SB-2

As filed with the Securities and Exchange Commission on March 1, 2007 Registration No. 333-                

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

POLYGENETICS INTERNATIONAL INC.

(Name of small business issuer in its charter)

CALIFORNIA (State or jurisdiction of incorporation or organization) 6719 (Primary Standard Industrial Classification Code Number) 20-4428326 (I.R.S. Employer Identification No.)

15143 Kennedy Road, Los Gatos, CA 95032

(Address and telephone number of principal executive offices)

15143 Kennedy Road, Los Gatos, CA 95032

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

Paracorp Incorporated

640 Bercut Drive, Suite A, Sacramento CA 95814

Telephone: 888-972-7273

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

With Copies to:

Lawler & Associates

11622 El Camino Real, Suite 100, San Diego, CA

Telephone: 951-506-8888      Facsimile: 951 506-8877

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

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

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

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

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

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities To Be Registered	Amount To Be Registered	Proposed Maximum Offering Price Per Unit	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee(1)
Common Stock	500,000	$4.00	$2,000,000.00	$214.00

(1)

Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(o) under the Securities Act.

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

Subject to Completion

Prospectus

Polygenetics International Inc.

500,000 Shares of

Common Stock

This is a public Offering of 500,000 shares of common stock, $0.001 par value, of Polygenetics International Inc., a California corporation, at a price of $4.00 per share.

This Offering involves a high degree of risk; see "RISK FACTORS" beginning on page 5 to read about factors you should consider before buying shares of the common stock.

These securities have not been approved or disapproved by the Securities and Exchange Commission (the “SEC”) or any state or provincial securities commission, nor has the SEC or any state or provincial securities commission passed upon the accuracy or adequacy of this prospectus.  Any representation to the contrary is a criminal offense.

We have elected to make this public offering of securities to raise the funds that are necessary to commence the expansion of our present operations.  Our decision to finance our expanded operations through this public offering is based on a presumption that we will be more successful by offering securities under an effective registration statement than through a private offering of equity or through debt financing. Following the effective date of the registration statement on Form SB-2 in which this prospectus is included becoming effective, we intend to have an application filed on our behalf by a market maker for approval of our common stock for quotation on the Over-the Counter / Bulletin Board quotation system.

Our common stock is presently not listed on any national securities exchange or the Nasdaq Stock Market.

The Offering:

500,000 Shares Offered	Price Per Share	Maximum Offering Amount
Public Price	$4.00	$2,000,000
Underwriting Discounts and Commissions	$ 0.00	$  0
Total	$4.00	$2,000,000

This is a best efforts public offering, with no minimum offering requirement.  

1. Polygenetics International Inc. is not using an underwriter for this Offering.

2. All proceeds from this Offering shall be placed in a trust account until the earlier of (a) the closing of this Offering and (b) receipt of the aggregate amount of $1,000,000 of subscription proceeds is received from this Offering, at which time all proceeds will be released and available to Polygenetics International Inc. for its use.

3. The closing date for this Offering is

, 2007.

The information in this prospectus is not complete and may be changed.  Polygenetics International Inc. may not sell these securities until the registration statement relating to these securities which has been filed with the Securities and Exchange Commission is effective.  This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

The date of this Prospectus is ________, 2007

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TABLE OF CONTENTS

Item No.	Item in Form SB-2 Prospectus Caption	Page No.
1	Front of Registration Statement and Outside Front Cover Page of Prospectus
2	Prospectus Cover Page	2
3	Summary Information and Risk Factors	4
4	Use of Proceeds	9
5	Determination of Offering Price	11
6	Dilution	11
7	Selling Security Holders	12
8	Plan of Distribution	12
9	Legal Proceedings	13
10	Directors, Executive Officers, Promoters and Control Persons	13
11	Security Ownership of Certain Beneficial Owners and Management	15
12	Description of Securities	16
13	Interest of Named Experts and Counsel	16
14	Disclosure of Commission Position on Indemnification for Securities Act Liabilities	16
15	Organization within Last Five Years	17
16	Description of Business	17
17	Management’s Discussion and Analysis or Plan of Operation	28
18	Description of Property	30
19	Certain Relationships and Related Transactions	31
20	Market for Common Equity and Related Stockholder Matters	31
21	Executive Compensation	33
22	Financial Statements	33
23	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	33

Securities offered through this prospectus will not be sold through dealers, but will be sold on a direct participation basis only.

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Item 3.  Summary Information and Risk Factors

The Company

Polygenetics International Inc. (referred to in this prospectus as “Poly International”, “us”, “we” and “our”) was incorporated on July 8, 2005, in the State of California. We are a California corporation that was formed for the purpose of acquiring a control position in Polygenetics, Inc., a California corporation ("Polygenetics"). Effective September 1, 2005, Poly International entered into an Acquisition Agreement with certain of the shareholders of Polygenetics whereby it was agreed that certain of the issued and outstanding shares of Polygenetics representing approximately 55% of the total issued and outstanding shares of Polygenetics would be acquired by Poly International in exchange for shares of Poly International’s common stock, at a ratio of 3 shares of Poly International’s common stock for every 2 shares of Polygenetics. This resulted in the issuance of 2,700,000 shares o f Poly International’s common stock to the shareholders of Polygenetics that entered into the Acquisition Agreement. This transaction was closed and consummated on September 5, 2005. Polygenetics was organized to develop and commercially exploit certain porous polymer technology in the biomedical field.

Our principal executive offices are located at 15143 Kennedy Road Los Gatos, CA 95032. Our telephone number is (888) 211-7181. All of our operations are conducted through our 55% owned subsidiary, Polygenetics, whose principal executive offices are also located at 15143 Kennedy Road Los Gatos, CA 95032, and its telephone number is (408) 356-1815.  Polygenetics is a California corporation founded on August 3, 1993 as Biopore Corporation. On November 19, 2002, Polygenetics changed its name from Biopore Corporation to Polygenetics, Inc.   

Polygenetics’ technology has its origins in a polymer research program conducted by Unilever Plc. (“Unilever”) in the 1980s. In 1993, Sunstorm Research Corporation (“Sunstorm”) obtained a license (signed August 18, 1993) to the eleven patents and know-how that resulted from Unilever’s polymer research program. Sunstorm is a California corporation founded in 1991 and controlled and wholly owned by Poly International’s President, James R. Benson, Ph.D. This license was assigned by Sunstorm to Polygenetics on August 27, 1993, which then had the legal name of Biopore Corporation. Dr. Benson formed Biopore Corporation to develop this technology in the industrial and consumer products areas. Biopore’s developmental efforts resulted in seven additional US patents, 2 European PCT applications granted, one Australian patent granted, and two Japanese patent applications pending.   ; 

Despite the time and more than $2,000,000 invested in technology research and development, industrial and commercial  product development based on the Unilever technology and marketing of such products prior to 2000, Biopore’s marketing efforts were not successful enough to warrant continuing in the industrial and consumer fields.  Accordingly, Dr. Benson and Biopore Corporation’s Board of Directors began in 2000 to look for new ways to realize the potential of the porous polymer technology it has developed.  They recognized that the biomedical and biotechnology fields, given their high margins and visibility to the investor community, offered the best opportunity to further develop and commercially exploit the spherical porous polymer developed by Biopore Corporation.  In 2002, Biopore changed its legal name to Polygenetics, Inc. to emphasize its focus solely on t hese fields.

During this transition, Sunstorm acquired title to all Polygenetics’ patents to satisfy the significant indebtedness of Polygenetics to Dr. Benson for legal fees paid on behalf of Biopore in a legal action brought by a former customer against Biopore before it changed its name to Polygenetics.  The action was settled in favor of Polygenetics after the court ruled against the customer on a summary judgment motion it brought.  Dr. Benson cancelled the debt in consideration for Biopore’s assignment of the patents to Sunstorm. Sunstorm licensed back to Biopore, on a royalty free basis, rights under those patents in the biomedical and biotechnology fields, giving Biopore the exclusive rights (as related to Dr. Benson and Sunstorm) to commercially exploit the patents and to sublicense the patents. Sunstorm retained the rights to pursue industrial and consumer applications abandoned by Biopore; however, Sunstorm has an obligation to pay royalties to Biopore for any proceeds realized from its commercial exploitation or licensing of the patents in these fields. All investment in Polygenetics is to be used to fund efforts in biomedical areas and no investment funds will be used in industrial and consumer areas.

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We are a holding company and Polygenetics is our only subsidiary. All of the operations are carried on by Polygenetics.

Neither Poly International nor Polygenetics has ever declared bankruptcy, has ever been in receivership, and has never, in the past five years  been involved in any legal actions or proceedings.

Aside from the operations of Polygenetics, we have not had any operations. Aside from the assets of Polygenetics, we have no additional assets. While Polygenetics does generate revenues at this time, further funds are required to fund the additional planned operations of Polygenetics, as presented in this document, so as to further increase business opportunities which we expect to increase Polygenetics’ revenues.   We will need to raise funds from this Offering to execute the business plan described below.

Summary of Financial Information

All of the financial information in this prospectus has been stated in USD.

The financial information provided below reflects the consolidated financial statements of Poly International and Polygenetics.

Summary Financial Information for the fiscal years ending December 31, 2005 and 2004 and the nine month period ending September 30, 2006.

	December 31, 2004	December 31, 2005	September 30, 2006
Current Assets	$623,011	$357,024	$117,045
Current Liabilities	$222,754	$329,804	$320,977
Shareholders’ Equity (Deficit)	$557,119	$17,701	$(130,840)
Revenue	$672,492	$366,747	$336,642
Net Income (Loss)	$230,622	$(218,495)	($243,010)

We and our subsidiary presently have limited operations and limited assets.  As at September 30, 2006, our accumulated deficit was $130,840.  We anticipate that we will operate in a deficit position and continue to sustain net losses for the foreseeable future while we expand our operations.

The Offering

Common Shares Outstanding Before This Offering	6,853,172
Maximum Shares Being Offered	500,000
Maximum Common Shares Outstanding After This Offering	7,353,172

We are authorized to issue 100,000,000 shares of common stock.  Current shareholders of Poly International collectively own 6,853,172 shares of common stock, which represents all of our issued and outstanding shares.

This Offering consists of 500,000 shares of Poly International common stock (the “Offering”). The Offering price is $4.00 per share.  No officers, directors or significant investors own any of the shares being offered.

There is currently no public market for the common stock of Poly International as it is presently not traded on any market or securities exchange. 

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Risk Factors

The securities offered hereby are highly speculative and should be purchased only by persons who can afford to lose their entire investment in Poly International. Each prospective investor should carefully consider the following risk factors, as well as all other information set forth elsewhere in this prospectus, before purchasing any of the shares of our common stock.

Uncertainties and Risk Factors Generally Relating To Our Business

If we do not raise sufficient additional capital to fully fund our operational requirements, we will be forced to reduce or even suspend our operations, and may even be forced to liquidate our assets and wind-up and dissolve Poly International.

Our limited operating history could adversely affect our business

We are subject to all the risks and issues inherent in the establishment and expansion of a new business enterprise. In general, development stage businesses are subject to levels of risk that are often greater than those encountered by companies with established operations and relationships.  Startups often require significant capital from sources other than operations.  The management and employees of a startup business shoulder the burdens of the business operations and a workload associated with company growth and capitalization that is disproportionately greater than that for an established business. Our relatively limited operating history makes it difficult, if not impossible, to predict future operating results.  We cannot give any assurance that we will successfully address these risks.  Our failure to successfully address these risks could have a material, adverse effect on our business, financial condition and res ults of operations.

We currently have only one major customer

We currently derive most of our operating income from royalties received from a single customer (see Items 15 and 16, Recent Milestones, below).  If the amount of these royalties should dramatically fall due to reduced sales of royalty-bearing products or any other reason before additional customers license our technology, our need for capital would increase substantially.  We cannot be sure we could find an alternative source of capital.  Our failure to do so successfully or a decline in royalties with any replacement by royalties paid by new licensees could have a material, adverse effect on our business, financial condition and results of operations.

Marketplace

There can be no guaranty that Polygenetics will find additional licensees that will execute agreements of the kind and value already achieved with Polygenetics’ present licensee. It is also possible Polygenetics will enter into licensing agreements with licensees that do not succeed in selling developed products to the extent necessary to support Polygenetics. It is possible Polygenetics will enter into development agreements with other corporations, but the programs will fail to produce marketable products. It is also possible that some corporations under development contracts with Polygenetics will elect not to proceed with product sales, even though the development program succeeds.  

In addition, other technologies may emerge concurrently with or subsequent to Polygenetics’ own technology that may have more attractive features or that are available at lower cost.

Limitations on IP

The license from Unilever is world-wide, but non-exclusive. An exclusive license was not available because Unilever issued other non-exclusive licenses prior to the license originally granted to Sunstorm. Consequently, it is possible that another Unilever licensee could develop other HIPE (High Internal Phase Emulsion) polymers that may compete with Polygenetics’ products. Since Polygenetics’ patents preclude anyone else from making spherical-shaped particles utilizing a different technology, such products would have to either be much larger than the Polygenetics’ products or clearly non-spherical. In either case Polygenetics’ management is presently unconcerned about this type of competition.  

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The license from Unilever reserves certain applications of the licensed technology or patents for use by Unilever. In particular, Unilever reserves use of its polymer for immobilized enzymes, cosmetics, detergents, cell culture applications and peptide synthesis. Consequently, there remains a possibility that certain applications will not be made available to Polygenetics via the license from Unilever. However, Unilever associated risks are not significant since the principal Unilever patents covering its reserved applications expired by the end of 2005. Those four patents of Unilever that remain in force and are covered by the license and Unilever’s reservation are not considered by management to involve substantial risk to Polygenetics’ development and marketing efforts.  

While we have received no notice or have any substantial reason to believe that any of our technology, infringes the intellectual propertyof any third party, or the patents on which our technology is based, are invalid, such claims cannot be ruled out in the future.  Such claims are relatively common in our industry as they are in most sectors where technology is an important part of the business being conducted.  Defending such claims can be very expensive and detract from the efforts of our personnel to conduct business even if the claims are without merit or our position is ultimately upheld.

Commercial Development

Investors should recognize that development programs are an effort to produce new materials. With any such program, many factors contribute to success or failure and no one can predict the outcome with certainty. Investors are also warned that the plans for further commercial exploitation of spherical products, including licensing and additional product development, are not yet definitive, may not succeed and, even if they do, may involve more expense, risk and lower returns than are presently contemplated.  

Competition

Competition for Polygenetics’ products and technologies will come from companies that develop and/or manufacture competitive materials such as conventional porous polymers, gels and bioerodible polymers, as well as from companies that develop and/or manufacture different types of technologies which may be usable in each of the targeted market areas. Many of these companies may have substantially more financial and other resources and expertise compared to Polygenetics and may be able to develop products and technologies that remove the need for Polygenetics’ product offerings.

Need for Additional Capitalization

Although Poly International believes it will be able to accomplish its goals for its subsidiary Polygenetics over the next few years with the funding currently being raised, or be able to raise additional funding if needed, it is possible that funding may run out sooner than anticipated and Polygenetics cannot complete its work as planned. In addition, if Poly International needs to raise additional funds in the future, although it intends to do so at a higher valuation, it is possible there may be significant dilution for our shareholders.

In addition to the risks associated with Polygenetics’ specific development plans, there are a number of other risks associated with investment in Poly International that are outlined below.  

Larger or potentially much better funded companies in either the chemical field or the biomedical and biochemical fields which Polygenetics intends to enter will develop products that make the success of Polygenetics’ products much less likely or impossible, either because the products have better qualities than Polygenetics’ products or are available at significantly lower costs.  

Other new companies or large or potentially much better funded companies could develop technologies that make Polygenetics’ technology inadequate or unacceptable by comparison.  

Our President, Dr. James Benson, who is the sole shareholder of Sunstorm Research Corporation may have a conflict of interest due to certain transactions between our Company and Sunstorm

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Dr. Benson is the President and controlling shareholder of our Company, he is also the sole shareholder of Sunstorm Research Corporation.  Since Sunstorm owns all of the patents that are licensed to Polygenetics, covering Polygenetics’ technology, should a conflict arise between the Company and Sunstorm in the interpretation of that license, we cannot be assured that Dr. Benson will act in the best interests of our Company.

We also cannot be assured that the terms of our licenses from Sunstorm are as favorable as they would be to a third party.

Further, Sunstorm leases office and laboratory space from Dr. Benson and then Sunstorm subleases office and laboratory space to Polygenetics, Inc.   We cannot be assured that the terms of the sublease are as favorable as they might be should we lease other space.  If a conflict should occur between Sunstorm and Polygenetics, Inc. over use of the premises or if a conflict occurs in regards to the lease or sublease, Dr. Benson may not act in the best interests of our Company.

 Dr. Benson may also have difficultly allocating his available time between Sunstorm and Polygenetics.

There is a possibility that Sunstorm will gain further intellectual property as a result of Dr. Benson’s work with Polygenetics.

Uncertainties and Risks Relating To Shares

There is no public market for our Shares.

There is no public market for our common stock, and we cannot give you any assurance that any public trading market for our common stock will ever develop or be sustained.

We intend to file a registration statement with the Securities and Exchange Commission to register the Corporation as a public reporting company. Following the effective date of such registration statement, we intend to arrange for a market maker to file for us an application for our common stock to be traded on the Over-The-Counter/Bulletin Board (OTC/BB). There is no assurance that approval for such application will be obtained or when or that if approval is obtained that any public trading market will be established.

If we are able to be approved for quotation on the OTC/BB, we anticipate that the market price for our common stock could be very volatile and subject to significant price and volume fluctuations in response to a variety of external and internal factors. This is especially true with respect to emerging companies such as ours.  Examples of external factors, which can generally be described as factors that are unrelated to the operating performance or financial condition of any particular company, include changes in interest rates and worldwide economic and market conditions, as well as changes in industry conditions, such as publicly available information regarding various medical conditions and treatments, regulatory and environment rules, and announcements of technology innovations or new products by other companies.  Examples of internal factors, which can generally be described as factors that are directly related to our consolidat ed financial condition or results of operations, would include release of reports by securities analysts and announcements we may make from time-to-time relative to our operating performance, advances in technology or other business developments.

Because we are an enterprise with a limited operating history and no profits to date, the market price for our shares will be more volatile than that of a seasoned issuer.  Changes in the market price of our shares, for example, may have no connection with our operating results or prospects.  No predictions or projections can be made as to what the prevailing market price for our shares will be at any time, or as to what effect, if any, that the sale of shares or the availability of Shares for sale at any time will have on the prevailing market price.  

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Sales of substantial amounts of our shares on the public market, or the perception that substantial sales could occur, could adversely affect the market prices for those shares and also, to the extent the market price for our shares is reduced, adversely impact our ability to raise additional capital in the equity markets.  

You will be subject to the penny stock rules to the extent our stock price is less than $5.00

Since our shares are not listed on a national stock exchange or quoted on the Nasdaq Market within the United States, trading in our shares on the OTC/BB will be subject, to the extent the market price for our shares is less than $5.00 per share, to a number of regulations known as the "penny stock rules".  The penny stock rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC, to provide the customer with additional information including current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the customer's account, and to make a special written determination that the penny stock is a suitable investment for the Subscriber and receive the Subscriber’s written agreement to the transaction.  To the extent these requi rements may be applicable they will reduce the level of trading activity in the secondary market for our shares and may severely and adversely affect the ability of broker-dealers to sell our shares.

You should not expect to receive dividends

Neither we nor our subsidiary, Polygenetics, have ever paid any cash dividends on any shares of our capital stock, and we do not anticipate that we will pay any dividends in the foreseeable future.  Our current business plan is to retain any future earnings to finance the expansion of our business.  Any future determination to pay cash dividends will be at the discretion of our board of directors, and will be dependent upon our consolidated financial condition, results of operations, capital requirements and other factors as our board of directors may deem relevant at that time.

You should not expect to receive a liquidation distribution

If we were to wind-up or dissolve Poly International and liquidate and distribute our assets, our shareholders would share ratably in our assets only after we satisfy any amounts we would owe to our creditors.  If our liquidation or dissolution were attributable to our inability to profitably operate our business, then it is likely that we would have material liabilities at the time of liquidation or dissolution.  Accordingly, we cannot give you any assurance that sufficient assets will remain available after the payment of our creditors to enable you to receive any liquidation distribution with respect to any Shares you may hold. Moreover, the holders of the Corporation’s subsidiary’s Preferred Stock are entitled to receive a preferential distribution on liquidation equal to their original investment further making a distribution to the holders of Common Stock of the Corporation unlikely.

Our right to issue additional shares of stock at any time could have an adverse effect on your proportionate ownership and voting rights

We are authorized under our Articles to issue up to 100,000,000shares. Subject to compliance with applicable corporate and securities laws, we may issue these shares under such circumstances and in such manner and at such times, prices, amounts and purposes as our board of directors may, in their discretion, determine to be necessary and appropriate.  Your proportionate ownership and voting rights as a common shareholder could be adversely affected by the issuance of additional Shares, including a substantial dilution in your net tangible book value per share.

Item 4. Use of Proceeds

We intend to raise a maximum amount of $2,000,000 from the sale of 500,000 shares of common stock at $4.00 per share. This Offering has no minimum amount. All funds received from this Offering will be held in trust until the closing or until $1 million is raised from this Offering.   We have no intention to return any proceeds to investors.

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The proceeds of this Offering are expected to be sufficient for Poly International and Polygenetics to accomplish all of its business objectives over the next twelve (12) months, but this cannot be guaranteed.  We do not intend to spend all proceeds from the Offering during the twelve months following receipt of the proceeds. At some point in the future it is likely we will need more capital. There are no assurances that additional financing will be available.

The following table indicates how we intend to use these proceeds of this Offering.

Proceeds from Sale of Common Stock	$2,000,000
Expenses Costs of the Offering Consulting Working Capital – Poly Inc. Working Capital - Polygenetics Legal and Accounting Marketing and Promotion – Polygenetics R&D Expenses Capital Equipment	$25,000 $65,000 $20,000 $1,200,000 $130,000 $150,000 $210,000 $200,000
Total	$2,000,000

The above expenditure items are defined as follows:

Costs of the Offering:  We will be required to pay the costs of this offering, estimated to be $25,000 for consulting fees in preparing this prospectus from the funds raised under this Offering.

Consulting. Some consulting costs associated with hiring chemists primarily on a project basis for certain R&D projects such as development of Polygenetics’ polymers or customer proof of concept and development work are anticipated.

Working Capital:  This expense refers to working capital to be used for continuing operations.

Legal and Accounting: This expenditure item refers to the normal legal and accounting costs associated with maintaining a publicly traded company. It will also cover the cost of preparation of appropriate agreements and documents connected to our licensing program.

Marketing and Promotion: This item refers to the cost of a basic marketing campaign and efforts expended to acquire new potential licensees.  The bulk of these costs involve travel and accommodation expenses plus costs of attending various biomedical and pharmaceutical conferences.

R&D Expenses. This item represents addition of new personnel to carry out new polymer development projects and research into possible new applications of existing polymer materials.

Capital Equipment. This item represents acquisition of capital equipment necessary to carry out the R&D program described above. This equipment consists of research and lab equipment to produce polymers in research quantities and perform various tests on the polymers.

There is no assurance that Poly, Inc. will raise the full $2,000,000 as anticipated. The following is the break down of how management intends to use the proceeds if only 50 percent, 75 percent, or 100 percent of the total Offering amount is raised:

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Expenditure Item	50%	75%	100%
	$	$	$
Offering Costs	25,000	25,000	25,000
Consulting	35,000	45,000	65,000
Legal and Accounting	90,000	100,000	130,000
Marketing and Promotion	60,000	90,000	150,000
R&D Expenses	140,000	140,000	210,000
Capital Equipment	100,000	100,000	200,000
Working Capital- Polygenetics	530,000	980,000	1,200,000
Working Capital – Poly, Inc.	20,000	20,000	20,000
TOTAL	1,000,000	1,500,000	2,000,000

In the event that only 50% of the Offering amount is raised, we would continue with our development plans, reducing capital equipment costs, R&D expenses, consulting, some legal and some marketing costs.

If 75% of the total Offering amount is raised, we would continue with our development plans, reducing capital equipment costs, R&D expenses, consulting, some legal and some marketing costs.

If we do not raise any funds under this Offering then we will have the additional expenses of $25,000 for the costs of this Offering which will be additional debt and will be required to be paid from any available operating capital.  We may not have sufficient operating capital to pay this debt on a timely basis.  

Item 5. Determination of Offering Price

There is no established market for our stock. Although we attempted to establish a good faith value for our Company if the offering were successful and we became a public company, the offering price for shares sold pursuant to this Offering was arbitrarily set at $4.00 per share. Factors considered in determining the offering price included maximizing the amount of money that could be raised while minimizing the amount of dilution to the existing shareholders. Of the 5,547,603 shares of common stock held by our officers and directors, 2,700,000 shares were sold for total consideration of $2,700, and the remaining 4,153,172 shares were issued to acquire the 55% of the issued and outstanding shares of our subsidiary, Polygenetics.  All of the shares of Poly International that are currently outstanding are restricted. The additional factors that were included in determining the sales price are the lack of liquidity since there is no present m arket for our stock and the high level of risk considering our lack of profitable operating history.

Item 6. Dilution

“Net tangible book value” is the amount that results from subtracting the total liabilities and intangible assets from the total assets of an entity.  Dilution occurs because we determined the Offering price based on factors other than those used in computing book value of our stock.  Dilution exists because the book value of shares held by existing stockholders is lower than the Offering price offered to new investors.

We are offering shares of our common stock for $4.00 per share through this Offering.  Our directors and officers and affiliates purchased 2,700,000 shares of our common stock for $0.001 per share and we issued a total of 4,153,187 shares of our common stock at a deemed price of $0.001 per share for the acquisition of 55% of the total issued and outstanding shares of Poly, Inc. 

As at September 30, 2006, our consolidated net tangible book value was ($0.019) per common share.  If we are successful in selling all of the offered shares at the public offering price, our pro forma net tangible book value of Poly International would be $1,844,160 after deducting remaining Offering costs of $25,000, or approximately $0.251 per share, which would represent an immediate increase of $0.270 in net tangible book value per share and $3.75 or 94% per share dilution to new investors, assuming all the shares are sold at the Offering price of $4.00 per share.

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Following is a table detailing dilution to investors if 50%, 75%, or 100% of the Offering is sold.  Table assumes net offering costs of $25,000 regardless of percentage of Offering sold.

	50%	75%	100%
Net Tangible Book Value Per Share Prior to Stock Sale	(0.019)	(0.019)	(0.019)
Net Tangible Book Value Per Share After Stock Sale	0.119	0.186	0.251
Increase (Decrease) in Net Book Value Per Share Due to Stock Sale	0.138	0.205	0.270
Immediate Dilution (subscription price of $4.00 less net tangible book value per share)	3.862	3.795	3.73

Item 7. Selling Security Holders

Our current shareholders are not selling any of the shares being offered in this prospectus.

Item 8. Plan of Distribution

Upon effectiveness of the registration statement, of which this prospectus is a part, we will conduct the sale of shares we are offering on a self-underwritten, best–efforts basis. There will be no underwriters used, no dealer's commissions, no finder's fees, and no passive market making. The officers and directors of Poly International, Mr. James Benson, Mr. Kent Anderson, and Mr. Marco Bastidas will sell the securities on behalf of Poly International in this Offering. Mr. James Benson, Mr. Kent Anderson,  and Mr. Marco Bastidas are not subject to a statutory disqualification as such term is defined in Section (a)(39) of the Securities Exchange Act of 1934. They will rely on Rule 3a4-1 to sell Poly International’s securities without registering as broker-dealers. They are serving as officers and directors and primarily perform substantial duties for or on behalf of Poly International otherwise than i n connection with transactions in securities and will continue to do so at the end of the Offering, and have not been a broker or dealer, or an associated person of a broker or dealer, within the preceding 12 months, and have not nor will not participate in the sale of securities for any issuer more than once every twelve months. Our officers and directors will not receive commissions or other remuneration in connection with their participation in this Offering based either directly or indirectly on transactions in securities. Our officers and directors intend to personally contact their friends, family members and business acquaintances in attempting to sell the shares offered hereunder. Poly International will not be conducting a mass-mailing connection with this offering, nor will it offer shares to potential customers.  Poly International may also employ the services of an agent or intermediary to introduce Poly International to prospective subscribers to the Offering. In such event, Poly Int ernational is prepared to pay commissions or finder’s fees of up to 10% of the proceeds from the Offering.  In the event that Poly International does employ the services of an agent or intermediary, and such agent or intermediary is acting as an underwriter, Poly International will file a post effective amendment to name such underwriter, disclose the material terms of the underwriting, disclose the material terms of such underwriting agreement and file such as an exhibit.

We plan to offer our shares to the public, at a price of $4.00 per share, with no minimum offering amount. However, until we receive $1 million from this Offering, all proceeds will be held in trust with our U.S. securities counsel, Lawler & Associates, a professional law corporation. The officers, directors and existing shareholders and affiliates will not purchase any shares under this Offering. We plan to keep the Offering open until we sell all of the shares registered, or July 1, 2008 which ever occurs first, but reserve the right to terminate the offering sooner if we deem it appropriate.  There can be no assurance that we will sell all or any of the shares offered.  We have no arrangement or guarantee that we will sell any shares.  All subscription checks will be made payable to Poly International or as we may otherwise direct.

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Item 9. Legal Proceedings

Neither Poly International nor its subsidiary, Polygenetics, is a party to any pending legal proceedings, nor is Poly International aware of any governmental authority contemplating any legal proceeding against it.

Item 10. Directors, Executive Officers, Promoters and Control Persons

James Benson, Ph.D. – Chairman, CEO, President and member of the Board of Directors, age 64

Dr. James R. Benson is the founder, Chairman and CEO of Polygenetics, Inc. and has been since its founding in 1993, and has also served as President since November 2002. He is also the CEO and President of Poly International. His background consists of more than thirty years of experience in advanced technology businesses including developing, manufacturing and marketing porous polymer materials. He has worked in strategic partnerships with major corporations and is a recognized expert in advanced polymers and biomedical matters. He occasionally provides expert witness services for high profile patent infringement, trade secret and product liability cases.  

Dr. Benson was a co-founder of NASDAQ listed Dionex Chemical Corporation; a company involved in spherical polymer development, and eventually became its President. After leaving Dionex, he founded Interaction Chemicals Inc. for the purpose of developing and marketing advanced spherical polymers for chromatography applications. He later sold Interaction to E. Merck (Darmstadt). He then founded Sunstorm Research Corporation, a company involved in consulting and in licensing and technology transfer of advanced materials. Through Sunstorm, he negotiated a license for polymer technology from Unilever Plc. that ultimately led to the birth of Polygenetics. Dr. Benson is supported by outside consultants and advisors who are leaders in the medical and pharmaceutical fields and have significant experience in management of biomedical and high technology companies. He obtained his Ph.D. from Stanford University.

Kent P. Anderson, Ph.D. – CFO and member of the Board of Directors, age 64

Dr. Anderson has been the CFO and a director of Poly International since its founding; he is also the CFO and a director of Polygenetics, Inc. having been first elected in April 2004. Dr. Anderson is a former vice president and is currently special consultant to National Economic Research Associates, Inc. (NERA). He retired as Vice President of NERA and became a consultant to NERA in 2001. He has worked on a variety of economic matters throughout his career. Dr. Anderson provided expert advice and/or testimony on economic damages in a variety of proceedings, including those having to do with antitrust liability, patent infringement, breach of contract and lender liability. He also analyzed the economics of such diverse industries as major league baseball, yellow pages advertising, the postal service, computerized airline reservation systems, exotic mushrooms, pharmaceuticals, and biotechnology. He obtained his Ph.D. in economics from MIT.

Marco Bastidas – Secretary and member of the Board of Directors, age 42

Mr. Bastidas has served as Poly International’s Secretary and a member of the board of directors since its inception. Mr. Bastidas has been a self-employed businessman since 1994.  From 1994 to present, Mr. Bastidas has been involved in several business ventures, including the development of companies to initial public offering.  Mr. Bastidas is the sole shareholder and director of 874226 Alberta Ltd., dba Western Translation Services, a private company in the business of providing translation services.  

Mr. Bastidas obtained his Bachelors of Commerce (Honours) degree from the University of Ottawa in 1990, with a specialization in marketing and international business.

Jacqueline Danforth– member of the Board of Directors, age 34

Ms. Danforth has been a member of the Board of Directors since September 1, 2005. She is the CEO and President of FACT Corporation, a company which trades on the over-the-counter bulletin board. Ms. Danforth has been a director and Secretary-Treasurer of Food and Culinary Technology Group Inc., a subsidiary of FACT Corporation since November 7, 2001, and President since July 22, 2002.  Ms. Danforth

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was also named Secretary-Treasurer and appointed to the Board of Directors of FACT Products Inc. on November 5, 2001, and has been President and a director of Wall Street Investment Corp since November 15, 2001.  Ms. Danforth became the President, Secretary and Treasurer, as well as a director of Wall Street Real Estate Ltd. upon its incorporation on July 23, 2002. Over the past ten years, Ms. Danforth has worked for both private and publicly traded companies, providing management and direction. She has extensive experience in start up operations, and her range of experience with publicly traded corporations listed on both Canadian and US exchanges includes all aspects of public reporting, corporate finance and shareholder communications. She has worked in a broad range of industry sectors including natural resources and technology. Ms. Danforth continues to provide consulting services to other private and public corporations on a limited basis, and sits as a director on several private and public boards, such as Grand Cru Resources Corp and Templar Resources Corporation both CDN public reporting companies. She is the President and sole director of Argonaut Management Group, Inc., her private consulting company.

Nai-Hong Li, Ph.D. - Director of Research – Polygenetics, Inc., age 67

Dr. Li, co-founder of Polygenetics, Inc. and has been a full time employee of Polygenetics, Inc. since June 2005. Prior to that time he was a part time consultant to Polygenetics since its founding and a Research Associate with the Department of Chemistry of the University of Alberta. He is primarily responsible for advancing Unilever’s underlying technology such that spheres can be economically manufactured having the unique morphology that characterizes Cavilink™ microspheres. Dr. Li is co-inventor on several Cavilink™ patents and continues to advance Polygenetics’ polymer technology. He completed his Ph.D. work at Nankai University in Tianjin, China, specializing in polymers, their structure and chemistry.

William Landgraf, Ph.D. – Consultant –Polygenetics, Inc., age 76

Dr. Landgraf has been self employed as a consultant for over five years and assisted Polygenetics, Inc. as a consultant during that time. He worked to advance Polygenetics’ hydrophilic polymer technology and was principally responsible for developing and advancing the work on zero-order release of drugs utilizing Polygenetics’ Cavilink™ microspheres. He co-authored a monograph describing this work that was published in Drug Delivery Technology (2003, 2005). Dr. Landgraf has worked for Dey Laboratories and Syntex and has experience in obtaining FDA approval of drugs and medical devices. He obtained his Ph.D. in physical organic chemistry from Stanford University.

Robert A. Hiatt, M.D., Ph.D. – Board of Directors- Polygenetics Inc., age 64

Dr. Hiatt is currently Director of Population Sciences at the University of California San Francisco Cancer Center (UCSF); he was Professor of Epidemiology at the UCSF School of Medicine from 1998-2003 until being appointed to his present position. Prior to accepting this position, Dr. Hiatt was Deputy Director of Division of Cancer Control & Population Sciences, National Cancer Institute, NIH. Dr. Hiatt obtained his M.D. from the University of Michigan Medical School, a Masters in Public Health from UC Berkeley, and his Ph.D. from UC School of Public Health, Berkeley.  

Scientific Board of Advisors of Polygenetics, Inc.

Polygenetics has assembled a group of scientific advisors to assist management in exploiting its technology and addressing new markets. The board contains Dr. James Thrall, Dr. Robert Hiatt and Dr. Gerald Masover, who have each served on the Board for over five years.

Dr. James Thrall obtained his B.S. and M.D. degrees from the University of Michigan and completed his medical residency at the Walter Reed Army Medical Center. He has been a professor at the University of Michigan and has served as a professorship at the Harvard Medical School since 1988. Dr. Thrall was also appointed Radiologist-in-Chief at the Massachusetts General Hospital in 1988, and chairs its International Medicine Committee. He has also cofounded two biomedical companies in partnership with the Massachusetts General Hospital.  

Dr. Robert Hiatt earned his B.A. and M.D. degrees at the University of Michigan and his MPH and Ph.D. degrees at the University of California, Berkeley. He is board certified in both internal and preventive

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medicine, has served as an Assistant Director at the Permanente Medical Group, Inc. and the Director of Prevention Sciences, Northern California Cancer Center. Dr. Hiatt currently holds the position of Director of Population Sciences at the UCSF Cancer Center, and Professor of Epidemiology at the UCSF School of Medicine.  

Dr. Gerald Masover worked as Quality Control Senior Microbiologist at Genentech, Inc. beginning in 1991. He is currently retired from Genentech, but works as consultant for that company. He obtained his Ph.D. from Stanford University School of Medicine. He is a registered pharmacist and has degrees in biology and pharmacy from the University of Illinois, Chicago. He has published extensively in the field of microbiology and is a renowned expert in mycoplasma, FDA regulated quality assurance and related microbiological manufacturing operations.

None of our executive officers or directors have been involved in any bankruptcy proceedings within the last five years, been convicted in or has pending any criminal proceeding, been subject to any order, judgment or decree enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity or been found to have violated any federal, state or provincial securities or commodities laws.

Audit Committee Financial Expert

We have not yet formed our audit committee and therefore we have not yet determined any financial expert.  We expect to form our audit committee immediately upon completion of our offering.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following is a table detailing the current shareholders of Poly International owning 5% or more of the common stock, and shares owned by Poly International’s directors and officers as of January 20, 2007:

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class(1)
Common	James R. Benson Director, CEO, President 15143 Kennedy Road Los Gatos, CA 95032	4,497,603 shares held directly	65.6%
Common	Marco Bastidas Director, Secretary 1832-19th Ave S.W., Calgary, Alberta T2T 0J6	1,050,000 shares held indirectly (2)	15.3%
Common	Kent P. Anderson Director, Chief Financial Officer 803 Greystone Place San Luis Obispo, CA 93401	0	0
	Jacqueline Danforth, Director 2102 18A Street SW Calgary, AB t2T 4W2	0	0
Common	Directors and officers as a group of four (4)	5,547,603 shares held	80.9%
Common	Nai-Hong Li 707 Continental Circle, Apartment 234 Mountain View, CA 94040	1,155,569 held directly	16.9%

(1)

The percentage of class is based on the total number of shares outstanding of 6,853,172.

⁽²⁾

These shares are held in the name of Metro Global Management Inc., a company of which Marco Bastidas is the sole shareholder.

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Item 12. Description of Securities

Common Stock

Our Articles of Incorporation authorize the issuance of 100,000,000 shares of common stock with $0.001 par value.  We are not authorized to issue any series or shares of preferred stock.

Common Stock

Each holder of our shares is entitled to one vote for each share owned of record on matters voted upon by stockholders. Holders of our common stock do not have cumulative voting rights. Under the California Corporations Code (the "Corporations Code"), a majority vote of outstanding shares is required to amend Poly International’s Articles and certain other actions, while a majority of shares voting at a meeting is required to approve corporate reorganizations and certain other transactions is required for all action to be taken by stockholders. Any director may be removed from office by the vote of the stockholders unless the votes cast against removal would have been sufficient to elect the director. If the Board of Directors were to declare a dividend out of funds legally available therefore, all of the outstanding shares of common stock would be entitled to receive such dividend.  We have never declared dividends and we do not intend to declare dividends in the foreseeable future.  If we were liquidated or dissolved, holders of shares of our common stock would be entitled to share ratably in assets remaining after satisfaction of our liabilities.   In the event of a liquidation, dissolution or winding-up of the Corporation, the holders of our shares are entitled to share equally and ratably in the assets of the Corporation, if any, remaining after the payment of all debts and liabilities of the Corporation, and payment of the liquidation preference of any outstanding preferred stock. The Shares have no preemptive rights and no redemption, sinking fund or conversion provisions.

Item 13. Interest of Named Experts and Counsel

Poly International has not hired or retained any experts or counsel on a contingent basis, who would receive a direct or indirect interest in Poly International or who is, or was, a promoter, underwriter, voting trustee, director, officer or employee, of Poly International.

Child, Van Wagoner and Bradshaw, PLLC of, Salt Lake City, Utah, have audited our financial statements for the years ended December 31, 2004 and December 31, 2005 and presented their audit report dated August 16, 2006 regarding such audit which is included with this prospectus with consent as experts in accounting and auditing.

W. Scott Lawler, Esq. whose offices are located at 11622 El Camino Real, Suite 100, San Diego, California, 92130 has issued an opinion on the validity of the shares offered by this prospectus, which has been filed as an exhibit to this prospectus with Mr. Lawler’s consent.

Item 14. Disclosure of Commission Position of Indemnification for Securities Liabilities

The California Corporations Code requires Poly International to indemnify officers and directors for any expenses incurred by any officer or director in connection with any actions or proceedings, whether civil, criminal, administrative, or investigative, brought against such officer or director because of his or her status as an officer or director, to the extent that the director or officer has been successful on the merits or otherwise in defense of the action or proceeding. The California Corporations Code permits a corporation to indemnify an officer or director, even in the absence of an agreement to do so, for expenses incurred in connection with any action or proceeding if such officer or director acted in good faith and in a manner in which he or she reasonably believed to be in or not opposed to the best interests of Poly International and such indemnification is authorized by the stockholders, by a quorum of disinterested directors, by independent legal counsel in a written opinion authorized by a majority vote of a quorum of directors consisting of disinterested directors, or by independent legal counsel in a written opinion if a quorum of disinterested directors cannot be obtained.

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The California Corporations Code prohibits indemnification of a director or officer if a final adjudication establishes that the officer's or director's acts or omissions involved intentional misconduct, fraud, or a knowing violation of the law and were material to the cause of action. Despite the foregoing limitations on indemnification, the California Corporations Code may permit an officer or director to apply to the court for approval of indemnification even if the officer or director is adjudged to have committed intentional misconduct, fraud, or a knowing violation of the law.

The California Corporations Code also provides that indemnification of directors is not permitted for the unlawful payment of distributions, except for those directors registering their dissent to the payment of the distribution.

According to Section 7 of Article IX of Poly International’s bylaws, Poly International is authorized to indemnify its officers and directors to the fullest extent authorized under California law subject to certain specified limitations.

Insofar as indemnification for liabilities arising under the Securities Act may be provided to directors, officers or persons controlling Poly International pursuant to the foregoing provisions, Poly International has been informed 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.

Items 15 and 16. Organization Within Last Five Years and Description of Business

BUSINESS DEVELOPMENT AND GENERAL DESCRIPTION

Company History

We are a California corporation that was formed for the purpose of acquiring a control position in Polygenetics, Inc., a California corporation ("Polygenetics").  Effective September 5, 2005, Poly International acquired approximately 55% of the total issued and outstanding shares of Polygenetics. Polygenetics was organized to develop and commercially exploit certain porous polymer chemistry in the biomedical and biotechnology fields.

Milestones

What Polygenetics must do and how it will be accomplished	Target completion date or, if not known, the number of months to complete	The cost of completion
Develop three new polymers	12 months	$   250,000
Prosecute two new patents	12 months	$     50,000
Engage three new development agreements	12 months	$     60,000
Establish partnership for development of new biomedical technology	12 months	$   150,000
Acquire capital equipment	3 months	$   100,000

New Polymers

The Company hopes to develop two and possibly three porous polymers with surface characteristics that differ from the surface characteristics of its current polymers.  These new polymers are being developed in anticipation of their usefulness in applications of potential customers, but not at the request of or for the benefit of any specific party.  The expenditures cited above cover basic research and development costs and directly related overhead.

New Patents

The Company expects to file applications for two and possibly three United States patents with claims covering the new characteristics of its porous polymers.  The expenditures cited above cover the anticipated legal fees for filing and prosecuting these patent applications.

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Developments Deals

The Company typically enters into relatively short term Proof of Concept Agreements with its customers to demonstrate that the Company’s polymers will, in general, be a suitable delivery agent for the customer’s product.  If these efforts are successful, the customer and the Company typically enter into a longer term Development Agreement to develop and refine a polymer to precisely suit the customer’s needs for a specific product.   The Company believes that over the next year, it will enter into three such development agreements with two customers now engaged in proof of concept transactions and with one or more new customers now being pursued.  The expenditures cited above cover the travel and other out of pocket expenses, as well as the legal expenses, associated with consummating these transactions.

Biomedical Partnership

The Company is in preliminary and confidential negotiations with a scientist affiliated with an academic institution to enter into a cooperative arrangement to develop the Company’s polymers for two specific biomedical applications.  The expenditures cited above cover the travel and other out of pocket expenses, as well as the legal expenses, associated with consummating these transactions and the basic research and development costs and directly related overhead that are estimated to be borne by the Company during the first year of this project.

New Equipment

The Company plans to purchase a pharmaceutical coating instrument, a microscope, a balance, a spectrophotometer, two vacuum ovens, a gas chromatograph, an automatic sampler, an extraction apparatus and miscellaneous and other analytical instruments.  These will be used in the Company’s research and development activities, in analyzing the polymers it develops and in producing laboratory and evaluation quantities of such polymers.  The expenditures cited above cover the cost of acquiring this equipment.  The Company plans to acquire all of this equipment shortly after the close of its offering under this prospectus.

None of the expenditure amounts in the “Milestones” table above includes basic overhead to keep the Companies going.

Recent Milestones

Polygenetics has successfully licensed its technology for an important medical application to a major biomedical corporation, Boston Scientific Corporation. Boston Scientific obtained its first FDA approval on the use of products it developed under Polygenetics’ intellectual property and has begun shipping those products to its customers. The products involve a new line of differentiated embolotherapy.Embolotherapy is a recently approved medical procedure that involves injection of porous polymer spheres into the vasculature surrounding non-metastatic tumors. These porous polymers block blood flow to the tumor, thereby depriving it of nutrients. The tumor succumbs and is eventually absorbed by the body. The procedure is minimally invasive and has proved effective in treating a variety of cancers. The second phase of the licensing agreement covers local delivery of therapeutic drugs utilizing Polygenetics ’ Cavilink™ technology, potentially revolutionizing embolotherapy applications. The licensee hopes to obtain its second FDA approval during 2007. Obtaining the first FDA approval was the first milestone under the license agreement, which triggered payments by Boston Scientific to Polygenetics as well as quarterly royalty payments and milestone payments. Polygenetics will receive additional milestone payments upon the second FDA approval as well as continued royalty payments on new product sales.

Applications / Products

Polygenetics is currently focused in two principal areas:  

.

• Proprietary drug delivery products

.

• Artificial organs

In addition, since there have been some encouraging results in the gene therapy market, the Company would consider further work in this area providing it finds an industrial partner.  

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Polygenetics’ porous polymers have demonstrated delivery of drugs with zero order kinetics in-vitro. This means that drugs released by Polygenetics’ Cavilink™ microcarriers will enter the bloodstream and remain at a constant level of concentration for an extended period. This contrasts with conventional release mechanisms that follow “first order release” wherein drugs quickly rise to very high concentrations in the blood, then fall off rapidly to low levels (below therapeutic range). Delivery of drugs carried by Cavilink™ microspheres is based on the unique structure of those microparticles and should be applicable to a wide range of drugs. Articles describing these results were published in Drug Delivery Technology (2003, 2005).

Cavilink™ polymers have unique, large interconnected cavities ideally suited to growing cells such as spheroid shaped hepatocytes that have been shown to be the most effective in performing liver-specific functions, and chondrocytes, cells associated with cartilage. Cavilink™ microspheres have also been shown effective in immobilized enzyme applications and have been used in growing human cells in culture.  Polygenetics believes these polymers are ideally suited for tissue engineering applications such as those described.  

Gene therapy products consist of proprietary porous polymer substrates containing cavities sufficiently large to retain and carry genetically altered viruses to specific cells in the human body. These polymer substrates could transmit large amounts of modified viruses and protect them from the immune system of the host. When the polymer spheres become in contact with cells they deliver the viruses over an extended time period allowing transfer of genetic information. Targeting of specific cells may also be possible. This project has been sufficiently developed by a collaborating scientist that Polygenetics is prepared to begin animal testing providing it finds an acceptable business partner. Results were recently published in J. Virolog. Methods.95 (2001) 57-64.

Polygenetics is poised to apply the advantages of its unique polymer technology to drug delivery markets via development agreements that are expected to lead to license agreements with leaders in the various fields. This focus follows Polygenetics’ recent success in licensing Boston Scientific and that company obtaining FDA approval on products it developed under Polygenetics’ license. Polygenetics anticipates it will secure at least two more development agreements in 2007.  

Mission

Polygenetics’ mission is to develop innovative, practical and high quality technology that will lead to more efficacious and safer products in the fields of drug delivery, gene therapy, artificial organs and related biomedical applications. The maximization of shareholder value will be the key criteria for prioritizing the different business opportunities foreseeable with Polygenetics’ products and technologies. Polygenetics will always view itself as responsible to the biomedical community who license and/or use our products. Through a long-term commitment to this mission, we should be known as a company that innovates and succeeds.

Intellectual Property

Seven core USA patents covering the Cavilink™ microspheres have been issued to an affiliate of Polygenetics, Sunstorm Research Corporation, that protect and differentiate this technology from that developed by Unilever, which was the original basis for Polygenetics’ business in 1993. (Polygenetics has an exclusive license from Sunstorm to develop these patents in the fields of medical and prescription drug applications.) The claims in these patents cover method, process and composition of matter for Cavilink™ microspheres. Since the claims are structured to preclude anyone else from making similar spherical-shaped particles utilizing a different technology, Polygenetics believes that they present barriers to any current or future competition. Two patent applications filed by Sunstorm and licensed to Polygenetics through the PCT for Europe have been granted, as well as one in Australia. Tw o Japanese patent applications are pending. Polygenetics also intends to aggressively pursue additional patent protection for its core technology and new discoveries, as well as file for patents covering the various applications of Cavilink™ as they are developed.   These patents, which are owned by our affiliate Sunstorm and licensed to us exclusively in our fields of use, are separate from the eleven patents originally licensed by Sunstorm from Unilever, which license was assigned to us; seven of the eleven licensed Unilever patents have since

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expired; the remaining four Unilever patents expire over the next few years.  The Company does not believe that these four patents are material to its current business operations.

Sunstorm has made application for two Japanese patents which we have listed as patents pending at the bottom of the following table.

Polygenetics holds licenses from Sunstorm Research Corporation for biomedical and biotechnology applications under the following patents (these patents all represent new discoveries made by Polygenetics and do not include any of the patents licensed from Unilever):

Patent number	Date issued	Title
US 5,583,162	1996	Polymeric Microbeads and Method of Preparation
US 5,653,922	1997	Polymeric Microbeads and Method of Preparation
US 5,760,097	1998	Methods of Preparing Polymeric Microbeads
US 5,863,957	1999	Polymeric Microbeads
Australian Patent 702241	1999	Polymeric Microbeads and Method of Preparation
US 6,048,908	2000	Hydrophilic Polymeric Microbeads
US 6,100,306	2000	Polymeric Microbeads and Method of Preparation
US 6,218,440	2001	Hydrophilic Polymeric Microbeads and Method of Preparation
EP  0764047	2003	Polymeric Microbeads and Method of Preparation
EP 0993337	2004	Hydrophilic Polymer Material and Method of Preparation
Japanese Patents Pending
08-501165	Pending	Hydrophilic Polymer Material and Method of Preparation (1995)
11-505611	Pending	Polymeric Microbeads and Method of Preparation (1998)

An opposition was filed in the European Patent Office against one of the European patents. Sunstorm has filed a reply arguing for maintenance of the patent as granted, and alternatively requesting minor claim amendments.  This matter is still awaiting action by the European Patent Office, which may require further argument or oral proceedings before issuing a decision to maintain the patent as granted, amend the patent, or revoke the patent.  Any such decision will be subject to appeal.  Our management, however, does not believe the outcome, whether in favor of or against Polygenetics, will adversely affect Polygenetics’ ability to carry out its business plan as described in this Prospectus.

In addition, an affiliate of Polygenetics, Sunstorm Research Corporation, has filed an application to register the trademark Cavilink in the United States.  Polygenetics licenses the Cavilink trademark on a royalty free basis.

Research and Development

Polygenetics is regularly examining roles that research is expected to play in the company’s growth. Polygenetics is currently focused on developing specific applications that will enable its core technology to offer competitive market advantages and therefore appeal to prospective licensees. In order to promote the speed and effectiveness of Polygenetics’ future products, Polygenetics is committed to the following: (1) demonstrate zero-order release in vitro for a wider range of drugs; (2) demonstrate zero-order release in vivo (animal models); (3) develop bioerodible version of our technology [this would be useful both for drug delivery (injectable) and artificial organs]; (4) investigate improvements in manufacturing methods to reduce anticipated manufacturing costs – lower manufacturing costs would enable us to address applications having lower profit margins (compared with drugs, for ex ample);and (5) co-develop with partners in the areas of gene therapy and artificial organs.

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The Technology

Highly porous polymers

Polygenetics’ technology had its origins at Unilever Plc. Unilever invested several years in its program, and was awarded eleven patents on its high internal phase emulsion (HIPE) technology. Because this technology was not strategic to Unilever’s core business and their technology for bulk formation of the porous polymer made it difficult to utilize the product, Unilever decided to license its technology to other companies. Polygenetics (then Biopore Corporation) obtained a license to the technology in certain fields of use, continued development of the technology and achieved major technology breakthroughs: spherical forms of the polymer called Cavilink™. Production of polymers in spherical form greatly reduces manufacturing costs and adds important properties that enable it to address many more markets than originally conceived by Unilever. Polygenetics believes that these properties are partic ularly promising in the biomedical field.  

Cavilink™ spheres can be custom manufactured in sizes from less than 100 to over 1000 micrometers and have cavities ranging in size from less than 1 to more than 30 micrometers. Polymers can be produced having total porosities between 70% and 90%, much higher than competitive porous polymers. In addition, Cavilink™ microspheres are distinguished by their cavities being interconnected by smaller pores. In contrast, competing porous polymers have much smaller pores that are not interconnected, but terminate inside the polymer body, making the free flow of liquids in and out of these pores much more onerous.

Furthermore, the technology allows for use of different polymer chemistries, thus permitting a wide range of materials that can be developed while maintaining the unique and proprietary morphology. The surface chemistries of Cavilink™ spheres can be further modified to impart desired characteristics for a given application, such as improved and molecular specific adsorption or controlled release of substances placed in the cavities.

Business Strategy

Polygenetics intends to follow its recent success in licensing applications under its patent portfolio. Development fees, license fees, milestone payments and royalties will continue to increase Polygenetics’ revenues as it secures license agreements with additional parties.  

The core technology for making different Cavilink™ microspheres has already been developed and patented. This enables Polygenetics to focus on developing applications for its polymers in a variety of biomedical applications where they can offer significant competitive advantages to its current licensee and its future licensees. Initial emphasis will be placed on applications for drug delivery, gene therapy, and artificial organs. Where necessary, Polygenetics will tailor its products to amplify and enhance benefits offered for these specific applications.

In order to expand upon its recent success, Polygenetics plans to seek prospective licensees who are leaders in markets it has targeted. These companies will be chosen based on their market position, technical expertise and capability for working with Polygenetics to develop new products. Utilizing the licensee’s knowledge in specific applications should enable Polygenetics to accelerate the identification of needs it can address and then design optimal products.  

Agreements with licensees will be structured to give them rights, and in some cases exclusive rights in one or more fields of use, to utilize Polygenetics’ products in well-defined applications within defined territories or world wide. Polygenetics will retain rights to use any products or knowledge developed for all applications outside the field of use that has been licensed. It is anticipated that Polygenetics should therefore realize a broad knowledge base that it can leverage in further developments. This knowledge base should continually enhance Polygenetics’ ability to create new applications for its own products as well as increase opportunities to license other customers in diverse fields of use. The value of its knowledge base should increase its chances for further successful developments, making Polygenetics more attractive to current and future partners, and increase its sha reholder value.

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Applications

1.

Advanced Drug Delivery  

The Market

Drug delivery involves an application of biochemical engineering and consists of a formulation or device that delivers therapeutic agents to desired body locations and/or provides timely release of those therapeutic agents. Drug delivery is a system of its own and is not a therapy; however it improves the efficacy and/or safety of the therapeutic agents that are carried.  

A broad diversity of drug delivery systems and their key applications presently exist. Fast-dissolving oral tablets, needle injection systems, transdermal patches, transmucosal delivery, drug-coated stents, nanotechnology, liposomes, monoclonal antibodies, gene delivery, and implants all contribute to the varied ways that drugs can be delivered. Consequently, there are many approaches available for delivering drugs that target major diseases including cardiovascular, cancer, asthma, diabetes, and the central nervous system as well as others.

Drug delivery systems can help major pharmaceutical and biotechnology companies overcome productivity and patent expiration issues. Many major drugs will reach patent expiration during 2007-2011 and will lose more than $40 billion in market value to generic drug makers. Polygenetics’ management therefore believes that pharmaceutical and biotechnology companies therefore have great interest in using drug delivery to develop future commercial opportunities.

The drug delivery market is dramatically changing due to introduction of new techniques and routes of delivery. R&D spending along with increasing competition, new technologies, the international marketplace and a changing customer base are contributing to creation of a new kind of market involving drug delivery systems. Benefits of new formulations which give a competitive edge after expiration of patents, market extension, drug rescue, reduction of drug development cost and reduction of healthcare costs are all considered, making this approach essential to companies involved in the drug delivery sector.  

Management’s research of the market indicates that the U.S. market for drug delivery systems was $43.7 billion in 2003 and is expected to rise to $74.5 billion by 2008. The sustained release (oral, injectable and topical) dosage form market segment has grown considerably in past years. Sustained release drugs realized sales of $21.5 billion in 2003 and the market is expected to reach $34.1 billion by 2008. Targeted drug delivery systems, another market segment, saw sales of $8.3 billion in 2003 and is expected to grow to $15.5 billion in 2008.

Oral controlled-release medication will continue to account for the largest share of drug delivery system demand based on favorable cost advantages, a wealth of potential new product applications and significant efficacy advantages over conventional dosage formulations. Demand will expand 7.8 percent per year to $36.5 billion in 2007. Medicines adapted to controlled-release coated-bead, diffusion and reservoir systems will all post steady sales gains as drug makers seek to gain competitive advantages by introducing new, improved formulations of off-patent pharmaceuticals. Spurred by ingestion and onset-of-action benefits, oral buccal and rapid disintegration doses will generate rapid growth opportunities in the delivery of pain control and other critical care matters such as cardiovascular irregularities. Longer term, oral drug delivery systems based on polymers, liposomes and other unique substances are expected to pene trate applications involving proteins and other pharmaceuticals which can now only be administered safely and effectively through injection or infusion.  

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Potential of Cavilink™ Polymers

It is believed that Cavilink™ microspheres could be utilized for developing formulations offering:

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• Enhanced Efficacy

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• Improved Safety Profiles

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• Increased Compliance

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• High Drug Loadings

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• Favorable Economics

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• Patent Protection

Enhanced efficacy derives from zero-order kinetics, and allows blood concentration of drugs to be maintained within the desired therapeutic range. This would avoid periods in which drug levels may drop below the minimum therapeutic limit and render treatments less effective. Zero-order kinetics also provides the basis for improved safety. Reducing blood level fluctuations of drugs, and particularly high peak levels seen with conventional first-order kinetic formulations, would decrease unwanted side effects.

By extending the time over which drug blood levels are maintained in the therapeutic range, Cavilink™ based formulations would allow for reduced dosing regimens. This is especially important with drugs that need to be taken three or more times per day as well as with drugs taken by elderly patients who sometimes forget to take their medications. Reducing dosing regimens could thus increase compliance. In fact, increased compliance could further enhance the therapeutic effect of drugs.

Cavilink™ polymers have extremely high porosity thereby enabling much higher drug loading than many of the competing technologies. Up to 90% of the final formulation could contain active ingredients. Many competing technologies have much lower loadings of only 40-50%.

Both the cost of Cavilink™ and the process for loading them with drugs are relatively low compared to many of the sophisticated osmotic and liposomal systems currently studied. Therefore, the ultimate economics of Polygenetics’ products should be very favorable. This is particularly important when considering applications involving high volume, low cost drugs, some of which have not been formulated with new drug delivery systems because of their added costs.

Lastly, patents involving Cavilink™ technology would cover any new pharmaceutical formulations developed. Since these patents were recently issued, this protection should extend well beyond the time needed for commercializing new products.  

Cavilink™ microspheres could also be particularly beneficial for delivery of polypeptide and protein-based drugs. These molecules are much larger than most conventional drugs, yet they would be beneficially contained within the large micrometer-sized cavities of Cavilink™ microspheres. Furthermore, protecting these very sensitive molecules in Cavilink™ cavities may reduce undesirable conformational changes that would make them less effective.  

Cavilink™ therefore appears to be a valuable tool that pharmaceutical and biotechnology companies can utilize for:  

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•

Improving existing conventionally delivered formulations  

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•

Developing new formulations of off-patent, or soon to be off-patent drugs which could give significant product differentiation and effective patent extension  

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•

Making viable products from new drugs that might not be feasible without improved delivery systems  

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•

Creating generic versions of existing controlled delivery products.

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2. Artificial Organs

The Market

In the US alone it is estimated that 10 million people have some form of liver disease or impairment that result from infection, cirrhosis, drug overdose, chemical toxicity, and other causes. Approximately 750,000 patients per year are treated in US hospitals for liver failure today. The increasing incidence of Hepatitis C is anticipated to dramatically add to this number in the future. In the most severe cases, liver transplantation has become a primary therapeutic option. However, there is a nationwide shortage of organ donors and a large number of patients die before a liver can be procured for transplantation. According to the American Liver Foundation, “as many as 15,000 Americans are now on waiting lists for liver transplants, and 1,500 die each year waiting for a liver. It is anticipated that the need for liver donors will increase 300 to 600 percent in the next ten years.” There is clearly a need for a medical device that would provide long-term support for patients with liver disease in the same way that kidney dialysis machines assist patients with kidney disease. Such a device would help patients awaiting liver transplants survive until a donor organ became available and could also help the millions of people with chronic liver diseases survive life-threatening flare-ups of their conditions. The potential market in the US is estimated at over $500 million annually.

It is said that arthritis will eventually affect everyone. Pharmaceutical companies have invested hundreds of millions of dollars in developing drugs and other therapies for the various forms of arthritis. Osteoarthritis, characterized by chronic degeneration of the cartilage of the joints, affects millions of people. Companies such as Genzyme have developed methods of utilizing a patient’s own chondrocytes for use in repair of cartilage defects. These advances are promising, but are limited to a small number of medical problems. What is desired is development of complete synthetic cartilage, grown from a patient’s own chondrocytes. Although research into this problem is underway, no one has yet found an appropriate scaffold for seeding the chondrocytes and allowing them to proliferate to sufficient density that new cartilage is formed.  

Cavilink™ microspheres have been shown capable of receiving whole, living cells into their large cavities and allowing those cells to proliferate (published in Biochemical Engineering). Polygenetics intends to further advance this technology, and in collaboration with other companies, develop viable bioartificial livers, synthetic cartilage and other soft and hard tissue scaffolding.

Current Bioartificial Liver Devices

There has been an intense interest to design an optimal Bioartificial Liver (BAL) or extracorporeal liver assist device (ELAD) for patients with both acute and chronic liver failure. Such devices are expected to increase life expectancy of patients, improve the care and quality of life of patients and to reduce the costs of care.

Unlike the heart, lung or kidney, which has one primary function, the liver has multiple functions essential to maintain life, including carbohydrate metabolism, synthesis of proteins, amino acid metabolism, urea synthesis, lipid metabolism, drug biotransformation, and waste removal. Therefore, the preferred artificial liver support system would perform these various liver functions. Most liver support systems and therapeutic regiments used in the past relied on blood detoxification. However, this does not improve survival in patients with severe encephalopathy, which strongly suggests that blood detoxification should be accompanied by replacement of biotransformation and liver synthetic functions. This seems possible to achieve only with the use of intact hepatocytes.  

Studies have shown that liver support systems based on viable hepatocytes can prolong life in animals having acute liver failure. Recent clinical trials in humans have shown very encouraging results for BALs utilizing both porcine and human hepatocyte cultures. A key objective of current work is to prolong the viability and specific liver functions of the hepatocytes. To this end, it has been shown that hepatocytes cultured into three-dimensional, tightly packed, freely suspended, multicellular aggregates, or spheroids remain viable longer and had significantly higher levels of liver-specific functions compared to hepatocytes

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in a monolayer. Various stationary culture methods for forming hepatocyte spheroids have been developed which employ different attachment substrates such as themoresponsive polymers, positively charged or chemically modified polystyrene. In addition, hydrogels, porous polyvinyl formal resin, water-soluble synthetic polymers, and porous polysulfone hollow-fibers have also been reported as supports for hepatocyte cultures. These materials have spherical shape, large surface area, exhibit large pores and high porosity, or are hydrophilic and biocompatible. Such features can help to achieve the high-density culture of hepatocytes desired, and enhance the cell spheroid formation. However, among these materials, no one possesses all the desired properties. There is thus a need for a support matrix that could provide all these properties in order to have a BAL with improved efficiency and effectiven ess.

Advantages of Cavilink™ microspheres

The high porosity, large pore size and low density of Polygenetics’ Cavilink™ microspheres are ideally suited for this application. These polymers should enable large scale hepatocyte cultures having high cell densities and retaining a high level of liver-specific cell function. A particularly important feature of Cavilink™ microspheres is the smaller pores that interconnect between the large adjacent cavities. This should allow easy transfer of nutrients and blood plasma throughout the support structure and enable maximum interaction with the hepatocyte cultures. Furthermore, the large open cavities are conducive to the spheroid formation of hepatocytes that have been demonstrated to give the best results.

Cavilink™ microspheres can be tailored to meet specific requirements of the application. Either hydrophilic or hydrophobic polymers can be used. The surface of beads can be chemically modified with various functional groups to enhance cell adhesion, optimize hepatocyte or chondrocytes culture or impart other desirable characteristics. Different systems can be designed in which fresh hepatocytes or chondrocytes can be attached within the microspheres, frozen, stored and thawed when needed. Additionally, the costs for the Cavilink™ microspheres should be very competitive compared with other alternative supports.

It seems clear that Polygenetics’ novel patented polymers result in low-density materials that exhibit high mass transfer, high binding capacity and elevated effluent flow rates, and offer a unique combination of properties needed for this application. These polymers will allow the large-scale spheroid hepatocyte or chondrocyte cultures and high-density cell immobilization that should result in improved functioning in a bioartificial liver or synthetic cartilage. The first approach will be development of an extracorporeal device for use outside the body. In the future, the design flexibility afforded with Cavilink™ microspheres could also lead to the development of an implantable bioartificial liver.  

There are a number of other cell support applications that Polygenetics believes could also benefit from the use of Cavilink™ microspheres. Based on the knowledge learned during the development of the products for bioartificial liver and synthetic cartilage, Polygenetics intends to identify and tailor products for related applications.  

Regulatory Approval

Regulatory reviews and approvals, as well as confidential disclosure agreements (“CDAs”), may be required for products developed. With respect to the polystyrene copolymers that have been used in many of Polygenetics’ evaluations, the US Pharmacopoeia volume 23 lists Sodium Polystyrene Sulfonate and its aqueous suspension, as compendial items, for use in oral or rectal administration. The former have been used as cationic exchange resins and consist of microspheres having chemistry quite similar to many of the Cavilink™ microspheres being proposed for use in drug delivery. The significant differences between Polygenetics’ products and the US Pharmacopoeia listed polymers are physical, i.e. structural changes that are unlikely to result in any harmful effects within the patients. Therefore, Polygenetics believes there should be no unusually difficult or major hurdles in obtaining regul atory approval for these products.

Polygenetics’ proposed products for drug delivery applications will consist of two major components: the drug, which will be the active ingredient; and the polymer microcarriers, that should be reviewed as excipients. Since this polystyrene polymer is treated as an “FDA approved” compendial item, it should pose no serious review issues or regulatory concerns. The active ingredients initially being considered for drug

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delivery applications have previously been FDA approved for therapeutic use. Thus, Polygenetics does not expect major FDA review or approval delays.

The first use of products being developed for bioartificial livers are intended to be used in extracorporeal dialysis type devices. Though these will not be put directly into the human body, they likely will require regulatory approvals and an NDA as well. Additional approvals will be required if products for use in implantable bioartificial livers are also developed.  

As part of Polygenetics’ business strategy, licensees will be responsible for getting regulatory approval of the final products. Part of the decision process in choosing licensees will involve assessing their ability to do pre-formulation work, establish chemical or biological stability standards, perform preclinical and clinical planning and statistical evaluation of clinical trials, and their GLP and GMP capabilities. Also taken into consideration will be their prior history in dealing with the FDA, and their ability to develop a comprehensive NDA package, e.g. CMC sections etc., which can be forwarded to the FDA, with a minimal delay. All of Polygenetics’ collaborations will reflect the concern for timely regulatory submissions, and where possible, allow Polygenetics to utilize all regulatory efforts obtained for one submission, to be used in other NDA submissions, in order to expedite future regulatory approvals.

Manufacturing

Investment funds will be used to acquire small pilot scale facilities in order to scale the process and increase capacity to allow samples to be prepared for evaluation by potential licensees involved in development programs.

Polygenetics does not intend to use a significant portion of its funds for manufacturing capability. In biomedical applications targeted, the costs of the Cavilink™ microspheres are anticipated to be a small portion of the final product price. Consequently, it is anticipated that licensees will manufacture the Cavilink™ microspheres for their customers or have them manufactured by a third party. Polygenetics would assist customers in identifying toll manufacturers if the licensee does not wish to manufacture the polymers at its own facility. Polygenetics’ license allows licensees to “make, have third parties make for them, use and sell…” products developed under the license.

Marketing

Polygenetics does not intend to build a large sales and marketing team, but rather focus its resources on developing applications for its products and technologies, then seek licensees for the technologies or products developed. Polygenetics plans to enter into development agreements, a precursor to licensing relationships, joint ventures and partnerships with leaders in particular fields who would provide not only application knowledge and financial support, but who will also be positioned to market final products. A small team could, therefore, handle the number of marketing contacts for Polygenetics. The marketing leverage achieved via this approach should enable much more broad and rapid penetration into targeted fields, without burdening Polygenetics with large marketing expenses.

Since the development time for gene therapy, drug delivery and artificial organ products could be three to five years or more, marketing efforts for these programs will be directed to select potential licensees who understand the market directions necessary to succeed.  

Competition

Polygenetics is a small company that will be competing with manufacturers of other porous polymers, gels and bioerodible polymers. In each of its target market areas, Polygenetics will also be competing with companies having different technologies that are trying to address the same market requirements. Many, if not most, of these competing companies and technologies have significantly more funding and other resources than Polygenetics.

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Other Porous Products

There are other porous materials commercially available. The most popular materials are macroporous and gel polystyrene and a variety of methacrylates. These macroporous polymers embody technology several decades old. Pores are irregular and terminate inside the polymer matrix. They do not contain interconnections throughout, a distinguishing feature of Cavilink™ microspheres, and are limited to porosities of about fifty percent. Gel-type polystyrene materials are also available from several sources, but these are somewhat inferior even to macroporous polystyrene for most biomedical and biotechnology applications. Gels are low cross-linked polymers that swell in most solvents. They are physically less stable than their macroporous counterparts.

Competing Technologies

There are many companies, both large and small, that have developed various approaches to improving delivery of active ingredients.Many of these will compete directly with Polygenetics for specific applications, although no existing approach seems to be universally applicable for a wide variety of drugs.

A number of companies and academic institutions are working on the development of bioartificial livers and synthetic cartilage. Some approaches to bioartificial livers are based on hollow fiber technology to support the hepatocyte cells. One company already has a product on the market and others are in various stages of clinical trials. These products are expected to be successful and should establish the market. Polygenetics’ products are anticipated to have unique properties that differentiate them and offer advantages over the current products, making them preferred for the second generation of bioartificial liver devices. However, there is no assurance that such advantages will actually exist or that the market will give value to such advantages.

Forward-Looking Statements

This prospectus contains forward-looking statements that involve risks and uncertainties.  Poly International uses words such as: anticipate, believe, plan, expect, future, intend and similar expressions, to identify such forward-looking statements.  You should not place too much reliance on these forward-looking statements.  Actual results are most likely to differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced as described in this Risk Factors section and elsewhere in this prospectus.  Factors which may cause the actual results or the actual plan of operations to vary include, among other things, decisions of the board of directors not to pursue a specific course of action based on its re-assessment of the facts or new facts, or changes in general economic conditions and those other factors set out in this prospectus.

Reports to Security Holders

We will voluntarily make available to securities holders an annual report, including audited financials, on Form 10-KSB.  We are not currently a fully reporting company, but upon effectiveness of this registration statement, we will be required to file reports with the SEC pursuant to the Securities Exchange Act of 1934; such as quarterly reports on Form 10-QSB and current reports on Form 8-K.

The public may read and copy any materials filed with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

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Item 17.  Management’s Discussion and Analysis or Plan of Operation

Management’s Discussion and Analysis of Financial Condition and Results of Operations

For the fiscal year ended December 31, 2005, Poly International had a loss from operations of $400,418 as compared to income from operations of $228,321 for the fiscal year ended December 31, 2004. The decrease in fiscal 2005 income (loss) compared to fiscal 2004 income can be attributed to a decrease in royalty income to $366,747 in fiscal 2005 from $672,492 in fiscal 2004.  The decrease in royalty income can be attributed to the final one time milestone payment being made in 2004 under the agreement with Boston Scientific Corporation; only product royalties were paid in 2005.  Expenses increased to $767,165 (2005) from $444,171 (2004).  The most significant increases in expenses were in rent ($486,509 in 2005 compared to $339,962 in 2004), salaries and payroll taxes and contract services ($77,857 in 2005 compared to $0 in 2004) and professional and financial expenses ($103,049 in 2005 compared to $56,524 in 2004) .

Net loss for the fiscal year ended December 31, 2005 was $218,495, compared to net income of $230,622 for the fiscal year ended December 31, 2004.   The loss for the fiscal year ended December 31, 2005, is due to shortfalls from operations and increases in certain expenses, such as rent and compensation, compared to prior periods (although other expenses were reduced). 

For the nine month periods ending September 30, 2006, Poly International had a loss from operations of $250,211 and a total net loss of $243,010, as compared to a loss from operations of $262,954 and a total net loss of $142,875 for the same period from the previous year. The increase in the operating loss can be attributed to no longer reflecting a minority interest in the loss of the subsidiary.  Royalties increased to $336,642 (2006) from $301,390 (2005).   Salaries and wages and contract services increased to $100,380 (2006) from $58,121 (2005), rental expenses decreased to $321,114 (2006) from $351,434 (2005) and professional and financial expenses decreased to $74,611 (2006) from $82,808 (2005).

It is our intent to raise the funds under this prospectus to expand the research and development and marketing efforts of Polygenetics by acquiring additional laboratory equipment, adding both technical and marketing personnel, as well as by increasing participation in industry conferences, calls on potential customers and the like.  As of the date of this prospectus, Poly, Inc. generates sufficient revenues to meet all of its operating expenses, however, it does not generate sufficient revenues to execute our business plan and we will be required to raise the funds under this prospectus in order to execute our proposed expansion plan. 

Trends

Poly International is not aware of any trends, events or uncertainties that have or are reasonably likely to have a material impact on our short term or long term liquidity.  

Liquidity and Capital Resources

Summary of Working Capital and Stockholders' Equity

As of September 30, 2006, Poly International had negative working capital of $203,932 and Stockholders' Deficit of $130,840 compared with working capital of $27,220 and Stockholders' Equity of $17,701 as of December 31, 2005. The Company’s working capital has decreased primarily because of decrease in cash Stockholders' Deficit increased predominantly as a result of losses from current operations.

Liquidity

Poly International anticipates it may require as much as approximately $1,000,000 over the next twelve months to fully implement its existing business plan. Poly International may require additional funds over the next three years to assist in realizing its goals should it not achieve anticipated bench marks over the 2007, 2008 and 2009 fiscal years.  The amount and timing of additional funds required can not be definitively stated as at the date of this report and will be dependent on a variety of factors. As of the date of this prospectus, Poly International has been successful in paying its operating costs from existing revenue

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and shareholder loans or the deferral of amounts due related parties for rent. Poly International anticipates revenues generated from current development and licensing transactions that are in the negotiation stages and the funds raised under this Offering will greatly reduce the requirement for additional funding; however, we can not be certain Poly International will be successful in achieving revenues from those operations. Furthermore, we cannot be certain that we will be able to raise any additional capital to fund our ongoing operations or that Poly International will raise any funds under this Offering.

Sources of Working Capital

During fiscal 2005 and the first nine months of fiscal 2006, Poly International's primary sources of working capital have come from net proceeds generated from royalties and development and other service fees, as well as cash on hand from royalties paid during prior periods.

Material Commitments for Capital Expenditures

None.

Plan of Operation

Expenditures

The following chart provides an overview of our budgeted expenditures, by significant area of activity, for Poly International to continue operations and to effect our business plan.  The center column, totaling $1,000,000, is the minimum funds required for us to continue our expansion if we are only able to raise 50% of the funds from this Offering.  The right column, totaling $2,000,000 will allow us to effect our total business plan.

Expenses	Minimum Funds Required ($)	Maximum funds received ($)
Offering Costs	25,000	25,000
Consulting	35,000	65,000
Legal and Accounting	90,000	130,000
Marketing and Promotion	60,000	150,000
R&D Expenses	140,000	210,000
Capital Equipment	100,000	200,000
Working Capital – Polygenetics	530,000	1,200,000
Working Capital – Poly, Inc.	20,000	20,000
TOTAL	1,000,000	2,000,000

The above expenditure items are defined as follows:

Costs of the Offering:  We will be required to pay the costs of this offering, estimated to be $25,000 for consulting fees for assistance in preparing this prospectus from the funds raised under this Offering.

Consulting. Some consulting costs associated with hiring chemists primarily on a project basis for certain R&D projects such as development of Polygenetics’ polymers or customer proof of concept and development work are anticipated.

Working Capital:  This expense refers to working capital to be used for continuing operations.

Legal and Accounting: This expenditure item refers to the normal legal and accounting costs associated with maintaining a publicly traded company. It will also cover the cost of

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preparation of appropriate agreements and documents connected to our licensing program.

Marketing and Promotion: This item refers to the cost of a basic marketing campaign and efforts expended to acquire new potential licensees.  The bulk of these costs involve travel and accommodation expenses plus costs of attending various biomedical and pharmaceutical conferences.

R&D Expenses. This item represents addition of new personnel to carry out new polymer development projects and research into possible new applications of existing polymer materials.

Capital Equipment. This item represents acquisition of capital equipment necessary to carry out the R&D program described above. This equipment consists of research and lab equipment to produce polymers in research quantities and perform various tests on the polymers.

We are confident we can meet our financial obligations and pursue our plan of operations if we can raise the amount of funding as contemplated by this Offering.

Off Balance Sheet Arrangements

None.

Item 18. Description of Property

Poly International does not own any real property.

We do not have any investments or interests in any real estate.  Our company does not invest in real estate mortgages, nor does it invest in securities of, or interests in, persons primarily engaged in real estate activities.

Polygenetics currently sublets the 13,200 sq ft. property from Sunstorm Research Corporation, an affiliated company. The affiliated company shares the rent and related overhead with the Polygenetics in proportion to their respective uses of the facility, which can vary on a month by month basis. However, the affiliated company is prohibited from utilizing more than 50% of the premises. Sunstorm in turn leases the property from James R. Benson, Poly International’s President and a member of its Board of Directors. The lease was executed on April 1, 2004 and expires on December 31, 2010. Polygenetics paid rent in the amount of $360,000 for the 12 month period ended December 31, 2005 and $321,114 for the nine month period ended September 30, 2006, while it recorded deferred rent in the amount of $240,000 at December 31, 2005 and $263,400 at  September 30, 2006.  The remaining payment requirements under the master lease to be paid by Polygenetics and Sunstorm are as follows:   

Lease Period	Monthly Rent
1 January 2007 – 31 December 2007	$36,300
1 January 2008 – 31 December 2008	$39,600
1 January 2009 – 31 December 2009	$42,900
1 January 2010 – 31 December 2010	$46,200

There are presently no extensions to this Lease Agreement, which expires December 31, 2010.  Polygenetics entered into the Lease Agreement effective 1 April 1, 2004.

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Item 19. Certain Relationships and Related Transactions

Other than the stock transactions discussed below, Poly International has not entered into any transaction nor are there any proposed transactions in which any director, executive officer, shareholder of Poly International or any member of the immediate family of any of the foregoing had or is to have a direct or indirect material interest.

On July 8, 2005, we issued from treasury a total of 2,700,000 common shares to Metro Global Management Inc.   Mr. Marco Bastidas, an officer and a member of our board of directors, is the sole shareholder of Metro Global Management Inc.   The shares were issued for cash consideration of $2,700.

On September 1, 2005, Metro Global Management Inc. transferred a total of 150,000 common shares to International Securities Group Inc., 1,200,000 common shares to James Benson, a director and officer of Poly International and 300,000 common shares to Nai Hong Li, the director of research for Poly.

Subsequently on September 1, 2005, we issued a total of 4,153,172 common shares pursuant to a share exchange agreement between Poly International, Poly, James Benson, and Nai Hong Li whereby Poly International acquired 55% of the issued and outstanding shares of Poly in exchange for 3,297,603 common shares issued to James Benson and 855,569 common shares issued to Nai Hong Li.

At the time of the share exchange agreement, Poly International and Poly were related parties due to the fact that James Benson was a director and officer of Poly International and also a director and officer of Poly.

The Sublease Agreement described in Section 18 above, under which Polygentics occupies a portion of a research and development facility in Mountain View, California is with Sunstorm Research Corporation. Sunstorm is wholly owned by James R. Benson, Poly International’s President and a member of its Board of Directors, who leases the facility to Sunstorm on the terms described in Section 18 above.

There are no promoters being used in relation to this Offering, except for our officers and directors who will be selling the securities offered by Poly International and who may be deemed to be promoters under Rule 405 of Regulation C promulgated by the Securities and Exchange Commission under the Securities Act of 1933.  No person who may, in the future, be considered a promoter of this Offering, will receive or expect to receive assets, services or other considerations from us.  No assets will be, nor are expected to be, acquired from any promoter on behalf of our company.  We have not entered into any agreements that require disclosure to our shareholders.

Item 20. Market for Common Equity and Related Stockholder Matters

Market Information

Currently there is no public trading market for our stock, and we have not applied to have Poly International’s common stock listed.  We intend to apply to have our common stock quoted on the OTC Bulletin Board.  No trading symbol has yet been assigned.

Rules Governing Low-Price Stocks that May Affect Our Shareholders' Ability to Resell Shares of Our Common Stock

Our stock currently is not traded on any stock exchange or quoted on any stock quotation system.  Upon the registration statement in which this prospectus is included becoming effective, we will apply for quotation of our common stock on the NASD's OTC/BB.

Quotations on the OTC/BB reflect inter-dealer prices, without retail mark-up, markdown or commission and may not reflect actual transactions.  Poly International’s common stock may be subject to certain rules adopted by the SEC that regulate broker-dealer practices in connection with transactions in "penny stocks".  Penny stocks generally are securities with a price of less than $5.00, other than securities registered on certain national exchanges or quoted on the Nasdaq system, provided that the exchange or system provides current price and volume information with respect to transaction in such securities.  The additional sales practice and disclosure requirements imposed upon broker-dealers may discourage broker-dealers from

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effecting transactions in our shares which could severely limit the market liquidity of the shares and impede the sale of our shares in the secondary market.

The penny stock rules require broker-dealers, prior to a transaction in a penny stock not otherwise exempt from the rules, to make a special suitability determination for the purchaser to receive the purchaser’s written consent to the transaction prior to sale, to deliver standardized risk disclosure documents prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock.  In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt.  A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representat ive and current quotations for the securities.  Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks.

Holders

As of the filing of this prospectus, we have four (4), shareholders of record of Poly International’s common stock.

Rule 144 Shares.

A total of 6,853,712 shares of the common stock are available for resale to the public, if sold in accordance with the volume and trading limitations of Rule 144 (e) of the Act. In general, under Rule 144 as currently in effect, a person who has beneficially owned shares of a company's common stock for at least one year is entitled to sell within any three month period a number of shares that does not exceed the greater of: 1% of the number of shares of Poly International common stock then outstanding which, in this case, will equal approximately 685,317 shares as of the date of this prospectus; or the average weekly trading volume of Poly International’s common stock during the four calendar weeks preceding the filing of a notice on form 144 with respect to the sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about Poly International. Under Rule 144(k), a person who is not one of Poly International’s affiliates at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least 2 years, is entitled to sell shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

As of the date of this prospectus, persons who are Poly International’s affiliates hold 6,703,172 shares of the 6,853,712 shares which may be sold as of the date of this prospectus in accordance with Rule 144.  Although Poly International’s stock cannot currently be sold into a public market since it is not listed on any exchange or quoted on any quotation system, Poly International intends to apply for quotation on the OTC/Bulletin Board.  If such quotation is approved, then Poly International’s affiliates would be able to sell their shares in accordance with the requirements of Rule 144.

Dividends.

As of the filing of this prospectus, we have not paid any dividends to our shareholders. There are no restrictions which would limit the ability of Poly International to pay dividends on common equity or that are likely to do so in the future. The California Corporations Code, however, prohibits us from declaring dividends where, after giving effect to the distribution of the dividend Poly International would not be able to pay its debts as they become due in the usual course of business; or its total assets would be less than the sum of the total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

32

Difficulty To Resell Poly International Stock, As The Company Has No Expectations To Pay Cash Dividends In The Near Future

The holders of our common stock are entitled to receive dividends when, and if, declared by the board of directors.  We will not be paying cash dividends in the foreseeable future, but instead we will be retaining any and all earnings to finance the growth of our business.  To date, we have not paid cash dividends on our common stock.  This lack of an ongoing return on investment may make it difficult to sell our common stock and if the stock is sold the seller may be forced to sell the stock at a loss.

Item 21.  Executive Compensation

COMPENSATION

The following table sets forth the compensation paid to our directors and members of our management group for the last fiscal year.  No executive officer of Poly International or its wholly owned subsidiary earned a salary and bonus for such fiscal year in excess of USD$100,000.

Annualized Compensation Long Term Compensation

Name and Principal Position	Year	Salary	Bonus	Securities Under Options to be Granted (#)	Long Term Incentive Plan Payouts	All other Compensation
James R. Benson(1) President & Director	2006	-0-	-0-	-	-	-
Kent Anderson Chief Financial Officer & Director	2006	-0-	-0-	-	-	-
Jacqueline Danforth Director	2006	-0-	-0-	-	-	-
				-	-	-
Marco Bastidas Director	2006	-0-	-0-

(1)  This compensation was paid to Mr. Benson by Poly International’s 55% owned subsidiary, Polygenetics.

The Company has not paid any compensation to any other members of its management, administrative or supervisory bodies.   

Compensation of Directors

No directors receive any form of compensation in their capacity as directors of Poly International.

Item 22. Financial Statements

The audited financial statements and the unaudited prepared by management financial statements of Poly International appear on pages F-1 through F-16.

Item 23. Changes In and Disagreements With Accountants on Accounting and Financial Disclosures

Not applicable

33

POLYGENETICS INTERNATIONAL INC.

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005 AND 2004

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Officers and Directors

Polygenetics International Inc.

We have audited the accompanying consolidated balance sheet of Polygenetics International Inc. as of December 31, 2005, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the  years ended December 31, 2005 and 2004.  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 of America).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Polygenetics International Inc. as of  December 31 2005, and the results of its operations, changes in stockholders’ equity  and its cash flows for the  years ended December 31, 2005 and 2004, in conformity with accounting principles generally accepted in the United States of America.

/s/ Child, Van Wagoner & Bradshaw, PLLC

Certified Public Accountants

Salt Lake City, Utah

August 16, 2006

F-2

Polygenetics International Inc.

Consolidated Balance Sheet

December 31,  2005

ASSETS

Current Assets
Cash	$	357,024
Accounts receivable		0
Total Current Assets		357,024
Fixed Assets net of allowance of $116,351		18,647
Other Assets
Deposit and rent on Plymouth		48,100
Deposit on Panarama Research		2,500
Total Other Assets		50,600
TOTAL ASSETS	$	426,271

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable	$	5,744
Deferred rent		240,000
Deferred revenue		34,642
Payable – related party		48,100
Accrued liabilities		1,318
Total Current Liabilities		329,804
Minority Interest		78,766
Stockholders' Equity
Common stock; par value $0.001 Authorized 100,000,000 shares Issued and outstanding 6,853,172		6,853
Additional paid-in capital		2,094,265
Notes receivable – related parties		(72,919)
Retained deficit		(2,010,498)
Total Stockholders' Equity		17,701
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	426,271

See Accompanying Notes

F-3

Polygenetics International Inc.

Consolidated Statements of Operations  

Years Ended December 31,

		2005		2004
Royalty Income	$	366,747	$	672,492
Expenses
Salaries and payroll taxes		57,857		0
Contract services-related party		20,000		0
Other general and administrative expenses		2,767		537
Marketing		4,734		4,412
Travel		39,149		22,697
Professional and financial expenses		103,049		56,534
Office expense		5,093		2,097
Laboratory expense		30,162		17,199
Organization expense		350		0
Insurance		16,770		0
Building rental Plymouth St.		486,509		339,952
Depreciation expense		725		743
Total expenses		767,165		444,171
Net operating income (loss)		(400,418)		228,321
Other income (expense)
Interest income		10,941		3,408
Interest expense		(155)		(307)
Total other income (expense)		10,786		3,101
Income (loss) before minority interest		(389,632)		231,422
Provision for income taxes		(800)		(800)
Income (loss) before minority interest		(390,432)		230,622
Minority interest in (loss) of subsidiary		171,937		0
Net income (loss)	$	(218,495)	$	230,622
Weighted average income (loss) per share	$	(0.04)	$	0.06
Weighted average outstanding shares		5,053,172		4,153,172

See Accompanying Notes

F-4

Polygenetics International Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the years ended December 31, 2005 and 2004

	CommonShares		Stock  Amount		Additional Paid-in Capital		Retained Deficit		Total Stockholders’ Equity
Balance at December 31, 2003	4,153,172	$	4,153	$	2,173,031	$	(1,850,688)	$	326,496
Net income							230,622		230,622
Balance at December 31, 2004	4,153,172		4,153		2,173,031		(1,620,066)		557,118
Stock issued in recapitalization	2,700,000		2,700		(78,766)				(76,066)
Net loss							(218,495)		(218,495)
Net loss – minority interest							(171,937)		(171,937)
Balance at December 31, 2005	6,853,172	$	6,853	$	2,094,265	$	(2,010,498)	$	90,620

See Accompanying Notes

F-5

Polygenetics International Inc.

Consolidated Statements of Cash Flows  

Years Ended

December 31,

	2005	2004
Operating Activities:

Net income (loss)	$	(218,495)	$	230,622
Adjustments to reconcile net income (loss)               to net cash provided (required)  by operations
Depreciation and amortization		725		743
Minority interest		(171,937)		0
Changes in operating assets and liabilities
Accounts receivable		471,398		(392,485)
Notes receivable		16,057		(88,876)
Accounts payable		5,744		(36,912)
Deferred rent		67,200		172,800
Deferred revenue		34,642		0
Accrued liabilities		(537)		48,100
Net cash provided (required) by Operating Activities		204,797		(66,008)
Investing Activities:
Purchase equipment		(2,086)		(1,867)
Deposit and rent on Plymouth		0		(48,100)
Net cash required by Investing Activities		(2,086)		(49,967)
Financing Activities:
Sale of stock		2,700		101,376
Net cash provided by Financing Activities		2,700		101,376
Net cash increase (decrease)  for period		205,411		(14,599)
Cash at beginning of period		151,613		166,212
Cash at end of period	$	357,024	$	151,613

See Accompanying Notes

F-6

POLYGENETICS INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005 AND 2004

Note 1- Summary of Significant Accounting Policies

This summary of significant accounting policies of Polygenetics International Inc. is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars. 

Organization

Polygenetics International Inc. (the “Company”) was incorporated on July 8, 2005 in the State of California.  On September 1, 2005, the Company acquired 55% of the total issued and outstanding shares of Polygenetics, Inc. a California company in the business of bio-technology development in exchange for 4,153,187 shares of the common stock of the Company. Polygenetics, Inc. was incorporated on August 3, 1993 as Biopore Corporation in the State of California. Its technology had its origins at Unilever Plc.  Unilever invested several years and millions of dollars in its program, and it was awarded eleven patents on its high internal phase emulsion technology.  Because this technology was not strategic to Unilever’s core business and their technology for bulk formation of the porous polymer made it difficult to utilize this product, Unilever decided to license it to Biopore’s affiliate co mpany, Sunstorm Research Corporation, which under the license from Unilever, arranged development of the technology and oversaw major technology breakthroughs; specifically spherical forms of the polymer called Cavilink™  Biopore changed its name to Polygenetics, Inc. on November 19, 2002.  The consolidated results of operations are primarily those of Polygenetics, Inc.

Operations  

The Company presently has no ongoing operations save the management of its 55% owned subsidiary, Polygenetics, Inc.  Polygenetics, Inc. has throughout its history and is currently engaged in the business of developing and licensing porous polymers for pharmaceutical and bio-medical applications. The Company is principally focused on advanced drug delivery methods that involve the company’s patented porous polymer materials.  These unique polymers can act as drug reservoirs and permit near zero-order release of active components.  Utilizing these polymers as biomedical devices, the company seeks to license various applications under its patents.

Polygenetics, Inc. is a research, development, and licensing company.  It does not manufacture products, but rather develops and patents advanced technologies and offers licenses to companies interested in exclusive patent protection for particular applications.  Polygenetics, Inc. often carries out contract research in order to enhance or optimize materials for specific applications.  

 Use of Estimates in the preparation of the financial statements 

The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.

Depreciation and amortization

 Depreciation has been provided in amounts sufficient to relate the costs of depreciable assets to operations over their estimated useful lives principally using the double declining balance method of five years for office equipment, computers, and lab equipment.

Cash and Cash Equivalents 

The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.

F-7

POLYGENETICS INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005 AND 2004

Currency

The functional currency of the Company is the United States Dollar.

Income (Loss) Per Share 

Income (loss) per share of capital stock is computed by dividing the net income (loss) by the weighted average number of shares outstanding during the year.  Fully diluted earnings per share are not presented because they are anti-dilutive. At the end of the periods presented, the Company had no other common stock equivalents.  

Fair Value of Financial Instruments 

Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 107 (“SFAS 107”), Disclosure About Fair Value of Financial Instruments. SFAS 107 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amount of the Company’s cash and cash equivalents, accounts receivable, prepaid expenses and other current assets and liabilities approximate their estimated fair values due to their short-term maturities. 

Income taxes 

The Company is subject to United States and California state income taxes.  Income taxes are accounted for under the asset and liability method.  Under this method, 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 and operating loss and tax credit carry forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain.  At December 31, 2005, the Company has net operating loss carry forwards totalling approximately $1,635,000.   The carry forwards begin to expire in fiscal year 2014. The Company has established a valuation allowance for the full tax benefit of the operating loss carryovers due to the uncertainty regarding realization.

Other

The company has selected December 31 as its year-end.

The Company paid no dividends in 2005 or 2004.

Note 2 – Basis of Presentation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP).  All necessary intercompany transactions have been eliminated in consolidation.

Note 3 – Business combinations

On September 1, 2005, the Company, Polygenetics, Inc., and the two shareholders of Polygenetics, Inc. owning approximately 55% of Polygenetics, Inc.’s outstanding stock (2,768,791 shares of Common Stock (the “Shareholders Shares”) from a total of 5,035,473 shares of issued and outstanding shares of Common Stock and Preferred Stock (the “Poly Inc. Shares”), James R. Benson and Nai Hong Li (the “Polygenetics Majority Shareholders”), entered into and consummated a Share Exchange Agreement. (James R. Benson is a director and the president/CEO of Polygenetics, Inc.) Under the Share Exchange Agreement, the Polygenetics Majority Shareholders exchanged their 2,768,791 shares of Common Stock for 4,153,172 shares of capital stock of Polygenetics International Inc. The effect of the transaction was to give Polygenetics International Inc. voting control of Polygenetics, Inc. and to make James R. Benson and Nai Hong Li ma jority shareholders of Polygenetics International Inc. The parties also agreed to cooperate

F-8

POLYGENETICS INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005 AND 2004

Note 3 – Business combinations (continued)

and use their best efforts in attempting to effect an exchange by all other shareholders of Polygenetics, Inc. of their shares in Polygenetics, Inc. for shares in Polygenetics International Inc. on a two shares of Polygenetics, Inc. stock for three shares of Polygenetics International Inc. basis. This exchange, if successful, would make Polygenetics, Inc. a wholly owned subsidiary of Polygenetics International Inc. At the present time, the Company reflects a 45% minority interest in Polygenetics, Inc. on its balance sheet.  

Note 4 – Amounts due from shareholders

Amounts due from shareholders reflect the following: Dr.  James R Benson and Dr. Nai Hong Li, majority shareholders, have loans and interest due of $57,069 and $15,850 as of December 31, 2005 and $73,876       and $15,100 as of December 31, 2004.  The loans bear interest at 4% per annum and are due and receivable in four annual instalments, with a final due date of March 31, 2008 as to Dr. Benson’s loan and April 10, 2008 as to Dr. Li’s loan. The amounts due from the shareholders relates to the purchase of shares of stock of Polygenetics, Inc in 2004.

Note 5 –Payable – related party

 As of December 31, 2005 and December 2004, the Company owed $48,100 to a related entity for a security deposit and last-month’s rent.

 Note 6 – Related Party Transactions 

During the year ended December 31, 2005 Dr. Benson, an officer and director of the Company received $ 20,000 for services rendered. Dr. Li received $53,472 as salary and $62,995 as contract services.  In 2004, Dr. Li received payments in the amount of $31,981 for contract services.  Dr. Li now has an employment contract with the Company.  In 2005, the Company paid $11,428 to Sunstorm Research for consulting fees.  Sunstorm is controlled by Dr. Benson.  

The sublease agreement as described below is with a company which is controlled by Dr. Benson, a director and officer of Polygenetics International Inc. and Polygenetics, Inc.

Note 7 – Commitments 

(i)    The Company entered into a sublease for a research facility located in Mountain View, California.

The Company sublets the 13,200 sq ft. property from Sunstorm, an affiliated company. The affiliated company shares the rent and related overhead with the Company in proportion to use. However, the affiliated company is prohibited from utilizing more than 50% of the property.   The sublease was executed on April 1, 2004 and expires on December 31, 2010.  The Company paid rent in the amount of $112,000 for the 8 month period for 2004 and $360,000 for the 12 month period ended December, 2005.   The remaining payment requirements under the lease by both the Company and Sunstorm and which must be allocated between them  under the sublease are as follows:

Rent table:

F-9

Lease Period	Monthly Rent
1 January 2006 – 31 December 2006	$33,000
1 January 2007 – 31 December 2007	$36,300
1 January 2008 – 31 December 2008	$39,600
1 January 2009 – 31 December 2009	$42,900
1 January 2010 – 31 December 2010	$46,200

POLYGENETICS INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED DECEMBER 31, 2005 AND 2004

Note 7 – Commitments (continued) 

There are presently no extensions to this lease agreement, which expires 31 December, 2010.  The Company entered into the Sublease Agreement effective 1 April, 2004. The remaining annual rent required under the lease by both the Company and Sunstorm and which must be allocated between them under the sublease are as follows:

 Year ending 12/06                              $396,000

  Year ending 12/07                              435,600

  Year ending 12/08                              475,200

  Year ending 12/09                              514,800

  Year ending 12/10                              554,400

                                                            $2,376,000

Rent expense for the years ended December 31, 2005 and 2004 was $427,200 and $284,800 respectively as calculated in accordance with Financial Accounting Standards Board Technical Bulletin No. 85-3, Accounting for Operating Leases with Scheduled Rent Increases (“FTB 85-3”). At December 31, 2005 the Company has recorded a deferred rent liability in the amount of $240,000.  This is the cumulative difference between the amount of rent owed under FTB 85-3 and the amounts actually paid to date.

Note 8 – Deferred Revenue

At December 31, 2005 the Company had received from a customer $34,642 of royalty revenue in excess of the amount earned through December 31, 2005.    

F-10

POLYGENETICS INTERNATIONAL INC.

CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2006

F-11

PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

	Page
Unaudited Consolidated Financial Statements
Consolidated Balance Sheets	F-13
Consolidated Statements of Operations	F-14
Consolidated Statements of Cash Flows	F-15
Notes to Unaudited Consolidated Financial Statements	F-16

F-12

POLYGENETICS INTERNATIONAL INC.

Consolidated Balance Sheets

Sept 30, 2006 (Unaudited) December 31,  2005 (Note 1)

ASSETS

Current Assets
Cash	$	87,045	$	357,024
Accounts receivable		30,000		0
Total Current Assets		117,045		357,024
Fixed Assets net of allowance of $117,399 and $116,351		22,492		18,647
Other Assets
Deposit and rent on Plymouth		48,100		48,100
Deposit on Panarama Research		2,500		2,500
Total Other Assets		50,600		50,600
Total Assets	$	190,137	$	426,271

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities
Accounts payable	$	8,159	$	5,744
Deferred rent		263,400		240,000
Deferred revenue		0		34,642
Payable- related party		48,100		48,100
Accrued liabilities		1,318		1,318
Total Current Liabilities		320,977		329,804
Minority Interest		0		78,766
Stockholders’ Equity (Deficit)
Common stock; par value $0.001 Authorized 100,000,000 shares Issued and outstanding as at September 30, 2006 and December 31, 2005, 6,853,172 common shares.		6,853		6,853
Additional paid in capital		2,173,032		2,094,265
Notes receivable – related parties		(57,217)		(72,919)
Retained deficit		(2,253,508)		(2,010,498)
Total Stockholders’ Equity (Deficit)		(130,840)		17,701
Total Liabilities and Stockholders’ Equity (Deficit)	$	190,137	$	426,271

 The accompanying notes are an integral part of these unaudited financial statements

F-13

POLYGENETICS INTERNATIONAL INC.

Consolidated Statements of Operations

(Unaudited)

Three months ended	Nine months ended
September 30,	September 30,

2006 2005 2006 2005

Royalty Income $ 53,605 $ 61,013 $ 336,642 $ 301,390

Expenses

Salaries and payroll taxes	39,472	38,121	100,380	38,121
Contract services-related party	0	0	0	20,000

Other general and admin expenses 124 0 1,112 3,293

Marketing 1,916 120 12,919 2,699

Travel 12,178 7,288 28,864 27,190

Professional and financial expenses	9,830	5,972	74,611	82,808
Office expense	786	421	3,182	2,561
Laboratory expenses	1,329	7,929	21,079	25,909
Organization Expense	0	350	0	350
License and permits	112	0	547	0
Insurance	8,217	4,694	21,997	9,254
Building Rental Plymouth St	107,457	116,546	321,114	351,434
Depreciation Expense	350	400	1,048	725

Total expenses 181,771 181,841 586,853 564,344

Net operating loss (128,166) (120,828) (250,211) (262,954)

Other income (expense)

Interest income	3,595	2,787	8,941	8,444
Other expense	(10)	(15)	(140)	(85)

Total other income (expense) 3,585 2,772 8,801 8,359

Income (loss) before taxes and minority interest (124,581) (118,056) (241,410) (254,595)

Provision for income taxes 0 0 (1,600) (800)

Income (loss) before minority interest	(124,581)	(118,056)	(243,010)	(255,395)
Minority interest in (loss) of subsidiary	(52,933)	112,520	0	112,520

Net loss $ (177,514) $ (5,536) $ (243,010) $ (142,875)

Weighted avg income (loss) per share $ (0.03) $ (0.00) $ (0.04) $ (0.03)

Weighted average outstanding shares 6,853,172 4,153,172 6,853,172 4,713,941

The accompanying notes are an integral part of these unaudited financial statements

F-14

POLYGENETICS INTERNATIONAL INC.

Consolidated Statements of Cash Flows

(Unaudited)

Nine months ended September 30,

	2006	2005
Operating Activities:

Net (loss)	$	(243,010)	$	(142,875)
Adjustments to reconcile net income (loss) to net cash provided (required)  by operations
Depreciation and amortization		1,048		725
Minority Interest		0		(112,520)
Changes in operating assets and liabilities
Accounts receivable		(30,000)		410,485
Notes receivable		15,702		16,661
Accounts payable		2,416		11,257
Deferred rent		23,400		50,400
Deferred revenue		(34,642)		100,000
Net Cash provided (required) by Operating Activities		(265,086)		334,133
Investing Activities:
Purchase equipment		(4,893)		(2,086)
Net Cash used by Investing Activities		(4,893)		(2,086)
Financing Activities
Sale of stock		0		2,700
Net Cash provided by Investing Activities		0		2,700
Net cash  gain (decrease) for period		(269,979)		334,747
Cash at beginning of period		357,024		151,613
Cash at end of period	$	87,045	$	486,360

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1,600	$	800

The accompanying notes are an integral part of these unaudited financial statements

F-15

POLYGENETICS INTERNATIONAL INC.

Notes to Financial Statements for the Nine Months Ended September 30, 2006

 (Unaudited – prepared by Management)

Note 1- Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial statements should be read in conjunction with the financial statements for the year ended December 31, 2005 of Polygenetics International Inc.

The interim consolidated financial statements present the balance sheet, statements of operations, and cash flows of Polygenetics International Inc. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

The interim consolidated financial information is unaudited.  In the opinion of management, all adjustments necessary to present fairly the financial position as of September 30, 2006 and the results of operations and cash flows presented herein have been included in the financial statements. All such adjustments are of a normal and recurring nature.  Interim results are not necessarily indicative of results of operations for the full year.

Note 2 – Subsequent Events

In November 2006, Polygenetics entered into a one-year Development/Option Agreement with the U.K. division of a multi-national pharmaceutical company as the result of a Proof of Concept Agreement that was previously entered between the parties and completed.  The Development/Option Agreement contemplates the exclusive development of an orally delivered pain reliever by Polygenetics and provides for the payment of three (3) development fees of $140,000 each, plus expenses.  The first of three development fees of $140,000 and a four month $12,000 expense advance have been received.  During the term of the agreement, plus thirty (30) days following the end of such term, the client shall have the option to acquire an exclusive, world-wide license from Polygenetics for products that are the result of this development in the specific field of use.  In the event that the client commits to proceed with the third 4-month period of development work, then in exchange for this option and the exclusivity of this development work, Polygenetics will receive an option fee of $200,000 if the client decides to proceed with the third four (4) month development period of the agreement.  If the client does not proceed with the third four (4) month period, no option fees will be payable.

Sunstorm, which provides us with premises for our operations, is effecting a “like-kind” exchange of the existing premises on Plymouth Street for other premises which will provide larger and better equipped facilities to Polygenetics, Inc.  The due diligence contingency removal date has passed and the work on the new premises will start soon as the necessary permits have been obtained recently.  Closing on the exchange of premises will occur shortly after  the work is complete.  No rent increase is planned.

Effective November 1, 2006, Polygenetics, Inc. increased Nai Hong Li’s salary from $110,000 per year to $120,000 per year.

F-16

 [OUTSIDE BACK COVER PAGE OF PROSPECTUS]

Dealer Prospectus Delivery Requirements

Until ninety (90) days from the effective date of this registration statement, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

34

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers

Our officers and directors are indemnified as provided by the California Corporations Code and Poly International’s bylaws.  Under the California Corporations Code, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company's Articles of Incorporation. Poly International’s Articles of Incorporation do not specifically limit the directors’ immunity.  Excepted from that immunity are: (a) a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest; (b) a violation of criminal law, unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful; (c) a transaction from which the director derived an improper personal profit; and (d) will ful misconduct.

Poly International’s bylaws provide that we will indemnify the directors to the fullest extent not prohibited by California law; provided, however, that Poly International may modify the extent of such indemnification by individual contracts with the directors and officers; and, provided, further, that we shall not be required to indemnify any director or officer in connection with any proceeding, or part thereof, initiated by such person unless such indemnification: (a) is expressly required to be made by law, (b) the proceeding was authorized by the board of directors, (c) is provided by us, in our sole discretion, pursuant to the powers vested us under Nevada law or (d) is required to be made pursuant to the bylaws.

Our bylaws provide that we will advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer, of Poly International, or is or was serving at the request of us as a director or executive officer of another company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefore, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under the bylaws or otherwise.

Our bylaws provide that no advance shall be made by it to an officer of Poly International except by reason of the fact that such officer is or was a director of Poly International in which event this paragraph shall not apply, in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made: (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (b) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of Poly International.

We are presently in the process of amending our articles to provide the protections to the directors and officers as described above.

Item 25. Other Expenses of Issuance and Distribution

We have, or will expend fees in relation to this registration statement as detailed below:

Expenditure Item	Amount
Attorney Fees	25,000
Audit Fees	7,000
Transfer Agent Fees	2,000
SEC Registration and Blue Sky Registration	1,000
Total	$35,000

35

Item 26. Recent Sales of Unregistered Securities

We have sold securities within the past three years without registering the securities under the Securities Act of 1933 on two occasions.

On  July 8, 2005, we issued a total of 2,700,000 shares of common stock to Metro Global Management Inc., a company incorporated pursuant to the laws of the State of Nevada.  

On September 1, 2005, we issued a total of 4,153,172 shares of common stock to two shareholders, James Benson as to 3,297,603 common shares and Nai Hong Li as to 855,569 common shares.

Both of these offerings were conducted pursuant to Regulation D of the Securities Act of 1933. Neither Poly International nor any person acting on its behalf offered or sold any of the securities by any form of general solicitation or general advertising. The securities sold are restricted shares; the purchasers were informed that the securities cannot be resold without the securities being registered under the Securities Act of 1933 or an exemption therefrom. Poly International exercised reasonable care to assure that the purchases were not underwritten within the meaning of section 2(a) (11) of this Act including but not limited to the placement of a restrictive legend on the certificates representing the shares, and the aggregate offering price was less that $1,000,000.

Item 27. Exhibits

Number	Description
3.1	Articles of Incorporation	Filed herewith
3.2	Bylaws	Filed herewith
5	Opinion re: Legality	Filed herewith
10.1	Share Exchange Agreement between Polygenetics International, Inc., James Benson, Nai Hong Li and Polygenetics Inc. dated September 1, 2005	Filed herewith
10.2	Sublease Agreement between Polygenetics Inc. and Sunstorm Research Corporation	Filed herewith
10.3	Financing Default License Agreement dated October 14, 2002, by and between Biopore Corporation (Polygenetics Inc.) and Sunstorm Research Corporation	Filed herewith
10.4	Loan and Security Agreement dated December 31, 2001, by and between Biopore Corporation (Polygenetics Inc.) and Sunstorm Research Corporation	Filed herewith
23.1	Consent of Attorney	Consent included in Exhibit 5
23.2	Consent of Independent Registered Public Accountants	Filed herewith

36

Item 28. Undertakings

Poly International hereby undertakes the following:

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(a)

To include any prospectus required by Section 10(a) (3) of the Securities Act of 1933;

(b)

To reflect in the prospectus any facts or events arising after the effective date of this registration statement, or most recent post-effective amendment, which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement; and

(c)

To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in the registration statement.

That, for the purpose of determining any liability under the Securities Act, each post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

To remove from registration by means of a post-effective amendment any of the securities being registered hereby which remain unsold at the termination of the offering.

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

In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of the directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of the directors, officers, or controlling persons in connection with the securities being registered, Poly International will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and Poly International will be governed by the final adjudication of such issue.

For determining liability under the Securities Act, to treat the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 424(b) (1) or (4) or 497(h) under the Securities Act as part of this Registration Statement as of the time the Commission declared it effective.

37

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Gatos, State of California on March 1^st, 2007.

POLYGENETICS INTERNATIONAL INC.

/s/ James Benson

James Benson

President, Principal Executive Officer

/s/ Kent Anderson

Kent Anderson

Chief Financial Officer, Principal Accounting Officer and Principal Financial Officer

In accordance with the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates stated.

/s/ James Benson

March 1, 2007

James Benson

Director

/s/ Kent Anderson

March 1, 2007

Kent Anderson

Director

/s/ Marco Bastidas

March 1, 2007

Marco Bastidas

Director

/s/ Jacqueline Danforth

March 1, 2007

Jacqueline Danforth

Director

38

EX-3

ARTICLES OF INCORPORATION

ENDORSED - FILED

In the office of the Secretary of State

        Of the State of California

JULY 8 2005

The name of the corporation is:  Polygenetics International Inc.

The Purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the GENERAL CORPORATION LAW of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

The name in the State of California of this corporation’s initial agent for service of process is:

Name:  Paracorp Incorporated

This corporation is authorized to issue only one class of shares of stock; and the total number of shares which this corporation is authorized to issue is 100,000,000

/s/ M. Powell

M. Powell, Incorporator

         OFFICE OF THE

THE GREAT SEAL OF THE STATE OF

              CALIFORNIA

   SECRETARY OF STATE

EX-3

BYLAWS FOR THE REGULATION OF

POLYGENETICS INTERNATIONAL INC.,

A California Corporation

(the “Corporation”)

ARTICLE I

Applicability

        Section 1.    Applicability of Bylaws.  These Bylaws govern, except as otherwise provided by statute or its articles of Incorporation, the management of the business and the conduct of the affairs of the Corporation.

ARTICLE II

Offices

        Section 1.  Principal offices.  The Board of Directors shall fix the location of the principal executive office of the Corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the Corporation has one or more business offices in this state, the Board of Directors shall designate a principal business office in the State of California.

        Section 2.  Change in Location or Number of offices. The Board of Directors may change any office from one location to another or eliminate any office or offices.

ARTICLE III

Meetings of Shareholders

        Section 1.  Place of Meetings.  Meetings of the shareholders shall be held at any place within or without the State of California designated by the Board of Directors, or, in the absence of such designation, at the principal executive office of the Corporation.

         Section 2.  Annual Meeting.  An annual meeting of the shareholders shall be held within 180 days following the end of the fiscal year of the Corporation at a date and time designated by the Board of Directors. Directors shall be elected at each annual meeting and any other proper business may be transacted thereat.

         Section 3.  Special Meetings.  

         (a)  Special meetings of the shareholders may be called by the Board of Directors, the Chairman of the Board and the President or by the shareholders upon the request of the holders of shares entitled to cast not less than 10 percent of the votes at such meeting.

         (b)  Any request for the calling of a special meeting of the shareholders shall (1) be in writing, (2) specify the date and time thereof, which date shall be not less than 35 nor more than 60 days after receipt of the request, (3) specify the general nature of the business to be transacted thereat and (4) be given either personally or by first-class mail, postage prepaid, or other means of written communication to the Chairman of the Board, President, any Vice President or Secretary of the Corporation. The officer receiving a proper request to call a special meeting of the shareholders shall cause notice to be given pursuant to the provisions of section 4 of this Article III to the shareholders entitled to vote thereat that a meeting will be held at the date and time specified by the person or persons calling the meeting. If notice is not given within 2 0 days of the receipt of the request, the shareholders making the request may give notice of such meeting so long as the notice given complies with the other provisions of this subsection.

         (c)  No business may be transacted at a special meeting unless the general nature thereof was stated in the notice of such meeting.

         Section 4.  Notice of Annual, Special or Adjourned Meetings.  

         (a)  Whenever any meeting of the shareholders is to be held, a written notice of such meeting shall be given in the manner described in subdivision (d) of this section not less than 10 nor more than 60 days before the date thereof to each shareholder entitled to vote thereat. The notice shall state the place, date and hour of the meeting and (1) in the case of a special meeting, the general nature of the business to be transacted or (2) in the case of the annual meeting, those matters which the Board of Directors, at the time of the giving of the notice, intends to present for action by the shareholders. The notice of any meeting at which directors are to be elected shall include the name of any nominees or nominees who, at the time of the notice, management intends to present for election.

         (b)  Any proper matter may be presented at an annual meeting for action. However, any action to approve (1) a contract or transaction in which a director has a direct or indirect financial interest under Section 310 of the California Corporations Code (the “Code”), (2) an amendment of the Articles of Incorporation under Section 902 of the code, (3) a reorganization of the Corporation under Section 1201 of the Code, (4) a voluntary dissolution of the Corporation under section 1990 of the code, or (5) a distribution in dissolution (other than in accordance with the rights of outstanding preferred shares) under Section 2007 of the Code may be taken only if the notice of the meeting states the general nature of the matter to be approved.

         (c)  Notice need not be given of an adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, except that if the adjournment is for more than 45 days or if after the adjournment a new record date is

#

provided for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at that meeting.

         (d)  Notice of any meeting of the shareholders shall be given personally, by first class mail, or by telegraph or other written communication, addressed to the shareholder at his address appears or is given, at the place where the principal executive office of the Corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. Notice shall be deemed to have been given at the time when delivered personally to the recipient, deposited in the mail, delivered to a common carrier for transmission to the recipient or sent by other means of written communication. An affidavit of the mailing or other means of giving notice may be executed by the secretary, assistant secretary or any transfer agent of the Corporation giving the notice and shall be prima facie ev idence of the giving of the notice. Such affidavits shall be filed and maintained in the minute books of the Corporation.

         (e)  If any notice or report addressed to the shareholder at his address appearing on the books of the Corporation is returned to the Corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice or report to the shareholder at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the shareholder upon his written demand at the principal executive office of the Corporation for a period of one year from the date of the giving of the notice or report to all other shareholders.

         Section 5.  Record Date.  

         (a)  The Board of Directors may fix a time in the future as a record date for determination of the shareholders who are (1) entitled to receive notice of any meeting or to vote thereat, (2) entitled to give written consent to any corporate action without a meeting, (3) entitled to receive payment of any dividend or other distribution or allotment of any rights or (4) entitled to exercise any rights in respect of any other lawful action. The record date so fixed shall be not more than 60 or less than 10 days prior to the date of any meeting of the shareholders, or more than 60 days prior to any other action.

         (b)  In the event no record date is fixed:

                 (1)  The record date for determining the shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the first written consent is given.

                 (2)  The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board of Directors has been taken, shall be the day on which the first written consent is given.

                 (3)  The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto, or the 60^th day prior to the date of such other action, whichever is later.

         (c)  Notwithstanding any transfer of any shares on the books of the Corporation after the record date, only shareholders of record on the close of business on the record date are entitled to receive notice and to vote, to give written consent, to receive a dividend, distribution or allotment of rights or to exercise rights, as the case may be

         (d)  A determination of shareholders of record entitled to receive notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than 45 days from the date set for the original meeting.

         Section 6.  Quorum.  

         (a)  A majority of the shares entitled to vote at a meeting of the shareholders, represented in person or by proxy, shall constitute a quorum for the transaction of business thereat.

         (b)  The shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

         Section 7.  Adjournment.    Any meeting of the shareholders may be adjourned from time to time whether or not a quorum is present by the vote of a majority of the shares represented thereat either in person or by proxy. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting.

           Section 8.  Validation of Actions Taken at Defectively Called, Noticed or Held Meetings.    

         (a)  The transactions of any meeting of the shareholders, however called and noticed and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote thereat, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. Any written waiver of notice shall comply with subdivision (f) of section 601 of the Code. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

         (b)  Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except (1) when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and (2) that attendance at a meeting is not a waiver of any right to object to the consideration of any matter required by the Code to be included in the notice but not so included, if such objection is expressly made at the meeting.

           Section 9.  Voting for Election of Directors.

         (a)  Except as provided in subdivision (c) of this section, the affirmative vote of the majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number is required by law or the Articles of Incorporation.

         (b)  Every shareholder complying with subdivision (c) of this section and entitled to vote at any election of directors may cumulate his votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which his shares are normally entitled, or distribute his votes on the same principle among as many candidates as he thinks fit.

         (c)  No shareholder shall be entitled to cumulate his votes (i.e., cast for any candidate a number of votes greater than the number of votes which such shareholder normally is entitled to cast) unless the candidate’s or candidates’ name(s) for which he desires to cumulate his votes has or have been placed in nomination prior to the voting and the shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination.

         (e)  Elections for directors may be by voice vote or by ballot unless any shareholder entitled to vote demands election by ballot at the meeting prior to the voting, in which case the vote shall be by ballot.

           Section 10.  Proxies.

         (a)  Every person entitled to vote shares may authorize another person or persons to act with respect to such shares by a written proxy signed by him or his attorney-in-fact and filed with the secretary of the Corporation. A Proxy shall be deemed signed if the shareholders name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by him or his attorney-in-fact.

         (b)  Any validly executed proxy, except a proxy which is irrevocable pursuant to subdivision (c) of this Section 10, shall continue in full force and effect until the expiration of the term specified therein or upon its earlier revocation by the person executing it prior to the vote pursuant thereto (1) by a writing delivered to the Corporation stating that it is revoked, (2) by written notice or the death of the person executing the proxy, delivered to the Corporation, (3) by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting or (4) as to any meeting, by attendance at such meeting and voting in person by the person executing the proxy. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. The date contained on the form of proxy shall be deeme d to be the date of its execution.

         (c)  A proxy which states that it is irrevocable is irrevocable for the period specified therein subject to the provisions of subdivisions (e) and (f) of Section 705 of the Code.

           Section 11.  Inspectors of Election.

         (a)  In advance of any meeting of the shareholders, the Board of Directors may appoint either one or three persons (other than nominees for the office of director) as inspectors of election to act at such meeting or any adjournments thereof. If inspectors of election are not so appointed, or if any person so appointed fails to appear or refuses to act, the chairman of any such meeting may, and on the request or any shareholder or his proxyholder shall, appoint inspectors of election (or persons to replace those who so fail or refuse to act) at the meeting. If appointed at a meeting on the request of one or more shareholders or the proxyholders thereof, the majority of shares represented inspectors are to be appointed.

         (b)  The duties of inspectors of election and the manner of performance thereof shall be as prescribed in subdivisions (b) and (c) of Section 707 of the Code.

         Section 12.  Action by Written Consent.

         (a)  Subject to subdivisions (b) and (c) of this section, any action which may be taken at any annual or special meeting of the shareholders may be taken without a meeting, without a vote and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the Secretary of the Corporation and maintained with the corporate records.

          (b)  Except for the election of a director by written consent to fill a vacancy on the Board of Directors (other than a vacancy created by removal), directors may be elected by written consent only by the unanimous written consent of all shares entitled to vote for the election of directors. In the case of an election of a director by written consent to fill a vacancy (other than a vacancy created by removal), any such election requires the consent of a majority of the outstanding shares entitled to vote for the election of directors.

          (c)  Unless the consents of all shareholders entitled to vote have been solicited in writing, the Secretary of the Corporation shall give prompt notice of the corporate action approved by the shareholders without a meeting. This notice shall be given in the manner specified in subdivision (d) of Section 4 of this Article III. In the case of approval of (1) contracts or transactions in which a director has a direct or indirect financial interest under Section 310 of the Code, (2) indemnification of agents of the Corporation under Section 317 of the Code, (3) a reorganization of the Corporation under Section 1201 of the Code, or (4) a distribution in dissolution (other than in accordance with the rights of outstanding preferred shares) under Section 2007 of the Code, notice of such approval shall be given at least ten (10) days before the consummati on of any action authorized by that approval.

          (d)  Any shareholder giving a written consent, or his proxyholder, or a transferee of the shares or a personal representative of the shareholder or their respective proxyholders, may revoke the consent by a writing received by the Corporation prior to the time that written consents of the number of shares required to authorize the proposed action have been filed with the Secretary of the Corporation, but may not do so thereafter. Such revocation is effective upon its receipt by the Secretary of the Corporation.

ARTICLE IV

Directors

         Section 1.  Number of Directors.

        (a)  The exact number of directors shall be no less than three and no more than nine.

        (b)  The authorized number of directors may only be changed by an amendment of this Section I or of the Articles of Incorporation approved by the vote or written consent of a majority of the outstanding shares entitled to vote; provided, however, that an amendment reducing the minimum number of directors to a number less than five (5) shall not be adopted if the votes cast against its adoption at a meeting (or the shares not consenting in the case of action by written consent) exceed 16-2/3% of such outstanding shares.

         Section 2.  Election of Directors.  Directors shall be elected at each annual meeting of the shareholders.

         Section 3.  Term of office.  Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which he is elected and until a successor has been elected and qualified.

         Section 4.  Vacancies.

         (a)  A vacancy on the Board of Directors exists whenever any authorized position of director is not then filled by a duly elected director, whether caused by death, resignation, removal, change in the authorized number of directors or otherwise.  

         (b)  Except for a vacancy created by the removal of a director, vacancies on the Board of Directors may be filled by a majority of the directors then in office, or, if the number of directors then in office is less than a quorum, by (1) the unanimous written consent of the directors then in office, (2) the affirmative vote of the majority of the directors then in office at a meeting held pursuant to notice or waivers of notice or (3) a sole remaining director. A vacancy created by the removal of a director shall be filled only by a person elected by a majority of the shareholders entitled to vote at a duly held meeting at which there is a quorum present or by the unanimous written consent of the holders of the outstanding shares entitled to vote at such a meeting.

         (c)  The shareholders may elect a director at any time to fill any vacancy not filled by the directors.

         Section 5.  Removal.

         (a)  The Board of Directors may declare vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony.

         (b)  Any or all of the directors may be removed without cause if such removal is approved by a majority of the outstanding shares entitled to vote; provided, however, that no director may be removed (unless the entire Board of Directors is removed) whenever the votes cast against his removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively at an election at which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of his most recent election were then being elected; and provided, further, if the Corporation’s Articles of Incorporation provide that the shareholders of any class or series, voting as a class or series, are entitled to elect one or more dir ectors, any director so elected may be removed only by the applicable vote of the shareholders of such class or series.

         (c)  Any reduction of the authorized number of directors does not remove any directors does not remove any director prior to the expiration of his term of office.

         (d)  A director may not be removed prior to the expiration of his term office except as provide in this section and except as ordered by the superior court of the proper county at the suit of shareholders of at least 10 percent of the outstanding shares of any class.

         Section 6.  Resignation.  Any director may resign effective upon giving written notice to the Chairman of the Board. The President, the Secretary or the Board of Directors of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

         Section 7.  Fees and Compensation.  Directors may be paid for their services in such capacity a sum in such amounts, at such times and upon such conditions as may be determined from time to time by resolution of the Board of Directors and may be reimbursed for their expenses, if any, for attendance at each meeting of the Board. No such payments shall preclude any director from serving the Corporation in any other capacity and receiving compensation in any manner therefore.

ARTICLE IV

Committees of the Board of Directors

         Section 1.  Designation of Committees.  The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate (a) one or more committees, each consisting of two or more directors and (b) one or more directors as alternate members of any committee, who may replace any absent member at ant meeting thereof. Any member r alternate member of a committee shall serve at the pleasure of the Board.

         Section 2.  Powers of Committees.  Any committee, to the extent provided in the resolution of the Board of Directors designating such committee, shall have all the authority of the Board, except with respect to:

         (a)  The approval of any action for which the Code also requires any action by the shareholders;

         (b)  The filling of vacancies on the Board or in any committee thereof;

         (c)  The fixing of compensation of the directors for serving on the Board or on any committee thereof;

         (d)  The amendment or repeal of these Bylaws or the adoption of new bylaws;

         (e)  The amendment or repeal of any resolution of the Board which by its express terms is not so amendable or repeatable;

         (f)  A distribution to the shareholders of the Corporation, except at a rate, in a periodic amount or within a price range determined by the Board of Directors; or

         (g)  The designation of other committees of the Board or the appointment of members or alternate members thereof.

ARTICLE VI

Meetings of the Board of Directors

And Committees Thereof

           Section 1.  Place and Meetings.  Regular meetings of the Board of Directors shall be held at any place within or without the State of California which has been designated from time to time by the Board or, in the absence of such designation, at the principal executive office of the Corporation. Special meetings of the Board shall be held either at any place within or without the State of California which has been designated in the notice of meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the Corporation.

          Section 2.  Annual Meeting.  Immediately following each annual meeting of the shareholders, the Board of Directors shall hold a regular meeting for the purpose of organization and the transaction of other business. Notice of any such meeting is not required.

          Section 3.  Other Regular Meetings.  Other regular meetings of the Board of Directors shall be held without call at such time as shall be designated from time to time by the Board. Notice of any such meeting is not required.

          Section 4.  Special Meetings.  Special meetings of the Board of Directors may be called at any time for any purpose or purposes by the Chairman of the Board or the President or any Vive President or the Secretary or any two directors of the Corporation. Notice shall be given of any special meeting of the Board.

          Section 5.  Notice of Special Meetings.  Notice of the time and place of special meetings of the Board of Directors shall be delivered personally or by telephone to each director or sent to each director by first-class mail or telegraph, charges prepaid, addressed to each director at that director’s address as shown on the records of the Corporation. Such notice shall be given four days prior to the holding of the special meeting if sent by mail or 48 hours prior to the holding thereof if delivered personally or given by telephone or telegraph. The notice or report shall be deemed to have been given at the time when delivered personally to the recipient or deposited in the mail or sent by other means of written communication. Notice of any special meeting of the Board of Directors need not specify the purpose thereof .

          Section 6.  Waivers, Consents and Approvals.  Notice of any meeting of the Board of Directors need not be given to any director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

          Section 7.  Quorum; Action at Meetings; Telephone Meetings.

         (a)  A majority of the authorized number of directors shall constitute a quorum for the transaction of business. Every act or decision done or made by a majority of the directors present is the act of the Board of Directors, unless action by a greater proportion of the directors is required by law or the Articles of Incorporation.

         (b)  A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.

         (c)  Members of the Board of Directors may participate in a meeting through use of conference telephone or similar communications equipment so long as all members participating in such meeting can hear one another.

          Section 8.  Adjournment.  A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than 24 hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment.

          Section 9.  Action without a Meeting.  Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors.

          Section 10.  Meetings of and Action by Committees.  The provisions of this Article VI apply to committees of the Board of Directors and action by such committees with such changes in the language of those provisions as are necessary to substitute the committee and its members for the Board and its members.

ARTICLE VII

Officers

          Section 1.  Officers.  The Corporation shall have as officers, a President, a Secretary and a Chief Financial Officer. The Corporation may also have, at the discretion of the Board, a Chairman of the Board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article VII. One person may hold two or more offices.

          Section 2.  Election of officers.  The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article VII shall be chosen by the Board of Directors.

          Section 3.  Subordinate officers, Etc.  The Board of Directors may appoint by resolution, and may empower the Chairman of the Board, if there be such an officer, or the President, to appoint such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are determined from time to time by resolution of the Board or, in the absence of any such determination, as are provided in these Bylaws. Any appointment of an officer shall be evidenced by a written instrument filed with the Secretary of the Corporation and maintained with the corporate records.

          Section 4.  Removal and Resignation.

         (a)  Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board of Directors or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by resolution of the Board.

         (b)  Subject to the rights, if any, of the Corporation under any contract of employment, any officer may resign at any time effective upon giving written notice to the Chairman of the Board, President, any Vice President or the Secretary of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation.

          Section 5.  Vacancies.  A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to such office.

          Section 6.  Chairman of the Board.  If there is a Chairman of the Board, he shall, if present, preside at all meetings of the Board of Directors, exercise and perform such other powers and duties as may be from time to time assigned to him by resolution of the Board or prescribed by these Bylaws and, if there is no president, the Chairman of the Board shall be the chief executive officer of the Corporation and have the power and duties set forth in Section 7 of this Article VII.

          Section7.  President.  Subject to such supervisory powers, if any, as may be given by these Bylaws or the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the chief executive officer and general manager of the Corporation and shall, subject to the control of the Board, have general. Supervision, direction and control of the business and affairs of the Corporation. He shall preside at all meetings of the shareholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board. He shall have the general powers and duties of management usually vested in the officer of president of a corporation, and shall have such other powers and duties as may be prescribed from time to time by resolution of the Board.

          Section 8.  Vice President.  In the event of the absence or disability of the president. In the event of the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or, if not ranked, the Vice President designated by the Board, shall perform all the duties of the President, and when so acting shall have all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board or as the President may from time to time delegate.

          Section 9.  Secretary.

         (a)  The Secretary shall keep or cause to be kept (1) the minute book, (2) the share register and (3) the seal, if any, of the Corporation.

         (b)  The Secretary, an assistant secretary, or if they are absent or unable to act, any other officer shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by these Bylaws or by law to be given, and shall have such other powers and perform such other duties as may be prescribed from time to time by the Board of Directors or any committee of the Board of Directors.

          Section 10.  Chief Finacial Officer.

         (a)  The Chief Financial Officer shall keep, or cause to be kept, the books and records of account of the Corporation.

         (b)  The chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositories as may be designated from time to time by resolution of the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and the Board, whenever they request it, an account of all of his transactions As Chief Financial officer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed from time to time by the Board or as the President may from time to time delegate.

ARTICLE VIII

Records and reports

          Section 1.  Minute Book.  The Corporation shall keep or cause to be dept in written form at its principal executive office or such other place as the Board of Directors may order, a minute book which shall contain a record of all actions by its shareholders, Board or committees of the Board including the time, date and place of each meeting; whether a meeting is regular or special and, if special, how called; the manner of giving notice of each meeting and a copy thereof; the names of those present at each meeting of the Board or committees thereof; the number of shares present or represented at each meeting of the shareholders; the proceedings of all meetings; any written waivers of notice, consents to the holding of a meeting or approvals of the minutes thereof; and written consents for action without a meeting.

          Section 2.  Share Register.  The Corporation shall keep or cause to be kept at its principal executive office or, if so provided by resolution of the Board of Directors, at the Corporation’s transfer agent or registrar, a share register, or a duplicate share register, which shall contain the names of the shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation.

          Section 3.  Books and Records of Account.  The Corporation shall keep or cause to be kept at its principal executive office or such other place as the Board of Directors may order, adequate and correct books and records of account.

          Section 4.  Bylaws.  The Corporation shall keep at its principal executive office or, in the absence of such office in state of California, at its principal business office in the state, the original or a copy of the Bylaws as amended to date.

          Section 5.  Inspection of Records.  The shareholders and directors of the Corporation shall have all of the rights to inspect the books and records of the Corporation that are specified in Sections 213 and 1600 through 1602 of the Code.

          Section 6.  Annual Report to Shareholders.  So long as the Corporation has less than 100 holders of record of its shares, the annual report to the shareholders described in Section 1501 of the Code is expressly dispensed with, but nothing herein shall be interpreted as prohibiting the Board of Directors from issuing annual or other periodic reports to the shareholders of the Corporation as it sees fit.

ARTICLE IX

Miscellaneous

          Section 1.  Checks, Drafts, Etc.  All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, and any assignment or endorsement thereof, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors.

          Section 2.  Contracts, Etc. – How Executed.  The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, agent or agents, to  enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and, unless so authorized or ratified by the Board, no officer, employee or other agent shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount.

          Section 3.  Certificates of Stock.  A certificate or certificates for shares of the capital stock of the Corporation shall be issued to each shareholder when the shares are fully paid or the Board of Directors may authorize the issuance of certificates for shares as partly paid provided that these certificates shall conspicuously state the amount of the consideration to be paid for them and the amount already paid. All certificates shall be signed in the name of the Corporation by the Chairman of the Board of the President or a Vice President and by the Chief Financial Officer or an assistant treasurer or the Secretary or an assistant secretary, certifying the number of shares and the class or series thereof owned by the shareholder. Any or all of the signatures on a certificate may be by facsimile signature. In the event any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

          Section 4.  Lost Certificates.  Except as provided in this section, no new certificate for shares shall be issued in lieu of an old certificate unless the latter is surrendered to the Corporation and canceled at the same time. The Board of Directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of a new certificate in lieu thereof, upon such terms and conditions as the Board may require, including provision for indemnification of the Corporation secured by a bond or other adequate security sufficient to protect the Corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate.

          Section 5.  Representation of Shares of Other Corporations.  Any person designated by resolution of the Board of Directors or, in the absence of such designation, the Chairman of the Board, the President or any Vice President, or by any other person authorized by any of the foregoing, is authorized to vote on behalf of the Corporation any and all shares of any other corporation or corporations, foreign or domestic, owned by the Corporation.

          Section 6.  Construction and Definitions.  Unless the context otherwise requires, the general provisions, rules of construction and definitions contained in the California Corporations Code shall govern the construction of these Bylaws.

          Section 7.  Indemnification of Corporate Agents; Purchase of Liability Insurance.

         (a)  Subject only to the express limitations of the Corporation’s Articles of Incorporation and Sections 204 and 317 of the Code, as the same may from time to time be amended, (i) the Corporation shall indemnify each of its directors and officers from and against any expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding to which such person was or is a party or is threatened to be made a party arising by reason of the fact that such person is or was a director or officer of the Corporation; and (ii) the Corporation may indemnify any other agent of the Corporation with respect to such proceedings and to the extent the Board of Directors so determines by resolution.

         (b)  The Corporation shall, if and to the extent the Board of Directors so determines by resolution, enter into indemnification agreements with its agents on the terms and conditions determined by the Board of Directors, subject to those limitations upon the Corporation’s capacity to indemnify its agents set forth in the Corporation’s Articles of Incorporation and Sections 204 and 317 of the Code, as the same may from time to time be amended.

         (c)  Subject to the provisions of subdivision (i) of Section317 of the Code, as the same may from time to time be amended, the Corporation shall, if and to the extent the Board of Directors so determines by resolution, purchase and maintain insurance in an amount and on behalf of such agents of the Corporation as the Board may specify in such resolution against any liability asserted against or incurred by the agent in such capacity or arising out of the agent’s status as such whether or agent against such liability under the provisions of this section 7.

         (d)  The Corporation shall, if and to the extent the Board of Directors so determines by resolution, advance expenses incurred by an agent in defending any proceeding prior to the final disposition of such proceeding, subject to the provisions of subdivision (f) of Section 317 of the Code, as the same may from time to time be amended.

         (e)  This Section 7 shall not apply to any proceeding against any trustee, investment manager or other fiduciary of an employee benefit plan in such person’s capacity as such, even though such person may be an agent, as defined in subdivision (f) hereof.

         (f)  For purposes of this Section 7, and “agent” of the Corporation includes any person who is or was a director, officer, employee or other agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation; “Proceeding” means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative, and includes an action or proceeding by or in the right of the Corporation to procure a judgment in its favor; and “expenses” includes, without limitation, attorneys fees and any expenses of establishing a right to indemnification under subdivisions (d) or (e) (4) of Section 317 of the Code.

ARTICLE X

Amendments

          Section 1.  Amendments.  New bylaws may be adopted or these Bylaws may be adopted or these Bylaws may be amended or repealed by the approval of an affirmative vote of a majority of the outstanding shares entitled to vote or by the Board of Directors. Notwithstanding the preceding sentence, the adoption of a bylaw (a) specifying or changing a fixed number of directors or the minimum or maximum number of directors, or (b) changing from a fixed to a variable board or vice versa may only be adopted by the approval of an affirmative vote of a majority of the outstanding shares, subject to the provisions of Section I of Article IV of these Bylaws.

DATED effective as of the 8^th day of July, 2005

                                                                        /s/ Marco Bastidas

                                                                        Marco A. Bastidas, President and Secretary

EX-5

LAWLER & ASSOCIATES

a professional law corporation

41877 Enterprise Circle North, Suite 220

Temecula, California 92592

Telephone: 951-506-8888

Facsimile: 951-506-8877

  W. Scott Lawler, Esq.

Admitted in California and Utah

February 23, 2007

Board of Directors

POLYGENETICS INTERNATIONAL INC.

15143 Kennedy Road

Los Gatos, CA 95032

Dear Board Members:

Polygenetics International Inc., a California corporation (the “Company”), has asked me to opine on the legality of the issuance of up to 500,000 shares of common stock in connection with the registration under the Securities Act of 1933 (the “Securities Act”) of such 500,000 shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”), as described below.  A registration statement on Form SB-2 has been prepared by the Company and will be filed with the Securities and Exchange Commission on or about February 23, 2007 (the “Registration Statement”).  This opinion shall be filed with the Registration Statement.

The Registration Statement seeks the registration of 500,000 shares of the Common Stock (the “Registered Shares”).  The Registered Shares are to be offered to the public by the Company on a best efforts basis without the use of any underwriters.

In connection with rendering this opinion I have examined copies of the Registration Statement and all exhibits thereto as well as the amendments to the Registration Statement.  I have also examined and relied upon the original, or copies certified to my satisfaction, of (i) the Articles of Incorporation and the Bylaws of the Company, (ii) minutes and records of the corporate proceedings of the Company with respect to the issuance of the Registered Shares and related matters, and (iii) such other agreements and instruments relating to the Company as I deemed necessary or appropriate for purposes of the opinion expressed herein.  In rendering such opinion, I have made such further investigation and inquiries relevant to the transactions contemplated by the Registration Statement as I have deemed necessary for the opinion expressed herein, and I have relied, to the extent I deemed reas onable, on certificates and certain other information provided to me by officers of the Company and public officials as to matters of fact of which the maker of such certificate or the person providing such other information had knowledge.

Furthermore, in rendering my opinion, I have assumed that the signatures on all documents examined by me are genuine, that all documents and corporate record books submitted to me as originals are accurate
and complete, and that all documents submitted to me are true, correct and complete copies of the originals thereof.

Based upon the foregoing, I am of the opinion that the Registered Shares have been duly and validly authorized by the Company and that the Registered Shares will be legally and validly issued upon the effectiveness of the Company’s Registration Statement for such shares on Form SB-2.

I hereby consent to the filing of this opinion as an exhibit to the Registration Statement.

Sincerely,

/s/ W. Scott Lawler

W. Scott Lawler

EX-10

SHARE EXCHANGE AGREEMENT

           THIS SHARE EXCHANGE AGREEMENT (this “Agreement”), dated September 1, 2005, is made and entered into by and among James Benson, an individual residing in the State of California; Nai Hong Li, an individual residing in the State of California;  (hereinafter the “Shareholders”); POLYGENETICS INTERNATIONAL, INC., a corporation  incorporated and existing pursuant to the laws of the State of California; (hereinafter “Poly International”) and POLYGENETICS, INC., a corporation incorporated and existing pursuant to the laws of the State of California (hereinafter “Poly Inc.”)

RECITALS

           This Agreement is made and entered into with respect to and in reliance upon the following facts:

      A.  Poly Inc. is a California corporation having a registered office address of 15143 Kennedy Road, Los Gatos, CA 95032 engaged in the business of developing and licensing advanced porous polymers for pharmaceutical and bio-medical applications.

A.

The Shareholders are the registered and beneficial owners of 2,768,791 common shares of Poly, Inc, (the “Shareholders Shares”) from a total of  5,035,473common and preferred shares (the “Poly Inc. Shares”);

B.

Poly International is a California  corporation which will file an SB-2 to register its shares  with the U.S. Securities and Exchange Commission, having an office address of 41877 Enterprise Circle N., Suite 220, Temecula, California 92590;

C.

Poly International desires to acquire the Shareholders Shares by issuing shares of Poly International common stock and exchanging them for the Shareholders Shares on the basis of three shares of Poly International  for each two shares of Poly Inc., from the Shareholders, for a total of  4,153,187 common shares to be issued by Poly International (the “Poly International Shares”) to the Shareholders; and

D.

The parties to this Agreement wish to acknowledge that Poly International will use all reasonable efforts to offer to acquire by share exchange or arrangement, from the remaining shareholders of Poly Inc. (the “Remaining Shareholders”) their shares of Poly Inc. (the “Remaining Shares”) based on an offer of three (3) shares of Poly International for every two shares of Poly Inc. held by Remaining Shareholders.

NOW THEREFORE THIS AGREEMENT WITNESSES that for and in consideration of the mutual premises and the mutual covenants and agreements contained herein, the parties covenant and agree each with the other as follows:

ARTICLE I

DEFINITIONS

Section 1.01.   The following terms shall have the following respective meanings in this Agreement:

(a)

“Closing Date” shall mean on or before September 5, 2005 or any other date that the parties hereto agree to in writing;

(b)

 “Poly Inc. Counsel” shall mean The Freed Law Firm of 18510 Decatur Road, Monte Sereno, California;

(c)

“Share Exchange” shall mean the transfer, by the Shareholders, of the Shareholders  Shares to Poly International in exchange for the issuance and delivery, by Poly International of the Poly International Shares to the Poly Inc. Shareholders;

(d)

 “Poly International Counsel” shall mean the law firm of Lawler & Associates of 41877 Enterprise Circle N., Suite 220, Temecula, California 92590.

ARTICLE II

THE SHARE EXCHANGE

Section 2.01.

Exchange.  Subject to the terms and conditions of this Agreement, on the Closing Date, the Shareholders agree to transfer and deliver the Poly Inc. Shares to Poly International in exchange for Poly International issuing and delivering to the Shareholders the Poly International Shares, as set forth in Schedule 2.01, and as referred to in Sections 10.02 and 10.03, and Poly International agrees to transfer to the Shareholders 4,153,187 Poly International Shares in exchange for the Shareholders’ transfer to Poly International of the Poly Inc. Shares, as set forth in Schedule 2.01, and as referred to in Sections 10.02 and 10.03.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF POLY INC.

Poly Inc. and the Shareholders hereby severally, but not jointly represent and warrant, and in the case of the Shareholders to the best of their knowledge only, subject to the exceptions set forth on the attached Schedule III (the “Schedule of Exceptions”) to Poly International as follows:

Section 3.01.

Organization, Standing and Authority; Qualification.

(a)

Poly Inc. is a corporation duly organized, validly existing and in good standing under the laws of the State of California with all requisite corporate power and authority to enter into, and perform the obligations under the Agreement.  Poly Inc. has all requisite corporate power and authority to own, lease and operate its assets, properties and business and to carry on its business as now being and as heretofore conducted.

(b)

Poly Inc. is duly qualified or otherwise authorized to transact business and is in good standing in the jurisdiction of the State of California, which is the only jurisdiction in which such qualification or authorization is required by law.  No other jurisdiction has claimed, in writing or otherwise, that Poly Inc. is required to qualify or otherwise be

2

licensed therein.  Poly Inc. does not file any franchise, income or other tax returns in any other jurisdiction based upon the ownership or use of property therein or the derivation of income therefrom.  

Section 3.02.

Capitalization.   

(a)

The authorized capital stock of Poly Inc. consists of 20,000,000 shares of common stock and 5,000,000 shares of preferred stock of which 250,000 are Series A Preferred, 750,000 are Series B Preferred and 500,000 are Series C Preferred.  At the close of business on the date of this Agreement, 3,808,050 shares of Poly Inc. common stock and 1,227,413 shares of Poly Inc. preferred stock were outstanding and there were not issued and outstanding any securities, including bonds, notes or indentures, having the right to vote on any matters on which Poly Inc.’s shareholders may vote.

(b)

The Poly Inc. Shares are duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights.  The Shareholders have all requisite rights, power and authority to enter into this Agreement and to carry out and perform the transactions contemplated hereby.

Section 3.03.

Corporate Status of Poly Inc.

(a)

Poly Inc. has heretofore delivered to Poly International true, correct and complete copies of the Certificate or Articles of Incorporation (certified by the State of California) and By-laws or comparable instruments (certified by the corporate secretary thereof) of Poly Inc.  

(b)

The minute books of Poly Inc. accurately reflect all actions taken at all meetings and consents in lieu of meetings of its stockholders, and all actions taken at all meetings and consents in lieu of meetings of each of their boards of directors and all committees.

Section 3.04.

Execution and Delivery.  Poly Inc. has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Poly Inc. and thereby constitutes a valid and binding agreement, enforceable against Poly Inc. in accordance with its terms subject to (i) applicable bankruptcy, insolvency, reorganization or others laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies.

Section 3.05.

Consents and Approvals.  The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein have been duly authorized by all necessary corporate action by Poly Inc and do not require Poly Inc. to obtain any consent, approval or action of, or make any filing with or give any notice to, any person or entity.  

Section 3.06.  No Conflict.  The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

(a)

violate any provision of the Articles or Certificate of Incorporation, By-laws or other charter or organizational document of Poly Inc.;

3

(b)

violate, conflict with or result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both, constitute) a default under, any contract or agreement to which Poly Inc. is a party to by or to which any of them or any of their respective assets or properties may be bound or subject;

(c)

violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon Poly Inc. or upon the Poly Inc. Shares or the properties or business of Poly Inc.;

(d)

violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to Poly Inc.; or

(e)

result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license.

Section 3.07.

Options or Other Rights.

(a)

There is no outstanding right, subscription, warrant, call, unsatisfied preemptive right, option, contract or other agreement of any kind to purchase or otherwise to receive from Poly Inc. any of the outstanding, unauthorized or treasury shares of the Common Stock of Poly Inc.,  other than those disclosed in or pursuant to this Agreement; and

(b)

there is no outstanding security of any kind convertible into any common shares of Poly Inc., and, except as aforesaid, there is no outstanding contract or other agreement to purchase, redeem or otherwise acquire any of the Poly Inc. Shares.

Section 3.08.

Poly Inc. Financial Statements.  

(a)

Poly Inc. has, or will have prior to the Closing Date, provided to Poly International the financial statements of Poly Inc., for the period ended December 31, 2004, audited by an independent accounting firm registered with the Public Company Accounting Oversight Board and financial statements for the interim period ended September 30, 2005 ( together the “Poly Inc. Financial Statements”).

(b)

The Poly Inc. Financial Statements shall be true, correct and complete in all material respects and fairly present the financial condition of Poly Inc. and its subsidiaries and the results of its operations for the period then ended and shall be prepared in conformity with United States generally accepted accounting principles applied on a consistent basis.

Section 3.09.

Material Information.

(a)

This Agreement, the Schedules hereto, the Poly Inc. Financial Statements and all other information provided in writing by Poly Inc., or representatives thereof, to Poly International, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make any statement contained herein or therein not misleading.

(b)

There are no facts or conditions, which have not been disclosed to Poly International in writing, which, individually or in the aggregate, could have a material adverse effect on Poly Inc. or a material adverse effect on the ability of Poly Inc. to perform any of its obligations pursuant this Agreement.

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Section 3.10.

Absence of Certain Changes.  Since

the date of the Poly Inc. Financial Statements, there has been no event, change or development which could have a material adverse effect on the business, properties, financial position or results of operations of Poly Inc.

Section 3.11.

Undisclosed Liabilities.  Except as reflected or reserved against in the Poly Inc. Financial Statements, as of and for the period reflected therein, Poly Inc. was not on that date subject to, and since that date Poly Inc.  has not incurred, any direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise, of a kind required by generally accepted accounting principles to be reflected or reserved against on a financial statement (“Liabilities”), which individually or in the aggregate exceeds $100,000.

Section 3.12.  Operations of Poly Inc..  Except as contemplated by this Agreement, since the date of the Poly Inc. Financial Statements, Poly Inc. has not:

(a)

amended its Certificate or Articles of Incorporation or By-laws or merged with or into or consolidated with any other person or entity, subdivided or in any way reclassified any shares of its capital stock or changed or agreed to change in any manner the rights of its outstanding capital stock or the character of its business;

(b)

issued, reserved for issuance, sold or redeemed, repurchased or otherwise acquired, or issued options or rights to subscribe to, or entered into any contract or commitment to issue, sell or redeem, repurchase or otherwise acquire, any shares of its capital stock or any bonds, notes, debentures or other evidence or indebtedness;

(c)

incurred any indebtedness for borrowed money or incurred or assumed any other liability in excess of $100,000 in any one case (or, in the aggregate, in the case of any related series of occurrences) or $250,000 in the aggregate;

(d)

  declared or paid any dividends or declared or made any other distributions of any kind to its shareholders;

(e)

  made any change in its accounting methods or practices or made any change in depreciation or amortization policies, except as required by law or generally accepted accounting principles;

(f)    made any loan or advance to any of  its shareholders or to any of its directors, officers or employees, consultants, agents or other representatives, or made any other loan or advance, otherwise than in the ordinary course of business;

 (g)

   entered into any lease (as lessor or lessee) under which Poly Inc. is obligated to make or would receive payments in any one year of $50,000 or more;

(h)     sold, abandoned or made any other disposition of any of its assets or properties;

(i)     granted or suffered any lien on any of its assets or properties;

(j)   entered into or amended any contracts to which it is a party, or by or to which it or its assets or properties are bound or subject which if existing on the date hereof would be required to be disclosed in Section 3.16;

(k)  made any acquisition of all or a substantial part of the assets, properties, securities or business of any other person or entity;

(l)   paid, directly or indirectly, any of its material liabilities before the same became due in accordance with its terms or otherwise than in the ordinary course of business;

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(m)  terminated or failed to renew, or received any written threat (that was not subsequently withdrawn) to terminate or fail to renew, any contract that is or was material to the assets, liabilities, business, property, operations, prospects, results of operations or condition (financial or otherwise of Poly Inc.); or

(n) entered into any other contract or other transaction that materially increases the liabilities of Poly Inc.

Section 3.13.

Compliance with Laws.  Poly Inc. is not in violation of any applicable order, judgment, injunction, award or decree nor is it in violation of any Federal, provincial, local or foreign law, ordinance or regulation or any other requirement of any governmental or regulatory body, court or arbitrator, other than those violations which, in the aggregate, would not have a material adverse effect on Poly Inc.  Poly Inc. has not received written notice that any violation is being alleged, or received written notice that any investigation or review by any governmental entity or agency is pending or threatened.

Section 3.14.  Permits and Licences  

(a)

Poly Inc. has all permits and licenses that are necessary for the ownership and conduct of its business, and such permits and licenses are or, shall be, in full force and effect and are or, shall be, sufficient for the ownership and conduct of such business;

(b)

No violations exist or have been recorded in respect of any such permit or license; and, to the best of Poly Inc.’s knowledge, no proceeding is pending or threatened that would suspend, revoke or limit any such permit or license.

Section 3.15. Actions and Proceedings.  

(a)

There are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against or involving Poly Inc., or against or involving any of the Poly Inc. Shares; and

(b)

To the best of Poly Inc.’s knowledge, there are no actions, suits or claims or legal, regulatory, administrative or arbitration proceedings pending or threatened against or involving Poly Inc. or any of the Poly Inc. Shares.

Section 3.16.  Contracts.  

(a)

There have been delivered or made available to Poly International true, correct and complete copies of each of the contracts set forth in Schedule 3.16 or in any other Schedule.  Each such contract is valid, subsisting, in full force and effect and binding upon the parties thereto in accordance with its terms, and Poly Inc. is not in default in any respect under any of them; and

(b)

Without limiting the generality of section 3.16(a), Poly Inc. is not a party to any:

(i)

contracts with any current or former officer, director, employee, consultant, agent or other representative which is not disclosed on Schedule  III appended hereto;

(ii)

contracts for the purchase or sale of equipment or services that contain an escalation, renegotiation or re-determination clause or that can be cancelled without liability, premium or penalty only on ninety days’ or more notice;

(iii)

contracts for the sale of any of its assets or properties or for the grant to any person of any preferential rights to purchase any of its or their assets or properties;

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(iv)

contracts (including with limitation, leases of real property) calling for an aggregate purchase price or payments in any one year of more than $100,000 in any one case (or in the aggregate, in the case of any related series of contracts);

(v)

contracts relating to the acquisition by Poly Inc. of any operating business of, or the disposition of any operating business by, any other person;

(vi)

executory contracts relating to the disposition or acquisition of any investment or of any interest in any person;

(vii)

joint venture contracts or agreements;

(viii)

contracts under which Poly Inc. agrees to indemnify any party, other than in the ordinary course of business or in amounts not in excess of $100,000, or to share tax liability of any party;

(ix)

contracts containing covenants of Poly Inc. not to compete in any line of business or with any person in any geographical area or covenants of any other person not to compete with  Poly Inc. in any line of business or in any geographical area;

(x)

contracts relating to the making of any loan by Poly Inc.;

(xi)

contracts relating to the borrowing of money by Poly Inc. or the direct or indirect guaranty by Poly Inc. of any obligation for, or an agreement by Poly Inc. to service, the repayment of borrowed money, or any other contingent obligations in respect of indebtedness of any other Person, including, without limitation,

(1)

any contract with respect to lines of credit;

(2)

any contract to advance or supply funds to any other person other than in the ordinary course of business;

(3)

any contract to pay for property, products or services of any other person even if such property, products or services are not conveyed, delivered or rendered;

(4)

any keep-well, make-whole or maintenance of working capital or earnings or similar contract; or

(5)

any guarantee with respect to any lease or other similar periodic payments to be made by any other person;

(xiii)

contracts for or relating to computers, computer equipment, computer software or computer services; and

(xiv)

any other material contract whether or not made in the ordinary course of business.

Section 3.17.

Liens.  Poly Inc. has good, clear and marketable title to all of its assets and properties free and clear of any claims, charges, security interests, encumbrances or liens, other than those liens disclosed in Schedule  3.17 appended hereto.

Section 3.18.

Officers, Directors and Key Employees.

(a)

Poly Inc. does not have any contract or agreement with any of its officers, directors, employees or consultants whose annual salary equals or exceeds $110,000 or who received or has accrued in respect of such period a bonus equal to or in excess of $110,000; and

(b)

Poly Inc. does not have any commitments or contracts to increase the wages or to modify the condition or terms of employment or consultancy of any of the employees or consultants of Poly Inc., including the aggregate cost to Poly Inc. of all such commitments or contracts.

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Section 3.19.

Brokerage.  No broker or finder has acted, directly or indirectly, for the Shareholders nor have the Shareholders incurred any finder’s fee or other commission, in connection with the transactions contemplated by this Agreement.  

Section 3.20

Tax Returns and Audits.  Poly Inc. has duly filed all federal, state, local and foreign tax returns and reports required to be filed by it, except where the failure so to file would not have a material adverse effect on it, and has duly paid or made adequate provision on its books in accordance with generally accepted accounting principles for the payment of all taxes which have been incurred or are due and payable, except where the failure so to pay would not have a material adverse effect on Poly Inc.  For purposes of this Agreement, the term “tax” shall include all federal, state, local and foreign net income, gross income, gross receipts, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, stamp, occupation, property, custom duty and other taxes, governmental charges and like assessments or fees of any kind whatsoever, together with interest and any penalty, addition to tax or additional amount imposed thereon of any nature whatsoever.

Section 3.21     Survival of Warranties.  The representations and warranties made in this Article III shall survive the closing for eighteen months.  Any claim brought on account of such representations and warranties shall be brought within thirty months after the earlier of (i) the Closing or (ii) one year of the actual or constructive discovery of the breach of such warranty or representation, whichever occurs first.  Nai Hong Li shall have no liability for any representation or warranty made under this Article III, and James Benson shall have no such liability unless such misrepresentation is knowing and intentional. Neither Poly, Inc. nor James Benson shall have any liability for any misrepresentation under this Article III until the damages for any one misrepresentation or the aggregate of damages for all misrepresentations is more than $50,000.  James R. Benson 6;s liability for any breach of any warranty or representation made by him under Article III shall be limited to $100,000.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS

 The Shareholders hereby represent and warrant to Poly International as follows:

Section 4.01.

Execution and Delivery. The Shareholders have all requisite corporate power and authority to enter into this Agreement and consummate the transactions contemplated hereby.  This Agreement has been duly executed and delivered by the Shareholders and thereby constitutes a valid and binding agreement, enforceable against the Shareholders in accordance with its terms.

Section 4.02.

Consents and Approvals.  The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein do not require the Shareholders to obtain any consent, approval or action of, or make any filing with or give any notice to, any person or entity.  

Section 4.03.

Title to Stock.  

(a)

The Shareholders have valid title to the Poly Inc. Shares free and clear of all liens or encumbrances, including, without limitation, any community property claim; and

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(b)

Upon delivery of the Poly Inc. Shares on the Closing Date, as herein provided, Poly International shall acquire good and marketable title thereto, free and clear of any lien, including, without limitation, any community property claim.

Section 4.04. Actions and Proceedings.  

(a)

There are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against or involving any of the Poly Inc. Shares held by the Shareholders; and

(b)

To the best of the Shareholder’s knowledge, there are no actions, suits or claims or legal, regulatory, administrative or arbitration proceedings pending or threatened against or involving the Poly Inc. Shares.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF POLY INTERNATIONAL

Poly International represents and warrant to Poly Inc. and the Shareholders as follows:

Section 5.01.

Organization, Standing and Authority of Poly International.  Poly International is a   corporation duly organized, validly existing and in good standing under the laws of the State of California and has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder.

Section 5.02.   Execution and Delivery.  This Agreement has been duly authorized, executed and delivered by Poly International and constitutes the valid and binding agreement of Poly International enforceable against Poly International in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization or others laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies..

Section 5.03.

Consents and Approvals.  The execution, delivery and performance by Poly International of this Agreement and the completion by Poly International of the transactions contemplated hereby do not require Poly International to obtain any consent, approval or action of, or make any filing with or give any notice to, any person.

Section 5.04.

No Conflict.  The execution, delivery and performance of this Agreement and the completion of the transactions contemplated herein will not:

(a)

violate any provision of the Articles or Certificate of Incorporation, By-laws or other charter or organizational document of Poly International;

(b)

violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which Poly International is a party or by or to which its assets or properties may be bound or subject;

(c)

violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic,

9

binding upon Poly International or upon the securities, assets or business of Poly International;

(d)

violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to Poly International or to the securities, properties or business of Poly International; or

(e)

result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit or license held by Poly International.

Section 5.05.

Capitalization.  

(a)

Schedule 5.05 sets forth the total issued and outstanding shares of common stock of Poly International, which is the only class of Poly International’s capital stock issued and outstanding at Closing, other than the newly authorized share issuances as indicated in this Agreement.

(b)

Schedule 5.05 also sets forth all the outstanding warrants and options and any other security issued by Poly International that carry the right to purchase additional shares of Poly International Common Shares and the terms thereof at Closing, other than any newly authorized warrants as indicated in this Agreement.

Section 5.06.

Brokerage.  No broker or finder, has acted, directly or indirectly, for Poly International, nor has Poly International incurred any obligation to pay any brokerage, finder’s fee or other commission in connection with the transactions contemplated by this Agreement.

Section 5.07.

Certificate of Incorporation and By-Laws.

(a)

Poly International has heretofore delivered to the Shareholders true, correct and complete copies of the Certificate or Articles of Incorporation (certified by the State of California) and By-laws or comparable instruments (certified by the corporate secretary thereof) of Poly International; and

(b)

The minute books of Poly International accurately reflect all actions taken at all meetings and consents in lieu of meetings of its shareholders, and all actions taken at all meetings and consents in lieu of meetings of its board of directors and all committees for the period from incorporation to the date hereof.

Section 5.08.

Material Information.  This Agreement, the Schedules attached hereto and all other information provided, in writing, by Poly International or representatives thereof to the Shareholders, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make any statement contained herein or therein not misleading.  There are no facts or conditions which have not been disclosed to the Shareholders in writing which, individually or in the aggregate, could have a material adverse effect on Poly International or a material adverse effect on the ability of Poly International to perform any of their obligations pursuant to this Agreement.

Section 5.09.

Financial Statements.  

(a)

Poly International’s financial statements for the period ended September 31, 2005 are true, correct and complete in all material respects and fairly present the financial condition of Poly International and the results of its operations for the periods then

10

ended and were prepared in conformity with U.S. generally accepted accounting principles applied on a consistent basis;

(b)

The Shareholders have the right to inspect, review and approve any debts incurred by Poly International subsequent to the date of this Agreement that individually or in aggregate exceed $10,000; and

(c)

Poly International has, or will have, provided to the Shareholders, the Poly International financial statements of Poly International for the period ended September 30, 2005 the “Poly International Financial Statements”).  The Poly International Financial Statements shall be true, correct and complete in all material respects and fairly present the financial condition of Poly International and the results of its operations for the period then ended and shall be prepared in conformity with U.S. generally accepted accounting principles applied on a consistent basis.

Section 5.10.

Undisclosed Liabilities. Poly International has no liabilities except as reflected in the Poly International  Financial Statements as of and for the period reflected therein, Poly International was not, as of September  30, 2005, subject to, and since that date Poly International has not incurred, any direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise, of a kind required by generally accepted accounting principles to be reflected or reserved against on a financial statement (“Liabilities”), which individually or in the aggregate exceeds $10,000.

Section 5.11.

Compliance with Laws.  To the best of Poly International’s knowledge, Poly International is not in violation of any applicable order, judgment, injunction, award or decree nor is it in violation of any Federal, state, local or foreign law, ordinance or regulation or any other requirement of any governmental or regulatory body, court or arbitrator, other than those violations which, in the aggregate, would not have a material adverse effect on Poly International and Poly International has not received written notice that any violation is being alleged.

Section 5.12. Actions and Proceedings.  There are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against or involving Poly International.  There are no actions, suits or claims or legal, regulatory, administrative or arbitration proceedings pending or, to the knowledge of Poly International threatened against or involving Poly International.

Section 5.13. Contracts.  

(a)

there have been delivered or made available to the Shareholders and Poly Inc. true, correct and complete copies of each of the contracts set forth in Schedule 5.13 or in any other Schedule.  Each such contract is valid, subsisting, in full force and effect and binding upon the parties thereto in accordance with its terms, and neither Poly International nor any of Poly International’s other affiliates, as the case may be, is in default in any respect under any of them; and

(b)

without limiting the generality of section 5.13(a) and excluding any obligation referenced in this Agreement, Poly International is not a party to any:

(i)

contracts with any current or former officer, director, employee, consultant, agent or other representative having more than three months to run from the date hereof or

11

providing for an obligation to pay and/or accrue compensation of $10,000 or more per annum, or providing for the payment of fees or other consideration in excess of $10,000 in the aggregate to any officer or director of Poly International, or to any other entity in which Poly International has an interest;

(ii)

contracts for the purchase or sale of equipment or services that contain an escalation, renegotiation or re-determination clause or that can be cancelled without liability, premium or penalty only on ninety days’ or more notice;

(iii)

contracts for the sale of any of its assets or properties or for the grant to any person of any preferential rights to purchase any of its or their assets or properties;

(iv)

contracts (including with limitation, leases of real property) calling for an aggregate purchase price or payments in any one year of more than $50,000 in any one case (or in the aggregate, in the case of any related series of contracts);

(v)

contracts relating to the acquisition by Poly International of any operating business of, or the disposition of any operating business by, any other person;

(vi)

executory contracts relating to the disposition or acquisition of any investment or of any interest in any person;

(vii)

joint venture contracts or agreements;

(viii)

contracts under which Poly International agrees to indemnify any party, other than in the ordinary course of business or in amounts not in excess of $10,000, or to share tax liability of any party;

(ix)

contracts containing covenants of Poly International not to compete in any line of business or with any person in any geographical area or covenants of any other person not to compete with  Poly International in any line of business or in any geographical area;

(x)

other than disclosed in Schedule 5.13 appended hereto, contracts relating to the making of any loan by Poly International;

(xi)

other than disclosed in Schedule 5.13 appended hereto, contracts relating to the borrowing of money by Poly International or the direct or indirect guarantee by Poly International of any obligation for, or an agreement by Poly International to service, the repayment of borrowed money, or any other contingent obligations in respect of indebtedness of any other Person, including, without limitation,

(1)

any contract with respect to lines of credit;

(2)

any contract to advance or supply funds to any other person other than in the ordinary course of business;

(3)

any contract to pay for property, products or services of any other person even if such property, products or services are not conveyed, delivered or rendered;

(4)

any keep-well, make-whole or maintenance of working capital or earnings or similar contract; or

(5)

any guarantee with respect to any lease or other similar periodic payments to be made by any other person;

(xii)

contracts for or relating to computers, computer equipment, computer software or computer services; or

(xiii)

any other material contract whether or not made in the ordinary course of business.

Section 5.14.

Officers, Directors and Key Employees.  Poly International does not have any contract or agreement with any of its officers, directors, employees or consultants whose annual

12

salary equals or exceeds $10,000 or who received or has accrued in respect of such period a bonus equal to or in excess of $5,000; and Waves does not have any commitments or contracts to increase the wages or to modify the condition or terms of employment or consultancy of any of the employees or consultants of Poly International, including the aggregate cost to Poly International of all such commitments or contracts.

Section 5.15  Operations of Poly International.  Except as contemplated by this Agreement, since the date of the Poly International Financial Statements, Poly International has not:

(a)

amended its Certificate or Articles of Incorporation or By-laws or merged with or into or consolidated with any other person or entity, subdivided or in any way reclassified any shares of its capital stock or changed or agreed to change in any manner the rights of its outstanding capital stock or the character of its business;

(b)

other than disclosed in Schedule 5.05 appended hereto, issued, reserved for issuance, sold or redeemed, repurchased or otherwise acquired, or issued options or rights to subscribe to, or entered into any contract or commitment to issue, sell or redeem, repurchase or otherwise acquire, any shares of its capital stock or any bonds, notes, debentures or other evidence or indebtedness;

(c)

incurred any indebtedness for borrowed money or incurred or assumed any other liability in excess of $10,000 in any one case (or, in the aggregate, in the case of any related series of occurrences) or $25,000 in the aggregate;

(d)

declared or paid any dividends or declared or made any other distributions of any kind to its shareholders;

(e)

made any change in its accounting methods or practices or made any change in depreciation or amortization policies, except as required by law or generally accepted accounting principles;

(f)

made any loan or advance to any of  its shareholders or to any of its directors, officers or employees, consultants, agents or other representatives, or made any other loan or advance, otherwise than in the ordinary course of business;

(g)

entered into any lease (as lessor or lessee);

(h)

sold, abandoned or made any other disposition of any of its assets or properties;

(i)

granted or suffered any lien on any of its assets or properties;

(j)

entered into or amended any contracts to which it is a party, or by or to which it or its assets or properties are bound or subject which if existing on the date hereof would be required to be disclosed in Schedule 5.13;

(k)

made any acquisition of all or a substantial part of the assets, properties, securities or business of any other person or entity;

(l)

paid, directly or indirectly, any of its material liabilities before the same became due in accordance with its terms or otherwise than in the ordinary course of business;

(m)

terminated or failed to renew, or received any written threat (that was no subsequently withdrawn) to terminate or fail to renew, any contract that is or was material to the assets, liabilities, business, property, operations, prospects, results of operations or condition (financial or otherwise) of Poly International; or

(n)

entered into any other contract or other transaction that materially increases the liabilities of Poly International.

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Section 5.16.

Absence of Certain Changes.  Since

the date of the Poly International Financial Statements, there has been no event, change or development which could have a material adverse effect on Poly International.

ARTICLE VI

THE SHAREHOLDERS’S COVENANTS AND AGREEMENTS

Section 6.01.

Conduct of Businesses in the Ordinary Course.  From the date of this Agreement to the Closing Date, the Shareholders shall cause Poly Inc. to conduct its business substantially in the manner in which it is currently conducted and to not undertake any of the actions specified in Sections 3.12 and 3.10, nor enter into any Contract described in Section 3.16, without the prior written consent of Poly International, such consent not to be unreasonably withheld, delayed or conditioned.

Section 6.02.

Preservation of Permits and Services.  From the date of this Agreement to the Closing Date, the Shareholders shall cause Poly Inc. to use its best efforts preserve any permits and licenses in full force and effect and to keep available the services, and preserve the goodwill, of its present officers, employees, agents, and consultants.

Section 6.03.  Litigation.   From the date of this Agreement to the Closing Date, the Shareholders shall notify Poly International promptly of any actions or proceedings of the type described in Section 3.15 that from the date hereof are threatened or commenced against Poly Inc. or its subsidiaries or against any officer, director, employee, properties or assets of Poly Inc. with respect to its affairs, or against any of the Poly Inc. Shares and of any requests for information or documentary materials by any governmental or regulatory body in connection with the transactions contemplated hereby.

Section 6.04.

Conduct of the Shareholders Pending the Closing Date.  From the date of this Agreement to the Closing Date:

(a)

the Shareholders shall use, and the Shareholders shall cause Poly Inc. to use, its best efforts to conduct its affairs in such a manner so that, except as otherwise contemplated or permitted by this Agreement, the representations and warranties contained in Article III shall continue to be true and correct on and as of the Closing Date as if made on and as of the Closing Date; and

(b)

the Shareholders shall promptly notify Poly International of any event, condition or circumstance occurring from the date of this Agreement to the Closing Date that would constitute a violation or breach of this Agreement by the Shareholders

Section 6.05.  Corporate Examinations and Investigations.  Prior to the Closing Date, Poly International shall be entitled, through its employees and representatives, to make such reasonable investigation of the assets, liabilities, properties, business and operations of Poly Inc. and its subsidiaries, and such examination of the books, records, tax returns, results of operations and financial condition of Poly Inc. and its subsidiaries.  Any such investigation and examination shall be conducted with prior notice at reasonable times and under reasonable circumstances and the Shareholders and Poly Inc. and the employees and representatives of Poly Inc., including without limitation, their counsel and independent public accountants, shall cooperate fully with

14

such representatives in connection with such reasonable review and examination.  All information examined or obtained as a result of such investigations and examinations shall not be disclosed to any third person except Poly International’s professional advisors and shall only be used for purposes related to and in furtherance of the transactions contemplated by this Agreement.

Section 6.06.

Acquisition Proposals.  From the date of this Agreement to the Closing Date, neither the Shareholders nor Poly Inc., nor any of the officers, directors, affiliates, employees, representatives or agents of Poly Inc., shall, directly or indirectly, solicit, initiate or participate in any way in discussions or negotiations with, or provide any information or assistance to, or enter into any contract with any person, entity or group (other than Poly International) concerning any acquisition of a substantial equity interest in, or in a merger, consolidation, liquidation, dissolution, disposition of assets of Poly Inc. or any disposition of any of the Poly Inc. Shares (other than pursuant to the transactions contemplated by this Agreement) (each, an “Acquisition Proposal”), or assist or participate in, facilitate or encourage any effort or attempt by any other person or entity to do or seek to do any of the foregoing.  The Shareholders shall promptly communicate to Poly International the terms of any Acquisition Proposal, which any of them may receive.

Section 6.07.

Expenses.  Poly Inc., shall bear its own expenses incurred in connection with the preparation, execution and performance of this Agreement and the transactions contemplated hereby, including, without limitation, all fees and expenses of agents, representatives, counsel, actuaries, and accountants.

ARTICLE VII

POLY INTERNATIONAL COVENANTS AND AGREEMENTS

Section 7.01.

Conduct of Businesses in the Ordinary Course.  From the date of this Agreement to the Closing Date, Poly International shall conduct its business substantially in the manner in which it is currently conducted and shall not enter into any Contract described in Section 5.13, or undertake any of the actions specified in Sections 5.15 or 5.16, without the prior written consent of the Shareholders.

Section 7.02.

Preservation of Permits and Services.  From the date of this Agreement to the Closing Date, Poly International shall use its best efforts to preserve any permits and licenses in full force and effect and to keep available the services of its respective present officers, employees, consultants and agents and to preserve their goodwill.

Section 7.03.  Litigation. From the date of this Agreement to the Closing Date,  Poly International shall notify the Shareholders of any actions or proceedings of the type described in Section 5.12 that are threatened or commenced against Poly International or against any officer, director, employee, properties or assets of Poly International with respect to its affairs and of any requests for information or documentary materials by any governmental or regulatory body in connection with the transactions contemplated hereby.

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Section 7.04.

Conduct of Poly International Pending the Closing.  From the date hereof through the Closing Date,

(a)

Poly International  shall use its best efforts to conduct its affairs in such a manner so that, except as otherwise contemplated or permitted by this Agreement, the representations and warranties contained in Article V shall continue to be true and correct on and as of the Closing Date as if made on and as of the Closing Date

(b)

Poly International shall promptly notify the Shareholders of any event, condition or circumstance occurring from the date hereof through the Closing Date that would constitute a violation or breach of this Agreement by Poly International.

Section 7.05.  Corporate Examinations and Investigations.  Prior to the Closing Date, the Shareholders, or Poly Inc., shall be entitled, through its employees and representatives, to make any investigation of the assets, liabilities, properties, business and operations of Poly International such examination of the books, records, tax returns, results of operations and financial condition of Poly International.  Any such investigation and examination shall be conducted at reasonable times and under reasonable circumstances and Poly International and the employees and representatives of Poly International, including without limitation, their counsel and independent public accountants, shall cooperate fully with such representatives in connection with such reasonable review and examination

Section 7.06.

Expenses.  Poly International shall bear its own expenses incurred in connection with the preparation, execution and performance of this Agreement and the transactions contemplated hereby, including, without limitation, all fees and expenses of agents, representatives, counsel, actuaries, and accountants.

Section 7.07.

Further Assurances.  Poly International shall execute such documents and other papers and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby.  

Section 7.08.  Directors and Remaining Shares:  On or prior to the Closing Date, and effective on the Closing Date, Poly International shall take all necessary corporate steps to cause:

(a)

the appointment of two directors designated by the Shareholders to the Board of Poly International;

(b)

the election and appointment of two officers to be Chairman, President and Chief Financial Officer, designated by the Shareholders, as new officers of Poly International; and

(c)

all actions to acquire the remaining shares of Poly Inc. on a best efforts basis, but in any event not until Poly International shall be listed for trading on the OTC Bulletin Board.

ARTICLE VIII

CONDITIONS PRECEDENT TO THE OBLIGATION OF POLY INTERNATIONAL TO CLOSE

The obligation of Poly International to enter into and complete the Share Exchange and related transactions contemplated by the Agreement is subject, at Poly International’s option, acting in

16

accordance with the provisions of this Agreement with respect to the termination hereof, to the fulfillment on or before the Closing Date, of the following conditions, any one or more of which may be waived by it, to the extent permitted by law.

Section 8.01.

Representations and Covenants.  

(a)

the representations and warranties of the Shareholders and Poly Inc. contained in this Agreement shall be true and correct on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date, except that any of such representations and warranties that are given as of a particular date and relate solely to a particular date or period shall be true as of such date or period;

(b)

the Shareholders and Poly Inc. shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by them on or before the Closing Date.  The Shareholders and Poly Inc. shall each have delivered to Poly International a certificate, dated the Closing Date, and signed by each of the Shareholders and Poly Inc. to the foregoing effect.

Section 8.02.

Governmental Permits and Approvals.  

(a)

all approvals, authorizations, consents, permits and licenses from governmental and regulatory bodies required for the transactions contemplated by this Agreement and to permit the business currently carried on by Poly Inc. to continue to be carried on by Poly Inc. substantially in the same manner immediately following the Closing Date shall have been obtained and shall be in full force and effect, and Poly International shall have been furnished with appropriate evidence, reasonably satisfactory to it, of the granting of such approvals, authorizations, consents, permits and licenses; and

(b)

there shall not have been any action taken by any court, governmental or regulatory body then prohibiting or making illegal on the Closing Date the transactions contemplated by this Agreement;

Section 8.03.

Third Party Consents.  All consents, permits and approvals from parties to contracts with Poly Inc. that may be required in connections with the performance by the Shareholders of their obligations under this Agreement or the continuance of such contracts with Poly Inc.  in full force and effect after the Closing Date, shall have been obtained.

Section 8.04.

Litigation.  No action, suit or proceeding shall have been instituted and be continuing or be threatened by any person to restrain, modify or prevent the carrying out of the transactions contemplated hereby, or to seek damages in connection with such transactions, or that has or could have a material adverse effect on Poly Inc.

Section 8.05

No Change in Capitalization.  On the Closing Date, the capitalization of Poly Inc. shall be substantially as represented in Schedule A.

Section 8.06

No Severance Payments.

No Shareholders shall be entitled to severance or change of control payments by Poly Inc. as a result of this Agreement being performed.

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ARTICLE IX

CONDITIONS PRECEDENT TO THE OBLIGATION OF

THE SHAREHOLDERS TO CLOSE

The obligation of the Shareholders to enter into and complete the Share Exchange, and related transactions contemplated by this Agreement, is subject, at the Shareholder’s option acting in accordance with the provisions of this Agreement with respect to the termination hereof, to the fulfillment, on or before the Closing Date, of the following conditions, any one or more of which may be waived by it, to the extent permitted by law.

Section 9.01.

Representations and Covenants.  

(a)

The representations and warranties of Poly International contained in this Agreement shall be true and correct on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date, except that any of such representations and warranties that are given as of a particular date and relate solely to a particular date or period shall be true as of such date or period; and

(b)

Poly International shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by it on or before the Closing Date.  Poly International shall have delivered to the Shareholders a certificate dated the Closing Date, and signed by an authorized signatories of Poly International to the foregoing effect.

Section 9.02.

No Change in Capitalization.  On the Closing Date, the capitalization of Poly International shall be as represented in Schedule 9.02, which represents the complete capitalization as at the Closing Date as per this Agreement, and includes the intended allocation of all shares issued pursuant to this Agreement.

Section 9.03.

Governmental Permits and Approvals.  

(a)

all approvals, authorizations, consents, permits and licenses from governmental and regulatory bodies required for the transactions contemplated by this Agreement shall have been obtained and shall be in full force and effect, and Poly International shall have been furnished with appropriate evidence, reasonably satisfactory to it, of the granting of such approvals, authorizations, consents, permits and licenses; and

(b)

there shall not have been any action taken by any court, governmental or regulatory body then prohibiting or making illegal on the Closing Date the transactions contemplated by this Agreement;

Section 9.04.

Third Party Consents.  All consents, permits and approvals from parties to contracts with Poly International that may be required in connections with its performance of its obligations under this Agreement or the continuance of such contracts with Poly International in full force and effect after the Closing Date, shall have been obtained.

Section 9.05.

Litigation.  No action, suit or proceeding shall have been instituted and be continuing or be threatened by any person to restrain, modify or prevent the carrying out of the transactions contemplated hereby, or to seek damages in connection with such transactions, or that has or could have a material adverse effect on Poly International.

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ARTICLE X

CLOSING ARRANGEMENTS

Section 10.01.  Closing Location.  The closing of the Share Exchange and the other transactions contemplated by this Agreement (“The Closing”) will take place at 13:00 (MST) on the Closing Date at the offices of Poly International’s Counsel, or such other date or location as the parties may agree to in writing.

Section 10.02.  The Shareholders’ Closing Documents.  At the Closing, the Shareholders will tender to Poly International:

(a)

Certified copies of resolutions of the directors of Poly Inc. in a form reasonably satisfactory to Poly International, authorizing:

(i)

the execution and delivery of this Agreement;

(ii)

the registration of the Poly Inc. Shares in the name of, Poly International, and issue of new share certificates representing the Poly Inc. Shares in the name of Poly International;

(b)

Share certificates issued in the name of the Shareholders representing the Poly Inc. Shares duly endorsed for transfer to Poly International;

(c)

A certified copy of the shareholder register of Poly Inc. showing Poly International as the registered owner of the Poly Inc. Shares;

(d)

A certificate executed by each of the Shareholders certifying that Poly International conditions in Section 8.01(b) have been satisfied; and

(e)

Copies of all corporate records and books of account of Poly Inc., including minute books, share registers and annual reports, and a certificate of good standing.

Section 10.03. Poly International’s Closing Documents.  At the Closing, Poly International will tender to the Shareholders:

(a)

Certified copies of resolutions of the directors of Poly International in a form reasonably satisfactory to the Shareholders, acting reasonably, authorizing:

(i)

the execution and delivery of this Agreement;

(ii)

the amendments as specified in 7.08(a);

(iii)

The appointment of two (2) new directors to Poly International which are nominees of the Shareholders; and

(iv)

The appointment of up Chairman of the Board, Chief Executive Officer, President and Chief Financial Officer to Poly International which are nominees of the Shareholders.

(b)

share certificates, registered in the names of the Shareholders, representing the Poly International Shares;

(c)

a certified copy of the share issuance order of Poly International showing the Shareholders as the registered owners of the Poly International Shares;

(d)

a certified copy of the register of directors of Poly International  showing that up to  two (2) nominees of the Shareholders and two (2) directors of Poly International as the directors of Poly International; and

(e)

A certificate executed by Poly International certifying that the Shareholders’ conditions in Section 9.01(b) have been satisfied.

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Section 10.04.  The parties hereto mutually agree to conduct the Closing by relying upon the exchange of their respective solicitors’ undertakings and that the Closing shall take place in the following sequence:

(a)

Poly International’s Solicitor will deliver to the Shareholders’ Solicitor the Poly International Closing Documents, upon the latter’s undertaking to hold them in trust;

(b)

Upon receipt of the Poly International  Closing Documents, the Shareholders’ Solicitor will hold them in trust until it is able to deliver to the Poly International Solicitor the Shareholders’ Closing Documents;

(c)

The Shareholders’ Solicitor will then deliver to the Poly International Solicitor the Shareholders’ Closing Documents;

(d)

Upon receipt of the Shareholders’ Closing Documents, the Poly International’s Solicitors shall release the Shareholders’ Closing Documents to Poly International and the Shareholders’ Solicitor shall release the Poly International Closing Documents to the Shareholders.

ARTICLE XI

MISCELLANEOUS

Section 11.1.  Public Notices.  The parties agree that all notices to third parties and all other publicity concerning the transactions contemplated by this Agreement shall be jointly planned and coordinated and no party shall act unilaterally in this regard without the prior approval of the others, such approval not to be unreasonably withheld.

Section 11.2.  Time.  Time shall be of the essence hereof.

Section 11.3.  Notices.  Any notice or other writing required or permitted to be given hereunder or for the purposes hereof shall be sufficiently given if delivered or faxed to the party to whom it is given or, if mailed, by prepaid registered mail addressed to such party at:

if to Poly Inc. Shareholders, at: Poly Inc.’s Counsel, fax number (408) 354-0823

 Attn:  Marc Freed

if to Poly International , at: Poly International’s Counsel, fax number (951) 506-8877,       

             Attn: Scott Lawler;

Or at such other address as the party to whom such writing is to be given shall have last notified to the party giving the same in the manner provided in this clause. Any notice mailed shall be deemed to have been given and received on the fifth business day next following the date of its mailing unless at the time of mailing or within five business days thereafter there occurs a postal interruption which could have the effect of delaying the mail in the ordinary and usual course, in which case any notice shall only be effectively given if actually delivered or sent by telecopy. Any notice delivered or faxed to the party to whom it is addressed shall be deemed to have been given and received on the business day next following the day it was delivered or faxed.

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Section 11.4.  Governing Law.  This Agreement shall be governed by and construed in accordance with the law of the State of California and the parties submit and attorn to the jurisdiction of the courts of the State of California.

Section 11.5.   Severability.  If a court of other tribunal of competent jurisdiction determines that any one or more of the provisions contained in this Agreement is invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provision or provisions shall not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless in either case as a result of such determination this Agreement would fail in its essential purpose.

Section 11.6.  Entire Agreement.  This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, oral or written, by and between any of the parties with respect to the subject matter hereof.

Section 11.7.  Further Assurances.  The parties shall with reasonable diligence, do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated by this Agreement, and each party shall provide such further documents or instruments required by the other party as may be reasonably necessary or desirable to give

effect to the purpose of this Agreement and carry out its provisions whether before or after the Closing Date.

Section 11.8.  Enurement.  This Agreement and each of the terms and provisions hereof shall enure to the benefit of and be binding upon the parties and their respective heirs, executors, administrators, personal representatives, successors and assigns.

Section 11.9.  Counterparts.  This Agreement may be executed in as many counterparts as may be necessary or by facsimile and each such counterpart agreement or facsimile so executed shall be deemed to be an original and such counterparts and facsimile copies together shall constitute one and the same instrument.

Section 11.10.  Currency.  All amounts expressed in this document are in US Dollars, unless otherwise specified.

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IN WITNESS WHEREOF the parties hereto have set their hand and seal as of the day and year first above written.

“The Shareholders”

POLYGENETICS INTERNATIONAL INC, a California corporation

/s/ James R. Benson

By:    /s/ Marco A. Bastidas

James R. Benson

Name: Marco A. Bastidas

Title:  Director

/s/ Nai-Hong Li

Nai-Hong Li                        

                                                                       POLYGENETICS INC, a California corporation

By: /s/ James R. Benson

Name: James R. Benson, Ph.D.

Title: President and CEO

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SCHEDULE A

CAPITALIZATION OF POLY INC.

Common Stock

  Total Capitalization of POLY INC.

Warrants, Options, ROFR, Pre-empted Rights

23

 SCHEDULE 2.01

SHARE EXCHANGE

POLY INC.  Shareholder POLY INC.  Shares Held POLY INC.  Shares to be Transferred to Poly International

Poly International Shares Issued per Share Exchange Poly International Shares Issued to POLY INC. Shareholder Recipient POLY INC. Shareholder

24

SCHEDULE 3.17

LIST OF POLY INC. CONTRACTS

Contract Description

25

SCHEDULE 3.17

LIST OF POLY INC. LIENS

26

SCHEDULE 5.05

CAPITALIZATION OF POLY INTERNATIONAL AS AT THE DATE OF THIS AGREEMENT

This schedule represents all issued and outstanding shares and is represented by Poly International as being complete and inclusive as of the date of this Agreement, other than as contemplated in this Agreement.

Common Shares

Warrants, Options, ROFR, Pre-empted Rights

Warrant Holder # of Warrants Exercisable

27

SCHEDULE 5.13

LIST OF POLY INTERNATIONAL CONTRACTS

Contract Description

. Nil

28

  SCHEDULE 9.01

POLY INTERNATIONAL CAPITALIZATION AT CLOSING

Poly International  Capitalization - Shares:

 Common Shares

Poly International Capitalization - Warrants:

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EX-10

Industrial Sublease Agreement

INDUSTRIAL SUBLEASE AGREEMENT

1615 PLYMOUTH STREET

MOUNTAIN VIEW, CALIFORNIA

Tenant: Sunstorm Research Corporation

Subtenant: Polygenetics, Inc.

Date: 1 April, 2004

Parties

1.1 This Sublease is made and entered into as of 1 April, 2004, by and between Sunstorm Research Corporation ("Sunstorm"), and Polygenetics, Inc. ("Subtenant"), under the Master Lease dated 1 July, 2003, between James R. Benson, as "Landlord" and Sunstorm Research Corporation as “Tenant”. A copy of the Master Lease is attached hereto as Attachment I and incorporated herein by this reference.

Provisions Constituting Sublease

2.1 This Sublease is subject to all of the terms and conditions of the Master Lease. Subtenant hereby assumes and agrees to perform all of the obligations of Tenant under the Master Lease except as specifically set forth herein. Sunstorm hereby agrees to cause Landlord under the Master Lease to perform all of the obligations of Landlord thereunder to the extent said obligations apply to the Subleased Premises and Subtenant's use of the Subleased Premises. Subtenant shall not commit or permit to be committed on the Subleased Premises any act or omission which violates any term or condition of the Master Lease. Except to the extent waived or consented to in writing by the other party or parties hereto who are affected thereby, neither of the parties hereto will, by renegotiation of the Master Lease, assignment, subletting, default or any other voluntary action, avoid or seek to avoid the observance or performance of the terms to be observed or performed hereunder by such party, but will at all times in good faith assist in carrying out all the terms of this Sublease and in taking all such action as may be necessary or appropriate to protect the rights of the other party or parties hereto who are affected thereby against impairment. Nothing contained in this Section 2.1 or elsewhere in this Sublease shall prevent or prohibit Sunstorm (a) from exercising its right to terminate the Master Lease pursuant to the terms thereof or (b) from assigning its interest in this Sublease or subletting the Premises to any other third party.

2.2 All of the terms and conditions contained in the Master Lease are incorporated herein, and the terms and conditions specifically set forth in this Sublease, shall constitute the complete terms and conditions of this Sublease.

Subleased Premises, Rent and Financial Obligations

3.1 Subleased Premises

Sunstorm leases to Subtenant and Subtenant leases from Sunstorm the Subleased Premises upon all of the terms, covenants and conditions contained in this Sublease. The Subleased Premises consist of approximately 13,200 ± square feet, located at 1615 Plymouth Street, Mountain View, California. The parties agree to shared use of Subleased Premises, including DI water system, restrooms, kitchen, clean rooms, office areas, storage areas, mezzanine area, conference room and general research and laboratory areas.

3.2 Rent

Subtenant shall pay to Sunstorm as Rent for the Subleased Premises the sum of Fourteen Thousand Dollars ($14,000) per month, without deductions, offset, prior notice or demand. Rent shall be payable by Subtenant to Sunstorm in consecutive monthly installments on or before the first day of each calendar month during the Sublease Term. If the Sublease commencement date or the termination date of the Sublease occurs on a date other than the first day or the last day, respectively, of a calendar month, then the Rent for such partial month shall be prorated and the prorated Rent shall be payable on the Sublease commencement date or on the first day of the calendar month in which the Sublease termination date occurs, respectively.

3.3

Increases in Rent

Commencing January 1, 2005, the rent shall increase according to the schedule set forth in the Master Lease, with Subtenant paying Sunstorm rent in proportion to Subtenant’s use of the Subleased Premises, which amount shall not be less than 50% of the rent schedule set forth in the Master Lease.

3.4

Advance Payment of Last Month's Rent

Within 150 days following Subtenant's execution of this Lease, Subtenant shall deposit with Sunstorm the sum of $ 23,100 as Subtenant’s proportionate share of the advance payment of the last month's rent as required in the Master Lease.

3.5 Security Deposit

Within 150 days following Subtenant's execution of this Lease, Subtenant shall pay to Sunstorm the sum of $25,000 as a non-interest bearing Security Deposit, representing Subtenant’s proportionate share of the Security Deposit as set forth in the Master Lease. In the event Subtenant has performed all of the terms and conditions of this Sublease during the term hereof, Sunstorm shall return to Subtenant, within ten days after Subtenant has vacated the Subleased Premises, the Security Deposit less any sums due and owing to Sunstorm.

3.6 Utilities

In addition to the Rent specified above, Subtenant shall pay Sunstorm for all utility costs associated with the Subleased Premises, including gas, electric, water, waste removal and other such utilities that are required in the Master Lease. The amount Subtenant shall be obligated to pay Sunstorm shall be in proportion to Subtenant’s proportionate use of the Subleased Premises.

3.5 Property Taxes

In addition to the Rent specified above, Subtenant shall pay Sunstorm for all property taxes associated with the Subleased Premises that are required in the Master Lease. The amount Subtenant shall be obligated to pay Sunstorm shall be in proportion to Subtenant’s proportionate use of the Subleased Premises.

3.6 Insurance

In addition to the Rent specified above, Subtenant shall pay Sunstorm for all insurance costs associated with the Subleased Premises that are required by the Master Lease. The amount Subtenant shall be obligated to pay Sunstorm shall be in proportion to Subtenant’s proportionate use of the Subleased Premises.

3.7 Maintenance Costs

In addition to the Rent specified above, Subtenant shall pay Sunstorm for all maintenance costs associated with the Subleased Premises that are required by the Master Lease. The amount Subtenant shall be obligated to pay Sunstorm shall be in proportion to Subtenant’s proportionate use of the Subleased Premises.

Rights of Access and Use; Term

4.1 Use

Subtenant shall use the Subleased Premises only for those purposes permitted in the Master Lease, unless Sunstorm and Landlord consent in writing to other uses prior to the commencement thereof.

4.2 Sublease Term

The Sublease Term shall be for the period commencing on 1 April, 2004, and continuing through 31 December, 2010. In no event shall the Sublease Term extend beyond the Term of the Master Lease.

Notices

All notices, demands, consents and approvals which may become or are required to be given by either party to the other hereunder shall be given in the manner provided in the Master Lease, at the addresses shown on the signature page hereof. Sunstorm shall notify Subtenant of any Event of Default under the Master Lease, or of any other event of which Sunstorm has actual knowledge which will impair subtenant's ability to conduct its normal business at the Subleased Premises, as soon as reasonably practical following Sunstorm's receipt of notice from the Landlord of an Event of Default or actual knowledge of such impairment. If Sunstorm elects to terminate the Master Lease, Sunstorm shall so notify Subtenant by giving at least 60 days notice prior to the effective date of such termination.

IN WITNESS WHEREOF, Sunstorm and Subtenant have executed this Sublease the date and year first above written.

“SUNSTORM"

“SUBTENANT"

SUNSTORM RESEARCH CORPORATION

POLYGENETICS, INC.

a California corporation

a California corporation

/s/ James R. Benson

/s/ James R. Benson

James R. Benson, Ph.D.

By:  James R. Benson

Its: President

Its:  President

Address:

P.O. Box 33115

Los Gatos, CA 95031

/s/ James R. Benson

By: James R. Benson

Its:  Secretary

Address:

1615 Plymouth Street

Mountain View, CA 94043

EX-10

BIOPORE CORPORATION  

SUNSTORM RESEARCH CORPORATION/BIOPORE CORPORATION

FINANCING DEFAULT LICENSE AGREEMENT

         This Agreement is made and entered into as of the fourteenth day of October 2002 by and among Sunstorm Research Corporation, a California corporation that is wholly owned by James R. Benson, Ph.D., (“Sunstorm”), James R. Benson, Ph.D., and Biopore Corporation, a California corporation, (“Biopore”).

RECITALS

         This Agreement is made and entered into with respect to and in reliance upon the following facts:

         A.  The parties previously entered into that certain Loan and Security Agreement, dated as of December 31, 2001 (the "Loan Agreement”), pursuant to which the due date of the loan Dr. Benson had made to Biopore to finance its defense of a legal action brought against it by Mott Corporation was extended from December 31, 2001, to August 31, 2002 and certain intellectual property of Biopore was provided as security for the loan.

         B.  None of the amounts due under the loan made by Dr. Benson to Biopore, whether the original principal amount of $115,000 or accrued interest has been repaid, and all sums owed by Biopore to Dr. Benson, in the approximate amount of $138,000.00, are now due and payable.

           C.  Dr. Benson desires, in lieu of exercising his right to obtain the intellectual property of Biopore securing his loan to Biopore, and thereby obtain all right, title and interest in and to such intellectual property, or compel the sale of such intellectual property to a third party in order to potentially recover the amounts he is owed, to enter into an arrangement allowing Biopore to continue to utilize such intellectual property in the fields of use it is now involved in and to obtain the rights to use such intellectual property in other fields.

          D.  Biopore desires to enter into this Agreement in order to provide for the orderly transfer of the intellectual property serving as collateral for the loan identified above to Sunstorm, without the need to incur substantial transaction or defense costs and to retain the exclusive rights, including as to Sunstorm and its affiliates, to sublicense or otherwise commercially exploit such intellectual property in certain fields of use, subject to the terms and conditions set forth below, in lieu of a public or private sale of such intellectual property by Sunstorm or Dr. Benson pursuant to Article 9 of the Uniform Commercial Code and the Loan Agreement.  

NOW, THEREFORE, the parties agree as follows:

         1.  DEFINITIONS. As used in this Agreement, the following capitalized terms in quotation marks shall have the meanings set forth below:

            (a)        “Collateral Patents” means any of the patents that serve as collateral for the loan described above as listed on the attached Exhibit A.

          (b)

“Intellectual Property Rights” means any or all of the following and all rights in, arising out of, or associated therewith: (i) all patents issued by the United States and any other country and applications therefor, and all reissues, divisionals, renewals, extensions, provisionals, continuations and continuations-in-part thereof (“Patents”); (ii) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, including, but not limited to, software, technical data and customer lists, and all documentation related to any of the foregoing (“Trade Secrets”); and (iii) all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world (“Copyrights”).

(c)

“Licensed Patents” means the United States Patents and international patent applications listed on the attached Exhibit A and all Intellectual Property Rights associated with any such patent or patent application.

            (d)

“Licensed Field” means the fields of (i) gene therapy, (ii) oral drug delivery, (iii) injectable drug delivery, (iv) embolization therapy, (v) urology, (vi) gynecology, (vii) treatment of gastro-intestinal disorders,including orally delivered non-absorbed polymers for sequestering unwanted entities from the GI tract and excreting them, (viii) oligonucleotide peptide and protein synthesis and characterization, (ix) support for tissue and bone, including artificial liver and artificial cartilage, (x) dressing of wounds, (xi) bulking agents, e.g. in urinary incontinence, (xii) dermal augmentation, (xiii) cell culture and (xiv) any other use for medical treatment of a human patient.  The term “Licensed Fields” shall also include such other fields requested to be added by Biopore, if Sunstorm consents to such addition, such consent not to be unreasonably withheld if Suns torm, at the time of such request, is not actively pursing commercial exploitation, whether directly or as a licensor or potential licensor of others, of the technology covered by the Licensed Patents.   

(e)

“Licensing Expenses” means all reasonable expenses actually incurred by Sunstorm in marketing and licensing the Licensed Patents and the associated Intellectual Property Rights to third parties as envisioned by this Agreement, as well as all reasonable fees and expenses actually incurred by Sunstorm in obtaining, prosecuting maintaining and enforcing the Licensed Patents and such other governmental registrations of Intellectual Property Rights covering the Licensed Technology as Sunstorm shall deem appropriate, including any sums paid to any inventor of any invention of a Licensed patent in order to secure such inventor's cooperation in obtaining, prosecuting or

2

maintaining a patent in any country.  Licensing Expenses shall include both (i) a reasonable allowance for labor costs of Sunstorm employees (excluding James R. Benson, Ph.D.) participating in such marketing and licensing, as well as participating in obtaining, prosecuting and maintaining the Licensed Patents and such other governmental registrations of Intellectual Property Rights covering the Licensed Technology, while so participating, but shall not include any overhead expenses and (ii) all out of pocket expenses incurred by Sunstorm in such marketing and licensing.  Licensing Expenses shall also include any payments made to any third party on account of the transactions envisioned by this Agreement, including reasonable commissions paid to licensing agents and representatives and royalties paid to Unilever under the Unilever Agreement.

        (f)         “Unilever” means Unilever, PLC, a corporation organized and existing under the laws of Great Britain.

        (g)        “Unilever Agreement” means the license agreement made on or about August 18, 1993 between Sunstorm and Unilever concerning porous polymeric “Polyhipe” materials produced by high phase emulsions.

        2.  TRANSFER OF PATENTS.  Subject to the terms and conditions set forth elsewhere in this Agreement, Biopore will transfer all of its right, title and interest in and to the Collateral Patents and all associated Intellectual Property Rights to Sunstorm.  Upon such transfer, Dr. Benson will forgive all indebtedness due him, including the principal sum of approximately $115,000, all accrued interest and any other fees costs or other amounts due him, under the loan identified above that was the subject to the Loan Agreement or that are due him under the Loan Agreement or a total of $138,600.97 of indebtedness.  

         3.  LICENSE GRANT.  Subject to the terms and conditions set forth elsewhere in this Agreement, and Biopore’s adherence to all applicable terms and conditions of the Unilever Agreement, Sunstorm hereby grants to Biopore an exclusive, world-wide, assignable, irrevocable, royalty free, license under the Licensed Patents (and all Sunstorm Intellectual Property Rights in the Licensed Field) to grant to third parties, on such terms and conditions as Biopore deems best, provided such third parties are obligated to pay a reasonable royalty or other monetary consideration for the rights so granted to them by Biopore, the rights to exercise any and all rights under the Licensed Patents and all other all Sunstorm Intellectual Property Rights in the Licensed Field.  The exclusivity of the license granted above shall be such that Sunstorm shall be excluded from exercising the licensed rights on and after November 30, 2002 to the extent it may be exercising or may have exercised such right prior to such date, the parties acknowledging that any such use in the Licensed field is and/or was incidental or inadvertent.    In addition to the rights licensed above, Biopore shall also have the right, but not the obligation, to obtain, prosecute maintain and enforce the Licensed Patents and such other governmental registrations of Intellectual Property Rights covering the Licensed Field as Biopore shall deem

3

best in accordance with Section 9 below.  Without limiting the generality of the foregoing or restricting or limiting Biopore’s rights in any way, Sunstorm shall not contact any licensee or prospective licensee of any of the Licensed Patents in the Licensed Field or any inventor of any invention or other work covered by any of these and discuss any matter pertaining to the Licensed Patents in the Licensed Field without the prior written consent of Biopore, except as may be necessary to discharge its obligations hereunder to prosecute and maintain the Licensed Patents.

         4.  APPLICATION AND PAYMENT OF LICENSING CONSIDERATION.  As further consideration for Biopore’s entry into this Agreement and transfer of the Collateral patents to Sunstorm, hereunder, Sunstorm agrees that any proceeds realized from its commercial exploitation (the use or manufacture of sale of products to or for third parties for value) or licensing of the Licensed Patents in fields other than the Licensed Field will be applied and paid as follows:

A.

To repay Sunstorm any Licensing Expenses incurred by Sunstorm prior to the receipt of such proceeds;

B.

Ninety percent (90%) of any remaining proceeds realized from Sunstorm’s commercial exploitation or licensing of the Licensed Patents in any field other than the Licensed Technology shall be retained by Sunstorm, and the remaining ten percent (10%) of such proceeds shall be paid to Biopore by Sunstorm in accordance with Section 4.

         5.  LICENSING REPORTS. Within thirty (30) days after the end of each calendar quarter, Sunstorm shall deliver to Biopore a report summarizing any commercial exploitation of the Collateral Patents in any field other than the Licensed Field or any licensing transactions involving the Collateral Patents in any field other than the Licensed Field negotiated and entered into that quarter including the name of each licensee or prospective licensee and the principal terms and conditions being discussed in any such negotiations and the principal terms and conditions of any such license entered into, as well as any material activities taken by Sunstorm during such quarter with respect to obtaining, prosecuting maintaining and enforcing the Licensed Patents and such other governmental registrations of associated Intellectual Property Rights.  The report shall also set forth the application of any proceeds collected during such quarter and any amount due Biopore from all such transactions during such quarter and the basis on which such total was computed.  Within such thirty (30) day period, Sunstorm shall also pay to Biopore the amount, if any, payable to Biopore hereunder for such calendar quarter.

         6.  REPRESENTATIONS AND WARRANTIES.  Each of the parties represents and warrants to the other parties as follows, acknowledging that the other party is relying on such representations and warranties in consenting to and entering into this Agreement, such representation to be deemed to have

4

been made upon the execution of this Agreement, as well as the closing envisioned by Section 8:

         A.  The party has the authority to enter into this Agreement and to perform all of the party’s obligations and duties hereunder.  The person signing this Agreement on behalf of the party has full authority to do so.  The party has obtained all authorizations and consents necessary for the party to enter into and perform its duties and obligations hereunder, including all consents and authorizations required by its organizational and charter documents, law or any contract to which it is a party or by which it is bound or in any legal proceedings to which it is a party.

         B. The party has carefully read this Agreement, understands the content and the consequences of this Agreement and enters into this Agreement as the party’s free act, with full consideration and advice of legal counsel or the informed waiver of the opportunity to obtain such advice and without any mistake, duress or undue influence.  In entering into this Agreement, the party is relying on the party’s own judgment, belief and knowledge, and not by any representations or agreements not set forth herein regarding the contents of this Agreement by the other party or anyone representing the other party.

         C.   Neither the party’s entry into this Agreement nor its performance of its duties and obligations under this Agreement will constitute a breach of or violate its Articles of Incorporation or bylaws or constitute a breach of or an event of default under any agreement or instrument to which such party is a party or by which it or any of its material assets are bound, or constitute a breach of any law applicable to such party or any governmental or court order by which such party or any of its material assets are bound or to which it or they are subject.

         D.   Biopore has good, valid and marketable title to all of the Collateral Patents to be transferred to Sunstorm hereunder and such rights are free of all claims liens and encumbrances, except those of licensees and potential licensees of Biopore in the Licensed Fields.  

         E.    The party is not a party to any pending or threatened arbitration proceeding, lawsuit or governmental investigation or proceeding or any other similar proceeding the outcome of which could materially interfere with its ability to execute and deliver this Agreement or to perform its obligations hereunder.

         7.  DELIVERIES AT CLOSING.  At the closing for the transaction envisioned by this Agreement, Biopore shall deliver to Sunstorm the following documents or information as they or it relate(s) to the Collateral Patents: (a) all invention disclosures, (b) copies of any relevant technical specifications, (c) a list of attorneys, by patent, prosecuting or supervising the maintenance of any of the Collateral Patents, (d) an assignment from Biopore to Sunstorm, in form and substance reasonably satisfactory to Sunstorm, of each of the Collateral Patents.  

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Dr. Benson shall deliver to Biopore any note evidencing the loan identified above marked “paid in full” or ”cancelled” or other evidence of the satisfaction of such indebtedness.

         8.  CLOSING.  The closing of the transactions that are envisioned by this Agreement and the parties’ deliveries under Section 7 above shall occur on or before December 1, 2002, by facsimile, express courier or such similar means as are agreed to by the parties or on such other date and at such other place and time as the parties may agree upon.

             9.  POST CLOSING COVENANTS.  After the closing envisioned by Section 7 above Biopore shall provide to Sunstorm such assistance as Sunstorm shall reasonably request to assist Sunstorm in prosecuting, maintaining and enforcing the Collateral Patents and such other governmental registrations of related Intellectual Property Rights as Sunstorm shall deem appropriate, including the execution of such documents and instruments as Sunstorm may reasonably request from Biopore or the named inventors of particular Collateral Patents (in the case of such inventors Biopore shall assist Sunstorm in obtaining any needed signatures from such inventors).  Sunstorm shall take all reasonable steps, at its sole cost and expense, to prosecute and maintain the Licensed Patents in the United States and those other countries it reasonably decides, after consultations with Biopore, would be appropriate.  The parties shall negotiate in good faith the actions to be taken and an equitable allocation of costs involved with respect to the enforcement of the Licensed Patents against any infringer in the Licensed Field or any third party asserting the invalidity of the licensed patents in any field.  Sunstorm shall keep Biopore apprised of all material actions it takes and plans to take with respect to such prosecution, maintenance and enforcement.  In the event that Sunstorm fails to so prosecute and maintain any of the Licensed Patents, Biopore shall have the right, but not the obligation, to prosecute and maintain any of the Licensed Patents and such other governmental registrations of Intellectual Property Rights covering the Licensed Field as Biopore shall deem best.  In the event Biopore so prosecutes or maintains any such Licensed Patent or Intellectual Property Right, Sunstorm shall promptly, upon the demand of Biopore, reimburse Biopore for any out of pocket cost incur red by Biopore in such prosecution or maintenance efforts.  If Sunstorm fails to reimburse Biopore within thirty days after any such demand and the total of all unpaid reimbursements then totals $10,000 or more, Sunstorm will assign any Licensed Patent that it has not maintained or prosecuted to Biopore promptly upon Biopore’s request.  Biopore and Sunstorm shall each also promptly report in writing to the other any: (i) known infringement or suspected infringement or misappropriation by a third party of any of the Intellectual Property Rights under or related to the patents to be transferred to Sunstorm or licensed back to Biopore hereunder in the other’s field of use, and shall provide the other party with all available evidence supporting said infringement, suspected infringement or unauthorized use or misappropriation.  Biopore will also (i) deliver to Sunstorm a copy of its annual balance sheet within 30 days

6

after the end of Biopore’s fiscal year and 30 days’ after Sunstorm’s reasonable request for an interim balance sheet, (ii) notify Sunstorm prior to instituting any legal action against any third party and keep Sunstorm apprised of the material developments in any such litigation, (iii) notify Sunstorm within ten days after being served in any litigation by any third party and keep Sunstorm apprised of the material developments in any such litigation, or (iv) notify Sunstorm if Biopore elects to dissolve or to go out of business or to cease operations.

         10.  REVERSION OF LICENSE.  The license granted to Biopore under Section 3 shall terminate and all rights in the licensed patents revert to Sunstorm if after the occurrence of any of the following events, Sunstorm notifies Biopore that Sunstorm desires to terminate such license:

a.

the insolvency of Biopore or its inability to pay its debts as they mature;

b.

the failure of Biopore to obtain a dismissal of any litigation against it or to provide for all liability that may be imposed upon it in any such litigation within 30 days after being served in such litigation; or

c.

Biopore’s election to dissolve, to go out of business or to cease operations other than after a voluntary sale of all or substantially all of the assets of the Company.  

         Such termination shall be effective at such date on or after Sunstorm’s notice of termination to Biopore as Sunstorm shall specify in such notice.  Upon such termination, all rights of Biopore to license the Licensed Patents or to sell products covered by the claims of the Licensed Patents shall immediately cease, except that Biopore may sell any products then in its inventory or ordered from manufacturers under orders that cannot be cancelled without any payment or penalty for the ninety days following termination and any licenses entered into prior to termination shall be deemed valid as to the sublicensee.

         11.  FURTHER ASSURANCES.  In addition to their specific obligations under Section 8, the parties shall also take such other actions, including the execution of such instruments and agreements as either party may reasonably request, and give each other such assurances as any party may reasonably request as shall be reasonably necessary to effect the transactions envisioned by this Agreement.

12.  MISCELLANEOUS.

         A.  Notices.  Any notice required by or envisioned by this Agreement shall be in writing and shall be sent to the recipient party by such means and to such address as the recipient party shall specify to all of the other party.  Each party shall specify such means and address in writing to the other at or prior to the closing envisioned by Sections 4 and 8 above.  Thereafter, a party may change the party’s preferred means of notice and address by notifying all of the other parties of such change at the addresses and by the means most recently provided by them in accordance with this Section 12A.     

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B.  Counterparts.  This Agreement may be signed in counterparts and each such counterpart shall be deemed an original, and all such counterparts together shall constitute but one agreement.

         C.   Captions.   The titles and headings used in this Agreement are used for convenience only and shall not affect the meaning or interpretation of any of the provisions of this Agreement.

         D.  Amendments and Waivers.  No amendment of this Agreement shall be effective unless set forth in a written instrument signed by the party against whom the amendment is to be enforced.  No waiver of any right under this Agreement shall be effective unless set forth in a written instrument signed by the waiving party.

         E.  Integration.  This Agreement contains the entire understanding of the parties concerning the subject matter of this Agreement and all such understandings and prior negotiations and agreements about such subject matter are merged into this Agreement.  The exhibits to this Agreement are an integral part of this Agreement.

         F.  Assignment.  Neither party shall have any right to delegate any duty it has under this Agreement without the prior consent of the other; provided, however, such consent shall not be unreasonably withheld.  The rights and obligations of a party to this Agreement shall inure to and be binding upon the permitted successors and assigns of such party.

         G.  Severability.  If any provision of this Agreement is found to be illegal, void, ineffective or unenforceable for any reason by a court of competent jurisdiction, the remaining provisions shall continue to be enforceable in accordance with their terms.

         H.  Governing Law.  This Memorandum of Understanding is entered into under and shall be governed by the laws of the State of California, except its choice of law principles.

         I.  Relationship of Parties.  Nothing in this Agreement is intended to or shall be construed to create a partnership or similar relationship among the parties.

         J.  Attorneys Fees.  The prevailing party in any legal action brought to interpret or enforce this Agreement or any promissory note delivered pursuant to this Agreement or attached to this Agreement or the security interest created by this Agreement shall be entitled to collect the prevailing party’s reasonable attorneys’ fees and costs in addition to any other relief to which it may be entitled.

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SIGNATURE PAGE OF

SUNSTORM RESEARCH CORPORATION/BIOPORE CORPORATION

FINANCING DEFAULT LICENSE AGREEMENT

         IN WITNESS WHEREOF, the undersigned have executed this Loan and Security Agreement as of the date first written above.

                                                          BIOPORE CORPORATION, a California   

                                                                      corporation

                                                           By /s/ Bruce S. Morra

                                                                Name: Bruce S. Morra

                                                                Title:   President

                                                          SUNSTORM RESEARCH CORPORATION,           

                                                                 a California corporation

                                                           By /s/ James R. Benson

                                                                Name: James R. Benson, Ph.D.

                                                                Title:  President

/s/ James R. Benson

James R. Benson, Ph.D.

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EX-10

BIOPORE CORPORATION/SUNSTORM RESEARCH CORPORATION

LOAN AND SECURITY AGREEMENT

         This Loan and Security Agreement is made and entered into as of the 31st

of December, 2001 by and among Biopore Corporation, a California corporation, (“Biopore”), James R. Benson, Ph.D., and Sunstorm Research corporation, a California corporation, (“Sunstorm”).

RECITALS

         This Agreement is made and entered into with respect to and in reliance upon the following facts:

         A.  Dr. Benson previously agreed to advance to Biopore the sums needed to finance its defense to a legal action brought against it by Mott Corporation.

         B.  Dr, Benson has, in fact, advanced to Biopore approximately $150,000 in order to fund such defense.

         C.  Among the terms and conditions under which these advances were made, as set forth in the resolutions of the Board of Directors of Biopore authorizing it to obtain such advances, is a requirement that such sums be repaid after the demand of Dr. Benson, such demand to be made anytime after December 31, 2001.    

          D.  The parties desire to enter into this Agreement in order to set forth all of the terms and conditions that will govern Dr. Benson’s repayment demand to Biopore, including Biopore’s grant of a security interest in Biopore’s patents to Sunstorm, of which Dr. Benson owns all the issued and outstanding stock.  

         NOW, THEREFORE, the parties agree as follows:

1.

BENSON LOAN TO BIOPORE.  Subject to the terms and conditions

set forth elsewhere in this Agreement, Benson confirms his previous advance of approximately $150,000 to Biopore and Biopore acknowledges that it has received such advance in one or more installments and that Dr Benson has the right to demand repayment at any time after December 31, 2001.  In consideration for such advances and Dr. Benson’s agreement, which he hereby confirms, subject to all of the terms and conditions of this Agreement, to not make any repayment demand until August 31, 2002, and to reduce the interest payable on the advance from 8% per annum to 7% per annum, Biopore hereby agrees to grant the security interest as set forth in Section 5 below, subject to all of the terms and conditions of this Agreement.  

  2.  REPRESENTATIONS AND WARRANTIES.  Each of the parties represents and warrants to the other parties as follows, acknowledging that the other party is relying on such representations and warranties in consenting to and entering into this Agreement:

         A.  The party has the authority to enter into this Agreement and to perform all of the party’s obligations and duties hereunder.  The person signing this Agreement on behalf of the party has full authority to do so.  The party has obtained all authorizations and consents necessary for the party to enter into and perform its duties and obligations hereunder, including all consents and authorizations required by its organizational and charter documents, by law or by any contract to which it is a party or by which it is bound or in any legal proceedings to which it is a party.

         B. The party has carefully read this Agreement, understands the content and the consequences of this Agreement and enters into this Agreement as the party’s free act, with advice of legal counsel or the waiver of the opportunity to obtain such advice.  In entering into this Agreement, the party is relying on the party’s own judgment, belief and knowledge, and not by any representation or agreements not set forth herein regarding the contents of this Agreement by any of the other parties or anyone representing them.

         C.   Neither the party’s entry into this Agreement nor its performance of its duties and obligations under this Agreement will constitute a breach of or violate its Articles of Incorporation or bylaws or constitute a breach of or an event of default under any agreement or instrument to which such party is a party or by which it or any of its material assets are bound, or constitute a breach of any law applicable to such party or any governmental or court order by which such party or any of its material assets are bound or to which it or they are subject.

         D.   Biopore has good, valid and marketable title to all of its material assets, free of all claims liens and encumbrances not listed on the attached Exhibit 2D, including those assets in which Sunstorm has been or is being granted a security interest, and all of such assets are in good order and repair and/or are otherwise suitable for the use to which they are currently put and are proposed to be put in the operation of Biopore’s business.

         E.    Biopore is not a party to any pending arbitration proceeding, lawsuit or governmental investigation or proceeding or any other similar proceeding not listed on the attached Exhibit 2E, and knows of no reasonable basis for any such proceeding, except as set forth therein.

         3.  DELIVERIES AT CLOSING.  At the closing for the transaction envisioned by this Agreement, Biopore shall deliver to Dr. Benson: (i) if requested by Dr. Benson, Biopore’s duly executed promissory note evidencing all advances previously made to Biopore by Dr. Benson, (ii) a duly executed copy of

2

this Agreement; and Biopore shall deliver to Sunstorm: (i) a duly executed copy of this Agreement and (ii) the Collateral Assignments and the UCC-1 Finanicng Statement envisioned by Section 5 below.  Dr Benson will to deliver to Biopore and to Sunstorm a duly executed copy of this Agreement.  Sunstorm will deliver to Biopore and to Dr. Benson a duly executed copy of this Agreement.

        4.  POST CLOSING COVENANTS.  After the closing envisioned by Section 3 above and until the later of the repayment of all advances made by Dr. Benson to Biopore as envisioned by this Agreement, Biopore shall provide to Dr. Benson such reasonable reports on Biopore’s business and progress as Dr. Benson shall reasonably request.  Biopore warrants that it used and shall use the proceeds of any advance made to it hereunder only for paying the expenses of the defense of the legal action brought against Biopore by Mott Corporation and for such general corporate and business purposes as Dr. Benson may approve in his sole discretion.  

         5.  SECURITY INTEREST.  Biopore hereby grants to Sunstorm a security interest in all of Biopore’s patents, patent applications and related inventions and trade secrets, and all royalties and other income due Biopore as the owner of such intellectual property (the “Collateral”) as security for payment of its obligations under any loan or other advance by Sunstorm to Biopore as envisioned by or pursuant to or in accordance with this Agreement.  Biopore shall deliver to Sunstorm a UCC-1 Financing Statement, suitable for recordation in the Office of the Secretary of State of California and in form and substance reasonably acceptable to Sunstorm and its counsel no later than the closing envisioned by Section 3 above.  In addition, Biopore shall, promptly after the request of Sunstorm, prepare, execute and deliver to Sunstorm collat eral assignments of any patent or patent application of Biopore suitable for recordation in the United States Patent Office or the and the corresponding offices throughout the world and in form and substance reasonably acceptable to Sunstorm and its counsel.  Biopore shall notify Sunstorm in advance of any filing by Sunstorm of any patent application or copyright registration throughout the world.  In the event of a default in any payment due under any loan or other any advance made by Sunstorm hereunder or otherwise or in the event of any failure by Biopore to observe or perform any duty, obligation or condition under this Agreement, or in the event any warranty made hereunder by Biopore is found by Sunstorm to be inaccurate in any material respect, which default remains uncured for more than thirty (30) days after notice thereof to Biopore, Sunstorm shall have all the rights and remedies afforded a secured party under the California Uniform Commercial Code or any statute applicable to the Collate ral, including, without limitation, the right to liquidate or to sell at public or private sale or to retain in satisfaction of any amount owed to Sunstorm as a result the Collateral in addition to such other remedies as may be available to Sunstorm hereunder.  Biopore shall pay to Sunstorm all expenses and expenditures, including reasonable attorneys’ fees, incurred or paid by Sunstorm in exercising or protecting its interests, rights and remedies under this Section 5.  Biopore shall

3

not grant any security interest in the Collateral with a priority equal to or senior to Sunstorm’s position or grant a junior security interest in the Collateral without prior notice to Sunstorm.  Biopore shall not transfer or otherwise convey ownership of or an exclusive license to any of the Collateral without the prior written consent of Sunstorm, which consent may be granted or withheld in its sole discretion.  Anything to the contrary in the foregoing notwithstanding, this security interest and Sunstorm’s rights in the Collateral shall be subject to any licenses to use the Collateral that are entered into by Biopore prior to effectiveness of the collateral assignments referred to above (that is, the operation of such assignments to transfer title to Sunstorm or its designee) or any public or private sale of the Collateral and to any license entered into by Biopore prior to December 31 , 2002 with Boston Scientific Corp. or any other licensee designated by Biopore prior to August 31, 2002 in the fields of vascular embelotherapy or injectable and/or endoluminal bulking agents for urological and/or gastro intestinal applications and/or such other fields as Sunstorm may consent to, such consent not to be unreasonably withheld.

         6.  FURTHER ASSURANCES.  The parties shall use their best efforts to negotiate in good faith the terms and conditions of any other agreements and instruments that are needed to implement the terms and conditions of this Agreement, including standard form collateral assignments, financing statements, and shall enter into or execute any such agreement or instrument.  Such agreements and instruments shall include such representations, warranties, covenants and conditions as are usual and customary in such agreements and instruments or that the parties agree upon that are consistent with this Agreement.   The parties shall also take such other actions and give each other such assurances as any party may reasonably request as shall be reasonably necessary to effect the transactions envisioned by this Agreement.

         7.  CLOSING.  The closing of the transactions that are envisioned by this Agreement and the parties’ deliveries under Section 4 above shall occur simultaneously on April 30, 2002, by such means as the parties agree upon or on such other date and at such other place and time as the parties may agree upon.

8.  MISCELLANEOUS.

         A.  Notices.  Any notice required by or envisioned by this Agreement shall be in writing and shall be sent to the recipient party to the address set forth opposite the recipient’s party’s signature to this Agreement or such other address as the recipient party may specify to the other parties pursuant to this Section 8A.

         B.  Counterparts.  This Agreement may be signed in counterparts and each such counterpart shall be deemed an original, and all such counterparts together shall constitute but one agreement.

4

C.   Captions.   The titles and headings used in this Agreement are used for convenience only and shall not affect the meaning or interpretation of any of the provisions of this Agreement.

         D.  Gender and Number.  Unless the context clearly requires otherwise, in this Agreement, the masculine or neuter gender shall include the other and the singular number shall include the plural and vice versa.

         E.  Amendments and Waivers.  No amendment of this Agreement shall be effective unless set forth in a written instrument signed by the party against whom the amendment is to be enforced.  No waiver of any right under this Agreement shall be effective unless set forth in a written instrument signed by the waiving party.

         F.  Integration.  This Agreement contains the entire understanding of the parties concerning the subject matter of this Agreement and all such understandings and prior negotiations and agreements about such subject matter are merged into this Agreement.  The exhibits to this Agreement are an integral part of this Agreement.  

         G.  Assignment. Neither party shall have any right to delegate any duty it has under this Agreement without the prior consent of the other.  The rights and obligations of a party to this Agreement shall inure to and be binding upon the permitted successors and assigns of such party.

         H.  Severability.  If any provision of this Agreement is found to be illegal, void, ineffective or unenforceable for any reason by a court of competent jurisdiction, the remaining provisions shall continue to be enforceable in accordance with their terms.

         I.  Governing Law.  This Memorandum of Understanding is entered into under and shall be governed by the laws of the State of California, except its choice of law principles.

         J.  Relationship of Parties.  Nothing in this Agreement is intended to or shall be construed to create a partnership or similar relationship among the parties.

         K.  Attorneys Fees.  The prevailing party in any legal action brought to interpret or enforce this Agreement or any promissory note delivered pursuant to this Agreement or attached to this Agreement or the security interest created by this Agreement shall be entitled to collect the prevailing party’s reasonable attorneys’ fees and costs in addition to any other relief to which it may be entitled.

SIGNATURE PAGE TO FOLLOW

5

SIGNATURE PAGE TO

BIOPORE CORPORATION/SUNSTORM RESEARCH CORPORATION

LOAN AND SECURITY AGREEMENT

         IN WITNESS WHEREOF, the undersigned have executed this Loan and Security Agreement as of the 31^st day of December 2001.

Address:____________________

              ____________________

                                                                /s/ James R. Benson

                                                                 James R. Benson, Ph.D.

                                                                BIOPORE CORPORATION, a California   

Address: P.O. Box 33115

          corporation

               Los Gatos, CA 95031

                                                                 By /s/ Bruce S. Morra

                                                                      Name:  Bruce S. Morra

                                                                      Title:  President

                                                                SUNSTORM RESEARCH    

                                                                CORPORATION , a California  

   Address: ____________________        corporation

                  ____________________

                                                                 By /s/ James R. Benson

                                                                      Name: James R. Benson, Ph.D.

                                                                      Title:   President

6

EX-23

Child, Van Wagoner & Bradshaw, PLLC

Exhibit 23.2

 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form SB-2 of our report dated August 16, 2006, relating to the consolidated financial statements of Polygenetics International Inc., which appears in such Prospectus. We also consent to the reference to us under the heading Interest of Named Experts and Counsel in such Prospectus.

/s/ Child, Van Wagoner & Bradshaw, PLLC                                                                                      

Certified Public Accountants

Salt Lake City, Utah

March 1, 2007

5296 So. Commerce Dr., Suite 300 • Salt Lake City, Utah 84107-5370

Telephone: (801) 281-4700 • Facsimile: (801) 281-4701

Members: American Institute of Certified Public Accountants • Utah Association of Certified Public Accountants