MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

FINANCIAL STATEMENTS

AND

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

DECEMBER 31, 2009 AND 2008

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

CONTENTS

Report of Independent Registered Public Accounting Firm	1

Financial Statements

Balance Sheets	2

Statements of Operations	3

Statement of Stockholders’ Deficiency	4

Statements of Cash Flows	5-6

Notes to Financial Statements	7-16

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

MediSync BioServices, Inc.

We have audited the accompanying balance sheets of MediSync BioServices, Inc. (a development stage company) (the “Company”) as of December 31, 2009 and 2008, and the related statements of operations, changes in stockholders’ deficiency and cash flows for the years then ended and for the period from November 30, 2006 (date of inception) to December 31, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the 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 audits 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 financial statements referred to above present fairly, in all material respects, the financial position of MediSync BioServices, Inc. (a development stage company) as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years then ended and for the period from November 30, 2006 (date of inception) to December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has not commenced operations or established a source of revenue, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Roseland, New Jersey

July 19, 2010.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

BALANCE SHEETS

December 31,	2009			2008

ASSETS

Current assets
Cash	$	14,454		$	303,079
Accounting receivable		7,100
Total current assets		21,554			303,079

Furniture and equipment		25,057

Deposit		7,650

Total assets	$	54,261		$	303,079

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

Current liabilities
Accrued liabilities	$	555,917		$	327,555
Notes payable to directors (net of $90 and $0 original interest discount)		74,910
Note payable from acquisition of assets		43,000
Senior subordinated convertible promissory notes (net of $2,193 original interest discount and $75,428 debt issuance costs)		572,579
Total current liabilities		1,246,406			327,555

Long-term liabilities
Notes payable to directors (net of $60 and $0 original interest discount in 2009 and 2008, respectively)		52,940			53,000
Senior subordinated convertible promissory notes (net of $5,168 original interest discount and $177,775 debt issuance costs)					467,257
Total long-term liabilities		52,940			520,257

STOCKHOLDERS’ DEFICIENCY

Preferred stock, par value $.0001, 10,000,000 shares authorized and 0 shares outstanding		-			-
Common stock, par value $.0001, 50,000,000 shares authorized, 2,260,000 and 2,245,000 shares issued and outstanding at December 31, 2009 and 2008, respectively		226			225
Additional paid in capital		22,374			22,225
Deficit accumulated during the development stage		(1,267,685	)		(567,183	)
Total stockholders’ deficiency		(1,245,085	)		(544,733	)

Total liabilities and stockholders’ deficiency	$	54,261		$	303,079

See accompanying notes to financial statements.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

	For the Year Ended December 31, 2009			For the Year Ended December 31, 2008			Period from November 30, 2006 (date of inception) to December 31, 2009

Revenues	$	-		$	-		$	-

Operating expenses
General and administrative expenses		444,075			423,542			956,639
Impairment charge		110,843						110,843
Total operating expenses		554,918			423,542			1,067,482

Loss from operations		(554,918	)		(423,542	)		(1,067,482	)

Interest expense		(145,584	)		(45,969	)		(200,203	)

Net loss	$	(700,502	)	$	(469,511	)	$	(1,267,685	)

Net loss per common share, basic and diluted	$	(0.31	)	$	(0.65	)	$	(1.32	)

Weighted average number of common shares outstanding, basic and diluted		2,245,697			717,064			958,883

See accompanying notes to financial statements.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

STATEMENT OF STOCKHOLDERS DEFICIENCY

For the period from November 30, 2006 (date of inception) to December 31, 2009

	Common Stock				Additional paid-in		Deficit accumulated during the development
	Shares		Amount		Capital		stage			Total

Balance, inception	-		$	-	$	-	$	-		$	-

Net loss, for the period November 30, 2006 to December 31, 2006								(48,000	)		(48,000	)
Balance, December 31, 2006								(48,000	)		(48,000	)

Net loss for 2007								(49,672	)		(49,672	)
Balance, December 31, 2007								(97,672	)		(97,672	)

Issuance of common stock in exchange for services		1,100,000		110		10,890					11,000

Issuance of common stock with Convertible Notes		595,000		60		5,890					5,950

Issuance of common stock to placement agent		550,000		55		5,445					5,500

Net loss for 2008								(469,511	)		(469,511	)
Balance, December 31, 2008		2,245,000		225		22,225		(567,183	)		(544,733	)

Issuance of common stock with Bridge Notes		15,000		1		149					150

Net loss for 2009								(700,502	)		(700,502	)
Balance, December 31, 2009		2,260,000	$	226	$	22,374	$	(1,267,685	)	$	(1,245,085	)

See accompanying notes to financial statements.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

STATEMENT OF CASH FLOWS

	For the Year Ended December 31, 2009			For the Year Ended December 31, 2008			Period from November 30, 2006 (date of inception) to December 31, 2009

Cash flows from operating activities
Net loss	$	(700,502	)	$	(469,511	)	$	(1,267,685	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment charge		110,843						110,843
Amortization of discount on convertible debt		2,975			782			3,757
Amortization of deferred debt issuance cost		102,347			26,919			129,266
Issuance of common stock in exchange for services					11,000			11,000
Increase in cash attributable to changes in operating assets and liabilities:
Accrued liabilities		228,362			298,411			535,423
Net cash used in operating activities		(255,975	)		(132,399	)		(477,396	)

Cash flows from investing activities
Purchase of Mountain West assets		(100,000	)					(100,000	)
Payment of deposit		(7,650	)					(7,650	)
Net cash used in investing activities		(107,650	)					(107,650	)

Cash flows from financing activities
Proceeds from notes payable		75,000			40,000			213,000
Proceeds from issuance of Senior subordinated convertible promissory notes					550,000			550,000
Payment of debt issuance costs					(163,500	)		(163,500	)
Net cash provided by financing activities		75,000			426,500			599,500

Net increase (decrease) in cash		(288,625	)		294,101			14,454

Cash, beginning of period		303,079			8,978
Cash, end of period	$	14,454		$	303,079		$	14,454

See accompanying notes to financial statements.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

STATEMENT OF CASH FLOWS (continued)

	For the Year Ended December 31, 2009		For the Year Ended December 31, 2008		Period from November 30, 2006 (date of inception) to December 31, 2009

Supplemental disclosures of non-cash financing and investing activities:

Note payable issued in connection with the acquisition of assets	$	43,000	$	-	$	43,000

Accrued debt issuance costs	$	-	$	35,694	$	35,694

Issuance of common stock to placement agent	$	-	$	5,500	$	5,500

Conversion of notes payable to senior subordinated convertible promissory notes	$	-	$	90,000	$	90,000

Accrued interest converted to notes payable	$	-	$	5,000	$	5,000

Accrued interest converted to senior subordinated convertible promissory notes	$	-	$	10,200	$	10,200

See accompanying notes to financial statements.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

1. Description of business and summary of significant accounting policies

We are MediSync BioServices, Inc., (the “Company”) a Delaware corporation formed, for the principal purpose of consolidating contract research organizations (“CROs”) and related businesses that serve the pharmaceutical and biotechnology industries, including site management organizations (“SMOs”), which sub-contract clinical trial-related responsibilities from a CRO or pharmaceutical/biotechnology company, and post marketing surveillance companies, which monitor a pharmaceutical drug or device after it has been released on the market. We believe that our future operations may provide added value to the pharmaceutical and biotechnology industries, resulting in increased value to our shareholders. We further believe that each CRO and related business that we acquire (an “Acquired Subsidiary”) may benefit from (a) potential cost savings and efficiencies proposed by our consolidation model, (b) the sharing of, and collaboration on, clinical research studies among the Acquired Subsidiaries, and (c) new services offered by our Acquired Subsidiaries.

Basis of Presentation

The accompanying financial statements are presented in U.S. dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

These financial statements were approved by management and available for issuance on July 19, 2010. Subsequent events have been evaluated through this date.

Development Stage Activities

The Company has been in the development stage since its inception on November 30, 2006. All activity through December 31, 2009 relates to the Company’s formation and organization, initial funding, senior subordinated convertible promissory notes issuance and the acquisition of Mountain West Clinical Trials, LLC (“Mountain West”) on December 15, 2009, however there were no operations in 2009. The Company selected December 31 as its fiscal year-end.

Use of Estimates

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

Cash

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s accounts at these institutions may, at times, exceed the Federally insured limits. The Company has not experienced any losses in such accounts.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

1. Description of business and summary of significant accounting policies (continued)

Accounts Receivable

Accounts receivable were acquired in conjunction with the Company’s December 2009 acquisition of Mountain West. Under the acquisition method of accounting, accounts receivable were recorded on the Company’s books at fair value. The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions.

Furniture and Equipment

Furniture and equipment was acquired in conjunction with the Company’s December 2009 acquisition of Mountain West. Under the acquisition method of accounting, furniture and equipment was recorded on the Company’s books at fair value. Depreciation will be computed using the straight-line method over the estimated lives of the assets. At December 31, 2009, furniture and equipment was $10,213 and $14,844, respectively. No depreciation was taken during 2009.

Income Taxes

The Company accounts for income taxes in accordance with GAAP which requires that deferred tax assets and liabilities be recognized for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, GAAP requires recognition of future tax benefits, such as carryforwards, to the extent that realization of such benefits is more likely than not and that a valuation allowance be provided when it is more likely than not that some portion of the deferred tax asset will not be realized. As of December 31, 2009 and 2008, the Company has not recorded any future tax benefits or liabilities.

In accordance with GAAP, the Company is required to determine whether a tax position is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position The Company files an income tax return in the U.S. federal jurisdiction, and may file income tax returns in various U.S. state and local jurisdictions. Generally the Company is no longer subject to income tax examinations by major taxing authorities for years before 2007.The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized results in the Company recording a tax liability that increases stockholders’ deficiency. This policy has been applied to all existing tax positions upon the Company’s initial adoption for the year ended December 31, 2009. Based on its analysis, the Company has determined that the adoption of this policy did not have a material impact on the Company’s financial statements upon adoption. However, the Company’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. The Company recognizes interest accrued related to unrecognized tax benefits and penalties related to unrecognized tax benefits in income tax fees payable, if assessed. No interest expense or penalties have been recognized as of and for the year ended December 31, 2009.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

1. Description of business and summary of significant accounting policies (continued)

Goodwill and Impairment Charge

In accordance with GAAP, long-lived assets, including goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the estimated fair value of the assets.

During 2009, the Company determined that the carrying amount of the goodwill exceeded its fair value, which was estimated based on the present value of expected future cash inflows. Accordingly, a goodwill impairment loss of approximately $111,000 was recognized.

Balance, December 31, 2008	$	-
Goodwill from Acquisition of Mountain West		110,843
Impairment charge		(110,843	)

Balance, December 31, 2009	$	-

Revenue Recognition

The Company has not received or recognized any revenue since inception.

The Company will follow the guidance of the United States Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) No. 104 Revenue Recognition. The Company will recognize revenues when it has completed its obligations and the amount earned is fully determinable and realizable, and collectability is reasonably assured.

Business Combinations

The Company accounts for business combinations in accordance with GAAP, which requires most identifiable assets, liabilities, non-controlling interests and goodwill acquired in a business combination to be recorded at “full fair value”. Under GAAP, all business combinations will be accounted for under the acquisition method. GAAP requires that contingent assets and liabilities and contingent consideration shall be recorded at estimated fair value as of the acquisition date, with any subsequent changes in fair value charged or credited to earnings. Further, acquisition-related costs will be expensed rather than treated as part of the acquisition.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

1. Description of business and summary of significant accounting policies (continued)

Net Loss Per Common Share

In accordance with GAAP, net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period.

Basic net loss per common share excludes dilution and is computed as net loss divided by the weighted average common shares outstanding for the period. Diluted net loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. As the Company reported a net loss for the years ended December 31, 2009 and 2008 and for the period from November 30, 2006 (inception) to December 31, 2009, the effect of common stock equivalents, if any, are not considered in the diluted net loss per common share since these dilutive securities would reduce the net loss per common share and become anti-dilutive.

Stock-based Compensation

The Company accounts for equity instruments issued to employees for services based on the fair value of the equity instruments issued and accounts for equity instruments issued to other than employees based on the fair value of the consideration received or the fair value of the equity instruments, whichever is more reliably measurable.

The Company accounts for stock-based compensation in accordance with GAAP, which requires that the cost resulting from all share-based transactions be recorded in the financial statements. This statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based transactions.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2009-01, Topic 105 - Generally Accepted Accounting Principles - amendments based on Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification (“ASC”) and the Hierarchy of Generally Accepted Accounting Principles. This ASU reflected the issuance of FASB Statement No. 168. This ASU amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. This ASU includes FASB Statement No. 168 in its entirety, including the accounting standards update instructions contained in Appendix B of the Statement. The FASB ASC does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. The FASB ASC is effective for interim and annual periods ending after September 15, 2009, and as of the effective date, all existing accounting standard documents will be superseded. The FASB ASC is effective for the Company in the third quarter of 2009, and accordingly, this annual report for the year ended December 31, 2009 and all subsequent reports will reference the FASB ASC as the sole source of authoritative literature.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

1. Description of business and summary of significant accounting policies (continued)

Recent Accounting Pronouncements (continued)

In June 2009, the FASB issued ASU No. 2009-02, Omnibus Update - Amendments to Various Topics for Technical Corrections. This omnibus ASU detailed amendments to various topics for technical corrections, effective as of July 1, 2009. The adoption of ASU 2009-02 did not have a material impact on the Company’s financial statements.

In August 2009, the FASB issued ASU No. 2009-03, SEC Update - Amendments to Various Topics Containing SEC Staff Accounting Bulletins. This ASU updated cross-references to Codification text. The adoption of ASU 2009-03 did not have a material impact on the Company’s financial statements.

In August 2009, the FASB issued ASU No. 2009-04, Accounting for Redeemable Equity Instruments -Amendment to Section 480-10-S99. This ASU represents an update to Section 480-10-S99, Distinguishing Liabilities from Equity, per Emerging Issues Task Force Topic (“EITF”) D-98, “Classification and Measurement of Redeemable Securities.” The adoption of ASU 2009-04 did not have a material impact on the Company’s financial statements.

In August 2009, the FASB issued ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) - Measuring Liabilities at Fair Value. This ASU amends Subtopic 820-10, Fair Value Measurements and Disclosures, to provide guidance on the fair value measurement of liabilities. This update is effective for financial statements issued for interim and annual periods ending after August 26, 2009. The adoption of ASU 2009-05 did not have a material impact on the Company’s financial statements.

In September 2009, the FASB issued ASU No. 2009-06, Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities. This ASU provides additional implementation guidance on accounting for uncertainty in income taxes and eliminates the disclosures required by paragraph 740-10-50-15(a) through (b) for nonpublic entities. This update is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of ASU 2009-06 did not have material impact on the Company’s financial statements.

In September 2009, the FASB issued ASU No. 2009-08, Earnings Per Share Amendments to Section 260-10- S99. This ASU represents technical corrections to Topic 260-10-S99, Earnings per Share, based on EITF Topic D-53, Computation of Earnings Per Share for a Period that Includes a Redemption or an Induced Conversion of a Portion of a Class of Preferred Stock and EITF Topic D-42, The Effect of the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock. The adoption of ASU 2009-08 did not have material impact on the Company’s financial statements.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

2. Going concern

The Company is currently in the development stage. The Company has not yet begun generating revenues as of December 31, 2009. Its activities through December 31, 2009 have been organizational and developmental. The Company acquired the assets of Mountain West on December 15, 2009, but as of December 31, 2009 had not commenced operations.

The Company has continued to incur losses and negative cash flows from operations since inception. For the years ended December 31, 2009 and 2008, the Company incurred a net loss of approximately $701,000 and $470,000, respectively and negative cash flows from operations of approximately $256,000 and $132,000, respectively. As of December 31, 2009, the Company had a deficit accumulated in the development stage of approximately $1,268,000 and working capital deficits of approximately $1,225,000 and $24,000, respectively. While the Company is attempting to commence operations and generate revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. Cash generation from Mountain West in 2010 is not considered to be significant enough to contribute to the Company’s overhead. Due to the current credit crisis, it is uncertain that the Company could secure financing with a financial institution if needed. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

Management intends to raise additional funds by way of a public or private offering. There are no assurances that the Company will complete the engagements successfully or that these engagements will be extended. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is independent upon the Company’s ability to further implement its business plan and generate revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

3. Accrued liabilities

Accrued liabilities consisted of the following at December 31,

	2009		2008

Accrued legal and consulting fees	$	443,672	$	302,172
Accrued interest		53,580		11,718
Other		58,665		13,665

	$	555,917	$	327,555

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

4. Notes payable

During 2006, the Company borrowed under a note payable of $48,000 from the President of the Company. As of December 31, 2009 and 2008, the outstanding balance was approximately $53,000. For the years ended December 31, 2009 and 2008, and for the period from November 30, 2006 (date of inception) to December 31, 2009, the Company has recorded interest expense of $2,650, $1,310 and $8,760, respectively.

During 2009 and 2008, the Company borrowed under various notes payable, due in September 2010, of $90,000 from entities affiliated with Directors of the Company. During September 2008 the officers elected to convert $45,000 of the notes payable into the $45,000 Convertible Notes of the Company and 45,000 shares of common stock. The remaining $45,000 of principal plus accrued interest of approximately $10,200 was evidenced by convertible notes convertible into Units identical to those sold in August-September 2008. For the years ended December 31, 2009 and 2008, and for the period from November 30, 2006 (date of inception) to December 31,2009, the Company has recorded interest expense of $6,012, $8,188 and $18,320, respectively.

During September 2008, the Company sold 22 Units in the face amount of $550,000. Each unit consists of 25,000 shares of the Company’s common stock, and a Senior Subordinated Convertible Promissory Note (the “2008 Convertible Note”) in the principal amount of $25,000. 2008 Convertible Notes bear interest at 6% and are currently due August and September 2010.

The aggregate amounts from the sale of Units were allocated to the common stock and Convertible Notes and $5,950 was recorded as a debt discount at the date of issuance of the 2008 Convertible Note and was amortized to interest expense using the interest method over the stated term of the 2008 Convertible Note. During the years ended December 31, 2009 and 2008, and for the period from November 30, 2006 (date of inception) to December 31, 2009, $2,975, $2,225 and $5,200 of debt discount was accreted and recorded as amortization of debt discounts, respectively.

In December 2009, the Company borrowed under various notes payable $75,000 from certain directors and entities affiliated with directors of the Company. These notes have an interest rate of 6% and are due on April 16, 2010. The notes have a default interest rate of 15%. There were 15,000 shares of common stock issued as incentive to the directors to loan the funds and $150 was recorded as a debt discount at the date of issuance. There was no amortization on this discount in 2009. Interest recorded for the year ended December 31, 2009 on these notes was $200. In April 2010, the notes and accrued interest were converted in private placement to common stock.

5. Stockholders’ deficiency

The Company is authorized to issue 50,000,000 shares of common stock and 10,000,000 shares of preferred stock with a par value of $.0001 each.

As of December 31, 2009 and 2008, no preferred stocks were issued and outstanding.

During the year ended December 31, 2008, the Company issued an aggregate of 1,100,000 shares of common stock to the management of the Company in exchange for a total of $11,000 of services rendered. These shares were valued at a weighted average of $0.01 per share which represents the fair value of the stock issued which did not differ materially from the value of services received.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

5. Stockholders’ deficiency (continued)

During the year ended December 31, 2008, the Company issued an aggregate of 550,000 shares of common stock to an affiliate of its placement agent for a total of $5,500. These shares were valued at a weighted average of approximately $0.01 per share.

During the year ended December 31, 2009, the Company issued 15,000 shares of Common Stocks to Directors as incentive for loaning $75,000 in various bridge notes.

6. Related party transactions

The Company has entered into a services agreement with SMC Ventures Inc. (the “Contractor”), as an independent contractor of the Company, to make available the services of Dov Ehrlich (the “Services Agreement”). SMC Ventures Inc. is wholly owned by Mr. Ehrlich. The Services Agreement has a term of three years from the date of the next qualified offering. Mr. Ehrlich serves as the Company’s Chief Executive Officer, President and Secretary, reporting to the Board of Directors. The Services Agreement was not in effect during 2008 or 2009 because the qualifying event did not occur.

The Services Agreement is terminable by the Company with or without “cause,” and by the Contractor for “good reason,” as further discussed below. The Services Agreement provides that the Contractor is eligible for twelve months severance pay in the event that the Services Agreement is terminated by the Company without “cause,” or by the Contractor for “good reason”.

For the years ended December 31, 2009 and 2008, and for the period from November 30, 2006 (date of inception) to December 31, 2009, the Company paid fees of $175,000, $92,495 and $346,495, respectively, to the Contractor for Mr. Ehrlich’s services. These payments were not pursuant to the Services Agreement.

Pursuant to the terms of a stock option agreement, a consultant is entitled to receive the grant of stock options to purchase 67,350 shares of Common Stock. The options will be fully vested on the date of grant, will have a five year term (subject to earlier termination upon termination of services), will be issued at an exercise price equal to fair market value on the date of grant, and will be subject to such other terms and conditions as are contained in the applicable stock option agreement. No options were granted or outstanding under this agreement as of December 31, 2009.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

7. Income taxes

A reconciliation of the statutory U.S. federal income tax rate to the Company's effective tax was as follows for December 31,

	2009			2008

Statutory U.S. rate		34	%		34	%
State income taxes, net of federal benefit		6			6
Effect of allowance		(40	)		(40	)
Total income tax expense (benefit)		0	%		0	%

Deferred income taxes are provided for the differences between the bases of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company recorded a deferred income tax asset for the tax effect of start-up costs and temporary differences, aggregating approximately $460,000 and $223,000 at December 31, 2009 and 2008, respectively. In recognition of the uncertainty regarding the ultimate amount of income tax benefits to be derived, the Company recorded a full valuation allowance as of December 31, 2009 and 2008.

8. Acquisition of Mountain West

Effective as of December 15, 2009, the Company closed on the acquisition (the “Acquisition”) of substantially all of the assets of Mountain West, an Idaho limited liability company. The Company acquired Mountain West as part of its principal business plan of consolidating CROs.

The aggregate purchase price for the Acquisition, subject to certain post-closing adjustment, is comprised of (i) a $100,000 cash payment at closing, (ii) a one-year subordinated promissory note in the aggregate principal amount of $43,000 with an interest rate of 7% per annum and (iii) earn-out payments, payable in cash, based on Mountain West’s achievement of revenue targets of $535,000 and $715,000 during 2010 and 2011, respectively. The Company has not ascribed value to this contingent consideration because it is unlikely that Mountain West will achieve the revenue targets triggering the earn-out payments. Acquisition costs of approximately $30,000 incurred in connection with the transaction were expensed under general and administrative expenses in the statements of operations for the year ended December 31, 2009. In connection with the Acquisition, two members of Mountain West’s executive management team have executed three-year employment agreements and consulting agreements with the Company, effective as of the closing of the Acquisition.

Under the acquisition method of accounting, the identifiable assets acquired were recognized and measured as of the acquisition date based on their estimated fair values as of December 31, 2009. The excess of the Acquisition date fair value of consideration transferred over estimated fair value of the net intangible assets acquired were recorded as goodwill. The Company did not recognize any other intangible assets in the Acquisition.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

8. Acquisition of Mountain West (continued)

The total purchase price for the Acquisition is allocated as follows:

Accounts receivable	$	7,100
Furniture and equipment		25,057
Goodwill		110,843
	$	143,000

Immediately following the December 15, 2009 Acquisition, the Company recognized an impairment charge for the entire amount of goodwill (see Note 1). The impact of the Acquisition has been recorded in the accompanying 2009 balance sheet and statement of cash flows. There were no revenues or costs associated with Mountain West in the year ended December 31, 2009.

9. Subsequent events

From April 2010 to July 2010, the Company sold 19.8 units of stock in the face amount of $25,000 per unit. Each unit consists of 25,000 shares of the Company’s common stock, and a Senior Subordinated Convertible Promissory Note (the “2010 Convertible Note”) in the principal amount of $25,000. The 2010 Convertible Notes bear interest at 6% and have a maturity date of June 30, 2011.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

INTERIM CONDENSED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2010

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

CONDENSED BALANCE SHEETS

	September 30,			December 31,
	2010			2009
ASSETS	(Unaudited)

Current assets:
Cash	$	91,112		$	14,454
Accounts receivable		8,000			7,100
Total current assets		99,112			21,554

Furniture and equipment, net		24,705			25,057
Deposits		33,130			7,650
Total assets	$	156,947		$	54,261
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

Current liabilities:
Accounts payable and accrued expenses	$	1,211,199		$	555,917
Notes payable to directors		53,000			74,910
Note payable from acquisition of assets		43,000			43,000
Senior subordinated convertible promissory notes (net of $0 and $2,193 original interest discount and $0 and $75,428 debt issuance costs at September 30, 2010 and December 31, 2009, respectively)		1,354,005			572,579
Total current liabilities		2,661,204			1,246,406

Long-term liabilities:
Notes payable to directors		—			52,940
Total long-term liabilities		—			52,940

STOCKHOLDERS’ DEFICIENCY
Preferred stock, par value $.0001, 10,000,000 shares authorized and 0 shares outstanding		—			—
Common stock, par value $.0001, 50,000,000 shares authorized, 2,989,805 and 2,260,000 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively		299			226
Additional paid in capital		29,339			22,374
Deficit accumulated during the development stage		(2,533,895	)		(1,267,685	)
Total stockholders’ deficiency		(2,504,257	)		(1,245,085	)

Total liabilities and stockholders’ deficiency	$	156,947		$	54,261

See accompanying notes to the condensed financial statements.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

CONDENSED STATEMENTS OF OPERATIONS - (Unaudited)

	For the Nine Months Ended September 30,						Period from November 30, 2006 (date of inception) to September 30,
	2010			2009			2010

Revenues	$	53,855		$	-		$	53,855
Cost of Revenue		27,310			-			27,310
Gross Margin		26,545			-			26,545
Operating expenses
General and administrative expenses		1,089,731			299,491			2,046,370
Impairment charge		-			-			110,843
Total operating expenses		1,089,731			299,491			2,157,213

Loss from operations		(1,063,186	)		(299,491	)		(2,130,668	)

Interest expense		(203,024	)		(109,163	)		(403,227	)

Net loss	$	(1,266,210	)	$	(408,654	)	$	(2,533,895	)

Net loss per common share, basic and diluted	$	(0.48	)	$	(0.18	)	$	(1.96	)

Weighted average number of common shares outstanding, basic and diluted		2,638,598			2,246,313			1,295,972

See accompanying notes to the condensed financial statements.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS - (Unaudited)

	For the Nine Months Ended September 30,						Period from November 30, 2006 (date of inception) to September 30,
	2010			2009			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,266,210	)	$	(408,654	)	$	(2,533,895	)

Adjustments to reconcile net loss to net cash used in operating activities:
Impairment charge		-—			-—			110,843
Amortization of original discount on convertible debt		2,193			2,225			5,950
Amortization of debt issuance cost		75,428			76,550			204,694
Depreciation expense		352			-—			352
Issuance of common stock in exchange for services		-—			-—			11,000

Increase (decrease) in cash attributable to changes in operating assets and liabilities, net of assets and liabilities acquired:
Accounts receivable		(900	)		-—			(900	)
Accounts payable and accrued liabilities		666,275			139,364			1,201,698
NET CASH USED IN OPERATING ACTIVITIES		(522,862	)		(190,515	)		(1,000,258	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Mountain West assets		-—			-—			(100,000	)
Payment deposit		(25,480	)		—			( 33,130	)
NET CASH USED IN INVESTING ACTIVITIES		(25,480	)		-—			(133,130	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable		-—			-—			213,000
Proceeds from issuance of senior subordinate convertible promissory notes		625,000			-—			1,175,000
Payment of the debt issuance costs		-—			-—			(163,500	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		625,000			-—			1,224,500

INCREASE (DECREASE ) IN CASH		76,658			(190,515	)		91,112
CASH - BEGINNING OF PERIOD		14,454			303,079			-—
CASH - END OF PERIOD	$	91,112		$	112,564		$	91,112

Supplemental disclosures of non cash financing activities:
Accrued debt issuance costs	$	62,750			—		$	62,750
Conversion of notes payable to senior subordinated convertible promissory notes	$	(75,000	)		—		$	(75,000	)
Accrued interest converted to senior subordinated convertible promissory notes	$	3,805			—		$	3,805

See accompanying notes to the condensed financial statements.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

MediSync BioServices, Inc., a Delaware corporation (the “Company”), was formed in 2006, for the principal purpose of consolidating contract research organizations (CROs) and related businesses that serve the pharmaceutical and biotechnology industries, including site management organizations (SMOs), which sub-contract clinical trial-related responsibilities from a CRO or pharmaceutical/biotechnology company, and post marketing surveillance companies, which monitors a pharmaceutical drug or device after it has been released on the market. We believe that our future operations may provide added value to the pharmaceutical and biotechnology industries, resulting in increased value to our shareholders. We further believe that each CRO and related business that we acquire (an “Acquired Subsidiary”) may benefit from (a) potential cost savings and efficiencies proposed by our consolidation model, (b) the sharing of, and collaboration on, clinical research studies among the Acquired Subsidiaries, and (c) new services offered by our Acquired Subsidiaries.

On December 15, 2009, we closed on our first target purchase and acquired substantially all of the assets of Mountain West Clinical Trials, LLC (“Mountain West”). See Note 2 “Summary of significant accounting policies – Acquisition”.

The accompanying unaudited condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and instructions to Form 10Q for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2010 is not necessarily indicative of the results that may be expected for the year ended December 31, 2010. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 2009.

The balance sheet at December 31, 2009 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

2. Summary of significant accounting policies

Development stage activities

The Company has been in the development stage since its inception on November 30, 2006. Although the operations of Mountain West were included in the results of the Company for the nine months ended September 30, 2010, they have been insignificant to the development activities of the Company. All financing activity through September 30, 2010 relates to the Company’s formation and organization, initial funding and issuance of senior subordinated convertible promissory notes.

Uses of estimates in the preparation of financial statements

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

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

Revenue Recognition

The Company uses revenue recognition criteria outlined in ASC 605. Accordingly, revenues are recognized based on the performance requirements of the agreement. Non-refundable up-front fees, where we have an ongoing involvement or performance obligation, are deferred and amortized over the term of the performance obligation. Subsequent milestone payments received are either recognized immediately or ratably, over a contractual period, depending on the nature of the milestone agreement terms and accounting guidance for such transactions.

Acquisition

Effective as of December 15, 2009, the Company closed on the acquisition (the “Acquisition”) of substantially all of the assets of Mountain West, LLC, an Idaho limited liability company. The Company acquired Mountain West as the first step in its plan to consolidate CROs.

The aggregate purchase price for the Acquisition, subject to certain post-closing adjustment, was comprised of (i) a $100,000 cash payment at closing, (ii) a one-year subordinated promissory note in the aggregate principal amount of $43,000 with an interest rate of 7% per annum and (iii) earn-out payments, payable in cash, based on Mountain West’s achievement of revenue targets of $535,000 and $715,000 during 2010 and 2011, respectively. As of September 30, 2010 and December 31, 2009, the Company did not ascribe value to this contingent consideration because it is unlikely that Mountain West will achieve the revenue targets triggering the earn-out payments. Acquisition costs of approximately $30,000 incurred in connection with the transaction were expensed under general and administrative expenses in the statements of operations for the year ended December 31, 2009. In connection with the Acquisition, two members of Mountain West’s executive management team have executed three-year employment agreements and consulting agreements with the Company, effective as of the closing of the Acquisition.

Accounts receivable................................	$	7,100
Furniture and equipment........................		25,057
Goodwill………………….....................		110,843
	$	143,000

Immediately following the December 15, 2009 Acquisition, the Company recognized an impairment charge for the entire amount of goodwill (see “Goodwill and Impairment Charge” below). The impact of the Acquisition has been recorded in the accompanying 2009 balance sheet and statement of cash flows. There were no revenues or costs associated with Mountain West in the year ended December 31, 2009.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

Goodwill and Impairment Charge

As of December 31, 2009, the Company determined that the carrying amount of the goodwill exceeded its fair value, which was estimated based on the present value of expected future cash inflows. Accordingly, a goodwill impairment loss of approximately $111,000 was recognized.


Balance, December 31, 2008.........................................	$	-

Goodwill from Acquisition of Mountain West.............		110,843
Impairment charge.........................................................		(110,843	)

Balance, December 31, 2009.........................................	$	-

Net Loss Per Common Share

In accordance with GAAP, net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period.

Basic net loss per common share excludes dilution and is computed as net loss divided by the weighted average common shares outstanding for the period. Diluted net loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. As the Company reported a net loss for the nine month periods ended September 30, 2010 and 2009 and for the period from November 30, 2006 (inception) to September 30, 2010, the effect of common stock equivalents, if any, are not considered in the diluted net loss per common share since these dilutive securities would reduce the net loss per common share and become anti-dilutive.

Recently issued accounting standards

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for us with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which will become effective for us with the reporting period beginning July 1, 2011. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on the Company’s condensed financial statements.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

Going concern

The Company has been in the development stage since its inception on November 30, 2006. The Company has only incurred losses and negative cash flows from operations since inception. Although the operation of Mountain West were included in the results of the Company for the nine months ended September 30, 2010, they have been insignificant with respect to the development activities of the Company. All activity through September 30, 2010 relates to the Company’s formation and organization, initial funding and senior subordinated convertible promissory notes issuance.

While the Company is attempting to commence operations and generate revenues through its contemplated merger with Vyteris, Inc., as more specifically described in Note 8 hereto with capitalized terms used as defined in Note 8, the Company’s cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. There are no assurances that the Company will complete the engagements successfully or that these engagements will be extended. While the Company believes in the viability of its strategy to increase revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

3. Deposits

As of September 30, 2010, the Company paid $25,000 as a deposit to the acquisition target as an earnest money deposit to be applied against the purchase price upon consummation of the acquisition. The Company paid a rental deposit on behalf of Mountain West in the amount of $8,130.

4. Accounts payable and accrued liabilities

Accrued liabilities consist of the following:

	September 30,		December 31,
	2010		2009
Accrued legal and consulting fees	$	1,027,774	$	443,672
Accrued interest		105,314		53,580
Other		78,111		58,665
Accounts payable and accrued liabilities	$	1,211,199	$	555,917

5. Notes payable

During 2006, the Company borrowed under a note payable of $48,000 from the President of the Company.

In 2008, the balance increased to $53,000 due to a $5,000 extension fee paid to the noteholder to extend the maturity date of the note to June 30, 2011. As of September 30, 2010 and December 31, 2009, the outstanding balance was $53,000. For the nine months ended September 30, 2010 and 2009, the Company has recorded related interest expense of $2,385 on the statement of operations. The Company has recorded related interest expense from inception to date of $7,202 on the statement of operations.

During 2007 and 2008, the Company borrowed under various notes payable of $90,000 from the officers of the Company. During September 2008 the officers elected to convert the notes payable to the Convertible Notes of the Company along with the accrued interest of $10,200. The Company issued 45,000 shares of common stock upon conversion. For the nine months ended September 30, 2010 and 2009, the Company has recorded related interest expense of $4,496 on the statement of operations. The Company has recorded related interest expense from inception to date of $10,013 on the statement of operations.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

During September 2008, the Company sold 22 units in the face amount of $550,000. Each unit consists of 25,000 shares on the Company’s common stock, and Senior Subordinated Convertible Promissory Notes (the “Convertible Note”) in the principal amount of $25,000. The Convertible Notes bear interest at 6% and are due in September, 2010. The holders of the Convertible Notes have extended the maturity until the closing of the Merger. Originally, under the terms of the Convertible Notes, after the first closing of Series B Offering (as defined below), the holder of the Convertible Note will have the option to convert the outstanding principal amount and accumulated interest into Series B Units as the price paid and on the terms offered to investors participating in the Series B Offering (as defined below). Following the sale of Units, the Company currently contemplates offering (the “Series A Offering”) for sale between $5 to $10 million of units comprised of its Series A Preferred Stock and warrants to purchase common stock (the “Series A Units”). Following the Series A Offering, the Company currently contemplates offering (the “Series B Offering”) for sale between $10 to $15 million of units comprised of its Series A Preferred Stock and warrants to purchase common stock (the “Series B Units”). Since the execution of the Merger Agreement with respect to the Merger, the holders of the Convertible Notes will instead convert their Notes into shares of Vyteris Common Stock upon consummation of the Merger as set forth in footnote 9 below. The Company issued 220,000 finders warrants to Spencer Trask Ventures, Inc., a related party to a principal stockholder of the Company, bearing substantially the same terms as the warrants issued to investors. The fair value of such warrants was de minimis.

In December 2009, the Company borrowed $75,000 pursuant to various notes payable issued to certain directors and entities affiliated with directors of the Company. These notes had an interest rate of 6% and were due on April 16, 2010. They were converted, along with accrued interest of $3,805, to Senior Subordinated Convertible Promissory Notes issued with respect to the 2010 offering described below.

In the first and second quarters of 2010, the Company raised an additional $625,000 through the offering of Senior Subordinated Convertible Promissory Notes. The terms of these Notes are identical to the terms of the Convertible Notes except that the due date for these notes is June 30, 2011. These Notes will also be converted into Vyteris, Inc. common stock upon closing of the Merger. The Company issued 198,000 finders warrants to Spencer Trask Ventures, Inc., related party to a principal stockholder of the Company, bearing substantially the same terms as the warrants issued to investors. The fair value of such warrants was de minimis.

6. Stockholders’ deficiency

The Company is authorized to issue 50,000,000 shares of common stock (“Common Stock”) and 10,000,000 shares of preferred stock with a par value of $.0001 per share. As of September 30, 2010, there were no shares of preferred stock issued and outstanding.

During the nine months ended September 30, 2010, the Company issued additional 729,805 shares of Common Stock associated with the issuance of the 2010 Senior Subordinated Convertible Promissory Notes. The notes were accounted for as long term liabilities with original interest discount of $7,298 recorded to paid in capital. The notes were later transferred to short term liabilities and the amortization of the original interest discount was accelerated as of September 30, 2010 in connection with the contemplated merger as described in Note 9.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

7. Related party transactions

The Company has entered into a services agreement with SMC Ventures Inc. (the “Contractor”), as an independent contractor of the Company, to make available the services of Dov Ehrlich (the “Services Agreement”). SMC Ventures Inc. is wholly owned by Mr. Ehrlich. The Services Agreement has a term of three years from August 2008. Mr. Ehrlich serves as the Company’s Chief Executive Officer, President and Secretary, reporting to the Board of Directors. The Services Agreement states that the Company’s current intention is to be headquartered in New York, New Jersey, or Connecticut.

Under the Services Agreement, the Contractor is entitled to $175,000 in annual base compensation (subject to review at least annually for possible increases) and an annual bonus pursuant to any bonus plan or program established by the Company that applies to the Contractor (the “Annual Bonus”). The Contractor is also entitled to an option to purchase 134,700 shares of Common Stock The option will be subject to such terms and conditions, including vesting criteria, as may be established by the Compensation Committee in the option agreement, but will also vest upon the earlier of the effective date of a change of control (as defined in the option agreement) or the first closing date of the Company’s issuance and sale of units, through a placement agent, comprised of shares of the Company’s Series B Preferred Stock and debt instruments or warrants convertible into or exercisable for the Company’s capital stock, with gross proceeds to the Company from such issuance and sale of at least $10,000,000, provided Mr. Ehrlich continues to perform services for the Company on the applicable date. No options were granted and outstanding under this agreement as of September 30, 2010.

The Services Agreement is terminable by the Company with or without “cause,” and by the Contractor for “good reason,” as further discussed below. The Services Agreement provides that the Contractor is eligible for twelve months severance pay in the event that the Agreement is terminated by the Company without “cause,” or by the Contractor for “good reason”.

For the nine months ended September 30, 2010 and 2009, the Company paid fees of $131,247 and $373,738 from inception to date.

Pursuant to the terms of another consulting agreement entered into by the Company in August 2008, a consultant is entitled to receive the grant of a stock option to purchase 67,350 shares of Common Stock. The grant of the option will be made effective as of the minimum closing, subject to the approval of the Company’s Board of Directors. The option will be fully vested on the date of grant, will have a 5 year term (subject to earlier termination upon termination of services), will be issued at an exercise price equal to fair market value on the date of grant, and will be subject to such other terms and conditions as are contained in the applicable stock option agreement. No options were granted and outstanding under this agreement as of September 30, 2010.

8. Income taxes

Deferred income taxes are provided for the differences between the bases of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company recorded deferred income tax assets for the tax effect of start-up costs and temporary differences, aggregating approximately $862,000, at September 30, 2010. In recognition of the uncertainty regarding the ultimate amount of income tax benefits to be derived, the Company recorded a full valuation allowance as of September 30, 2010.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

9. Merger

On September 12, 2010, the Company executed an Agreement and Plan of Merger (“Merger Agreement”) with Vyteris, Inc. (“Vyteris”), and VYTR Sub, Inc., a wholly owned subsidiary of Vyteris (“Merger Sub”), pursuant to which the Merger Sub will be merged with and into the Company (“Merger”), with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Vyteris. As a result of the Merger, the business of the Company will be wholly owned and operated by Vyteris. The parties have made customary representations, warranties, covenants and indemnification provisions in the Merger Agreement. The parties’ obligations to consummate the closing of the Merger are subject to certain closing conditions, including stockholder approval, and there can be no assurance that the Merger will be consummated. In addition, the Merger Agreement contains certain termination rights for both parties. The parties anticipate that the Merger will close in the first quarter of 2011.

The Company issued 220,000 finders warrants to Spencer Trask Ventures, Inc., related party to a principal stockholder of the Company, bearing substantially the same terms as the warrants issued to investors. The fair value of such warrants was de minimis.

The following is a summary of certain terms and conditions set forth in the Merger Agreement.

Purchase Price

Vyteris has agreed to pay the following consideration to the holders of debt and equity securities of Company in connection with the Merger:

To the holders of Company common stock, five shares of Vyteris’ common stock for each share of Company’s common stock.

To the holders of convertible notes and other indebtedness of Company, five shares of the Vyteris’ common stock for each $1.00 of Company debt.

To the holders of Company warrants, warrants to purchase five shares of Vyteris’ common stock, at a $0.20 exercise price, for each warrant to purchase (i) a share of Company common stock and (ii) $1 of convertible note to be issued by Company.

To the holders of Company options, options to purchase five shares of Vyteris’ common stock for each option to purchase a share of Company common stock.

In total, (i) 25,031,253 shares of Vyteris common stock shall be issued to holders of Company common stock, convertible notes and other indebtedness, (ii) warrants to purchase 2,090,000 shares of Vyteris common stock shall be issued to holders of Company warrants and (iii) options to purchase 1,010,250 shares of Vyteris common stock shall be issued to holders of Company options.

Board Seats

Subject to the terms and conditions set forth in the Merger Agreement, the parties agreed that upon consummation of the Merger, two current Company directors shall be appointed to Vyteris’ Board of Directors.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

10. Definitive Agreement

On September 2, 2010, the Company entered into an agreement to purchase all of the issued and outstanding equity of a New Jersey based CRO. The purchase price for the acquisition consists of

·	$4,250,000 in cash,

·	$950,000 in promissory notes, and

·	Vyteris common stock valued at $750,000.

For each of the first three years following closing, the two principals of the CRO will be entitled to $400,000 in earn outs each year if the following EBITDA targets are met:

·	year 1 - $1,250,000,

·	year 2 - $1,437,000; and

·	year 3 - 1,625,000.

The two principals are also to enter into employment agreements with the Company at closing. The two employment agreements carry a term of three years from the date of closing and contain compensation terms similar to those currently in place between those principals and the CRO. On December 15, 2010, the CRO entered into an amendment to the acquisition agreement with MediSync pursuant to which the closing was extended to March 31, 2011, and on each of January 31, 2011, February 28, 2011 and March 31, 2011, MediSync is to pay the CRO $25,000 as consideration for extension of the closing date from December 15, 2010.

MEDISYNC BIOSERVICES, INC.

(A Development Stage Company)

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

Introduction

The following discussion and analysis should be read in conjunction with MediSync BioServices Inc.’s (the “Company” or “we”, “our” or “us”) accompanying financial statements and the notes to those financial statements included elsewhere in this Information Statement. The following discussion includes forward-looking statements that reflect MediSync’s plans, estimates and beliefs. MediSync’s actual results could differ materially from those discussed in these forward- looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this Information Statement.

Overview

We are a development stage company formed in 2006 for the purpose of consolidating preclinical and contract research organizations (CROs) and related businesses, including site management organizations (SMOs), which sub-contract clinical trial-related responsibilities from a CRO or pharmaceutical/biotechnology company, and post marketing surveillance companies, which monitor pharmaceutical drugs or devices after release into the market. MediSync believes that its future operations may provide added value to the pharmaceutical and biomedical industries as a valuable outsource service to them, resulting in increased value to its shareholders. The CRO business model is expected to provide cash flow which can assist in funding operations while MediSync continues to develop its drug delivery technologies. It will also provide operational synergies as two business operations are combined in one infrastructure creating efficiencies in administrative functions as well as other areas. MediSync further believes that each CRO and related business that it acquires (each, an “Acquired Business”) may benefit from (a) potential cost savings and efficiencies proposed by its consolidation model, (b) the sharing of, and collaboration on, clinical research studies among the Acquired Businesses and (c) new services offered by other Acquired Businesses. MediSync closed on its first acquisition in December 2009, Mountain West, and has several other potential Acquired Businesses in its pipeline, including one which is scheduled to close in the first quarter of 2011. See “Plan of Operations” for a discussion of the acquisition pipeline.

MediSync anticipates that its Acquired Businesses will consist of companies that play an integral role in assisting pharmaceutical and biotechnology companies with their development of and strategies relating to drugs, biologics and medical devices. MediSync intends to principally target privately owned and operated companies that are profitable (after making certain pro-forma acquisition adjustments), with at least five years of operating history, and which have built a good reputation through working with numerous well-known pharmaceutical customers.

MediSync plans to build value through programs designed to drive incremental new revenues and benefit from economies of scale, proactive business development and marketing initiatives, centralized management and information systems, “brand name” identification, and by broadening the scope of services offered by each of its Acquired Businesses.

With respect to its Acquired Businesses, MediSync plans to strategically:

Contribute expansion capital as appropriate and available;

Increase operational efficiency;

Leverage unique specialties and areas of expertise of each Acquired Business;

Create new revenue streams through new service offerings;

	·	Leverage cost savings through economies of scale;
	·	Operate throughout the US and subsequently embark upon a global expansion; and

Carefully monitor the synergies between the Acquired Businesses and nurture organic growth of their businesses.

MediSync intends to cause each Acquired Business to maintain its own identity and specialty skills while at the same time benefiting from operating efficiencies and lower overhead costs. Because MediSync plans to target small to mid-size companies, management believes that a consolidation of resources could significantly contribute to the expansion of operations resulting in increased revenues. MediSync believes that its acquisition of carefully selected companies with complementary attributes and expertise will contribute to an inherent synergy, thereby allowing the Acquired Businesses to source, and collaborate on, clinical research studies among each other. Through this cross pollenization, MediSync can expand its operation by offering a larger range of services provided by each of its unique Acquired Businesses to potential customers.

Plan of Operations

MediSync's plan is to acquire CRO businesses pursuant to an internally developed schedule of targeted acquisitions. MediSync has initiated action under this schedule through the completion of a definitive agreement in the fourth quarter of 2010 with its first target company with a purchase price of $7,150,000 in a combination of cash and debt. This company provides services to the medical and CRO industries through utilization of its proprietary knowledge and expertise. MediSync has also executed a letter of intent in January 2011 with a second target company with respect to which substantive due diligence is currently under way. This company is a CRO and the proposed purchase price for the acquisition is $10,000,000. MediSync has also initiated substantial discussions with several other targets and is currently negotiating four additional letters of intent with these targets. The prospective plan is to continue to develop and augment the acquisition pipeline and MediSync’s development activities are proceeding consistent with this plan.

In order to be able to successfully complete the acquisitions set forth in its business plan, MediSync will be required to raise additional capital. MediSync will need to raise approximately $17,150,000 to fund the purchase price of the two CRO target acquisitions for which it has a definitive agreement and an executed letter of intent. MediSync will need to raise an additional $15,000,000 for the funding of the four proposed Acquisitions for which draft letters of intent are being discussed, There is no assurance that MediSync will be able to raise the capital require to fund the aforesaid acquisitions, either on its own or in combination with Vyteris, and if it is successful in identifying sources of funding, whether funding will be available on favorable terms to MediSync.

In September 2010, we entered into a Merger Agreement with Vyteris, Inc. (the “Company”) with the following terms:

Purchase Price

· To the holders of MediSync Common Stock, five (5) shares of Company Common Stock for each share of MediSync Common Stock .

· To the holders of convertible notes and other indebtedness of MediSync, five (5) shares of Company Common Stock for each $1.00 of MediSync debt.

· To the holders of MediSync warrants, warrants to purchase five (5) shares of Company Common Stock, at a $0.20 exercise price, for each warrant to purchase (i) a share of MediSync Common Stock and (ii) $1 of convertible note issued by MediSync.

· To the holders of MediSync options, options to purchase five (5) shares of Company Common Stock for each option to purchase a share of MediSync Common Stock.

In total, (i) 25,031,253 shares of Company Common Stock shall be issued to holders of MediSync Common Stock, convertible notes and other indebtedness, (ii) warrants to purchase 2,090,000 shares of Company Common Stock shall be issued to holders of MediSync warrants and (iii) options to purchase 1,010,250 shares of Company Common Stock shall be issued to holders of MediSync options.

	·	Board Seats: two current MediSync directors shall be appointed to the Vyteris Board of Directors.
	·	Closing date: On or about February 15, 2011.

Critical Accounting Policies

The “Management’s Discussion and Analysis of Financial Condition or Plan of Operation” section discusses our financial statements, which have been prepared in accordance with GAAP. To prepare these financial statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities. These estimates also affect our reported revenues and expenses. On an ongoing basis, management evaluates its estimates and judgment, including those related to revenue recognition, accrued expenses, financing operations and contingencies and litigation. Management bases its estimates and judgment on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The following represents a summary of our critical accounting policies, defined as those policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

Use of Estimates:

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

Principles of Consolidation

The condensed financial statements include the accounts of the Company, and its wholly owned subsidiary, Mountain West. All significant inter-company balances and transactions have been eliminated in consolidation.

Revenue Recognition:

MediSync recognizes revenues when collection is allowed within client contracts. There is no revenue recognition for any amounts that are not due from clients on a current basis. MediSync does not believe there is significant risk of recognizing revenue prematurely since its contracts are standardized, the earnings process is short, and no single project accounts for a significant portion of MediSync’s revenue.

Plan of Operation

Estimated Future Cash Requirements

MediSync’s cash requirements have been historically met by private investors, who are either existing contacts of MediSync’s current management or board of directors or who come to the attention of MediSync through brokers, financial institutions and other intermediaries. Cash generated from MediSync’s wholly owned subsidiary, Mountain West is not sufficient to support MediSync’s overhead. MediSync’s access to capital has always been dependent upon general financial market conditions.

MediSync’s future capital requirements will depend on numerous factors, including the profitability of its subsidiary projects and its ability to control overhead costs. MediSync believes that its current assets will not be sufficient to meet its operating expenses and capital expenditures. However, MediSync cannot predict when and if any additional capital contributions may be needed, and MediSync will rely on the ability of Vyteris to attract additional financing after the closing of the Merger to fund its operations.

There can be no assurances that Vyteris will be successful in raising additional capital via debt or equity funding, or that any such transactions, if consummated, will be on terms favorable to Vyteris and MediSync. In the event that additional capital is not obtained from other sources, it may become necessary to alter MediSync’s development plans.

Definitive Agreement

On September 2, 2010, we entered into an agreement to purchase all of the issued and outstanding equity of a New Jersey based CRO. The purchase price for the acquisition consists of

·	$4,250,000 in cash,

·	$950,000 in promissory notes, and

·	Vyteris common stock valued at $750,000.

For each of the first three years following closing, the two principals of the CRO will be entitled to $400,000 in earn outs each year if the following EBITDA targets are met:

·	year 1 - $1,250,000,

·	year 2 - $1,437,000; and

·	year 3 - 1,625,000.

The two principals are also to enter into employment agreements with us at closing. On December 15, 2010, the CRO entered into an amendment to the acquisition agreement with us pursuant to which the closing was extended to March 31, 2011, and on each of January 31, 2011, February 28, 2011 and March 31, 2011, MediSync is to pay the CRO $25,000 as consideration for extension of the closing date from December 15, 2010.

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

MediSync acquired Mountain West on December 15, 2009. However, operations did not commence as an acquired subsidiary until January 20, 2010. As such, comparisons in revenue, gross profits and income for the nine months ended September 30, 2010 will include results for Mountain West (for comparative purposes only), but the results for the year ended December 31, 2009 and the interim period for September 30, 2009 will not include any results for Mountain West. This is consistent with the presentation reported by MediSync’s independent auditors in a prepared audit.

Comparison of September 30, 2010 versus 2009

MediSync generated $53,855 in revenues during the nine months ended September 30, 2010 as compared to no revenues during the nine months ended September 30, 2009. The 2010 revenues are derived from our Mountain West subsidiary.

Cost of revenues during the nine months ended September 30, 2010 was $27,310, which were derived from activity from Mountain West, resulting in gross margin of $26,545. There was no cost of revenues during the nine months ended September 30, 2009.

General and administrative expenses were $1,089,731 during the nine months ended September 30, 2010 compared to $299,491 during the nine months ended September 30, 2009. The 263.9% increase was primarily due to additional consulting expenses in connection with support during the development phase.

As a result, the loss from operations was $1,063,186 during the nine months ended September 30, 2010 compared to a loss from operations of $299,491 during the nine months ended September 30, 2009. This 255.0% increase in loss was due to an increase in general and administrative expenses.

Interest expense was $203,024 during the nine months ended September 30, 2010 compared to $109,163 during the nine months ended September 30, 2009. The 86.0% increase was due to the accelerated amortization of debt issuance costs in anticipation of a new round of financing.

Net loss was $1,266,210 during the nine months ended September 30, 2010 compared to $408,654 during the nine months ended September 30, 2009. The 209.8% increase in the loss was due to the increased general and administrative costs related to locating acquisition targets and interest expenses.

Comparison of December 31, 2009 versus 2008

For the year ended December 31, 2009, MediSync had no revenues or gross margin.

General and administrative expenses were $444,075 for the year ended December 31, 2009 and $423,542 for the year ended December 31, 2008. This 4.8% increase was due to an increase in legal and auditing fees.

In 2009, there was an impairment charge of $110,843 representing the decline in fair value of goodwill associated with the acquisition of our Mountain West subsidiary.

As a result, the loss from operations was $554,918 for the year ended December 31, 2009 compared to a loss from operations of $423,542 for the year ended December 31, 2008. This 31.0% increase in loss was due primarily to the impairment charge.

Interest expense for the year ended December 31, 2009 was $145,584 compared to $45,969 for the year ended December 31, 2008. This expense increase of 216.7% was due to an increase in notes payable incurred by MediSync, in addition to the recognition of amortization of debt issuance costs recorded as interest expense.

MediSync’s net loss was $700,502 for the year ended December 31, 2009 compared to a net loss of $469,511 for the year ended December 31, 2008. This loss increase of 49.2% was due primarily to the additional interest expense of additional borrowing and the impairment charge.

Comparison of December 31, 2008 versus 2007

The Company MediSync was a development stage company in 2008 and as such had no revenues, costs associated with revenues or gross margin for the twelve months ended December 31, 2008 and December 31, 2007.

General and administrative expenses were $423,542 during the twelve months ended December 31, 2008 compared to $41,022 during the twelve months ended December 31, 2007. The increase of 932.5% was due to full year of consulting expenses and the first full year of legal expenses associated with the activities of the development company.

Interest expense was $45,969 during the twelve months ended December 31, 2008 compared to $8,650 during the twelve months ended December 31, 2007. This increase of 431.4% was due to additional notes from directors that were used to finance the Company’s development activities.

Net loss was $469,511 during the twelve months ended December 31, 2008 compared to $49,672 during the twelve months ended December 31, 2007. The 845.2% increase in the loss was due to the aforementioned increase consulting, legal and interest expense.

Liquidity and Capital Resources

Liquidity

For the year ended December 31, 2009, MediSync issued $75,000 principal amount of promissory notes. MediSync’s expenses exceeded this additional capital and as a result, MediSync’s cash position decreased from $303,079 to $14,454. Accounts receivable increased $7,100 as a result of the acquisition of Mountain West.

During the nine months ended September 30, 2010, MediSync issued an additional $700,000 principal amount of promissory notes allowing the support of MediSync’s development needs. Additionally, the Company increased its general and administrative expenses by $659,088 during this period.

As a result, MediSync’s cash position increased by $76,658 during the nine months ended September 30, 2010. Accounts receivable increased a non material amount of $900 during the nine months ended September 30, 2010. There are no other liquidity components of MediSync. MediSync’s management believes that additional capital raising efforts will be needed to allow MediSync to meet its liquidity needs.

On December 31, 2009, MediSync had total assets of $54,261 compared to $303,079 on December 31, 2008. The decrease of $248,818 was due to a decrease in cash, offset by an increase of $39,807 in assets acquired in the acquisition of Mountain West.

Capital Resources

MediSync’s capital resources are comprised primarily of private investors who are either existing contacts of MediSync’s management or board of directors or who come to the attention of MediSync through brokers, financial institutions and other intermediaries. MediSync’s access to capital is always dependent upon general financial market conditions, especially those which pertain to venture capital situations.

Material Commitments for Capital Expenditures

MediSync has made no material commitments for future expansion as of September 30, 2010. Since MediSync is in the development stage, with the goal of acquisitions, there are various acquisition targets that will be the subject of disclosure when definitive agreements are completed.

Inflation

MediSync's results of operations have not been affected by inflation; however, MediSync’s management anticipates that inflation may have a material impact on its operations in the future.

Off-Balance Sheet Arrangements

MediSync currently does not have any off-balance sheet arrangements.

VYTERIS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2010

	Vyteris, Inc.		MediSync BioServices Inc.		Pro forma Adjustments				Pro forma

ASSETS

Current Assets
Cash	$	1,153,819	$	91,112	$	-			$	1,244,931
Accounts receivable		-		8,000		-				8,000
Other current assets		110,765		-		-				110,765
Total current assets		1,264,584		99,112		-				1,363,696

Property and Equipment & Other Assets
Debt issuance costs, net		2,044,421		-		-				2,044,421
Property and equipment , net		27,799		24,705		-				52,504
Other assets		290,352		33,130		-				323,482
Intangibles, contractual rights		-		-		7,891,799		d		7,891,799

Total Assets	$	3,627,156	$	156,947	$	7,891,799			$	11,675,902

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable & accrued liabilities	$	2,219,249	$	1,211,199	$	(105,314	)-	a	$	3,325,134
Fair value of derivative financial statements		10,180,233		-		-				10,180,233
Notes payable		-		53,000		-				53,000
Note payable from acquisition of assets		-		43,000		-				43,000
Accrued expenses & other		3,508,350		-		-				3,508,350
Senior secured convertible promissory notes		-		1,354,005		(1,354,005	)	a		-
Interest payable and accrued expenses due to related party		190,093		-		-				190,093
Total current liabilities		16,097,925		2,661,204		(1,459,319	)			17,299,810

Other Liabilities
Promissory note due related party		1,750,000		-		-				1,750,000
Senior subordinated convertible promissory notes, net of discount		26,859		-		-				26,859
Deferred revenue and other		746,237		-		-				746,237
Convertible note		500,000		-		-				500,000
Total other liabilities		3,023,096		-		-				3,023,096

Total Liabilities	$	19,121,021	$	2,661,204	$	(1,459,319	)		$	20,322,906

See accompanying notes to pro forma condensed combined financial statements

VYTERIS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2010 - continued

	Vyteris, Inc.			MediSync BioServices Inc.			Pro forma Adjustments					Pro forma

EQUITY

Stockholders' equity

Stockholders' equity (deficit):	$	1,031,326		$	299		$	(299	)	b		$	1,406,795
								375,469		c
Additional paid in capital		213,139,437			29,339			(29,339	)		b		219,610,829
								5,882,344			c
								589,048			e
Accumulated deficit		(229,664,628	)		(2,533,895	)		2,533,895			b		(229,664,628	)
Total stockholders' equity		(15,493,865	)		(2,504,257	)		9,351,118					(8,647,004	)

Total Liabilities and Stockholders’ Equity	$	3,627,156		$	156,947		$	7,891,799				$	11,675,902

See accompanying notes to pro forma condensed combined financial statements

VYTERIS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

	Vyteris, Inc.			MediSync BioServices Inc.			Pro forma Adjustments				Pro forma

Revenues	$	141,533		$	53,855		$	-			$	195,388

Cost of sales		-			27,310			-				27,310

Gross margin		141,533			26,545			-				168,078

Operating Expenses
Research and development		2,083,087			-			-				2,083,087
General and administrative		4,283,243			1,089,731			-				5,372,974
Total general and administrative		6,366,330			1,089,731			-				7,456,061
					,
Loss from Operations Before Other Expenses and Taxes		(6,224,797	)		(1,063,186	)		-				(7,287,983	)

Interest (Income) Expenses
Interest (income) expense – net		(1,182	)		-			-				(1,182	)
Interest expense to related parties		449,029			203,024			(200,639	)	a		451,414
Interest expense		29,367			-			-				29,367
Non-cash interest expense for warrants issued on induced conversion of debt		2,832,706			-			-				2,832,706
Non cash interest expense for warrants issued to investors		485,029			-			-				485,029
Total interest expense (income), net		3,794,949			203,024			(200,639	)			3,797,334

Other (Income) Expenses
Increase in fair value of derivative financial Instruments		5,313,661			-			-				5,313,661
Total other expenses		5,313,661			-			-				5,313,661

Net Loss	$	(15,333,407	)	$	(1,266,210	)	$	(200,639	)		$	(16,398,978	)

Net Loss per Common Share
Basic and diluted loss per share	$	(0.24	)								$	(0.19	)
Common shares outstanding		-			2,989,805			(2,989,805	)	b		-
Weighted average common shares outstanding		62,716,803			-			25,031,253		c		87,748,056

See accompanying notes to pro forma condensed combined financial statements

VYTERIS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2009

	Vyteris, Inc.			MediSync BioServices Inc.			Pro forma Adjustments				Pro forma

Revenues	$	4,560,709		$	-		$	-			$	4,560,709

General and Administrative
Research and development		2,895,691			-			-				2,895,691
General and administrative including (credit) for reversal of performance- based stock option grants of ($6.1) million in 2008		2,796,763			444,075			100,000		f		3,340,838
Facility realignment and impairment Charges		177,831			110,843			-				288,674
Amortization of intangible assets		-			-			7,891,799		d		7,891,799
Registration rights penalty		215,988			-			-				215,988
Total general and administrative		6,086,273			554,918			7,991,799				14,632,990

Earnings (Loss) Before Other Expenses and Taxes		(1,525,564	)		(554,918	)		(7,991,799	)			(10,072,281	)

Interest (Income) Expenses
Interest (income) expense – net		(552	)		-			-				(552	)
Interest expense to related parties		1,451,728			145,584			(142,404	)	a		1,454,908
Interest expense		169,610			-			-				169,610
Total interest expense, net		1,620,786			145,584			(142,404	)			1,623,966

Other (Income) Expenses
Gain on settlement of lease obligations		(1,953,977	)		-			-				(1,953,977	)
Gain on settlement of registration rights penalty		(1,385,017	)		-			-				(1,385,017	)
Net non cash debt extinguishment		35,909,507			-			-				35,909,507
Revaluation of warrant liability		294,668			-			-				294,668
Total other expenses		32,865,181			-			-				32,865,181

Loss Before Benefit from State Income Taxes		(36,011,531	)		(700,502	)		(7,849,395	)			(44,561,428	)

Sale of State of New Jersey Net Operating Losses		2,071,168			-			-				2,071,168

Net Loss	$	(33,940,363	)	$	(700,502	)	$	(7,849,395	)		$	(42,490,260	)

Net Loss per Common Share
Basic and diluted loss per share	$	(3.77	)								$	(1.25	)
Common shares outstanding		-			2,260,000			(2,260,000	)	b		-
Weighted average common shares Outstanding		9,002,816			-			25,031,253		c		34,034,069

See accompanying notes to pro forma condensed combined financial statements

VYTERIS, INC.

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

The unaudited pro forma condensed combined financial statements included herein have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission. Certain information and certain footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading.

The statements contained in this section may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Such statements are intended to be covered by the safe harbor to “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by the words “believe,” “expect, “anticipate,” “intend,” “estimate” and similar expressions. These forward-looking statements are based largely on management’s expectations and are subject to a number of uncertainties. Actual results could differ materially from these forward-looking statements. Vyteris, Inc. does not undertake any obligation to update publicly or revise any forward-looking statements.

(A.) BASIS OF PRESENTATION

The accompanying unaudited pro forma condensed combined financial statements were prepared using the purchase method of accounting. Under this method of accounting, the purchase consideration is allocated to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values. For purposes of the unaudited pro forma condensed combined financial statements, the fair values were established based on the final closing price of Vyteris' (parent company) stock on January 19, 2011.

All unaudited interim financial statements incorporated by reference or furnished herein reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. All such adjustments are of a normal and recurring nature.

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2009 and the nine month period ended September 30, 2010 give effect to the acquisition of MediSync as if it occurred on January 1, 2009. The unaudited condensed combined pro forma balance sheet is presented to give effect to the acquisition of MediSync as if it had occurred on September 30, 2010. This pro forma information is based on, derived from, and should be read in conjunction with, the historical consolidated financial statements of Vyteris, Inc. for the year ended December 31, 2009, included in its Annual Report on Form 10-K filed on March 25, 2010 and for the quarter and nine months ended September 30, 2010 included in its Quarterly Report on Form 10-Q filed on November 15, 2010 and the historical financial statements of MediSync for the year ended December 31, 2009, and as of and for the unaudited nine months ended September 30, 2010, which are included elsewhere in this document. We have not adjusted the historical financial statements of either entity for any costs recognized during the year that may be considered to be nonrecurring.

The unaudited pro forma condensed combined financial statements are provided for illustrative purposes only. They do not purport to represent what Vyteris’ consolidated results of operations and financial position would have been had the transaction actually occurred as of the dates indicated, and they do not purport to project Vyteris’ future consolidated results of operations or financial position.

The actual adjustments to our consolidated financial statements upon the closing of the acquisition of MediSync will depend on a number of factors, including additional information that becomes available. Therefore, the actual adjustments will differ from the unaudited pro forma adjustments, and the differences may be material.

VYTERIS, INC.

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

The process for estimating the fair values of identifiable intangible assets, and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows, developing appropriate discount rates, and estimating the costs, timing and probability of success to complete contracts under negotiation. Transaction costs are not included as a component of consideration transferred. The purchase price allocation is subject to finalization of Vyteris’ analysis of the fair value of the assets and liabilities of MediSync as of the effective date of the acquisition. Accordingly, the purchase price allocation in the unaudited pro forma condensed combined financial statements presented above is preliminary and will be adjusted upon completion of the final valuation. Such adjustments could be material. The final valuation is expected to be completed as soon as practicable but no later than one year after the consummation of the acquisition.

For purposes of measuring the estimated fair value of the assets acquired and liabilities assumed as reflected in the unaudited pro forma condensed combined financial statements, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability. Additionally, fair value measurements for an asset assume the highest and best use of that asset by market participants. As a result, Vyteris may be required to value assets at fair value measures that do not reflect Vyteris’ intended use of those assets. Use of different estimates and judgments could yield different results.

(B.) CONSIDERATION

Under the terms of the acquisition, Vyteris issued an aggregate of 25,031,253 shares of its common stock in consideration for 100% of the issued and outstanding shares of MediSync. Based on a closing price of Vyteris' common stock of $0.25 on January 19, 2011, the preliminary aggregate purchase price was approximately $6,257,813 for the common stock portion of the merger consideration. Additionally, in connection with the acquisition, warrants and options outstanding to purchase MediSync common stock were replaced with options and warrants to purchase Vyteris common stock, based on the terms of the acquisition agreement. Accordingly, 2,090,000 and 1,010,250 replacement warrants and options were issued, respectively. The fair value of the MediSync warrants and options that related to pre-combination service provided by employees of MediSync is $589,048 which represents the fair value of such instruments based on the following assumptions used in the Black-Scholes model:

A closing price of Vyteris' common stock of $0.25 on January 19, 2011, the preliminary aggregate purchase price was approximately $6,846,861. Based on the stability of the nature of Vyteris’ operations in the current marketplace, the fair value of the January 19, 2011 consideration was deemed to be representative of the current market value.

The fair value of stock-based awards was estimated using the Black-Scholes-Merton model, or in the case of awards with market or performance based conditions, the binomial model, with the following weighted-average assumptions for stock options as of January 19, 2011: (i) per share closing stock price of $0.25; (ii) expected holding period (in years) – 5; (iii) risk free interest rate – 1.95%; (iv) dividend yield – 0%; (v) calculation of per share fair value of options and warrants granted - $0.19; (vi) expected volatility – 91.86%; and (vii) option forfeiture rate – 14.4%.

The preliminary estimated total purchase price of the acquisition is as follows:

Fair value of Vyteris common stock issued	$	6,257,813
Fair value of MediSync warrants and options replaced		589,048
Total preliminary estimated purchase price	$	6,846,861

VYTERIS, INC.

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

The purchase price consisted of the following:

·	To the holders of MediSync Common Stock, five (5) shares of Vyteris Common Stock for each share of MediSync Common Stock.

·	To the holders of convertible notes and other indebtedness of MediSync, five (5) shares of Vyteris Common Stock for each $1.00 of MediSync debt.

·	To the holders of MediSync warrants, warrants to purchase five (5) shares of Vyteris Common Stock, at a $0.20 exercise price, for each warrant to purchase (i) a share of MediSync Common Stock and (ii) $1.00 of convertible note issued by MediSync.

·	To the holders of MediSync options, options to purchase five (5) shares of Vyteris Common Stock for each option to purchase a share of MediSync Common Stock.

Under the purchase method of accounting, the total estimated purchase price is allocated to MediSync's net tangible and intangible assets based on their estimated fair values at the date of the completion of the acquisition. When these transactions are completed, Vyteris will account for these transactions in accordance with Accounting Standards Codification 805-10 (“ASC 805-10”). ASC 805-10 provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any non-controlling interest in the acquiree. ASC 805-10 also requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If the fair value of an asset or liability cannot be determined, the asset or liability that arises from a contingency, the asset or liability would be recognized in accordance with Accounting Standards Codification 30-1 (“ASC 30-1”) and if the fair value is not determinable no asset or liability would be recognized. At the present time, we are not in possession of all of the information to apply ASC 805-10 or ASC 30-1 to these unaudited pro forma condensed combined financial statements and will not be in possession of such information until the Effective Date. Therefore, for the purposes of preparing these unaudited pro forma condensed combined financial statements we have established an estimated fair value of the equities being offered in this transaction as of January 19, 2011. The preliminary purchase price allocation is based on management’s estimate of acquired tangible and intangible assets and will be adjusted based on the final valuation to be completed within one year from the acquisition date. The excess of the total purchase price over the fair value of the net assets acquired have been allocated to the identifiable intangible asset, contractual rights. The estimated useful life of the identifiable intangible asset, contractual rights, is twelve months.

The following table summarizes the preliminary allocation of the purchase price:

Assets:
Current Assets	$	99,112
Property and Equipment & Other		57,835
Intangible Asset, Contractual Rights		7,891,799
Total Assets Acquired	$	8,048,746

Liabilities:
Current Liabilities	$	1,201,885
Total Liabilities Assumed	$	1,201,885

Net Assets Acquired	$	6,846,861
Total Preliminary Estimated Purchase Price	$	6,846,861

VYTERIS, INC.

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

(C.) DETAILS OF THE PRO FORMA ADJUSTMENTS ARE AS FOLLOWS:

a.	To eliminate the convertible notes converted into 10,082,228 shares of Vyteris’ common stock and the related interest expense on the convertible notes. The 10,082,228 shares of Vyteris’ common stock are included in total amount of shares exchanged to consummate the acquisition.

b.	To eliminate MediSync's historical shareholders' equity accounts.

c.	To record the fair value of 25,031,253 shares of Vyteris’ common stock exchanged in the acquisition.

To record the acquired intangible asset which represents the contractual rights to acquire the future cash flows of a target acquisition with a definitive agreement in place. Additional contractual and non contractual relationships were considered of value, but are not recorded in this intangible asset. Due to the nature of the contracts, we believe this asset to have a life of twelve months, which is considered in the amortization life in the 2009 pro forma adjustments on the statements of operations.

e.	To record the fair value of the MediSync’s warrants and options replaced that related to pre-acquisition service.

f.	To record the estimated transaction costs in 2009.

By Order of the Board of Directors

	/s/ Eugene A. Bauer
	Eugene A. Bauer
	Chairman of the Board
February 2, 2011

Title of Class	Name of Beneficial Owner	Number of Shares		Percentage of Outstanding Shares in Class			Pro Forma Effect of Merger on Percentage of Outstanding Shares in Class (8)
Common Stock:
5% Holders
	Kevin Kimberlin (1)		53,038,896		46.6	%		41.8	%
	Global Alpha Long Short Fund (2)		6,344,666		5.6	%		4.6	%

Directors and Officers:	Eugene Bauer (3)		731,162		-			1.2	%
	Haro Hartounian (5)		3,150,962		2.8	%		2.3	%
	John Burrows (5)		297,313		-			-
	Arthur Courbanou (5)		377,145		-			-
	David DiGiacinto (4)		312,397		-			-
	Susan Guerin (5)		372,321		-			-
	Joseph Himy (5)		1,010,416		-			-
	Joel Kanter (9)		62,362		-			2.6	%
	Cormac Lyons (5)		412,751		-			-
	Michael Reidy (5)		968,276		-			-
	Russell Potts (6)		320,893		-			-

	Directors and Officers as a Group (11 persons) (7)
			8,015,998		7.0	%		9.0	%

	By Order of the Board of Directors

	/s/ Eugene A. Bauer
	Eugene A. Bauer
	Chairman of the Board
February 2, 2011

		Page

SECTION 1. DEFINITIONS AND TERMS		1
1.1.	Definitions	1
1.2.	Usage	1

SECTION 2. THE MERGER		2
2.1.	Merger	2
2.2.	Closing and Effective Time	2
2.3.	Certificate of Incorporation; By-laws	3
2.4.	Officers and Directors	3
2.5.	Deliveries at Closing	3

SECTION 3. EFFECT OF MERGER		3
3.1.	Stock and Debt Conversion; Cancellation	3
3.2.	MediSync Warrants	4
3.3.	MediSync Options	4
3.4.	Surrender of Certificates and Notes	4
3.5.	Certain Adjustments	5

SECTION 4. REPRESENTATIONS AND WARRANTIES OF MEDISYNC		5
4.1.	Organization and Power	5
4.2.	Subsidiaries	5
4.3.	Authorization; No Breach	6
4.4.	No Violation	6
4.5.	Capitalization	6
4.6.	Financial Statements	7
4.7.	Absence of Certain Developments	8
4.8.	Real Property	8
4.9.	Tangible Personal Property	8
4.10.	Taxes	9
4.11.	Contracts and Commitments	9
4.12.	Intellectual Property	10
4.13.	Litigation	11
4.14.	Governmental Consents	11
4.15.	Employees; Labor Matters	11
4.16.	Employee Benefits	12
4.17.	Compliance with Laws	14

4.18.	Environmental Compliance	14
4.19.	Undisclosed Liabilities	14
4.20.	Insurance	14
4.21.	Permits	15
4.22.	Related Party Transactions	15
4.23.	Brokerage	15

SECTION 5. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB		15
5.1.	Organization and Power	16
5.2.	Subsidiaries	16
5.3.	Authorization; No Breach	16
5.4.	No Violation	16
5.5.	Capitalization	17
5.6.	Financial Statements	17
5.7.	Absence of Certain Developments	18
5.8.	Real Property	18
5.9.	Tangible Personal Property	18
5.10.	Taxes	19
5.11.	Contracts and Commitments	19
5.12.	Intellectual Property	21
5.13.	Litigation	21
5.14.	Governmental Consents.	21
5.15.	Employees; Labor Matters.	21
5.16.	Employee Benefits.	22
5.17.	Compliance with Laws	24
5.18.	Environmental Compliance	24
5.19.	Undisclosed Liabilities	24
5.20.	Insurance	25
5.21.	Permits	25
5.22.	Related Party Transactions	25
5.23.	Brokerage	25
5.24.	Public Filings	25

SECTION 6. PRE-CLOSING COVENANTS		26
6.1.	Access and Investigation	26
6.2.	Operation of the Businesses	26
6.3.	No Inaccuracy or Breach of Representations, Warranties and Covenants	26
6.4.	Takeover Proposals	26
6.5.	MediSync Disclosure Schedule	27
6.6.	Parent Disclosure Schedules	27

SECTION 7. POST-CLOSING COVENANTS		27
7.1.	Cooperation; Other Approvals, Filings and Consents	27
7.2.	Director and Officer Liability and Indemnification	28
7.3.	Employee Matters	28

SECTION 8. CONDITIONS TO CLOSING		29
8.1.	Conditions to Obligation of Parent and Merger Sub	29
8.2.	Conditions to Obligation of MediSync	31

SECTION 9. TERMINATION		33
9.1.	Termination Events	33
9.2.	Effect of Termination	33

SECTION 10. MISCELLANEOUS		33
10.1.	Press Releases and Communication	33
10.2.	Expenses	33
10.3.	Notices	33
10.4.	Assignment	34
10.5.	Severability	34
10.6.	No Strict Construction	35
10.7.	Amendment and Waiver	35
10.8.	Complete Agreement	35
10.9.	Counterparts	35
10.10.	No Third-Party Beneficiaries	35
10.11.	Governing Law; Jurisdiction; Waiver of Jury Trial	35
10.12.	Specific Performance	36

Appendix A		Definitions

Schedule 3.1(a)		Merger Consideration Allocation – Common Stock Holders
Schedule 3.1(b)		Merger Consideration Allocation – MediSync Notes Holders
Schedule 3.1(c)		Merger Consideration Allocation – MediSync Indebtedness
Schedule 3.2		Merger Consideration Allocation – MediSync Warrant Holders
Schedule 3.3		Merger Consideration Allocation – MediSync Option Holders
Schedule 8.1(c)		MediSync Consents
Schedule 8.2(c)		Parent/Merger Sub Consents

Exhibit A		Form of Warrant
Exhibit B		Form of Option Agreement
Exhibit C		Form of Letter of Transmittal
Exhibit D		Knowledge Individuals – MediSync
Exhibit E		Knowledge Individuals – Parent/Merger Subs

	MEDISYNC

	MediSync BioServices, Inc.

	By:	/s/ Dubi Ehrlich
		Name: Dubi Ehrlich
		Title: President

	PARENT

	Vyteris, Inc.

	By:	/s/ Haro Hartounian
		Name: Haro Hartounian
		Title: Chief Executive Officer

	MERGER SUB

	VYHNSUB, INC.

	By:	/s/ Haro Hartounian
		Name: Haro Hartounian
		Title: President

		Page
Agreement		1
Certificate of Merger		2
Closing		2
Closing Date		2
DGCL		2
Effective Time		2
Environmental Permits		14
Indemnified Parties		28
Indemnified Party		28
Information Statement		32
Letter of Transmittal		4
MediSync Audited Financial Statements		7
MediSync Certificates		4
MediSync Competing Business		15
MediSync Disclosure Schedules		5
MediSync Documents		6
MediSync Employees		11
MediSync Financial Statements		7
MediSync Interim Balance Sheet Date		7
MediSync Interim Financial Statements		7
MediSync Leased Property		8
MediSync Material Contracts		9
MediSync Plan		12
Merger		1
Merger Sub		1
Parent		1
Parent Audited Financial Statements		17
Parent Competing Business		25
Parent Disclosure Schedules		15
Parent Documents		16
Parent Employees		21
Parent Financial Statements		17
Parent Interim Balance Sheet Date		17
Parent Interim Financial Statements		17
Parent Leased Property		18
Parent Material Contracts		19
Parent Plan		22
Parent Public Reports		25
Parent Welfare Benefit Plans		29
Parties		1
Party		1
Surviving Corporation		2
Surviving Corporation By-laws		3
Surviving Corporation Certificate		3

Holder	Shares of MediSync Common Stock Held Immediately Prior to Closing		Shares of Parent Common Stock Issuable at Closing
Ehrlich, Dov (SMC Ventures Inc.)		481,550		2,407,750
Kay, Jack		28,875		144,375
Bauer, Eugene A. M.D.		71,881		359,405
Brukardt, Gary		114,604		573,020
Burleson, Gene		132,966		664,830
Abeles, John (Northlea Partners)		342,515		1,712,575
Kanter, Joel (Windy City)		245,098		1,225,490
Bonanno Family Partnership, LLLP		150,000		750,000
Samuel Del Presto		25,000		125,000
O.T. Finance, SA		25,000		125,000
Kanter Family Foundation		55,226		276,130
Carl J. Domino		25,000		125,000
Richard Nuestader		75,000		375,000
Ron Eller		25,000		125,000
Mark Abrams		25,000		125,000
Steven H. Deutsch		125,000		625,000
Michael J. Pierce		25,000		125,000
Reed Oslan		20,000		100,000
Richard M. Spitalny		15,000		75,000
Stanley & Miriam Greenberg		25,000		125,000
CIBC Trust Company (Bahamas) Limited		135,809		679,045
Spencer Trask Breakthrough Partners, LLC		550,000		2,750,000
Chicago Investments, Inc.		36,281		181,405
Elliot Braun		25,000		125,000
Craig Whited		50,000		250,000
R&R Ventures, LLC		25,000		125,000
Kevin Carnahan		100,000		500,000
Joe N. and Jamie W. Behrendt Revocable Trust dated October 30, 1996		25,000		125,000
Robert Burkhardt		10,000		50,000
Total		2,989,805		14,949,025

Holder	Principal and Interest Outstanding on MediSync Promissory Notes Immediately Prior to Closing*		Shares of Parent Common Stock Issuable at Closing
Ehrlich, Dov (SMC Ventures Inc.)	$	25,517		127,586
Bauer, Eugene A. M.D.		41,033		205,167
Brukardt, Gary		28,205		141,027
Burleson, Gene		47,288		236,442
Abeles, John (Northlea Partners)		179,322		896,612
Kanter, Joel (Windy City)		88,523		442,613
Bonanno Family Partnership, LLLP		180,756		903,778
Samuel Del Presto		28,267		141,336
O.T. Finance, SA		28,267		141,336
Kanter Family Foundation		59,603		298,016
Carl J. Domino		28,205		141,027
Richard Nuestader		90,316		451,581
Ron Eller		28,205		141,027
Mark Abrams		28,205		141,027
Steven H. Deutsch		151,026		755,132
Michael J. Pierce		28,205		141,027
Reed Oslan		22,564		112,822
Richard M. Spitalny		17,923		89,616
Stanley & Miriam Greenberg		28,205		141,027
CIBC Trust Company (Bahamas) Limited		147,732		738,660
Chicago Investments, Inc.		37,615		188,077
Elliot Braun		31,055		155,277
Craig Whited		62,111		310,553
R&R Ventures, LLC		30,705		153,526
Kevin Carnahan		122,821		614,104
Joe N. and Jamie W. Behrendt Revocable Trust dated October 30, 1996		30,705		153,526
Robert Burkhardt		12,282		61,410
Total	$	1,604,667		8,023,333

Holder	Indebtedness Outstanding Immediately Prior to Closing		Shares of Parent Common Stock Issuable at Closing
Kanter, Joel (Windy City)	$	361,779		1,808,895
Chicago Investments, Inc.		50,000		250,000
Total	$	411,779		2,058,895

Holder	Warrants to Purchase Shares of MediSync Common Stock Held Immediately Prior to Closing		Warrants to Purchase Shares of Parent Common Stock Issuable at Closing
Spencer Trask Ventures		418,000	2,090,000 ($0.20 exercise price)
Total		418,000		2,090,000

Holder	Options to Purchase Shares of MediSync Common Stock Held Immediately Prior to Closing		Options to Purchase Shares of Parent Common Stock Issuable at Closing
Ehrlich, Dov		134,700		673,500
Bauer, Eugene A. M.D.		67,350		336,750
Total		202,050		1,010,250

	High		Low
Year Ending December 31, 2010
First Quarter	$	0.79	$	0.25
Second Quarter		0.75		0.25
Third Quarter		0.75		0.25

Year Ended December 31, 2009:
First Quarter	$	0.28	$	0.10
Second Quarter		0.28		0.10
Third Quarter		0.75		0.11
Fourth Quarter		1.40		0.26

Year Ended December 31, 2008:
First Quarter	$	10.05	$	2.25
Second Quarter		4.80		1.65
Third Quarter		2.00		0.35
Fourth Quarter		0.87		0.20

Plan Category	(a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		(b) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		(c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity Compensation Plans Approved by Stockholders:
Vyteris Holdings 2005 Stock Option Plan		193,460	$	2.11		-

Equity Compensation Plans Not Approved by Stockholders:
Vyteris Holdings 2005 Stock Option Plan (1)		2,834,608	$	2.11		2,423,424
Outside Director Stock Incentive Plan (1)		1,265,374	$	0.92		1,317,959

Total		4,293,442	$	1.76		3,741,383

Report of Independent Registered Public Accounting Firm		B-16

Consolidated Balance Sheets as of December 31, 2009 and 2008		B-17

Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007		B-18

Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2009, 2008 and 2007		B-19

Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007		B-20

Notes to Consolidated Financial Statements		B-22

	Years Ended December 31,
	2009			2008			2007
Revenues:
Product development revenue	$	1,913,080		$	2,821,098		$	2,634,540
Licensing and other revenue		2,647,629			329,298			149,547
Total revenues		4,560,709			3,150,396			2,784,087

Costs and expenses:
Cost of sales		—			103,490			1,490,847
Research and development		2,895,691			6,269,636			8,956,962
General and administrative including (credit) for reversal of performance – based stock option grants of ($6.1) million in 2008		2,796,763			(125,155	)		15,369,243
Sales and marketing		—			175,507			6,251,362
Facility realignment and impairment of fixed assets		177,831			2,565,434			82,637
Non-cash warrant expense – financial consultants		—			81,592			17,115,000
Registration rights penalty		215,988			260,897			260,184
Total costs and expenses		6,086,273			9,331,401			49,526,235
Loss from operations		(1,525,564	)		(6,181,005	)		(46,742,148	)

Interest (income) expense:
Interest income		(552	)		(42,984	)		(210,359	)
Interest expense to related parties		1,451,728			1,570,054			2,208,557
Interest expense		169,610			377,942			1,790,197
Interest expense, net		1,620,786			1,905,012			3,788,395

Other (income) expenses:
Gain on settlement of lease obligations		(1,953,977	)		—			—
Gain on settlement of registration rights penalty		(1,385,017	)		—			—
Non-cash debt extinguishment		35,909,507			—			6,724,523
Non-cash modification of redeemable preferred stock terms		—			—			3,680,000
Revaluation of warrant liability		294,668			—			10,341,408
Total other expenses		32,865,181			—			20,745,931

Loss before benefit from state income taxes		(36,011,531	)		(8,086,017	)		(71,276,474	)

Sale of State of New Jersey net operating losses		2,071,168			61,777			463,786

Net loss	$	(33,940,363	)	$	(8,024,240	)	$	(70,812,688	)

Net loss per common share:
Basic and diluted	$	(3.77	)	$	(1.14	)	$	(13.28	)

Weighted average number of common shares:
Basic and diluted		9,002,816			7,032,288			5,333,834

					Additional						Total
	Common Stock				Paid-in			Accumulated			Stockholders’
	Shares		Amount		Capital			Deficit			Equity (Deficit)
Balance at January 1, 2007		4,218,997	$	63,285	$	70,922,366		$	(101,553,930	)	$	(30,568,279	)
Non-cash stock-based compensation expense		–		–		8,166,739			–			8,166,739
Exercise of stock options		20,044		301		501,227			–			501,528
Issuance of restricted shares under outside director compensation plan		5,179		78		57,522			–			57,600
Issuance of common stock for capital raised		1,420,488		21,307		22,856,692			–			22,877,999
Disbursements related to issuance costs of common stock raise and warrants		–		–		(2,417,512	)		–			(2,417,512	)
Issuance of warrants associated with working capital facility		–		–		736,287			–			736,287
Issuance of common stock pursuant to conversion of senior secured convertible debentures		256,989		3,855		959,852			–			963,707
Transfer of warrant liability to equity upon shareholder approval of sufficient authorized shares		–		–		19,334,776			–			19,334,776
Cashless exercise of warrants		3,696		55		(55	)		–			–
Issuance of warrants to advisors		–		–		543,750			–			543,750
Issuance of warrants to financial consultants		–		–		17,115,000			–			17,115,000
Charge resulting from non-cash debt extinguishment, net of unamortized discount		–		–		6,696,058			–			6,696,058
Charge resulting from non-cash modification of redeemable preferred stock terms		–		–		3,680,000			–			3,680,000
Net loss		–		–		–			(70,812,688	)		(70,812,688	)
Balance at December 31, 2007		5,925,393		88,881		149,152,702			(172,366,618	)		(23,125,035	)
Non-cash stock based compensation expense (credits)		–		–		(4,051,359	)		–			(4,051,359	)
Issuance of common stock for capital raised, net		660,000		9,900		1,790,100			–			1,800,000
Exercise of warrants		611,895		9,178		1,826,505			–			1,835,683
Non-cash warrant expense – financial consultants		–		–		81,592			–			81,592
Issuance of warrants for services rendered		–		–		184,000			–			184,000
Issuance of common stock for services rendered		85,000		1,275		48,025			–			49,300
Adjustment to common stock related to reverse stock split		514		8		(8	)		–			–
Net loss		–		–		–			(8,024,240	)		(8,024,240	)
Balance at December 31, 2008		7,282,802		109,242		149,031,557			(180,390,858	)		(31,250,059	)
Non-cash stock based compensation expense, net		–		–		639,007			–			639,007
Issuance of common stock for services rendered		9,000		135		1,260			–			1,395
Issuance of common stock upon exercise of warrants issued For settlement with landlord		80,000		1,200		6,800			–			8,000
Issuance of warrants		–		–		154,200			–			154,200
Issuance of common stock for capital raised, net		3,000,000		45,000		477,000			–			522,000
Issuance of common stock and warrants upon settlement of registration rights penalty		1,250,000		18,750		1,214,250			–			1,233,000
Issuance of common stock pursuant to conversion of senior secured convertible debentures and preferred stock due to a related party		50,777,015		761,655		19,549,151			–			20,310,806
Reclassification of the fair value of warrants from an equity instrument to a liability instrument		–		–		(2,339,820	)		–			(2,339,820	)
Charge resulting from non-cash debt extinguishment		–		–		35,909,507			–			35,909,507
Net loss		–		–		–			(33,940,363	)		(33,940,363	)
Balance at December 31, 2009		62,398,817	$	935,982	$	204,642,912		$	(214,331,221	)	$	(8,752,327	)

Manufacturing and laboratory equipment	5 years
Furniture and fixtures	5 years
Office equipment	3 years
Leasehold improvements	4 – 10 years
Software	3 years

	Operating Leases
Years ended December 31,
2010	$	407,088
2011		402,580
2012		-
2013		-
2014		-
Thereafter		-
Total minimum lease payments	$	809,668

	Totals
Balance as of December 31, 2007	$	-
Facilities realignment charge		2,350,600
Deferred rent adjustment		179,067
Accretion		132,606
Payments		(311,104	)
Balance as of December 31, 2008		2,351,169

Less current portion included in accrued expenses, deferred revenue and other		(251,411	)
Present value of abandoned operating lease payments	$	2,099,758

	Number of Shares			Exercise Price Per Share	Weighted Average Exercise Price		Intrinsic Value
Outstanding at December 31, 2006		281,391		$4.20 - $45.60	$	29.55
Granted		526,000		8.10 - 41.40		33.15
Exercised		(20,044	)	4.20 - 28.65		25.05
Forfeited		(85,681	)	4.20 - 45.60		38.25
Outstanding at December 31, 2007		701,666		4.20 - 45.60		31.35	$	44,600
Granted		2,103,238		0.25 - 5.25		0.44
Exercised		-		-		-
Forfeited		(451,780	)	0.50 - 45.60		34.88
Outstanding at December 31, 2008		2,353,124		0.25 - 45.60		3.02		-
Granted		2,022,005		0.25 - 0.72		0.33
Exercised		-		-		-
Forfeited		(81,687	)	0.29 - 45.60		2.66
Outstanding at December 31, 2009		4,293,442		0.25 - 45.60		1.76	$	1,531,693
Exercisable at December 31, 2009		2,536,134		$0.25 - $45.60	$	2.73	$	843,250

	Options Outstanding at December 31, 2009					Options Exercisable at December 31, 2009
Exercise Price	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Number of Shares		Weighted Average Exercise Price
$0.25-18.60	4,107,611	$	0.55		8.82		2,351,936	$	0.71
$18.61-21.75	86,536		19.73		2.39		86,542		19.73
$21.76-24.00	20,267		23.26		7.66		18,604		23.26
$24.01-31.50	17,016		29.65		4.30		17,036		29.65
$31.51-45.60	62,012		42.20		5.85		62,016		42.20
	4,293,442	$	1.76		8.90		2,536,134	$	2.73

	As of December 31, 2009					As of December 31, 2008
Unvested Stock Option Awards	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Unvested at January 1,		1,240,036		$	0.69		480,989		$	32.70
Awards		1,847,000		$	0.29		2,103,238		$	0.44
Forfeitures		(57,437	)	$	1.03		(394,914	)	$	35.51
Vestings		(1,272,291	)	$	0.56		(949,277	)	$	1.84
Unvested at December 31,		1,757,308		$	0.57		1,240,036		$	0.69

	Number of Shares			Exercise Price Per Share	Weighted Average Exercise Price
Outstanding at December 31, 2006		2,311,066		$3.75–$143.25	$	25.80
Granted		1,605,628		11.25 – 28.50		22.20
Exercised		(6,111	)	7.35 – 7.35		7.35
Forfeited		(45,662	)	3.75 – 67.05		49.50
Outstanding at December 31, 2007		3,864,921		3.75 – 143.25		7.50
Granted		1,433,355		3.00 – 24.75		2.97
Exercised		(611,895	)	3.75 – 67.05		3.00
Forfeited		(678,006	)	6.75 – 6.75		6.75
Outstanding at December 31, 2008		4,008,377		1.65 –143.25		11.00
Granted		5,904,487		0.10 – 15.41		6.44
Exercised		(80,000	)	0.10 - 0.10		0.10
Forfeited		(878,661	)	3.00 – 67.05		38.58
Outstanding at December 31, 2009		8,954,203		$0.10–$143.25	$	2.98

		Warrants Outstanding and Exercisable At December 31, 2009
	Exercise Price	Number of Shares	Weighted Average Exercise Price		Expiration Dates
$	0.10-6.75	7,623,800	$	2.73		2011-2014
$	11.25-11.55	755,818		8.33		2011-2014
$	15.90-18.75	7,500		18.75		2010-2010
$	22.50-22.50	539,683		20.58		2011-2012
$	28.50-43.20	26,005		38,07		2012-2013
$	67.05-143.25	1,397		143.25		2010-2010
$	0.10-143.25	8,954,203	$	2.98		2010-2014

	Quarters Ended
	Dec. 31, 2009			Sept. 30, 2009			June 30, 2009			March. 31 2009
Total revenue	$	2,430,365		$	674,394		$	641,463		$	814,487
Research and development		656,177			605,821			872,189			761,504
General and administrative		495,402			548,202			675,941			1,077,218
Facilities realignment and impairment of fixed assets		-			-			51,221			126,609
Registration rights penalty		21,384			65,581			64,868			64,155
Total costs and expenses		1,172,963			1,219,604			1,664,219			2,029,486
Income (loss) from operations		1,257,402			(545,210	)		(1,022,756	)		(1,214,999	)
Interest expense, net		364,356			408,817			400,211			447,402
Non-cash debt extinguishment		35,909,507			-			-			-
Gain on settlement of lease obligations		-			(1,953,977	)		-			-
Revaluation of warrant liability		294,668			-			-			-
Gain on settlement of registration rights penalty		(1,385,017	)		-			-			-
Total other expense (credit), net		34,819,158			(1,953,977	)		-			-
(Loss) income before benefit from state taxes		(33,926,112	)		999,950			(1,422,967	)		(1,662,401	)
Sale of State of New Jersey net operating losses		2,071,168			-			-			-
Net (loss) income	$	(31,854,944	)	$	999,950		$	(1,422,967	)	$	(1,662,401	)
Net (loss) income per common share:
Basic	$	(2.26	)	$	0.14		$	(0.20	)	$	(0.23	)
Diluted	$	(2.26	)	$	0.14		$	(0.20	)	$	(0.23	)
Weighted average number of shares:
Basic		14,088,966			7,291,703			7,291,703			7,282,802
Diluted		14,088,966			7,398,739			7,291,703			7,282,802

	Quarters Ended
	Dec. 31, 2008			Sept. 30, 2008			June 30, 2008			March. 31, 2008
Total revenue	$	407,038		$	877,075		$	1,146,532		$	719,751
Cost of sales		320			396			-			102,774
Research and development		1,374,066			1,488,214			1,613,798			1,793,558
General and administrative		989,124			996,744			417,585			(2,528,608	)
Sales and marketing		(203,402	)		8,760			192,413			177,736
Facilities realignment and impairment of fixed assets		54,786			40,438			37,382			2,432,828
Other		65,580			147,173			64,868			64,868
Total costs and expenses		2,280,474			2,681,725			2,326,046			2,043,156
Loss from operations		(1,873,436	)		(1,804,650	)		(1,179,514	)		(1,323,405	)
Interest expense, net		458,515			553,771			451,834			440,892
Loss before benefit from state taxes		(2,331,951	)		(2,358,421	)		(1,631,348	)		(1,764,297	)
Sale of State of New Jersey net operating losses		61,777			-			-			-
Net loss	$	(2,270,174	)	$	(2,358,421	)	$	(1,631,348	)	$	(1,764,297	)
Net loss per common share:
Basic and diluted	$	(0.32	)	$	(0.33	)	$	(0.23	)	$	(0.27	)
Weighted average number of shares:
Basic and diluted		7,206,117			7,197,821			7,197,684			6,519,782

	September 30, 2010			December 31, 2009
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,153,819		$	2,173,039
Other current assets		110,765			120,527
Total current assets		1,264,584			2,293,566

Debt issuance costs, net		2,044,421			—
Property and equipment, net		27,799			114,024
Other assets		290,352			225,356
TOTAL ASSETS	$	3,627,156		$	2,632,946

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	2,219,249		$	2,432,976
Fair value of derivative financial instruments		10,180,233			2,634,487
Accrued expenses and other		3,508,350			3,135,013
Interest payable and accrued expenses due to a related party		190,093			111,560
Total current liabilities		16,097,925			8,314,036

Promissory note due to a related party		1,750,000			1,750,000
Senior subordinated convertible promissory notes, net of discount (face amount $1.8 million)		26,859			—
Deferred revenue and other		746,237			821,237
Convertible note payable		500,000			500,000
Total liabilities		19,121,021			11,385,273

Commitments and contingencies

Stockholders’ equity (deficit):
Common stock, par value $0.015 per share; 400,000,000 shares authorized, at September 30, 2010 and December 31, 2009; 68,755,067 and 62,398,817 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively		1,031,326			935,982
Additional paid-in capital		213,139,437			204,642,912
Accumulated deficit		(229,664,628	)		(214,331,221	)
Total stockholders’ equity (deficit)		(15,493,865	)		(8,752,327	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	3,627,156		$	2,632,946

	Three months ended September 30,						Nine months ended September 30,
	2010			2009			2010			2009
Revenues:
Product development	$	3,956		$	476,928		$	15,466		$	1,557,569
Other revenue		—			197,466			126,067			572,774
Total revenues		3,956			674,394			141,533			2,130,343

Cost and expenses:
Research and development		604,651			605,821			2,083,087			2,239,514
General and administrative		966,907			548,202			4,283,243			2,301,361
Facilities realignment and impairment of fixed assets		—			—			—			177,831
Registration rights penalty		—			65,581			—			194,603
Total cost and expenses		1,571,558			1,219,604			6,366,330			4,913,309
Loss from operations		(1,567,602	)		(545,210	)		(6,224,797	)		(2,782,966	)

Interest (income) expense:
Interest (income)		(750	)		(24	)		(1,182	)		(427	)
Interest expense to related parties		390,774			393,839			449,029			1,173,565
Interest (credit) expense		(3,548	)		15,002			29,367			83,292
Non-cash interest expense for warrants issued on induced conversion of debt		2,832,706			—			2,832,706			—
Non-cash interest expense for warrants issued to investors		485,029			—			485,029			—
Interest expense, net		3,704,211			408,817			3,794,949			1,256,430

Increase in fair value of derivative financial instruments		569,301			—			5,313,661			—
Gain on settlement of lease obligations		—			(1,953,977	)		—			(1,953,977	)

Net (loss) income	$	(5,841,114	)	$	999,950		$	(15,333,407	)	$	(2,085,419	)

Net (loss) income per common share:
Basic	$	(0.09	)	$	0.14		$	(0.24	)	$	(0.29	)
Diluted	$	(0.09	)	$	0.14		$	(0.24	)	$	(0.29	)

Weighted average number of common shares:
Basic		62,685,276			7,291,703			62,716,803			7,288,802
Diluted		62,685,276			7,398,739			62,716,803			7,288,802

		Options Outstanding at September 30, 2010					Options Exercisable at September 30, 2010
	Exercise Price	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Number of Shares		Weighted Average Exercise Price
$	0.25-0.30	3,019,466	$	0.27		8.59		2,226,341	$	0.27
$	0.31-0.35	5,747,639		0.35		9.33		2,303,030		0.35
$	0.36-0.55	1,608,851		0.51		8.39		843,791		0.52
$	0.56-0.65	5,747,639		0.65		9.34		2,303,030		0.65
$	0.66-45.60	453,926		13.62		4.97		453,543		13.61
		16,577,521	$	0.82		9.05		8,129,735	$	1.17

	As of September 30, 2010					As of September 30, 2009
Unvested Stock Option Awards	Stock Options			Weighted Average Grant Date Fair Value		Stock Options			Weighted Average Grant Date Fair Value
Unvested at January 1,		1,757,308		$	0.69		1,240,078		$	0.69
Awards		12,444,724		$	1.00		1,847,000		$	0.29
Forfeitures		-			-		(40,475	)	$	1.14
Vestings		(5,754,246	)	$	0.49		(1,015,948	)	$	0.59
Unvested at September 30,		8,447,786		$	0.57		2,030,655		$	0.57

	As of September 30,
	2010		2009
Convertible preferred stock		-		500,000
Convertible debt		9,477,454		365,180
Warrants		32,489,513		3,530,990
Options		16,557,521		4,135,402
Total		58,524,488		8,531,572

	2010 Transactions
Issued in connection the 2010 Notes (see Note 6)		12,495,000
Issued in connection the June 2010 Notes (see Note 7)		2,760,000
Issued in connection with September 30, 2010 conversion of the June 2010 Notes (see Note 7)		6,986,250
Issued to vendors and others		1,294,060
Total		23,535,310