Immunosyn Corporation
(A Development Stage Company)
Notes To Financial Statements

Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Background

Immunosyn Corporation is a Delaware corporation formed August 3, 2006 and headquartered in La Jolla, California that granted an exclusive worldwide license to market, distribute and sell a biopharmaceutical drug product, currently referred to as SF-1019, for treatment of Chronic Inflammatory Demyelinating Polyneuropathy (“CIDP”), diabetic neuropathy and diabetic ulcers from an affiliated company, Argyll Biotechnologies, LLC (“Argyll Biotech”).

Cash and Cash Equivalents

For purposes of the statement of cash flows, Immunosyn considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Long-Lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying amount is not recoverable, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its fair value.

Income Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amount of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Stock Options

Immunosyn accounts for stock options using the fair value method. Fair value is determined at the date of grant for employee options and at the date at which the grantee’s performance is complete for non-employee options. Compensation cost is recognized over the vesting period based on the fair value of the options. The fair value of the options is calculated using the Black-Scholes option pricing model.

Basic and Diluted Net Loss per Share

Basic and diluted net loss per share calculations are presented in accordance with Financial Accounting Standards Statement 128, and are calculated on the basis of the weighted average number of common shares outstanding during the year. They include the dilutive effect of common stock equivalents in years with net income. Basic and diluted loss per share are the same due to the absence of common stock equivalents.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the

reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Immunosyn does not expect any recent accounting pronouncements to have a material effect on its financial position or results of operations.

Note 2. GOING CONCERN UNCERTAINTY

The accompanying financial statements have been prepared assuming that Immunosyn will continue as a going concern. Immunosyn was formed in August 2006 with an initial source of financing from issuance of common stock and an advance from an affiliate. As shown in the financial statements, Immunosyn had an accumulated deficit of $155,763 and a working capital deficit of $145,405 as of December 31, 2006 which is considered insufficient to fund operations over the next 12 months. Management is trying to raise additional capital through sales of common stock as well as seeking financing from third parties. These conditions raise substantial doubt about Immunosyn’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 3. LICENSE RIGHTS

Grant of Rights

Under the terms of the license agreement executed on September 28, 2006, Immunosyn was granted the exclusive worldwide right to market, distribute, sell and promote SF-1019 for treatment of CIPD, diabetic neuropathy and diabetic ulcers by Argyll Biotech, in exchange for 147,000,000 shares of the common stock of the Company. Argyll Biotech also licensed its trademarks and granted Immunosyn a right of first offer to enter into additional license agreements for other uses of SF-1019 and its variants and cognates. Argyll Biotech purchased a group of patents for $5,000,000 and licensed one of those patents to Immunosyn. Also, during the first five years of the term of the license agreement, Immunosyn has the right to enter into partnering arrangements with Argyll Biotech for development of other novel drug treatment products.

Development and Regulatory Matters

Argyll Biotech anticipates that it will commence clinical trials and studies of SF-1019 and prepare and submit all filings required for regulatory approval of that product for treatment of CIPD, diabetic neuropathy and diabetic ulcers, both in the United States and in other countries that are targeted for distribution and sale of the product. Argyll Biotech is required to submit periodic written reports to Immunosyn to document its efforts toward procuring such regulatory approval, as well as clinical budgets and plans for each year during which development efforts are conducted. Argyll Biotech retains full responsibility for preparation and implementation of all trial protocols and regulatory activities and for all costs associated with those activities.

Distribution and Promotion

Immunosyn assumes full responsibility to promote and sell SF-1019 for its approved uses. To accomplish this, Immunosyn plans to develop a sales force, and an order processing and distribution network for each country in which regulatory approval of SF-1019 is granted. Immunosyn plans to develop full marketing plans for each such country, although Argyll Biotech will retain a right to participate in all marketing and promotion activities. Each party is responsible for its own costs associated with these activities.

License Fees

As consideration to Argyll Biotech for the rights granted to Immunosyn under the agreement, Immunosyn issued 147,000,000 shares of common stock to Argyll Biotech. If and to the extent the proceeds received by Argyll Biotech from the disposition of such shares of Immunosyn’s common stock issued are insufficient to fund Argyll Biotech’s budget for obtaining regulatory approval for sale of SF-1019 in the U.S and U.K, Immunosyn will be required to pay a royalty to Argyll Biotech equal to three and one-half per cent (3-1/2%) of Immunosyn’s gross receipts from sales of SF-1019 until Argyll Biotech’s development costs have been reimbursed in full.

Payments and Reports

Argyll Biotech is not obligated to provide any accounting for its use of proceeds, nor does Immunosyn have any audit rights to inspect Argyll Biotech’s use of the license proceeds. Immunosyn is required to submit periodic sales reports to Argyll Biotech, which will be utilized to determine the amount of royalties that are payable, if any, to complete payment of the license fee.

Manufacture and Supply

Argyll Biotech retains responsibility for manufacturing and supplying all of Immunosyn’s requirements of SF-1019. Argyll Biotech plans to sell quantities of the product to Immunosyn at a price per dose that is below the anticipated market or reimbursement price per dose of the product. The exact product price is not specified in the license agreement, and will be the subject of future negotiations once Argyll Biotech’s cost of production is determined. Argyll Biotech shall also confirm through testing and other programs that the commercial quantities of SF-1019 that it manufactures are fully compliant with all manufacturing and laboratory standards applicable to drug products which are intended for use in humans.

Ownership; Patents and Trademarks

Argyll Biotech retains full ownership of its intellectual property, including intellectual property that is jointly-developed by the parties. Argyll Biotech must take reasonable steps to protect its intellectual property from third-party infringement, and to defend Immunosyn against charges of infringement that refer, relate or pertain to Immunosyn’s marketing, sale and distribution of SF-1019.

Publication and Confidentiality

Argyll Biotech and Immunosyn must collaborate on all publications of scientific or medical reports relating to either company’s business, operations, research and development or clinical trial results.

Recall and Indemnification

Argyll Biotech retains full responsibility for costs and activities relating to any recall of SF-1019, and is required to defend, indemnify and hold Immunosyn harmless for, from and against damages associated with those recalls.

Term and Termination

The license agreement is in full force and effect for as long as any patent coverage remains in place for SF-1019 in any country. Either party may terminate the agreement only on account of an uncured material breach by the other party. Immunosyn may terminate the agreement if a non-rebuttable regulatory or patient safety issue is raised, in which event all remaining license fee obligations will immediately be cancelled. Any fees paid prior to termination are non-refundable.

Valuation

The license rights are being recorded at Argyll Biotech’s cost basis of the underlying patents licensed to Immunosyn due to Argyll Biotech being a related party.

Note 4. ADVANCES FROM AFFILIATES

Immunosyn was advan ced $140,591 from Argyll Equities, LLC who together with an affiliated company, Argyll Biotech, owns 60% of Immunosyn’s common stock. These advances are unsecured and will be repaid on demand. No interest expense was accrued.

Note 5. STOCKHOLDERS’ EQUITY

Stock Options

Immunosyn has adopted a stock option plan for employees, outside consultants, and directors. There are 5,000,000 common shares available for grant under the plan. The plan allows for incentive options with exercise prices of at least 100% of the fair market value of Immunosyn’s common stock and nonqualified options with exercise prices of at least 85% of the fair market value of Immunosyn’s common stock.

Immunosyn accounts for stock options using the fair value method. Fair value is determined at the date of grant for employee options and at the date at which the grantee’s performance is complete for non-employee options. Compensation cost is recognized over the vesting period based on the fair value of the options. The fair value of the options is calculated using the Black-Scholes option pricing model.

No options have been granted as of March 9, 2007.

Note 6. COMMITMENTS AND CONTINGENT LIABILITIES

Pursuant to a subpoena dated January 20, 2006 issued by the Securities and Exchange Commission to an affiliate of Argyll Biotech in proceedings captioned In the Matter of Directors Financial Group, Ltd. and In The Matter of Prime Bank Securities , and pursuant to subpoenas issued by the SEC to affiliates of Argyll Biotech on March 30, 2006 and to Immunosyn on December 15, 2006 in a proceeding captioned In The Matter of The Argyll Group, LLC , Immunosyn and its affiliates have been asked to produce all documents concerning a wide variety of topics including many related directly to Immunosyn. Immunosyn and Argyll Biotech’s affiliates are actively cooperating with the SEC and producing documents responsive to these subpoenas.

On or about July 27, 2006, Daval International Limited filed suit in the United Kingdom, in the High Court of Justice, Chancery Division, against Argyll Biotech and five of Argyll Biotech’s research scientists seeking an injunction and damages based on allegations of breach by the scientists of confidentiality agreements with Daval and conspiracy by Argyll Biotech to wrongfully disclose and use Daval’s trade secrets. Argyll Biotech is investigating the merits of the suit and evaluating its defenses on the basis that, among other grounds, Argyll Biotech’s product and method of producing SF-1019 is fundamentally different than that used by Daval.

Immunosyn has been provided with rent-free office space for two executive offices under a monthly oral agreement with no specific term from its affiliate and shareholder, Argyll Equities LLC. It is uncertain how long Argyll Equities will continue providing office space or on what terms space will continue to be provided to Immunosyn in the future. At present, Immunosyn does not require dedicated office space.