantable
devices including an MRI visible vena cava filter and MRI visible stents, and
refinements to our technology for MRI safe pacemaker and neurostimulator leads.
In addition, we have developed market opportunities for an MRI safe and image
compatible ceramic motor and we have acquired additional technologies for
improving MRI contrast agents.

Fourth, we made progress on a competitive cardiac assist device, the
MYO-VAD(TM), through our relationship with Myotech, LLC.

Separately, we made strides in the technology to improve drug elution and drug
delivery systems using nanomagnetic particle technology and we established a
relationship with NaturalNano (OTCBB: NNAN) for the exclusive use of jointly
developed technologies for extracting, separating, and characterizing halloysite
nanotubes, useful for the delivery of drugs and other agents for extended
release. In a related area, we are developing thin film nanotechnology for a
system for generating power for implantable devices from body heat, which we are
co-developing with NASA.

We have successfully demonstrated effective solutions for making devices which
use long metal wire leads, such as pacemakers, defibrillators, neurostimulators,
et al, safe for use with MRI. Today, approximately 3 million people have devices
that cause them to be denied access to MRI when needed, due to safety concerns
and regulatory (FDA and other) contraindications. We believe that if
manufacturers of these devices incorporate our solutions into their products,
they can be made safe for use with MRI.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United Stales of America. In
preparation of those financial statements, we apply various accounting policies.
We also make estimates and assumptions that affect the reported amounts of
assets, liabilities and disclosures at the date of the financial statements.
Although our accounting policies and certain estimates and assumptions are
disclosed within the notes to our consolidated financial statements, the
following is a discussion of the accounting policies, estimates and assumptions
we believe are most critical.

Principles of Consolidation

The consolidated financial statements include the accounts of Biophan
Technologies, Inc. ("Biophan"), its wholly owned subsidiaries, LTR Antisense
Technology, Inc.("Antisense") and Nanolution, LLC, formerly MRIC Drug Delivery
Systems, LLC, ("Nanolution"), and its majority owned subsidiaries Biophan Europe
GmbH ("Biophan Europe"), formerly aMRIs GmbH, and TE Bio LLC ("TE Bio"),
collectively referred to as the "Company". All significant intercompany accounts
and transactions have been eliminated in consolidation.

Investments in Other Entities

Our minority interest investment in Myotech LLC is accounted for under the
equity method because we have the ability to exercise significant influence, but
not control. This means that our investment in Myotech LLC is adjusted at each
balance sheet date to reflect capital contributions made, dividends received,
and our respective share of such affiliate's losses.

Our investment in New Scale Technologies, Inc., a nonpublic entity, represents a
10% common stock ownership interest and is carried at cost.

Revenue Recognition

The Company earns and recognizes revenue under development agreements when the
phase of the agreement to which amounts relate is completed and the Company has
no further performance obligation. Completion is determined by the attainment of
specified milestones including a written progress report. Advance fees received
on such agreements are deferred until recognized.

The Company recognizes initial license fees over the term of the related
agreement. Revenue related to a performance milestone is recognized upon the
achievement of the milestone, as defined in the respective agreements.

The Company recognizes revenues from testing services and consulting fees as
services are performed.

Research and Development

The Company expenses research and development costs as incurred. Research and
development expenses include, but are not limited to, research salaries, patent
attorney professional fees, research consulting, and funding of various research
projects.

Stock Based Compensation
The Company has elected to apply Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations in
accounting for its stock options issued to employees (intrinsic value) and has
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation.

Effective March 1, 2006, the Company is required to adopt provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123R, "Share-Based
Payment", which replaces SFAS 123 and supercedes APB No. 25. Under provisions of
SFAS 123R, compensation cost relating to share-based payment transactions will
be recognized in the financial statements as compensation expense based upon
alternative fair value models. For additional details, please refer to the
discussion in Item 8, "Financial Statements and Supplemental Data", Footnote 1,
"Principal Business Activity and Summary of Significant Accounting Policies",
caption "Stock Options".

Summary of Results

In 2006, we reported revenues of $1,044,861 and a net loss of $(14,315,029), or
$(0.19) loss per diluted share, compared to no revenues and a net loss of
$(5,793,547) or $(0.08) per diluted share for 2005. For the year ended February
28, 2006, the non-cash charge to earnings for stock options granted was
$4,609,778, of which $4,244,280 related to the vesting, during the first and
second quarters, of contingent options previously granted to executive officers
and non-employee directors that vested upon the achievement of specified
performance-based milestones. These particular options, because they are not
"fixed and determinable," must be expensed for any intrinsic value at the time
and to the extent that they vest. The calculated amounts resulted in a non-cash
charge in the statement of operations and an offsetting credit to additional
paid-in capital.

Results of Operations

Comparison of the Years Ended February 28, 2006 and 2005

Revenues. The total revenues for the year ended February 28, 2006 were
$1.045 million compared to no revenues in 2005. Our 2006 revenues pertain to
$0.704 million in development payments and license fees from our licensing
agreement with Boston Scientific Scimed, Inc. and $0.341 million from our MRI
testing services and consulting fees in Biophan Europe.

Operating Expenses

Research and Development. These expenses primarily consist of the
personnel-related, technical consulting, professional fees for patent attorneys,
and license fees. For the year ended February 28, 2006, these expenses increased
by 129% or $3.405 million to $6.035 million compared to $2.630 million for 2005.
The most significant increase was caused by a 57% increase, or $1.948 million,
in non-cash contingent stock option expense due to the vesting of contingent
options that vested upon the achievement of specified performance-based
milestones In addition, we increased funding by approximately $0.750 million in
various research and development projects; we increased our cost of licensing
fees by $0.505 million; and we incurred increased expenses of $0.273 million due
to additional professional staff and salary increases for current staff.

General and Administrative. General and administrative expenses include
the costs of personnel-related expenses for the administrative, legal, finance,
information technology, and communications functions. For the year ended
February 28, 2006, these expenses rose by 148%, or $4.950 million to $8.287
million compared to $3.337 million for 2005. Of this increase, approximately
46%, or $2.296 million, pertained to non-cash contingent stock option expense
due to the vesting of contingent options that vested upon the achievement of
specified performance-based milestones. Outside services increased by $1.271
million, consisting primarily of additional legal and financial consulting and
communications expenses, combined with $0.333 million in added costs for added
staff and increased salaries, and $0.219 million for travel and other
administrative expenses.

Other Income (Expense)
Interest Expense. We incurred interest expense amounting to approximately
$1.141 million primarily related to a $5 million line of credit from Biomed
Solutions, LLC ("Biomed"), which included a beneficial conversion feature of
approximately $1.0 million. The discount is being amortized over the term of the
line of credit. The Company incurred no interest expense in 2005

Equity Loss on Investment. This loss is a pro rata share of the loss
incurred by Myotech, LLC ("Myotech") for the three months ended February 28,
2006. As further described in Note 6 - "Investment" in the "Notes to the
Consolidated Financial Statements," effective November 30, 2005, the Company
made a combined investment in and advances to Myotech of $11.8 million. This
investment reflects a 38% minority interest in Myotech. We account for this
investment using the equity method of accounting. This means that our investment
in Myotech, LLC is adjusted at each balance sheet date to reflect capital
contributions made, dividends received and our respective share of Myotech's
losses.

Comparison of the Years Ended February 28, 2005 and February 29, 2004
Revenues. The Company recorded no revenues for the year ended February 28,
2005, and $75,000 in revenues from a single development payment in the year
ended February 29, 2004.

Operating Expenses
Research and Development. Research and development expenses primarily
consist of the personnel-related, technical consulting, professional fees for
patent attorneys, and license fees. For the year ended February 28, 2005, these
expenses increased by $1.39 million or from $1.240 million to $2.630 million.
The increased expenses were due primarily to approximately $0.4 million in
increased outside patent attorney services, $0.5 million in increased stent
project funding with Alfred University, and $0.2 million in increased technical
consulting expenses.

General and Administrative. General and administrative expenses include
the costs of personnel and related expenses for the administrative, legal,
finance, information technology and communications functions. For the year ended
February 28, 2005, these expenses rose by approximately $1.3 million to $3.337
million compared to $1.996 million for 2004. This increase was due primarily to
$1.0 million in communications expenses and an increase of $0.3 million in legal
and financial consulting fees.

Other Income (Expense)
Interest Expense We incurred no interest expense in 2005 and $0.730
million in 2004. We recorded a discount on a note from Biomed due to a
beneficial conversion feature on the note. The discount was amortized over the
term of the note.

Related Party Transactions

The Company has affiliations with three entities, Biomed Solutions, LLC
("Biomed"), Technology Innovations, LLC ("TI"), and Myotech, LLC ("Myotech")
that are related by virtue of common management personnel and stock ownership.
During the years ended February 28, 2006, 2005, and February 29, 2004, the
Company charged Biomed and Myotech for services of certain Company personnel.
The total of these charges was $197,362, $161,014, and $85,584, respectively.
The Company also charges Biomed, TI, and Myotech for expenses allocable to and
paid on their behalf. During the years ended February 28, 2006, 2005, and
February 29, 2004 expenses paid by the Company on their behalf were
approximately $762,000, $240,000, and $120,000, respectively. At February 28,
2006, the combined balances due from these related parties was $41,577. The
amounts do not bear interest and the Company received payment within forty-five
days.

During the year ended February 28, 2006, and 2005, the Company was billed
$93,000, and $9,000, respectively, for legal services provided by Bramson &
Pressman of which Robert S. Bramson, a director of the Company, is a partner.
Also, Steven Katz & Associates, Inc. of which Steven Katz, a director of the
Company is an owner, billed the Company $110,000 during the year ended February
28, 2006, for consulting services.

Liquidity and Capital Resources

On June 30, 2005, we executed a definitive equity investment agreement and a
technology license with Boston Scientific Scimed. In the equity transaction,
which closed on August 2, 2005, we issued 1,653,193 shares of common stock to
Boston Scientific Scimed for an aggregate purchase price of $5 million,
reflecting a per share price of $3.02, which represents a 10% premium over the
average of the closing price for the 30 calendar-day period prior to the
closing. The technology license included an upfront payment of $750,000 (which
we received on August 2, 2005), and annual maintenance fees, in addition to
royalties and milestone payments.

To ensure that we would have adequate cash on hand for pending activities, on
May 27, 2005, we entered into a line of credit agreement with our affiliate,
Biomed, providing for a line of credit facility of up to $2 million. Borrowings
under the line bear interest at 8% per annum and are convertible at 90% of the
average closing price for the 20 trading days preceding the date of the
borrowing. In June 2005, the full $2 million was loaned and Biomed received
warrant coverage of 500,000 shares priced at 110% of the average closing price
for the 20 trading days preceding the date of execution of the credit agreement.
The independent board members of Biophan negotiated and approved this credit
facility. The terms of this credit facility are considered to be better than are
available from commercial lending sources. On August 31, 2005, Biomed elected to
convert $1 million of the outstanding loan, plus accrued interest to date, into
480,899 shares of our common stock. On October 7, 2005, we repaid $500,000 of
principal plus all accrued interest on the outstanding loan. Biomed has extended
until August 31, 2006 the due date for our repayment of the remaining $500,000.

On May 27, 2005, we cancelled a previous financing agreement with SBI Brightline
Consulting, LLC and entered into a new agreement with its affiliate, SBI
Brightline XI, LLC providing a $30 million fixed price commitment to purchase,
upon our demand, up to 10 million shares of our common stock at an average price
of $3 per share, with a range from $2 a share to $4 a share, which must be taken
in sequential tranches of 1 million shares each. We amended this financial
agreement on January 8, 2006, to clarify a minor ambiguity in the agreement
related to the closing dates. There are no warrants or fees associated with this
agreement. SBI's obligation to purchase the shares is subject to the condition
that the shares be registered for resale under the Securities Act of 1933. We
have filed with the SEC a registration statement on Form S-3 covering the shares
issuable to SBI Brightline, but the registration statement has not yet been
declared effective. We believe that the proceeds from sales of shares to SBI
Brightline, together with anticipated payments by Boston Scientific Scimed, will
satisfy our liquidity requirements for at least the next 12 months.

Effective November 30, 2005, we entered into a Securities Purchase Agreement
with Myotech, LLC to acquire a substantial minority interest in Myotech, LLC
with the right to acquire a controlling interest. The acquisition involved
approximately $11.1 million of newly issued shares of our common stock and cash
advances in exchange for Class A units in Myotech, LLC. The independent members
of our Board of Directors negotiated, recommended and approved all terms of this
transaction. Our Board of Directors, including the independent members,
determined that the transaction was in the best interests of Biophan.

New Accounting Standards

Other than SFAS No. 123R, "Share-Based Payment," which requires compensation
cost related to share-based payment transactions be recorded as actual expense,
we do not believe there are any recently issued, but not yet effective
accounting pronouncements that will have a material effect on our financial
reporting.

Licensing and Joint Venture Strategy

Boston Scientific License

On June 30, 2005, we entered into a licensing agreement with Boston Scientific
Scimed, Inc. The agreement provides Boston Scientific with the right to use
Biophan's MRI safety and image compatibility technology and other technologies
in a broad range of exclusive and non-exclusive product areas at royalty rates
of 3% to 5%. The exclusive product area includes vascular implants and RF
ablation catheters, and the non-exclusive product area covers a broad array of
medical devices including pacemakers, defibrilators, neurostimulators,
catheters, and guidewires. Boston Scientific has the right to sub-license the
exclusive product areas to third parties, with Biophan and Boston Scientific to
share all proceeds from these sub-licensees. The agreement also provides for
milestone payments to Biophan for specific product areas which may be as high as
several million dollars per product. In addition, the agreement required Boston
Scientific to make an initial upfront payment to Biophan of $750,000 (which will
not be an offset to future earned royalties); make annual minimum royalty and
substantial annual earned royalty payments; and receive a right of first
negotiation on new technologies acquired by Biophan in the fields of MRI safety
and image compatibility. The initial $750,000 payment was made on August 2,
2005, and recognized as revenue over the next twelve months. Accordingly, one
half of the payment, or $375,000 was recorded as revenue in the fiscal year
ended February 28, 2006.

In December 2005, we received $250,000 for the first annual minimum payment
under our license. The agreement calls for milestone payments upon achievement
of significant project milestones, with some of these milestones in the
multi-million dollar range, and requires payment of royalties for products sold
incorporating our technologies. Boston Scientific has sublicensing rights to
certain technologies, sharing revenue with Biophan, and other product lines will
revert to Biophan in the event of non-performance. The agreement includes rights
to our technology for making pacemakers, defibrillators, and neurostimulators
safe and image compatible for use with MRI.

Acquisition of Intellectual Assets

We currently have an overall estate of 213 patents, including 156 U.S. patents,
inclusive of those assigned and licensed, filed applications, allowed, and
issued patents. Of these, 50 U.S. patents have issued. Additionally, we have 57
international patents or applications in process. We believe that a strong and
broad intellectual property portfolio is vital to our ability to achieve and
maintain royalties and product sales to major industrial partners across our
product lines.

The technologies allowing visualization of implants have been developed at
Biophan, and with technology partners under exclusive license, including aMRIs
Patents GmbH in Germany (via an exclusive license); Aachen Resonance in Germany
(via an exclusive license); and Nanoset, LLC in the U.S. (via an exclusive
license). The patents include those licensed from Nanoset, LLC. Nanoset's
technology can be used to reduce image artifacts caused by implantable and
interventional medical devices.

The patents total also includes those licensed as part of the Biophan Europe
acquisition whereby we obtained worldwide exclusive rights to a significant
patent portfolio totaling fifteen issued and pending patents covering critical
capabilities needed by the medical industry as the use of MRI interventional
medicine and MRI diagnostics for examination of stents and other implants
becomes standard medical procedure.

On an ongoing basis, we are aggressively pursuing internal research and
development projects, as well as sourcing leading-edge providers of related
technologies. We are currently reviewing several cardiovascular technologies
which we feel have potential for exclusive licensing in, and subsequent product
development and licensing out. Intellectual property, such as technology
solutions and patents, may be developed internally, through joint ventures,
licensed in, or purchased. To ensure the continuing value of our intellectual
assets, we intend to aggressively defend our patents and licensed technology,
both domestically and abroad.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not participate in any derivative financial instruments, or other
financial and commodity instruments for which fair value disclosure would be
required under SFAS No. 107.

Our primary market risk exposures are in the areas of interest rate risk and
foreign currency exchange rate risk. The Company's investment portfolio of cash
equivalents is subject to interest rate fluctuations, but the Company believes
this risk is immaterial due to the short-term nature of these investments. For
the year ended February 28, 2006, foreign currency translation gains were
approximately $6,000 as a result of consolidating our foreign subsidiaries.
During the year, we did not engage in any foreign currency hedging activities

We do not participate in any derivative financial instruments, or other
financial and commodity instruments for which fair value disclosure would be
required under SFAS No. 107.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONTENTS

Report of Independent Registered Public Accounting Firm F-1

Consolidated Financial Statements:

Balance Sheet F-2

Statement of Operations F-3

Statement of Stockholders' Equity F-4 - F-7

Statement of Cash Flows F-8 - F-9

Notes to Consolidated Financial Statements F-10 - F-19

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------

To the Board of Directors and Shareholders
Biophan Technologies, Inc.

We have audited the accompanying consolidated balance sheets of Biophan
Technologies, Inc. and Subsidiaries (a development stage company) as of February
28, 2006 and 2005 and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
then ended February 28, 2006, and the amounts in the cumulative column in the
consolidated statements of operations, stockholders' equity, and cash flows for
the period from March 1, 2000 to February 28, 2006. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Biophan
Technologies, Inc. and Subsidiaries as of February 28, 2006 and 2005 and the
results of their operations and their cash flows for each of the three years in
the period then ended February 28, 2006. Additionally, the amounts included in
the cumulative column in the consolidated statements of operations and cash
flows for the period from March 1, 2000 to February 28, 2006 are fairly
presented, in all material respects, in conformity with United States generally
accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the Company's
internal control over financial reporting as February 28, 2006, based on
criteria established in Internal Control - Integratred Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated April 26, 2006 expressed an unqualified opinion thereon.

/s/GOLDSTEIN GOLUB KESSLER LLP
New York, New York
April 26, 2006

F-1

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

February 28,
------------
ASSETS 2006 2005
------------- ------------

Current assets:
Cash and cash equivalents $ 1,441,178 $ 753,288
Accounts receivable 162,558 -
Stock subscriptions receivable - 900,000
Due from related parties 41,577 220,959
Prepaid expenses 131,633 91,596
Other current assets 81,048 41,338
------------- ------------
Total current assets 1,857,994 2,007,181

Property and equipment, net 91,434 73,518

Other assets:
Intellectual property rights, net of amortization 943,165 997,738
Investment in New Scale Technologies, Inc. 100,000 100,000
Investment in and advances to Myotech, LLC 11,767,062 -
Security deposit 3,800 2,933
Deferred tax asset, net of valuation allowance
of $7,560,000 and $4,787,000, respectively - -
------------- ------------
12,814,027 1,100,671
------------- ------------
$ 14,763,455 $ 3,181,370
============= ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued expenses $ 1,081,960 $ 1,037,103
Line of credit - related party, net of discount
of $1,323,921 1,476,079 -
Due to related parties 27,114 -
Deferred revenue 520,833 225,000
Note payable - 200,000
------------- ------------
Total current liabilities 3,105,986 1,462,103

Minority interest 69,543 -

Stockholders' equity:
Common stock, $.005 par value:
Authorized, 125,000,000 shares
Issued and outstanding , 81,805,243 and
74,317,832 shares, respectively 409,026 371,589
Additional paid-in capital 42,979,203 18,982,952
Stock subscription receivable - (150,000)
Deficit accumulated during the
development stage (31,800,303) (17,485,274)
------------- ------------
11,587,926 1,719,267
------------- ------------
$ 14,763,455 $ 3,181,370
============= ============

See notes to consolidated financial statements

F-2

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF OPERATIONS
-------------------------------------------------------------------------------

Period from August
Year Ended 1, 1968 (date of
February 28, February 29, inception) to
2006 2005 2004 February 28, 2006

Revenues:
Development payments $ 225,000 $ - $ 75,000 $ 300,000
License Fees 479,166 -- -- 479,166
Consulting fees 340,695 -- -- 340,695
-------------- -------------- -------------- --------------
1,044,861 -- 75,000 1,119,861

Operating expenses:
Research and development 6,034,994 2,629,980 1,240,439 12,340,805
General and administrative 8,286,687 3,337,185 1,911,003 17,660,639
Write-down of intellectual
property rights -- -- -- 530,000
-------------- -------------- -------------- --------------
14,321,681 5,967,165 3,151,442 30,531,444
-------------- -------------- -------------- --------------

Operating loss (13,276,820) (5,967,165) (3,076,442) (29,411,583)

Other income(expense):
Interest expense (1,140,866) -- (729,527) (2,871,789)
Interest income 70,701 11,869 1,815 129,148
Equity loss in investment (222,992) -- -- (222,992)
Other income 254,948 161,749 85,584 731,356
Other expense -- -- -- (65,086)
-------------- -------------- -------------- --------------
(1,038,209) 173,618 (642,128) (2,299,363)

Loss from continuing operations (14,315,029) (5,793,547) (3,718,570) (31,710,946)

Loss from discontinued operations -- -- -- (89,357)
-------------- -------------- -------------- --------------

Net loss $ (14,315,029) $ (5,793,547) $ (3,718,570) $ (31,800,303)
============== ============== ============== ==============

Loss per common share - basicand
diluted $ (0.19) $ (0.08) $ (0.08)
============== ============== ==============

Weighted average shares
outstanding 77,014,450 69,263,893 44,017,010
============== ============== ==============

See notes to consolidated financial statements

F-3

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
PERIOD FROM AUGUST 1, 1968 (DATE OF INCEPTION) TO FEBRUARY 28, 2006
--------------------------------------------------------------------------------

Deficit
Accumulated
Additional Stock During the Stockholders'
Number Common Paid-in Subscription Development Equity
of Shares Stock Capital Receivable Stage (Deficiency)
----------------------------------------------------------------------------------------------------------------------------------

1969-1993 - 382,130 shares issued for
services for $.05 per share 382,130 $1,911 $17,196 $19,107

1970 - 1,405,000 shares issued for
mining rights for $.05 per share 1,405,000 7,025 63,225 70,250

Net loss from inception through
February 28, 1998 (89,357) (89,357)
----------------------------------------------------------------------------------------------------------------------------------
Balance at February 28, 1998 1,787,130 8,936 80,421 (89,357) --

1999 - 10,000 shares issued for
services for $.05 per share 10,000 50 450 500

1999 - 1,000,000 shares issued for
services for $.005 per share 1,000,000 5,000 5,000

Net loss for the year ended
February 28, 1999 (5,500) (5,500)
----------------------------------------------------------------------------------------------------------------------------------

Balance at February 28, 1999 2,797,130 13,986 80,871 (94,857) --

2000 - 1,000,200 shares issued
for services for $.005 per share 1,000,200 5,001 5,001

Net loss for the year ended
February 29, 2000 (5,001) (5,001)
----------------------------------------------------------------------------------------------------------------------------------
Balance at February 29, 2000 3,797,330 18,987 80,871 (99,858) --

2000 - 250,000 shares issued for
services for $.005 per share 250,000 1,250 1,250

2000 - Expenses paid by stockholder 2,640 2,640

2000 - 10,759,101 shares issued for
acquisition of Antisense Technology, Inc 10,759,101 53,795 121,205 175,000

2000 - 10,759,101 shares issued for
cash for $.005 per share 10,759,101 53,796 121,204 175,000

Net loss for the year ended
February 28, 2001 (729,130) (729,130)
----------------------------------------------------------------------------------------------------------------------------------
Balance at February 28, 2001 25,565,532 127,828 325,920 (828,988) (375,240)

2001 - 2,399,750 shares issued for
cash for $1.00 per share 2,399,750 11,999 2,387,751 2,399,750

2001 - 468,823 shares issued for interest 468,823 2,344 466,479 468,823

2001 - Redemption of 200,000 shares (200,000) (1,000) (1,000)

CONTINUED ON FOLLOWING PAGE

F-4

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
PERIOD FROM AUGUST 1, 1968 (DATE OF INCEPTION) TO FEBRUARY 28, 2006
--------------------------------------------------------------------------------

2001 - 1,315,334 shares issued upon
conversion of bridge loans at $.75
per share 1,315,334 6,576 979,924 986,500

2001 - Offering costs associated with
share issuances for cash (254,467) (254,467)

2002 - Grant of stock options for services 702,800 702,800
Net loss for the year ended
February 28, 2002 (3,705,917) (3,705,917)
----------------------------------------------------------------------------------------------------------------------------------

Balance at February 28, 2002 29,549,439 147,747 4,608,407 (4,534,905) 221,249

2002 - Shares issued for cash for
$.34 per share 993,886 4,969 337,461 342,430

2002 - Shares issued for cash for
$.15 per share 1,192,874 5,964 167,002 172,966

2002 to 2003 - Shares issued for cash for
$.25 per share 5,541,100 27,706 1,357,569 1,385,275

2002 to 2003 - Shares issued as commissions
on offerings 357,394 1,787 (1,787) -

2002 to 2003 Cash commissions on offerings (119,488) (119,488)

Offering costs (45,644) (45,644)

Grant of stock options for services 485,000 485,000

Intrinsic value of beneficial conversion
feature
of note payable and MRI liability 800,000 800,000
Net loss for the year ended
February 28, 2003 (3,438,252) (3,438,252)
----------------------------------------------------------------------------------------------------------------------------------

Balance at February 28, 2003 37,634,693 188,173 7,588,520 (7,973,157) (196,464)

2003 - Shares issued upon conversion of
related party loans at $.14 per share 1,268,621 6,343 177,607 183,950

2003 - Shares issued upon conversion of
stockholder loan plus accrued interest
at $.20 per share 775,000 3,875 151,693 155,568

2003 - Shares issued for cash pursuant to
equity line of credit at prices from
$.11 to $.23 per share 3,325,757 16,629 474,561 491,190

2003 - Shares issued for option exercises
at $.14 per share 3,000,000 15,000 412,847 427,847

CONTINUED ON FOLLOWING PAGE

F-5

2004 - Shares issued for warrant exercises
at $.25 and $.50 per share 995,940 4,980 327,864 332,844

2004 - Shares issued for cash pursuant to
stock purchase agreement at prices from
$.15 to $.40 per share 11,000,000 55,000 2,845,000 2,900,000

2004 - Shares issued upon conversion of
related party loans at $.10 per share 7,945,000 39,725 754,775 794,500

Offering costs (209,528) (209,528)

Grant of stock options for the year 565,000 565,000

Intrinsic value of beneficial conversion
feature of note payable 250,950 250,950

Net loss for the year ended February 29, 2004 (3,718,570) (3,718,570)
------------------------------------------------------------------------------------------------------------------------------------

Balance at February 29, 2004 65,945,011 329,725 13,339,289 - (11,691,727) 1,977,287

2004 - Shares issued for option exercise
at $.32 per share 70,000 350 22,050 22,400

2004 - Shares issued for option exercise
at $.50 per share 24,999 125 12,375 12,500

2004 -Shares issued upon exercise of
warrants at $.25 per share 868,700 4,343 212,832 217,175

2004 - Shares issued upon exercise of
warrants at $.50 per share 926,700 4,634 458,716 463,350

2004 - Shares issued upon exercise of
warrants at $1.00 per share 108,375 542 107,833 108,375

2004 - Shares issued upon cashless exercise
of warrants 74,047 370 (370) -

2004 - 2005 - Shares issued for cash pursuant to
stock purchase agreement at prices from
$.60 to $.70 per share 6,000,000 30,000 3,870,000 3,900,000
2005 - Restricted shares issued in connection
with employment agreements at
$1.34 per share 200,000 1,000 267,000 268,000

2005 - Restricted shares issued in connection
with acquisition of Biophan Europe at
$1.34 per share 100,000 500 133,500 134,000

Offering costs (41,998) (41,998)

CONTINUED ON FOLLOWING PAGE

F-6

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

Grant of stock options for services 201,000 201,000

Section 16(b) short swing profits 400,725 400,725

Stock subscription receivable (150,000) (150,000)

Net loss for the year ended February 28, 2005 (5,793,547) (5,793,547)
------------------------------------------------------------------------------------------------------------------------------------
Balance at February 28, 2005 74,317,832 $ 371,589 $ 18,982,952 $ (150,000) $(17,485,274) $1,719,267

2005 - Shares issued for option exercise
at $.50 per share 74,998 375 66,208 66,583

2005 - Shares issued for option exercise
at $.67 per share 12,500 63 8,312 8,375

2005 - Shares issued for option exercise
at $1.00 per share 136,667 683 106,901 107,584

2005 -Shares issued upon exercise of
warrants at $.16 per share 54,054 270 8,379 8,649

2005 -Shares issued upon exercise of
warrants at $.39 per share 12,500 62 4,813 4,875

2005 -Shares issued upon exercise of
warrants at $.41 per share 17,520 88 7,095 7,183

2006 - Restricted shares issued in connection
with acquisition of Biophan Europe at
$1.34 per share 100,000 500 133,500 134,000

2006 - Shares issued for acquisition of
Minority interest in Myotech, LLC
at $2.10 per share 4,923,080 24,615 10,313,853 10,338,468

2006 - Shares issued pursuant to investment
Agreement with Boston Scientific
at $3.02 per share 1,653,193 8,266 4,991,734 5,000,000

2006 - Restricted shares issued pursuant to
license agreement at $1.72 per share 22,000 110 37,730 37,840

2006 - Shares issued upon conversion of
related party loans at $2.12 per share 480,899 2,405 1,017,101 1,019.506

Beneficial conversion feature of
note payable 2,395,485 2,395,485

Stock options issued for services 4,609,778 4,609,778

Section 16(b) short swing profits 295,362 295,362

Stock subscription receivable 150,000 150,000

Net loss for the year ended February 28, 2006 (14,315,029) (14,315,029)
-----------------------------------------------------------------------------------
Balance at February 28, 2006 81,805,243 409,026 42,979,203 - (31,800,303) 11,587,926
====================================================================================

See notes to consolidated financial statements

F-7

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------------------------------------------------------------------------------------------------------

Period from
Year Ended August 1,
------------------------------------------------- 1968 (date of
February 28, inception) to,
------------------------------- February 29, February 28
2006 2005 2004 2006
------------- ------------- ----------- -------------

Cash flows used for operating activities:
Net loss $ (14,315,029) $ (5,793,547) $(3,718,570) $ (31,800,303)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of intellectual property rights 54,573 - - 54,573
Depreciation 43,068 28,020 23,643 135,261
Loss on disposal of equipment 1,505 - - 1,505
Realized and unrealized losses on marketable
securities - - - 66,948
Accrued interest on note converted to common
stock 19,506 - 11,998 31,504
Amortization of interest on convertible notes payable - - 667,617 1,050,950
Write-down of intellectual property rights - - - 530,000
Amortization of discount on payable to related
party 1,071,564 - - 1,146,564
Issuance of common stock for services - 268,000 - 369,108
Issuance of common stock for acquisition of
licensing rights 171,840 - - 171,840
Issuance of common stock for interest - - - 468,823
Grant of stock options for services 4,609,778 201,000 565,000 6,563,578
Expenses paid by stockholder - - - 2,640
Equity loss on investment 222,992 - - 222,992
Minority interest 69,543 - - 69,543
Changes in operating assets and liabilities:
(Increase) decrease in advances receivable - - 10,127 -
(Increase) decrease in accounts receivable (162,558) - - (162,558)
(Increase) decrease in due from related parties 179,382 (186,737) (9,854) (41,577)
(Increase) decrease in prepaid expenses (40,037) (22,411) 21,738 (131,633)
(Increase) decrease in other current assets (39,710) - - (39,710)
(Increase) decrease in security deposits (867) - - (3,800)
Increase (decrease) in accounts payable and
accrued expenses 44,857 405,821 (89,158) 691,405
Increase (decrease) in due to related parties 27,114 - (9,401) (16,382)
Increase (decrease) in deferred revenues 295,833 225,000 - 520,833
-------------------------------------------------------------------
Net cash used in operating activities (7,746,646) (4,874,854) (2,526,860) (20,097,896)

F-8

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------

Cash flows used for investing activities:
Purchases of property and equipment (62,489) (39,302) (21,625) (227,178)
Sales of marketable securities - 1,150,000 302,000 2,369,270
Purchase of investment - (100,000) - (100,000)
Investment in and advances to Myotech, LLC (1,651,585) - - (1,651,585)
Cash paid for acquisition of Biophan Europe,
net of cash received of $107,956 - (258,874) - (258,874)
Purchases of marketable securities - - (1,150,000) (2,436,218)
-------------- --------------- ---------------- ----------------
Net cash provided by (used in) investing activities (1,714,074) 751,824 (869,625) (2,304,585)

Cash flows provided by financing activities:
Proceeds of bridge loans - - - 986,500
Loan from stockholder - - - 143,570
Line of credit borrowing from related party 4,300,000 - 250,950 4,850,950
Line of credit payments (500,000) - (72,500) (572,500)
Notes payable (200,000) - - (200,000)
Proceeds from sales of capital stock 6,050,000 2,850,000 3,252,200 16,263,849
Exercise of options 182,541 34,900 427,847 645,288
Exercise of warrants 20,707 788,900 332,844 1,142,451
Swing profits 295,362 400,725 - 696,087
Deferred equity placement costs - (22,107) (19,891) (112,536)
-------------- --------------- ---------------- ----------------
Net cash provided by financing activities 10,148,610 4,052,418 4,171,450 23,843,659
-------------- --------------- ---------------- ----------------

Net increase (decrease) in cash and equivalents 687,890 (70,612) 774,965 1,441,178

Cash and equivalents, beginning 753,288 823,900 48,935 -
-------------- --------------- ---------------- ----------------

Cash and equivalents, ending $ 1,441,178 $ 753,288 $ 823,900 $ 1,441,178
============== =============== ================ ================
Supplemental schedule of cash paid for:
Interest $ 9,800 $ - $ - $ 9,800
============== =============== ================ ================

Continued on next page

F-9

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------------

Supplemental schedule of non-cash investing and
financing activities:

Allocation of proceeds from line of credit - related party
to beneficial conversion feature and warrants $ 2,395,485 $ - $ - $ 2,395,485
=============== ================ ================= =================
Issuance of common stock upon conversion
of LOC loans $ 1,000,000 $ - $ 978,450 $ 1,978,450
=============== ================ ================= =================
Issuance of common stock for the acquisition of
A 35% interest in Myotech, LLC $ 10,338,468 $ - $ - $ 10,338,468
=============== ================ ================= =================
Issuance of common stock as part of
License Agreements $ 171,840 $ - $ - $ -
=============== ================ ================= =================
Common stock issued for subscription receivable $ - $ 1,050,000 $ - $ 1,050,000
=============== ================ ================= =================
Liabilities assumed in conjunction with acquisition of
51% interest in Biophan Europe and certain
intellectual property rights:
Fair value of assets acquired $ 1,105,714

Cash paid (366,830)

Promissory note issued (200,000)

Restricted stock issued (134,000)

Payables incurred (226,500)
---------
Liabilities assumed $ 178,384 $ - $ 178,384
=============== ================ ================= =================
Issuance of common stock upon conversion
of bridge loans $ - $ - $ 155,568 $ 1,142,068
=============== ================ ================= =================
Acquisition of intellectual property $ - $ - $ - $ 425,000
=============== ================ ================= =================
Intellectual property acquired through issuance of
capital stock and assumption of related party payable $ - $ - $ - $ 175,000
=============== ================ ================= =================

See notes to consolidated financial statements

F-10

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of Biophan
Technologies, Inc. ("Biophan"), its wholly owned subsidiaries, LTR Antisense
Technology, Inc.("Antisense")and Nanolution, LLC, formerly MRIC Drug Delivery
Systems, LLC, ("Nanolution"), and its majority owned subsidiaries Biophan Europe
GmbH ("Biophan Europe"), formerly aMRIs GmbH, and TE Bio LLC ("TE Bio"),
collectively referred to as the "Company". All significant intercompany accounts
and transactions have been eliminated in consolidation.

COMPANY HISTORY

The Company was incorporated under the laws of the State of Idaho on August 1,
1968 and on January 12, 2000, changed its domicile to Nevada by merging into a
Nevada corporation, and on July 19, 2001, changed its name to Biophan
Technologies, Inc. From the inception of the current line of business on
December 1, 2000, the Company has not generated any material revenues.
Therefore, the Company is in the development stage and will remain so until the
realization of significant revenues. The Company's ability to continue in
business is dependent upon obtaining sufficient financing or attaining future
profitable operations.

PRINCIPAL BUSINESS ACTIVITIES

The primary mission is to develop and commercially exploit technologies for
improving the performance, and as a result, the competitiveness of biomedical
devices manufactured by third party companies. The Company possesses
technologies for enabling biomedical devices, both implantable and those used in
diagnostic and interventional procedures, to be safe (do not harm the patient or
physician) and compatible (allow effective imaging of the device and its
surrounding tissue) with MRI (magnetic resonance imaging). The Company is also
developing technologies for improving MRI contrast agents; for improved drug
elution and drug delivery systems, including an MRI safe and image compatible
ceramic motor; a system for generating power for implantable devices from body
heat, and a series of implantable devices including an MRI-visible vena cava
filter.

REVENUE RECOGNITION

The Company recognizes revenues from testing services and consulting fees as
services are performed.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all highly
liquid instruments with an original maturity of three months or less to be cash
equivalents. The Company places its temporary cash investments with high credit
quality financial institutions. At times such investments may be in excess of
the Federal Deposit Insurance Corporation (FDIC) insurance limit.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash deposits. Accounts are insured by the
Federal Deposit Insurance Corporation (FDIC) up to $100,000. At times throughout
the year, the Company has balances on account in excess of insured limits.

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE

Accounts receivable are reported at their outstanding unpaid principal balances.
The Company writes off accounts receivable when they are deemed uncollectible.
The Company has historically experienced insignificant amounts of bad debts.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for major additions
and improvements are capitalized, and minor replacements, maintenance, and
repairs are charged to expense as incurred. When property and equipment are
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is included in the
results of operations for the respective period. Depreciation is provided over
the estimated useful lives of the related assets using the straight-line method.
The estimated useful lives for significant property and equipment categories are
as follows:

Computers 5 years
Furniture and equipment 5 to 7 years
Internet website 7 years

INTANGIBLE ASSETS

The Company evaluates the recoverability of identifiable intangible assets
whenever events or changes in circumstances indicate that an intangible asset's
carrying amount may not be recoverable. Such circumstances could include, but
are not limited to: (1) a significant decrease in the market value of an asset,
(2) a significant adverse change in the extent or manner in which an asset is
used, or (3) an accumulation of costs significantly in excess of the amount
originally expected for the acquisition of an asset. The Company measures the
carrying amount of the asset against the estimated undiscounted future cash
flows associated with it. Should the sum of the expected future net cash flows
be less than the carrying value of the asset being evaluated, an impairment loss
would be recognized. The impairment loss would be calculated as the amount by
which the carrying value of the asset exceeds its fair value. The fair value is
measured based on quoted market prices, if available. If quoted market prices
are not available, the estimate of fair value is based on various valuation
techniques, including the discounted value of estimated future cash flows. The
evaluation of asset impairment requires the Company to make assumptions about
future cash flows over the life of the asset being evaluated. These assumptions
require significant judgment and actual results may differ from assumed and
estimated amounts. Also, at each balance sheet date, the Company evaluates the
period of amortization of intangible assets.

DEFERRED TAXES

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted rates
expected to apply when the differences are expected to be realized. A valuation
allowance is recognized if it is anticipated that some or all of the deferred
tax asset may not be realized.

LOSS PER SHARE

Basic loss per common share is computed by dividing net loss by the weighted-
average number of shares of common stock outstanding during the period. Diluted
loss per common share gives effect to dilutive options, warrants and other
potential common stock outstanding during the period. Potential common stock has
not been included in the computation of diluted loss per share, as the effect
would be antidilutive.

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
STOCK OPTIONS

The Company has elected to apply Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations in
accounting for its stock options issued to employees (intrinsic value) and has
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation. Had the
Company elected to recognize compensation cost based on the fair value of the
options granted at the grant date as prescribed by SFAS No. 123, the Company's
net loss and loss per common share would have been as follows:

Year Ended
Year ended February 28, February 29,
--------------------------- ------------
2006 2005 2004
------------- ------------ ------------
Net loss - as reported $(14,315,029) $ (5,793,547) $ (3,718,570)
Add: Stock-based employee
compensation expense included
in reported net loss, net of
related tax effects 4,384,530 201,000 118,000
Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects (6,520,862) (342,000) (241,000)
------------ ------------ ------------
Net loss - pro forma (16,451,361) (5,934,547) (3,841,570)
============ ============ ============
Basic and diluted loss
per share - as reported $ (0.19) $ (0.08) $ (0.08)
============ ============ ============
Basic and diluted loss
per share - pro forma $ (0.21) $ (0.08) $ (0.08)
============ ============ ============

The Company's assumptions used to calculate the fair values of options issued
during the year ended February 28, 2006 were (i) risk-free interest rates of
4.5% through 4.6%, (ii) expected lives of 5 to 10 years, (iii) expected
volatility of 60% through 103%, and (iv) expected dividends of zero.

The Company's assumptions used to calculate the fair values of options issued
during the year ended February 28, 2005 were (i) risk-free interest rates of
4.04% through 4.50%, (ii) expected lives of 5 to 10 years, (iii) expected
volatility of 88% through 150%, and (iv) expected dividends of zero.

The Company's assumptions used to calculate the fair values of options issued
during the year ended February 29, 2004 were (i) risk-free interest rates of
3.17% through 4.38%, (ii) expected lives of 5 to 10 years, (iii) expected
volatility of 160%, and (iv) expected dividends of zero.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" ("SFAS No. 123R"), which replaces SFAS No. 123 and supersedes APB No.
25. SFAS No. 123R requires that the compensation cost relating to share-based
payment transactions be recognized in financial statements based on alternative
fair value models. The share-based compensation cost will be measured based on
the fair value of the equity or liability instruments issued. Per APB No. 25,
compensation expense was recognized only to the extent the fair value of common
stock exceeded the stock option exercise price at the measurement date. In
addition, the pro forma disclosures previously permitted under SFAS No. 123 no
longer will be an alternative to financial statement recognition. SFAS No. 123R
also requires the benefits of tax deductions in excess of recognized
compensation cost to be reported as a financing cash flow rather than as an
operating cash flow as required under current literature. Under the effective
date provisions, the Company is required to implement SFAS No. 123R as of the

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

STOCK OPTIONS (CONTINUED)
first fiscal year after June 15, 2005, which would be March 1, 2006. The Company
is evaluating the requirements of SFAS No. 123R and expects that the adoption
will have a material impact on the consolidated results of operations and
earnings per share similar to the current pro forma disclosures under SFAS No.
123, as per above.

For the year ended February 28, 2006, the non-cash charge to earnings for stock
options granted was $4,609,778 of which $4,244,280 is related to the vesting,
during the first and second quarters, of contingent options previously granted
to executive officers and non-employee directors that vested on a contingent
basis upon the achievement of specified performance-based milestones. These
particular options, because they are not "fixed and determinable", do not
qualify under the accounting rules for "disclosure only" treatment and
accordingly, must be expensed for any intrinsic value at the time and to the
extent that they vest. The calculated amounts resulted in a non-cash charge in
the statement of operations and an offsetting credit to additional paid-in
capital.

ESTIMATES

Preparing the Company's financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to make estimates and assumptions that affect 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 could differ from those
estimates.

RECLASSIFICATION

For comparative purposes, certain amounts in the accompanying statement of
operations for fiscal 2004 and 2005 have been reclassified to conform to the
presentation used for fiscal 2006. These reclassifications had no effect on
previously reported results of operations or accumulated deficit.

RECENT ACCOUNTING PRONOUNCEMENTS

Management does not believe that there are any recently issued, but not yet
effective accounting pronouncements that will have a material effect on
financial reporting other than SFAS No. 123R as discussed above.

2. BUSINESS COMBINATIONS

Effective June 3, 2004, the Company executed final agreements for the
acquisition of a 51% ownership interest in TE Bio, LLC ("TE Bio"), a newly
formed limited liability company that acquired an exclusive license to certain
technology from Biomed Solutions LLC ("Biomed"), a related party. TE Bio is also
owned 46.5% by Biomed, a related company, and 2.5% by Stuart G. MacDonald,
Vice-President of Research and Development for the Company. The primary reason
for the acquisition was the development of an implantable biothermal battery
using body heat gradients to power medical devices. The Payment Agreement (the
"Agreement") provides for the investment in TE Bio of $300,000 per year for
three years from the Company's working capital. In addition, the Company will
provide certain administrative, marketing, and research and development services
to TE Bio. The results of operations of TE Bio from June 3, 2004 to February 28,
2005 are included in the accompanying consolidated statement of operations. TE
Bio had no significant assets, liabilities or operations at time of acquisition.

On February 24, 2005, the Company entered into an agreement for the purchase of
a 51% ownership interest in aMRIs GmbH, a German company formed November 2004.
Concurrently, aMRIs acquired a 58.4% interest in MR:comp GmbH. The name of aMRIs
was subsequently changed to Biophan Europe GmbH. For accounting purposes, the
acquisition is treated as a purchase as of February 28, 2005. Operating results
of the subsidiary for the period from February 25 through February 28, 2005 were
not material and are not included.

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The principal reasons for the acquisition, in addition to obtaining a European
market presence, were to add complementary intellectual property to the
Company's existing technologies, further expertise to its management team, and
additional research and development capabilities. Accordingly, in connection
with the purchase, the Company executed an exclusive license agreement for
certain patents related to the Company's own proprietary technologies in the
area of MRI safety and compatibility, employment agreements with key executives
of aMRIs and agreed to contribute to aMRIs $2,000,000 over four years for
funding specific salaries and research and development expenses.

Total consideration for the 51% interest in aMRIs and for intellectual property
rights was $1,105,714, consisting of the following:

Cash paid $ 132,500
Promissory note issued 200,000
Amount payable in cash 92,500
Amount payable in restricted stock 134,000
Restricted stock issued (100,000 shares) 134,000
Direct acquisition costs 234,330
Liabilities assumed 178,384
----------
Total purchase price $1,105,714
==========

The allocation of the purchase price is as follows:

Intellectual property rights (estimated useful
life of 17 years) $ 927,738
Current assets 176,954
Equipment 1,022
----------
Total $1,105,714

The following summarized pro forma consolidated statement of operations
(unaudited) for the year ended February 28, 2005, assumes the acquisition of
aMRIs as if it had occurred on March 1, 2004:

Operating expenses:
Research and development $ 2,737,038
General and administrative 3,505,300
------------
6,242,338
------------
Operating loss (6,242,338)
Other income 246,745
------------
Net loss $ (5,995,593)
============
Loss per common share-basic
and diluted $ (0.09)
============
Weighted average shares
outstanding 69,263,893
============

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3. PREPAID EXPENSES:

Prepaid expenses consist of the following:

February 28
------------------
2006 2005
-------- --------
Prepaid conference fees $ 29,400 $ --

Prepaid insurance 22,233 23,071

Prepaid license fees - related company 15,000 --

Prepaid legal fees 30,000 20,000

Prepaid supplies -- 18,125
Prepaid royalties - related company 35,000 25,000

Other -- 5,400
-------- --------
$131,633 $ 91,596
======== ========

4. PROPERTY AND EQUIPMENT:

Property and equipment, at cost, consists of the following:

February 28,
---------------------
2006 2005
--------- ---------
Furniture and Equipment $ 96,597 $ 66,346
Computers 67,296 45,206
Internet Website 54,159 54,159
--------- ---------
218,052 165,711
Less accumulated depreciation (126,618) (92,193)
--------- ---------
$ 91,434 $ 73,518
========= =========

Depreciation expense for the years ended February 28, 2006, 2005 and February
29, 2004 amounted to $43,068, $28,020, and $23,643, respectively. Depreciation
expense for the period from August 1, 1968 (date of inception) to February 28,
2006 was $135,261.

5. INTELLECTUAL PROPERTY RIGHTS:

Certain intellectual property rights were acquired on December 1, 2000 in
connection with the merger that established the Company in its present form.
Additional intellectual property rights were acquired on February 24, 2005 in
connection with the acquisition of Biophan-Europe. All such rights encompass the
utilization of new proprietary technology to prevent implantable cardiac
pacemakers and other critical and life-sustaining medical devices from being
affected by MRI and other equipment using magnetic fields, radio waves and
similar forms of electromagnetic interference. These assets are amortized over
the estimated seventeen year economic life of the underlying patents. Estimated
amortization expense for the next five years is as follows:
Fiscal year ending February, Amount
---------------------------- ------
2007 $54,570
2008 54,570
2009 54,570
2010 54,570
2011 54,570
Amortization expense for the year ended February 28, 2006 was $54,573. There
was no amortization of intellectual properties in previous years.

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
6. INVESTMENT:

The investment in New Scale Technologies, Inc. represents a 10% investment in
the Company's common stock, a non-public company, stated at cost.

Effective November 30, 2005, we entered into a Securities Purchase Agreement for
the acquisition of an initial 35% interest in Myotech, LLC ("Myotech"), a New
York limited liability company, whereby we exchanged 4,923,080 shares of our
common stock, par value $.005, for 3,768,488 Class A (voting) units of Myotech.
Under the Securities Purchase Agreement, we will also purchase for cash
consideration of $2.225 million an additional 811,037 Class A units of Myotech
over a six-month period. On February 28, 2006 Biophan has provided $1,185,000 of
the additional funding for 431,946 Class A units of Myotech increasing our
ownership to 38%. Biophan has also provided an additional amount of funding
since February 28, 2006 of $305,000 for which shares have not yet been issued.
We are obligated to fund the investment amount, subject to certain conditions.
This acquisition is being accounted for under the equity method. The equity loss
for the year ended February 28, 2006 was $222,992.

Further, at our discretion, we may purchase up to an additional 3,563,097 Class
A units of Myotech for aggregate cash consideration of $9.775 million upon
achievement of certain milestones satisfactory to Biophan measured over a
24-month period. Upon the consummation of these additional elective milestone
investments, we would hold a majority interest in Myotech.

The following is selected financial data for Myotech, LLC:

February 28, 2006
-------------------
Total current assets $ 59,608
Noncurrent assets (1) 8,524,246
-------------------
Total assets $ 8,583,854
===================
Current liabilities $ 161,948
Equity 8,421,906
-------------------
$ 8,583,854
===================

Three Months
Ended February
28, 2006
-------------------
Net loss from operations $ (628,245)
===================

Equity share of loss $ (222,992)
===================

(1) Noncurrent assets includes 4,923,080 shares of Biophan common stock
received under the Securities Purchase Agreement

7. LINE OF CREDIT AGREEMENT:

On January 24, 2006, we entered into a Line of Credit Agreement (the "Line of
Credit Agreement") with Biomed, a related party, pursuant to which Biomed has
committed to make advances to us, in an aggregate amount of up to $5,000,000.
Under the Line of Credit Agreement, advances may be drawn down in such amounts
and at such times as we determine upon 15 days' prior notice to Biomed, except
that we may not draw down more than $1,500,000 in any 30-day period. Amounts
borrowed will bear interest at the rate of 8% per annum and are convertible into
shares of our Common Stock at the rate of $1.46 per share. Biomed's obligation
to lend to us under the Line of Credit Agreement expires on June 30, 2007, on
which date the entire amount borrowed by us (and not converted into shares of
our Common Stock) becomes due and payable. We are obligated to utilize the
entire credit facility. The Company recorded a discount on the borrowings of
$2,300,000 due to the beneficial conversion feature of the note as well as for
the value of the warrants. The discount is being amortized as additional
interest expense over the term of the note. During the quarter ended February
28, 2006 amortization of the discount on the note resulted in a non-cash
interest expense of $113,404. In connection with the establishment of the credit
facility under the Line of Credit Agreement, on January 24, 2006 we issued to
Biomed a Stock Purchase Warrant (the "Warrant") entitling Biomed to purchase up
to 1,198,630 shares of our Common Stock at an exercise price of $1.89 per share.
Biomed's purchase rights under the Warrant expire on January 23, 2011. The
balance of borrowings on the line was $2,300,000 at February 28, 2006 and
$3,450,000 at May 12, 2006. The fair value of the note approximates the
principal value of the note.

On May 27, 2005, we entered into a Line of Credit Agreement with Biomed, a
related company, whereby Biomed agreed to provide a line of credit facility of
up to $2 million. Borrowings under the line bear interest at 8% per annum, are
payable on demand after August 31, 2006 and are convertible, at Biomed's
election into the Company's common stock at 90% of the average closing price for
the 20 trading days preceding the date of borrowings under the line. In June
2005, the Company borrowed the

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
7. LINE OF CREDIT AGREEMENT (CONTINUED):
entire $2 million under the line in two separate draws of $1 million each and,
in accordance with the agreement, Biomed received warrants to purchase 500,000
shares of the Company's common stock at an exercise price of 110% of the average
closing price for the 20 trading days preceding the date of execution of the
credit agreement. The Company recorded a discount on the borrowings of $958,160
due to the beneficial conversion feature of the note as well as for the value of
the warrants. The discount was amortized as additional interest expense over the
term of the note and has been fully amortized as of November 30, 2005. On August
31, 2005, Biomed elected to convert $1 million of the note plus accrued interest
into 480,899 shares of common stock at which time, the remaining discount
related to the $1 million portion of the loan was fully expensed. On October 7,
2005, we repaid $500,000 of principal and all accrued interest on the loan.
During the year ended February 28, 2006 amortization of the discount on the note
resulted in a non-cash interest expense of $958,160. The balance of borrowings
on the line was $500,000 at February 28, 2006.

8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

Accounts payable and accrued expenses consist of the following:

February 28,
-------------------------------
2006 2005
-------------- ---------------
Accounts payable $ 674,147 $ 649,146
Bonuses - Biophan-Europe 150,000 -
Accrued payroll and related
expenses 70,965 46,738
License fees 70,000 -
Interest payable 34,112 -
Other 82,736 87,059
Acquisition fees - 254,160
-------------- ---------------
$1,081,960 $1,037,103
============== ===============

9. NOTE PAYABLE:

The note payable at February 28, 2005 in the amount of $200,000, bearing
interest at 2.74% per annum, was paid June 1, 2005 to the previous owners of
Biophan Europe GmbH (formerly aMRIs GmbH). The note was issued on February 24,
2005 as part of the consideration for the acquisition of a 51% ownership
interest in Biophan Europe GmbH. The carrying amount for the note payable
approximates its fair value due to the short-term nature of the note.

10. STOCKHOLDERS' EQUITY:

On February 5, 2004, the Company entered into a second stock purchase agreement
with SBI Brightline Consulting, LLC ("SBI") that obligates SBI to purchase, upon
the Company's election, up to 17,750,000 shares of common stock for an aggregate
purchase price of $25.0 million. Currently, only 6,000,000 shares covered by the
stock purchase agreement have been registered for resale. SBI will not be
obligated to purchase the remaining shares covered by the stock purchase
agreement unless and until the Company has registered the resale of such shares
by SBI. During the year ended February 28, 2005, the Company elected to sell the
6,000,000 shares to SBI for an aggregate of $3,900,000.

On February 24, 2005, in connection with the acquisition of Biophan Europe (see
Note 2), 100,000 shares of restricted stock, valued at $134,000, were issued,
fully charged and accrued to intellectual property rights in the accompanying
consolidated balance sheet; and in connection with Employment Agreements of the
same date, 200,000 shares of restricted stock valued at $268,000 were issued to
two key executives of the German subsidiary company aMRIs GmbH and fully charged
to operating expenses in the accompanying consolidated statement of operations.

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
On August 2, 2005, the Company entered into an investment agreement with Boston
Scientific Scimed. At that time, 1,653,193 shares of common stock were issued
for $5,000,000.

On November 30, 2005, the Company issued 4,923,080 shares of common stock,
valued at $19,338,468 for the acquisition of approximately a 35% minority
ownership in Myotech, LLC.

On December 6, 2005, in connection with the acquisition of Biophan Europe (see
Note 2), 100,000 shares of restricted stock, valued at $134,000, were issued and
fully charged to intellectual property rights in the accompanying consolidated
balance sheet.

Also, on December 6, 2005, the Company issued 22,000 restricted shares of common
stock valued at $37,840 for the acquisition of licensing rights.

During the years ended February 28, 2006 and 2005, the Company issued 84,074 and
1,903,775 shares of stock upon the exercise of warrants for total proceeds of
$20,707 and $788,900, respectively; and issued 74,047 shares upon exercise of
cashless warrants during the year ended February 28, 2005. As of February 28,
2006 and 2005, warrants to purchase 3,247,920 and 1,525,029 shares of our common
stock were outstanding, respectively. The exercise prices for these warrants
range from $.15 per share to $2.49 per share, and the weighted-average exercise
price for all of the outstanding warrants is $1.28 per share. In addition,
during the years ended February 28, 2006 and 2005, 224,165 and 94,999 shares of
stock were issued upon the exercise of options for total proceeds of $182,541
and $34,900, respectively.

Additional paid-in capital was further increased by$4,609,778 and $201,000 of
expense related to stock options issued for services during the years ended
February 28, 2006 and 2005, respectively. Also, $295,362 and $400,725 of profits
were received during the years ended February 28, 2006 and 2005, respectively,
from a related company owed pursuant to the "short swing profit" rules of the
Securities Exchange Act of 1934.

11. RESEARCH AND DEVELOPMENT COSTS:

Expenditures for research activities relating to intellectual property
development and improvement are charged to expense as incurred. Such
expenditures amounted to $6,034,994, $2,629,980 and $1,240,439 for the years
ended February 28, 2006 and 2005, and February 29, 2004, respectively.

12. COMMITMENTS:

Lease Obligation
The Company is obligated under an operating lease for office space expiring
January 30, 2008. The Company may terminate the lease upon ninety days prior
written notice to the landlord. Following are the minimum future payments under
this lease for the years ending February 28:

2007 $ 63,144
2008 57,882
----------
$ 121,026
==========

Rent expense charged to operations under this operating lease aggregated
$62,032, $58,546 and $57,899 for the years ended February 28, 2006, 2005 and
February 29, 2004, respectively. Rent expense charged to operations for the
period from August 1, 1968 (Date of Inception) to February 28, 2005 was
$246,722.

Cooperation Agreement
The Company's subsidiary, Biophan Europe, has a cooperation agreement with a
German university to test and further develop coronary stents whereby the
parties provide personnel and know-how. The agreement is for a term of one year
ending May 31, 2006. Biophan Europe is committed to assume costs of the project
up to an amount of approximately $133,000.

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
License Agreements
The Company is obligated under seven license or royalty agreements for patents
that expire at various dates through 2025. These agreements may be terminated by
the Company with 60 days written notice. Aggregate minimum future payments over
the remaining life of the patents under these agreements total $6,352,500.
License/royalty expense charged to operations was $594,890, $89,880 and $15,000
for the years ended February 28, 2006, 2005 and February 29, 2004, respectively.

Employment Agreements
Biophan has employment agreements with its executive officers that renew
annually unless terminated by either party. Such agreements, which have been
revised from time to time, provide for minimum salary levels, adjusted annually
for cost-of-living changes, as well as for incentive bonuses that are payable if
specified management goals are attained.

Also, Biophan has an employment contract with an officer that expires November
9, 2007, and Biophan Europe has an employment agreement with a key employee
that expires on February 24, 2009. These agreements provide for base salaries,
bonuses based on attaining certain milestones, a restricted stock grant and
stock options. The aggregate commitment for future base salaries at February 28,
2006, excluding bonuses and other awards approximates $615,000.

13. RELATED PARTY TRANSACTIONS:

The Company has affiliations with three entities, Biomed, Technology
Innovations, and Myotech, that are related by virtue of common senior management
personnel and stock ownership. During the years ended February 28, 2006, 2005
and February 29, 2004, the Company charged Biomed and Myotech for services of
certain Company personnel. The total of these charges was $197,362, $161,014 and
$85,584, respectively. The Company also charges Biomed, TI and Myotech for
expenses allocable to and paid on their behalf. During the year ended February
28, 2006, 2005 and February 29, 2004 expenses paid by the Company on their
behalf was approximately $762,000, $240,000 and $120,000, respectively. At
February 28, 2005, the combined balances due from these related parties was
$42,063. The amounts do not bear interest and the Company received payment
within forty-five days.

During the year ended February 28, 2006, 2005 and February 29, 2004, the Company
was billed $93,000, $9,000 and $4,500, respectively for legal services provided
by Bramson & Pressman of which Robert S. Bramson, a director of the Company, is
a partner.

Steven Katz & Associates, Inc. of which Steven Katz, a director of the Company
is an owner, billed the Company $115,000 during the year ended February 28, 2006
for consulting services. No services were billed in preceding years.

Wood & Company, CPA, PC, of which Robert J. Wood, the Company's former CFO is
the owner, billed the Company $9,800 for services rendered during the year ended
February 28, 2006. No services were billed in preceding years.

14. STOCK-BASED COMPENSATION PLAN:

The Company has a stock option plan (the "Plan") which provides for the granting
of nonqualified or incentive stock options ("ISO") to officers, key employees,
non-employee directors and consultants. The Plan authorizes the granting of
options to acquire up to 13,000,000 common shares. ISO grants under the Plan are
exercisable at the market value of the Company's stock on the date of such
grant. Nonqualified option grants under the Plan are exercisable at amounts
determined by the board of directors. All options under the Plan are exercisable
at times as determined by the board of directors, not to exceed 10 years from
the date of grant. Additionally, the Plan provides for the granting of
restricted stock to officers and key employees.

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
The following table summarizes activity in stock options:

Weighted-
average
Exercise
Options Price
-----------------------
Outstanding at February 28, 2003 2,489,995 $ .48
Granted 4,469,998 .17
Forfeited (90,000) .30
Exercised (3,000,000) .14
-----------------------
Outstanding at February 29, 2004 3,869,993 .39
Granted 4,149,859 .96
Forfeited -- --
Exercised (94,999) .37
-----------------------
Outstanding at February 28, 2005 7,924,853 .69
Granted 1,968,331 1.88
Forfeited (74,999) .83
Exercised (224,165) .81
-----------------------
Outstanding at February 28, 2006 9,594,020 $ .95
=======================
Weighted-average fair value of
options granted during the year
ended:
February 28, 2006 $1.54
February 28, 2005 $.61
February 29, 2004 $.16
============

The following table summarizes information about stock options outstanding and
exercisable at February 28, 2006:
Options
Options Outstanding Options Exercisable
------------------------------------ ---------------------
Weighted Weighted
Average Average Weighted
Remaining Remaining Average
Range of Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
--------------------------------------------------------------------------------
$.10- $.43 2,175,000 6.32 years $.25 1,877,500 $.26
$.50-$1.04 5,032,497 7.22 years $.82 4,029,997 $.81
$1.18-$1.26 484,859 7.90 years $1.21 79,859 $1.21
$1.56-$2.97 1,901,664 9.43 years $2.01 517,914 $1.90
--------------------------------------------------------------------------------
$.10-$2.97 9,594,020 7.49 years $.95 6,505,270 $.74
================================================================================

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

--------------------------------------------------------------------------------
On February 28, 2006 and 2005, 235,982 and 1,740,148, shares of common stock
were reserved for future issuance of stock options.

15. INCOME TAXES:

As of February 28, 2006, the Company had net operating loss carryforwards of
approximately $14,080,000 for federal income tax purposes, which expire through
2025.

The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is as follows:

For the Years Ended
=========================================================
February 28, February 29,
------------------------------------- ----------------
2006 2005 2004
----------------- --------------- ----------------

Tax benefit at U.S. statutory rates (34%) (34%) (34%)

Increase in valuation allowance 34% 34% 34%
----------------- --------------- ----------------
0% 0% 0%
================= =============== ================

February 28,
-----------------------------------
2006 2005
----------------- ---------------
Deferred tax asset is comprised of the following:

Net operating loss carryforwards $ 7,400,000 $ 4,627,000
Write-down of intellectual property rights 160,000 160,000
----------------- ---------------
Total deferred tax asset 7,560,000 4,787,000

Valuation allowance $ (7,560,000) $(4,787,000)
================= ===============

16. CONTINGENCIES:

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

-----------------------------------------------------------------------------------------------------------------
17. QUARTERLY STATEMENTS OF OPERATIONS (UNAUDITED) Year Ended February 28, 2006
----------------------------
Quarter ended: May 31 August 31 November 30 February 28
------------ ------------ ------------ ------------

Revenues $- $ 62,500 $ 466,935 $ 515,426
Research and development expenses 1,599,742 2,291,762 1,212,239 931,251
General and administrative expenses 1,895,984 1,548,299 3,123,641 1,718,763
Other income (expense) 85,887 (670,575) (81,098) (372,423)
------------ ------------ ------------ ------------
Net loss $ (3,409,839) $ (6,023,478) $ (2,374,701) $ (2,507,011)
============ ============ ============ ============

Loss per common share - basic and diluted $ (.05) $ (.08) $ (.03) $ (.03)
Weighted average shares outstanding 74,417,378 75,129,518 76,814,262 81,797,050

Year Ended February 28, 2005
----------------------------
Quarter ended: May 31 August 31 November 30 February 28
------------ ------------ ------------ ------------
Revenues $- $- $- $-
Research and development expenses 560,919 573,846 685,469 809,746
General and administrative expenses 433,767 776,804 1,055,312 1,071,302
Other income (expense) 42,661 48,445 36,089 46,423
------------ ------------ ------------ ------------
Net loss $ (952,025) $ (1,302,205) $ (1,704,692) $ (1,834,625)
============ ============ ============ ============

Loss per common share - basic and diluted $ (.01) $ (.02) $ (.02) $ (.03)
Weighted average shares outstanding 66,419,732 67,665,026 70,029,872 73,031,165

18. VALUATION AND QUALIFYING ACCOUNTS

Years ended February 28, 2006, 2005 and 2004
-----------------------------------------------------------------------
Balance at Additions charged Balance at end of
Description beginning of year to expense (*) Deductions year
---------------- ----------------- ----------------- ----------- ------------

Year ended February 28, 2006:
-----------------------------
Valuation allowance- deferred tax asset $4,787,000 $2,773,000 $-0- $7,560,000

Year ended February 28, 2005:
-----------------------------
Valuation allowance-deferred tax asset $2,926,000 $1,861,000 $-0- $4,787,000

Year ended February 29, 2004:
-----------------------------
Valuation allowance-deferred tax asset $2,120,000 $ 806,000 $-0- $2,926,000

(*) Offset to tax benefit of net operating losses.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of Biophan Technologies, Inc. (the "Company") is responsible for
establishing and maintaining an adequate system of internal control over
financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934, as amended ("Exchange Act"). The
Company's internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of the consolidated financial statements. Our internal control over
financial reporting is supported by a program of appropriate reviews by
management, written policies and guidelines, careful selection and training of
qualified personnel, and a written Code of Business Conduct adopted by our
Company's Board of Directors, applicable to all Company Directors and all
officers and employees of our Company.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements and even when determined to be
effective, can only provide reasonable assurance with respect to financial
statement preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

The Audit Committee of our Company's Board of Directors meets with the
independent public accountants and management periodically to discuss internal
control over financial reporting and auditing and financial reporting matters.
The Audit Committee reviews with the independent public accountants the scope
and results of the audit effort. The Audit Committee also meets periodically
with the independent public accountants without management present to ensure
that the independent public accountants have free access to the Audit Committee.
The Audit Committee's Report can be found in the Definitive Proxy Statement to
be issued in connection with the Company's 2006 Annual Meeting of Stockholders.

Management assessed the effectiveness of the Company's internal control over
financial reporting as of February 28, 2006. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control --
Integrated Framework. Based on our assessment, management believes that the
Company maintained effective internal control over financial reporting as of
February 28, 2006.

The Company's independent public accountants, Goldstein Golub Kessler LLP, a
registered public accounting firm, are appointed by the Audit Committee of the
Company's Board of Directors. Goldstein Golub Kessler LLP has audited and
reported on the consolidated financial statements of Biophan Technologies, Inc.,
management's assessment of the effectiveness of the Company's internal control
over financial reporting and the effectiveness of the Company's internal control
over financial reporting. The reports of the independent public accountants are
contained in this Annual Report on Form 10-K.

/s/ Michael L. Weiner
------------------------
Michael L. Weiner
Chief Executive Officer

/s/ Darryl L. Canfield
-------------------------
Darryl L. Canfield
Chief Financial Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------

To the Board of Directors and Stockholders
Biophan Technologies, Inc.

We have audited management's assessment, included in the accompanying
Management's Report on Internal Control over Financial Reporting, that Biophan
Technologies, Inc. maintained effective internal control over financial
reporting as of February 28, 2006, based on criteria established in Internal
Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Biophan Technologies, Inc.'s
management is responsible for maintaining effective internal control over
financial reporting and for its assessment about the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the company's
internal control over financial reporting based on our audit.

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

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

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

In our opinion, management's assessment that Biophan Technologies, Inc.
maintained effective internal control over financial reporting as of February
28, 2006, is fairly stated, in all material respects, based on criteria
established in Internal Control--Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Also, in our
opinion, Biophan Technologies, Inc. maintained, in all material respects,
effective internal control over financial reporting as of February 28, 2006,
based on criteria established in Internal Control--Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Biophan Technologies, Inc. as of February 28, 2006 and 2005, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended February 28, 2006 and the amounts in
the cumulative column in the consolidated statement of operations, stockholders'
equity and cash flows for the period March 1, 2000 to February 28, 2006 and our
report dated April 26, 2006 expressed an unqualified opinion thereon.

/s/GOLDSTEIN GOLUB KESSLER LLP
New York, New York
April 26, 2006

Disclosure Controls and Procedures and Internal Control Over Financial
Reporting:

Disclosure controls and procedures are designed with the objective of ensuring
that information required to be disclosed in the Company's reports filed under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), such as
this report, is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures are also designed with the objective of
ensuring that such information is accumulated and communicated to the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.

Evaluation of Disclosure Controls and Procedures:

As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
Chief Executive Officer and Chief Financial Officer, of the effectiveness of
disclosure controls and procedures as defined in Rules l3a-15(e) and l5d-15(e)
of the Exchange Act. Based on such evaluation, the Company's Chief Executive
Officer and Chief Financial Officer have concluded that as of the end of the
period covered by this report, the Company's disclosure controls and procedures
were effective at meeting their objectives.

Changes in Internal Controls:

There were no changes in the Company's internal controls over financial
reporting that occurred during the Company's most recently completed fiscal
quarter that materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.

Report on Management's Assessment of Effectiveness of Internal Control Over
Financial Reporting and the Report of Independent Registered Public Accounting
Firm on Effectiveness of Internal Control Over Financial Reporting are
incorporated herein by reference from Part II, Item 8 of this Form 10-K.

ITEM 9B. OTHER INFORMATION

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The officers and directors of Biophan are as follows:

Name Age Title
---- --- -----

Guenter H. Jaensch 67 Chairman of the Board
Michael L. Weiner 58 Director, Chief Executive Officer, President
Darryl L. Canfield 59 Vice-President, Treasurer, Secretary,
Chief Financial Officer
Stuart G. MacDonald 57 Vice-President-Research and Development
Jeffrey L. Helfer 53 Vice-President-Engineering
John F. Lanzafame 38 Chief Operating Officer,
Vice-President-Business Development
Robert S. Bramson 67 Director
Steven Katz 58 Director
Ross B. Kenzie 74 Director
Michael Friebe 41 Director
Theodore A. Greenberg 46 Director

The above listed officers and directors will serve until the next annual meeting
of the shareholders or until their death, resignation, retirement, removal, or
disqualification, or until their successors have been duly elected and
qualified. Vacancies in the existing Board of Directors may be filled by
majority vote of the remaining directors. Officers serve at the will of the
Board of Directors.

GUENTER H. JAENSCH, Ph.D. is the former Chairman and CEO of Siemens Pacesetter,
Inc., a manufacturer of pacemakers. During his more than twenty-five years at
Siemens, Dr. Jaensch held various senior executive positions prior to running
Siemens Pacesetter, including President of Siemens Communications Systems, Inc.
from August 1983 to March 1985, Chairman and President of Siemens Corporate
Research and Support, Inc., from April 1982 to September 1991 and Chairman and
CEO of Siemens Pacesetter, Inc. and Head of the Cardiac Systems Division of
Siemens AG Medical Engineering Group from October 1991 to September 1994. Dr.
Jaensch holds a Masters Degree in Business Administration and a Ph.D. in
Business and Finance from the University of Frankfurt and taught business and
statistics at the University prior to joining Siemens in 1969. In 1994, he
joined St. Jude Medical as Chairman and CEO of Pacesetter, Inc., a St. Jude
Medical Company, and retired in 1995 to manage his personal investments. Since
December 1997 he has been a director of MRV Communications, a publicly traded
company which is a leading company in the fiber optic technology business. Dr.
Jaensch has been a director of Biophan since March 2002.

MICHAEL L. WEINER began his career at Xerox Corporation in 1975 where he served
in a variety of capacities in sales and marketing, including manager of software
market expansion and manager of sales compensation planning. In 1982, he
received the President's Award, the top honor at Xerox for an invention
benefiting a major product line. In 1985, Weiner founded Microlytics, a Xerox
spin-off company which developed technology from the Xerox Palo Alto Research
Center into a suite of products, including the award winning Word Finder
thesaurus, with licenses out to over 150 companies, including Apple, Microsoft,
and Sony. Microlytics was acquired by a merger with a public company in 1990,
which Weiner then headed up through 1993. In January, 1993 Weiner co-founded
TextWise, a company developing natural language search technologies for the
intelligence community. In 1995, Weiner co-founded and served as CEO of Manning
& Napier Information Services (MNIS), a Rochester-based company providing patent
analytics, prior art searches, and other services, for the U.S. Patent and
Trademark Office and many large corporations, and which subsequently acquired
TextWise. He held this position until January of 1999. MNIS remains private, and
has generated several spin-off companies (Talavara and IP.COM). TextWise won the
Department of Commerce Tibbet's Award for SBIR research in 1998. In February
1999, Weiner founded Technology Innovations, LLC, to develop intellectual
property assets. In August 2000, Technology Innovations created a subsidiary,
Biomed Solutions, LLC, to pursue biomedical and nanotechnology opportunities,
investing in embryonic-to-seed stage innovations which generate new ventures
and/or licenses. These companies are holding companies for intellectual property
assets and equities in other ventures.

Mr. Weiner serves on the Boards of Biomed Solutions, LLC, Technology
Innovations, LLC, Speech Compression Technologies, LP (an R&D partnership
commenced in 1989 to pursue compression technologies) OncoVista, Inc.,
NaturalNano, Inc., Myotech, LLC, TE Bio, LLC, Nanoset, LLC, and StemCapture Inc.
Mr. Weiner holds twenty-two U.S. patents. Mr. Weiner has been CEO and a director
of Biophan since December 2000.

DARRYL L. CANFIELD brings over 30 years experience in finance and accounting to
Biophan Technologies, Inc. as Chief Financial Officer, Vice President,
Treasurer, and Secretary. The position was previously held by Robert Wood who
announced his retirement in November 2005. For five years prior to joining
Biophan, Mr. Canfield was Vice President, Corporate Controller, and Chief
Accounting Officer at Genencor International, Inc., a $400 million,
internationally recognized leader in the development and manufacturing of
innovative diversified products for the biotechnology industry. Genencor was a
multi-national NASDAQ-listed company before it was sold in April 2005. Mr.
Canfield has held senior financial officer positions, including CFO and
Corporate Controller, in other public companies where he gained experience in
multiple industries including technology, software, manufacturing, and
distribution. He has been a major contributor at the executive and board of
director levels by leading initiatives to set strategic direction as well as
capture and build on new opportunities to improve profitability, cash flow and
value creation. With an MBA degree in Finance from the Columbia University
Graduate School of Business and a BS degree in Accounting (Cum Laude) from
Clarkson University, Mr. Canfield is a New York State Certified Public
Accountant and is a member of the American Institute of Certified Public
Accountants, the New York State Society of Certified Public Accountants, and
Financial Executives International. He also has extensive experience working
with the requirements of the Sarbanes-Oxley Act. Mr. Canfield shares his
expertise as a frequent speaker to professional and academic groups regarding
technical, financial, and business issues.

STUART G. MACDONALD is experienced in research and development with a broad
engineering and science background, emphasizing a systems approach to developing
complex technology. From January 1995 through December 2000, Mr. MacDonald was
employed at Ortho-Clinical Diagnostics, a Johnson & Johnson company, in
Rochester, New York, holding the position of Director-Engineering from 1996 to
mid-1997 and Vice-President, Clinical Lab Instrumentation R&D from mid-1997
through December 2000. He was responsible for overall management of the R&D
group, including personnel, administration and financial performance. He worked
at Eastman Kodak Company from 1971 to 1994, rising to the position of Assistant
Director, Clinical Diagnostic Research Labs. Mr. MacDonald has a B.S. in
Mechanical Engineering and Masters of Engineering degree from Cornell
University. He is also licensed as a professional engineer by the State of New
York. Mr. MacDonald was employed by Biophan as Vice-President-Research and
Development in January 2001. A portion of Mr. MacDonald's time is spent
assisting with the research program of Biomed Solutions, LLC and Myotech, LLC,
related companies, for which Biophan is reimbursed. He holds thirty-four U.S.
patents.

JEFFREY L. HELFER has a background that includes 28 years in new product and
technology development, systems management, new business development, and
regulatory affairs, having served in a number of positions at Eastman Kodak
Company for 19 years until November 1994 and from December 1994 to September
2001 at Ortho-Clinical Diagnostics (OCD) in Rochester, New York, a Johnson &
Johnson company. Most recently, he was program director within OCD's Product
Development and Program Management Center of Excellence, where he was
responsible for systems management of OCD's next-generation clinical chemistry
platform. He also held positions as Program Director and Director of Regulatory
Affairs from April 2000 to September 2001, Director of Engineering from January
1997 to March 2000, Director of New Business Development from February 1995 to
December 1996, and headed up multiple international and corporate initiatives to
improve product performance and business processes. He holds a B.S. from
Rochester Institute of Technology and an M.S. from the University of Rochester,
both in Mechanical Engineering. Mr. Helfer is a Johnson & Johnson certified
Design for Six Sigma Black Belt and a New York State Professional Engineer. Mr.
Helfer was employed by Biophan as Vice-President-Engineering in October 2001. A
portion of Mr. Helfer's time is spent assisting with the research program of
Biomed Solutions, LLC, a related company, for which Biophan is reimbursed.

JOHN F. LANZAFAME has over fifteen years experience in the medical device
industry. With a background that includes education in chemical and industrial
engineering, Mr. Lanzafame combines a strong technical background with extensive
experience in business development and executive level management. Until early
2004, Mr. Lanzafame was employed by STS Biopolymers, Inc., a privately held
medical device company that marketed high performance polymer-based coatings for
the medical device industry, including drug eluting surfaces for devices such as
coronary stents and indwelling catheters. Mr. Lanzafame held a variety of
positions with STS Biopolymers, including positions in research, product
development, and sales and marketing, ultimately leading to his assuming the
position of President of STS Biopolymers beginning in 2003. Mr. Lanzafame left
STS Biopolymers in 2004, following sale of the company to Angiotech
Pharmaceuticals.

Mr. Lanzafame joined Biophan Technologies, Inc. in 2004 and has served as Vice-
President Business Development and President of Nanolution, LLC, the drug
delivery division of Biophan. In 2006, Mr. Lanzafame was promoted to Chief
Operating Officer of Biophan Technologies and currently leads operations and
business development for the company. Mr. Lanzafame is also a member of the
Board of Directors of NaturalNano, Inc.

ROBERT S. BRAMSON is an engineer and patent attorney and since 1996 has been a
partner in Bramson & Pressman, a law firm that focuses on patent and technology
licensing matters. He is former head of the Computer and Technology law group of
Schnader, Harrison, Segal & Lewis (where he worked from 1968 to 1989); former
Vice President and General Patent and Technology Counsel for Unisys (from 1989
to 1990); founder and former CEO of InterDigital Patents Corporation, a patent
licensing company (from 1992 to 1995); former Licensing Counsel for Abbott
Laboratories (from 1963 to 1966); and has been Adjunct Professor of Patent Law,
Computer Law and Licensing Law at Temple Law School, Rutgers Law School and
Villanova Law School at different times (from 1980 to date). Mr. Bramson has
been a director of Biophan since July 2001.

STEVEN KATZ is President of Steven Katz & Associates, Inc., a technology-based
management consulting firm specializing, since 1982, in strategic planning,
corporate development, new product planning, technology licensing, and
structuring and securing various forms of financing. From January 2000 until
October 2001, Mr. Katz was President and Chief Operating Officer of Senesco
Technologies, Inc., a public company engaged in the development of genetic
technologies to improve commercial agriculture and to treat major medical
conditions in humans. From 1983 to 1984, he was the co-founder and Executive
Vice President of S.K.Y. Polymers, Inc., a biomaterials company. Prior to that
Mr. Katz was Vice-President and General Manager of a non-banking division of
Citicorp. From 1976 to 1981, he held various senior management positions at
National Patent Development Corporation including president of three
subsidiaries. Mr. Katz has also held positions with Revlon, Inc. (1975) and
Price Waterhouse & Co. (1969 to 1974). Mr. Katz received a Bachelor of Business
Administration degree in Accounting from the City College of New York in 1969.
He is a member of the Boards of Directors of four other publicly held
corporations: USA Technologies, Inc.; NaturalNano, Inc.; Nanoscience
Technologies, Inc.; and Health Systems Solutions, Inc., as well as several
private companies.

ROSS B. KENZIE is a former Chairman and Chief Executive Officer of Goldome Bank,
from which he retired in June 1989. He was previously Executive Vice-President
of Merrill Lynch & Co., in the New York worldwide headquarters, and is a former
member of the Merrill Lynch & Co. Board of Directors. He is a former Director of
the Federal Home Loan Bank of New York (from 1984 to 1988) and served on the
boards of the National Council of Savings Institutions (from 1982 to 1986), the
Federal Reserve Bank of New York, Buffalo Branch (from 1985 to 1987), and the
Savings Banks Association of New York State (from 1984 to 1987). Mr. Kenzie was
a Director of Millard Fillmore Hospitals (from 1982 to 1995) and is currently
Past Chairman Emeritus. He served on the Board of the Kaleida Health, Education
and Research Foundation (from 1998 to 2000) and is currently on its Investment
Committee. He was a Director of the Health Systems Agency of Western New York
(from 1988 to 1991), and was a member of the Western New York Commission on
Health Care Reform (from 1987 to 1990). Mr. Kenzie was a member of the College
Council of the State University College at Buffalo (from 1981 to 1998) and
served as Chairman. He was a Director of the College's Foundation and a member
of its Finance Committee (from 1984 to 1998) and is currently on its Investment
Committee. He served on the Council of the Burchfield-Penney Art Center (from
1990 to 2001) and the Albright Knox Art Gallery (from 1983 to 1985). He is also
a member of the Board, and the Chairman of the Investment Committee of the State
University at Buffalo Foundation. Mr. Kenzie currently serves on the boards of
several companies including the publicly held Rand Capital Corporation and
NaturalNano, Inc. and many entrepreneurial ventures that are privately held,
including the Boards of Members of Biomed Solutions LLC and Technology
Innovations, LLC. Mr. Kenzie has been a Director of Biophan since December 2000.

MICHAEL H. FRIEBE, Ph.D. is Chief Executive Officer and President of Tomovation
GmbH and BIOPHAN Europe GmbH. Tomovation is a German company that owns and
operates imaging centers in Germany and makes investments in early stage
European medical technology companies. Prior to forming Tomovation, Dr. Friebe
was the founder of Neuromed AG and the President of UMS-Neuromed. These
companies operated mobile MRI, CT and PET systems in a number of European
Countries. Dr. Friebe received his degrees in Electrical Engineering from the
University of Stuttgart in Germany, and a PhD in medical engineering from the
University of Witten in Germany. He also holds a Masters degree in Management
from Golden Gate University in San Francisco. He is a member of several
professional engineering and medical societies. Dr. Friebe is also a member of
the board of INTRAOPMEDICAL, Inc., Santa Clara, CA and was elected to Biophan's
board in February 2005.

THEODORE A. GREENBERG has more than 20 years experience in investment
management, consulting, and public accounting. In 2005, he joined Infinity
Capital Group, Inc., a business development company. He currently serves as
Chief Investment Officer, Chief Financial Officer, Secretary, and is a member of
Infinity's board. Since 2004 he has been, and continues to be, a project
consultant and advisor and has provided services to various companies, including
a private equity fund, a children's entertainment company, a real estate
development fund, a software development company and an internet company. In
1999, Mr. Greenberg co-founded Park Avenue Equity Partners, LP, a $100 million
middle market private equity fund and he was a general partner until 2003. From
1998 to 1999, Mr. Greenberg was the Chief Financial Officer of Development
Capital, LLC. Mr. Greenberg has also held senior positions at various accounting
firms. Mr. Greenberg was appointed to the Board in April 2006.

COMMITTEES

The Board of Directors has an Audit Committee consisting of Messrs. Jaensch,
Kenzie and Greenberg and a Compensation Committee consisting of Messrs. Jaensch,
Bramson, Katz and Kenzie. The responsibilities of the Audit Committee include
appointing, retaining, replacing, compensating and overseeing the work of the
independent accountants, who report to, and are directly accountable to, the
Committee. The Audit Committee reviews with the independent accountants the
results of the audit engagement, approves professional services provided by the
accountants including the scope of non-audit services, if any, and reviews the
adequacy of our internal accounting controls. The Board of Directors has
determined that Messrs. Kenzie and Greenberg, both independent directors, meet
the qualifications as an "audit committee financial expert".

The Compensation Committee makes recommendations to the Board regarding
executive and employee compensation and benefits.

CODE OF ETHICS

The Company has adopted a Code of Ethics for Senior Financial Officers that is
applicable to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.

POTENTIAL CONFLICTS OF INTEREST

Messrs. MacDonald, Helfer, Canfield and other of our employees from time to time
spend a portion of their time on the business affairs of Biomed or its
affiliates, for which Biomed reimburses us a percentage of their salary and
benefits. Our Board of Directors reviews this arrangement on a regular basis.
Currently, Biomed reimburses us for less than 50% of the payroll costs of
Messrs. MacDonald, Helfer, Canfield and others. The Board of Directors does not
believe that any conflicts of interest arise as a result of this policy, but it
monitors the relationship on an ongoing basis.

Michael Weiner devotes the majority of his time to our company. His employment
agreement with us requires a majority of his time, allowing him to attend to
certain administrative duties of Technology Innovations, its subsidiary, Biomed,
and Speech Compression Technologies, LP, an R&D partnership holding certain
assets. Mr. Weiner is a member and the manager of Biomed and of Technology
Innovations. Ross Kenzie, one of the Biophan directors, is on the Board of
Members of each of Technology Innovations and Biomed. Biomed is in the business
of identifying and acquiring technologies in the biomedical field for
exploitation.

Further, Mr. Weiner is on the board of Nanoset, LLC, an entity owned in part by
Biomed and with which we have entered into a technology license agreement, and
Myotech, LLC, an entity in which Biomed is a 12.53% owner and Biophan is a
36.39% owner. Messrs. MacDonald and Helfer also serve on the board of managers
of Myotech. Myotech is developing a biomedical device that does not compete with
those being developed by us.

Messrs Weiner, Lanzafame, Katz and Kenzie are also on the Board of NaturalNano,
Inc., the principal owner of which is Technology Innovations, LLC. NaturalNano
has entered into a research and development agreement with us for drug eluting
technology.

Biomed has agreed that all intellectual property developed by the employees of
Biomed that is in the area of MRI Safe and/or Image Compatible Technology (MRI
Technology) and HIV Antisense will be assigned to us. Per this agreement, MRI
Technology means the technology necessary to enable medical devices to be
resistant to radio frequency and static and gradient electromagnetic fields
produced by MRI machines. HIV Antisense is a method of treating HIV.

Our independent directors will make all determinations and decisions relating to
the issue involving Biomed and its affiliates described above, without the vote
of either Mr. Weiner or Mr. Kenzie. In addition, the Board will act to ensure
that Mr. Weiner and Mr. Kenzie discharge their obligations to us in accordance
with their fiduciary duties to us.

LIMITATION ON LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Nevada Revised Statutes Section 78.138, a director or officer is generally
not individually liable to the corporation or its shareholders for any damages
as a result of any act or failure to act in his capacity as a director or
officer, unless it is proven that:

o his act or failure to act constituted a breach of his fiduciary
duties as a director or officer; and
o his breach of those duties involved intentional misconduct, fraud or
a knowing violation of law.

This provision is intended to afford directors and officers protection against
and to limit their potential liability for monetary damages resulting from suits
alleging a breach of the duty of care by a director or officer. As a consequence
of this provision, stockholders of Biophan will be unable to recover monetary
damages against directors or officers for action taken by them that may
constitute negligence or gross negligence in performance of their duties unless
such conduct falls within one of the foregoing exceptions. The provision,
however, does not alter the applicable standards governing a director's or
officer's fiduciary duty and does not eliminate or limit the right of Biophan or
any stockholder to obtain an injunction or any other type of non-monetary relief
in the event of a breach of fiduciary duty.

As permitted by Nevada law, Biophan's By-Laws include a provision which provides
for indemnification of a director or officer by us against expenses, judgments,
fines and amounts paid in settlement of claims against the director or officer
arising from the fact that he was an officer or director, provided that the
director or officer acted in good faith and in a manner he or she believed to be
in or not opposed to our best interests. Biophan has purchased insurance under a
policy that insures both Biophan and its officers and directors against exposure
and liability normally insured against under such policies, including exposure
on the indemnities described above. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.

SCIENTIFIC ADVISORY BOARD

From time to time, we call upon the advice of members of our Scientific Advisory
Board who currently serve without fixed cash compensation but are each entitled
to receive 8,333 options upon completion of each full year of membership. The
members of our Board are:

BRADFORD C. BERK, M.D., PH.D. - Since 1998, Dr. Berk has been Director, Center
of Cardiovascular Research; Paul N. Yu Professor and Chief of Cardiology;
Charles A. Dewey Professor and Chairman of Medicine, University of Rochester
Medical Center. Dr. Berk has clinical expertise in adult cardiology and
scientific expertise in cardiovascular medicine, particularly vascular biology.

DAVID A. GLOCKER, PH.D. - Dr. Glocker is President of Isoflux Incorporated, a
manufacturer of sputter coating equipment. Prior to founding Isoflux in 1993 he
led a group at the Eastman Kodak Company that was responsible for the
development of coating processes for many Kodak products. He has published
numerous articles on coating technology and holds more than 25 patents in the
field.

HERBERT A. HAUPTMAN, PH.D. - In 1970, Dr. Hauptman joined the crystallographic
group of the Hauptman-Woodward Medical Research Institute (formerly the Medical
Foundation of Buffalo) of which he became Research Director in 1972. He
currently serves as President of the Hauptman-Woodward Medical Research
Institute as well as Research Professor in the Department of Biophysical
Sciences and Adjunct Professor in the Department of Computer Science at the
University of Buffalo. He was awarded the 1985 Nobel Prize in Chemistry and was
elected to the National Academy of Sciences in 1988.

RAY KURZWEIL, B.S. - Founder, Chairman, and CEO of Kurzweil Technologies, Inc.,
a technology development company, since 1995. President Clinton awarded Mr.
Kurzweil the National Medal of Technology in 1999, for his invention of the
Kurzweil Reading Machine for the Blind. Mr. Kurzweil was inducted into the
National Inventor's Hall of Fame in 2002, and received the Lemelson-MIT Prize in
2001. Mr. Kurzweil also developed Kurzweil Voice Recognition System, and
Kurzweil Music Synthesizer. He is a renowned best-selling author and lecturer.

MARK E. LADD, PH.D. - Professor and Director of Biomedical Imaging, Institute
for Diagnostic and Interventional Radiology and Neuroradiology, University
Hospital Essen, Germany; Director of the International Research Center for
Magnetic Resonance in Medicine and Cognitive Science in Essen, Germany; Vice
President for Research and Development of MR-Innovation GmbH, Essen, Germany.
Dr. Ladd is an international expert in magnetic resonance imaging with research
interests in MR safety, MR-guided vascular interventions, MR elastography, MR
angiography, whole-body MR imaging, and high-field MR imaging.

ANDREAS MELZER, M.D. - Dr. Melzer is Professor of applied biomedical
engineering, Director and Chairman of the Board at the Institute for Medical
Technologies and Management in Medicine INSITE med. at the University of Applied
Sciences in Gelsenkirchen, Germany. He also holds a clinical position as
part-time staff radiologist at the Department of Diagnostic and Interventional
Radiology at St. Mary's Hospital Buer in Gelsenkirchen, Germany. He has
co-invented more than 30 patents and has authored over 150 publications.
Additionally, Dr. Melzer is engaged as co-organizer, chairman, and invited
speaker of various medical conferences, and is a board member of several medical
societies, as well as professional committees.

KEVIN PARKER, M.S., PH.D. - Dean Parker is a Professor of Electrical and
Computer Engineering, Radiology, and Bioengineering at the University of
Rochester. In 1998, Dr. Parker was named Dean of the School of Engineering and
Applied Sciences.

HARALD H. QUICK, PH.D. - Associate Professor of Radiology and Senior Physicist,
Institute for Diagnostic and Interventional Radiology and Neuroradiology,
University Hospital Essen, Germany; Founder, President & CEO of MR-Innovation
GmbH, Essen, Germany. Dr. Quick is an international expert in magnetic resonance
imaging with research interests in MR safety, MR-guided vascular interventions,
MR angiography, whole-body MR imaging, high-field MR imaging and radiofrequency
(RF) coil design.

FRANK G. SHELLOCK, PH.D. - Dr. Shellock is Adjunct Clinical Professor of
Radiology and Medicine at the Keck School of Medicine, University of Southern
California and the Founder of the Institute for Magnetic Resonance Safety,
Education, and Research (www.IMRSER.org); Dr. Shellock is a world-renowned
expert on MRI safety. He created the internationally popular website,
www.MRIsafety.com. Dr. Shellock has authored five medical textbooks, over 60
book chapters, and more than 190 peer-reviewed articles. In 2004, the
International Society for Magnetic Resonance in Medicine recognized the
significant contributions Dr. Shellock has made to the scientific and
educational mission of the ISMRM by designating him a Fellow of the Society.

HENRY M. SPOTNITZ, M.D. - Since 1994, Dr. Spotnitz has been Vice-Chairman,
Research and Information Systems Department of Surgery at Columbia Presbyterian
Medical Center.

JIANHUI ZHONG, PH.D. - Professor Zhong joined the University of Rochester in
1997 and is currently an Associate Professor of Radiology, Physics, and
Biomedical Engineering, and Director of the MRI Research Group at the University
Medical Center.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") requires our executive officers and directors and persons who own more
than ten percent of our common stock to file reports of ownership and changes in
ownership with the SEC. Such executive officers, directors and greater than ten
percent stockholders are also required by SEC rules to furnish us with copies of
all Section 16(a) forms they file. Based solely on representations from certain
reporting persons, we believe that, with respect to the year ended February 28,
2006, the following transactions applicable to our executive officers, directors
and ten percent stockholders required by Section 16(a) were not reported timely.
On May 27, 2005, Michael Weiner acquired an indirect interest in 1,428,319
shares as a result of the issuance of a convertible promissory note and warrants
to Biomed Solutions LLC. On August 31, 2005, the aforementioned indirect
interest in derivative shares was reduced and Mr. Weiner's indirect interest in
non-derivative shares was increased by 480,899 as a result of conversion of
portion of the promissory Note. On July 27, 2005, the date of our Annual
Stockholders Meeting, each non-management director was granted 35,000 options.
On December 8, 2005, Michael Friebe acquired an indirect interest in 100,000
shares of restricted stock and on February 24, 2006 was granted 72,500 options.
On December 21, 2005, executive officers Messrs. Weiner, MacDonald and Helfer
each acquired indirect interests in 4,923,080 shares which were issued to
Myotech LLC.

ITEM 11. EXECUTIVE COMPENSATION

The following table summarizes the annual compensation paid to our named
executive officers during each of the last three fiscal years:

Securities
Underlying
Name and Principal Position Year Salary options/SARs
--------------------------- ------- ------------ ------------
Michael L. Weiner, CEO 2/28/06 $ 237,115 -0-
Michael L. Weiner, CEO 2/28/05 $ 198,269 1,000,000
Michael L. Weiner, CEO 2/29/04 $ 175,000 300,000

Robert J. Wood, CFO (1) 2/28/06 $ 160,817 25,000
Robert J. Wood, CFO 2/28/05 $ 134,654 400,000
Robert J. Wood, CFO 2/29/04 $ 129,000 125,000

Darryl L. Canfield, CFO (2) 2/28/06 $ 50,192 600,000

Stuart G. MacDonald,
Vice-President-Research 2/28/06 $ 175,384 25,000
Stuart G. MacDonald,
Vice-President-Research 2/28/05 $ 149,711 425,000
Stuart G. MacDonald,
Vice-President-Research 2/29/04 $ 153,846 200,000

Jeffrey L. Helfer,
Vice-President-Engineering 2/28/06 $ 176,153 25,000
Jeffrey L. Helfer,
Vice-President-Engineering 2/28/05 $ 149,711 425,000
Jeffrey L. Helfer,
Vice-President-Engineering 2/29/04 $ 153,846 200,000

John F. Lanzafame,
Vice-President-Business
Development 2/28/06 $ 159,039 575,000

John F. Lanzafame,
COO, Vice-President-Business
Development (3) 2/28/05 $ 53,308 250,000

(1) Retired effective January 20, 2006

(2) Hired November 9, 2005, appointed Chief Financial Officer effective
January 20, 2006

(3) Hired September 4, 2004, appointed Chief Operating Officer effective April
12, 2006.

Columnar information required by Item 402(a)(2) of Regulation SK has been
omitted for categories where there has been no compensation awarded to, earned
by, or paid to, the named executive officers required to be reported in the
table during fiscal years 2004 through 2006.

STOCK OPTIONS

On June 22, 2001, the Board of Directors adopted the Biophan Technologies, Inc.
2001 Stock Option Plan. The Option Plan was last amended on July 27, 2005. The
Option Plan provides for the grant of incentive and non-qualified stock options
to selected employees, the grant of non-qualified options to selected
consultants and to directors and advisory board members. The Option Plan is
administered by the Compensation Committee of the Board of Directors and
authorizes the grant of options for 13,000,000 shares. The Compensation
Committee determines the individual employees and consultants who participate
under the Plan, the terms and conditions of options, the option price, the
vesting schedule of options and other terms and conditions of the options
granted pursuant thereto. Non-employee directors participate pursuant to the
formula set forth in the Option Plan whereby, on the date of each annual
stockholders meeting, each receives a grant of options to purchase up to 50,000
shares, the number to be determined by the Compensation Committee. Such options
vest upon the earlier of the completion of one year of service or the day
preceding the next annual stockholders meeting. As of February 28, 2006, we had
granted options to purchase 13,108,183 shares of common stock under the Option
Plan and 9,594,020 were outstanding.

The following table summarizes information concerning stock options granted to
the named executive officers during the last completed fiscal year ended
February 28, 2006:

Percent of
Number of total
securities options/SARs Exercise
underlying granted to or base
options/SARs employees in price Expiration
Name granted (#) fiscal year ($/Sh) date
------------------ ------------ ----------- -------- -----------

Michael L. Weiner -0- -0- -0-- -0-
Robert J. Wood 25,000 1.47% $2.60 5/27/15
Darryl L. Canfield 600,000 35.40% $1.87 11/9/15
Stuart G. MacDonald 25,000 1.47% $.97 5/27/15
Jeffrey L. Helfer 25,000 1.47% $.97 5/27/15
John F. Lanzafame 575,000 33.92% $1.56 -$1.80 3/10/15-1/6/16

No named executive officer exercised options in the fiscal year ended February
28, 2006. The following table presents the number and values of exercisable and
unexercisable options as of February 28, 2006:

Number of
Securities Value of
underlying unexercised
unexercised in-the-money
Shares options/ SARs at options/SARs at
acquired FY-end (#) FY-end ($)
on Value Exercisable/ Exercisable/
Name exercise realized Unexercisable Unexercisable
------------------- -------- -------- ----------------- -------------------

Michael L. Weiner None -- 1,525,000/275,000 $ 2,501,000/$451,000
Robert J. Wood None -- 528,750/171,250 $ 826,150/$280,850
Darryl L. Canfield None -- 100,000/500,000 $ 0/$0
Stuart G. MacDonald None -- 715,000/135,000 $ 1,131,600/$221,400
Jeffrey L. Helfer None -- 715,000/135,000 $ 1,131,600/$221,400
John F. Lanzafame None -- 725,000/315,000 $ 516,600/$221,400

EMPLOYMENT AGREEMENTS

Each of Michael L. Weiner, President and Chief Executive Officer; Darryl L.
Canfield, Treasurer, Secretary and Chief Financial Officer; Stuart G. MacDonald,
Vice President of Research and Development; Jeffrey L. Helfer, Vice President of
Engineering; and John F. Lanzafame, Chief Operating Officer and Vice President
of Business Development, has entered into an employment agreement with Biophan.

Mr. Weiner's employment agreement has an initial term of three years with
subsequent one-year renewal periods. His employment agreement may be terminated
by us for cause or upon his death or disability. In the event of the disability
of Mr. Weiner, termination of his employment agreement by us following a change
in control or termination of his employment agreement by him for good reason,
Mr. Weiner is entitled to receive (i) the unpaid amount of his base salary
earned through the date of termination; (ii) any bonus compensation earned but
not yet paid; and (iii) a severance payment equal to one (1) year of his then
current salary. In addition, Mr. Weiner will be immediately vested in any
options, warrants, retirement plan or agreements then in effect. "Good reason"
means (i) a material change of Mr. Weiner's duties, (ii) a material breach by us
under the employment agreement, or (iii) a termination of Mr. Weiner's
employment in connection with a change in control.

As used in Mr. Weiner's employment agreement, "change in control" means:

(1) our merger or consolidation with another entity where the members of our
Board do not, immediately after the merger or consolidation, constitute a
majority of the Board of Directors of the entity issuing cash or securities in
the merger or consolidation immediately prior to the merger or consolidation, or

(2) the sale or other disposition of all or substantially all of our assets.

In the event of termination for cause, all of Mr. Weiner's unexercised warrants
and options, whether or not vested, will be canceled, and Mr. Weiner will not be
eligible for severance payments. In the event of voluntary termination, Mr.
Weiner's vested warrants and options remain exercisable for the life of the
applicable agreement but he will not be eligible for severance payments.

The employment agreements for Messrs. Canfield, MacDonald, Helfer and
Lanzafame are terminable by either us or the employee upon 30 days' notice or by
us for cause (as defined in their employment agreements) or upon the death or
disability of the employee. However, each of them is entitled to receive
severance equal to six months' base salary, payable in six equal consecutive
monthly installments in the event that the employee is terminated by us within
ninety (90) days following a change in control. In addition, under such
circumstances each of them will be immediately vested in any options, warrants,
retirement plan or agreements then in effect.

For purposes of the employment agreements for Messrs. Canfield, MacDonald,
Helfer and Lanzafame "change in control" means (1) on the date of the merger or
consolidation of Biophan with another entity where the members of the Board of
Directors, immediately prior to the merger or consolidation, would not,
immediately after the merger or consolidation, constitute a majority of the
Board of Directors of the entity issuing cash or securities in the merger or
consolidation; (2) on the date Michael L. Weiner is terminated as CEO of the
Company; or (3) on the date of the sale or other disposition of all or
substantially all of the assets of Biophan.

In the event of termination for cause, all unexercised warrants and options held
by the applicable employee, whether or not vested, will be canceled and the
employee will not be eligible for severance payments. In the event of voluntary
termination, all vested warrants and options remain exercisable for the life of
the applicable agreement.

COMPENSATION OF THE BOARD OF DIRECTORS

Directors who are also our employees do not receive additional compensation for
serving on the Board or its committees. Non-employee directors, for their
services as directors, are paid an annual cash fee of $8,000. Dr. Jaensch
receives an additional $2,000 per month for serving as Chairman of the Board
through July 31, 2005. Commencing August 2005, the monthly fee was increased to
$2,500 per month. In addition, non-employee directors receive options under our
Stock Option Plan. All directors are reimbursed for their reasonable expenses
incurred in attending Board meetings. An additional $3,000 per year is paid to
the Chairman of the Audit Committee. Otherwise, no additional compensation is
paid to any director for serving as a member of any committee of the Board. We
maintain directors and officers liability insurance.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The table below lists the beneficial ownership of our common stock, as of May
12, 2006, by each person known by us to be the beneficial owner of more than 5%
of our common stock, by each of our directors and officers and by all of our
directors and officers as a group.

------------------------------------------------ -------- -------------------------- --------------------
Name and Address of Notes Number of Shares Percent of Class
Beneficial Owner Beneficially Owned (1)(2) (2)

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

+Guenter H. Jaensch
16065 Bristol Isle Way
Delray Beach, FL 33446 (3) 1,027,500 1.25%
------------------------------------------------ -------- -------------------------- --------------------
+Michael L. Weiner
693 Summit Drive
Webster, NY 14580 (4) 7,426,136 8.73%
------------------------------------------------ -------- -------------------------- --------------------
+Robert S. Bramson
1100 East Hector Street
Suite 410 (5) 257,500 *
Consohocken, PA 19428
------------------------------------------------ -------- -------------------------- --------------------
+Ross B. Kenzie
Cyclorama Bldg. Suite 100
369 Franklin Street
Buffalo, NY 14202 (6) 257,500 *
------------------------------------------------ -------- -------------------------- --------------------
+Steven Katz
20 Rebel Run Drive
East Brunswick, NJ 08816 (7) 257,500 *
------------------------------------------------ -------- -------------------------- --------------------
+Michael Friebe
Paul-Schuerholz-Str. 7
D-45657 Recklinhausen (8) 324,125 *
Germany
------------------------------------------------ -------- -------------------------- --------------------
+Theodore A. Greenberg
530 F Grand Street
New York, NY 10002 0 *
------------------------------------------------ -------- -------------------------- --------------------
Stuart G. MacDonald
4663 East Lake Road
Pultneyville, NY 14538 (9) 805,000 *
------------------------------------------------ -------- -------------------------- --------------------
Jeffrey H. Helfer
4 Highland Green
Victor, NY 14564 (10) 845,700 1.02%
------------------------------------------------ -------- -------------------------- --------------------
John F.
Lanzafame
10 Alameda Drive (11) 315,000 *
Fairport, NY
14450
------------------------------------------------ -------- -------------------------- --------------------
Darryl L. Canfield
32 Merryhill Lane
Pittsford, NY 14534 (12) 200,000 *
------------------------------------------------ -------- -------------------------- --------------------
Technology Innovations, LLC
150 Lucius Gordon Drive
Suite 215
West Henrietta, NY 14586 (13) 3,312,786 3.97%
------------------------------------------------ -------- -------------------------- --------------------
Biomed Solutions, LLC
150 Lucius Gordon Drive
Suite 215
West Henrietta, NY 14586 (14) 3,012,142 3.61%
------------------------------------------------ -------- -------------------------- --------------------
Myotech, LLC
150 Lucius Gordon Drive
Suite 218
West Henrietta, NY 14586 4,923,080 6.02%
------------------------------------------------ -------- -------------------------- --------------------
All Officers and Directors as
a group (10 persons) 11,715,961 13.16%
------------------------------------------------ -------- -------------------------- --------------------

* Denotes less than one percent.
+ Denotes Member of the Board of Directors.

1) Except as may be set forth below, the persons named in the table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them.

2) Applicable percentage of ownership is based on 81,805,243 shares
outstanding as of May 12, 2006, together with applicable options for such
shareholder. Beneficial ownership is determined in accordance with the
rules of the SEC and includes voting and investment power with respect to
shares. Shares subject to options or warrants currently exercisable or
exercisable within 60 days after May 12, 2006 are included in the number
of shares beneficially owned and are deemed outstanding for purposes of
computing the percentage ownership of the person holding such options or
warrants, but are not deemed outstanding for computing the percentage of
any other stockholder.

3) Includes 577,500 shares issuable upon exercise of options granted to Dr.
Jaensch.

4) Michael L. Weiner is a member and the manager of Technology Innovations,
LLC, which is the majority owner of Biomed Solutions, LLC. Mr. Weiner is
also the Manager of Biomed. Mr. Weiner's calculation includes 3,394,501
shares owned beneficially and of record by Biomed and 300,644 shares owned
beneficially and of record by Technology Innovations. Also includes
1,698,630 shares issuable upon exercise of warrants held by Biomed and
1,525,000 shares issuable upon exercise of options held by Mr. Weiner.

5) Includes 257,500 shares issuable upon exercise of options held by Mr.
Bramson.

6) Includes 257,500 shares issuable upon exercise of options held by Mr.
Kenzie. Does not include shares owned beneficially or of record by Biomed
or by Technology Innovations. Mr. Kenzie is the Manager and an equity
member of Biophan Ventures, LLC, which is the 43% equity member in Biomed;
he is also the Manager of Patent Ventures LLC, which is the Class A Member
of Technology Innovations. Mr. Kenzie and Mr. Weiner comprise the Board of
Members of Biomed; Mr. Kenzie serves on the Board of Members of Technology
Innovations.

7) Includes 257,500 shares issuable upon exercise of options held by Mr.
Katz.

8) Includes 50,000 shares owned beneficially and of record by aMRIs Patente
GmbH and 50,000 shares owned beneficially and of record by aMRIs Patente
Verwaltungs GmbH & Co. KG. These entities are controlled by Drs. Michael
Friebe and Andreas Melzer who are employees and minority owners of Biophan
Europe GmbH, our 51% owned subsidiary. Dr. Friebe is also a member of our
Board of Directors. aMRIs Patente GmbH is owned 50% by Tomovation GmbH and
50% by Dr. Melzer. Tomovation is a German company which is owned 80.8% by
Dr. Friebe and 19.2% by four individuals. aMRIs Patente Verwaltungs GmbH &
Co KG is owned 50% each by Dr. Friebe and Dr. Melzer.

9) Includes 715,000 shares issuable upon exercise of options held by Mr.
MacDonald.

10) Includes 715,000 shares issuable upon exercise of options held by Mr.
Helfer.

11) Includes 315,000 shares issuable upon exercise of options held by Mr.
Lanzafame.

12) Includes 200,000 shares issuable upon exercise of options held by Mr.
Canfield.

13) Includes 3,394,501 shares owned beneficially and of record by Biomed and
1,698,630 shares issuable upon exercise of warrants held by Biomed.
Technology Innovations, LLC is the majority owner of Biomed Solutions,
LLC. Biomed reports ownership of a smaller number of shares.

14) Includes 1,698,630 shares issuable upon exercise of warrants held by
Biomed.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

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

Plan Category Number of securities to be Weighted average exercise Number of securities
issued upon exercise of price of outstanding remaining available for
outstanding options, options, warrants and future issuance under
warrants and rights rights equity compensation plans
(excluding securities
reflected in column (a))
(a) (b) (c)
------------------------------- ---------------------------- ---------------------------- -------------------------
Equity compensation plans
approved by security holders 9,594,020 $.69 1,980,148
------------------------------- ---------------------------- ---------------------------- -------------------------
Equity compensation plans not
approved by security holders
-0- -0- -0-
------------------------------- ---------------------------- ---------------------------- -------------------------
Total 9,594,020 $.69 1,980,148
------------------------------- ---------------------------- ---------------------------- -------------------------

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

1) Michael L. Weiner, President and Chief Executive Officer of Biophan, is
the Manager and a 42.7% equity member of Technology Innovations, LLC., a
57% equity member of Biomed Solutions, LLC. Mr. Weiner is also the Manager
of Biomed. He and Ross Kenzie make up the Board of Members of Biomed.
Biomed is the record owner of 656,756 shares of common stock of Biophan;
Technology Innovations is the record owner of 300,644 shares of common
stock of Biophan. As Manager of Technology Innovations and Biomed, Mr.
Weiner has control over these entities. Mr. Weiner is also on the board of
Nanoset, LLC, an entity owned in part by Biomed Solutions, and with which
we have entered into a technology license agreement. Mr. Weiner is also on
the Board of Myotech, LLC which is the record owner of 4,923,080 shares of
Biophan common stock. Biophan owns 45.7% of the Class A (voting) units of
Myotech, LLC.

2) On December 1, 2000, Biomed received 10,759,101 shares of Biophan's common
stock in exchange for its shares of LTR Antisense Technology, Inc. Most of
those shares have been distributed to the members of Biomed and their
members.

3) On December 1, 2000, Biomed transferred its MRI-compatible pacemaker
patent pending and related technology to Biophan for a future payment of
$500,000. This obligation bears interest at 8% per annum from February 28,
2002, and has been extended several times, to June 1, 2004. After June 1,
2004, principal and interest are payable in 12 equal monthly installments.
Since November 30, 2002, this entire obligation has been convertible into
common shares of Biophan at a conversion price equal to the lowest of (i)
the closing bid price on June 4, 2002; (ii) the closing bid price on the
date of exercise; or (iii) the lowest per share purchase price paid by any
third party between June 4, 2002 and the exercise date. On February 10,
2004, Biomed transferred $300,000 of this obligation to SBI Brightline
Consulting, LLC and converted the remaining balance of $200,000 into
shares of our common stock. On the same date, SBI converted the $300,000
obligation transferred to it into shares of our common stock.

4) On June 4, 2002, we executed a line of credit agreement with Biomed
providing for borrowings up to $250,000. On August 19, 2002, the line was
increased by $100,000 and the expiration date thereof for that portion of
the line was set at August 19, 2003. The payment date of amounts borrowed
under the original line was extended to December 1, 2002. On November 7,
2002, the maturity date of the line was extended until such time as the
financing contemplated by the Spectrum stock purchase agreement commenced.
It was later extended to June 1, 2004. On February 10, 2004, all
outstanding balances under the line of credit were converted to common
stock in accordance with the terms of the credit agreement.

On May 27, 2005, we entered into an unsecured loan agreement with Biomed
Solutions, LLC, a related company, whereby Biomed agreed to provide us
with a line of credit facility of up to $2 million. Borrowings under the
line bear interest at 8% per annum (compounded monthly) and are payable on
demand on or after November 27, 2005. In June 2005 the entire facility was
drawn down. The outstanding principal and interest are convertible into
shares of our Common Stock at 90% of the average market closing price per
share of our Common Stock for the 20 trading days preceding the date of
borrowings under the line ($2.12 per share for the first $1 million and
$2.19 per share for the second $1 million). Additionally, Biomed received
pro-rata warrant coverage of 500,000 shares, with the warrants priced at
110% of the average market closing price per share of our Common Stock for
the 20 trading days preceding the date of execution of the loan agreement
($2.49 per share). On August 31, 2005, Biomed elected to convert
$1,000,000 of the outstanding debt plus accrued interest into 480,899
shares of our Common Stock. On October 7, 2005, we repaid $500,000 of the
outstanding debt plus the entire accrued interest to date, leaving
an outstanding principal balance of $500,000. The loan agreement requires
us to use our best efforts to include the shares issued and issuable upon
conversion of the loan in any registration statement we file covering
resale of shares of our Common Stock.

On January 24, 2006, we entered into a Line of Credit Agreement (the "Line
of Credit Agreement") with Biomed Solutions, LLC, a New York limited
liability company ("Biomed"), pursuant to which Biomed has committed to
make advances to us, in an aggregate amount of up to $5,000,000. Under the
Line of Credit Agreement, advances may be drawn down in such amounts and
at such times as we determine upon 15 days' prior notice to Biomed, except
that we may not draw down more than $1,500,000 in any 30-day period. As of
April 19, 2006, we had borrowed an aggregate of $3,200,000 under the Line
of Credit Agreement. We are obligated to utilize the entire credit
facility. Amounts borrowed will bear interest at the rate of 8% per annum
and are convertible into shares of our Common Stock at the rate of $1.46
per share. Any amounts drawn down and repaid may be reborrowed at any time
(subject to a requirement of 15 days' notice and the limitation that not
more than $1,500,000 may be drawn down during any 30-day period). Biomed's
obligation to lend to us under the Line of Credit Agreement expires on
June 30, 2007, on which date the entire amount borrowed by us (and not
converted into shares of our Common Stock) becomes due and payable. Our
obligations with respect to borrowings under the credit facility are
governed by a Convertible Promissory Note issued by us to Biomed on
January 24, 2006. In connection with the establishment of the credit
facility under the Line of Credit Agreement, on January 24, 2006 we issued
to Biomed a Stock Purchase Warrant (the "Warrant") entitling Biomed to
purchase up to 1,198,630 shares of our Common Stock at an exercise price
of $1.89 per share. Biomed's purchase rights under the Warrant expire on
January 23, 2011.

5) Biomed holds warrants to purchase a total of 1,698,630 shares of our
common stock. On November 7, 2002, Biomed was granted warrants to purchase
500,000 shares at an exercise price of $.50 per share in consideration of
another extension of the Transfer Agreement payment. Each extension of the
Transfer Agreement payment enabled us to retain the MRI-compatible
technology that we acquired under the Transfer Agreement.

Pursuant to the Line of Credit Agreement, on January 24, 2006 the Company
issued warrants to Biomed. These warrants entitles Biomed to purchase, at
any time or times prior to January 23, 2011, up to 1,198,630 shares at an
exercise price of $1.89 per share. If all the warrants are exercised, the
Company will receive, in cash, aggregate consideration upon exercise in
the amount of $2,265,411.

In connection with each issuance of warrants to Biomed, our board of
directors determined, without the vote of Mr. Weiner or Mr. Kenzie, that
the consideration received by us was fair and adequate consideration for
the warrants issued.

6) The Company has affiliations with three entities, Biomed Solutions, LLC
("Biomed"), Technology Innovations, LLC ("TI") and Myotech, LLC
("Myotech"), that are related by virtue of common management personnel and
stock ownership. During the current year ended February 28, 2006, the
Company charged Biomed and Myotech for services of certain Company
personnel and charged Biomed, TI and Myotech for expenses allocable to and
paid on their behalf. The total of these charges was approximately
$959,000 for the year ended February 28, 2006 and $404,754 for the year
ended February 28, 2005. At February 28, 2006, the combined balances due
from these related parties was $42,063. The amounts do not bear interest
and the Company received payment within forty-five days.

7) During the years ended February 28, 2006 and 2005, the Company was billed
$93,000 and $9,000 respectively, for legal services provided by Bramson &
Pressman of which Robert S. Bramson, a director of the Company, is a
partner.

8) During the year ended February 28, 2006, the Company was billed $110,000
for consulting services provided by Steve Katz, a director of the Company.

9) All transactions discussed above are considered by the Board of Directors
to have been consummated on terms approximately equivalent to those that
might have prevailed in arms-length transactions with unaffiliated parties
under similar circumstances.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Our principal accountant is Goldstein Golub Kessler LLP ("the Firm"). Through
September 30, 2005, the Firm had a continuing relationship with American Express
Tax and Business Services Inc. ("TBS") from which it leased auditing staff who
were full time, permanent employees of TBS and through which its partners
provided non-audit services. Subsequent to September 30, 2005, this relationship
ceased and the Firm established a similar relationship with RSM McGladrey, Inc.
("RSM"). The Firm has no full time employees, and, therefore, none of the audit
services performed were provided by permanent, full-time employees of the Firm.
The Firm manages and supervises the audit and audit staff and is exclusively
responsible for the opinion rendered in connection with its examination. Other
services, which do not include financial information systems design and
implementation fees, have been provided by TBS or RSM.

1) Audit Fees

The aggregate fees billed by Goldstein Golub Kessler LLP for professional
services rendered for the audits of the Company's annual financial
statements, for the reviews of the financial statements included in the
Company's quarterly reports on Form 10-Q and Form 10-QSB and other
services provided in connection with statutory and regulatory filings
during the last two fiscal years ended February 28, 2006 and February 28,
2005 was $172,775 and $50,584, respectively. Substantially all of the
increase in Audit Fees in 2006 compared to 2005 is attributable to
opinions on management's assessment of and our effectiveness regarding
internal controls over financial reporting in connection with our
compliance with the Section 404 of Sabanes-Oxely Act of 2002.

2) Audit-Related Fees

The Company did not engage its principal accountant to provide assurance
and related services during the last two fiscal years.

3) Tax Fees

The Company did not engage its principal accountant to provide tax
compliance, tax advice and tax planning services during the last two
fiscal years.

4) All Other Fees

The Company did not engage its principal accountant to render services to
the Company during the last two fiscal years, other than as reported
above.

5) Pre-approval Policies and Procedures

In accordance with its charter, the Audit Committee is required to approve
all audit and non-audit services provided by the independent auditors and
shall not engage the independent auditors to perform the specific
non-audit services proscribed by law or regulation.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) 1. Financial Statements, Financial Statement Schedules and Exhibits

(1) Financial Statements - as listed in Item 8-Table of Contents

(2) Financial Statement Schedules - as listed in Item 8-Table of
Contents

Note: All other schedules are omitted as the required information is not
applicable or the information is presented in the consolidated financial
statements or notes thereto.

(3) Pro Forma Financial Information

Not Applicable.

(4) Exhibits

Exhibit No. Exhibit Description Location
----------- ------------------- --------

2.1 Articles of Merger Incorporated by reference to Exhibit
3.2 to Form 10-KSB for the year ended
February 29, 2000 (the "2000 10-KSB")
2.2 Articles of Dissolution Incorporated by reference to Exhibit
3.3 to the 2000 10-KSB
2.3 Exchange Agreement, dated as of December 1, 2000, Incorporated by reference to Exhibit
by and among Biophan, Biomed Solutions, LLC 2.3 Registration Statement
(formerly Biophan, LLC), and LTR Antisense on Form SB-2 filed on January 15, 2003
Technology, Inc. (File No. 333-102526)
2.4 Agreement dated as of February 24, 2005 among Incorporated by reference to Exhibit
Biophan, aMRIs GmbH, Dr. Michael Friebe, 2.4 to form 10-KSB/A for the year ended.
Tomovation GmbH, Prof. Dr. Andreas Melzer, February 28, 2005 (the "2005 10-KSB")
Dipl-Ing. Gregor Schaefers, and Dipl. Betriebsw.
Andreas Pieper
3.1 Articles of Incorporation (Nevada) Incorporated by reference to Exhibit
3.1 to the 2000 10-KSB
3.2 Bylaws (Nevada) Incorporated by reference to Exhibit
3.2 to Form 10-SB filed on May 13, 1999.
3.3 Amendment to the Articles of Incorporation Incorporated by reference to Exhibit
3.1(i) to Form 8-K filed on December 15, 2000.
3.4 Amendment to Exchange Agreement Incorporated by reference to Exhibit 2
to Form 10-KSB for the year ended February 28,
2001 (the "2001 10-KSB").
3.5 Certificate of Amendment to Articles of Incorporated by reference to Exhibit
Incorporation 3.1(i) to Form 8-K filed on August 27, 2001.
4.1 Stock Purchase Warrant issued to Biomed Solutions, Incorporated by reference to Exhibit
LLC (formerly Biophan, LLC) dated June 4, 2002 4.1 to Form 10-QSB for the period ended
May 31, 2002 (the "Q1'02 10-QSB").
4.2 Stock Purchase Warrant issued to Bonanza Capital Incorporated by reference to Exhibit
Masterfund Ltd. 4.2 to the Q1'02 10-QSB.
4.3 Restated Stock Purchase Warrant issued to Biomed Incorporated by reference to Exhibit
Solutions, LLC, dated January 8, 2003 4.3 to Form 10-QSB for the period ended
November 30, 2002 (the "Q3'02 10-QSB").

4.4 Stock Purchase Warrant issued to Biomed Solutions, Incorporated by reference to Exhibit
LLC dated November 11, 2002 4.4 to the Q3'02 10-QSB.
4.5 Form of Stock Purchase Warrant issued to Incorporated by reference to Exhibit
principals of Carolina Financial Services, for a 4.5 to the Q3'02 10-QSB.
total of 121,572 shares
4.6 Form of Stock Purchase Warrant issued to Incorporated by reference to Exhibit
Carolina Financial services in connection with the 4.6 to the Q3'02 10-QSB.
Stock Purchase Agreement with Spectrum Advisors,
Ltd
4.7 Form of Stock Purchase Warrant issued to investors Incorporated by reference to Exhibit
in private placement of securities, for a total of 4.7 to the Q3'02 10-QSB.
2,770,550 shares
4.8 Stock Purchase Warrant issued to SBI USA, LLC Incorporated by reference to Exhibit
4.8 to the Q3'02 10-QSB.
4.9 Registration Rights Agreement dated February 10, Incorporated by reference to Exhibit
2004 by and among Biophan Technologies, Inc., 4.9 to Registration Statement on Form SB-2
Biomed Solutions, LLC and SBI Brightline filed on February 10, 2004. (File No.
Consulting, LLC 333-112678)
4.10 Note and Pledge Agreement dated November 24, 2005 Incorporated by reference to Exhibit
between Biophan, Tomovation GmbH and Prof. Dr. 4.10 to the 2005 10-KSB.
Andreas Melzer
4.11 Convertible Promissory Note of Biophan payable Incorporated by reference to Exhibit
to the order of Biomed Solutions, LLC dated June 10.2 the Q1'02 10-QSB.
4, 2002
4.12 Stock Purchase Agreement between Biophan and Incorporated by reference to Exhibit
Bonanza Capital Masterfund LTD 10.4 the Q1'02 10-QSB.
4.13 Registration Rights Agreement between Biophan and Incorporated by reference to Exhibit
Bonanza Capital Masterfund LTD 10.6 to the Q1'02 10-QSB.
4.14 Stock Purchase Agreement between Biophan and Incorporated by reference to Exhibit
Spectrum Advisors, Ltd. 10.16 to the Q3'02 10-QSB.
4.15 Registration Rights Agreement between Biophan and Incorporated by reference to Exhibit
Spectrum Advisors, Ltd. 10.18 to the Q3'02 10-QSB..
4.16 First Amendment to Restated Stock Purchase Incorporated by reference to Exhibit
Agreement between Biophan and Spectrum Advisors, 10.27 to Amendment No. 1 to
Ltd. Registration Statement on Form SB-2/A
filed on March 14, 2003 (File No.
333-102526).
4.17 Stock Purchase Agreement dated October 1, 2003 Incorporated by reference to Exhibit
between Biophan and SBI Brightline Consulting, LLC. 10.50 to Registration Statement on Form
SB-2 filed on October 9, 2003 (File No.
333-109592).
4.18 Stock Purchase Agreement dated February 5, 2004 Incorporated by reference to Exhibit
between Biophan and SBI Brightline Consulting, LLC. 10.52 to Registration Statement on Form
SB-2 filed on February 10, 2004. (File No.
333-112678).
4.19 * Amended and Restated 2001 Stock Option Plan Incorporated by reference to Appendix A to
Proxy Statement filed on Schedule 14A,
June 28, 2005
4.20 Termination of Stock Purchase Agreement between Incorporated by reference to Exhibit
Biophan and SBI Brightline Consulting, LLC 4.20 to the 2005 10-KSB
4.21 Stock Purchase Agreement dated May 27, 2005 Incorporated by reference to Exhibit
between Biophan and SBI Brightline XI, LLC 4.21 to the 2005 10-KSB

4.22 Convertible Promissory Note of Biophan payable to Incoporated by reference to Exhibit
the order of Biomed Solutions, LLC dated May 27, 4.22 to the 2005 10-KSB
2005
4.23 Stock Purchase Warrant issued to Biomed Solutions, Incorporated by refernce to Exhibit
LLC dated May 27, 2005 4.23 to the 2005 10-KSB
4.24 Investment Agreement dated June 30, 2005 Incorporated by reference to Exhibit
between Biophan and Boston Scientific 4.5 to Form 10-Q for the period
Scimed, Inc. ended August 31, 2005
4.25 Rights Agreement among Myotech, LLC, the Incorporated by reference to Exhibit
Members of Myotech, LLC and Biophan 4.1 to Form 10-Q for the period
ended November 30, 2005
4.26 First Amendment to Line of Credit Agreement Incorporated by reference to Exhibit
between Biophan and Biomed Solutions, LLC 4.2 to Form 10-Q for the period
ended November 30, 2005
4.27 First Amendment to Convertible Promissory Note Incorporated by reference to Exhibit
4.3 to Form 10-Q for the period
ended November 30, 2005
4.28 Amendment No. 1, dated January 8, 2006, to Stock Incorporated by reference to Exhibit
Purchase Agreement by and between Biophan and SBI 4.1 to Form 8-K filed January 9, 2006
Brightline XI, LLC
4.29 Line of Credit Agreement dated as of January 24, Incorporated by reference to Exhibit
2006 between Biophan and Biomed Solutions, LLC 4.1 to Form 8-K filed January 25,
2006
4.30 Convertible Promissory Note dated January 24, Incorporated by reference to Exhibit
2006 to the order of Biomed Solutions, LLC 4.2 to Form 8-K filed January 25,
2006
4.31 Stock Purchase Warrant for the Purchase of up to Incorporated by reference to Exhibit
1,198,630 Shares of Common Stock issued to Biomed 4.3 to Form 8-K filed January 25,
Solutions, LLC 2006
10.1 Assignment, dated as of December 1, 2000, by and Incorporated by reference to Exhibit
between Biophan and Biomed Solutions, LLC 10.1 to Form 8-K, filed December 15,
(formerly Biophan, LLC), a New York limited 2000.
liability company
10.2 Security Agreement, dated as of December 1, 2000, Incorporated by reference to Exhibit
by and between Biophan and Biomed Solutions, LLC 10.2 to Form 8-K, filed December 15,
(formerly Biophan, LLC), a New York limited 2000.
liability company
10.3 Transfer Agreement Incorporated by reference to Exhibit
99.1 to the 2001 10-KSB.
10.4 Amendment to Transfer Agreement Incorporated by reference to Exhibit
99.2 to the 2001 10-KSB.
10.5 Line of Credit Agreement between Biophan and Incorporated by reference to Exhibit
Biomed Solutions, LLC dated June 4, 2002 10.1 to the Q1'02 10-QSB.
10.6 Escrow Agreement between Biophan, Bonanza Capital Incorporated by reference to Exhibit
Masterfund LTD and Boylan, Brown, Code, Vigdor & 10.5 to the Q1'02 10-QSB.
Wilson LLP
10.7 Executive Employment Agreement between Biophan and Incorporated by reference to Exhibit
Michael L. Weiner dated December 1, 2000 10.7 to the Q1'02 10-QSB.
10.8 * Executive Employment Agreement between Biophan and Incorporated by reference to Exhibit
Jeffrey L. Helfer dated June 6, 2002 10.8 to the Q1'02 10-QSB.
10.9 * Executive Employment Agreement between Biophan and Incorporated by reference to Exhibit
Stuart G. MacDonald dated June 6, 2002 10.9 to the Q1'02 10-QSB.
10.10 * Executive Employment Agreement between Biophan and Incorporated by reference to Exhibit
Robert J. Wood dated June 6, 2002 10.10 to the Q1'02 10-QSB.
10.11 Financial Accommodations Agreement between Biophan
Incorporated by reference to Exhibit and Bellador
(Labuan) Ltd dated July 1, 2002 10.11 to the Q1'02
10-QSB.
10.12 Escrow Agreement between Biophan, Spectrum Incorporated by reference to Exhibit
Advisors, Ltd. and Boylan, Brown, Code, Vigdor & 10.17 to the Q3'02 10-QSB.
Wilson LLP.
10.13 Lease Agreement between Biophan and High Incorporated by reference to Exhibit
Technology of Rochester, Inc. 10.19 to Amendment No. 1 to
Registration Statement on Form SB-2/A
filed on March 14, 2003 (File No.
333-102526).
10.14 Strategic Partnership Agreement between Biophan Incorporated by reference to Exhibit
and UB Business Alliance dated December 10, 2001 10.20 to Amendment No. 1 to
Registration Statement on Form SB-2/A
filed on March 14, 2003 (File No.
333-102526).
10.15 License Agreement between Biophan, Xingwu Wang and Filed as Exhibit 10.50 to
Nanoset, LLC dated January 15, 2004 Registration Statement on Form SB-2
filed on October 9, 2003 (File No.
333-109592).
10.16 Patent License Agreement between Biophan and Incorporated by reference to Exhibit
Deborah D. L. Chung dated April 5, 2002 10.22 to Amendment No. 1 to
Registration Statement on Form SB-2/A
filed on March 14, 2003 (File No.
333-102526).

10.17 License Agreement between Biophan and Johns Incorporated by reference to Exhibit
Hopkins University 10.23 to Amendment No. 1 to
Registration Statement on Form SB-2/A
filed on March 14, 2003 (File No.
333-102526).
10.18 Advisory Agreement between Biophan and SBI USA, Incorporated by reference to Exhibit
LLC dated December 18, 2002 10.24 to Amendment No. 1 to
Registration Statement on Form SB-2/A
filed on March 14, 2003 (File No.
333-102526).
10.19 Development Agreement between Biophan and Alfred Incorporated by reference to Exhibit
University dated February 21, 2002 10.25 to Amendment No. 1 to
Registration Statement on Form SB-2/A
filed on March 14, 2003 (File No.
333-102526).
10.20 Development Agreement between Biophan and Alfred Incorporated by reference to Exhibit
University dated January 24, 2003 10.26 to Amendment No. 1 to
Registration Statement on Form SB-2/A
filed on March 14, 2003 (File No.
333-102526).
10.21 Development Agreement between Biophan and Incorporated by reference to Exhibit
Greatbatch Enterprises, Inc., dated February 28, 10.28 to Amendment No. 2 to
2001 Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
10.22 Assignment of Patent No: 60,269,817, by and Incorporated by reference to Exhibit
between Biophan and Michael L. Weiner, Wilson 10.29 to Amendment No. 2 to
Greatbatch, Patrick R. Connelly, and Stuart G. Registration Statement on Form SB-2/A
MacDonald filed on May 1, 2003 (File No.
333-102526).
10.23 Assignment of Patent No: 10,077,988, by and Incorporated by reference to Exhibit
between Biophan and Patrick R. Connelly, Michael 10.30 to Amendment No. 2 to
L. Weiner, Stuart G. MacDonald, Thomas H. Foster, Registration Statement on Form SB-2/A
Wilson Greatbatch, and Victor Miller filed on May 1, 2003 (File No.
333-102526).
10.24 Assignment of Patent No: 10,077,836, by and Incorporated by reference to Exhibit
between Biophan and Michael L. Weiner, Stuart G. 10.31 to Amendment No. 2 to
MacDonald, and Patrick R. Connelly Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
10.25 Assignment of Patent No: 10,077,823, by and Incorporated by reference to Exhibit
between Biophan and Patrick R. Connelly, Michael 10.32 to Amendment No. 2 to
L. Weiner, Jeffrey L. Helfer , Stuart G. Registration Statement on Form SB-2/A
MacDonald, and Victor Miller filed on May 1, 2003 (File No.
333-102526).
10.26 Assignment of Patent No: 10,077,978, by and Incorporated by reference to Exhibit
between Biophan and Michael L. Weiner, Jeffrey L. 10.33 to Amendment No. 2 to
Helfer, Stuart G. MacDonald, Patrick R. Connelly, Registration Statement on Form SB-2/A
and Victor Miller filed on May 1, 2003 (File No.
333-102526).
10.27 Assignment of Patent No: 10,078,062, by and Incorporated by reference to Exhibit
between Biophan and Michael L. Weiner, Patrick R. 10.34 to Amendment No. 2 to
Connelly, Stuart G. MacDonald, Jeffrey L. Helfer, Registration Statement on Form SB-2/A
Victor Miller filed on May 1, 2003 (File No.
333-102526).

10.28 Assignment of Patent No: 10,077,932, by and Incorporated by reference to Exhibit
between Biophan and Michael L. Weiner, Jeffrey L. 10.35 to Amendment No. 2 to
Helfer, Patrick R. Connelly, Stuart G. MacDonald, Registration Statement on Form SB-2/A
and Victor Miller filed on May 1, 2003 (File No.
333-102526).
10.29 Assignment of Patent No: 10,077,887, by and Incorporated by reference to Exhibit
between Biophan and Michael L. Weiner, Jeffrey L. 10.36 to Amendment No. 2 to
Helfer, Patrick R. Connelly, Stuart G. MacDonald, Registration Statement on Form SB-2/A
and Victor Miller filed on May 1, 2003 (File No.
333-102526).
10.30 Assignment of Patent No: 10,077,883, by and Incorporated by reference to Exhibit
between Biophan and Michael L. Weiner, Jeffrey L. 10.37 to Amendment No. 2 to
Helfer, Patrick R. Connelly, Stuart G. MacDonald, Registration Statement on Form SB-2/A
and Victor Miller filed on May 1, 2003 (File No.
333-102526).
10.31 Assignment of Patent No: 10,077,958, by and Incorporated by reference to Exhibit
between Biophan and Michael L. Weiner, Jeffrey L. 10.38 to Amendment No. 2 to
Helfer, Patrick R. Connelly, Stuart G. MacDonald, Registration Statement on Form SB-2/A
and Victor Miller filed on May 1, 2003 (File No.
333-102526).
10.32 Assignment of Patent No: 10,077,888, by and Incorporated by reference to Exhibit
between Biophan and Patrick R. Connelly, Stuart G. 10.39 to Amendment No. 2 to
MacDonald, and Michael L. Weiner Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
10.33 Assignment of Patent No: 60,357,935, by and Incorporated by reference to Exhibit
between Biophan and Jeffrey L. Helfer, Robert W. 10.40 to Amendment No. 2 to
Gray, and Michael L. Weiner Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
10.34 Assignment of Patent No: 10,132,457, by and Incorporated by reference to Exhibit
between Biophan and Stuart G. MacDonald, Jeffrey 10.41 to Amendment No. 2 to
L. Helfer, and Michael L. Weiner Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
10.35 Assignment of Patent No: 09,864,944, by and Incorporated by reference to Exhibit
between Biophan and Wilson Greatbatch, Patrick R. 10.42 to Amendment No. 2 to
Connelly and Michael L. Weiner Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
10.36 Assignment of Patent No: 09,865,049, by and Incorporated by reference to Exhibit
between Biophan and Victor Miller, Wilson 10.43 to Amendment No. 2 to
Greatbatch, Patrick R. Connelly and Michael L. Registration Statement on Form SB-2/A
Weiner filed on May 1, 2003 (File No.
333-102526).
10.37 Assignment of Patent No: 09,885,867, by and Incorporated by reference to Exhibit
between Biophan and Wilson Greatbatch, Patrick R. 10.44 to Amendment No. 2 to
Connelly and Michael L. Weiner Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
10.38 Assignment of Patent No: 09,885,868, by and Incorporated by reference to Exhibit
between Biophan and Victor Miller, Wilson 10.45 to Amendment No. 2 to
Greatbatch, Patrick R. Connelly and Michael L. Registration Statement on Form SB-2/A
Weiner filed on May 1, 2003 (File No.
333-102526).

10.39 Assignment of Patent No: 10,283,530, by and Incorporated by reference to Exhibit
between Biophan and Wilson Greatbatch and Michael 10.46 to Amendment No. 2 to
L. Weiner Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
10.40 Assignment of Patent No: 10,369,429, by and Incorporated by reference to Exhibit
between Biophan and Jeffrey L. Helfer, Robert W. 10.47 to Amendment No. 2 to
Gray, and Michael L. Weiner Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
10.41 Assignment of Patent No: 10,162,318, by and Incorporated by reference to Exhibit
between Biophan and Biomed Solutions, LLC 10.48 to Amendment No. 2 to
Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
10.42 Strategic Partnership Agreement between Biophan Incorporated by reference to Exhibit
and UB Business Alliance dated May 27, 2003. 10.49 to Amendment No. 5 to
Registration Statement on Form SB-2/A
filed on July 11, 2003 (File No.
333-102526).
10.43 Development Agreement between Biophan and Alfred Incorporated by reference to Exhibit
University dated July 17, 2003 10.51 to Registration Statement on
Form SB-2 filed on
October 9, 2003 (File No. 333-109592.
10.44 Letter Agreement dated August 19, 2002 between Incorporated by reference to Exhibit
Biomed Solutions, LLC and Biophan 10.54 to Amendment No. 2 to
Registration Statement on Form SB-2
filed on April 9, 2004 (File No.
333-112678).
10.45 Payment Agreement dated June 3, 2004 between Incorporated by reference to Exhibit
Biophan and TE Bio LLC 99.1 to Form 8-K dated June 3, 2004.
10.46 AMP-Biophan License Agreement dated February 24, Incorporated by reference to Exhibit
2005 between Biophan and aMRIs Patent GmbH 10.46 to the amended 2005 10-KSB
(Confidential treatment has been granted with filed March 31, 2006
respect to certain positions of this Agreement.
This Agreement has been filed separately with the
SEC)
10.47 Employment Agreement dated February 24, 2005 among Incorporated by reference to Exhibit
aMRIs GmbH, Dr. Michael Friebe and Biophan 10.47 to the 2005 10-KSB.
10.48 Capital Pledge Agreement dated February 24, 2005 Incorporated by reference to Exhibit
among Biophan, TomoVation GmbH, and Prof. Dr. 10.48 to the 2005 10-KSB.
Andreas Melzer
10.49 * Executive Employment Agreement between Biophan and Incorporated by reference to Exhibit
John F. Lanzafame effective as of September 9, 2004 10.49 to the 2005 10-KSB
10.50 Line of Credit Agreement dated May 27, 2005 Incorporated by reference to Exhibit
between Biophan and Biomed Solutions, LLC 10.50 to the 2005 10-KSB
10.51 License Agreement dated June 30, 2005 between Incorporated by reference to Exhibit
Biophan and Boston Scientific Scimed, Inc. 10.2 to Amended Form 10-Q for the
period ended August 31, 2005, filed
January 9, 2006
10.52 Securities Purchase Agreement between Biophan and Incorporated by reference to Exhibit
Myotech, LLC, dated November 30, 2005 10.1 to Form 10-Q for the period
ended November 30, 2005
10.53 Letter Agreement, Amendment and Waiver of Certain Incorporated by reference to Exhibit
Conditions to Closing, between Biophan and Myotech, 10.2 to Form 10-Q for the period
LLC, dated December 21, 2005 ended November 30, 2005
10.54 * Executive Employment Agreement dated as of November Incorporated by reference to Exhibit
9, 2005 between Biophan and Darryl L. Canfield, 10.1 to Form 8-K filed January 26,
together with Employee Confidential Information, 2006
Invention and Non-Competition Agreement
10.55 * Executive Employment Agreement dated as of January Incorporated by reference to Exhibit
1, 2006 between Biophan and Jeffrey L. Helfer 10.2 to Form 8-K filed January 26,
2006
14.1 Code of Ethics for Senior Financial Officers Incorporated by reference to Exhibit
14.1 to the 2005 10-KSB.
21 Subsidiaries Filed herewith
23.1 Consent of Goldstein Golub Kessler LLP Filed herewith

23.3 Consent of Frank G. Shellock Incorporated by reference to Exhibit
23.2 to Amendment No. 3 to
Registration Statement on Form SB-2/A
filed on May 22, 2003 (File No.
333-102526).
23.4 Consent of Robert Rubin M.D. Incorporated by reference to Exhibit
23.3 to Amendment No. 2 to
Registration Statement on Form SB-2/A
filed on May 1, 2003 (File No.
333-102526).
31.1 Certification of C.E.O. pursuant to Rule 13a-14(a) Filed herewith
31.2 Certification of C.F.O. pursuant to Rule 13a-14(a) Filed herewith
32.1 Certification of C.E.O. pursuant to Rule Filed herewith
13a-14(b) and 18 U.S.C. Section 1350
32.2 Certification of C.F.O. pursuant to Rule 13a-14(b) Filed herewith
and 18 U.S.C. Section 1350

* Management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

BIOPHAN TECHNOLOGIES, INC.

By: \s\ Michael L. Weiner
-----------------------------------
Name: Michael L. Weiner
Title: President, CEO and Director

Dated: May 15, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

\s\ Michael L. Weiner President, CEO and Director May 15, 2006
------------------------ (Principal Executive Officer)
Michael L. Weiner

\s\ Darryl L. Canfield Vice President, Secretary, May 15, 2006
------------------------ Treasurer and CFO
Darryl L. Canfield (Principal Financial Officer
and Principal Accounting Officer)

\s\ Guenter H. Jaensch Chairman May 15, 2006
------------------------
Guenter H. Jaensch

\s\ Ross B. Kenzie Director May 15, 2006
------------------------
Ross B. Kenzie

\s\ Steven Katz Director May 15, 2006
------------------------
Steven Katz

\s\ Robert S. Bramson Director May 15, 2006
------------------------
Robert S. Bramson

\s\ Michael Friebe Director May 15, 2006
------------------------
Michael Friebe

\s\ Theodore A. Greenberg Director May 15, 2006
------------------------
Theodore A. Greenberg