IN Veritas Medical Diagnostics, Inc. - Quarterly Report of Financial Condition (10QSB)

Share Name	Share Symbol	Market	Type
In Veritas Medical Diagnostics Inc (PK)	USOTC:IVME	OTCMarkets	Common Stock

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	0.0001	0.0001	0.0846				0.00	14:30:29

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2008

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

For the Transition Period From _____ to _____

Commission File Number: 000-49972

IN VERITAS MEDICAL DIAGNOSTICS, INC.

(Exact name of registrant as specified in its charter)

Colorado	84-1579760
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)


The Green House, Beechwood Business Park North, Inverness, Scotland	IV2 3BL
(Address of principal executive offices)	(Zip Code)

011 44-1463-667-347

(Issuer's telephone number)

WITH COPIES TO:

Richard A. Friedman, Esq.

Sichenzia Ross Friedman Ference, LLP

61 Broadway, 32 nd Floor

New York, New York 10006

(212) 930-9700

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of December 14, 2007, the registrant had 86,103,457 shares of common stock issued, 25,685,000 shares of common stock held in escrow which are deemed as issued but not outstanding, and 60,418,457 shares of common stock outstanding.

Transitional Small Business Disclosure Format (check one): Yes [_] No [X]

INDEX


	Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.	F-1

Item 2. Management's Discussion and Analysis or Plan of Operations.		3

Item 3. Controls and Procedures		7

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.		7

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds		7

Item 3. Defaults Upon Senior Securities		8

Item 4. Submission of Matters to a Vote of Security Holders.		8

Item 5. Other Information		8

Item 6. Exhibits.		9

Signatures.		10

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

		Page

Unaudited Consolidated Balance Sheet at January 31, 2008		F-2

Unaudited Consolidated Statements of Operations for the three and six months ended
	January 31, 2008 and 2007 and for the period from March 26, 1997 (Inception)
	through January 31, 2008	F-3

Unaudited Consolidated Statements of Accumulated Other Comprehensive Loss
	for the six months ended January 31, 2008 and 2007 and for the period
	from March 26, 1997 (Inception) through January 31, 2008	F-4

Unaudited Statement of Changes in Shareholders' Deficit for the period from
	March 26, 1997 (Inception) through January 31, 2008	F-5

Consolidated Statements of Cash Flows for the six months ended
	January 31, 2008 and 2007 and for the period from March 26, 1997 (inception)
	through January 31, 2008	F-7

Notes to the Consolidated Financial Statements		F-8

F-1

In Veritas Medical Diagnostics, Inc.

(A Development Stage Company)

Unaudited Consolidated Balance Sheet

	January 31,
	2008
Assets
Current assets:
Prepaid expenses and other	$	19,848
Total current assets		19,848
Property and equipment, net (note 3)		4,077
Intangible assets:
Patent costs (note 4)		146,005
	$	169,930

Liabilities and Shareholders’ Deficit

Current liabilities:
Accounts payable	$	891,394
Overdraft		1,213
Accrued interest payable		1,011,537
Accrued liabilities		1,069,854
Indebtedness to related parties (note 2)		524,508
Current portion of Long Term Notes Payable		1,304,900
Notes payable, related party (note 9)		1,800,000
Short term advance from Related Party (note 9)		645,488
Short term advance		140,810
Total current liabilities		7,389,704

Long-term debt:
Royalty Participation Agreement advances (note 9)		778,773
Total liabilities		8,168,477

Shareholders’ deficit:
Preferred stock, $.001 par value, 50,000,000 shares authorized (aggregate
liquidation preference of $8 million)
Series A Preferred stock, 34,343,662 shares issued and outstanding (note 5)		34,344
Common stock, $.001 par value, 500,000,000 shares authorized,
86,103,457 shares issued, 25,685,000 held in escrow, and
60,418,457 shares outstanding		86,103
Stock issued as security for convertible debentues (note 9)		(3,339,050	)
Additional paid-in capital		9,390,498
Accumulated other comprehensive loss- foreign currency adjustment		(463,575	)
Deficit accumulated during the development stage		(13,706,866	)
Total shareholders' deficit		(7,998,546	)
	$	169,930

F-2

In Veritas Medical Diagnostics, Inc.

(A Development Stage Company)

Unaudited Consolidated Statements of Operations

													March 26, 1997
													(Inception)
	Three months ended January 31,						Six months ended January 31,						Through January 31,
	2008			2007			2008			2007			2008

Net sales and gross revenues:
Net sales	$	—		$	—			—		$	—		$	3,571,807
Cost of sales		—			—			—			—			242,097
Gross profit		—			—			—			—			3,329,710

Operating expenses:
Research and development		156,237			147,348			359,663			330,606			6,060,711
Legal & Professional		57,758			180,365			61,720			207,544			1,456,363
Selling and marketing		—			80,808			—			142,461			622,750
General and administrative		135,915			287,414			296,138			680,148			6,586,630
Total operating expenses		349,910			695,935			717,521			1,360,759			14,726,454

Loss from operations		(349,910	)		(695,935	)		(717,521	)		(1,360,759	)		(11,396,744	)

Nonoperating income (expense):
UK government grant (Note 1)		—			—			—			—			291,400
Interest expense		(274,798	)		(257,109	)		(563,212	)		(458,681	)		(2,175,075	)
Loan Finance issue costs		—			—			—			—			(708,279	)
Costs of aborted financing		—			—			—			—			(113,400	)
Compensation payment to former director		—			—			—			—			(135,000	)
Gain (loss) on foreign exchange		—			—			—			—			(132,378	)
Gain (loss) from extinguishments of debt		—			—			—			—			662,610

Loss before income taxes		(624,708	)		(953,044	)		(1,280,733	)		(1,819,440	)		(13,706,866	)

Income tax provision		—			—			—			—			—

Net loss	$	(624,708	)	$	(953,044	)		(1,280,733	)	$	(1,819,440	)	$	(13,706,866	)

Loss applicable to common stock	$	(624,708	)	$	(953,044	)		(1,280,733	)	$	(1,819,440	)

Basic and diluted loss per share	$	(0.010	)	$	(0.02	)		(0.021	)	$	(0.03	)

Weighted average number of common shares
outstanding		60,418,457			58,678,457			60,342,430			57,553,457

F-3

In Veritas Medical Diagnostics, Inc.

(A Development Stage Company)

Unaudited Consolidated Statements of Accumulated Other Comprehensive Loss

							March 26, 1997
							(Inception)
	Six month period ended						Through
	January 31,						January 31,
	2008			2007			2008

Net loss	$	(1,280,733	)	$	(1,819,440	)	$	(13,706,866	)

Other comprehensive loss, net of tax:
Cumulative translation adjustment		19,537			16,873			(463,575	)
Comprehensive loss	$	(1,261,196	)	$	(1,802,567	)	$	(14,170,441	)

F-4

In Veritas Medical Diagnostics, Inc.

(A Development Stage Company)

Unaudited Statement of Changes in Shareholders' Deficit

	Preferred Stock Outstanding
	Series A				Series B															Accumulated
											Common Stock				Additional			Stock		Deficit During			Accumulated Other
	Shares		Par Value		Shares		Par Value		Issued		Shares Outstanding		Par Value		paid-in capital			issued as security		Development Stage			Comprehensive Loss			Total

Balance, March 26, 1997		—	$	—		—	$	—		—		—	$	—	$	—		$	—	$	—		$	—		$	-
October 2000, sale of stock, ($0.0035/share)		4,366,377		4,366		—		—		—		—		—		10,874			—		—			—			15,240
December 2001, sale of stock, ($0.0035/share)		6,545,703		6,546		—		—		—		—		—		16,301			—		—			—			22,847
October 2001, sale of stock, ($0.0202/share)		23,431,582		23,432		—		—		—		—		—		448,906			—		—			—			472,338
										—
Foreign currency
translation adjustment		—		—		—		—		—		—		—		—			—		—			21,203			21,203
Net loss		—		—		—		—		—		—		—		—			—		(1,350,829	)		—			(1,350,829	)
Balance, July 31, 2001		34,343,662		34,344		—		—		—		—		—		476,081			—		(1,350,829	)		21,203			(819,201	)

Foreign currency
translation adjustment		—		—		—		—		—		—		—		—			—		—			(140,377	)		(140,377	)
Net loss		—		—		—		—		—		—		—		—			—		(1,007,362	)		—			(1,007,362	)
Balance, July 31, 2002		34,343,662		34,344		—		—		—		—		—		476,081			—		(2,358,191	)		(119,174	)		(1,966,940	)
										—
Foreign currency										—
translation adjustment		—		—		—		—		—		—		—		—			—		—			(185,391	)		(185,391	)
Net loss		—		—		—		—		—		—		—		—			—		(1,080,619	)		—			(1,080,619	)
Balance, July 31, 2003		34,343,662		34,344		—		—		—		—		—		476,081			—		(3,438,810	)		(304,565	)		(3,232,950	)
										—
Merger with HEMP (Note 8)		—		—		—		—		38,397,164		38,397,164		38,397		(29,397	)		—		—			—			9,000
July 2004, merger with SIPC		—		—		—		—		10,550,000		10,550,000		10,550		(10,688	)		—		—			—			(138	)
July 2004, issuance of common
stock for bridge loans, ($0.2750/share)		—		—		—		—		1,636,233		1,636,233		1,636		448,364			—		—			—			450,000
July 2004, issuance of common
stock for services, ($0.4093/share)		—		—		—		—		239,289		239,289		239		97,702			—		—			—			97,941
Foreign currency
translation adjustment		—		—		—		—		—		—		—		—			—		—			(339,570	)		(339,570	)
Reclassification of debt forgiveness
by Westek (Notes 2 and 9)		—		—		—		—		—		—		—		2,030,298			—		—			—			2,030,298
Net loss		—		—		—		—		—		—		—		—			—		(1,016,972	)		—			(1,016,972	)
Balance, July 31, 2004		34,343,662		34,344		—		—		50,822,686		50,822,686		50,822		3,012,360			—		(4,455,782	)		(644,135	)		(2,002,391	)

August 2004, additional paid in capital from bridge
loans exchanged for shares		—		—		—		—		—		—		—		17,495			—		—			—			17,495

F-5

											—		—			—			(6,000	)		—			—			—			(6,000	)
Conversion of Preferred Stock into Debenture	—			—		—			—		694,550		694,550			695			427,695			—			—			—			428,390
December 2004, issuance of stock for interest on	—			—		—			—		60,096		60,096			60			76,100			—			—			—			76,160
bridge loan
March 2005, issuance of stock for services	—			—		—			—		100,000		100,000			100			62,880			—			—			—			62,980
April 2005, issuance of stock warrants for
services	—			—		—			—		—		—			—			17,295			—			—			—			17,295
April 2005, sale of preferred Series B stock
net of $97,995 offering costs ($.001 par),	—			—		—			—		—		—			—			—			—			—			—			-
($0.65/share)	—			—		617,692			618		—		—			—			302,887			—			—			—			303,505
April 2005, issuance of stock for
debt forgiveness	—			—		246,152			246		—		—			—			159,754			—			—			—			160,000
June 2005, issuance of stock options for
services	—			—		—			—		—		—			—			35,403			—			—			—			35,403
Reversal of conversion of											—
convertible preferred shares	(1,301,178	)		(1,301	)	—			—		1,301,178		1,301,178			1,301			—			—			—			—			-
July 2005, issuance of stock for services	—			—		—			—		120,000		120,000			120			35,288			—			—			—			35,408
July 2005, issuance of stock for conversion
of debt	—			—		—			—		1,162,791		1,162,791			1,163			278,047			—			—			—			279,210
Foreign currency translation adjustment	—			—		—			—		—		—			—			—			—			—			274,643			274,643
Net loss	—			—		—			—		—		—			—			—			—			(2,450,792	)		—			(2,450,792	)
Balance July 31, 2005	33,042,484			33,043		863,844			864		54,261,301		54,261,301			54,261			4,419,204			—			(6,906,574	)		(369,492	)		(2,768,694	)

Conversion of common stock into debentures	—			—		(863,844	)		(864	)	—		—			—			(555,636	)		—			—			—			(556,500	)
(Note 10)
Conversion of preferred stock into common stock	1,301,178			1,301		—			—		(1,301,178	)	(1,301,178	)		(1,301	)		—			—			—			—			-
Shares issued as security for convertible debtures	—			—		—			—		25,685,000		—			25,685			3,313,365			(3,339,050	)		—			—			-
(Notes 5 and 10)
Stock Issued for services (August 2005)	—			—		—			—		28,000		28,000			28			3,612			—			—			—			3,640
Stock Issued for services (August 2005)	—			—		—			—		472,000		472,000			472			60,888			—			—			—			61,360
Stock Issued for services (September 2005)	—			—		—			—		805,000		805,000			805			132,020			—			—			—			132,825
Stock Issued for services (September, 2005)	—			—		—			—		750,000		750,000			750			254,250			—			—			—			255,000
Stock Issued for services (May 2006)	—			—		—			—		875,000		875,000			875			86,625			—			—			—			87,500
Stock Issued for services (June 2006)	—			—		—			—		83,334		83,334			83			8,251			—			—			—			8,334
Foreign currency translation adjustment	—			—		—			—		—		—			—			—			—			—			(79,486	)		(79,486	)
January, 2006, Issuance of stock options for
services	—			—		—			—		—		—			—			62,379			—			—			—			62,379
September 2006 issuance of stock warrants
in connection with financing	—			—		—			—		—		—			—			45,164			—			—			—			45,164
Net loss	—			—		—			—		—		—			—			—			—			(1,848,797	)		—			(1,848,797	)
Balance July 31, 2006	34,343,662			34,344		—			—		81,658,457		55,973,457			81,658			7,830,122			(3,339,050	)		(8,755,370	)		(448,977	)		(4,597,275	)

Discount on issue of loan note (Note 10)	—			—		—			—		—		—			—			62,640			—			—			—			62,640
Issuance of stock for services (October, 2006)	—			—		—			—		1,000,000		1,000,000			1,000			67,000			—			—			—			68,000
Issuance of stock for services (October, 2006)	—			—		—			—		1,250,000		1,250,000			1,250			148,749			—			—			—			149,999
October, 2006 issuance of stock options for services	—			—		—			—		—		—			—			223,844			—			—			—			223,844
Foreign currency translation adjustment	—			—		—			—		—		—			—			—			—			—			(34,135	)		(34,135	)
Net Loss	—			—		—			—		—		—			—			—			—			(3,670,764	)		—			(3,670,764	)
Partial conversion of Convertible Loan Note into Common Stock (Dec. 2006) (Note 6)	—			—		—			—		1,000,000		1,000,000			1,000			49,000			—			—			—			50,000
Stock Option Expense	—			—		—			—		—		—			—			466,624			—			—			—			466,624
Beneficial conversion discount underlying Convertible Loan Notes (Notes 2 & 9)	—			—		—			—		—		—			—			283,874			—			—			—			283,874
Stock issued for services (December 2006)	—			—		—			—		850,000		850,000			850			51,000			—			—			—			51,850
Cashless conversion - Montgomery	—			—		—			—		345,000		345,000			345			(345	)		—			—			—			-
Imputed discount cancelled due to loan default	—			—		—			—		—		—			—			(62,640	)		—			—			—			(62,640	)
Balance July 31, 2007	34,343,662			34,344		—			—		86,103,457		60,418,457			86,103			9,119,868			(3,339,050	)		(12,426,134	)		(483,112	)		(7,007,981	)

Net Loss for the period (unaudited)	—			—		—			—		—		—			—			—			—			(1,280,733	)		—			(1,280,733	)
Foreign currency translation adjustment (unaudited)	—			—		—			—		—		—			—			—			—			—			19,537			19,537
Stock Option Expense (unaudited)	—			—		—			—		—		—			—			270,630			—			—			—			270,630
Balance January 31, 2008 (unaudited)	34,343,662		$	34,344		—		$	—		86,103,457		60,418,457		$	86,103		$	9,390,498		$	(3,339,050	)	$	(13,706,866	)	$	(463,575	)	$	(7,998,546	)

F-6

In Veritas Medical Diagnostics, Inc.

(A Development Stage Company)

Unaudited Consolidated Statements of Cash Flows

							March 26, 1997
							(Inception)
	Six month period ended						Through
	January 31,						January 31,
	2008			2007			2008

Cash flows from operating activities:
Net loss	$	(1,280,733	)	$	(1,819,440	)	$	(13,706,866	)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization		1,174			6,567			164,559
Retirement of patents (written off)		—			—			—
Intercompany interest income		—			—			242,382
Interest imputed (non cash)		217,086			411,410			441,276
Prepaid element of expenses and beneficial		—						—
discounts on loan note conversions		—			(307,308	)		169,031
Stock issued for compensation and services		—						—
and stock option expense		270,630			674,304			2,466,625
Stock issued for interest		—			—			86,160
Gain (loss) on debt forgiveness		—			—			(662,610	)
Changes in operating assets and liabilities:		—						—
Receivables		—			195,192			(21,927	)
Prepaid expenses and other current assets		(8,696	)		(14,275	)		2,403
Deferred debt issue costs		—			—			—
Accounts payable		(8,424	)		153,048			1,161,097
Accrued expenses		140,896			66,068			1,918,942
Accrued interest payable		346,126			86,982			346,126
Accounts payable (related party)		—			(194,479	)		138,697
Other		—			50,554			45,304
Net cash used in
operating activities		(321,941	)		(691,377	)		(7,208,801	)

Cash flows from investing activities:
Acquisition of patents		(50,460	)		(58,834	)		(149,538	)
Acquisition of equipment		—			—			(151,209	)
Net cash used in
investing activities		(50,460	)		(58,834	)		(300,747	)

Cash flows from financing activities:
Advances from affiliates		—			—			4,378,963
Proceeds from debenture issue		—			—			335,000
Repayment of advances from affiliates		—			—			(728,426	)
Advances from related parties		292,028			91,903			728,538
Proceeds from issuance of preferred stock		—			—			813,930
Discount on notes payable		—			—			144,382
Proceeds from Royalty Participation Agreement		—			—			450,000
Proceeds from issue of Loan Notes		—			335,000			1,262,495
Repayment of notes payable		—			—			(10,000	)
Interest payable reclassified as Loan Notes		—			192,300			—
Short term advances		60,810			80,000			140,810
Net cash provided by
financing activities		352,838			699,203			7,515,692

Effect on cash from foreign currency translation		19,537			1,111			(7,357	)

Net change in cash and
cash equivalents		(26	)		49,897			(1,213	)

Cash and cash equivalents:
Beginning of period		(1,187	)		61,240			—

End of period	$	(1,213	)	$	11,343		$	(1,213	)

Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes	$	—		$	—		$	—
Interest	$	—		$	—		$	—

Non-cash financing activities:
Conversion of note payable to common stock	$	—		$	—		$	700,000
Conversion of interest to common stock		—			—			—
Conversion of preferred stock into debentures		—			—			86,160
	$	—		$	—		$	786,160

F-7

In Veritas Medical Diagnostics, Inc.

(Formerly In Vivo Medical Diagnostics, Inc.)

(A Development Stage Company)

Notes to Consolidated Financial Statements

Note 1: ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN

Attention is drawn to the detailed disclosures in this Note and elsewhere in these Financial Statements which creates substantial doubt concerning the Company’s ability to continue to finance and maintain its current operations.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company, the accompanying unaudited condensed financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of January 31, 2008, the results of operations for the three months ended January 31, 2008 and 2006 and the period from March 26, 1997 (inception) through January 31, 2008, and cash flows for the three months ended January 31, 2008 and 2006 and the period from March 26, 1997 (inception) through January 31, 2008. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company's annual report on Form 10-KSB for the year ended July 31, 2007. There have been no updates or changes to our audited financial statements for the year ended July 31, 2007.

There is no provision for dividends for the quarter to which this quarterly report relates.

The results of operations for the three and six month period ended January 31, 2008 is not necessarily indicative of the results to be expected for the full year.

We are a development stage company as defined in Statement of Financial Accounting Standards No. 7. We are devoting substantially all of our present efforts to developing new products. Our planned principal operations have not commenced and, accordingly, no significant revenue has been derived therefrom.

We have reported net losses of $3,670,764, $1,848,797 and $12,426,134 for the fiscal years ended July 31, 2007, 2006 and for the period from the date of inception, March 26, 1997 to July 31, 2007, respectively. The loss from date of inception, March 26, 1997 to January 31, 2008 amounts to $13,706,866. We have a net capital deficit at January 31, 2008 ($7,998,546) and had substantial net current liabilities of $7,369,856 and cash balances of $nil at January 31, 2008. In addition, as explained in Note 10 we are in default under the terms of Loan Notes with total amounts outstanding at January 31, 2008 of $873,800. These factors, among others, raise substantial doubt about our ability to continue as a going concern.

We require ongoing capital to continue our development activities but have been unable to raise adequate new capital to support operational needs and are currently dependent upon minimal advances being made by Westek as described in Note 9, which simply maintain very basic operations and compliance. As described in Note 11 Westek has put us and our other loan note holders on notice of its inability to continue to provide such finance on an ongoing basis unless our other loan note holders agree to join in the provision of working capital finance or to restructure or convert their loans to allow us to negotiate with other financiers to provide fresh capital from a clean balance sheet. The other Loan Note Holders have declined to do this and the Company and its Loan Note Holders are in the advanced stages of negotiating a transaction, which is described in outline on Note 11, that would return the Company to a shell, with reduced and simplified debt and other obligations, as an alternative to imminent insolvency by threatened loan note foreclosure.

There can be no assurance that this proposed transaction will take place and it remains possible that terms of the proposed transaction may change or that it will not take place at all. In the event that the proposed transaction does occur the Company’s financial statements would change materially, as outlined in Note 11. In the event that the proposed transaction does not occur, then, in the absence of any further initiatives taken by the loan note holders, it seems likely that the Company and its subsidiaries will become insolvent and certain adjustments would need to be made to the carrying value of the assets included in the consolidated balance sheet in such an event.

As explained in Note 10 we are in default on several of our Loan Notes at July 31, 2007. Our major creditors and Loan Note holders have continued to work with us during the six month period ended January 31, 2008 to restructure our obligations to enable us to match future payments with our future working capital plans and several Loan Note holders formally restructured their advances to us in the period ended January 31, 2008. In addition the directors, management team and key contractors have deferred payment of compensation due to them since October 2006 (and in certain cases previously) and many key suppliers are providing us with valued and ongoing support and forbearance with respect to our payment obligations.

F-8

Prior to July 31, 2006 we recorded revenues from billings made under a Research and Development Contract with Inverness Medical Innovations (IMI), dated November 2002. Under the terms of this contract (and a related Patent License Agreement, both subsequently amended throughout the contract field work) we jointly developed, with IMI, the technology underlying a new product (a prothrombin measurement device which is used for the measurement of coagulation of blood in patients at risk of heart disease and stroke) ("The PT Product"). In July 31, 2006 our involvement in the development of this product ended and we anticipate that the product will be launched into the global markets in 2007/2008. The product is to be sold by IMI and we have no influence over the marketing and sales process. Under the terms of our agreements with IMI we are entitled to participate in the following revenue streams: (a) billings to IMI for our development work during the product development phase ("Development Revenues") and (b) the receipt of 2% of all future net sales proceeds arising from the sale of The PT Product ("Royalty Income"). Development Revenues ceased with the completion of the development of the PT Product in July, 2006. We will begin to earn Royalty Income simultaneously with the commencement of sales of the PT Product. The commencement of the sale of this product will result in a change of our status from a "Development-stage Enterprise". We are currently developing other hand held and portable products which are focused on (a) the measurement and detection of pregnancy and labor and (b) the detection of diseases and medical conditions using magnetic detection techniques applied to tissue and blood. We intend to engage in discussions with several parties which management believes may result in commercial, revenue earning contracts.

Note 2: Related Party Transactions

As of January 31, 2008, $524,508 was due to related parties for services. We purchased additional services from related parties during the three month period ended January 31, 2008 amounting to $39,181. All of these fees were purchased from AWY Ltd and the ARM Partnership, the companies through which Graham Cooper, our CEO, and Martin Thorp, our CFO, provide services to the Company. Both AWY Ltd and the ARM Partnership have agreed to defer or forego, in part or in full, these amounts pending the ability of the company, or its subsidiaries to make such payments. During the three month period ended January 31, 2007 we purchased services amounting to $8,052

In July 2004, Westek, a related party, agreed to release us from $2,030,298 of previously accumulated advances in exchange for a non interest-bearing promissory note totaling $1,800,000. We reflected a capital contribution totaling $2,030,298 in our financial statements at that time. The promissory note was payable in full by September 30, 2006.

On November 13, 2006 we reached and agreement with Westek to amend the terms of the Promissory Note to extend the maturity date until March 31, 2008. The amended Promissory note carries interest at a rate of 10% per annum from October 1, 2006 which is payable quarterly in arrears. Unpaid interest may, at the option of Westek, be converted into shares of the Company’s common Stock at a price of $ 0.05 per share. The market value of the common stock at the date of the amendment was $0.072 and therefore there is a beneficial discount underlying the conversion option. We have valued that discount at $113,400, (using the Black Scholes method). The inherent discount has been charged to Additional Paid in Capital within shareholders funds in the balance sheet and has been charged in the profit and loss account as interest expense on a straight line basis across the life of the amended Promissory Note.

During the three and six month period ended January 31, 2008 Westek advanced $131,208 and $280,984 respectively to the Company. These advances are interest free and are payable on demand. The advances are intended to enable the Company to maintain a basic level of operation ahead of securing new commercial contracts. These short term advances are described more fully in Note 9.

Note 3: Property and Equipment

Major classes of property and equipment as of January 31, 2008 are listed below:

Furniture and Fixtures	$	16,523
Office Equipment		89,814
Plant and Equipment		20,939
		127,276
Less: accumulated depreciation		123,199
	$	4,077

Depreciation expense was $568 and $2867 for the three month periods ended January 31, 2008 and 2007, (and $1,174 and $6,567 for the six month period ended January 31, 2008 and 2007), respectively.

Note 4: Intangible Assets - Patent Costs

Changes in Intangible assets - Patent Costs for the six month period ended January 31, 2008 were as follows:

Cost - start of year	$	95,545

Costs incurred during the period		50,460
Amortization		-
Retirements		-
Cost - end of period	$	146,005

F-9

No amortization is recorded because the economic life of the underlying patents is expected to be less than their legal life and the company has yet to derive revenue from the commercial applications of the underlying patents. At such time as we begin earning revenues, the cost of the underlying patents will be amortized over their estimated economic life.

Note 5: Preferred Stock

We are authorized to issue 50,000,000 shares of preferred stock.

4% Convertible Preferred Stock

As of January 31, 2008, the Company had 34,343,662 shares of Series A 4% voting callable convertible preferred stock outstanding. Such shares pay an annual dividend of 4% and are convertible at any time at the option of the holder into Common Stock at the rate of one share Common Stock for each outstanding share of Series A Preferred Stock. Holders of Series A Preferred Stock have priority over all of the shares of the Company on liquidation or sale at the rate of $0.233 per share. Holders of Series A Preferred Stock are entitled to vote on all matters as to which Common Stock shareholders are entitled to vote. The preferred stock is redeemable at the option of the Company. There is no mandatory redemption feature. The dividends are cumulative.

The aggregate of arrearages in cumulative preferred dividends on the Series A Preferred Shares through January 31, 2008, are $22,756.

Note 6: Common Stock

We are authorized to issue 500,000,000 shares of common stock.

We issued the following shares of common stock for services during the six month periods ended January 31, 2008 and 2007, respectively:

	January 31, 2008				January 31, 2007
	Number	Fair Value			Number		Fair Value
	of Shares	of Shares			of Shares		of Shares
Shareholder	Issued	Issued			Issued		Issued
Crown Capital Group Ltd						1,000,000		68,000
UTEK Corporation						1,250,000		150,000
Sichenzia Ross Friedman and Ference LLP						850,000		51,850
	0		$	0		3,100,000	$	269,850

We value the shares of common stock issued for services at the quoted market price of the stock at the issue date or at the contracted value of the services where this is clearly defined in the underlying contract.

No other shares of common stock, other than those described above, were issued during the six month periods ended January 31, 2008 and 2007.

Note 7: Stock Options and Warrants

Stock Options - Employees and contractors (“Staff”)

Since inception, stock options have been granted to staff members under the Company's 2005 Stock Incentive Plan as follows:

During May 2004, the Company granted 9,659,000 common stock options to two officers with an exercise price of $1.00 per share. The Company's common stock had no traded market value on the date of grant. The market value of the stock was determined to be $1.00 per share based on estimates made by the directors at that time. In March 2006 one of the officers resigned and the 4,829,500 options granted to him lapsed. Under the terms of the option award the remaining 4,829,500 options vest in three equal installments of 1,609,834 each in May 2006, 2007 and 2008, subject to certain operating performance criteria having been met. The performance criteria were not met by the first vesting date and therefore 1,609,834 of these options have lapsed. Management is of the view that the performance criteria are unlikely to be met by each of the future vesting periods.

The Company adopted and reserved 21,434,788 shares of Common Stock for issuance under its 2005 Stock Incentive Plan. Under the plan, options may be granted which are intended to qualify as Incentive Stock Options under Section 422 of the Internal Revenue Code of 1986 or options which are not intended to qualify as Incentive Stock Options under Section 422 of the Internal Revenue Code of 1986.

F-10

The 2005 Stock Incentive Plan and the right of participants to make purchases thereunder are intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended. The 2005 Stock Incentive Plan is not a qualified deferred compensation plan under Section 401(a) of the Internal Revenue Code and is not subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

On June 1, 2005, the Company issued 650,000 options to its staff under the plan, with an exercise price of $0.55 per share. The market price on June 1, 2005 was also $0.55 per share.

On January 3, 2006, the Company issued 725,000 options to its staff under the plan, with an exercise price of $0.10 per share. The market price on January 3, 2006 was also $0.10 per share.

On October 10, 2006, the Company issued 16,015,000 options to its staff under the plan, with an exercise price of $0.065 per share. The market price on October 10, 2006 was also $0.065 per share. The vesting date of these options varies as set out in the table below:

Vesting Date	No of options
October 10, 2006		2,500,000
November 30, 2006		500,000
December 31, 2006		150,000
September 30, 2007		5,515,000
September 30, 2008		3,750,000
September 30, 2009		3,600,000
Total		16,015,000

Options that vested on the day of grant were granted primarily (2,000,000 of the total options which vest on the grant date of October 10, 2006) to Martin Thorp, the Company’s CFO, to provide Mr. Thorp with a significant equity interest in the Company in line with the other members of the Company’s Board of Directors, in order to provide mutuality of interest going forward and to reward him for past performance.

The fair value for the options granted is estimated at the date of grant using the Black-Scholes option-pricing model with the assumptions set out in the table below.

	Grant Date
	May, 2004			June, 2005			January, 2006			October, 2006
Risk Free Interest Rate		2.3	%		4.4	%		4.4	%		4.7	%
Dividend Yield		0	%		0	%		0	%		0	%
Volatility Factor		0	%		55	%		88	%		314	%
Weighted Average Expected Life (yrs)		5			5			5			5
No of options expected to vest on vesting date		0			650,000			725,000			16,015,000
Value of one option (Black Scholes)	$	0.000		$	0.289		$	0.070		$	0.065
Value of option grant (aggregate)	$	0		$	187,850		$	50,750		$	1,040,975

From August 1, 2006 we were required to adopt SFAS No. 123(R) whereby we account for stock option expense for employees and contractors by charging the fair value of options granted and expected to vest equally over the vesting period. In the case of options that vest on grant the fair value of the option is expensed immediately. The expense is shown as stock option expense in the consolidated statement of operations with the credit posted to Additional Paid In Capital. Prior to August 1, 2006 we were not required to treat employee stock options in accordance with SFAS No. 123 (R) , and we disclosed the impact on pre-tax results had we valued employee stock options on a proforma basis in the footnotes to our Annual Financial Statements. In the three month period and nine month period ended January 31, 2007 the stock option charge would have increased by approximately $37,500 and $112,500, respectively, had we adopted SFAS No. 123(R) in that period.

In determining which options are expected to vest we have taken account of the fact that options have only been granted to relatively few key members of staff and in the opinion of management all of those people are likely to stay with the Company through the vesting period of their options and beyond. Therefore, it is assumed that all options granted are likely to vest, except those that are not expected to vest by virtue of underlying performance conditions (described above).

The Black-Scholes options valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options. The Company determined the expected term was based on the legal life of the option; volatility was calculated using our historical stock price and the risk free rate was taken from the 20-year Treasury Constant Maturity Series based on the nominal 3-year rate.

No options have yet been exercised by any employees.

F-11

Warrants

On April 11, 2005, the Company granted to its former financial representative, Westor Capital Group, Inc. warrants to purchase 61,769 shares of the Company’s common stock. The warrants carry an exercise price of $1.50 per share, vest on the date of grant and expire on April 15, 2008. No warrants have yet been exercised.

The Company’s common stock’s traded market value on the date of grant was $1.01. The weighted average exercise price and weighted average fair value of these warrants as of April 11, 2005 were $1.50 and $0.29, respectively.

The fair value for these warrants was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate	4.35%
Dividend yield	0.00%
Volatility factor	55.10%
Weighted average expected life	5 years

On September 9, 2005, as part of the consideration for arranging a financing for the Company, we issued to Montgomery Equity Partners Ltd (“Montgomery”), three-year warrants to purchase 350,000 shares of Common Stock at an exercise price of $0.001 per share. The market value of the Company's common stock on the date of the negotiation of this transaction was $0.13. The weighted average exercise price and fair value of the warrants at the date of their grant were $0.001 and $0.076, respectively. On October 27, 2006 Montgomery exercised these warrants by way of cashless conversion into 345,000 shares of Common stock.

The fair value for these warrants was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Risk-free interest rate	4.18%
Dividend yield	0.00%
Volatility factor	88.40%
Weighted average expected life	3 years

Summary of options and warrants outstanding

The following schedule summarizes the changes in the Company's outstanding stock awards since July 31, 2007.

						Weighted		Weighted
	Options Outstanding					Average		Average	Aggregate
	Number of		Exercise Price			Exercise Price		Remaining	Intrinsic
	Shares		Per Share			Per Share		Contractual Life	Value
Balance at July 31, 2007		19,401,603	$	$	0.055-1.50	$	0.1636	8.06 years		1,296,238

Awards Granted to Staff		0		$	0	$	0
Awards cancelled/expired		0		$	0	$	0
Warrants exercised		0		$	0	$	0

Balance at January 31, 2008		19,401,603	$	$	0.055-1.50	$	0.1636	8.06 years	$	1,296,238

Awards exercisable at
January 31, 2008		10,101,769		$	0.550-1.50	$	0.1075	6.66 years	$	819,052

Note 8: Income Taxes

We record our income taxes in accordance with Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes". We had tax losses available to carry forward in our UK operating subsidiaries at July 31, 2007 and we continued to incur tax losses in the six month period ended January 31, 2008. We have therefore not recorded any tax charge of liability in the three month period ended January 31, 2008.

F-12

Note 9: Financings

The Company has substantial obligations under various financial instruments arising from the following financing agreements:

A. April 2005, Financing

On April 15, 2005, we completed the sale of 863,845 units (the “Units”), each Unit consisting of one share of Series B 5% Convertible Preferred Stock, one warrant to purchase one share of the Company’s common stock (“Stock Warrants”), and one warrant to purchase an additional unit (“Unit Warrants”). Such shares paid an annual dividend of 5% and were convertible at any time at the option of the holder into Common Stock at the rate of one share Common Stock for each outstanding share of Series B Preferred Stock commencing April 15, 2005. The Stock Warrants were exercisable from April 15, 2005 until April 15, 2008 at an exercise price of $1.50 per share, subject to adjustment. The Unit Warrants were exercisable for a period of 180 days from the effective date of the registration statement at an exercise price of $0.65 per unit, subject to adjustment. All preferential amounts to be paid to the holders of Series B Preferred Stock were to have been be paid on a pari-passu basis with any preferential amounts to be paid to the holders of our Series A Preferred Stock, and prior to the common stock. As explained below the Units were subsequently exchanged for Notes issued under the September, 2005 Financing.

B. September 2005 Financing and subsequent restructurings

In a linked series of transactions dated September 7, 2005, the Company entered into:

1. A Standby Equity Distribution Agreement (the "Distribution Agreement") with Cornell Capital Partners LP ("Cornell")providing for the sale and issuance to Cornell of up to $10,000,000 of Common Stock over a period of up to 24 months.

2. A Securities Purchase Agreement (the "Purchase Agreement") with Montgomery Equity Partners Ltd. ("Montgomery"), an affiliated fund of Cornell, providing for the sale by the Company to Montgomery of its 18% secured convertible debentures in the aggregate principal amount of $750,000 (the "Debentures") of which $300,000 was funded on September 7, 2005; $200,000was to have been funded two business days prior to the Company's completion of its audited financial statements for the fiscal year ended July 31, 2005, and; $250,000 was to have been funded within five business days of the date the Registration Statement is declared effective by the SEC. Under the Purchase Agreement, the Company also issued to Montgomery three-year warrants (the "Warrants") to purchase 350,000 shares of Common Stock at $0.001 per share, which have subsequently been exercised. The Debentures matured on September 7, 2006 and bear interest at the annual rate of 18%. Holders have the right to convert, at any time, the principal amount outstanding under the Debentures into shares of Common Stock, at a conversion price per share equal to $0.144, subject to adjustment. Upon three-business day advance written notice, the Company may redeem the Debentures, in whole or in part. In the event that the closing bid price of the Common Stock on the date that the Company provides advance written notice of redemption or on the date redemption is made exceeds the conversion price then in effect. Redemption of Debentures is to be calculated at 112% of the Debentures' face value. In the event of default the debenture holder is entitled to liquidated damages calculated at the rate of 24% per annum on any unpaid balance.

3. A Securities Purchase Agreement (the "Accredited Investor Purchase Agreement") with the investors in a April 2005, Financing, pursuant to which these investors agreed to exchange the securities that they purchased in the earlier financing for an aggregate of $556,500 principal amount of Debentures, such debentures have substantially the same terms as those issued to Montgomery and described in the preceding paragraph 2 above.

As further security for its obligations under the above mentioned facilities, the Company has deposited into escrow 25,685,000 shares of common stock, these shares are deemed issued but not outstanding.

Pursuant to these agreements, the Company filed a registration statement on Form SB-2 with the Securities and Exchange Commission for the purpose of registering the securities underlying the transactions. In connection therewith, the Company has received comments from the Commission indicating that, in the Commission's view, based upon the structure of the transactions, the Company may not register the securities sold in the financing transactions. On March 6, 2006, we withdrew the registration statement on Form SB-2 (File No. 333-128321) by filing a Form R-W with the Commission. As a result, the Company has not been able to draw down any further amounts under the Debenture (other than the initial $300,000) or the related Distribution Agreement and was unable to pay interest and principal payments on the debentures drawn down under this financing, as consequence it became in default under the terms of the Debentures.

We have held discussions with several of the Debenture Holders to restructure our obligations to rectify the defaults and the following agreements have been entered into:

1. On October 19, 2006, the Company entered into a Termination, Settlement, and Forbearance Agreement effective as of October 16 (the "Settlement Agreement"), with Cornell and Montgomery. The Settlement Agreement relates to the Distribution Agreement and the Purchase Agreement and included the following principal terms:

F-13

The Company shall pay Montgomery an aggregate of $348,000 (the "Funds") which represents the agreed amounts owed by the Company to Montgomery under the Debenture as of October 19, 2006 including outstanding principal and interest. The Company shall pay the Funds to Montgomery monthly at the rate of $29,000 ("Monthly Payment") per calendar month, with the first payment being due and payable on November 15, 2006 and each subsequent payment being due and payable on the first business day of each subsequent month until the Funds are repaid in full.

Montgomery shall continue to have valid, enforceable and perfected first-priority liens upon and security interests in the Pledged Property and the Pledged Shares (each as defined in the Purchase Agreement transaction documents).

The Company and Montgomery agree that during the term of the Settlement Agreement, the Debenture shall not bear any interest and no liquidated damages shall accrue under any of the financing documents.

The Conversion Price (as set forth in the Debenture) in effect on any Conversion Date (as set forth in the Debenture) from and after the date hereof shall be adjusted to equal $0.05, which may be subsequently adjusted pursuant to the other terms of the Debenture.

Montgomery shall retain the Warrants issued in accordance with the Securities Purchase Agreement.

The Company and Cornell agree to terminate the Distribution Agreement and related transaction documents.

In the event that the Company defaults under the terms of this agreement penalties and redemption premiums payable under the original agreement shall be reinstated.

2. On November 29, 2006, the Company issued a secured subordinated convertible note to Triumph Small Cap Fund Inc. ("Triumph"), (one of the investors in the Accredited Investor Purchase Agreement referred to above) in the principal amount of $165,000 in exchange for the interest and principal outstanding under the Debenture previously issued to Triumph under the terms of the Accredited Investor Purchase Agreement. The note (a) matures on October 31, 2008; (b) bears interest at the rate of8% per annum, which is payable on maturity of the note and (c) is convertible, at Triumph's option, into shares of the Company’s common stock at a conversion price of $0.05 per share, subject to a 9.99% conversion restriction.. On December 11, 2006Triumph converted $50,000 of the principal amount outstanding under their note into 1,000,000 shares of the Company's common stock in accordance with these conversion rights.

3. On January 9, 2007, the Company issued two secured convertible notes to Longview Fund L.P. (“Longview”)(one of the investors in the Accredited Investor Purchase Agreement referred to above) in the aggregate principal amount of$309,300 as follows:.

Secured convertible note in the principal amount of $261,300 issued in exchange for the interest and principal outstanding under the Debenture previously issued to Longview under the terms of the Accredited Investor Purchase Agreement. The note (a) matures on October 31, 2008; (b) bears interest at the rate of 18% per annum, which is payable in accordance with the repayment provisions described in the Note and (c) is convertible at Longview's option, into shares of the Company’s common stock at a conversion price of $0.05 per share. Minimum repayments are due under the note as follows: (i) two installments of $12,500 each were due to be paid on or before February 28, 2007 and March 30, 2007; (ii) monthly installments of $15,000 commencing on November 30, 2007; and (iii) the remaining principal balance plus unpaid interest on the maturity date.

Secured convertible note in the principal amount of $48,000 was issued in exchange for liquidated damages payable as result of the default on the Debenture previously issued to Longview under the terms of the Accredited Investor Purchase Agreement. This note has the same interest and conversion terms as described above, but is repayable on maturity (principal and interest).

Subsequent to the restructuring of the Loan Notes with Longview and Cornell / Montgomery, both described above, the Company has been unable to comply with the payment installments due under the terms of the restructured loan notes and is therefore in default under these new Loan Notes. These Loan Notes provide the note holder with the right to liquidated damages at the rate of 24% per annum during the period of default on unpaid balances.

The conversion terms of the restructured loan notes from Longview and Cornell / Montgomery enable the Loan Note holder to convert the amount outstanding under the Notes into shares in the Company's common stock at a price of $0.05 cents per share. The market price of the common stock at the dates that the restructured loan notes were issued was, in the case of Cornell /Montgomery, $0.072 and in the case of Longview $0.055 and therefore there is a beneficial discount underlying these conversion options. We have valued that discount at $170,474, using the Black Scholes method. The inherent discount has been charged to Additional Paid in Capital within shareholders funds in the balance sheet and is being charged in the profit and loss account as interest expense on a straight line basis across the life of the amended Loan Note.

F-14

C. Royalty Participation Agreement (May to November, 2006)

On May 5, 2006 , we completed the sale of a percentage of future royalties pursuant to a Royalty Participation Agreement (the” Agreement") with The Rubin Family Irrevocable Stock Trust The royalties to be paid pursuant to the Agreement are derived from the Patent License Agreement with Inverness Medical Innovations, Inc. (the "IMI Agreement") pursuant to which the Company’s subsidiary, IVMD (UK) Limited, will receive royalties from the sale of a Prothrombin blood clotting measuring device (the "IMI Royalties). The IMI Agreement is further described in the "Organization and Basis of Presentation" section of these financial statements. Subsequently, in November 2006, the Company entered into a similar agreement with Triumph in respect of further advances made to us during June and October 2006.

Pursuant to these royalty participation agreements, the Company received the aggregate sum of $450,000 in exchange for 10% of the future IMI Royalties received by the Company, subject to the terms and conditions set forth in the Agreement (the "Royalty Payments"). The Royalty Payments shall be paid to The Rubin Family Irrevocable Stock Trust and Triumph Research Partners LLP ("The Investors") within 15 days of the end of the month in which the Company receives future IMI Royalties. The Company has the option to terminate the Agreement at any time, without penalty, by making a lump sum payment to the Investors equal to 300% of the funds received from the Investors pursuant to the Agreement, being $1,350,000. If no Royalty payments are made to the Investors by December 31, 2007, or if $450,000 of Royalty payments are not made by December 31, 2008, the Investors shall have the right to convert the advances made into a three year note with a face value of $1,350,000 accruing interest at 4% above prime and repayable in one lump sum at the end of the term. In addition, if the aggregate payments made to the Investors under Agreements prior to December 31, 2007 are less than $450,000 and provided that the Company has raised at least $3,000,000 in the form of new equity finance, we are obliged to make an advance payment to the Investors (on account of future amounts payable to them) equal to the difference between $450,000 and the aggregate payments made prior to December 31, 2007(capped at the amount by which the equity funding exceeds $3,000,000).

On November 8, 2006 The Rubin Family Irrevocable Stock Trust assigned its rights under the Agreement to Harbor View Fund Inc, an entity which is unrelated to the Company.

D. Secured Subordinated Convertible Loan Notes (November 2006)

On November 29, 2006, the Company issued a secured subordinated convertible note to Triumph, in the principal amount of$335,000 in consideration of new cash advances made to the Company by Triumph subsequent to July 31, 2006. This note (a) matures on October 31, 2008; (b) bears interest at the rate of 8% per annum which is payable on maturity of the notes; and (c) is convertible, at Triumph's option, into shares of the Company's common stock at a conversion price of $0.05 per share (approximately the share price on the date of issue), subject to a 9.99% conversion restriction.

E. Related Party Loans - Westek Limited

As more fully discussed in Note 2, on November 14, 2006 the terms of our $1,800,000 Promissory Note with Westek Ltd were amended to address default conditions that had arisen. Under the amended terms the Loan Note maturity has been extended until March 31, 2008 (from September 30, 2006) and interest will now be charged at 10% per annum from October 1, 2006 which is payable quarterly in arrears. Unpaid interest may, at the option of Westek, be converted into shares of the Companies common Stock at a price of $ 0.05 per share.

During the six month period ended January 31, 2008 Westek advanced $280,984 to the Company and its subsidiaries, giving a total short term indebtedness to Westek of $645,488 at January 31, 2008. The intention of Westek in making such advances was to maintain a basic level of operations in our main trading subsidiary (IVMD UK Ltd) and to maintain compliance at IVMD Inc. Westek has continued to make limited funding available to the Group subsequent to July 31, 2007 . These advances are interest free and are payable on demand.

F. Short Term Advance from Loan Note Holder

During the year ended July 31, 2007, Triumph advanced a sum of $80,000 to the Company. Triumph has subsequently indicated that it will not demand repayment of this loan, but no formal arrangements have been entered into. Therefore, this loan is treated as repayable on demand. The note does not bear interest and is not convertible.

During the six month period ended January 31, 2008, Triumph advanced the sum of $60,810 to the Company in connection with the transaction detailed in note 11. The funds have been used specifically to cover ongoing costs in maintaining the compliance of the public entity. No formal arrangements have been entered into, and therefore this loan is treated as repayable on demand. The note does not bear interest and is not convertible.

F-15

Presentation of Financings in the Financial Statements

Accounting for the Royalty Participation Agreement (May - July, 2006 Financings)

We have accounted for these transactions in accordance with EITF 1988 Issue 88-18 as debt and have classified them as Long Term Debt on the balance sheet. We have calculated the maximum effective rate of interest underlying the Agreement at 37%per annum by taking what we consider to be the most prudent view of the possible cash payments required to relinquish our obligations under the Agreement (and therefore effectively repay the advances) and computing the inherent interest rate within that future cash payment stream. Interest on the amount advanced is included in interest expense and added to the amount of the debt shown in the balance sheet. As payments are made to the Investors the debt will be reduced accordingly and the estimated underlying interest rate may in the future be amended.

The following table shows the treatment of the Royalty Participation Agreement Advances in the Financial Statements at January 31, 2008.

Total Amount Advanced	$	450,000
Interest Imputed from inception until January 31, 2008	$	328,773
Included in Long Term Debt at January 31, 2008	$	778,773

Accounting for September, 2005 Financing and subsequent restructurings

The Principal amount of unpaid Loan Notes at July 31, 2007 is shown separately on the balance sheet as Notes Payable. The total is classified within Current Liabilities as “Current Portion of Notes Payable”, since all amounts are repayable before October 31, 2008.

The following table shows the composition and classification of the Principal amounts of Notes Payable in the balance sheet at July 31, 2007:

	Total Principal
	Outstanding

Montgomery Capital Partners		348,000
Triumph Small Cap Fund		450,000
Longview		309,300
Other Accredited Investors*		216,500
Total Notes payable
(before beneficial conversion discount**)		1,323,800

*Described in A above

** see “Beneficial Conversion Rights” below

All accrued interest and potential penalties payable under these Notes Payable is included in Current Liabilities under Accrued Interest Payable

Beneficial Conversion Rights

As explained above and in Note 2 the conversion rights in certain of the Loan Notes described above have been granted at a discount from the market price of the shares of the Company's common stock at the date that the loan notes were issued. Such beneficial discounts are recognized when the loan note is issued. The value of the discount is estimated using the Black Scholes method and is credited to Additional Paid in Capital on the balance sheet. The cost of the discount is expensed (as interest expense) over the life of the loan note. The unamortized portion of the value of the discount ($18,900) is show as a deduction from the total principal value of the loan notes outstanding on the balance sheet, resulting in a net balance of $1,304,900.

Note 10: Defaults upon Senior Securities

As explained in Note 9, the Company has been unable to pay interest and principal repayments when due under the terms of its September, 2005 financing and certain of the subsequent restructurings of the loans made under the September 2005 financing. As of July 31, 2007, the arrears of due but unpaid interest and penalties on Debentures and Loan Notes that were in default was $663,141 and the arrears of unpaid but due principal on Debentures in default amounted to $873,800.

Note 11: Recent Developments

In common with most Development-stage entities we have incurred losses since inception. At January 31, 2008 we had a net capital deficit of $7,998,546 and net current liabilities of $7,369,856. We are in default under the terms of certain convertible loan notes under which we owed $1,654,904 (including interest and penalties) at January 31, 2008. These circumstances have effectively prevented us, during the year, from raising adequate working capital to operate the business effectively and we have been dependent upon advances from Westek Ltd, a Company that is related to Mr. Graham Cooper, our Chief Executive Officer to maintain basic operations and compliance and avoid insolvency. Westek provided this support whilst the Company and its loan note holders sought to reach agreement to restructure the Company’s borrowings to enable it to raise adequate new capital. Such negotiations occurred throughout the year and subsequently, and were exhaustive. However, they failed to produce a satisfactory solution and, as a result, Westek has recently indicated to the Company and the other loan note holders that it can not continue to advance funds. It proposed that the loan note holders work together and with the Company and others to find an alternative solution to avoid insolvency. Negotiations are now at an advanced stage between all of the loan note holders, the Company and a new company, Medical Diagnostic Innovations Limited (“MDI”) (a company incorporated under the laws of England and Wales, which has been formed by the management and employees of the subsidiaries, including Mr. Graham Cooper and Mr. Martin Thorp) to work together with the objective of entering into a transaction which, if consummated, would involve the sale of the share capital of the subsidiaries to MDI and the simplification and reduction of the indebtedness of the Company so as to enable the Company to return to a “shell” and pursue future merger transactions. There can be no certainty that this potential a transaction will take place, or what the precise terms will be, and, in the event that these or similar negotiations fail, the Company and its subsidiaries face the prospect of insolvency and complete loss of shareholder value.

F-16

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

Forward-Looking Statements The information in this quarterly report contains forward-looking statements within the meaning of the Private Securities litigation Reform Act of 1995. This Act provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their business and operations so long as they identify these statements as forward looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than these statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward looking statements. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results may differ significantly from management's expectations.

The following discussion and analysis should be read in conjunction with the financial statements of In Veritas Medical Diagnostics, Inc., included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.

Plan of Operation

Overview

In Veritas Medical Diagnostics Inc. ("IVMD" or the "Company") specializes in the field of near patient medical diagnostics, also known as "point of care". We develop products to address conditions affecting large numbers of the population which are aimed at transforming their lives, quality of treatment and significantly reducing healthcare costs. We focus on developing products which are designed to be accurate, cost effective, easy to use, and portable. Our products are designed to bring diagnosis into patients' hands.

We operate through two wholly owned subsidiaries located in England and Scotland, both of which are incorporated under the Laws of England and Wales:

(A) IVMD (UK) Limited, and (B) Jopejo Limited.

Our website is located at www.ivmd.com.

Intellectual Property and Product Development

We have applied for thirteen patents, three of which have been granted. We are currently working on a number of additional patent applications in related areas. Patent protection and management is an important part of our business model.

The first product to be completed using our technology is a prothrombin measurement device, which is used for the measurement of coagulation of blood in patients at risk of heart disease and stroke.

The prothrombin measurement device (the "PT Device") was developed under a research and development contract with Inverness Medical Innovations Inc ("IMI"), which was entered in on November 11, 2002 (the "IMI Agreement"). Pursuant to the IMI Agreement, we are entitled to two types of revenue streams: (i) billings to IMI for our development work during the product development phase and (ii) royalties equal to 2% of net revenues from the sale of the PT Device. The product development phase of the IMI Agreement has been completed. Commercialization of the PT Device by IMI is expected to commence in 2008. IMI will oversee sales and marketing of the prothrombin device and we will not have any influence over this process.

We are developing additional hand held or portable products which are focused on (a) the measurement and detection of pregnancy and labor and (b) the detection of diseases and medical conditions using magnetic detection techniques applied to tissue and blood. We routinely seek to identify potential product applications which would benefit from our technology and know-how and we are in discussions with several parties which our management believes may result in commercial, revenue earning contracts.

Results of Operations

Three and six months ended January 31, 2008 compared to three and six months ended January 31, 2007

Revenues

We did not generate any revenues during the three and six months ended January 31, 2008 and 2007. As explained above, the next phase of the IMI agreement involves our receiving royalties from future sales of the PT Device by IMI. Additionally, we are seeking to enter into additional research and development or IPR license contracts.

Depreciation Expenses

Depreciation expenses for the three and six months ended January 31, 2008 amounted to $567 and $1174, (compared to $2,867 and $6,567 for the three and six months ended January 31, 2007), respectively. The decline is due to that fact that it has not been necessary to replace or update any of our fixed asset base which is adequate for our purposes and therefore the depreciation charge continues to decline.

General & Administrative Expenses

General and administrative expenses for the three and six months ended January 31, 2008 were $135,915 and $296,138 as compared to $287,414 and $680,148 for the three and six months ended January 31, 2007. This change reflects efforts to reduce general and administrative expenses in the light of cash constraints.

Sales and Marketing Expenses

We incurred $nil of marketing costs in the three and six month period ended January 31, 2008, as compared to $80,808 and $142,461 for the three and six month period ended January 31, 2007.

Research & Development Expenditure

During the three and six months ended January 31, 2008, we spent $156,237 and $359,663 respectively on research and development compared to $147,348 and $330,606 during the three and six month period ended January 31, 2007. In the three month period ended January 31, 2008 our R&D activity was focused on our Magnetic Strip Reader technology and our Magnetic Detection technology. By comparison, during the three month period ended January 31, 2007, our R&D expenditure was focused in part on the PT Device which was completed in late August early September 2006 causing a lower comparable charge in the period.

Stock Option Expense

No stock options were awarded during the six month period ended January 31, 2008. We account for stock option expense under the provisions of SFAS No. 123(R) whereby we value stock options using the Black Scholes method and spread the charge equally from the date of grant until the date that the options vest, adjusting for options that we believe are unlikely to ever vest. The remaining options vest over various periods through September 30, 2010. The total charge for option expense in the three month period ended January 31, 2008 amounted to $135,315 compared to $180,612 in the three month period ended January 31, 2007.

Net Income (Loss)

Net loss before other income and expense (which excluded interest expense) for the three months ended January 31, 2008 was $(349,910), as compared to a net loss of $(695,935) for the three months ended January 31, 2007. The decrease in net loss is attributable to significantly reduced expenditure in the areas of legal and professional fees, selling and marketing and general and administrative as the company introduced efforts to reduce the monthly burn rate.

Net loss (after other income and expense, including interest) for the three and six month period ended January 31, 2008 amounted to $(624,708) and ($1,280,733), respectively compared to $(953,044) and $(1,819,440) for the three and six month period ended January 31, 2007. The decrease in net loss was due to the factors discussed above. Interest expense amounted to $274,798 in the three month period ended January 31, 2008, as compared to $257,109 in the three month period ended January 31, 2007. The increase in interest expense is attributable to punitive interest charges related to outstanding debt obligations of the Company which were in default during the three month period ended January 31, 2008 and the generally increased debt burden of the Company.

Liquidity and Capital Resources

We have incurred operating losses since our inception. At January 31, 2008, we had an accumulated deficit from inception of $(13,706,866). We are in default under the terms of certain of our credit obligations and are operating at the forbearance of our creditors. Our auditors, in their report on our financial statement for the fiscal year ended July 31, 2007, have expressed substantial doubt about our ability to continue as a going concern.

The Company's working capital needs include payment of salaries, administrative expenses, and research and development activities. At January 31, 2008, we had no cash and we had net current liabilities of $7,369,856. We are in default under the terms of certain convertible loan notes under which we owed $1,654,904 (including interest and penalties) at January 31, 2008. These circumstances have effectively prevented us, during the year, from raising adequate working capital to operate the business effectively and we have been dependent upon advances from Westek Ltd, a Company that is related to Mr. Graham Cooper, our Chief Executive Officer to maintain basic operations and compliance and avoid insolvency. We have described under ‘Recent Developments’ above certain current events which indicate that, because of the failure of the loan note holders to agree on a financing solution between themselves and with the Company, the Company is unlikely to raise further working capital under its current structure; and, as further described there, discussions are taking place between the loan note holders and with the Company and others to sell the Company’s operating subsidiaries and return the Company to a shell with a simplified and reduced debt structure to enable it to realistically plan future merger transactions. In the event that these current negotiations are unsuccessful, and in the absence of any alternative solutions, the Company and its subsidiaries would be likely to face insolvency. However, the directors believe that current negotiations will end in an agreement between the loan note holders and the Company which will lead to the survival of the Company, potentially as a shell, as described above; or, alternatively, that some other outcome will materialize which will result in the survival of the Group.

Critical Accounting Policies

Principles of consolidation

Our consolidated financial statements include our accounts and the accounts of our two wholly owned foreign subsidiaries; IVMD (UK) Limited and Jopejo Limited, both UK companies. The assets and liabilities of our foreign subsidiaries have been translated from British pounds into U.S. dollars at the exchange rate in effect at January 31, 2008 with the related translation adjustments reported as a separate component of shareholders' deficit. Operating statement accounts have been translated at the average exchange rate in effect during the period presented. All significant intercompany transactions have been eliminated.

Basis of presentation

Our research and development is conducted in Inverness, Scotland, through our subsidiaries: IVMD (UK) Limited and Jopejo Limited. Development-stage activities consist of raising capital, obtaining financing, medical products research and development and administrative matters.

We are a development stage enterprise and have incurred losses since inception. We had a net capital deficit at January 31, 2008 of $(7,998,546). We also had substantial net current liabilities at January 31, 2008 and we were in default on several of our Notes Payable, as explained in Item 3 of Part 2. These factors, among others, raise substantial doubt about our ability to continue as a going concern, in common with many development stage companies in our industry. Historically we have depended on various sources of finance to support ongoing operations, in particular, until our various products and work in progress reach the point where they generate income (which cannot be assured) we are dependent upon external funding, which has generally been made available to us in the past by way of convertible loan notes provided by specialist investment funds. Since November 2006 such funding has not been forthcoming and we have depended upon short term advances from two of our loan note holders, as explained in Note 9 to the Unaudited Condensed Consolidated Financial Statements (set forth in Part I herein). More recently those advances have been restricted to one loan note holder, a related party, Westek. As explained in Liquidity and capital resources above, the Company is in negotiations to return to a shell to realistically plan future merger transactions, and thereby ensure the survival of the Company.

Use of Estimates

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

Research & Development Expenditure

Research & Development expenditure is written off as it is incurred.

Revenue Recognition

We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104 "Revenue Recognition in Financial Statements" (SAB 104). Arrangements with multiple elements are accounted for in accordance with Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, or EITF 00-21. We consider this methodology to be the most appropriate for our business model and current revenue streams.

Currently our only revenue streams relate to research and development contracts under which we enter into collaborative agreements with medical technology companies where the other party generally receives exclusive marketing and distribution rights for certain products for set time periods and set geographic areas. The terms of the collaborative agreements typically include funding of certain research and development efforts and royalties on product sales.

Revenue from research funding is recognized when the services are performed and is typically based on the fully burdened cost of a researcher working on a collaboration plus reimbursement of other costs incurred

Currently we receive revenue mainly from contracts which we enter into with commercial partners who work with us to develop new products which employ our core technology. This revenue is generally in the form of contribution towards development costs that we incur and is accounted for in accordance with the underlying contracts. In the future we anticipate the nature of our principle revenues changing from contribution towards development expenditure to royalty income from developed products, this change will not take place until products that are currently in development have been completed and are taken to market.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements as of January 31, 2008 or as of the date of this report.

Recent Accounting Pronouncements

Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payment (SFAS 123R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement does not change the accounting guidance for share-based payment transactions with parties other than employees provided in Statement 123 as originally issued and EITF Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services." This Statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, Employers' Accounting for Employee Stock Ownership Plans. The Company is required to adopt SFAS 123R effective January 1, 2006. The standard provides for a prospective application. Under this method, the Company will begin recognizing compensation cost for equity based compensation for all new or modified grants after the date of adoption. In addition, the Company will recognize the unvested portion of the grant date fair value of awards issued prior to the adoption abased on the fair values previously calculated for disclosure purposes.

In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument this is within its scope as a liability. Many of those instruments were previously classified as equity. SFAS No. 150 is effective for financial instruments entered into after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instruments of nonpublic entities. For nonpublic entities, mandatory financial instruments are subject to SFAS No. 150 for the first period beginning after December 15, 2003. Adoption of SFAS No. 150 will require us to report any cumulative redeemable preferred stock and any cumulative Class C redeemable preferred stock outstanding at the time of adoption as a liability.

On February 15, 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115. The fair value option established by Statement 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. Statement 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company does not expect that adoption of SFAS No. 159 will have a material effect on its financial position, results of operations, or liquidity and does not currently believe it will have a material impact on our financial statements .

On September 29, 2006, the FASB issued FASB Statement No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretire ment Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132R. This new standard requires an employer to: ( a ) recognize in its statement of financial position an asset for a plan’s over funded status or a liability for a plan’s under funded status; ( b ) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions); and ( c ) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. The requirement to recognize the funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006, for entities with publicly traded equity securities, and at the end of the fiscal year ending after June 15, 2007, for all other entities. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The Company does not expect that adoption of SFAS No. 158 will have a material effect on its financial position, results of operations, or liquidity and does not currently believe it will have a material impact on our financial statements.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements . This new standard provides guidance for using fair value to measure assets and liabilities. Statement 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. Under Statement 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. The provisions of Statement 157 are effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not expect that adoption of SFAS No. 157 will have a material effect on its financial position, results of operations, or liquidity and does not currently believe it will have a material impact on our financial statements.

In March 2006, the FASB issued FASB Statement No. 156, Accounting f or Servicing of Financial Assets - An Amendment of FASB Statement No. 140. This standard amends the guidance in FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Among other requirements, Statement 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in various situations. Statement 156 is effective as of the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company does not expect that adoption of SFAS No. 156 will have a material effect on its financial position, results of operations, or liquidity and does not currently believe it will have a material impact on our financial statements.

In February 2006, the FASB issued Statement No. 155, Accounting for Certain Hybrid Instruments. This standard amends the guidance in FASB Statements No. 133, Accounting for Derivative Instr uments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Statement 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. Statement 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company does not expect that adoption of SFAS No. 155 will have a material effect on its financial position, results of operations, or liquidity and does not currently believe it will have a material impact on our financial statements .

On July 13, 2006, FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109, was issued. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The new FASB standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has adopted the provisions of FIN 48 effective as of January 1, 2007. There is no financial statement impact from our adoption of FIN 48.

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective.

(b) Changes in internal controls. There was no change in our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

(c) Limitations on Effectiveness of Disclosure Controls and Procedures. Disclosure controls and procedures cannot provide absolute assurance of achieving financial reporting objectives because of their inherent limitations. Disclosure controls and procedures is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Disclosure controls and procedures also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by disclosure controls and procedures. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In Veritas is not a party to any pending legal proceeding, nor is its property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of In Veritas' business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

At January 31, 2008 we were in default under the terms of several notes payable. The total principal and interest due, but not paid, under these notes at January 31, 2008 were $873,800 (principal), and $536,245 (interest and penalties) respectively.

The notes in default were as follows:

Type of Security	Maturity Date	Principal Amount (not including interest)
Secured Convertible Note	Regular Repayments	$309,300

Secured Convertible Note	Monthly Repayments	$348,000

The lender of the above notes has served notice on us demanding repayment of the full amount due under the note. Subsequent to the receipt of this demand notice, we have entered into negotiations with the note holders with the objective of restructuring the debt outstanding. These notes are in default because capital repayments have not been made on schedule dates.

Type of Security	Maturity Date	Principal Amount (not including interest)
Secured Convertible Note	September 7, 2006	$201,500

Secured Convertible Note	September 7, 2006	$15,000

Negotiations are in place among the Company, Westek Limited, Montgomery Equity Partners, Ltd. Longview Fund, L.P., Triumph Small Cap Fund, Inc., Whalehaven Capital Fund Limited, and the Rubin Family Stock Trust, pursuant to which the Company will sell its subsidiaries to Medical Diagnostic Innovations Limited (“MDI”). Medical Diagnostic Innovations Limited is a company incorporated under the laws of the United Kingdom and Wales which was formed by the management and employees of the Company’s subsidiaries, including, Mr. Graham Cooper, our CEO and Martin Thorp, our CFO. The parties contemplate the entry into a Stock Purchase Agreement, pursuant to which MDI will acquire all of the issued and outstanding share capital of the Company’s subsidiaries. The parties also contemplate that the proceeds of the sale will be utilized to provide partial settlement of the outstanding amounts owed to the Loan Note Holders.

On December 18, 2007, the Convertible Debenture was assigned to Triumph Small Cap, Inc. (“Triumph”) pursuant to the terms of the Purchase and Assignment Agreement (the “Assignment Agreement”) among, Montgomery, Triumph and the Company. The Assignment Agreement became null and void on February 16, 2008 due to the fact that the transactions contemplated by the Share Purchase Agreement dated December 18, 2007 by and among, In Veritas Medical Diagnostics, Inc., Medical Diagnostic Innovations Ltd. (“MDI”), IVMD (UK) Limited, and Jopejo Limited were not consummated on or prior to February 16, 2008.

Management believes that this matter will be resolved, prior to further action being taken, to enable the planned sale of IVMD (UK) Limited and Jopejo Limited to MDI to progress in line with previously announced plans and agreements and are currently facilitating discussions between MDI and Yorkville to that end.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

EXHIBITS

	31.1	Certification by Graham Cooper, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification by Martin Thorp, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1	Certification by Graham Cooper, President and Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	32.2	Certification by Martin Thorp, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	IN VERITAS MEDICAL DIAGNOSTICS, INC.

Date: March 14, 2008	By:	/s/ Graham Cooper
		Graham Cooper Chief Executive Office




	By:	/s/ Martin E. Thorp
		Martin E. Thorp Chief Financial Officer

Market Data

News

Trading Tools

Markets

Discover

Hot Features

Follow Feed

Options Flow

Monitor

IVME In Veritas Medical Diagnostics Inc (PK)