CalEthos, Inc. - Annual Report: 2008 (Form 10-K)

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

FORM 10-K

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2008

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________to________________

Commission file number 000-50331

UPSTREAM BIOSCIENCES INC.
(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code 604.638.1674

Securities registered under Section 12(b) of the Act:

Securities registered under Section 12(g) of the Act:

Common Stock, $0.001 par value
(Title of class)

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes [ ] No [X]

Indicate by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [ ] No [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $786,019.69 based on a price of $0.0315 per share, being the average bid and asked price of such common equity as of March 31, 2008.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PAST FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ] N/A

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 49,453,006 shares of common stock as of December 19, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). Not Applicable

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PART I

Forward Looking Statements.

This report contains forward-looking statements. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “intends”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in Item 1A “Risk Factors” commencing on page 7 of this report, which may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

In this report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

As used in this report and unless otherwise indicated, the terms “we”, “us” and “our” refer to Upstream Biosciences Inc. and our wholly-owned subsidiaries.

ITEM 1. BUSINESS

We were incorporated pursuant to the laws of the State of Nevada on March 20, 2002 under the name Integrated Brand Solutions Inc. and on February 6, 2006, we changed our name to Upstream Biosciences Inc. We are a company engaged in the business of developing and commercializing genetic biomarkers and biotechnology drugs.

We have not generated any revenues from our technologies to date. We are a development stage company and we anticipate that we will require significant time and financing before our technologies are developed to a marketable state. Without adequate funding, it is management’s intention to wait until sufficient financial resources exist prior to spending additional and significant funds for the commercialization of our genetic biomarker program. Our company’s management and Board of Directors will continue to evaluate and determine the most effective use of available funds for its future research and development programs, including those programs related to diagnostic biomarkers, biomarkers for a drug response assay, as well as our drug development research and development efforts. Depending on the level of financing and resources available to us, we may further develop our pharmaceutical business, or biomarker business, or if possible, both. Once we have developed our technologies to commercialization, we could generate revenues in one of several ways. We may elect to sell directly to customers, license our diagnostic biomarkers and/or our drug candidates to third parties or we may elect to enter into joint ventures or other collaborations with third parties such as pharmaceutical, biotechnology and diagnostics companies, with the aim that they will develop and commercialize our discoveries into therapeutic, biopharmaceutical or diagnostic products. If such a collaboration is successful, we will seek to receive payments upon the successful completion of certain predetermined developmental stages and milestones, and receive royalties from the sales of the drugs and/or diagnostics kits, which will be based on our discoveries.

Biotechnology Drugs

On August 24, 2007, we acquired 100% of Pacific Pharma Technologies Inc. a Canadian early stage biopharmaceutical company that has developed a proprietary technology platform that combines artificial intelligence, advanced computational methods and chemical diversity techniques to discover new drug candidates. As of the closing date, we commenced the business of developing biotechnology drugs for certain infectious diseases and cancers. Our business strategy is to generate revenues through either licensing of our technology or

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sales of our products once commercial or collaborating with third party companies that develop and/or market biopharmaceuticals and pharmaceuticals internationally.

Pacific Pharma Technologies was acquired by our company from its founders, Mr. Gary Morrison and Dr. Artem Cherkasov. The technology, together with several compounds that were identified by Pacific Pharma Technologies’ founders as potential drug candidates for pre-clinical testing, were developed by Dr. Artem Cherkasov, a faculty member in the Department of Infectious Diseases in the Faculty of Medicine at the University of British Columbia, and the current Chairman of our Scientific Advisory Board. Subsequent to the acquisition of Pacific Pharma Technologies, Dr. Artem Cherkasov entered into a multi-year consulting agreement with our company. On December 31, 2007, we entered into an amended consulting agreement whereby Dr. Cherkasov provided his consulting services through JTAT Consulting, a proprietorship owned by Dr. Cherkasov and his spouse. This agreement was subsequently amended on March 10, 2008 (effective March 1, 2008).

The technology developed by Pacific Pharma Technologies, and subsequently acquired by our company, has generated novel compounds that in preliminary and pre-clinical laboratory studies suggest human and veterinary potential against certain tropical parasitic diseases. Screening analyses and diversity generation chemistry are then applied to produce an array of potential drug candidates. On June 13, 2007, Pacific Pharma Technologies through Dr. Artem Cherkasov, filed a provisional patent with the United States Patent and Trademark Office with respect to technology developed by its founders entitled “Anti-Parasitic Compounds and Methods for Selection Thereof” and this provisional patent was re-filed by our company on July 2, 2008. On August 13, 2008, we re-filed our provisional patent entitled “Method for combining 3D quantitative chemical structure activity relationships (QSAR) of compounds with genetic variation of drug targets and metabolic enzymes to optimize efficacy, provide predictive toxicology, and address drug resistant microorganisms” based on technology developed post-acquisition of Pacific Pharma Technologies as “Three-Dimensional Genetic-Variant QSAR Methods”.

We plan to further develop and improve upon these drug candidate compounds through additional pre-clinical and clinical studies, in order to successfully commercialize them.

Genetic Biomarkers

Our company is developing genetic diagnostic biomarkers for use in determining a patient’s susceptibility to disease and predicting a patient’s response to drugs. Our business strategy is to generate revenues through licensing our technologies or collaborating with third parties in the disease susceptibility, biomarkers identification, and drug response areas of cancer, primarily to companies that develop and/or market developing diagnostic products.

Our company focuses our research on variations in the untranslated regions of the human genome. Variations in these regions can be used as diagnostic markers to predict or aid in the prediction of susceptibility to disease or to predict a patient’s response to drugs. On June 27, 2008, we re-filed a provisional patent application on genetic markers that, following successful development and testing, may assist in determining the susceptibility of patients to liver cancer. These markers may also be important for determining the susceptibility of patients to other types of cancer, such as prostate or other cancers. On June 27, 2008, we re-filed a provisional patent application on an assay for identifying genetic markers that may predict a patient’s response to a drug entitled “In-Vivo Assay, Database and Software Algorithm for using Liver Enzyme CIS-Regulatory Allelic Binding Affinities to Profile and Predict a Haplotype’s Drug Response”. On August 13, 2008, we re-filed the three provisional patents that related to genetic biomarkers for prostate, ovarian and thyroid cancer susceptibility.

We incorporate data, ideas and methods from disciplines such as mathematics, computer science, biochemistry, evolutionary biology, literature mining, pattern recognition and network analysis and apply such information in a manner that permits us to understand the genetic basis of human disease and the role that variations in genes and their related gene regulatory regions play in the onset of disease, particularly cancer. If successful, we believe that our research and development will result in predictive models, discovery engines and related technologies, which will enable us to develop potential diagnostic markers. The presence, absence, varying quantities, and varying composition of molecules provide information about the development of a disease or other physiological condition. A molecule that provides this information is referred to as a diagnostic marker. In order to develop a diagnostic marker, we must identify a correlation between the presence of a particular variation of a molecule and a disease or other physiological condition. Once a correlation is identified, we must develop a method for identifying the

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correlation. Our goal is to develop our research into marketable diagnostic markers that are easy to perform, sensitive, consistent, safe, inexpensive, and cover an attractive market segment.

We are developing platforms and related technologies that we hope will enable the discovery of marketable diagnostic markers to aid in the disease susceptibility and drug response areas of cancer. We are developing our technologies which will enable us to identify and prioritize potential diagnostic markers. Our goal is to develop our platforms and related technologies to identify a variety of novel gene regulatory regions with potential applications in diagnostics. Our business strategy is to understand the relationship between genetic regulation, proteins and human diseases in order to develop molecular diagnostic products. Through our research and development, we intend to identify important disease genes, the proteins they produce, and the biological pathways in which they are involved to better understand the underlying molecular basis for the cause of human disease.

COMPETITION

The biotechnology and pharmaceutical industries are highly competitive. Numerous entities in the United States and elsewhere compete with our efforts to commercialize our technologies. Our competitors include pharmaceutical, biomedical, biotechnology and diagnostic companies, academic and research institutions and governmental and other publicly and privately funded research agencies. We face, and expect to continue to face, competition from these entities to the extent that they develop products that have a function similar or identical to the function of our technologies. We also face, and expect to continue to face, competition from entities that seek to discover therapeutic and diagnostic products.

Because many of our competitors have substantially greater capital resources and more experience in research and development, manufacturing and marketing than we do, we may not succeed in developing our proposed products and bringing them to market in a cost-effective and timely manner.

We are a development stage company engaged exclusively in research and development. We have not yet completed the development of our first product and have no revenue from operations. As a result, we may have difficulty competing with larger, established biomedical and pharmaceutical companies and organizations. Within the global genetic biomarker industry, examples of publicly traded companies include: Compugen, Ltd., Epigenomics AG, Myriad Genetics, Inc. and Diagnocure Inc.. Within the global pharmaceutical industry, examples of publicly traded companies involved in the development of drugs to treat infectious diseases include: GlaxoSmithKline plc, Johnson & Johnson, Novartis AG, Pfizer Inc. and Schering-Plough Corporation. These companies and organizations have much greater financial, technical, research, marketing, sales, distribution, service and other resources than us. Moreover, they may offer broader product lines, services and have greater name recognition than we do, and may offer discounts as a competitive tactic.

The technologies for discovering both drugs and genes that predispose persons to major diseases and approaches for commercializing those discoveries are new and rapidly evolving. Rapid technological developments may result in our potential services, products, or processes becoming obsolete before we recover a significant portion of our related research and development costs and any capital expenditures that we may incur. If we do not discover additional drug candidates or disease-predisposing genes, characterize their functions, develop predictive medicine products and related information services based on such discoveries, obtain regulatory and other approvals, launch such services or products before our competitors, and receive adequate financing to cover our operating costs, we may be adversely affected. Moreover, any products and technologies that we may develop may be made obsolete by less expensive or more effective drugs or tests or methods that may be developed from our competitors in the future.

INTELLECTUAL PROPERTY

Patent Applications

Our company has filed seven original provisional patent applications. Our company re-files provisional patents with the US Patent and Trademark Office on an annual basis, prior to completing an initial patent filing as part of our overall intellectual property strategy. We have identified and filed provisional patent applications on genetic markers that, following successful development and testing, may assist in determining the susceptibility of patients

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to liver cancer, prostate cancer, ovarian cancer, thyroid cancer, as well as, an assay for identifying genetic markers that may predict a patient’s response to a drug. On June 13, 2007, Pacific Pharma Technologies through Dr. Artem Cherkasov, filed a provisional patent with the United States Patent and Trademark Office with respect to technology developed by its founders entitled “Anti-Parasitic Compounds and Methods for Selection Thereof” and this provisional patent was re-filed by our company on July 2, 2008. On August 13, 2008, we re-filed our provisional patent entitled “Method for combining 3D quantitative chemical structure activity relationships (QSAR) of compounds with genetic variation of drug targets and metabolic enzymes to optimize efficacy, provide predictive toxicology, and address drug resistant microorganisms” based on technology developed post-acquisition of Pacific Pharma Technologies as “Three-Dimensional Genetic-Variant QSAR Methods”.

The validity and breadth of claims in medical technology patents involve complex legal and factual questions and, therefore, may be highly uncertain. No assurance can be given that any patents based on pending patent applications or any future patent applications by us, or any future licensors, will be issued, that the scope of any patent protection will exclude competitors or provide competitive advantages to us, that any of the provisional patent applications that have been or may be issued to us or our licensors will be held valid if subsequently challenged or that others will not claim rights in or ownership of the provisional patent applications and other proprietary rights held or licensed by us. Furthermore, there can be no assurance that others have not developed or will not develop similar products, duplicate any of our technology or design around any patents that may be issued to us or our licensors. Since provisional patent applications in the United States are maintained in secrecy until patents are issued, we also cannot be certain that others have not or will not file prior applications for inventions covered by our, and our licensors’ pending patent applications, nor can we be certain that we will not infringe any patents that may be issued to others on such applications.

Our success will also depend in part on our ability to commercialize our technology without infringing the proprietary rights of others. We have not conducted freedom of use patent searches and no assurance can be given that patents do not exist or could not be filed which would have an adverse affect on our ability to market our technology or maintain our competitive position with respect to our technology. If our technologies or subject matter are claimed under other existing United States or foreign patents or are otherwise protected by third party proprietary rights, we may be subject to infringement actions. In such event, we may challenge the validity of such patents or other proprietary rights or we may be required to obtain licenses from such companies in order to develop, manufacture or market our technology. There can be no assurances that we will be able to obtain such licenses or that such licenses, if available, may be obtained on commercially reasonable terms. Furthermore, the failure to either develop a commercially viable alternative or obtain such licenses may result in delays in marketing our proposed technology or the inability to proceed with the development, manufacture or sale of products requiring such licenses, which may have a material adverse affect on our business, financial condition and results of operations. If we are required to defend ourselves against charges of patent infringement or to protect our proprietary rights against third parties, substantial costs will be incurred regardless of whether we are successful. Such proceedings are typically protracted with no certainty of success. An adverse outcome could subject us to significant liabilities to third parties and force us to curtail or cease our development and commercialization of our technology.

Domain Names

We own and operate the following registered internet domain name: www.upstreambio.com. The information contained on our website does not form part of this annual report.

General

We also rely on trade secrets and unpatentable know-how that we seek to protect, in part, by confidentiality agreements. We intend to require all future employees, consultants, contractors, manufacturers, outside scientific collaborators and sponsored researchers, directors on our board, technical review board and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements will provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific limited circumstances. We intend to require signed confidentiality or material transfer agreements from any company that receives confidential information from our company. We intend to ensure that, in the case of employees, consultants and contractors, any agreements that our company enters into with such persons will

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generally provide that all inventions conceived by the person while rendering services to us shall be assigned to us as the exclusive property of our company. We can offer no assurance, however, that all persons who we seek to sign such agreements will sign, or if they do, that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets or unpatentable know-how will not otherwise become known or be independently developed by competitors.

GOVERNMENTAL REGULATION

Our research and development activities and the manufacturing and marketing of our technology are subject to the laws and regulations of governmental authorities in the United States and any other countries in which our technology is ultimately marketed. In the United States, the Food and Drug Administration, or FDA, among other activities, regulates new product approvals to establish safety and efficacy guidelines of the types of products and technologies our company is currently developing. Governments in other countries have similar requirements for testing and marketing.

Regulation by governmental authorities in the United States and foreign countries is a significant factor in the development, manufacture and marketing of our proposed technologies and in our ongoing research and development activities.

The products and technologies that we are currently researching and developing will require regulatory approval by governmental agencies prior to commercialization. Various federal statutes and regulations also govern or influence the testing, manufacturing, safety, labeling, storage, record keeping, and marketing of therapeutic products. The process of obtaining these approvals and the subsequent compliance with applicable statutes and regulations require the expenditure of substantial time and financial resources. Any failure by us or our collaborators, licensors or licensees to obtain, or any delay in obtaining regulatory approval, could have a material adverse effect on our business.

FDA Approval

In the United States of America, the U.S. Food and Drug Agency (the “FDA”) sets out guidelines for clinical trials which are conducted in order to obtain approval. Other countries have separate regulatory agencies that carry out similar functions to approve devices and drugs for medical use within their respective territories. Clinical trials are required to find effective treatments to improve health. All clinical trials are based on a protocol which is a study plan that describes the type of people who may participate in the trial, the schedule of tests and procedures, and the length of the study.

Most clinical trials in the United States must be approved and monitored by an Institutional Review Board, or IRB, to make sure the risks of the trial are as low as possible and are worth any potential benefits. All institutions that conduct or support biomedical research are required by federal regulation to have an IRB that initially approves and periodically reviews the research.

Upon successful completion of a clinical trial validation study, an application based on the results of the clinical trial is submitted for FDA approval. Upon receipt of FDA approval, the diagnostic screening test or drug is ready for commercialization.

In the United States, clearance or approval to commercially distribute new medical devices or products is received from the FDA through clearance of a 510(k) pre-market notification, or 510(k), or approval of a premarket approval application, or PMA. It may take from three to nine months from submission to obtain 510(k) clearance, but may take longer or clearance may not be obtained at all. The FDA may determine that additional information is needed before approval to distribute the product is given.

For any products that are cleared through the 510(k) pre-market notification process, modifications or enhancements that may significantly affect safety or constitute a major change in the intended use of the product will require new 510(k) submissions.

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A PMA application must be filed if a proposed product is not substantially equivalent to a medical product first marketed prior to May 1976, or if otherwise required by the FDA. The PMA approval process can be expensive, uncertain and lengthy, and a number of products for which other companies have sought FDA approval of a PMA application have never been approved for marketing. It generally takes from six to eighteen months from submission to obtain PMA approval, but it may take longer or the submission may not be approved at all.

In order to obtain FDA approval of a new medical product, sponsors must generally submit proof of safety and efficacy. In some cases, such proof entails extensive pre-clinical and clinical laboratory tests. The testing and preparation of necessary applications and processing of those applications by the FDA is expensive and may take several years to complete. There can be no assurance that the FDA will act favorably or in a timely manner in reviewing submitted applications, and we may encounter significant difficulties or costs in our efforts to obtain FDA approval. Such circumstances may delay or preclude us from marketing any products we may develop. The FDA may also require post-marketing testing and surveillance of approved products, or place other conditions on the approvals. These requirements may create difficulties for our company to sell the products and may increase the costs of such products which may restrict the commercial applications of such products. Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following initial marketing. For patented technologies, delays imposed by the governmental approval process may materially reduce the period during which we will have the exclusive right to exploit such technologies.

If human clinical trials of a proposed medical product are required, the manufacturer or distributor of the product will have to file an Investigational Device Exemption or Investigational New Drug submission with the FDA prior to commencing human clinical trials. The submission must be supported by data, typically including the results of pre-clinical and laboratory testing. Following submission of the Investigational Device Exemption or Investigational New Drug, the FDA has 30 days to review the application and raise safety and other clinical trial issues. If we are not notified of objections within that period, clinical trials may be initiated, and human clinical trials may commence at a specified number of investigational sites with the number of patients approved by the FDA.

RESEARCH AND DEVELOPMENT

Our research and development costs primarily consist of research programs related to the development of drug candidates for the treatment of certain infectious diseases and cancers. We estimate that our research and development cash expenditures, for the next twelve months will be approximately $350,000 as follows: $150,000 allocation of management salaries, $50,000 for contract research and development services from Dr. Artem Cherkasov and $150,000 for third party lab and testing services. These amounts exclude the contingent payments of company common equity that may be required if specific milestone discoveries are achieved.

Our company incurred a total of $882,433 in research and development costs for the year ended September 30, 2008, consisting of $353,320 in cash expenses and $529,113 in stock expenses, including the Malaria milestone achievement of 1,000,000 shares valued at $362,400. This was an increase from the year ended September 30, 2007 where we incurred a total of $160,107 in research and development costs, consisting of $155,265 in cash expenses and $4,842 in stock expenses.

Employees

We currently have two employees consisting of Joel Bellenson as our Chief Executive Officer and Dexster Smith as our President, Secretary and Treasurer. Tim Fernback acts as our Chief Financial Officer pursuant to the terms of a management contract between our company and TCF Ventures Corp., a company wholly-owned by Mr. Fernback. We have also entered into a consulting services agreement with a company owned by Dr. Artem Cherkasov to pay $49,250 (C$50,000) per year plus an equity component of $193,000 (C$200,000) in restricted common shares until the agreement expires July 31, 2010. We will hire additional employees when circumstances warrant.

Customers

As we are in the development stage of our business, we do not currently have any customers of our technologies.

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Suppliers

Our company is not reliant upon any suppliers for the research and development of our technologies.

ITEM 1A. RISK FACTORS

Risks Related to our Business

We have had negative cash flows from operations since inception. We will require significant additional financing, the availability of which cannot be assured, and if our company is unable to obtain such financing, our business may fail.

To date, we have had negative cash flows from operations and have depended on sales of our equity securities and debt financing to meet our cash requirements. Our ability to develop and, if warranted, commercialize our technologies, will be dependent upon our ability to raise significant additional financing. If we are unable to obtain such financing, we will not be able to fully develop our business. Specifically, we will need to raise additional funds to:

• pay our existing and accrued liabilities;
• support our planned growth and carry out our business plan;
• continue scientific progress in our research and development programs;
• address costs and timing of conducting clinical trials and seek regulatory approvals and patent prosecutions;
• address competing technological and market developments;
• establish additional collaborative relationships; and
• market and develop our technologies.

In light of the current financial crises, financing for companies such as ours is very difficult to obtain. Even if financing is available, it may not be available on terms that are favorable to us or in sufficient amounts to satisfy our requirements. If we require, but are unable to obtain, additional financing in the future, we may be unable to implement our business plan and our growth strategies, respond to changing business or economic conditions, withstand adverse operating results and compete effectively. Without additional funds, we may not be able to pay our employees or contracts to provide services, and these same employees or service providers may have to either accept accruals or common shares, or a combination of both, for compensation. More importantly, if we are unable to raise further financing when required, we may be forced to scale down our operations and our ability to continue operations may be negatively affected.

We have a history of losses and nominal operating results, which raise substantial doubt about our ability to continue as a going concern.

Since inception through the fiscal year ended September 30, 2008, we have incurred aggregate net losses of $5,874,300. We can offer no assurance that we will operate profitably or that we will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the level of competition and general economic conditions.

Our company’s operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. No assurance can be given that we may be able to operate on a profitable basis.

Due to the nature of our business and the early stage of our development, our securities must be considered highly speculative. We are engaged in the business of developing and commercializing genetic biomarkers and biotechnology drugs, which technology is in the development stage and we have not commenced the regulatory approval process for our technology. We have not realized a profit from our operations to date and there is little likelihood that we will realize any profits in the short or medium term. Any profitability in the future from our business will be dependent upon the successful commercialization or licensing of our core technology, which itself is subject to numerous risk factors as set forth herein.

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We expect to continue to incur development costs and operating costs. Consequently, we expect to incur operating losses and negative cash flows until our technology gains market acceptance sufficient to generate a sustainable level of income from the commercialization or licensing of our technology. Our history of losses and nominal operating results raise substantial doubt about our ability to continue as a going concern, as described in the explanatory paragraph in our company’s independent registered public accounting firm’s audit report dated November 27, 2008 which is included in our annual report on Form 10-K.

We currently hold no patents on our proprietary technology and if we are not able to protect our proprietary technology, our company will suffer a material adverse effect.

We currently have provisional patent applications filed on our technologies. We currently rely on the provisional patent applications and trade secrets to protect our proprietary intellectual property.

The departure of any of our management or any significant technical personnel or consultants we may hire in the future, the breach of their confidentiality and non-disclosure obligations, or the failure to achieve our intellectual property objectives may have a material adverse effect on our business, financial condition and results of operations. We believe our success depends upon the knowledge and experience of our management and our ability to market our existing technology and to develop new technologies.

While we believe that we have adequately protected our proprietary technology, and we intend to take all appropriate and reasonable legal measures to protect it in the future, the use of our technology by a competitor could have a material adverse effect on our business, financial condition and results of operations. Our ability to compete successfully and achieve future revenue growth will depend, in part, on our ability to protect our proprietary technology and operate without infringing upon the rights of others. We may not be able to successfully protect our proprietary technology, and our proprietary technology may otherwise become known or similar technology may be independently developed by competitors. Competitors may discover novel uses, develop similar or more marketable technologies or offer services similar to our company at lower prices. We cannot predict whether our technologies and services will compete successfully with the technologies and services of existing or emerging competitors.

Our inability to complete our product development activities successfully may severely limit our ability to operate and finance operations.

Commercialization of our core technologies will require significant additional research and development as well as substantial clinical trials. For our biomarker technologies, we believe that the United States will be the principal market for our technology, although we may elect to expand into Japan and Western Europe. With regards to our drug technologies for certain infectious diseases and cancers, we believe that Africa, the Middle East and Asia will be the principal market for our technology, although we may elect to expand into Central and South America, Europe and North America. We may not be able to successfully complete development of our core technology, or successfully market our technology. We, and any of our potential collaborators, may encounter problems and delays relating to research and development, regulatory approval and intellectual property rights of our technology. Our research and development programs may not be successful. Our core technology may not prove to be safe and efficacious in clinical trials, and we may not obtain the intended regulatory approvals for our core technology. Whether or not any of these events occur, we may not have adequate resources to continue operations for the period required to resolve the issue delaying commercialization and we may not be able to raise capital to finance our continued operations during the period required for resolution of that issue.

We may lose our competitiveness if we are not able to protect our proprietary technology and intellectual property rights against infringement, and any related litigation may be time-consuming and costly.

Our success and ability to compete depends to a significant degree on our proprietary technology. If any of our competitors copy or otherwise gain access to our proprietary technology or develop similar technologies independently, we may not be able to compete as effectively. The measures we have implemented to protect our proprietary technology and other intellectual property rights are currently based upon a combination of provisional patent applications, technology licenses and trade secrets. This, however, may not be adequate to prevent the unauthorized use of our proprietary technology and our other intellectual property rights. Further, the laws of foreign countries may provide inadequate protection of such intellectual property rights. We may need to bring legal claims

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to enforce or protect such intellectual property rights. Any litigation, whether successful or unsuccessful, may result in substantial costs and a diversion of our company’s resources. In addition, notwithstanding our rights to our intellectual property, other persons may bring claims against us alleging that we have infringed on their intellectual property rights or claims that our intellectual property rights are not valid. Any claims against us, with or without merit, could be time consuming and costly to defend or litigate, divert our attention and resources, result in the loss of goodwill associated with our business or require us to make changes to our technology.

If our provisional patent applications and proprietary rights do not provide substantial protection, then our business and competitive position will suffer.

Our success depends in large part on our ability to develop, commercialize and protect our proprietary technology. However, patents may not be granted on any of our provisional or future patent applications. Also, the scope of any future patent may not be sufficiently broad to offer meaningful protection. In addition, any patents granted to us in the future may be successfully challenged, invalidated or circumvented so that such patent rights may not create an effective competitive barrier.

Our company may become subject to intellectual property litigation which may harm our business.

Our success depends in part on our ability to develop commercially viable products without infringing the proprietary rights of others. Although we have not been subject to any filed infringement claims, other patents could exist or could be filed which may prohibit or limit our ability to market our products or maintain a competitive position. In the event of an intellectual property dispute, we may be forced to litigate. Intellectual property litigation may divert management’s attention from developing our technology and may force us to incur substantial costs regardless of whether we are successful. An adverse outcome could subject us to significant liabilities to third parties, and force us to curtail or cease the development and commercialization of our technology.

If our company commercializes or tests our technology, our company will be subject to potential product liability claims that may affect our earnings and financial condition.

We face an inherent business risk of exposure to product liability claims in the event that the use of our core technology during research and development efforts, including clinical trials, or after commercialization, results in adverse effects. As a result, we may incur significant product liability exposure, which may exceed any insurance coverage that we obtain in the future. Even if we elect to purchase such issuance in the future, we may not be able to maintain adequate levels of insurance at reasonable cost and/or reasonable terms. Excessive insurance costs or uninsured claims may increase our operating loss and affect our financial condition.

We have not generated any revenues from operations and if we are unable to develop market share and generate significant revenues from the commercialization or licensing of our technology, then our business may fail.

We operate in a highly competitive industry and our failure to compete effectively and generate income through the commercialization or licensing of our technology may adversely affect our ability to generate revenue. The business of developing genetic biomarkers and biotechnology drug development are both highly competitive and subject to frequent technological innovation with improved price and/or performance characteristics. There can be no assurance that our new or existing technologies will gain market acceptance. Management is aware of similar technologies that our technology, when developed to a stage of commercialization, will compete directly against. Many of our competitors have greater financial, technical, sales and marketing resources, better name recognition and a larger customer base than ours. In addition, many of our large competitors may offer customers a broader or superior range of services and technologies. Some of our competitors may conduct more extensive promotional activities and offer lower commercialization and licensing costs to customers than we do, which could allow them to gain greater market share or prevent us from establishing and increasing our market share. Increased competition in the genetic biomarker industry and the drug development industry may result in significant price competition, reduced profit margins or loss of market share, any of which may have a material adverse effect on our ability to generate revenues and successfully operate our business. Our competitors may develop technologies superior to those that our company is currently developing. In the future, we may need to decrease our prices if our competitors lower their prices. Our competitors may be able to respond more quickly to new or changing opportunities,

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technologies and customer requirements. Such competition will potentially affect our chances of achieving profitability, and ultimately affect our ability to continue as a going concern.

Rapid technological changes in our industry may render our technology non-competitive or obsolete and consequently affect our ability to generate future revenues.

The genetic biomarker and biotechnology drug development industries are characterized by rapidly changing technology, evolving industry standards and varying customer demand. We believe that our success will depend on our ability to generate income through the commercialization and licensing of our technology and that it will require us to continuously develop and enhance our technology that is currently being developed and introduce new and more technologically advanced technologies promptly into the market. We can make no assurance that our technology will not become obsolete due to the introduction of alternative technologies. If we are unable to continue to develop and introduce new genetic biomarkers, new biotechnology drugs and drug candidates to meet technological changes and changes in market demands, our business and operating results, including our ability to generate revenues, may be adversely affected.

If we fail to effectively manage the growth of our company and the commercialization or licensing of our technology, our future business results could be harmed and our managerial and operational resources may be strained.

As we proceed with the development of our technology and the expansion of our marketing and commercialization efforts, we expect to experience significant growth in the scope and complexity of our business. We will need to add staff to market our services, manage operations, handle sales and marketing efforts and perform finance and accounting functions. We anticipate that we will be required to hire a broad range of additional personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational resources. The failure to develop and implement effective systems, or to hire and retain sufficient personnel for the performance of all of the functions necessary to effectively service and manage our potential business, or the failure to manage growth effectively, could have a material adverse effect on our business and financial condition.

Failure to obtain and maintain required regulatory approvals will severely limit our ability to commercialize our technology.

We believe that it is important for the success of our business to obtain the approval of the United States Food and Drug Administration (FDA) before we commence commercialization of our technology in the United States, the principal market for our biomarker technology and internationally. Furthermore we believe that it is important for the success of our business to obtain the approval of the FDA or similar international drug regulatory bodies, before we can commence the commercialization of our biotechnology drug candidates in their respective international markets. We may also be required to obtain additional approvals from foreign regulatory authorities to apply for any sales activities we may carry out in those jurisdictions. If we cannot demonstrate the safety, reliability and efficacy of our technology, the FDA or other regulatory authorities could delay or withhold regulatory approval of our technology.

Even if we obtain regulatory approval of our technology, that approval may be subject to limitations on the indicated uses for which it may be marketed. Even after granting regulatory approval, the FDA and other regulatory agencies and governments in other countries will continue to review and inspect any future marketed products as well as any manufacturing facilities that we may establish in the future. Later discovery of previously unknown problems with a product or facility may result in restrictions on the product, including a withdrawal of the product from the market.

Further, governmental regulatory agencies may establish additional regulations which could prevent or delay regulatory approval of our technology.

Even if we obtain regulatory approval to commercialize our technology, lack of commercial acceptance may impair our business.

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Our product development efforts are primarily directed toward obtaining regulatory approval to market genetic diagnostic markers and biotechnology drugs. Diagnostic markers for cancer, as well as, biotechnology drugs for certain infectious diseases and cancers, have been widely available for a number of years, and our technology may not be accepted by the marketplace as readily as these or other competing products, processes and methodologies. Additionally, our technology may not be employed in all potential applications being investigated, and any reduction in applications may limit the market acceptance of our technology and our potential revenues. As a result, even if our technology is developed into a marketable technology and we obtain all required regulatory approvals, we cannot be certain that our technology will be adopted at a level that would allow us to operate profitably.

If we do not keep pace with our competitors, technological advancements and market changes, our technology may become obsolete and our business may suffer.

The market for our technology is very competitive, is subject to rapid technological changes and varies for different individual products. We believe that there are potentially many competitive approaches being pursued that compete with our technology, including some by private companies for which information is difficult to obtain.

Many of our competitors have significantly greater resources and have developed products and processes that directly compete with our technology. Our competitors may develop, or may in the future develop, new technologies that directly compete with our technology or even render our technology obsolete. Our technology is designed to develop diagnostic products as well as treatments for certain diseases. Even if we are able to demonstrate improved or equivalent results from our technology, researchers and practitioners may not use our technology and we may suffer a competitive disadvantage. Finally, to the extent that others develop new technologies that address the targeted application for our current technology, our business will suffer.

Our ability to hire and retain key personnel will be an important factor in the success of our business and a failure to hire and retain key personnel may result in our inability to manage and implement our business plan.

We are highly dependent upon our management personnel such as Joel Bellenson and Dexster Smith because of their experience developing genetic diagnostic markers and bioinformatics software as it relates to drug development. The loss of the services of one or more of these individuals may impair management’s ability to operate our company. We have not purchased key man insurance on any of these individuals, which would provide us with insurance proceeds in the event of their death. Without key man insurance, we may not have the financial resources to develop or maintain our business until we could replace the individual or to replace any business lost by the death of that person. The competition for qualified personnel in the markets in which we operate is intense. In addition, in order to manage growth effectively, we must implement management systems and recruit and train new employees. We may not be able to attract and retain the necessary qualified personnel. If we are unable to retain or to hire qualified personnel as required, we may not be able to adequately manage and implement our business.

We will depend upon the establishment of relationships with third parties to test our technologies and any relationship may require our company to share revenues and technology.

Management anticipates that it will be crucial to identify the degree of elevated or reduced risk of a particular disease or medication based on a particular variation or combination of variations. To do so will require access to samples of patients who have had the diseases in question as well as normal populations. And for each of these collections of samples, it will be important to note the demographic and epidemiological ranges covered by the collection. This would entail establishing relationships with clinics, hospitals, universities and companies that have repositories of biological samples with carefully curated patient disease and demographic information. These relationships have various confidentiality provisions that require negotiations that can span several months. In addition, some of these institutions have national or provincial mandates for providing access to these samples that may require us to make our test results publicly available for these jurisdictions or institutions at a reduced rate and could also require us to provide a flow back of intellectual property licensing for their further research process. Any such requirement may reduce our revenues.

Our company will be dependent on various outsourcing activities for testing our technology and failure to outsource certain activities will have a material adverse effect on our company.

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We intend to establish relationships with various vendors of biological laboratory services. Such laboratory services may include DNA SNP profiling, gene expression profiling, cell culturing, recombinant techniques for inserting reporter genes into artificial constructs for testing purposes, profiling of transcription factors active in different disease states, manufacturing and testing of potential drug candidates, pre-clinical and clinical drug trials, and other laboratory and analytical services depending upon the outcome of the results at various stages. Our ability to secure and maintain these future relationships will be critical to the success of our business objectives, and conversely the inability to secure these future relationships on reasonable commercial terms represents a risk and could have a material adverse effect on our operations or financial condition.

Most of our assets and a majority of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.

Although we are organized under the laws of the State of Nevada, United States, our principal business office is located in Vancouver, British Columbia, Canada. Outside the United States, it may be difficult for investors to enforce judgments against us that are obtained in the United States in any action, including actions predicated upon civil liability provisions of federal securities laws. In addition, three of our four directors and all of our executive officers reside outside the United States, and nearly all of the assets of these non-U.S. persons and our assets are located outside of the United States. As a result, it may not be possible for investors to affect service of process within the United States upon such persons or to enforce against us or such persons judgments predicated upon the liability provisions of United States securities laws. There is substantial doubt as to the enforceability against us or any of our directors and officers located outside the United States in original actions or in actions of enforcement of judgments of United States courts or liabilities predicated on the civil liability provisions of United States federal securities laws. In addition, as the majority of our assets are located outside of the United States, it may be difficult to enforce United States bankruptcy proceedings against us. Under bankruptcy laws in the United States, courts typically have jurisdiction over a debtor’s property, wherever it is located, including property situated in other countries. Courts outside of the United States may not recognize the United States bankruptcy court’s jurisdiction. Accordingly, you may have trouble administering a United States bankruptcy case involving a Nevada company as debtor with most of its property located outside the United States. Any orders or judgments of a bankruptcy court obtained by you in the United States may not be enforceable.

Our business is subject to comprehensive government regulation and any change in such regulation may have a material adverse effect on our company.

There is no assurance that the laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States, Canada or any other jurisdiction, will not be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business. The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on our company. Any or all of these situations may have a negative impact on our operations.

Risks Related to our Common Stock

A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our ability to continue operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because a significant portion of our operations has been and will be financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our operations. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.

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The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors. Any failure to meet these expectations, even if minor, may have a material adverse effect on the market price of our common stock.

If we issue additional shares in the future, it will result in the dilution of our existing shareholders.

Our certificate of incorporation authorizes the issuance of up to 750,000,000 shares of common stock with a $0.001 par value and 100,000,000 preferred shares with a par value of $0.001, of which 49,453,006 common shares were issued and outstanding as of September 30, 2008. Our board of directors may fix and determine the designations, rights, preferences or other variations of each class or series within each class. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares will result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current shareholders. Further, such issuance may result in a change of control of our company.

Trading of our stock may be restricted by the Securities Exchange Commission’s penny stock regulations, which may limit a stockholder’s ability to buy and sell our stock.

The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

FINRA’s sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission (see above for a discussion of penny stock rules), FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Our common stock is illiquid and the price of our common stock may be negatively impacted by factors which are unrelated to our operations.

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Our common stock is currently quoted on the OTC Bulletin Board. Trading of our stock through the OTC Bulletin Board is frequently thin and highly volatile. There is no assurance that a sufficient market will develop in the stock, in which case it could be difficult for shareholders to sell their stock. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of our competitors, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

ITEM 2. PROPERTIES.

Executive Offices

Our principal office is located at Suite 200 – 1892 West Broadway, Vancouver British Columbia Canada. The 400 square feet office space serves as the base of operations for our corporate, managerial, accounting, financial, administrative, sales and marketing functions. Our company has leased the office premises on a monthly basis for CDN$1000 ($953) per month, pursuant to an agreement commencing March 1, 2008. This monthly amount includes phone, fax and internet access, as well as the shared use of a receptionist and a boardroom facility.

ITEM 3. LEGAL PROCEEDINGS.

We know of no material, active, or pending legal proceeding against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation where such claim or action involves damages for more than 10% of our current assets as of December 19, 2008. Additionally, there were no proceedings in which any of our company’s directors, officers, or affiliates, or any registered or beneficial shareholders holding more than 5% of our voting securities, is an adverse party or has a material interest adverse to our company’s interest as of December 19, 2008.

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

None.

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PART II

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

Market for Securities

Our stock is listed for quotation on the OTC Bulletin Board under the trading symbol “UPBS”. Our common shares initially began trading on the OTC Bulletin Board on September 1, 2004 under the trading symbol “IBSO.OB”. The following table sets forth, for the periods indicated, the high and low closing prices for each quarter within the last two fiscal years ended September 30, 2008 as reported by the quotation service operated by the OTC Bulletin Board. All quotations for the OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

On December 18, 2008, the closing price for the common stock as reported by the quotation service operated by the OTC Bulletin Board was $0.055.

Nevada Agency and Trust Company is the registrar and transfer agent for our common shares. Their address is 50 West Liberty, Suite 800 Reno, Nevada, 89501 Telephone: 775.322.0626, Facsimile: 775.322.5623.

Holders of our Common Stock

As of December 18, 2008, there were 9 registered registered holders of record of our common stock. As of such date, 49,453,006 common shares were issued and outstanding.

Dividend Policy

We have not declared or paid any cash dividends since inception. Although there are no restrictions that limit our ability to pay dividends on our common shares, we intend to retain future earnings, if any, for use in the operation and expansion of our business and do not intend to pay any cash dividends in the foreseeable future.

Equity Compensation Plan Information

On March 16, 2007, our board of directors approved the 2007 Stock Option Plan. Under the terms of the 2007 Stock Option Plan, options to purchase up to 5,000,000 shares of our common stock may be granted to our officers, directors, employees and permitted consultants of our company.

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The following table sets forth certain information concerning all equity compensation plans previously approved by stockholders and all previous equity compensation plans not previously approved by stockholders, as of the most recently completed fiscal year.

Equity Compensation Plan Information As At September 30, 2008

⁽¹⁾ In addition, our company has agreed to issue 1,500,000 stock options to two directors and three new scientific advisory board members under the 2007 Stock Option Plan, on terms to be determined.

Recent Sales of Unregistered Securities

The following sets forth certain information concerning securities which were sold or issued by us during the last fiscal year ended September 30, 2008 without the registration of these securities under the Securities Act of 1933 in reliance on exemptions from such registration requirements.

On August 31, 2008, pursuant to the terms of an Amended and Restated Consulting Agreement, we issued 213,725 common shares to Dr. Artem Cherkasov. The common shares were issued to Dr. Artem Cherkasov as a non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933, as amended), in an offshore transaction relying on Regulation S and/or section 4(2) of the Securities Act of 1933, as amended.

On March 7, 2008, pursuant to the terms of a Consulting Services Agreement dated March 7, 2008, we issued 403,388 common shares to Dr. Artem Cherkasov. The common shares were issued to Dr. Artem Cherkasov as a non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933, as amended), in an offshore transaction relying on Regulation S and/or section 4(2) of the Securities Act of 1933, as amended.

On February 28, 2008, pursuant to the terms of the Share Exchange Agreement dated August 17, 2007, among our company, Pacific Pharma Technologies Inc., and the selling shareholders of Pacific Pharma Technologies Inc. we issued 462,500 common shares to Dr. Artem Cherkasov and 462,500 to Mr. Gary Morrison. The common shares were issued to Dr. Artem Cherkasov and Mr. Gary Morrison as a non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933, as amended), in an offshore transaction relying on Regulation S and/or section 4(2) of the Securities Act of 1933, as amended. At the same time, 37,500 shares were released to both Dr Artem Cherkasov and Mr Gary Morrison from the escrow pool of 225,000 performance-based shares which had been set aside for this purpose, leaving a balance of 150,000 shares for future milestones as of September 30, 2008.

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On January 31, 2008, pursuant to the terms of a Consulting Services Agreement dated December 31, 2007, we issued 83,183 common shares to Dr. Artem Cherkasov. The common shares were issued Dr. Artem Cherkasov as a non-U.S. person (as that term is defined in Regulation S of the Securities Act of 1933, as amended), in an offshore transaction relying on Regulation S and/or section 4(2) of the Securities Act of 1933, as amended.

ITEM 6. SELECTED FINANCIAL DATA.

Not Applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction with our audited consolidated financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report.

Our audited consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

Plan of Operations and Cash Requirements over the Next 12 Months

Without adequate funding, it is management’s intention to halt current research and development efforts associated with our biomarker program and wait until sufficient financial resources exist before spending additional and significant funds for the commercialization of our biomarker program, and concentrate our research and development efforts on our drug development programs. However, we will continue to evaluate and determine the most cost effective use of available funds for all future research and development programs, including diagnostic biomarkers, biomarkers for a drug response assay and drug development efforts. Depending on the level of financing and resources available, we may further develop our pharmaceutical business, or biomarker business, or both, if possible.

There is no assurance that our research and development programs will produce commercially viable products or treatments, and a great deal of additional R&D will be required before a final evaluation of the economic feasibility of our technologies can be determined. Even if we complete our proposed R&D and we are successful in identifying commercially viable products and/or treatments, we will have to spend substantial funds on further studies before we will know our products and/or treatments are commercially viable or not.

Anticipated Cash Requirements

Over the next 12 months, we have estimated our minimum cash requirements to be as follows:

For the 12 months ended September 30, 2008, we recorded a net operating loss of $2,209,502 and have an accumulated deficit of $5,915,950 since inception. As at September 30, 2008, we had cash on hand of $612,306 and for the next 12 months, management estimates minimum cash requirements of $800,000 to fund on-going operations and planned research and development programs. Accordingly, we do not have sufficient funds to meet our plan of operation over the next 12 months and will need to obtain further financing through issuance of shares, debentures or convertible debentures. We will also endeavor to access available funding from research and development grants

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or loans from various public and private research granting agencies. Moreover, all cash operating expenses will be carefully monitored to ensure we can meet our obligations as they come due.

Due to the current financial crisis, there can be no assurance that additional financing will be available when needed or, if available, on commercially reasonable terms. If we are not able to obtain additional financing on a timely basis, we may not be able to meet our obligations as they come due and may be forced to scale down or perhaps even cease business operations.

Liquidity and Capital Resources

Our financial position as at September 30, 2008 and September 30, 2007 and the changes for the years then ended are as follows:

Working Capital

Working capital has decreased from $1,389,619 at September 30, 2007 to $190, 409 at September 30, 2008 due to significantly lower cash balances and higher amounts payable to related parties on account of retiring allowances.

Cash Flows

During the years ended September 30, 2008 and 2007:

Results of Operations for year ending September 30, 2008

The following summary should be read in conjunction with our audited financial statements for the years ended September 30, 2008 and 2007 included herein.

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Revenue

We are a development stage company and have not generated any revenues from our technologies since inception. We anticipate significant additional time and financing will be required before our technologies are developed to a marketable state.

Expenses

Our operating expenses for the year ended August 31, 2008 were $2,220,985 compared to $1,928,231 in 2007. This net increase of $292,754 was primarily due to the following:

• $93,033 increase in management and consulting fees due to increased salary and accrued retiring allowance for one company officer to bring his compensation into line with the other two company officers.

• $42,414 decrease in professional fees since the legal fees for purchase of Pacific Pharma Technologies Inc. and completing the S8/ SB2 registration statements were not required in fiscal 2008.

• $59,579 increase in general and administration due to commencement of Intellectual Property Rights amortization and higher Directors & Officers insurance, both partially offset by gain on foreign exchange.

• $76,708 increase in corporate communication expenses primarily due to unsuccessful contracts with fund raising firms which have since been cancelled.

• $722,326 increase in research and development expenses of which $198,055 was cash and $554,271 equity. The increase in cash spend was due to start-up implementation of the newly acquired technologies including contracts with Dr. Artem Cherkasov, universities in Kampala, Moscow and Montreal along with various suppliers for technical materials and testing. The increase in stock issuances resulted from achieving the Malaria milestone and paying out the equity portion of Dr. Artem Cherkasov’s consulting services contract.

• $268,797 decrease in interest (income) expense primarily due to eliminating interest expense on the 5% convertible debentures after they were converted in March 2007. There was a modest $6,691 increase in interest income from short term deposits during 2008 compared to 2007.

• $347,681 decrease in stock-based compensation following resumption of normal stock option amortization in fiscal 2008 after recording a major catch-up on 2.2 million stock options last year when the new plan was adopted in March 2007.

Going Concern

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The audited financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception, has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon: (i) the continued financial support from our shareholders; (ii) the ability of our company to continue raising necessary equity financing to achieve its operating objectives; (iii) the continuing achievement of positive results from our Research and Development activities and (iv) the eventual attainment of profitable operations.

Our independent auditors included an explanatory paragraph in their annual report on our financial statements for the year ended September 30, 2008 regarding concerns about our ability to continue as a going concern. In addition, our financial statements contain further note disclosures in this regard. The continuation of our business plan is dependent upon our ability to continue raising sufficient new capital from equity or debt markets in order to fund our on-going operating losses and oil and gas acquisition and exploration activities. The issuance of additional equity securities could result in a significant dilution in the equity interests of our current stockholders.

Application of Critical Accounting Policies

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures of our company. Although these estimates are based on management’s knowledge of current events and actions that our company may undertake in the future, actual results may differ from such estimates.

Basis of presentation

Our consolidated financial statements and related notes are presented in accordance with generally accepted accounting principles in the United States of America (“US”) and are expressed in US dollars. We are a development stage company as defined by Statement of Financial Accounting Standard (“SFAS”) No. 7, “Accounting and Reporting by Development Stage Enterprises” and has not realized any revenues from its planned operations to date. These financial statements include the accounts of the Company and its wholly-owned subsidiaries, Upstream Canada and PPT, which were acquired pursuant to share exchange agreements on February 24, 2006 and August 24, 2007 respectively. All inter-company transactions and account balances have been eliminated on consolidation. The fiscal year end of our Company and subsidiaries is September 30.

Intellectual property rights

We have adopted the provisions of the Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets”. Intangible assets with a definite life are amortized over that expected life and tested for impairment at least annually or whenever events or circumstances indicate a revision to the remaining period of amortization is warranted.

The fair market value of Intellectual Property Rights (“IPR”) acquired on August 24, 2007 during the acquisition of Pacific Pharma Technologies Inc. is being amortized on a straight line basis over 5 years. The determination of any impairment of Intellectual Property Rights includes a comparison of net carrying value with estimated future operating cash flows anticipated during the remaining life; and is dependent on our ability to continue operating as a going concern.

During the annual impairment review, we determined the carrying value of our IPR at September 30, 2008 was not impaired.

Translation of foreign currencies

Our functional and reporting currency is the United States dollar and our Canadian subsidiaries is the Canadian dollar. The financial statements of the Canadian subsidiaries are translated into United States dollars in accordance with SFAS No. 52 “Foreign Currency Translation” using period-end rates of exchange for assets and liabilities, and period-average rates of exchange for revenues and expenses. Gains or losses resulting from foreign currency transactions are included in the consolidated statements of operations; whereas, adjustments arising from the translation of financial statements of our subsidiaries during the consolidation process are included as a separate

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component of shareholders’ equity called other comprehensive income (loss). We have not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Research and development

These costs are charged to expense when incurred and consist primarily of direct material and personnel costs, contract services and indirect costs. We have received government assistance in the past and may receive same in the future regarding our research and development activities. When the work is performed that qualifies for such grants, the related assistance amount is credited to research and development expense.

Stock-based compensation

Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123R, “Share Based Payments”, using the modified prospective transition method. Under this transition method, compensation cost is recognized for all share-based payments granted prior to January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123; and the compensation cost of all share-based payments granted subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R.

All transactions in which goods and services are the consideration received for the issuance of equity instruments are accounted for based on fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

Recent accounting pronouncements

We do not believe that any recently issued, but not yet effective accounting standards if currently adopted, will have a material effect on our financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R changes the accounting for and reporting of business combinations including, among other things, expanding the definition of a business and a business combination; requiring all assets and liabilities of the acquired business, including goodwill, contingent assets and liabilities, and contingent consideration to be recorded at fair value on the acquisition date; requiring acquisition-related transaction and restructuring costs to be expensed, rather than accounted for as acquisition costs; and requiring reversals of valuation allowances related to acquired deferred tax assets and changes to acquired income tax uncertainties to be recognized in earnings. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application of SFAS 141R is prohibited. We have reached the conclusion that this will have no impact on our consolidated financial statements.

In December 2007, the FASB issued Statement of Accounting Standards No. 160, “Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 changes the accounting and reporting for non-controlling interests (previously referred to as minority interests) such that non-controlling interests will be reported as a component of equity; losses will be allocated to the non-controlling interest; changes in ownership interests that do not result in a change in control will be accounted for as equity transactions and, upon a loss of control, any gain or loss on the interest sold will be recognized in earnings and any ownership retained will be re-measured at fair value. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier application of SFAS 160 is prohibited. SFAS 160 applies prospectively as of the beginning of the fiscal year in which it is initially applied, except for the presentation and disclosure requirements which apply retrospectively for all periods presented. We have reached the conclusion that this will have no impact on our consolidated financial statements.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 amends and expands the disclosure requirements of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities – as amended” (“SFAS 133”), to provide enhanced disclosures about how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under SFAS 133; and how derivative instruments and related hedged items affect an entity’s financial position,

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financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We have reached the conclusion that this will have no impact on our consolidated financial statements.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. We have reached the conclusion that this will have no impact on our consolidated financial statements.

In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 establishes that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities as defined in Emerging Issues Task Force (“EITF”) Issue No. 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128”, and should be included in the computation of earnings per share pursuant to the two-class method as described in Statement of Financial Accounting Standards No. 128, “Earnings per Share”. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period earnings per share data presented shall be adjusted retrospectively to conform to the provisions of FSP EITF 03-6-1. Early application is not permitted. We are currently evaluating the impact that the adoption of FSP EITF 03-6-1 will have on our consolidated financial statements.

In September 2008, the FASB issued two separate but related exposure drafts: (1) Proposed Statement of Financial Accounting Standards, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140”, and (2) Proposed Statement of Financial Accounting Standards, “Amendments to FASB Interpretation No. 46(R)” (together, the “proposed Statements”). The proposed Statements would remove the concept of a qualifying special-purpose entity (“QSPE”) from SFAS 140 and the exceptions from applying FIN 46R to QSPEs. The proposed Statements would be effective as of the beginning of a reporting entity’s fiscal year that begins after November 15, 2009. We have reached the conclusion that this will have no impact on our consolidated financial statements.

In November 2008, the Financial Accounting Standards Board (the “FASB”) voted on the effective date and other amendments of proposed FASB Staff Position FAS 140-e and FIN 46(R)-e, “Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities” (“FSP FAS 140-e and FIN 46R-e”). FSP FAS 140-e and FIN 46R-e would amend SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – as amended” (“SFAS 140”) and FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46R”) to require enhanced disclosures by public entities about transfers of financial assets and interests in variable interest entities, and provide users of the financial statements with greater transparency about a transferor’s continuing involvement with transferred financial assets and an enterprise’s involvement with variable interest entities. The disclosures required by FSP FAS 140-e and FIN 46R-e will be effective for reporting periods (interim and annual) ending after December 15, 2008. We have reached the conclusion that this will have no impact on our consolidated financial statements.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial position, revenues and expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Upstream Biosciences, Inc.

We have audited the accompanying consolidated balance sheets of Upstream Biosciences, Inc. (a development stage company) as of September 30, 2008 and 2007 and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended September 30, 2008 and 2007 and the period from June 14, 2004 (inception) through September 30, 2008. 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 an audit to obtain reasonable assurance 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Upstream Biosciences, Inc. as at September 30, 2008 and 2007 and the results of its operations and its cash flows for the years ended September 30, 2008 and 2007 and the period from June 14, 2004 (inception) through September 30, 2008 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated revenues since inception, has incurred losses in developing its business, and further losses are anticipated. The Company requires additional funds to meet its obligations and the costs of its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

UPSTREAM BIOSCIENCES, INC
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008

1. NATURE OF BUSINESS AND CONTINUANCE OF OPERATIONS

Upstream Biosciences, Inc. (“the Company”) was incorporated as Integrated Brand Solutions, Inc. on March 20, 2002 under the laws of the State of Nevada and on February 6, 2006 changed its name to Upstream Biosciences Inc. to better reflect the intended future direction and business of the Company.

On February 24, 2006, the Company completed the acquisition of 100% of the issued and outstanding shares of Upstream Biosciences, Inc. (“Upstream Canada”) pursuant to an amended share exchange agreement entered into with the shareholders of Upstream Canada. Upstream Canada was incorporated on June 14, 2004 under the laws of Canada for the purpose of developing genetic diagnostic biomarkers for use in determining a patient’s susceptibility to disease and predicting a patient’s response to drugs. After the agreement closed, the Upstream Canada shareholders held 54.2% of the issued and outstanding common shares of the Company. Accordingly, the transaction was accounted for as a recapitalization of Upstream Canada, which is similar to a reverse acquisition, whereby Upstream Canada is treated as the accounting parent (legal subsidiary) and the Company is treated as the accounting subsidiary (legal parent). This means Upstream Canada, the acquired entity, was regarded as the predecessor and continuing entity as of February 24, 2006.

On August 24, 2007, the Company completed the acquisition of 100% of the issued and outstanding shares of Pacific Pharma Technologies, Inc (“PPT”) pursuant to a share exchange agreement entered into with the shareholders of PPT. PPT was an early stage biopharmaceutical company incorporated under the laws of British Columbia, Canada that had developed a proprietary technology platform combining artificial intelligence, advanced computational methods and chemical diversity techniques to discover new drug candidates.

After the acquisition, the Company has been able to pursue business development strategies in two separate areas:

i) its original strategy of developing technologies in order to generate revenues from licensing and/or collaborating with third parties in the disease susceptibility, biomarkers identification, and drug response areas of cancer, primarily to companies that develop and/or market developing diagnostic products.

ii) an expanded strategy of developing biotechnology drugs for certain infectious diseases and cancers in order to generate revenues through either licensing the technology or selling the drug products following commercialization and collaboration with third party companies.

Significant time and financing are required before the Company’s technologies are developed to a marketable state. Depending on the level of financing and the resources available, the Company will continue to evaluate and determine the most cost effective way of implementing its on-going research and development programs in all areas of its expertise including diagnostic biomarkers, biomarkers for a drug response assay, and biotechnology drugs for infectious diseases and cancers.

Going concern

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As at September 30, 2008, the Company has working capital of $190,409 and has incurred losses since

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inception of $5,915,950. Further losses are anticipated in the development of its business and there can be no assurance that the Company will be able to achieve or maintain profitability. The continuing operations of the Company and the recoverability of the carrying value of assets is dependent upon the ability of the Company to obtain necessary financing to fund its on-going working capital requirements and research and development activities, and upon future profitable operations. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. There is no assurance that equity or debt capital will be available as necessary to meet the Company’s requirements or, if the capital is available, that it will be on terms acceptable to the Company. The issuances of additional equity securities by the Company may result in dilution in the equity interests of its current shareholders. Obtaining commercial loans, assuming those loans would be available, will increase the Company's liabilities and future cash commitments. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, the business and future success may be adversely affected.

Management plans to continue raising sufficient capital from equity or debt markets, as a supplement to its existing cash reserves of $612,306, in order to fund its on-going research and development program and operating losses.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

These consolidated financial statements and related notes are presented in accordance with generally accepted accounting principles in the United States of America and are expressed in US dollars. The Company is a development stage company as defined by Statement of Financial Accounting Standard (“SFAS”) No. 7, “Accounting and Reporting by Development Stage Enterprises” and has not realized any revenues from its planned operations to date. These financial statements include the accounts of the Company and its wholly-owned subsidiaries, Upstream Canada and PPT. All inter-company transactions and account balances have been eliminated on consolidation. The fiscal year end of the Company and its subsidiaries is September 30.

(b) Use of estimates

The preparation of financial statements in conformity with US 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 revenue and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are readily apparent from other sources. The actual results experienced by the Company may differ materially from the Company’s estimates. To the extent there are material differences, future results may be affected. Estimates used in preparing these financial statements include the carrying value of intellectual property rights, fair value of stock-based compensation, retiring allowances, deferred income tax rates and deferred compensation.

(c) Cash and cash equivalents

Cash and cash equivalents consist of bank deposits and short-term investments in financial instruments with maturities less than 90 days held for the purpose of meeting short-term cash commitments rather than for investing or other purposes. Restricted cash consists of security deposits for Company credit cards.

(d) Financial instruments

The Company’s financial instruments consist of cash and cash equivalents, other receivables, restricted cash, accounts payable, and amounts due to related parties. It is management’s opinion that the Company is not

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exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values due to the relatively short maturity of these instruments.

(e) Equipment

Equipment is valued at cost less accumulated amortization. Amortization is recorded using the straight-line method over four years and maintenance and repairs are expensed as incurred.

(f) Intellectual property rights

The Company has adopted the provisions of the SFAS No. 142, “Goodwill and Other Intangible Assets”. Intangible assets with a definite life are amortized over that expected life and tested for impairment at least annually or whenever events or circumstances indicate a revision to the remaining period of amortization is warranted.

The fair market value of Intellectual Property Rights (‘IPR’) acquired on August 24, 2007 during the acquisition of PPT is being amortized on a straight line basis over 5 years. The determination of any impairment of IPR includes a comparison of net carrying value with estimated future operating cash flows anticipated during the remaining life.

(g) Translation of foreign currencies

The functional and reporting currency of the Company is the United States dollar and of the Company’s Canadian subsidiaries is the Canadian dollar. The financial statements of the Canadian subsidiaries are translated into United States dollars in accordance with SFAS No. 52 “Foreign Currency Translation” using period-end rates of exchange for assets and liabilities, and period-average rates of exchange for revenues and expenses. Gains or losses resulting from foreign currency transactions are included in the consolidated statements of operations; whereas, adjustments arising from the translation of financial statements of the Company’s subsidiaries during the consolidation process are included as a separate component of shareholders’ equity called other comprehensive income (loss). The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

(h) Research and development

These costs are expensed when incurred and consist primarily of direct material and personnel costs, contract services and indirect costs. The Company has received government assistance in the past and may receive the same in the future regarding its research and development activities. When the work is performed that qualifies for such grants, the related assistance amount is credited to research and development expense.

(i) Stock-based compensation

The Company has adopted the fair value recognition provisions of SFAS No. 123R, “Share Based Payments”, whereby compensation expense is recognized for all share-based payments based on the fair value in accordance with the provisions of SFAS 123R.

All transactions in which goods and services are the consideration received for the issuance of equity instruments are accounted for based on fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

(j) Convertible debenture

In accordance with EITF 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments”, the proceeds received on issuance of convertible debentures are allocated between the convertible debt and the detachable warrants based on their relative fair values. At the date of issuance, the fair value of the detachable warrants represents the difference between the stated value and the carrying value of the

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convertible debenture and is recorded as additional paid-in capital. The carrying value of the debenture is accreted to its face value at maturity through charges to interest and finance charges over its term. As of September 30, 2008, no convertible debentures were outstanding.

(k) Deferred income taxes

Income taxes are provided for in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”), as interpreted by FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities, computed pursuant to FIN 48 and the reported amounts in the consolidated financial statements using the statutory tax rates in effect for the year when the reported amount of the asset or liability is recovered or settled, respectively. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets to the amount that is more likely than not to be realized. For each tax position taken or expected to be taken in a tax return, the Company determines whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to recognize. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement.

(l) Loss per share

The Company computes net loss per share in accordance with SFAS No. 128, “Earnings per Share”, which requires presentation of both basic and diluted loss per share (“LPS”) on the face of the statement of operations. Basic LPS is computed by dividing the net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted LPS gives effect to all potentially dilutive common shares outstanding during the period, including convertible debt, stock options and share purchase warrants, using the treasury stock method. The computation of diluted LPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on LPS.

(m) Long-Lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

(n) Comparative figures

Certain comparative figures have been reclassified to conform to the current year’s presentation.

(o) Recent accounting pronouncements

In November 2008, the FASB voted on the effective date and other amendments of proposed FASB Staff Position FAS 140-e and FIN 46(R)-e, “Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities” (“FSP FAS 140-e and FIN 46R-e”). FSP FAS 140-e and FIN 46R-e would amend SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – as amended” (“SFAS 140”) and FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46R”) to require enhanced disclosures by public entities about transfers of financial assets and interests in variable interest entities, and provide users of the financial statements with greater transparency about a transferor’s continuing involvement with transferred financial

4

assets and an enterprise’s involvement with variable interest entities. The disclosures required by FSP FAS 140-e and FIN 46R-e will be effective for reporting periods (interim and annual) ending after December 15, 2008. The Company has reached the conclusion that this will have no impact on its consolidated financial statements.

In September 2008, the FASB issued two separate but related exposure drafts: (1) Proposed Statement of Financial Accounting Standards, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140”, and (2) Proposed Statement of Financial Accounting Standards, “Amendments to FASB Interpretation No. 46(R)” (together, the “proposed Statements”). The proposed Statements would remove the concept of a qualifying special-purpose entity (“QSPE”) from SFAS 140 and the exceptions from applying FIN 46R to QSPEs. The proposed Statements would be effective as of the beginning of a reporting entity’s fiscal year that begins after November 15, 2009. The Company has reached the conclusion that this will have no impact on its consolidated financial statements.

In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 establishes that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities as defined in Emerging Issues Task Force (“EITF”) Issue No. 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128”, and should be included in the computation of earnings per share pursuant to the two-class method as described in Statement of Financial Accounting Standards No. 128, “Earnings per Share”. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period earnings per share data presented shall be adjusted retrospectively to conform to the provisions of FSP EITF 03-6-1. Early application is not permitted. The Company is currently evaluating the impact that the adoption of FSP EITF 03-6-1 will have on its consolidated financial statements.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The Company has reached the conclusion that this will have no impact on its consolidated financial statements.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 amends and expands the disclosure requirements of FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities – as amended” (“SFAS 133”), to provide enhanced disclosures about how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under SFAS 133; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company has reached the conclusion that this will have no impact on its consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R changes the accounting for and reporting of business combinations including, among other things, expanding the definition of a business and a business combination; requiring all assets and liabilities of the acquired business, including goodwill, contingent

5

assets and liabilities, and contingent consideration to be recorded at fair value on the acquisition date; requiring acquisition-related transaction and restructuring costs to be expensed, rather than accounted for as acquisition costs; and requiring reversals of valuation allowances related to acquired deferred tax assets and changes to acquired income tax uncertainties to be recognized in earnings. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Earlier application of SFAS 141R is prohibited. The Company has reached the conclusion that this will have no impact on its consolidated financial statements.

In December 2007, the FASB issued Statement of Accounting Standards No. 160, “Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 changes the accounting and reporting for non-controlling interests (previously referred to as minority interests) such that non-controlling interests will be reported as a component of equity; losses will be allocated to the non-controlling interest; changes in ownership interests that do not result in a change in control will be accounted for as equity transactions and, upon a loss of control, any gain or loss on the interest sold will be recognized in earnings and any ownership retained will be re-measured at fair value. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier application of SFAS 160 is prohibited. SFAS 160 applies prospectively as of the beginning of the fiscal year in which it is initially applied, except for the presentation and disclosure requirements which apply retrospectively for all periods presented. The Company has reached the conclusion that this will have no impact on its consolidated financial statements.

3. INTELLECTUAL PROPERTY RIGHTS

4. RELATED PARTY TRANSACTIONS

At September 30, 2008, the Company owed $364,198 (2007 - $219,706) in connection with retirement allowances accrued for three Company officers. These amounts are unsecured and non-interest bearing.

The compensation paid or accrued for the benefit of the three Company officers was as follows:

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Of the management fees and benefits expensed during the year, $158,003 was recorded as research and development (2007 - $152,340).

All related party transactions are conducted in the ordinary course of business and measured at the exchange amount, which is the consideration established and agreed to by the related parties.

5. DEFERRED INCOME TAXES

The parent Company is subject to income taxes in the US and its wholly-owned subsidiaries are subject to income taxes in Canada. As of September 30, 2008, both the Company and its subsidiaries had accumulated non-capital loss carry-forwards of approximately $3,050,000, which are available to reduce taxable income in future taxation years. These losses begin to expire in 2025 after carry-forward periods of 20 years. The Company is required to compute the deferred income tax benefits from non-capital loss carry-forwards. However, due to the uncertainty of realization of these loss carry-forwards, a full valuation allowance has been provided for this deferred income tax asset.

In addition, the Company has a deferred income tax liability of $45,932 (2007: $57,415) arising from the “tax gross-up” required by US GAAP during the acquisition of PPT. At the time of acquisition, it represented the deferred income tax on the difference between fair value of the IPR acquired for accounting purposes and the related tax base.

At September 30, 2008 and 2007, the components of the deferred income tax accounts are shown below including non-capital tax loss carry forwards, statutory tax rate, deferred income tax asset and elected amount of valuation allowance:

6. CAPITAL STOCK

a) Authorized

The authorized capital stock of the Company is comprised of 100,000,000 non-voting preferred shares and 750,000,000 voting common shares, both with a par value of $0.001 per share.

b) Issued and outstanding

No preferred shares have been issued to date.

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During the year ended September 30, 2007, the changes in common stock were as follows:

During the year ended September 30, 2008, the changes in common stock were as follows:

c) Stock Options

During the year ended September 30, 2007, the changes in stock options were as follows:

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The fair value of stock options granted during the year ended September 30, 2007 was estimated to be $1,449,100 using the Black-Scholes option pricing model using the following assumptions: expected stock price volatility of 132%, risk-free interest rate of 3.5%, expected option life of 3 years and expected dividend yield of 0%. Due to the subjective nature of these assumptions, the fair value estimate can vary significantly with changed assumptions.

During the year ended September 30, 2008, no stock options were granted but 200,000 were cancelled following the resignations of two former directors.

In connection with all options granted to date, the Company recorded $424,128 as stock-based compensation expense for the year ended September 30, 2008 (2007 – $771,809). The unamortized balance of $221,321 will continue to be charged to operations on a straight-line basis over the remaining vesting periods.

The following table provides continuity of the outstanding stock options during the year ended September 30, 2008:

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As of September 30, 2008, 1,533,333 stock options were exercisable with a weighted average exercise price and remaining life of $0.95 and 6.3 years, respectively.

d) Share Purchase Warrants

The following table provides continuity of the outstanding stock purchase warrants during the year ended September 30, 2008:

The weighted average exercise price and remaining life of the stock purchase warrants as of September 30, 2008 was $1.80 and 0.51 years, respectively.

7. NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES

During the year ended September 30, 2008, the Company issued 1,625,296 shares (year ended September 30, 2007 - 1,647,299) for non-cash consideration as follows:

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achieved. The fair value of the common shares issued was $362,400 which was recorded as research and development expense in the statement of operations for the year ended September 30, 2008.

8. COMMITMENTS AND CONTINGENCIES

(a) Employment contracts with three Company officers

The Company has entered into employment contracts with three Company officers for renewable periods of two to three years. The total annual cash compensation commitment for the three officers is $450,000, excluding a 40% bonus commitment for two of the three officers when certain performance milestones, yet to be determined, are achieved in the future.

In the event of contract termination by either party and subject to 30 to 90-day termination clauses, retirement allowances of $450,000 ($150,000 each) will become immediately payable to the three officers. In this connection, $175,000 has been charged to operations for the year ended September 30, 2008 (for the year ended September 30, 2007 - $131,250). The remaining unamortized balance of $85,417 is current and will be expensed over the remaining 7 months of the initial term of the contracts.

(b) On-going commitments pertaining to PPT acquisition

(c) Contingent payment for successful fund raising

On May 27, 2008, the Company signed a non-exclusive agreement with a Toronto-based investment firm for five months at $7,500 per month, extendable on a month-to-month basis by mutual agreement, which remains in effect to the date of this report. Upon successful completion of a financing agreement, the Company will pay this firm 2% of the funds raised or $247,800, whichever is greater.

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(d) License Agreement with British Columbia Cancer Agency Branch (“BCCA”)

The Company entered into a license agreement with BCCA on March 10, 2005 for a seven year term expiring March 2012 regarding bioinformatics technology developed at the University of British Columbia (“UBC”). Under terms of the agreement, the Company paid the initial license fee to BCCA during year ended September 30, 2006 by issuing 29,477 Company shares having a fair value of $17,747 at the time of issuance.

In addition, the Company is obligated to pay annual royalties starting September 14, 2007 equal to 10% of the gross revenue from licensed product sales or $9,632, whichever is greater. At September 30, 2008, royalties of $10,033 have been accrued but unpaid.

(e) License Agreement with University of British Columbia (“UBC”)

Upstream Canada entered into a License Agreement with UBC on March 23, 2005 for a ten year term expiring March 2015 regarding bioinformatics technology developed at UBC. Under terms of the agreement, Upstream Canada agreed to pay the initial license fee consisting of $7,554 cash plus an equity component which is subject to on-going negotiations. The former has been paid and the latter accrued at an estimated amount of $12,040 (CDN$12,500) but unpaid as of September 30, 2008.

In addition to the license fee and commencing March 2005, Upstream Canada has agreed to pay the greater of (a) annual royalties equal to 15% of the gross revenue from licensed product sales or (b) the minimum annual sliding scale amounts as follows: $7,554 from April 1, 2005 to March 31, 2007 (2 years); $14,448 from April 1, 2007 to March 31, 2012 (5 years); and $19,264 from April 1, 2012 to March 31, 2015 (3 years). To September 30, 2008, royalties of $21,672 (CDN$22,500) have been accrued but unpaid.

(f) Minimum annual commitments

The aggregate minimum annual commitments regarding the above commitments for the next five years ending September 30 are as follows:

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

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our principal executive officer and principal financial officer evaluated our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this annual report on Form 10-K. Based on this evaluation, these officers concluded that as of the end of the period covered by this Annual Report on Form 10-K. Disclosure controls and procedures are designed to ensure the information required to be disclosed in our company’s reports filed or submited under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures are designed to ensure that such information is accumulated and communicated to our company’s management, including our company’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Management’s Report on Internal Control Over Financial Reporting

Our company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) for our company. Our company’s internal control over financial reporting is designed to provide reasonable assurance, not absolute assurance, regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that our company’s receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

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

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Our Management, including our principal executive officer and principal financial officer, conducted an evaluation of the design and operation of our internal control over financial reporting as of September 30, 2008 based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded there are weaknesses in our internal controls over financial reporting which are indicative of many small companies with small staff as follows: (i) inadequate segregation of duties and effective risk assessment; (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines; (iii) inadequate security and restricted access to computer systems including insufficient disaster recovery plans; and (iv) no written whistle-blower policy. Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Our internal control over financial reporting was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

During the period covered by this annual report on Form 10-K, we have not been able to remediate the relatively minor weaknesses identified above. We plan to implement changes in internal control over financial reporting during our fiscal year ending September 30, 2009 in order to mitigate existing weaknesses.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Changes in Internal Control Over Financial Reporting.

There were no changes in our company’s internal control over financial reporting during the quarter ended September 30, 2008 that have materially affected, or are reasonably likely to materially affect, our company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

As at December 19, 2008, our directors and executive officers, their ages, positions held, and duration of such, are as follows:

Business Experience

The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person’s principal occupation during the period, and the name and principal business of the organization by which he was employed.

Joel Lloyd Bellenson

Joel Bellenson was appointed as a director and the Chief Executive Officer of our company on March 1, 2006 and was appointed as a director and Chief Executive Officer of Upstream Canada in August, 2004. From 1998 to present, Mr. Bellenson has been a partner in Libra Digital, LLC, a consulting limited liability company that develops new technologies and provides marketing assistance in the fields of biotechnology and alternative energy. Mr. Bellenson was also a co-founder of DigiScents Inc. and its Chief Executive Officer from 1999 to 2001. DigiScents developed hardware and software multimedia platforms for adding scent to movies, interactive games, advertising and e-commerce. Mr. Bellenson was also a co-founder of DoubleTwist Inc., its Chief Executive Officer and Chief Strategist from 1991 to 1999 and a director from 1991 to 2001. DoubleTwist was a bioinformatics company that designed informatics systems in the fields of biology, chemistry and healthcare for customers in the life sciences industries. Mr. Bellenson obtained a Bachelor of Science (Biology) from Stanford University in 1988.

Dexster L. Smith

Dexster Smith was appointed as a director and the President of our company on March 1, 2006 and was appointed as a director and the President of Upstream Canada in August, 2004. From 1998 to present, Mr. Smith has been a partner in Libra Digital, LLC, a consulting limited liability company that develops new technologies and provides marketing assistance in the fields of biotechnology and alternative energy. Mr. Smith was also a co-founder of DigiScents Inc. and its President from 1999 to 2001. DigiScents developed hardware and software multimedia platforms for adding scent to movies, interactive games, advertising and e-commerce. Mr. Smith was also a co-founder of DoubleTwist Inc., its President from 1991 to 1999 and a director from 1991 to 2001. DoubleTwist was a

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bioinformatics company that designed informatics systems in the fields of biology, chemistry and healthcare for customers in the life sciences industries. Mr. Smith obtained a Bachelor of Science (Industrial Engineering) from Stanford University in 1989.

Dr. Geert Cauwenbergh

Dr. Cauwenbergh was appointed as a director of our company on March 25, 2008. In 2001, Dr. Cauwenbergh founded Barrier Therapeutics, Inc., a pharmaceutical company developing and commercializing products in the field of dermatology, and he subsequently led Barrier Therapeutics’ successful initial public offering. Barrier Therapeutics merged with Stiefel Laboratories in August of 2008. Prior to Barrier Therapeutics, Dr. Cauwenbergh was Vice President of Technology of the Johnson & Johnson Consumer and Personal Care Products Companies, leveraging intellectual property owned by Johnson & Johnson to launch new companies and businesses. Previously, Dr. Cauwenbergh served as Vice President of Research & Development of the Johnson & Johnson Consumer Companies Worldwide, Vice President of Product Development and a member of the Management Board of the U.S. Johnson & Johnson Consumer Company and Director of the Corporate Skin Care Council of Johnson & Johnson. He also was a member of the Johnson & Johnson Business Development Council.

Earlier in his career, at Janssen Pharmaceutica in Belgium, Dr. Cauwenbergh was the International Director of Clinical R&D, Dermatology and Infectious Diseases at the Janssen Research Foundation. Dr. Cauwenbergh also serves on the Board of Directors of Ablynx nv and Euroscreen SA in Belgium, as well as DARA Biosciences Inc. and ECI Biotech in the USA. On August 25, 2008, Dr. Cauwenbergh joined RHEI Pharmaceuticals Inc., a private development company in China, as its Chairman and CEO. Dr Cauwenbergh has authored over 100 publications and co-authored several books. Dr. Cauwenbergh received a Ph.D. in medical sciences from the Catholic University of Leuven, Faculty of Medicine, where he also completed his Master’s and undergraduate work.

Jeffrey Bacha

Mr. Bacha was appointed as a director of our company on April 3, 2008. Jeffrey Bacha has over fifteen years of experience working within the life sciences industry, specifically in the areas of operations, strategy and finance. During his career, he has assisted biotechnology, pharmaceutical and medical device companies to develop and implement a wide range of business and financing strategies.

Mr. Bacha currently oversees the drug development and financial activities of Clera Inc. in his current role as Executive Vice President, Corporate Affairs and Chief Operating Officer and acts in an advisory capacity to a number of other companies.

In 2002, Mr. Bacha launched Inimex Pharmaceuticals as President and Founding Chief Executive Officer with University of British Columbia Professors Bob Hancock and Brett Finlay. Prior to leaving Inimex in 2005, Mr. Bacha led the company through its start-up phase to pre-clinical lead selection. He recruited the management and scientific research teams, completed key strategic partnerships and venture capital financing. Based on Mr. Bacha’s leadership, Inimex is positioned to advance new medicines that are anticipated to overcome the serious issues of drug resistance in the treatment of bacterial infections and other diseases into human clinical trials.

From 1998 until joining Inimex, Mr. Bacha served as Vice President, Corporate Development of Inflazyme Pharmaceuticals Ltd. where he was responsible for overall corporate strategy, partnering and licensing activities, corporate communications and investor relations.

In a consulting capacity, Mr. Bacha has served as a founding member of the Board of Directors of Urigen Holdings Inc., a clinical stage specialty pharmaceutical company focused on the development and commercialization of new products to treat and diagnose major urological disorders. During his tenure as a Director, he assisted the company in the development of its business plan, its relocation to Vancouver, Canada, the completion of a Series A financing and led the company’s successful effort to in-license a second clinical-stage urology platform in order to expand its product development portfolio. Urigen recently announced a reverse take-over of a NASDAQ listed company. Additionally, Mr. Bacha served as founding Chief Financial Officer and Vice President, Corporate Development of XBiotech Inc., a start-up antibody platform company. Mr. Bacha assisted the company in establishing its business

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including development of its business plan, raising initial seed capital and location of the company’s laboratories to co-founder and Nobel laureate Rolf Zinkernagel’s laboratories in Europe.

Prior 1998, Mr. Bacha spent a number of years in KPMG’s U.S. Health Ventures and Life Sciences Corporate Finance Group where he was most recently Senior Manager and Director in the Firm’s San Francisco practice. Mr. Bacha has also served as the Founding Director of Marketing for the Forensic Research Consulting Group, of San Diego, California, and as Production, New Product Development and Regulatory Compliance Manager for MarDx Diagnostics, Inc. of Carlsbad, California.

Mr. Bacha is originally from California, USA. He holds a B.Sc. in Biophysics from the University of California and an M.B.A. from the Goizueta Business School at Emory University.

Both Inimex and Inflazyme were named one of the “Top 10 Life Sciences Investment Opportunities” in Canada during every year of his tenure at those organizations. Mr. Bacha has been recognized by Business in Vancouver Magazine as one of the “Top 40 Under 40” business persons in British Columbia and in 2004 he was nominated for the Ernst & Young Entrepreneur of the Year Award.

In addition to his biotechnology industry endeavors, Mr. Bacha serves on the Board of Directors of Covenant House Vancouver, a not-for-profit agency focused on assistance to street youth; and as the former Chair of the Greater Vancouver Economic Council.

Tim Fernback

Tim Fernback has been the Chief Financial Officer of our company since April 12, 2006. Mr. Fernback has over a decade of experience financing both private and public companies in Canada. Mr. Fernback was the head of the technology consulting practice for Discovery Capital Corporation, a prominent British Columbia venture capital firm specializing in financing and consulting to technology based start-up ventures, and later oversaw the Investment Banking and Corporate Finance Departments for Western Canadian-based brokerage firm, Wolverton Securities Ltd.

In 2004, Mr. Fernback left Wolverton Securities and was the founder of a boutique technology consulting practice. Since 2002, Mr. Fernback has been an active director of the Okanagan Capital Fund, a Canadian-based technology venture fund. Mr. Fernback holds an Honors B.Sc. in Biology from McMaster University (1991) with a concentration in molecular biology, and also a graduate of the University of British Columbia (1993), where he completed his MBA with a concentration in Finance.

Significant Employees

We have no significant employees other than the officers of our company.

Family Relationships

There are no family relationships among our directors or officers.

Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:

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Audit Committee

Our board of directors struck an audit committee on December 3, 2008. As of this date, Jeffrey Bacha and Geert Cauwenbergh were appointed as sole members of the audit committee with Jeffrey Bacha acting as Chairman of the committee, both are independent directors of our company. Jeffrey Bacha and Geert Cauwenbergh of our compensation committee are independent as defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules. Our audit committee undertakes an independent review of our company’s financial statements, and meets with management to determine the adequacy of internal controls and other financial reporting matters.

Prior to striking the audit committee, our entire board of directors acted as the audit committee, which included Joel Bellenson, Dexster Smith, Dr. Geert Cauwenbergh and Jeffrey Bacha. Our board of directors determined that Dr. Geert Cauwenbergh and Jeffrey Bacha were the only members of our board of directors that were “independent” as the term is defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules.

Audit Committee Financial Expert

Our board of directors has determined that it does not have an audit committee member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that the audit committee members are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated revenues to date.

Nomination Procedures For Appointment of Directors

As of December 19, 2008, we did not effect any material changes to the procedures by which our stockholders may recommend nominees to our board of directors.

Code of Ethics

Effective January 29, 2004, our company’s board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, members of our board of directors, our company’s officers, contractors, consultants and advisors. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

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Our Code of Business Conduct and Ethics requires, among other things, that all of our company’s personnel shall be accorded full access to our president with respect to any matter which may arise relating to the Code of Business Conduct and Ethics. Further, all of our company’s personnel are to be accorded full access to our company’s board of directors if any such matter involves an alleged breach of the Code of Business Conduct and Ethics by our company officers.

In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly managers and/or supervisors, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal, provincial and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to his or her immediate supervisor or to our company’s President. If the incident involves an alleged breach of the Code of Business Conduct and Ethics by the President, the incident must be reported to any member of our board of directors. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company’s Code of Business Conduct and Ethics by another.

We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to our company at the address on the cover of this annual report.

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the Securities and Exchange Commission and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the fiscal year ended September 30, 2008, all filing requirements applicable to our officers, directors and greater than 10% percent beneficial owners were complied with, with the exception of the following:

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth all compensation received during the two years ended September 30, 2008 by our Chief Executive Officer, Chief Financial Officer and each of the other most highly compensated executive officers whose total compensation exceeded $100,000 in such fiscal year. These officers are referred to as the Named Executive Officers in this Report.

Summary Compensation

The following table provides a summary of the compensation received by the persons set out therein for each of our last two fiscal years:

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Compensation Discussion and Analysis

All of our current research and development is carried out by Mr. Bellenson and Mr. Smith, with some consulting services carried out by Dr. Artem Cherkasov. Mr. Bellenson and Mr. Smith have entered into employment agreements, while Dr. Artem Cherkasov has entered into a consulting agreement with our company. Pursuant to the terms of the employment agreements, our company agreed to pay Mr. Bellenson and Mr. Smith a base salary of $150,000 annually adjusted for any foreign exchange difference that may arise. Pursuant to the terms of the amended consulting contract, our company agreed to pay Mr. Cherkasov an annual consulting services fee of $49,250 (C$50,000) plus equity component of $193,000 (C$200,000) in restricted common shares based upon the closing price of our common stock at the end of each calendar month until the agreement expires July 31, 2010.

If the employment agreements between our company and Joel Bellenson or Dexster Smith are terminated for any reason, our company is required to pay the respective officer a $150,000 retiring allowance within 30 days of receiving notification of the termination. If either Mr. Bellenson or Mr. Smith terminate the employment agreement for any reason with 14 days notice, our company is required to pay all accrued salary, bonuses and benefits to the respective officer. Our company may terminate either agreement for cause on receipt of written notice to the officer, and without cause on 90 days written notice to the officer. Under such circumstances, our company is required to pay all accrued salary, bonuses and benefits to the terminated officer.

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Our company also retained TCF Ventures Corp., a company beneficially owned by Mr. Tim Fernback, as a consultant to provide financial advisory services to our company pursuant to the terms of a Consultant Engagement Agreement dated May 1, 2007, our company agreed to pay the consultant $150,000 annually plus applicable taxes subject to adjustment as set out in the consulting agreement, as well as 400,000 stock options. The options are exercisable until March 1, 2016 at the exercise price of $0.80 per share. On April 12, 2006, Mr. Fernback became our company’s Chief Financial Officer. If the consulting agreement between our company and TCF Ventures Corp. is terminated for any reason, our company is required to pay the respective officer a $150,000 retiring allowance within 30 days of receiving notification of the termination. If TCF Ventures Corp. terminates the consulting agreement for any reason with 14 days notice, our company is required to pay all accrued fees, bonuses and benefits. Our company may terminate either agreement for cause on receipt of written notice to the officer, and without cause on 90 days written notice to the officer. Under such circumstances, our company is required to pay all accrued fees, bonuses and benefits.

Our compensation program for our executive officers is administered and reviewed by our board of directors and the Compensation Committee. Historically, executive compensation consists of a combination of base salary and bonuses. Individual compensation levels are designed to reflect individual responsibilities, performance and experience, as well as the performance of our company. The determination of discretionary bonuses is based on various factors, including implementation of our business plan, acquisition of assets, development of corporate opportunities and completion of financing. The objectives of our compensation program are to retain and offer an incentive to current management, and to carry out our compensation related policies as per our Compensation Committee Charter.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of September 30, 2008.

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No options were granted during the year ended September 30, 2008 and 200,000 options were cancelled following the resignations of two former directors. At September 30, 2008, there were 2,000,000 stock options issued and outstanding. In addition to the stock options set out in the table above, our company has agreed to issue 1,500,000 stock options to Dr. Geert Cauwenbergh, Jeffrey Bacha and three new scientific and business advisory board members under the 2007 Stock Option Plan, on terms yet to be determined.

In March 2007, our company approved and adopted a stock option plan authorizing the issuance of up to 5,000,000 shares of common stock upon exercise of the options granted pursuant to the plan. Under the plan, our employees, directors, officers, consultants and advisors are eligible to receive a grant of our shares, provided however that bona fide services are rendered by consultants or advisors and such services are not in connection with the offer or sale of securities in a capital-raising transaction.

In connection with previously granted options, we recorded $424,128 as stock-based compensation expense for the year ended September 30, 2008 (year ended September 30, 2007 – $771,809). The unamortized balance of $221,321 will be charged to operations in the future on a straight-line basis over the remaining vesting periods.

A summary of our outstanding stock options as of September 30, 2008 is presented below:

The weighted average exercise price and remaining life of the stock options was $0.95 and 6.3 years, respectively.

Aggregated Option Exercises

There were no options exercised by any officer or director of our company during our twelve month period ended September 30, 2008.

Long-Term Incentive Plan

Currently, our company does not have a long-term incentive plan in favor of any director, officer, consultant or employee of our company.

Directors Compensation

The particulars of compensation paid to our directors for our year ended September 30, 2008, is set out in the following director compensation table:

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Independent directors may be paid their expenses for attending each board of directors meeting and may be paid a fixed sum for attendance at each meeting of the directors or a stated salary as director. No payment precludes any director from serving our company in any other capacity and being compensated for the service. Members of special or standing committees may be allowed like reimbursement and compensation for attending committee meetings.

Pension and Retirement Plans

Currently, we do not offer any annuity, pension or retirement benefits to be paid to any of our officers, directors or employees, in the event of retirement.

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

As of December 19, 2008, there were 49,453,006 shares of our common stock outstanding. The following table sets forth certain information known to us with respect to the beneficial ownership of our common stock as of that date by (i) each of our directors, (ii) each of our executive officers, and (iii) all of our directors and executive officers as a group. Except as set forth in the table below, there is no person known to us who beneficially owns more than 5% of our common stock.

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Changes in Control

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our company.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Except as described below, no director, executive officer, principal shareholder holding at least 5% of our common shares, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction, since the beginning of our year ended September 30, 2008, or in any currently proposed transaction, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year end for the last two completed fiscal years.

At September 30, 2008, we owed $364,584 (September 30, 2007 - $131,250) for accrued retiring allowances to three of our officers, two of whom are also directors.

Of the management compensation incurred during the year ended September 30, 2008, $158,003 was expensed as research and development (year ended September 30, 2007 - $152,340).

All related party transactions are conducted in the ordinary course of business and measured at the exchange amount, which is the consideration established and agreed to by the related parties.

Corporate Governance

We currently have four directors, consisting of Joel Bellenson, Dexster Smith, Dr. Geert Cauwenbergh and Jeffrey Bacha.

We have determined that Dr. Geert Cauwenbergh and Jeffrey Bacha are independent directors, as that term is used in Rule 4200(a)(15) of the Nasdaq Marketplace Rules and National Instrument 52-110.

Audit Committee

Our board of directors struck an audit committee on December 3, 2008. As of this date, Jeffrey Bacha and Dr. Geert Cauwenbergh were appointed as sole members of the audit committee, both of whom are independent. Jeffrey Bacha and Dr. Geert Cauwenbergh of our compensation committee are independent as defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules. Our audit committee undertakes an independent review of our company’s financial statements, and meets with management to determine the adequacy of internal controls and other financial reporting matters.

Prior to striking the audit committee, our entire board of directors acted as the audit committee, which included Joel Bellenson, Dexster Smith, Dr. Geert Cauwenbergh and Jeffrey Bacha. Our board of directors determined that Dr. Geert Cauwenbergh and Jeffrey Bacha were the only members of our board of directors that were “independent” as the term is defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules.

Our board of directors has determined that it does not have an audit committee member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that the audit committee members are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated revenues to date.

The audit committee acts in accordance with our Audit Committee Charter which is filed as an exhibit to this annual report.

Compensation Committee – Compensation Committee Interlocks and Insider Participation

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Our board of directors struck a compensation committee on September 11, 2008. As of this date, Dr. Geert Cauwenbergh and Jeffrey Bacha were appointed as sole members of the committee, each of whom are non-employee directors of our company. All of the members of our compensation committee are independent as defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules. The purpose of our compensation committee is to oversee our company’s compensation and benefit plans, including our compensation and equity-based plans. Our compensation committee also monitors and evaluates matters relating to the compensation and benefits structure of our company and takes other such actions within the scope of the compensation committee charter as our board of directors may assign to the compensation committee from time to time.

Prior to striking a compensation committee, our board of directors acted as the compensation committee, which included Joel Bellenson and Dexster Smith, each of whom is not independent. Joel Bellenson is the Chief Executive Officer of our company and Dexster Smith is the President of our company. Mr. Bellenson and Mr. Smith entered into related party transactions during the year ended September 30, 2008 as disclosed under the heading “Certain Relationships and Related Transactions, and Director Independence.”

The compensation committee acts in accordance with our Compensation Committee Charter which is filed as an exhibit to this annual report.

Compensation Committee Report

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and discussion, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in our company’s annual report.

Dr. Geert Cauwenbergh
Jeffrey Bacha

Transactions with Independent Directors

None of our independent directors entered into any transaction, relationship or arrangement during the year ended September 30, 2008 that was considered by our board of directors in determining whether the director maintained his independence in accordance with Rule 4200(a)(15) of the Nasdaq Marketplace Rules.

National Instrument 52-110

We are a reporting issuer in the Province of British Columbia. National Instrument 52-110 of the Canadian Securities Administrators requires our company, as a venture issuer, to disclose annually in our annual report certain information concerning the constitution of our audit committee and our relationship with our independent auditor. As defined in National Instrument 52-110, Jeffrey Bacha and Dr. Geert Cauwenbergh are independent. For a description of the education and experience of each audit committee member that is relevant to the performance of his responsibilities as an audit committee member, please see the disclosure under the heading “Item 10. Directors, Executive Officers and Corporate Governance – Business Experience”.

All of the audit committee members are “financially literate”, as defined in National Instrument 52-110, as all have the industry experience necessary to understand and analyze financial statements of our company, as well as the understanding of internal controls and procedures necessary for financial reporting.

The audit committee is responsible for review of both interim and annual financial statements for our company. For the purposes of performing their duties, the members of the audit committee have the right at all times, to inspect all the books and financial records of our company and any subsidiaries and to discuss with management and the external auditors of our company any accounts, records and matters relating to the financial statements of our company. The audit committee members meet periodically with management and annually with the external auditors.

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Since the commencement of our company’s most recently completed financial year, our company’s board of directors has not failed to adopt a recommendation of the audit committee to nominate or compensate an external auditor.

Since the commencement of our company’s most recently completed financial year, our company has not relied on the exemptions contained in sections 2.4 or 8 of National Instrument 52-110. Section 2.4 (De Minimis Non-audit Services) provides an exemption from the requirement that the audit committee must pre-approve all non-audit services to be provided by the auditor, where the total amount of fees related to the non-audit services are not expected to exceed 5% of the total fees payable to the auditor in the fiscal year in which the non-audit services were provided. Section 8 (Exemptions) permits a company to apply to a securities regulatory authority for an exemption from the requirements of National Instrument 52-110 in whole or in part.

The audit committee has adopted specific policies and procedures for the engagement of non-audit services as set out in the Audit Committee Charter of our company. A copy of our company’s Audit Committee Charter is filed as an exhibit to this annual report.

National Instrument 58-110

We are a reporting issuer in the Province of British Columbia. National Instrument 58-101 of the Canadian Securities Administrators requires our company, as a venture issuer, to disclose annually in our annual report certain information concerning corporate governance disclosure.

Board of Directors

Our board of directors currently acts with four members consisting of Joel Bellenson, Dexster Smith, Dr. Geert Cauwenbergh and Jeffrey Bacha. We have determined that Dr. Geert Cauwenbergh and Jeffrey Bacha are independent as that term is defined in National Instrument 52-110 and Joel Bellenson and Dexster Smith are not independent due to the fact that they are executive officers of our company.

Our board of directors facilitates its exercise of independent supervision over management by endorsing the guidelines for responsibilities of the board as set out by regulatory authorities on corporate governance in Canada and the United States. Our board’s primary responsibilities are to supervise the management of our company, to establish an appropriate corporate governance system, and to set a tone of high professional and ethical standards. The board is also responsible for:

• selecting and assessing members of the Board;
• choosing, assessing and compensating the Chief Executive Officer of our company, approving the compensation of all executive officers and ensuring that an orderly management succession plan exists;
• reviewing and approving the Company’s strategic plan, operating plan, capital budget and financial goals, and reviewing its performance against those plans;
• adopting a code of conduct and a disclosure policy for the Company, and monitoring performance against those policies;
• ensuring the integrity of the Company's internal control and management information systems;
• approving any major changes to the Company’s capital structure, including significant investments or financing arrangements; and
• reviewing and approving any other issues which, in the view of the Board or management, may require Board scrutiny.

Directorships

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The following directors are also directors of other reporting issuers (or the equivalent in a foreign jurisdiction), as identified next to their name:

Orientation and Continuing Education

We have an informal process to orient and educate new recruits to the board regarding their role of the board, our committees and our directors, as well as the nature and operations of our business. This process provides for an orientation with key members of the management staff, and further provides access to materials necessary to inform them of the information required to carry out their responsibilities as a board member. This information includes the most recent board approved budget, the most recent annual report, the audited financial statements and copies of the interim quarterly financial statements.

The board does not provide continuing education for its directors. Each director is responsible to maintain the skills and knowledge necessary to meet his or her obligations as directors.

Nomination of Directors

The board is responsible for identifying new director nominees. In identifying candidates for membership on the board, the board takes into account all factors it considers appropriate, which may include strength of character, mature judgment, career specialization, relevant technical skills, diversity and the extent to which the candidate would fill a present need on the board. As part of the process, the board, together with management, is responsible for conducting background searches, and is empowered to retain search firms to assist in the nominations process. Once candidates have gone through a screening process and met with a number of the existing directors, they are formally put forward as nominees for approval by the board.

Assessments

The board intends that individual director assessments be conducted by other directors, taking into account each director’s contributions at board meetings, service on committees, experience base, and their general ability to contribute to one or more of our company’s major needs. However, due to our stage of development and our need to deal with other urgent priorities, the board has not yet implemented such a process of assessment.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit fees

The aggregate fees billed for the two most recently completed fiscal periods ended September 30, 2008 and September 30, 2007 for professional services rendered by Dale Matheson Carr-Hilton Labonte LLP, Chartered Accountants for the audit of our annual consolidated financial statements, quarterly reviews of our interim consolidated financial statements and services normally provided by the independent accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

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In the above table, “audit fees” are fees billed by our company’s external auditor for services provided in auditing our company’s annual financial statements for the subject year. “Audit-related fees” are fees not included in audit fees that are billed by the auditor for assurance and related services that are reasonably related to the performance of the audit review of our company’s financial statements. “Tax fees” are fees billed by the auditor for professional services rendered for tax compliance, tax advice and tax planning. “All other fees” are fees billed by the auditor for products and services not included in the foregoing categories.

Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors

The board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.

The board of directors has considered the nature and amount of fees billed by Dale Matheson Carr-Hilton Labonte LLP and believes that the provision of services for activities unrelated to the audit is compatible with maintaining Dale Matheson Carr-Hilton Labonte LLP.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

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SIGNATURES

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

UPSTREAM BIOSCIENCES INC.

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

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