E MERGING G ROWTH R ESEARCH , LLP

Initial Report
Human BioSystems
Rating: Speculative • Human BioSystems is targeting the multi-billion dollar market opportunities for the

OTCBB: HBSC preservation of human blood platelets and organs for transplantation. The company
has seen good successes thus far with its patented, proprietary technologies and is
currently moving toward additional trials.

• Over the past few decades there have been few advances in the technology for blood
Joseph Noel
platelet storage. Each year, platelets worth hundreds of millions of dollars are
jnoel@emerginggrow.com discarded after the maximum shelf life is reached. The company’s proprietary
Emerging Growth Research technologies offer a way to increase the shelf life, potentially saving significant sums
San Francisco, California for the worldwide healthcare industry.
925.922-2560
• The recent failure of a major study targeted at increasing the shelf life of blood
platelets has focused additional attention on this issue and has shown the healthcare
industry the significant cost savings that can be gained by even moderate increases in
platelet shelf life.

• Organ transplant rates are on the rise as are the recipient waiting lists. The need for
kidneys is especially severe. Organs also have a very limited window of viability and
the healthcare industry is actively seeking way to improve shelf life in order to reduce
Analyst Certification
deaths of those on the waiting lists and to reduce costs. The company’s technologies
I, Joseph Noel, hereby
certify (1) that the views show strong promise relative to these areas.
expressed in this research
company report accurately ♦ While highly speculative, shares of Human BioSystems are likely to see significant
reflect my personal views price appreciation as trials are successfully completed and as the company moves
about any or all of the
toward FDA and other government approvals.
subject securities or issues
reflected in this company
report, and (2) no part of my
compensation was, is, or Market Data Financial Summary
will be directly or indirectly
related to specific Market Cap (MM) $1.3 Revenue FY 09E (MM) Pre-
recommendations or views Shares Outstanding (MM) 136 Revenue
expressed in this company Float 121 Cash end of Last Quarter (MM) Nil
report. Dividend Yield n/a Total Assets (MM) Nil
52-Week Range $0.01-$0.14 Long-Term Debt (MM) None
Shareholders Equity (MM) Negative

July 15, 2008

Please see important disclosures, including analyst certification

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 HUMAN BIOSYSTEMS

HUMAN BIOSYSTEMS
H

U Executive Summary savings that were available if only a two day extension in platelet life
could be achieved.

M Human BioSystems holds a set of meaningful patents relating to

Human BioSystems has developed a proprietary solution and protocol for
the preservation of blood platelets and human organs. The
the storage of blood platelets, which early testing indicating effective
A company is nearing completion of its platelet preservation product
storage up to 10 days and possibly longer. The company is working to
and early test results appear to be very encouraging. We believe
N the company could be ready to begin marketing its products to the
finalize testing and has started the process towards receiving the required
approvals to market the technology to the healthcare industry.
industry in 2010.

The company is also targeting the market for preservation of human

The worldwide market for human blood platelet transfusions is
B estimated to be worth billions of dollars per year. Blood platelets,
organs. Organ transplantation rates are rising throughout the Western
world as are waiting lists for available organs. The demand for
which provide for the very important blood clotting function, are
I transplanted organs continues to outstrip the supply resulting in thousands
derived by processing donated human blood into its individual
of deaths per year of individuals awaiting transplant. Human BioSystems
components. The platelets derived after processing are stored for
O has developed several proprietary technologies that could potentially
later use by patients who have depleted platelet levels due to a
change this dynamic by allowing for increased storage time of organs
S variety of medical conditions, with the majority of donated
prior to transplantation.
platelets being used by chemotherapy patients. Many patients
Y undergoing radiation treatment, organ and bone marrow transplant Our research clearly indicates there is a significant need for technologies
procedures also often require platelet replacement. to extend the life of platelets to be used for later transfusion and we
S
believe the healthcare industry, particularly within the United States,
Blood platelets had a very limited shelf life due to an extreme
could rapidly implement an FDA approved technology, potentially saving
T intolerance for temperature fluctuations and susceptibility to
hundreds of millions of dollars per year. Over the past 20 years the rate
bacterial growth. Government regulators generally require blood
E platelets to be stored for 48 hours so that any bacteria present in the
of organ transplantation has risen significantly, with kidney transplants
accounting for the vast majority of the market. With aging demographics
sample will have sufficient time to reach detectable levels so that
M throughout the Western world and a rapidly advancing diabetes epidemic,
the sample can be cleared for usage. This 48-hour waiting period
demand for kidney transplantation is expected to rise meaningfully over
substantially cuts into FDA mandated five day shelf life limitation,
S the next 10 years. Kidney transplantation continues to be mainly a local
creating an effective useful period of only three days. Within
affair due to issues with transporting the organs from the donor's location
Western Europe and Japan these time frames are even shorter. Due
to the recipient's location. Even modest increases in the shelf life of
to the extremely short time frames involved in platelet storage it is
transplantable kidneys would allow the medical community to perform
R estimated that several billion dollars of platelets are destroyed each
enhanced donor-recipient analysis that would reduce organ rejection rates
year.
E and save lives. Similar increases in survivability would be gained relative
Storage methodologies for blood platelets have changed very little to the smaller markets for heart, lung and other organ transplantation.
P over the past few decades. In 2007, the FDA allowed two
While clearly a highly speculative stock, shares of Human BioSystems
companies to conduct a large scale study into increasing the five
O day maximum holding period to seven days. The study was a
could see significant price appreciation as the company's technologies
continue to advance. We believe the company's market opportunity is
significant failure and was terminated shortly after it began after it
R worth hundreds of millions of dollars per year should the company's
was determined there was a very high probability the bacterial
technology proved commercially viable. We are expecting the company
screening process was seriously compromised. We believe the
T to soon provide the market with additional information relative to how the
study had a positive effect in that those healthcare facilities
FDA expects it to proceed toward human trials for both the platelet and
involved in the study were able to realize the significant cost
organ preservation markets.

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Introduction to Human BioSystems

Human BioSystems was founded in early 1999 after many years of extensive
research conducted by prominent members of the scientific community. The
company, which trades under the stock symbol HSBC, is currently perfecting
its core technologies targeted at the preservation of human organs and other
biomaterials for transplantation.

Company’s Focus is on Blood Platelet and Organ Preservation

The company is concentrating on two main markets. The first, and the most
important relative to near-term business prospects, is a technology that extends
the shelf life of blood platelets. Platelets, which are also known by their
formal name of thrombocytes, are the cells circulating in the blood that are
primarily involved in the mechanics of forming blood clots, but also perform
other functions. A variety of medical conditions can result in a low platelet
count, a condition which physicians call thrombocytopenia. When such a
condition exists normal clotting of blood is not possible, which could lead to
severe blood loss upon injury or other trauma. Platelets, while vital to the
function of blood clotting, are also important because they potentially
modulate the inflammatory process by interacting with other types of blood
cells and additionally provide some other more minor functions. Please see
Figure 1 for a photo of thrombocytes, (human platelets), leukocytes (white
blood cells), and RBCs (Red Blood Corpuscles).

Figure One Human Blood Cells (left, platelets; top white blood cell; bottom right red blood cell)
Source: American Medical Association

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Certain types of medical patients, those with cancer undergoing chemotherapy

for example, are closely monitored to determine the side effects of various
treatments and medications. One of the potentially serious side effects of
chemotherapy is a severe reduction in the number of platelets circulating in the
blood. When a blood test determines that the platelet count has fallen below a
specified level, donor platelets are introduced into the blood stream via a
transfusion. Other types of medical patients that may require platelet
replacement include those undergoing radiation treatment, organ
transplantation, bone marrow transplants, or cardiac surgery.

While some of the blood collected during the donation process is preserved in
its whole form in order to be used for direct transfusion into other people, a
large percentage of this blood is processed via a centrifuge, which breaks the
blood down into its individual components, such as, red blood cells, plasma,
and platelets. These separate components can then be used to benefit many
different patients with a variety of different diseases or conditions.

Please see Figure One, which shows the breakdown of the components of
whole blood.

Figure Two Main Components of Human Blood Source: Adams Labs, Inc.

Whole blood and its individual components have limited shelf life and must be
used within a specific amount of time in order to ensure patient safety.
Typically, blood platelets used for transfusion are used within a few days of
donation with five days being the traditionally accepted maximum before the
platelets must be discarded. Because of this limited shelf life, blood
processing and platelet replacement is mainly a local business with transfusion
and processing of blood product usually occurring in the same general
geographic area where the recipient patient is located. Having many local
blood processing centers is very expensive for the healthcare industry and for
many years there has been extensive research into methodologies to improve

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the shelf life of blood and blood related products in order to reduce these costs
and to provide better patient care.

The issue of the shelf life of blood, blood products and platelets is more than
simply a cost issue, but also one of saving human life. During periods of mass
casualties from events natural disasters, such as the recent earthquakes in
China and the tsunamis in southern Asia and during times of war, there are
often severe shortages of blood and blood products. The implementation of
technologies that would allow for long-term storage of these products to be
used during times of peak demand would have a significant positive impact on
survivability rates and reduce suffering.

For the past few decades the normal method to preserve blood platelets for
later donation has been to store the platelets in blood plasma. This method of
preservation has seen little advancement over the past 30 years. Up until very
recently, within the United States, after approximately 5 days, which is the
shelf life mandated in 1986 by the Food and Drug Administration (FDA),
blood banks, hospitals and clinics simply discard the materials. Typically,
within the European Union and Japan a timeframe of fewer than five days is
very strictly enforced.

The issue of contamination of blood platelets is especially important. Because

platelets cannot generally be refrigerated using normal methods it is relatively
easy for bacterial growth to take hold. Bacterial contamination of platelets
carries the highest risk for transfusion transmitted infections. Mortality rates
for platelet related sepsis, which is a serious medical condition causing a
whole body inflammatory state, occur in one out of every 20,000 to 80,000
transfusions.

In April of 2004, the American Association of Blood Banking issued a

mandate that required a method be performed to limit and detect the presence
of bacteria prior to transfusion. In order to adequately meet this requirement,
blood banks need to hold donated blood for 48 hours after donation to allow
for any bacteria that may be present in the blood to multiply into detectable
levels. After this holding time the blood can then be tested and only then can
suitability for transfusion be determined. Because of this requirement, the
effective utilization time or blood platelets in reality is only three days.

Because of this very short three-day window for usage of blood platelets, it is
estimated that industry-wide approximately 15% to 25% of all processed blood
platelets are ultimately discarded, costing the healthcare industry throughout
the United States, Europe, and Japan well over $1 billion per year. While no
accurate estimates currently exist, it is likely the worldwide figure could be
close to $2 billion per year, or higher.

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For many years there has been a desire to increase the shelf life of platelets
beyond the FDA's mandated five day standard and beyond the even shorter
periods generally enforced throughout the European Union and Japan. While
technologies to extend platelet life beyond 14 days are still thought to be well
off into the future, it is becoming increasingly clear that technologies to extend
the shelf life to 10 to 14 days are extremely viable and will likely be coming to
the market over the next few years.

Approximately, 10 million platelet transfusion units are given each year

throughout the world, which represents a worldwide market of between $20
billion and $30 billion per year, depending on the methodologies used for
calculation.

The ability for hospitals, clinics and blood banks to even moderately extend
the life beyond the five day US FDA mandated platelet shelf life would yield
significant cost savings for the industry and a huge opportunity for the
company or individuals that would be able to supply such technology to the
industry.

In 2007 the US FDA approved a longer storage of seven days for certain types
of blood platelets products in very specific cases under a study called
PASSPORT, which stands for Post Approval Surveillance Study of Platelet
Outcomes, Release Tested. The seven day storage required 100% bacterial
screening and participation in a surveillance study to help evaluate the effects
of the longer holding. Only certain laboratories, hospitals and clinics were
eligible for participation in the three-year study. Under the program donated
products were held only for 24 hours to allow any bacteria that may be present
to reach detectable levels, which effectively provided for a five to six-day long
period of effective usage of the platelets.

The study was voluntarily terminated in early 2008 by the two companies that
conducted the study due to concerns of patient safety. Early interim analysis
of the PASSPORT study, along with the review of other studies, determined
that up to 50% of the bacterial contaminated platelets may escape detection
using the shorter 24-hour holding period. Upon termination of the program all
participants in the study were advised to revert to the normal procedures,
including resumption of the five-day maximum holding.

With the blood industry suffering a major setback relative to the PASSPORT
study it has become increasingly clear among most within the industry that a
reduction in the 48 hour holding period for blood is not a viable solution to
extending the period for which platelets can be viably transfused into patients.
As a result, many within the industry believe the alternative will be to find
technologies that will significantly the timeframe for viability of the platlelets.

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Even though the PASSPORT study was a failure, in our opinion, there was
clearly a positive outcome in some regards. Those hospitals and clinics that
had participated in the study were able to demonstrate the significant cost
savings available to them as a result of only a two-day increase in the standard
platelet holding period. We believe the desire for the industry to renew these
cost savings is significant and will likely make it easier for companies with
technologies to extend the life of blood platelets to be taken seriously in the
future.

Organ Preservation and Transplantation

Currently, within the United States alone there are more than 100,000 men,
women and children waiting for organ transplantation. Approximately 75% of
these people are waiting for a kidney transplant. Generally speaking a person
with malfunctioning kidneys can be kept alive for a considerable amount of
time due to advances in dialysis treatments. Therefore, it is quite common for
such people to remain on the waiting list for an extended period of time. The
growing diabetes epidemics in North America and within the European Union
are making kidney failure much more prevalent leading to an even greater
demand for donating kidneys. The waiting list for donated livers is the next
longest with more than 15,000 patients in the U.S. currently on the list,
followed by more than 2500 patients waiting for hearts, approximately 2,000
patients waiting for a lung and around 1500 patients waiting for a pancreas.
The struggle for these people to continue their lives depends on a complex and
technologically advanced organ transplant allocation system that links patients
with organs donated by strangers. Please see Figures Three and Four, which
shows how the waiting list has grown significantly over the past few years and
the number of organ transplants versus the waiting list.

Figure Three The Growing Transplant Waiting List Source: Lifesharers

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Figure Four Transplants Performed Versus the Waiting List Source: Lifesharers

During the 1980s, the United States federal government passed the national
organ transplant act, which established the organ procurement and transplant
network, a national organ sharing system to guarantee the fairness in the
allocation of organs for transplant. Under the act, the Department of Health
and Human Services was authorized to contract for services to ensure fairness
in the organ allocation process. Since 1984 a nonprofit organization called the
United Network for Organ Sharing has served this function for the United
States by maintaining a centralized computer database with all the names of
the patients waiting for a kidney, heart, liver, lung, intestine, pancreas, and
multiple organ transplantation. These actions have significantly increased the
level of fairness in organ allocation, by setting up a complex set of waiting list
rules based on medical urgency, blood, tissue and size match with the donor,
among other criteria.

Within the United States and Western Europe there has also been a concerted
effort by government and private entities to increase organ donation. From the
period of 2002 to 2006 alone, the total rate of organ donations was up over
30%. During 2006, the most recent year for which statistics are available, a
total of approximately 29,000 organ transplant operations occurred within the
United States with nearly 80% of the donated organs coming from deceased
donors and approximately 20% coming from living donors. Several recent
studies, including a recent study conducted by the Gallup Organization,
indicate that Americans continue to strongly support the donation of organs
and tissues for transplantation. This clearly shows that there is a significant
trend for an increasing number of Americans to take personal actions to
become personal organ donors.

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Even though there has been significant efforts on the part of both government
and private organizations to ensure fairness in the organ transplantation
process and to increase the pool of available organs for transplantation, severe
shortages still exist. Each year, according to the US Health Resources and
Services Administration, more than 6,000 to 7,000 people die each year within
the United States waiting for a replacement organ that never arrives. Please
see Figure Five for additional information relative to these statistics.

Figure Five Death While Waiting for Organ Transplantation (2006-most recently available data)
Source: LifeSharers

There are several reasons why so many people die each year waiting for organ
transplants. First, is a severe shortage of donated organs. While the rates of
organ donation have increased significantly over the past few years, the pool
of available organs is still relatively small compared to the actual demand. In
order for organ to be useful for transplantation the donor must die in a very
specific manner - usually referred to as brain death where the majority of the
organs continued to function normally until the donor is taken off life support
systems. Such death accounts for less than 1% of all deaths each year,
resulting in only a small pool of available organs for donation. Within the
United States, Canada and the European Union approximately 60% of those
who die in this manner have either previously personally consented to organ
donation or their families consent upon the person’s death.

An additional reason that many people die waiting for organ transplantation is
simply the logistics of transporting the organs from the location where they are
harvested to the location where they can be transplanted. During the donation
surgery and just prior to the removal of the donated organ, ice cold
preservation solutions are flushed into the organ, which starts the process of
preservation. When the organ is removed from the donor's body it is packed in
several layers of sterile containers and cooled with an icy slush mixture, which

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significantly cools the organ but does not actually cause freezing. The
solutions that are currently used mimic the fluid contained within the cells of
the organ itself. While the science relative to how the solution actually works
is not yet proven, it is thought to reduce the amount of damage and limit the
swelling of the organ that would otherwise occur. There have been very few
advances in such procedures over the past few years, with the exception of the
preservation of kidneys. Occasionally, donated kidneys are placed on a special
machine that continuously pumps the preservation solution through the organ.
This procedure is still relatively uncommon, however.

If properly harvested and preserved, using current technologies, donated

organs can remain viable for transplantation for a period ranging from a few
hours too many hours, although transplantation success rates are often
negatively affected as the timeframe increases. The medical community’s
general rules for transportation and storage times are 24 hours for a kidney, 12
to 15 hours for a pancreas or liver, and four to five hours for a heart or lung.

Please see Figure Six for additional information relative to this issue.

Figure Six Human Organ Transport and Storage Times Source: The Scientific Registry

It is widely believed within the organ transplantation related medical

community that the ability to prolong the shelf life of donated organs would
significantly reduce the number of deaths each year of people who were
waiting, but are unable to receive an organ. While in an ideal world, the
industry would have technologies that would enable storage of organs for
weeks or months; such technologies are likely still years or perhaps decades
away. Those who study these issues believe, however, that technologies that
will allow for even modest increases in preservation times will still make a
significant impact on survivability.

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For example, relative to heart transplantations, which must be accomplished

within three to eight hours of removal from the donor, even an increase of a
few hours would make a significant difference. One of the functions that must
occur during the transplantation process is the matching between the donor and
the recipient. Because the timeframe is so very short, the types of donor-
recipient matching are usually limited to only blood type and patient size.
Such a limited matching increases the risk of mismatches between the donor
and the recipient and increases the likelihood that the organ will be rejected by
the donor upon transplantation. If hearts were able to be preserved for even a
few additional hours more advanced donor-recipient matching could be
performed, ultimately decreasing rejection rates, improving transplantation
success rates, reducing costs, and most importantly saving lives.

It is widely thought that some of the biggest gains relative to organ

preservation will likely be made relative to kidneys. With a significant
number of patients on the waiting list for kidney transplants and the
expectation that the number of kidney transplants will soar over the coming
years as the US and Western European baby boom generations age, significant
research is currently underway to increase the shelf life of donated kidneys.

Better organ preservation technologies would have a significantly positive

impact on the organ related medical community. Because of the very short
time frames for successful transplantation the geographic area for the
utilization of donated organs is seriously restricted. Often times, otherwise
viable organs are discarded simply because rapid transportation was not
available. Increasing organ survivability time could potentially change the
process of organ transplantation and perhaps someday create a worldwide
organ donation opportunity, which could save a significant number of lives
each year.

Organ transplantation is a very expensive process. One of the reasons for

these very high costs is that the vast majority of organ transplants are done on
an emergency basis, which adds significantly to overall costs due to higher
labor, transport, and facilities costs. If better preservation technologies
existed, transplantation surgeries could be planned, likely meaningfully
reducing overall costs.

The preservation of whole organs is a complex issue. Organs cannot simply

be frozen for reuse because the freezing and thawing process significantly
damages the tissues. One of the significant issues is that technologies do not
currently exist that will allow rapid enough freezing of the tissues. Current
cryo-preservation techniques allow for the freezing of tissues at only 1°C per
minute, which is significantly too slow to prevent the formation of ice crystals
in the tissues. It is the formation of these ice crystals that is one of the major

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problems preventing the advancement of the science.

Organs are mainly made of water. When water freezes it significantly

expands, which causes severe damage to the tissues and small blood vessels.
As frozen organs are re-warmed tiny ice crystals clump together and act as tiny
knives that cause additional damage to the tissues. The issue of organ damage
relative to this freezing and thawing process is one that has been heavily
researched over the past 50 years, but few successes have been realized.
Current state-of-the-art research into organ preservation is currently focusing
on the methods to reduce this freezing related damage.

Human BioSystems Solutions

Human BioSystems has developed several technologies to extend the life of

blood platelets and organs for transplantation. The company has been granted
five patents related to these technologies, including the method and apparatus
for preserving biological materials, platelets, and donor organs. Included in
this portfolio is a patent for the preservation of blood platelets with citrate and
on the compositions, methods and apparatus for preserving platelets.

The company's technologies suppress bacterial growth while maintaining

platelets and organ functionality. The company's proprietary preservation
systems consist of non-toxic liquid solutions and proprietary protocols for the
storage of platelets and organs. The technologies utilize both above zero and
below zero preservation methodologies.

The company's initial product emphasis is on a technology that will allow for
the extension from the five-day period for platelet utilization to seven to ten
days. The company's platelet preservation system utilizes a proprietary
process to store platelets in a solution under refrigeration. The process
maintains cell functionality for an extended period of time. Typically,
platelets are highly sensitive to temperature variations and have not been able
to tolerate refrigeration.

In mid 2001 the company filed a provisional patent to cover this improved
platelet preservation methodology and in July of 2002 received his first patent
on the technology and methodologies. In August of 2003, the company filed
an additional patent application covering a more sophisticated platelet
preservation methodology and this patent was approved in May of 2006.
Since this time the company has developed additional technologies, which it
plans on patenting in the near future.

While the company believes that even longer (beyond seven days) storage of
platelets is possible utilizing hydrostatic pressure technology to prevent the
platelets from freezing under sub zero temperatures, the management team
believes that a significant enough market opportunity exists for the currently

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available technology, which extends platelet life to seven to ten days.

The company has seen good results in the testing that has been conducted thus
far. Using the company's proprietary solution and protocol for storage and
testing, the company has indicated that after 24 hours of refrigeration up to
68% of platelets maintained their original disk shaped with up to 13% of
platelets remaining viable after five days of storage. Subsequent tests
demonstrated that up to 78% of platelets stored under refrigeration for a full 10
days survived with 20% maintaining full functionality. Because platelets are
very susceptible to extremes and temperature - either hot or cold - these results
are viewed by most in the blood industry as being highly significant.

Additional testing will be necessary before Human BioSystems will be able to

market its platelet preservation system to the blood industry. The management
team believes this work can be completed by the end of 2009 with full
commercial availability beginning in 2010, pending successful human trials
and FDA approval. The company has already completed tests with two
independent laboratories that specialize in platelet testing and the results thus
far have been positive and well received. It is estimated that human infusion
testing will likely take four to six months to complete upon receiving FDA
approval to proceed with such studies. An alternative for the company would
be to consider conducting human studies outside of the United States, where
regulatory barriers are not as stringent.

The company began research on kidney preservation in 2002 and has since
developed a solution that may allow for preservation for well over 30 hours,
which is well beyond the normal storage and transport period. A major
emphasis at the company will be to target the market for kidney storage, as this
is the most popular transplant surgery in the Western world with a significant
number of individuals on the waiting list. The company's goal is to extend the
shelf life for donated human kidneys for up to 72 to 96 hours at above freezing
temperatures, which will allow the industry to perform vastly superior donor-
recipient matching likely yielding significantly less organ rejection.

The company has conducted studies on rats where they have successfully
transplanted a rat kidney that had been frozen at a temperature of -80°C for a
period of three months using the company's subzero solution. At the end of
2005 the company successfully completed its initial phase of the survivability
study in small animals and will now likely turn its attention to additional
studies using larger animal species, before applying for FDA clearance to
conduct human trials.

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The Management and Technical Team

Management

Harry Masuda

CEO, Director and Co-Founder (64)

Former president and Founder of high tech companies Piiceon, Inc. and HK
Microwave. He successfully negotiated acquisitions for both companies.

David Winter, MD

President (74)

Previously President, GenPharm Intl., Sangstat, Human Organ Sciences and

others. He was also the NASA Director of Life Sciences, where he directed all
medical, biological, and biomedical engineering for the U.S. space program.
Dr. Winter led the development, registration and approval of cyclosporine and
six other major pharmaceutical products while at Sandoz Pharmaceuticals.

Paul Okimoto

Board Chairman, VP and Co-founder (72)

Previously President of Sanhill Systems. Expertise with high tech products in

biological and biomedical fields.

Luis Toledo, M.D., Ph.D.

Chief Medical Officer (64)

Internationally recognized authority on organ transplantation and preservation.

Authored numerous medical journal publications and books.

Larry McCleary, M.D.

Board Member (58)

Board certified pediatric neurosurgeon. He is the founder and Director of

Advanced Metabolic Research Group. Authored many professional medical
publications and has written his latest book entitled The Brain Trust Program
for the general public.

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ADVISORY BOARD

D. Michael Strong, Ph.D.

Operation Director Puget Sound Blood Center and Scientific Director of

Northwest Tissue Center. Received awards from National Institute of Health,
The Northwest Kidney Center, Society of Cryobiology, American Association
of Tissue Banks and many others.

Ed Snyder, M.D., F.A.C.P.

Director of Yale-New Haven Hospital Blood Bank. Immediate Past President

of American Association of Blood Banks. Professor of Laboratory Medicine at
Yale University School of Medicine.

Jose A. Venzor

A successful international businessman bringing his wealth of knowledge and

diverse experience resources to HBS. He was instrumental in the formation of
the first blood banks in Mexico and in other Latin American countries and was
involved in the formation of the first HMO in Illinois. He owned and managed
medical centers in the Chicago area and founded J.V. Limited, a real estate
development company.

Vincent A. Yalon, B.S., M.P.H.

Past President of the Blood Bank of California. Currently Administrator,

Stanford Medical School Blood Center with a staff of over 250.

Bryan Flaherty

Vice President of Sales and Marketing within Kentec Medical, a major

distributor for medical devices and blood filtration products.

George Rubissow, B.S., M.S., Ph.D.

Businessman, writer, composer and inventor. Co-founder of Rubissow-Sargent

Wine Company. Received B.S. and M.S. from Massachusetts Institute of
Technology and Ph.D. in Biophysics from University of California, Berkeley.

Richard Wells, Ph.D.

Dr. Wells has extensive experience in product development, both in industry

and academia, in the fields of Pharmaceuticals, Molecular Biology and
Cosmetics.

Competition

There are quite a few significantly sized corporations involved in areas related

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to blood, platelet and organ preservation. One of the biggest competitors

relative to platelet preservation is LifeCell Corp., which develops and markets
tissue repair related products for use in reconstructive and orthopedic surgical
procedures. With extensive experience in tissue preservation for use in
surgical procedures, this company is also believed to be working on platelet
preservation technologies and will need to be closely watched relative to
developments in this area. Another potential competitor relative to platelet
preservation is Cerus Corporation, which has developed various technologies
relating to viral inactivation for platelets and other blood products, but it is
believed that Cerus is not actively seeking US FDA approval and is not
planning on targeting the US market relative to its technologies

The management team of Human BioSystems believes its platelet storage

technologies are superior in that they do not make use of toxic chemicals to
preserve platelets and organs. If toxic chemicals are used in the preservation
process they must later be removed, which is expected to be a costly process.

Relative to the organ transplantation market, there are a variety of solutions

available on the market today that are used for organ storage. The company's
management team believes its products are vastly superior to current solutions
that are on the market today and believes its recent test results easily confirm
these claims. Relative to the future market for longer term organ storage via
freezing, the company believes its initial successes have not been duplicated
by any competitor in the industry.

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Investment Risk Factors

Resistance to Change in the Healthcare Industry

While it is apparent that the disposal of old blood platelets costs the healthcare
industry hundreds of millions of dollars per year, it is a cost that has been built
into the overall cost structure for many years. Just because a company is able
to demonstrate that it is able to save an industry money is not a guarantee that
the money-saving products will be implemented. The healthcare industry is
often slow moving and Human BioSystems could complete development of its
technology and still face significant lead times for implementation.

Government Regulation

This company will need FDA and/or other government approvals to market its
products to hospitals, blood banks and clinics. The approval process is often
lengthy and outcomes are uncertain.

Additional Capital Likely Required

The company still has development work to complete and will need to undergo
a potentially lengthy process of receiving FDA and other government
approvals before its products can be marketed to the industry. We believe it is
likely the company will need to raise additional capital in order to complete
the product development and approval processes.

Competition

The market for blood platelet preservation is a significant one and one that is
likely to attract a great deal of competition. Several other companies are
currently working on technologies for this purpose and there can be no
assurance that Human BioSystems will emerge as an industry leader. Our
initial research into the industry, however, does indicate that the company's
products have significant potential. With the proper direction and capital we
believe the company could develop an early industry-leading position.

Dependence on Key Employees

As is the case with many biotech-related companies, product development is

highly dependent on a small team of highly educated scientists. Retention of
these individuals is vital with the loss of any one potentially resulting in
significant product development delays.

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Our Opinions and Recommendations

We believe a very viable market exists for technologies that will allow
hospitals, clinics, and blood banks to even marginally extend the life of
platelets to be used in transfusions. The recent implementation and subsequent
failure of the PASSPORT study, which allowed for a very modest two day
increase (from five days to seven days) was a highly significant event for the
blood industry within the United States. The fact that the US FDA approved
the study, in our opinion, showed that there is a significant need to address the
issue of limited shelf life of donated platelets. Additionally, those healthcare
facilities that participated in the study were able to demonstrate significant cost
savings as a result of only a two day increase in allowable platelet shelf life.
We believe the industry's experience with the PASSPORT study has shed
additional light on the issue of platelet storage and will likely make it easier for
new technologies to be trialed and ultimately implemented by the industry.

We see clear evidence that the market for viable technologies in this area are
easily worth hundreds of millions of dollars in the US alone in likely two or
three times this amount on a worldwide basis.

We believe the market for organ preservation is also viable with the market for
kidney preservation being significantly larger than probably all of the other
markets combined. The rate of kidney disease continues to increase in the
United States, Western Europe and Japan partially as a result of the growing
diabetes epidemic being experienced in these areas. As a result of these factors
and due to the aging demographics of the Western world, all of the organ
donation related agencies and foundations are forecasting rising rates of kidney
transplantation over the coming years. Kidney transplantation continues to be
a localized industry due to the limitations of survivability of the organ after
harvest. Technologies that are able to extend this survivability by even a
marginal amount are likely to be highly desirable to the healthcare industry.

One of the factors that we believe is exciting relative to this developing market
opportunity, and to Human BioSystems in particular, is that even modest
increases in this survivability of both platelets and human organs are likely to
yield significant dividends both in terms of human survivability and in cost
savings to the healthcare industry.

While it still appears that long-term storage of human blood, blood products
and organs is still many years, or perhaps decades away, it appears that long
awaited advancements in short-term storage technologies are on the immediate
horizon. We believe companies that are able to capitalize on this opportunity
stand to make considerable sums of money over the coming years.

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We do see strong opportunities for Human BioSystems as it appears to us its

technologies are state-of-the-art and in significant demand by a healthcare
industry in the United States that is desperately seeking ways to reduce costs.
Blood platelet collection, storage and transfusion costs are excessively high in
the European Union and Japan as government regulations allow for very short
platelet storage periods. Technologies that are able to extend this storage
period even only modestly are likely to be of significantly value to healthcare
providers in these geographic areas as well.

Investors in Human BioSystems also have some upside investment opportunity

due to the company’s partial ownership in a company called Environmental
BioMass Energy, which is exploring the market for renewable energy utilizing
biomass to produce energy.

While shares of Human BioSystems are certainly highly speculative, we can

easily see a scenario where significant stock price appreciate can be achieved.
Over the next few quarters we will be looking for the company to make
additional announcements about large animal studies relative to organ
transplantation and to provide additional information relative to what the US
FDA will require for the next steps toward human trials and approval relative
to the blood platelet market. Should these milestones be reached with positive
results we would expect shares of the company to react very positively,
potentially yielding significant returns for the risk adverse investors who had
accumulated early equity positions in the company.

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Analyst and Other Important Disclosures

Analyst Certification - I, Joseph Noel, hereby certify (1) that the views expressed in this research company report accurately
reflect my personal views about any or all of the subject securities or issuers referred to in this company report and (2) no part
of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this
company report.

Analyst:

Joseph Noel is a 29-year veteran of small cap technology and healthcare investment industries. Joe was recently a senior
analyst at Pacific Growth Equities, LLC, where he tracked small cap stocks and the advanced industrial sector. Prior to Pacific
Growth, he covered both the telecommunications equipment and services industries at Hambrecht & Quist and was employed
by Gartner/Dataquest as a communications industry analyst. Before becoming an analyst, Mr. Noel received solid industry
experience at a number of telecommunications carriers, including MCI, where he was responsible for the frame relay product
marketing launch; and British Telecom, where he was involved in strategic planning for the company’s Internet access
service. He was also employed by various Bell Operating Companies in both marketing and technical roles for nearly ten
years. Mr. Noel received his MBA in finance from Wake Forest University, and holds a BS in business and economics. A
four-time Wall Street Journal All-Star Analyst, Joe specializes in emerging growth companies in the communications, Internet
and advanced industrial equipment sectors.

The coverage analyst uses a relative rating system in which stocks are rated as; BUY or SPECUATIVE, SELL, or HOLD.

Stock Ratings:

BUY or SPECULATIVE - the stock is expected to outperform the unweighted expected total return of the sector over a 12-
month investment horizon.

SELL - the stock is expected to underperform the unweighted expected total return of the sector over a-12 month time horizon

HOLD - the stock is expected to perform in line with the unweighted expected total return of the sector over a 12-month
investment horizon.

______________________________________________________________________________________________________________________________

Information, opinions, or recommendations contained in this research report are submitted solely for informational purposes. The information used in statements of fact made has been obtained from sources
considered reliable, but we neither guarantee nor represent their completeness or accuracy. Such information and the opinions expressed are subject to change without notice. This research report is not intended
as an offering or a solicitation of any offer to buy or sell the securities mentioned or discussed. The firm, its principles, or the assigned analyst may or may not own or trade shares, options, or warrants of this
covered company. Emerging Growth Research, LLP, has received, or will receive, monetary compensation for the production of this report and other related services. Additionally, the analyst responsible for
the production of this report may common stock and/or warrants in the subject company. The views expressed in this research company report accurately reflect the analyst’s personal views about any or all of
the subject securities or issuers referred to in this company report, and no part of the analyst’s or the firm’s compensation was, or will be directly or indirectly related to the specific recommendation or views
expressed in this report. Opinions expressed herein reflect the opinion of Emerging Growth Research, LLP and are subject to change without notice. We claim no responsibility to update the information
contained in this report. Investors should consider the suitability of any particular investment based on their ability to accept certain levels of risk, and should not rely solely on this report for information
pertaining to the company covered. The material in this document is intended for general circulation only and the recommendations contained herein do not take into account the specific objectives, financial
situation, or particular needs of any particular person. An investor should consult his investment representative regarding the suitability of this investment and take into account any specific investment
objectives, financial situation, or particular needs before he or she makes a commitment to purchase the shares of this or any other company's stock. No part of this document may be reproduced in any manner
without the written permission of Emerging Growth Research, LLP.

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