SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549
                    ----------------------------------

                                FORM 10-KSB

[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the fiscal year ended December 31, 2001

[ ] 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 1-13048


                        HEALTHY PLANET PRODUCTS, INC.
                 --------------------------------------------
                (Name of Small Business Issuer in Its Charter)

            Delaware                                   92-2601764
  -------------------------------                   --------------------
  (State or Other Jurisdiction of                   (IRS Employer
   Incorporation or Organization)                    Identification No.)


  1700 Corporate Circle, Petaluma, CA                   94954
  ---------------------------------------             --------
  (Address of Principal Executive Offices)           (Zip Code)

                               (707) 778-2280
               --------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

     Securities registered pursuant to Section 12(b) of the Exchange Act:

Common Stock, $.01 par value                American Stock Exchange
----------------------------                -----------------------
   (Title of Each Class)            (Name of Each Exchange on Which Registered

     Securities registered pursuant to Section 12(g) of the Exchange Act:

                         Common Stock, $.01 par value
                         ----------------------------
                               (Title of Class)

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

    Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendments to
this Form 10-KSB.  [X]

                                                                 Page 1 of 42
<PAGE>

    The issuer's revenues for its most recent fiscal year ended December 31,
2001 were $2,936,500.

    On March 20, 2002, the aggregate market value of the voting stock of
Healthy Planet Products, Inc., consisting of common stock, $.01 par value (the
"Common Stock") held by non-affiliates of the Registrant was approximately
$608,925 based on the closing price of $.26 per share for such Common Stock on
said date as reported by the American Stock Exchange.

    In making the forgoing calculation, the Registrant has, for calculation
purposes only, included all presently outstanding 31,335 shares of its Series
D Preferred Stock, which is convertible into shares of Common Stock on a
share-for-share basis.

    On March 20, 2002, there were 3,840,584 shares of Common Stock, $.01 par
value, issued and outstanding (exclusive of 31,335 shares of voting Series D
Preferred Stock convertible into 31,335 shares of Common Stock).


DOCUMENTS INCORPORATED BY REFERENCE:  None


                           TABLE OF CONTENTS

PART I                                                              PAGE

    Item  1.  Description of Business.                                3

    Item  2.  Description of Property.                                8

    Item  3.  Legal Proceedings.                                      8

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

PART II

    Item  5.  Market For Common Equity and Related                    9
              Stockholder Matters.

    Item  6.  Management's Discussion and Analysis of Financial       10
              Condition and Results of Operations.

    Item  7.  Financial Statements and Supplementary Data.            12

    Item  8.  Changes in and Disagreements with Accountants on        13
              Accounting and Financial Disclosure.

PART III

    Item  9.  Directors, Executive Officers, Promoters and            13
              Control Persons; Compliance with Section 16(a)
              of The Exchange Act.

    Item 10.  Executive Compensation.                                 15

    Item 11.  Security Ownership of Certain Beneficial Owners and     19
              Management.

    Item 12.  Certain Relationships and Related Party Transactions.   21

    Item 13.  Exhibits, Financial Statement Schedules, and            23
              Reports on Form 8-K.

SIGNATURES                                                            24


                                                                    Page 2 of 42
<PAGE>
                               PART I

Item 1. Business
        --------
Incorporation
-------------

    Healthy Planet Products, Inc. (hereinafter referred to as the "Registrant"
or the "Company") was originally organized under the laws of the State of
California on July 12, 1979 under the name of Carolyn Bean Publishing, Ltd.
On April 12, 1985, the Company effected a domiciliary reincorporation pursuant
to which the Company was reincorporated under the laws of the State of
Delaware, and the California corporate entity was merged into a new Delaware
corporation of the same name.  On August 2, 1993, the Company changed its name
to Healthy Planet Products, Inc.  The Company's executive offices and
warehouse facilities are located at 1700 Corporate Circle, Petaluma,
California 94954, and its telephone number is (707) 778-2280, fax number (707)
778-0307.

Principal Industry in Which the Company is Engaged
--------------------------------------------------

    The Company designs, publishes and markets, throughout the United States
and Canada, a diversified line of cause related, nature and wildlife greeting
cards, note cards, holiday cards, adoption kits, gifts and stationery.  In
response to environmental considerations, the Company has associated itself
through its licensing agreements with various non-profit organizations and
has, since inception, paid over $3,500,000 in royalties to these groups to
further their efforts on behalf of the environment and its inhabitants.

    All of the Company's paper products are produced on elementally chlorine-
free or recycled paper.  The Company publishes and markets over 500 everyday,
occasional and seasonal cards. The Company's products are predominantly
marketed through approximately 110 independent sales representatives to over
4,300 retail sales outlets comprised of card shops, stationery stores, gift,
notion and variety shops, drug stores, book stores, department stores and
miscellaneous chain and retail sales outlets.

    In May 1999, the Company acquired The Evergreen Group? product lines from
KT Holdings, Inc., a privately held company. The primary product is a line of
endangered animal adoption kits marketed under the trademarks Friends of the
Forest? and Friends of the Ocean?. These adoption kits are sold through
multiple channels including specialty retail and gift stores, print catalogs,
the internet, and directly to consumers via direct mail. A portion of the
proceeds of each kit sold is paid as a royalty to a conservation group that
assists in the development of the adoption kits.


                                                                Page 3 of 42
<PAGE>



General Business Developments During Most Recent Fiscal Year
------------------------------------------------------------

    During 2001, the Company continued its efforts to improve its cash flows
and financial position by reducing operating costs and negotiating with its
vendors and creditors.  In the first quarter of 2001, the Company started to
purchase most of its inventory outside of the country and fully assembled.
The shift to less expensive international suppliers was made possible by
negotiating shorter lead times for delivery.  During the third and fourth
quarters of 2001, the Company negotiated reduced payments on amounts due to
numerous vendors and other creditors.  Those successful negotiations in
restructuring the Company's debt resulted in a gain of $321,400, or $.08 per
share, which is reported as an extraordinary item.  Payments included a
combination of cash and equipment.  The fair value of equipment transferred to
vendors approximated book value at the date of transfer.

    In October 2001, the Company's Vice President of Sales resigned his
position.  The Company decided not to hire a new national sales manager, but
to restructure its sales department by hiring two new sales executives; one in
charge of East Coast sales the other in charge of the West Coast.  The Company
believes that this restructuring will result more direct and regionally
concentrated sales efforts and will improve the management of outside sales
representatives.  The East Coast position was filled in October, 2001 and the
West Coast position in January, 2002.

    The Company has also entered into two financing transactions with a
related party to obtain working capital in order to sustain operations, when
efforts to attract outside financing were not successful.  In October 2001, a
significant shareholder, The InterGroup Corporation ("InterGroup") made
available to the Company a $300,000 secured line of credit with an interest
rate of 10% per annum to provide working capital for the Company.  Loans made
pursuant to the line of credit are evidenced by promissory notes that mature
on June 30, 2002 and are secured by all of the Company's accounts receivable.
Subject to shareholder approval, InterGroup has the right, but not the
obligation, to convert any outstanding amounts due on the notes to common
stock of the Company at a price equal to 10% above the average trading price
of the Company's common stock for the 30 day period immediately preceding
October 15, 2001.  As of December 31, 2001, the aggregate principal balance of
the notes made pursuant to the line of credit was approximately $270,000.

    Previously, in 2000, the Company borrowed the sum of $500,000 from
InterGroup.  This loan was evidenced by a promissory note secured by all of
the Company's accounts receivables.  The loan, bearing interest at the rate of
13.875% per annum, was due on February 28, 2001.  InterGroup had agreed to an
extension of that note until April 30, 2001 and the Company intends to
negotiate a further extension of that note.  As of December 31, 2001, the
outstanding principal balance on that note was approximately $135,000.  The
Company's Chairman is also the Chairman and a principal shareholder of
InterGroup.

    Subsequent to year end, the Company entered into an amendment and
extension of its facility lease on March 4, 2002.  The original lease was due
to expire on April 15, 2002.  Pursuant to that amendment, the Company
surrendered approximately 16,343 square feet of its 26,331 square foot office
and warehouse facility.  The surrender of a portion of its leased premises is
in furtherance of the Company's efforts to streamline operations and is in
line with the Company's goal to eliminate any in-house assembly and reduce
space requirements.  As a result of that reduction of space, the Company is
expected to realize a savings in rental expense of approximately $94,500 on an
annualized basis beginning April 15, 2002 (see "Item 2. Properties").

                                                                 Page 4 of 42
<PAGE>

    As a result of the depletion of cash reserves, primarily due to recurring
losses, the Company continues to need additional sources of cash to finance
operations.  The Company is actively pursuing both debt and equity financing
that would provide for the Company's financing needs through December 2002.
If the Company is unable to obtain such financing, it could impact its ability
sustain operations. (See Item 6. Liquidity and Capital Resources.) The Company
will also consider acquisitions and other business combinations if considered
to be beneficial to the Company.

    The Company has also been notified by the American Stock Exchange ("AMEX")
that it does not currently meet the Exchange's continued listing standards,
including minimum stockholders' equity requirements.  At this time, it is
expected that the Company will submit a timely plan to AMEX to regain
compliance with its continued listing standards by December 31, 2002.  The
Company makes no assurances that such a plan will in fact be submitted and, if
submitted, will be accepted by AMEX or that the Company will be able to
achieve such compliance.

Products
--------

Source of Product and Arrangement with Photographers and Others
---------------------------------------------------------------

    Published Product
    -----------------

    While the overall concept and design of its published products are
developed by the Company in-house, it principally relies on independent,
unaffiliated photographers to create images for its product lines.  Agreements
between the Company and its photographers apply to specific images submitted
by a photographer and accepted by the Company.  These agreements are exclusive
as to those images, and do not normally cover all of a photographer's works.
The Company utilizes an available pool of 600-700 photographers. It
additionally receives unsolicited submissions from time to time from various
photographers.  When utilizing the work of a particular photographer, the
Company generally makes a one time payment of approximately $300-$400, which
entitles the Company to utilize the particular work for three to five years
without further royalty payments.  No single photographer with whom the
Company has entered into a license or purchase of rights agreement has created
products, which have accounted for 4% or more of the Company's sales in any
year.

    License Agreements
    ------------------

    The Company has entered into licensing agreement with the National
Wildlife Foundation expiring August 31, 2002. The agreement calls for royalty
payments of 5% of net sales, as defined in the agreement, subject to a minimum
annual royalty of $50,000. This agreement is cancelable with 60 days notice,
as defined in the agreement. An option exists to extend the term of the
agreement for another two years.


                                                                Page 5 of 42

<PAGE>
Manufacture of Product
----------------------

    The Company does not manufacture its products, nor does it have the
equipment to do so. Rather, it contracts for the physical production of its
products with independent contractors, using different suppliers at each stage
of production, so as not to rely on any one specific supplier to satisfy its
needs.  The Company believes that there are ample suppliers and production
facilities available to it at competitive costs.

    During the year ended December 31, 2001, the Company made 52.6% and 20.9%
of its purchases from two manufacturers or suppliers.  Each of these suppliers
is unaffiliated with the Company. The Company does not have any short or long
term supply agreements or exclusive agreements with these suppliers. The
Company believes that the loss of any of these suppliers would not have a
material impact upon the Company's business, since it believes that multiple
alternate suppliers are available to the Company at competitive prices.

Marketing and Sales
-------------------

    The Company's products are marketed to over 4,300 retail sales outlets
which are comprised of card shops, stationery stores, gift and book stores,
notions and variety shops, drug stores, department stores, and miscellaneous
and multiple retail outlets. Two national retail chains accounted for
approximately 18.9% and 13.5% of the Company's net sales for the year ended
December 31, 2001. No other single customer of the Company accounted for 10%
or more of the Company's net sales.

    In addition to its sales staff, the Company utilizes approximately 110
independent sales representatives who also represent the products of other
companies.  Independent sales representatives accounted for approximately
40.7% of Company sales for the year ended December 31, 2001 with the balance
of Company sales being generated via direct customer contact.  Independent
sales representatives are paid a fixed sales commission ranging from 5% to 25%
of sales.  For the year ended December 31, 2001, a total of $206,981 in
commissions was paid to the sales representatives.  During this period, no
single independent sales representative accounted for more than 10% of the
Company's sales.

    The Company has developed various merchandising programs, which have been
designed to provide increasing levels of benefits to its customers as
customers' commitment to the Company's product lines increase. The Company's
product line has been segmented and is targeted to specific markets.  Sales
literature, point of sale advertising and catalogs/flyers explain and
highlight the Company's programs and products, and are used by sales
representatives in presentations to customers.  The Company provides a range
of options, from small "promotional" displays to larger "departmental"
displays.

Advertising and Sales Promotion
-------------------------------

    The Company uses various methods to promote its products.  It exhibits at
certain trade and gift shows, and provides point of sale materials and a web
site presence.  In addition, it produces sales materials, which feature new
products and merchandising programs.  One of the Company's most effective
forms of retail advertising is the visual display of its products in display

                                                                Page 6 of 42

<PAGE>


space in retail outlets.  The Company believes that its cause related, nature
and wildlife card and other product lines will be the indirect beneficiary of
the promotion of each particular cause, and consumer concerns for the
environment and nature preservation.


Competition
-----------

    The greeting card, social stationery and gift industry is highly
competitive. The Company only marginally competes with major traditional card
companies, such as Hallmark Cards, Inc., American Greetings Corporation and
Recycled Paper Products.  The major greeting card companies have greater
financial resources, market penetration and experience than the Company.  The
Company primarily competes with the smaller alternative card companies,
several of whom have sales and resources greater than those of the Company;
i.e., Paramount, Leanin' Tree, Renaissance, Suzy's Zoo, Avanti and Sunrise
Publications (now part of Hallmark), among others.

    The primary basis upon which the Company competes is the marketing of its
cause related products.  This factor is a positive aspect to the business of
the Company so long as there continues to be public awareness, support and
identification with a particular cause or environmental issues.  Conversely,
should a cause or organization fall out of vogue with the public, the
attractiveness of a line may diminish.  The Company does not view itself as
being a significant competitive factor in the greeting card or gift
industries, though the Company does believe that growth and opportunity does
present itself within the niche of cause related and associated card and other
product lines.


Employees
---------

    The Company currently has 13 employees, including its three executive
officers.  Of the 13 employees, 9 are in administrative, managerial, and sales
positions, and 4 are warehouse persons.  In peak seasons, the Company may
employ up to 4 temporary employees for its warehouse operation.  None of the
Company's employees are represented by a labor union, and the Company
considers its relationship with its employees to be good.

Trademarks and Copyrights
-------------------------

    In most cases, the Company either owns or shares ownership of the
copyright with the photographers and artists who create products for the
Company, although there are some photographers and artists who have the
exclusive ownership of the copyright for the works published by the Company,
in which case, the right to market and exploit the product is licensed to the
Company in return for a royalty fee or one time payment for rights.  To the
extent that any single product enjoys substantial consumer acceptance or
demand, the Company is dependent upon the validity of the copyright of such
photograph.  The loss or invalidity of a copyright will not have a material
adverse effect on the Company since no single product, either published or
distributed by the Company, accounts for a material portion of the Company's
sales.


                                                              Page 7 of 42
<PAGE>


    The Company has registered HEALTHY PLANET PRODUCTS (Registered) as a
trademark in association with its environmentally cause-related product lines,
and has completed registration of the name, logo and design of HEALTHY PLANET
PRODUCTS with the United States Patent and Trademark Office and the European
Community.

    The Company has also registered the "Sea Dreams", "Nature Baby", "Healthy
Planet Collectibles", "Show the World you Care", "The Evergreen Group",
"Friends of the Forest", "Friends of the Ocean" and "Friends of the
Environment", names, logos, and designs as trademarks used in connection with
its various product lines.


Item 2.  Properties
         ----------

    The Company's offices, business and warehouse facilities are located 1700
Corporate Circle, Petaluma, California.  On March 4, 2002, the Company entered
into an amendment and extension of its lease agreement with RNM Lakeville LP,
the landlord of its existing facility, pursuant to which the Company will
surrender approximately 16,343 square feet of its approximate 26,331 square
feet of leased space.   The prior lease was due to expire on April 15, 2002.
The amended lease is for 9,988 square feet of office and warehouse space and
extends the term through April 14, 2005.  The amended lease provides for a
monthly base rent of $8,000 effective April 15, 2002.  In addition to the base
rent, the Company is to pay, as additional rent, its share of operating
expenses and real property taxes.  The Company believes that its present
facilities are now adequate and suitable for its present and anticipated
future needs.


Item 3.  Legal Proceedings
         -----------------

        In June 2000, the Sierra Club filed an arbitration proceeding against
the Company before the American Arbitration Association in San Francisco,
California.  Sierra Club seeks damages in excess of $412,000, arising out of
an alleged breach of licensing agreement by the Company, as well as a
declaration that the Sierra Club is entitled to future payments under the
contract.  The Company has filed its answer to the arbitration claim, in which
it denied the allegations of the claim and set forth certain affirmative
defenses.  The Company further set forth certain counterclaims against the
Sierra Club arising out of breaches by the Sierra Club of the same agreement.
A hearing date for the arbitration has been set for April 22, 2002.  The
Company believes that it has good and meritorious defenses to the claim and is
actively pursuing a settlement of the action.  The Company believes that it
will be able to settle this matter without any material effect on its
financial position.

Other than as set forth in the preceding paragraph, the Company is not a
party to any material pending legal proceedings, other than ordinary routine
litigation incidental to the business.



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

         There were no matters submitted to a vote of security holders during
 the fourth quarter of the fiscal year covered by this Report.

                                                               Page 8 of 42
<PAGE>



                           PART II

Item 5.  Market for and Dividends on the Registrant's
   Common Equity and Related Stockholder Matters
         ---------------------------------------------

A.  Principal Market
    ----------------

    The Company's Common Stock is listed and traded on The American Stock
Exchange ("AMEX") under the symbol "HPP".

B.  Market Information
    ------------------
    The following table sets forth the high and low sales prices for the
Company's common shares for each quarter of the last two fiscal years.



                Year 2001        High          Low
                ---------      --------      --------
               1st Quarter      $0.625        $0.400
               2nd Quarter      $0.540        $0.200
               3rd Quarter      $0.330        $0.200
               4th Quarter      $0.270        $0.090

                Year 2000        High          Low
                ---------      --------      --------
               1st Quarter      $1.625        $0.563
               2nd Quarter      $1.250        $0.438
               3rd Quarter      $0.813        $0.375
               4th Quarter      $0.875        $0.250


C.  Dividends
    ---------

    The Company has never paid a dividend, whether cash or property, on its
shares of Common Stock and has no present expectation of doing so in the
foreseeable future.

D.  Approximate Number of Equity Security Holders
    ---------------------------------------------

    The approximate number of record holders of the Company's Common Stock as
of March 20, 2002 was 96.  Such number of record owners was determined from
the Company's shareholder records, and does not include beneficial owners of
the Company's Common Stock whose shares are held in the names of various
security holders, dealers and clearing agencies.  The Company believes that
the number of beneficial owners of its Common Stock held by others in nominee
names exceeds 1,000 in number.



                                                                    Page 9 of 42
<PAGE>


Item 6.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations

Special Note Regarding Forward-Looking Statements
-------------------------------------------------

    Certain statements in this Form 10-KSB, including information set forth
under Item 6 "Management's Discussion and Analysis of Financial Condition and
Results of Operations" constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Act").
The Company desires to avail itself of certain "safe harbor" provisions of the
Act and is therefore including this special note to enable the Company to do
so. Forward-looking statements included in this Form 10-KSB or hereafter
included in other publicly available documents filed with the Securities and
Exchange Commission, reports to the Company's stockholders and other publicly
available statements issued or released by the Company involve known and
unknown risks, uncertainties, and other factors including those discussed
below, which could cause the Company's actual results, performance (financial
or operating) or achievements to differ from the future results, performance
(financial or operating) achievements expressed or implied by such forward
looking statements.  Such future results are based upon management's best
estimates based upon current conditions and the most recent results of
operations.  These include management's forecasts for sales, purchasing plans
and programs of certain large chain buyers relating to holiday product, net
operating losses in each of the four most recent fiscal years, general
economic conditions for the Company's product lines, competition generally and
specifically relating to greeting cards having environmental, nature or
wildlife themes, the ability of the Company to sustain consumer demand for the
Company's principal card lines, the absence of long term supply contracts
which could make production costs unpredictable, the ability to obtain
additional operating capital in order to sustain operations, the ability to
deal with its secured and general unsecured creditors, its ability to meet the
continued listing requirements of the American Stock Exchange, and certain
other risks and uncertainties such as the impact of terrorism and war on the
national economy and retailers.


Results of Operations
---------------------

2001 Compared to 2000
---------------------

    Gross sales for the year ended December 31, 2001 were $2,944,400, which
reflected a decrease of $1,904,900 or 39.3% versus last year's level of
$4,849,300. Adoption kit sales decreased by 26.9% and paper product sales
decreased by 41.6%.  The loss of sales to a distributor, to two closed dot.com
companies and to a key retail account that filed Chapter 11 bankruptcy
protection, combined with the general weakness of the retail economy all
contributed to the decrease. Net sales amounted to $2,936,500 compared to last
year's level of $4,509,100.  Included in the 2001 year end results is a
provision for future returns and allowances of approximately $7,900 compared
to the prior year's provision of $340,200. This provision recognizes and
provides for the return of unsold product from customers who have qualified
for a return privilege.  Subsequent to December 31, 2000, the Company changed
its standard policies, eliminating product return privileges.


                                                              Page 10 of 42
<PAGE>


    For the year ended December 31, 2001, gross profit amounted to $1,397,200
or 47.6% of net sales. For the comparable prior year period, gross profit
amounted to $2,039,900 or 45.2% of net sales. The gross profit percentage
improvement was a result of the Company's shift to lower cost international
suppliers for its finished inventory, thereby eliminating expensive assembly
costs.

    Selling and marketing expenses amounted to $1,186,100 reflecting a
decrease of $438,800 or 27% versus the prior year level of $1,624,900. This
decrease was a result of reductions in sales, and therefore less sales
commissions, reductions in marketing and office staffing and cutbacks in other
selling and marketing expenses.

    General and administrative expenses amounted to $860,800 reflecting a
decrease of $581,200 or 40.3% versus the prior year period of $1,442,000. The
decrease was a result of reductions in office staffing, professional fees and
medical insurance costs partially offset by an increase in triple net rent
expenses. Bad debts amounted to $3,400 compared to the prior year's level of
$314,700. Included in the prior year's bad debts was a $330,000 receivable to
a key retail account that filed Chapter 11.

    The Company reported an operating loss of $653,100 for the year ended
December 31, 2001, an improvement of $688,600 compared to the prior period's
operating loss of $1,341,700.  With the inclusion of interest expenses of
$36,000, the Company had an operating loss $689,900 before extraordinary item.
Extraordinary income of $321,400 from creditor negotiations and settlements
resulted in a net loss of $368,500 or $.10 per share as compared to a net loss
of $1,791,800 or $.47 per share in the prior year.


Liquidity and Capital Resources
-------------------------------

    Total assets at December 31, 2001 amounted to $1,829,800, which reflected
a decrease of $554,500 or 23.3% versus the prior year level of $2,384,300. An
increase in cash and prepaid expenses were offset by decreases in accounts
receivable, inventories, fixed assets, publishing rights and other assets.
Total current liabilities amounted to $1,350,300 as of December 31, 2001
which, reflected a decrease of $121,700 versus the prior year level of
$1,472,000. The decrease was a result of decreases in trade payable, royalty
payable, commissions and accrued wages offset by increases in accrued
liabilities, notes payable to related party and current maturities of
obligations under capital lease.

    At December 31, 2001, the Company's working capital was $15,200, compared
to the December 31, 2000 working capital of $138,400 for a year to year
decline of $123,200.  The decline was primarily due to lower receivables and
inventories combined with higher notes payable and current maturities of
obligations under capital lease.

The primary source of the Company's liquidity during the past several years
has been sales of the Company's securities.  A rights offering made to the
Company's stockholders in 1999, in which the Company issued an aggregate of
1,582,216 shares of Common Stock.  Of those shares, a total of 970,200 were
purchased by InterGroup, the Chairman, and a subsidiary of InterGroup.  That
rights offering resulted in the receipt by the Company of an aggregate of
approximately $1,649,230 in gross proceeds.  On October 13, 2000, the Company
borrowed the sum of $500,000 from InterGroup. This loan was evidenced by a
promissory note secured by all of the Company's accounts receivables.  The
loan, bearing interest at the rate of 13.875% per annum, was due on February

                                                                Page 11 of 42
<PAGE>


28, 2001.  InterGroup had agreed to an extension of that note until April 30,
2001 and the Company intends to negotiate a further extension of that note.
In October 2001, InterGroup made available to the Company a $300,000 secured
line of credit with an interest rate of 10% per annum to provide working
capital for the Company.  Loans made pursuant to the line of credit are
evidenced by promissory notes that mature on June 30, 2002 and are secured by
all of the Company's accounts receivable. Subject to shareholder approval,
InterGroup has the right, but not the obligation, to convert any outstanding
amounts due on the notes to common stock of the Company at a price equal to
10% above the average trading price of the Company's common stock for the 30
day period immediately preceding October 15, 2001.

Net cash used by operating activities during 2001 amounted to $162,100.
The net loss of $368,500 and changes in non-cash items of $800,700 were offset
by $1,007,100 in changes in net receivables, inventory and other assets and
liabilities. Cash used by investing activities amounted to $52,500 consisting
of $12,500 to purchase color separations and $40,000 to purchase publishing
rights. Cash provided by financing activities consisted of $23,700 as payments
of capital leases and $270,000 net cash proceeds from the loan from
InterGroup.

    The Company has experienced recurring losses from operations.  Due to the
depletion of cash reserves, the Company may not be able to finance purchases.
This creates an uncertainty about the Company's ability to continue as a going
concern.  Management of the Company has developed plans that it believes will
improve cash flow from operations for 2002: (i) the reduction in rent expense
which will start April 15, 2002; (ii) the decrease in minimum royalties that
will be paid during 2002; (iii) the reduction or elimination of product lines
that generate insufficient profit margins; (iv) revenues expected to be
generated from the introduction during the year of extensions of existing
product lines; and (v) shifting to less expensive suppliers for most of its
products.  The ability of the Company to continue as a going concern is
dependent on the success of management's plans and the Company's ability to
attract financing.

    The Company has also been notified by the American Stock Exchange ("AMEX")
that it does not currently meet the Exchange's continued listing standards,
including minimum stockholders' equity requirements.  At this time, it is
expected that the Company will submit a timely plan to AMEX to regain
compliance with its continued listing standards by December 31, 2002.  The
Company makes no assurances that such a plan will in fact be submitted and, if
submitted, will be accepted by AMEX or that the Company will be able to
achieve such compliance.


Effects of Inflation
--------------------

    The Company does not view the effects of inflation to have a material
effect upon its business.  Increases in material and labor costs have been
offset by increases in the price of the Company's product.   While the Company
has in the past increased its prices to its customers, it has maintained its
relative competitive price position.


Item 7.  Financial Statements and Supplementary Data
         -------------------------------------------

         See Index to Financial Statements attached hereto.

                                                              Page 12 of 42

<PAGE>
Item 8.  Changes in and Disagreements with Accountants on Accounting
         And Financial Disclosure
         -----------------------------------------------------------

Not Applicable.


                                PART III


Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act
         -------------------------------------------------------------

    The following table sets forth certain information with respect to the
Directors and Executive Officers of the Company as of December 31, 2001:

                         Position with
   Name                   the Company             Age        Term to Expire(4)
------------------     -------------------        ---      -------------------
Class 1 Directors:

William J. Nance       Director                   57       2001 Annual Meeting
(1)(2)(3)

Bruce A. Wilson(1)     Director                   50       2001 Annual Meeting

Class 2 Directors:

Michael G. Zybala(2)   Secretary, Director        49       2003 Annual Meeting

Daniel R. Coleman(3)   Director                   44       2003 Annual Meeting

Class 3 Directors:

John V. Winfield(1)(2) Chairman of the Board      55       2002 Annual Meeting

Other Executive
Officers:

Gregory C. McPherson   Interim President          43         N/A

Antonio H. Santiago    Vice President Finance;    45         N/A
                       Assistant Secretary

James P. Battle        Vice President Operations  31         N/A

---------------------------------------
(1) Member of the Executive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) The Company's Certificate of Incorporation provides for a staggered Board
    of Directors, with Directors elected to three-year terms.  All Officers
    serve at the discretion of the Board of Directors.

                                                              Page 13 of 42
<PAGE>


Business Experience:

The principal occupation and business experience during the last five years
for each of the Directors and Executive Officers of the Company are as
follows:

John V. Winfield -- Was elected as Chairman of the Board on August 5, 1998.
Mr. Winfield was first elected a Class 2 Director in September, 1997 in
connection with a private transaction in which he and The InterGroup
Corporation ("InterGroup"), a company with which he is affiliated, purchased
an aggregate of 300,000 shares of the Company's Common Stock and 300,000
Common Stock Purchase Warrants for an aggregate of $975,000.  Mr. Winfield is
the Chairman of the Board, President and Chief Executive Officer of
InterGroup, having first been appointed as such in 1987. InterGroup is a
public company traded on The Nasdaq Stock Market, Inc.  Mr. Winfield also
presently serves as Chairman and Chief Executive Officer of Santa Fe Financial
Corporation ("Santa Fe") Portsmouth Square, Inc. ("Portsmouth"), and Chairman
of Etz Lavud Ltd., all public companies.

Daniel R. Coleman -- Mr. Coleman was first elected as a Director of the
Company in August, 1996. He is currently an investment and financial
consultant.  During 2000 he served as Vice President of Investor Relations for
Go2Net, Inc.  For the previous five years he was a member of Brookhaven
Capital LLC, which managed three limited partnerships that invest in United
States equity securities.

William J. Nance - Mr. Nance was elected as a Class 1 Director in August,
1998.  Mr. Nance is a Certified Public Accountant and private consultant to
the real estate and banking industries.  For the past five years he has served
as President of Century Plaza Printers, Inc.  Mr. Nance is also the Treasurer
and a Director of InterGroup and a Director of Santa Fe and Portsmouth, each
of which is a public company.

Bruce A. Wilson -- Mr. Wilson joined the Company in 1987, and served in
various capacities including President and Chief Executive and Chief Financial
Officer within the company from 1988 through 1999.  Mr. Wilson has served
continuously as a Director since January, 1988.  Following his resignation as
an officer and employee of the Company on December 31, 1999, Mr. Wilson was an
independent business consultant.  On October 8, 2001, he took a position with
Avalon Natural Products, Inc. as that company's Chief Financial Officer.

Michael G. Zybala -- Mr. Zybala was elected as a Class 2 Director in June
1998.  He also serves as the Company's Secretary.  Since 1993, Mr. Zybala has
been General Counsel for Santa Fe, Portsmouth Square, Inc.  He has also served
as Vice President and Secretary of those entities since February 1998, and
Treasurer thereof as of May, 2000.  Mr. Zybala also serves as Vice President
Operations and Assistant Secretary of InterGroup, having been appointed to
those positions in January 1999.  Santa Fe, Portsmouth and InterGroup are all
public companies.

Gregory C. McPherson -- Mr. McPherson was appointed as Interim President of
the Company effective March 23, 2000.  Mr. McPherson is Executive Vice
President of InterGroup, where he has been employed since 1993.  Prior to
joining InterGroup, Mr. McPherson was a private financial and strategic
advisor, served as Vice President in the Investment Banking and Corporate
Finance Department of Kemper Securities Group, Inc., was with Prudential Bache
Capital Funding in their Mergers and Acquisitions and Financial Restructuring
Group and was a manager at the public accounting firm of
PricewaterhouseCoopers LLP.  Mr. McPherson received an M.B.A. from the Harvard
Business School and is a Certified Public Accountant.

                                                                 Page 14 of 42
<PAGE>

Antonio H. Santiago -- Mr. Santiago joined the Company in 1988 and has served
in various financial capacities since that date.  He was appointed as the
Company's Vice President of Finance in August, 2000. Mr. Santiago also serves
as Assistant Secretary of the Company.

James Battle - Mr. Battle joined the Company in 1990 and has served in various
sales and operational capacities since that date. He was appointed as the
Company's Vice President of Operations as of April, 2001.


Family Relationships:  There are no family relationships among directors,
Executive Officers, or persons nominated or chosen by the Company to become
Directors or Executive officers.

Involvement in Certain Legal Proceedings:  No director or executive officer,
or person nominated or chosen to become a Director or Executive Officer, was
involved in any legal proceeding requiring disclosure.



Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and each beneficial owner of more than ten percent of
the Common Stock of the Company, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.  Officers, directors
and greater than ten-percent shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during fiscal 2001 all
filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with.



Item 10.  Executive Compensation.
          ----------------------

Summary Compensation
--------------------

The following table provides certain summary information concerning
compensation awarded to, earned by, or paid to the named Executive Officers
and one employee of the Company who earned more than $100,000 (salary and
bonus) for all services rendered to the Company and its subsidiaries for
fiscal years 2001, 2000 and 1999.  There are currently no employment contracts
with the Executive Officers.



                                                             Page 15 of 42

<PAGE>




<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE


                                                                        Long Term Compensation
                                  Annual Compensation                          Awards
                           ------------------------------------     -----------------------------
                                                                                No. of Securities
                                                                    Restricted     Underlying
Name and Principal                                    Other Annual     Stock      Options/SARs
Position                    Year    Salary    Bonus       Comp.       Award(s)      Granted
-----------------------     ----   -------   -------   -----------    ---------- ----------------
<S>                         <C>    <C>        <C>       <C>           <C>                 <C>
Gregory C. McPherson(1)     2001   $      -   $     -   $60,000(2)    $     -             -
Interim President and       2000   $      -   $     -   $60,000(2)    $     -             -
Chief Executive Officer

Donald L. Beckman(3)        2001   $ 41,577   $     -   $     -       $     -             -
Executive Vice President    2000   $ 92,508   $     -   $     -       $     -             -
Chief Operating Officer

Bruce A. Wilson(4)          2001   $      -   $     -   $     -       $     -             -
President, Chief Executive  2000   $      -   $     -   $45,000(5)    $     -             -
Chief Operating and         1999   $150,000   $     -   $16,566(5)    $ 1,500(6)          -
Chief Financial Officer

M. Scott Foster(7)          2001   $ 86,384   $     -   $18,825(8)    $     -             -
Vice President of Sales     2000   $100,000   $84,206   $24,825(8)    $     -             -
                            1999   $100,000   $15,626   $24,825(8)    $     -             -

-----------------------
</TABLE>

(1) Mr. McPherson was appointed Interim President of the Company effective
    March 23, 2000.

(2) Amounts shown reflect consulting fees.

(3) Mr. Beckman joined the Company on January 6, 2000. On November 14, 2000,
    he was named Executive Vice President and Chief Operating Officer of the
    Company. Mr. Beckman resigned this position effective April 27, 2001 and
    rejoined the Company as a Vice-President of sales in October 2001.

(4) Mr. Wilson served in such capacity through his resignation effective
    December 31, 1999.

(5) Includes: (i) for 2000, severance compensation of $45,000; (ii) for
    1999, an automobile allowance of $12,000, the payment of premiums on a
    term life and disability insurance policy of $4,566 and the payment of
    taxes on 4,000 shares of restricted Common Stock which vested on December
    31, 1999 of $1,500.

(6) In April, 1991, Mr. Wilson was granted 60,000 restricted shares vesting
    at the rate of 4,000 shares per year on December 31 of each year, over a
    15-year period subject to certain accelerations.  As of December 31,
    1999, an aggregate of 36,000 shares had vested. The remaining 24,000
    restricted shares became forfeited effective upon Mr. Wilson's
    resignation.  Amounts reported under this column represent the fair
    market value, without giving effect to the diminution in value
    attributable to the restriction of such stock, of 4,000 shares of the
    Company's Common Stock, which have vested each year, as valued on December
    31 of each year.  See "Other Annual Compensation", with respect to the
    cash payment for taxes attributable to these shares.

(7)  Mr. Foster resigned his position as Vice President of Sales effective
 September 14, 2001.

(8)  Includes: (i) for 2001, an expense allowance of $18,000; the payment of
 annual premium on a life insurance policy of $825 and (ii) for each of
 the years 2000 and 1999, an annual expense allowance of $24,000 and the
 payment of annual premiums on a life insurance policy of $825.

                                                                Page 16 of 42
<PAGE>

                          STOCK OPTIONS/SAR GRANTS

     No stock option grants or Stock Appreciation Rights ("SARs") were made
during the year ended December 31, 2001 to any of the named Executive Officers
of the Company.


            AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                   AND FISCAL YEAR END OPTION/SAR VALUES

    No stock options (or tandem SARs) and freestanding SAR's were exercised
during the fiscal year ended December 31, 2001 and all such options/SARs expired
on December 31, 2001, without being exercised.

1999 Incentive Compensation Plan
    The Company's 1999 Incentive Compensation Plan (sometimes referred to as
the "Plan" or the "1999 Incentive Plan"), as adopted by the shareholders of
the Company at the Company's 1999 Annual Meeting of Shareholders, provides for
the issuance of up to 400,000 shares of the Company's Common Stock in
connection with the issuance of stock options and other stock purchase rights
to executive officers, key employees, consultants and directors of the
Company.  The Plan is administered by the Stock Option Committee of the Board
of Directors (the "Committee").

    The 1999 Incentive Plan provides several types of awards: stock options,
stock appreciation rights (including limited stock appreciation rights),
restricted stock, restricted stock units, bonus stock and awards in lieu of
obligations, dividend equivalents, annual incentive and performance awards,
and other stock-based awards.  During the year ended December 31, 2001, the
only awards granted under the Plan were stock options.  For a more detailed
description of the Plan, see the Company's proxy statement dated June 8, 1999
relating to the Company's 1999 Annual Meeting of Shareholders.

     It is the intent of the Company that the grant of any awards to or other
transaction by a holder who is subject to Section 16 of the Exchange Act shall
be exempt from Section 16 pursuant to an applicable exemption (except for
transactions acknowledged in writing to be non-exempt by such holder).
Accordingly, if any provision of the 1999 Incentive Plan or any award
agreement does not comply with the requirements of Rule 16b-3 as then
applicable to any such transaction, such provision shall be construed or
deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 so that such holder shall avoid liability under
Section 16(b).

    No award or other right or interest granted under the 1999 Incentive Plan
shall be pledged, hypothecated or otherwise encumbered or subject to any lien,
obligation or liability of the holder thereof to any party (other than the
Company or a subsidiary), or assigned or transferred by such holder otherwise
than by will or the laws of descent and distribution or to a beneficiary upon
the death of a holder, and such awards or rights that may be exercisable shall
be exercised during the lifetime of the holder only by the holder or his or
her guardian or legal representative, except that awards and other rights
(other than ISOs and SARs in tandem therewith) may be transferred to one or
more beneficiaries or other transferees during the lifetime of the holder, and

                                                                 Page 17 of 42
<PAGE>

may be exercised by such transferees, in accordance with the terms of such
award, but only if and to the extent such transfers are permitted by the
Committee pursuant to the express terms of an award agreement (subject to any
terms and conditions which the Committee may impose thereon).  A beneficiary,
transferee, or other person claiming any rights under the 1999 Incentive Plan
from or through any holder shall be subject to all terms and conditions of the
1999 Incentive Plan and any award agreement applicable to such holder, except
as otherwise determined by the Committee, and to any additional terms and
conditions deemed necessary or appropriate by the Committee.

     Automatic Option Grants to Non-Employee Directors.  The 1999 Incentive
Plan provides for the automatic grant of options to non-employee directors on
the last trading day of July of each year.  The Plan provides that each non-
employee director will automatically be granted an option to purchase 5,000
shares of the Company's Common Stock each year.  The exercise price for
options granted shall be 100% of the fair market value of the Common Stock on
the date of grant.  The term of each option is ten (10) years from the date of
grant, or three months following the date that a participant ceases to serve
as a director, and each option vests in three annual increments commencing one
year after the date of grant.   Pursuant to this automatic grant provision,
options for an aggregate of 25,000 shares were granted on July 31, 2001 to a
total of five directors, each at an exercise price of $.29 per share.


Employee 401(k) Plan

    The Company established a 401(k) Profit Sharing Plan and Trust through the
adoption of the Dun & Bradstreet Pension Services, Inc. Non-Standardized
401(k) Profit Sharing Plan and Trust (the "Plan").  The Plan is effective
January 1, 1996 and covers all employees of the Company.  Each present
employee or new hire is eligible to participate in the Plan after one year of
service.  Each eligible employee may elect to voluntarily contribute out of
his or her compensation amount ranging from 1% to 15% of compensation.  The
Company, though not required, may elect to make a matching contribution equal
to a discretionary percentage, to be determined by the Company, of the
employees' salary contributions. Vesting of a participant's interest in the
Plan is in accordance with a schedule of vesting ranging from 20% after two
years of service to 100% after six years of service.


Compensation of Directors
-------------------------

    Directors who are employees of the Company do not receive compensation for
serving as a Director.  Each non-employee Director receives an annual
Director's fee of $6,000.  In addition, each non-employee Director is eligible
to receive an automatic grant of options to purchase 5,000 shares of the
Company's Common Stock on the last trading day of July of each year pursuant
to the Company's 1999 Incentive Compensation plan, which is discussed above.
All options to be issued to non-employee Directors will be exercisable at 100%
of the fair market value for the Company's Common Stock on the date of grant.

Except for the foregoing, there are no other arrangements for compensation of
Directors and there are no employment contracts between the Company and its
Directors.

                                                                Page 18 of 42
<PAGE>
Employment Contracts and Termination of Employment,
and Change in Control Arrangements
--------------------------------------------------

    As of December 31, 2001, there were no employment contracts between the
Company and any named Executive Officer and no termination of employment or
change in control arrangements.


Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information as of March 20, 2002
with respect to the ownership of Common Stock by (i) the persons (including
any "group" as that term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), known by the Company
to be the beneficial owner of more than five percent of any class of the
Company's voting securities, (ii) each Director and each executive officer of
the Company, and (iii) all Directors and executive Officers as a group.
Except to the extent indicated in the footnotes to the following table, each
of the individuals listed below possesses sole voting power with respect to
the shares listed opposite such individual's name.


                                                Amount and Nature of
                                                Beneficial Ownership
                                                   And Percentage
                                           -------------------------------
         Name and Address of                  Number of
          Beneficial Owner                    Shares(1)         Percentage(2)
----------------------------------         ---------------      ----------

John V. Winfield                              2,205,145(3)        48.6%
820 Moraga Drive
Los Angeles, CA 90049

The InterGroup Corporation                    1,335,073(4)        31.7%
820 Moraga Drive
Los Angeles, CA 90049

Phyllis Jesselson                               273,107(5)         7.1%
450 Park Avenue
New York, NY 10022

Linda Jesselson                                 273,106(5)         7.1%
450 Park Avenue
New York, NY 10022

Grace & White, Inc.                             238,700(6)         6.2%
515 Madison Avenue
New York, NY 10022

Paul Bluhdorn                                   181,256(7)         4.7%
P.O. Box 7854
Burbank, CA 91510

Yvette Bluhdorn                                  71,738(8)         1.9%
P.O. Box 7854
Burbank, CA 91510

Mark S. Siegel                                   70,062(9)         1.8%
P.O. Box 7854
Burbank, CA 91510
                                                                Page 19 of 42
<PAGE>

Bruce A. Wilson                                  33,900(10)         *
1700 Corporate Circle
Petaluma, CA 94954

Daniel R. Coleman                                30,000(11)         *
1700 Corporate Circle
Petaluma, CA 94954

Michael G. Zybala                                20,000(12)         *
820 Moraga Drive
Los Angeles, CA 90049

William J. Nance                                 20,000(12)         *
2040 Avenue of the Stars
Los Angeles, CA 90067

Gregory C. McPherson                                  -             -
820 Moraga Drive
Los Angeles, CA 90049

Antonio H. Santiago                                   -             -
1700 Corporate Circle
Petaluma, CA 94954

James P. Battle                                       -             -
1700 Corporate Circle
Petaluma, CA 94954

All Directors and Executive Officers
   as a Group                                 2,309,045(13)       49.7%
-------------------------------------
* Less than one percent (1%)

(1)  Unless otherwise indicated, and subject to applicable community property
     laws, each person has sole voting and investment power with respect to
     the shares beneficially owned.

(2)  Percentages are calculated based on 3,840,584 shares of Common Stock
     outstanding as of March 20, 2002 and 31,335 shares of Series D
     Convertible Voting Preferred Stock, which vote together as single class,
     plus for each person or group, any securities that person or group has
     the right to acquire within 60 days pursuant to options, warrants,
     conversion privileges or other rights.

(3)  Based upon information contained in a Form 4 for December 1999 (the
     "Winfield Form 4"), on behalf of Mr. Winfield, The InterGroup Corporation
     ("InterGroup") and Santa Fe Financial Corporation ("Santa Fe"), and
     corporate records of the Company. Includes (i) 540,100 shares of Common
     Stock and warrants to purchase 304,972 shares of Common Stock owned by
     Mr. Winfield; (ii) 871,800 shares of Common Stock and warrants to
     purchase 363,224 shares of Common Stock owned by InterGroup and as to
     which Mr. Winfield has shared voting and dispositive power; (iii) 89,100
     shares of Common Stock and warrants to purchase 10,949 shares of Common
     Stock owned by Santa Fe and as to which Mr. Winfield has shared voting
     and dispositive power; and (iv) options to purchase 25,000 shares of
     Common Stock granted to Mr. Winfield pursuant to the Company's Non-
     Employee Director Plan.  As of December 19, 2001, Mr. Winfield owned
     52.8% of InterGroup, per a Schedule 14A dated December 21, 2001.  As of
     December 19, 2001, InterGroup controlled 54.9% of the voting shares of
     Santa Fe.  Mr. Winfield is the Chairman and CEO of both Santa Fe and
     InterGroup.

                                                               Page 20 of 42
<PAGE>

(4)  Based upon information contained in the Winfield Form 4 and corporate
     records of the Company, amount includes (i) 871,800 shares of Common
     Stock and 363,224 warrants owned by The InterGroup Corporation and (ii)
     89,100 shares of Common Stock and 10,949 warrants owned by Santa Fe
     Financial Corporation.

(5)  Based upon information contained in an amendment to a Schedule 13G dated
     December 22, 1999 filed by Linda Jesselson, Phyllis Jesselson and certain
     other persons, all of whom disclaim that they are acting as a group.  The
     number of shares set forth above does not include an additional 2,500
     shares owned by the other reporting persons in such Schedule 13G.

(6)  Based upon information contained in an amendment to a Schedule 13G dated
     February 9, 1999, filed on behalf of Grace & White Inc. ("Grace").
     According to the amended Schedule 13G, Grace is a registered investment
     advisor with voting power and sole dispositive power over 12,900 and
     238,700 shares, respectively.

(7)  Based on information contained in an amendment to a Schedule 13D dated
     January 27, 1993 (the "Bluhdorn 13D"), filed on behalf of Paul Bluhdorn,
     Yvette Bluhdorn and Mark Siegel.  It includes 31,250 shares of the
     Company's Common Stock owned by Mr. Bluhdorn, and 150,006 shares of
     Common Stock issued in February, 1998 upon conversion of 150,006 shares
     of Series D Preferred stock owned by Mr. Bluhdorn.  It does not include
     shares of Common Stock owned by Ms. Bluhdorn or Mr. Siegel, as to which
     shares of Common Stock Mr. Bluhdorn disclaims beneficial ownership.

(8)  Based on information contained in the Bluhdorn 13D and corporate records
     of the Company.  Does not include shares of Common Stock owned by Mr.
     Bluhdorn and Mr. Siegel as to which shares of Common Stock Ms. Bluhdorn
     disclaims beneficial ownership.

(9)  Based on information contained in the Bluhdorn 13D and corporate records
     of the Company.

(10) Includes 5,000 options.

(11) Includes 30,000 options.

(12) Includes 20,000 options.

(13) Includes an aggregate of 779,145 shares subject to warrants and presently
     exercisable options.


Item 12.  Certain Relationships and Related Transactions
          ----------------------------------------------

     Mr. Gregory C. McPherson serves as the Company's Interim President, his
principal employment is Executive Vice President of InterGroup, an affiliate
of the Company.  Mr. John V. Winfield, Chairman of the Board and a principal
shareholder of the Company, is also Chairman of the Board and a principal
shareholder of InterGroup.

    On October 12, 2000, the Company borrowed the sum of $500,000 from
InterGroup.  This loan was evidenced by a secured promissory note and a
security agreement granting a security interest in all Registrant's accounts
receivable and proceeds thereof.  The loan bears interest at the rate of
13.875% per annum and is due on February 28, 2001, or sooner from the proceeds

                                                                Page 21 of 42
<PAGE>

from the collection of Registrant's accounts receivable.  Prior to obtaining
this loan from InterGroup, Registrant unsuccessfully sought secured or
unsecured lending from bank or institutional lenders and to otherwise factor
or finance its accounts receivable.  In the absence of an alternative lender,
Registrant proposed the lending transaction to InterGroup. As of February 28,
2001, the outstanding principal balance on the note was approximately
$135,500.  InterGroup has agreed to an extension of the secured promissory
note to April 30, 2001 on the same terms and conditions. During 2001,
InterGroup also made available to the Company a $300,000 line of credit, with
interest at 10%, maturing in June 2002. Loans under the line of credit are
also by secured by accounts receivable.  Subject to shareholder approval, the
notes are convertible into common stock at a price equal to 10% above the
average trading price of the Company's common stock for the 30 day period
immediately preceding October 15, 2001.

    On September 29, 1997, the Company completed a transaction with John
Winfield and InterGroup.  Pursuant to the transaction, the Company sold
150,000 shares of its Common Stock to Mr. Winfield for an aggregate of
$487,500 and sold 150,000 shares of its Common Stock to InterGroup for an
aggregate of $487,500.  As part of the transaction, Mr. Winfield and
InterGroup were each issued warrants to purchase 150,000 shares each of the
Company's Common Stock, of which one-third of such warrants are exercisable at
$4.00 per share, one-third at $4.25 per share, and one-third at $4.50 per
share, subject to adjustment under certain circumstances.  The warrants are
exercisable commencing September 29, 1997 and may be exercised through
September 29, 2002.  Mr. Winfield and InterGroup were each accorded certain
demand and piggyback registration rights.  In connection with the transaction,
Mr. Winfield was elected a Class 3 Director and the Company agreed to use its
best efforts to cause Mr. Winfield to be elected as a Director through
September 29, 2000.  Since August 5, 1998, Mr. Winfield has served as the
Chairman of the Board of Directors of the Company.

    On March 16, 1999, the Company completed a rights offering which commenced
on February 22, 1999.  Mr. Winfield, InterGroup and Santa Fe (a subsidiary of
InterGroup) agreed to exercise all of their respective basic rights in the
rights offering.  In exchange for this commitment, the Company issued to Mr.
Winfield, InterGroup and Santa Fe additional warrants to purchase an aggregate
of 250,000 shares of Common Stock at an exercise price of $1.1875 per share,
distributed pro rata according to their ownership percentage before the rights
offering, as follows:  90,399 to Mr. Winfield, 148,652 to InterGroup and
10,949 to Santa Fe.  The warrants are exercisable commencing February 22, 1999
and may be exercised through February 22, 2004.  Mr. Winfield, InterGroup and
Santa Fe were each accorded certain demand and piggyback registration rights.
The Company did not offer warrants to any other stockholders in connection
with the rights offering.

    Effective December 31, 1999, the Employment Agreement between Mr. Bruce A.
Wilson and the Company expired according to its terms and Mr. Wilson resigned
as an employee of the Company.  As a result of his resignation, 24,000 of the
60,000 restricted shares granted to Mr. Wilson became forfeited and were
returned to the Company (See "Executive Compensation"). Mr. Wilson was
employed as the Company's President, Chief Executive, Chief Operating and
Chief Financial Officer.  Upon the expiration of his Employment Agreement, Mr.
Wilson was granted a severance package consisting of $30,000 in severance
compensation paid in six monthly installments, a $15,000 payment for
reasonable executive search fees, and the continuation of existing health and
life insurance through June 30, 2000.

                                                                 Page 22 of 42
<PAGE>

Item 13.  Exhibits and Reports on Form 8-K.
          --------------------------------

(a) 1.  Financial Statements

        See Index to Financial Statements attached hereto.

    2.  Financial Statement Schedules

        See Index to Financial Statements attached hereto.

    3.  Exhibits:

 Incorporated by reference to the Exhibit Index at the end of this
 Report.

(b) Reports on Form 8-K

      During the last quarter of the period covered by this Report, the
following report on Form 8-K was filed by the Registrant:

Date of Report               Item Reported             Description
--------------               -------------             -----------

October 22, 2001             Item 5. Other             Resignation of Vice
                             Events                    President Sales;
                                                       Hiring of Regional
                                                       Vice Presidents of
                                                       Sales



[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

                                                               Page 23 of 42
<PAGE>



                               SIGNATURES
     In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                    HEALTHY PLANET PRODUCTS, INC.
                              By:   /s/ Antonio H. Santiago
                                    -----------------------
                                    Antonio H.  Santiago
                                    Vice President Finance
                                    (Principal Financial and
                                     Accounting officer)


                              By:   /s/ Gregory C. McPherson
                                    ------------------------
                                    Gregory C. McPherson
                                    Interim President
                                   (Principal Executive Officer)

Dated March 29, 2002


    In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

/s/ Bruce A. Wilson                                        March 29, 2002
-------------------
Bruce A. Wilson
Director

/s/ John Winfield                                          March 29, 2002
------------------
John Winfield
Director

                                                           March 29, 2002
-------------------
Daniel Coleman
Director

/s/ William J. Nance                                       March 29, 2002
--------------------
William J. Nance
Director

/s/ Michael G. Zybala                                      March 29, 2002
---------------------
Michael G. Zybala
Director

                                                              Page 24 of 42
<PAGE>



                            EXHIBIT INDEX
    The exhibits designated with an asterisk (*) have previously been filed
with the Commission and, pursuant to 17 C.F.R. Secs. 201.24 and 240.12b-32,
are incorporated by reference to the document referenced in brackets following
the descriptions of such exhibits.
Exhibit
No.                               Description
-------                           -----------

2.1*     Certificate of Merger of Carolyn Bean Publishing, Ltd. (California)
         and Carolyn Bean Publishing, Ltd. (Delaware) [Exhibit 2.l to
         Registration Statement on Form S-18, File No. 2-97768]

3.l*     Amended and Restated Certificate of Incorporation of Registrant
         [Exhibit 3 to Quarterly Report on Form 10-Q for the quarterly period
         ended June 30, 1990]

3.2*     Certificate of Amendment of Certificate of Incorporation filed on
         August 2, 1993 effecting change in Registrant's name to Healthy
         Planet Products, Inc. [Exhibit 3.2 to Annual Report on Form 10-KSB
         for the year ended December 31, 1993]

3.3*     By-Laws [Exhibit 3.2 to Registration Statement on Form S-18, File No.
         2-97768]

4.l*     Form of Common Stock Certificate [Exhibit 4 to Quarterly Report on
         Form 10-Q for the quarterly period ended June 30, 1990]

4.3*     Form of Rights, Designation and Preferences of Series D Preferred
         Stock [Exhibit 4 to Current Report on Form 8-K dated January 8,
         1993]

10.2*    License Agreement between Registrant and Sierra Club dated December
         30, 1994 [Exhibit 10.1 to Current Report on Form 8-K dated January
24,      1995]

10.3*    License Agreement between Registrant and The Wilderness Society dated
         June 24, 1994 [Exhibit 10.1 to Current Report on Form 8-K dated July
         1, 1994]

10.4*    License Agreement between Registrant and The Marine Mammal Center
         dated July 28, 1994 [Exhibit 10.10 to Form 10-KSB for year ended
         December 31, 1995]

10.5*    Lease for premises 1694-1736 Corporate Circle, Petaluma, California
         94954 [Exhibit 10.1 to Current Report on Form 8-K dated February 15,
         1996]

10.6*    License Agreement between Registrant and Twin Oaks Publishing Limited
         dated December 18, 1995 [Exhibit 10.1 to Current Report on Form 8-K
         dated December 18, 1995]

10.7*    License Agreement with the Zoological Society of San Diego dated
         September 30, 1996 [Exhibit 10.1 to Current Report on Form 8-K dated
         November 5, 1996]

                                                                 Page 25 of 42
<PAGE>
10.8*    Lease dated December 8, 1999 between the Registrant, as lessee, and
         RNM Lakeville, L.P., as lessor [Exhibit 10.1 to Form 10-KSB for year
         ended December 31, 1999]

11       Computation of Earnings per Common Share [See page F-3 to audited
         financial statements]

23.1    Consent of Moss Adams, Independent Auditors, to the incorporation by
        reference in the Registration Statement of Healthy Planet Products,
        Inc. on Form S-8 (File No. 33-84740) of their report dated February
        8, 2002. [set forth below]

28.l*   Registrant's 1999 Incentive Compensation Plan [Appendix A to
        Definitive Proxy Statement dated June 8, 1999]


_______________________________________________________________________________

                                                                  EXHIBIT 23.1



CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



The Board of Directors and Stockholders of
   Healthy Planet Products, Inc.

We consent to the incorporation by reference in the registration statement of
Healthy Planet Products, Inc., on Form S-8 (File No. 33-84740) of our report
dated February 8, 2002 (except for Note 2 and Note 8, as to which the date is
March 4, 2002), on our audits of the balance sheet of Healthy Planet Products,
Inc. as of December 31, 2001, and the related statements of operations,
shareholders' equity and cash flows for each of the two years in the period
ended December 31, 2001, which report is included in this Annual Report on Form
10-KSB.

                                                           /s/ Moss Adams LLP

Santa Rosa, California
March 28, 2002

                                                              Page 26 of 42
<PAGE>



<PAGE>
______________________________________________________________________________

                           HEALTHY PLANET PRODUCTS, INC.

                           INDEPENDENT AUDITOR'S REPORT
                                       AND
                              FINANCIAL STATEMENTS

                                DECEMBER 31, 2001


______________________________________________________________________________

                                                                 Page 27 of 42
<PAGE>



______________________________________________________________________________

                                       CONTENTS


                                                                  PAGE

INDEPENDENT AUDITOR'S REPORT                                       F-1


FINANCIAL STATEMENTS

      Balance sheet - December 31, 2001                            F-2

      Statements of Operations -
          Years Ended December 31, 2001 and 2000                   F-3

      Statements of Shareholders' Equity -
          Years Ended December 31, 2001 and 2000                   F-4

      Statements of Cash Flows -
          Years Ended December 31, 2001 and 2000                   F-5

      Notes to Financial Statements                                F-6

______________________________________________________________________________

                                                                Page 28 of 42
<PAGE>





INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Healthy Planet Products, Inc.


We have audited the accompanying balance sheet of Healthy Planet Products,
Inc., as of December 31, 2001, and the related statements of operations,
shareholders' equity, and cash flows for each of the two years ended
December 31, 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Healthy Planet Products, Inc.,
as of December 31, 2001, and the results of its operations and its cash flows
for each of the two years ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has suffered recurring losses from operations, which
have depleted its cash reserves and its ability to obtain additional financing.
There is no certainty that the Company will be able to attract additional
capital or secure debt financing sufficient to meet the Company's cash flow
needs. This raises substantial doubt about the Company'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.


                                                       /s/  MOSS ADAMS LLP

Santa Rosa, California
February 8, 2002
(except for Note 2 and Note 8, as to
which the date is March 4, 2002)


                                                                    Page F-1
<PAGE>



                                                HEALTHY PLANET PRODUCTS, INC.
                                                                BALANCE SHEET
                                                            December 31, 2001
_____________________________________________________________________________

                                   ASSETS

CURRENT ASSETS
  Cash                                                            $  255,100
  Accounts receivable                                                615,100
  Inventories                                                        406,800
  Prepaid expenses                                                    88,500
                                                                  ----------
      Total current assets                                         1,365,500
                                                                  ----------
PROPERTY AND EQUIPMENT                                               311,500
                                                                  ----------

OTHER ASSETS
  Publishing rights, less accumulated amortization of $127,500        91,800
  Customer list, less accumulated amortization of $82,700             26,700
  Other                                                               34,300
                                                                  ----------
                                                                     152,800
                                                                  ----------
     Total assets                                               $  1,829,800
                                                                  ==========


                     LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABLITIES
  Accounts payable                                              $    414,900
  Royalties payable                                                  132,500
  Commissions payable                                                 40,700
  Series B preferred stock redemption and dividends payable          161,500
  Accrued wages, bonuses and payroll taxes                            47,400
  Accrued liabilities                                                 60,500
  Note payable to related party                                      405,500
  Current maturities of obligations under capital lease               87,300
                                                                   ---------
     Total current liabilities                                     1,350,300
                                                                   =========

SHAREHOLDERS' EQUITY
  Series D preferred stock, $0.10 par value, with aggregate
    liquidation preferences of $160,100; 371,009 shares
    authorized; 31,335 shares issued and outstanding                   3,100
  Common Stock, $0.01 par value; 12,000,000 shares
    authorized; 3,840,584 shares issued and outstanding               38,400
  Additional paid-in capital                                      14,670,200
  Accumulated deficit                                            (14,232,200)
                                                                  ----------
    Total shareholders' equity                                       479,500
                                                                  ----------
    Total liabilities and shareholder's equity                 $   1,829,800
                                                                  ==========

See accompanying notes.
______________________________________________________________________________

                                                                      Page F-2
<PAGE>
                                                 HEALTHY PLANET PRODUCTS, INC.
                                                      STATEMENTS OF OPERATIONS
                                        Years Ended December 31, 2001 and 2000

______________________________________________________________________________


                                                     2001            2000
                                                  -----------     ----------
GROSS SALES                                       $ 2,944,400     $ 4,489,300

LESS RETURNS AND ALLOWANCES                             7,900         340,200
                                                  -----------     -----------
NET SALES                                           2,936,500       4,509,100

COST OF GOODS SOLD                                  1,539,300       2,469,200
                                                  -----------      ----------
GROSS PROFIT                                        1,397,200       2,039,900

OPERATING EXPENSES
  Selling and marketing                             1,186,100       1,624,900
  General and administrative                          860,800       1,442,000
  Bad debts                                             3,400         314,700
                                                   ----------       ---------
                                                    2,050,300       3,381,600
                                                   ----------       ---------
OPERATING LOSS                                       (653,100)     (1,341,700)
                                                   ----------       ---------
OTHER INCOME (EXPENSE)
  Interest expense                                    (36,000)        (22,600)
  Interest income                                          -           19,900
  Other income                                             -            4,100
                                                    ----------      ---------
                                                      (36,000)          1,400
                                                    ----------      ------

LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM      (689,100)      1,340,300)

PROVISION FOR INCOME TAXES                                800         451,500
                                                     ---------      ---------
LOSS BEFORE EXTRAORDINARY ITEM                       (689,900)     (1,791,800)

EXTRAORDINARY ITEM-GAIN ON DEBT RESTRUCTURING          321,400             -
                                                    ----------      ---------
NET LOSS                                            $ (368,500)   $(1,791,800)
                                                    ==========     ==========
LOSS PER COMMON SHARE
  Loss before extraordinary item                    $    (0.18)   $     (0.47)
  Extraordinary item                                      0.08             -
                                                     ---------     ----------
  Net loss                                          $    (0.10)   $     (0.47)
                                                     =========     ==========

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING                                        3,840,584      3,480,584
                                                     ==========    ==========

See accompanying notes.
______________________________________________________________________________

                                                                      Page F-3
<PAGE>




                                                 HEALTHY PLANET PRODUCTS, INC.
                                            STATEMENTS OF SHAREHOLDERS' EQUITY
                                        Years Ended December 31, 2001 and 2000
______________________________________________________________________________


                                 SERIES D
                             ----------------------
                               PREFERRED STOCK               COMMON STOCK
                             ----------------------       -------------------
                              SHARES       AMOUNT          SHARES      AMOUNT
                             ----------  -----------      ---------  ---------


Balance, December 31, 1999      31,335   $    3,100        3,840,584  $ 38,400
  Net loss                          -            -                -         -
                              ---------  -----------       --------- ---------
Balance, December 31, 2000      31,335        3,100        3,840,584    38,400
  Net loss                          -            -                -         -
                              ---------  -----------       --------- ---------
Balance, December 31, 2001      31,335   $    3,100        3,840,584  $ 38,400
                              =========  ===========       =========  ========



                             ADDITIONAL
                              PAID-IN       ACCUMULATED
                              CAPITAL         DEFICIT
                             -----------   ------------

Balance, December 31, 1999   $14,670,200   $(12,071,900)
  Net loss                          -        (1,791,800)
                             -----------    -----------
Balance, December 31, 2000    14,670,200    (13,863,700)
  Net loss                          -          (368,500)
                             -----------    -----------
Balance, December 31, 2001   $14,670,200   $(14,232,200)
                             ===========     ==========


See accompanying notes.
______________________________________________________________________________

                                                                      Page F-4
<PAGE>


                                                 HEALTHY PLANET PRODUCTS, INC.
                                                      STATEMENTS OF CASH FLOWS
                                        Years Ended December 31, 2001 and 2000
______________________________________________________________________________

                                                      2001            2000
                                                  -----------     -----------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                        $  (368,500)    $(1,791,800)
  Adjustments to reconcile net loss to
    net cash from operating activities:
    Depreciation and amortization                     279,000         327,800
    Assets transferred in settlement of
     accounts payable                                  83,200             -
    Change in allowance for doubtful
     accounts and returns                            (672,000)        476,800
    Gain on debt restructuring                       (321,400)            -
    Inventory reserve                                (169,500)       (304,600)
    Deferred tax valuation allowance                       -          450,700
  Changes in:
    Accounts receivable                               885,400        (762,000)
    Inventories                                       262,300         325,600
    Prepaid expenses                                  (29,500)         60,000
    Other assets                                           -            4,800
    Accounts payable                                  (82,200)        301,100
    Royalties payable                                 (14,400)         83,500
    Commissions payable                               (14,500)         20,900
    Accrued wages, bonuses and payroll taxes          (38,100)        (79,100)
    Accrued liabilities                                38,100         (84,800)
                                                   -----------     -----------
     Net cash from operating activities              (162,100)       (971,100)
                                                   -----------      ----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of publishing rights                       (40,000)       (113,500)
  Purchases of property and equipment                 (12,500)       (219,700)
                                                   ----------       ---------
     Net cash from investing activities               (52,500)       (333,200)
                                                   ----------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from note payable to related party         270,000         500,000
  Payments on obligation under capital lease          (23,700)        (31,500)
  Proceeds from capital lease financing                   -           125,000
  Principal repayments on note payable to
    related party                                         -          (364,500)
                                                    ----------       ---------
    Net cash from financing activities                246,300         229,000
                                                    ----------       ---------
NET CHANGE IN CASH                                     31,700      (1,075,300)

CASH, beginning of the year                           223,400       1,298,700
                                                   ----------      ----------
CASH, end of the year                              $  255,100      $  223,400
                                                   ==========      ==========
SUPPLEMENTAL CASH FLOW INFORMATION
   Cash paid during the year for:
     Interest                                      $    5,100      $   22,600
     Income taxes                                         800             800

   Non-cash investing and financing activities
     Capital leases for office and computer        $       -       $   17,500
       activities


See accompanying notes.
______________________________________________________________________________

                                                                     Page F-5



<PAGE>

                                                 HEALTHY PLANET PRODUCTS, INC.
                                                 NOTES TO FINANCIAL STATEMENTS
______________________________________________________________________________


NOTE  1 -  DESCRIPTION OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
           POLICIES

Description of operations - Healthy Planet Products, Inc., designs, publishes,
markets, and distributes greeting cards, stationery, and other gift items. The
Company's products are marketed to over 4,300 retail sales outlets. The
majority of the Company's sales are blank notes and holiday greeting cards.

Inventory - Inventory consists of greeting cards, stationery, and other gift
items and is stated at the lower of cost (first-in, first-out method) or
market.

Property and equipment - Property and equipment are stated at cost and are
depreciated and amortized using the straight-line method over the estimated
useful lives of the assets or over the period of the lease. Additions or
improvements to property and equipment are capitalized at cost, while
maintenance and repair expenditures are charged to operations. Estimated useful
lives are as follows:

      Machinery, equipment, and leasehold improvements          3  -  12 years
      Computer software                                                5 years
      Color separations                                                3 years
      Furniture and fixtures                                           5 years

Royalties - The Company pays royalties to licensors for use of their names,
logos, and artwork based on actual volume of products sold.

Income taxes - The provision for income taxes is based on pre-tax earnings
reported in the financial statements, adjusted for requirements of current tax
law, plus the change in deferred taxes. Deferred tax assets and liabilities are
recognized using enacted tax rates and reflect the expected future tax
consequences of temporary differences between the recorded amounts of assets
and liabilities for financial reporting purposes and tax basis of such assets
and liabilities and future benefits from net operating loss carryforwards.

Publishing rights - Publishing rights consist of costs incurred to obtain
images for use on the Company's products. Such costs are capitalized and
amortized over three years.

Customer list - A customer list acquired in a prior acquisition is being
amortized using the straight-line method over three years.

Concentrations of risk - Financial instruments potentially subjecting the
Company to concentrations of credit risk consist primarily of bank demand
deposits in excess of FDIC insurance thresholds and trade receivable balances
of the Company's largest customers. Receivables are not collateralized, but the
Company conducts frequent credit checks on customers with material balances.

Use of estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires the
Company make estimates and assumptions affecting the reported amounts of
assets, liabilities, revenues and expenses, and disclosure of contingent assets
and liabilities. Significant estimates include the reserves for doubtful
accounts and product returns and slow-moving or obsolete inventory and the
valuation allowance on deferred tax assets. The amounts estimated could differ
from actual results.

______________________________________________________________________________

                                                                     Page F-6

<PAGE>

                                                 HEALTHY PLANET PRODUCTS, INC.
                                                NOTES TO FINANCIAL STATEMENTS
______________________________________________________________________________


Shipping costs - Shipping costs are included in cost of goods sold.

Advertising - Costs associated with the production of catalogs are capitalized
and amortized over the expected life of the catalog of one year. There are no
capitalized catalog costs at December 31, 2001. All other advertising costs are
expensed as incurred. Advertising expense totaled $78,000 and $149,100 for the
year ended December 31, 2001 and 2000.

Fair value of financial instruments - The following methods and assumptions
were used by the Company in estimating its fair value disclosures for financial
instruments:

Financing under obligations under capital lease:  Based on lease rates
currently available to the Company for leases with similar terms and
maturities, the fair value of capital leases approximates cost.

Loss per common share - Loss per common share is computed using the weighted
average number of common shares outstanding. Since a loss from operations
exists, a diluted earnings per common share is not presented because the
inclusion of common stock equivalents in the computation would be
antidilutive. Common stock equivalents associated with stock options and
warrants exercisable into 1,086,394 shares of common stock, preferred stock
convertible into 31,335 shares of common stock, and notes payable convertible
into approximately 1,326,030 shares of common stock could potentially dilute
earnings per common share in future years.

Recent accounting pronouncements - The Financial Accounting Standards Board
(FASB) has issued the following accounting pronouncements:

SFAS No. 141, "Business Combinations." This Statement addresses financial
accounting and reporting for business combinations and supersedes Accounting
Principles Board (APB) Opinion No. 16, "Business Combinations," and SFAS No.
38, "Accounting for Preacquisition Contingencies of Purchased Enterprises."
All business combinations in the scope of this Statement are to be accounted
for using one method, the purchase method. The provisions of this Statement
apply to all business combinations initiated after June 30, 2001. The adoption
of SFAS No. 141 is not expected to have a material effect on the Company's
financial statements.

SFAS No. 142, "Goodwill and Other Intangible Assets." This Statement addresses
financial accounting and reporting for acquired goodwill and other intangible
assets and supersedes APB Opinion No. 17, "Intangible Assets." It addresses
how intangible assets that are acquired individually or with a group of other
assets (but not those acquired in a business combination) should be accounted
for in financial statements upon their acquisition. This Statement also
addresses how goodwill and other intangible assets should be accounted for
after they have been initially recognized in the financial statements. The
provisions of this Statement are required to be applied starting with fiscal
years beginning after December 15, 2001. The adoption of SFAS No. 142 is not
expected to have a material effect on the Company's financial statements.

______________________________________________________________________________

                                                                      Page F-7

<PAGE>
                                                 HEALTHY PLANET PRODUCTS, INC.
                                                 NOTES TO FINANCIAL STATEMENTS
______________________________________________________________________________


SFAS No. 143, "Accounting for Asset Retirement Obligations," addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. This Statement applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition,
construction, development, and (or) the normal operation of a long-lived
asset. The provisions of this Statement are required to be applied starting
with fiscal years beginning after June 15, 2002. The adoption of SFAS No. 143
is not expected to have a material affect on the Company's financial
statements.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets," addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. SFAS No. 144 replaces SFAS No. 121 and amends
certain other accounting pronouncements. The provisions of this Statement are
effective for financial statements issued for fiscal years beginning after
December 15, 2001. The adoption of SFAS No. 144 is not expected to have a
material effect on the Company's financial statements.

Reclassifications - Certain reclassifications have been made to the 2000
financial statements to conform to the 2001 presentation.


NOTE  2 -  GOING CONCERN

The Company has experienced recurring losses from operations. Due to the
depletion of cash reserves, the Company may not be able to finance purchases.
This creates an uncertainty about the Company's ability to continue as a going
concern. Management has developed plans that it believes will improve cash flow
from operations for 2002: (i) the reduction in rent expense which will start
April 15, 2002 (Note 8), (ii) the decrease in minimum royalties that will be
paid during 2002, (iii) the reduction or elimination of product lines that
generate insufficient profit margins, (iv) revenues expected to be generated
from the introduction during the year of extensions of existing product lines,
and (v) shifting to less expensive suppliers for most of its products. The
ability of the Company to continue as a going concern is dependent on the
success of these plans and the Company's ability to attract debt or equity
financing. The financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business.


NOTE  3 -  ACCOUNTS RECEIVABLE

Accounts receivable                                               $   678,400
Less allowances for:
   Doubtful accounts                                                   57,000
   Returns                                                              6,300
                                                                  -----------
                                                                  $   615,100
                                                                  ===========
______________________________________________________________________________


                                                                     Page F-8
<PAGE>
                                                 HEALTHY PLANET PRODUCTS, INC.
                                                 NOTES TO FINANCIAL STATEMENTS
______________________________________________________________________________


The allowance for doubtful accounts decreased $369,500 from December 31, 2000.
During the fourth quarter of 2000, a major customer with a receivable balance
of $330,000 filed for Chapter 11 bankruptcy protection. In addition, several
other customers, primarily dot com companies, closed their operations or
reorganized. The high allowance at December 31, 2000, reflected these events.

The allowance for returns decreased $302,500 from December 31, 2000.
Subsequent to December 31, 2000, the Company experienced increased returns due
to agreements with certain customers allowing for unlimited returns of
merchandise. During the year ended December 31, 2001, the Company changed its
standard policies, eliminating return privileges. The allowance at
December 31, 2001, reflects a return agreement with one customer.


NOTE  4 -  PROPERTY AND EQUIPMENT

Machinery, equipment, and leasehold improvements                   $   385,900
Computer software                                                      225,000
Equipment under capital lease                                          142,500
Color separations                                                      111,400
Furniture and fixtures                                                 100,800
                                                                   -----------
                                                                       965,600
Less accumulated depreciation and amortization                         654,100
                                                                   -----------
                                                                   $   311,500
                                                                   ===========


NOTE  5 -  NOTES PAYABLE TO RELATED PARTY

The Company has a $135,500 loan from a shareholder, with interest accruing at
13.875%. The note matured in April 2001, but the stockholder has not demanded
repayment. During 2001, the stockholder made available to the Company a
$300,000 line of credit, with interest at 10%, maturing in June 2002. Both
notes are secured by accounts receivable. Subject to shareholder approval, the
notes are convertible into common stock at a price per share equal to 10%
above the average trading price of the Company's common stock for the 30 day
period immediately preceding October 15, 2001. Interest expense on these notes
was $30,800 and $8,700 for the years ended December 31, 2001 and 2000.


NOTE  6 -  OBLIGATIONS UNDER CAPITAL LEASE

Future minimum lease payments for office and computer equipment are as
follows:

Minimum lease payments                                             $   108,400
Less amounts representing interest                                      21,100
                                                                   -----------
                                                                   $    87,300
                                                                   ===========

The Company is in default on its capital leases, therefore all amounts are
considered current.
______________________________________________________________________________

                                                                      Page F-9
<PAGE>

                                                 HEALTHY PLANET PRODUCTS, INC.
                                                 NOTES TO FINANCIAL STATEMENTS
______________________________________________________________________________


NOTE  7 -  INCOME TAXES

                                                  2001               2000
                                               ----------         ----------
Provision for income taxes
   Federal                                     $        -         $        -
   State                                              800                800
                                               ----------         ----------
                                                      800                800
   Change in deferred income taxes                      -            450,700
                                               ----------         ----------
                                               $      800         $  451,500
                                               ==========         ==========


The difference between the actual income tax provision and the tax provision
computed by applying the statutory federal income tax rate to the loss before
taxes is attributable to the following:

                                                  2001               2000
                                               ----------         -----------
Income tax benefit                               (34.0) %            (34.0) %
State tax benefit                                 (5.8)               (5.8)
Change in deferred tax asset valuation
   allowance                                      47.0                71.0
Other                                             (7.2)                2.5
                                               ----------         ----------
                                                     -  %             33.7 %
                                               ==========         ==========


At December 31, 2001, the Company had available net operating loss carryovers
of approximately $13,259,600 and $3,960,700, to be applied against future
federal and California taxable income. Due to various changes in ownership
subsequent to the years in which these losses were incurred, utilization of
federal amounts may be subject to limitations under Section 382 of the Internal
Revenue Code. The Company has not calculated the effect of the limitation. These
net operating losses expire as follows:


                 Year Ending December 31,          Federal       California
                 ------------------------       ------------    ------------
                           2002                 $ 2,638,500     $   283,900
                           2003                   1,222,000         915,800
                           2004                   1,299,100       1,327,800
                           2005                     383,500             -
                           2006                      31,700             -
                           2010                         -           600,800
                           2011                         -           832,400
                           2012                     570,700             -
                           2018                   1,821,600             -
                           2019                   2,685,100             -
                           2020                   1,093,200             -
                           2021                   1,514,200             -
                                                ------------    ------------
                                                $13,259,600     $ 3,960,700
                                                ============    ============
______________________________________________________________________________

                                                                     Page F-10
<PAGE>

                                                 HEALTHY PLANET PRODUCTS, INC.
                                                 NOTES TO FINANCIAL STATEMENTS
______________________________________________________________________________


The Company has available approximately $25,500 of federal alternative minimum
tax credits that can be carried forward indefinitely and offset against future
income taxes.

Gross deferred tax assets and liabilities are $5,102,600 and $179,800,
respectively.

The significant temporary differences and carryforwards that give rise to
deferred tax assets at December 31, 2001, are as follows:

Accounts receivable allowances                                 $     27,100
Inventory reserve                                                   165,900
Other                                                                (3,300)
Valuation allowance                                                (189,700)
                                                               -------------
Current deferred tax asset                                     $        -
                                                               =============
Depreciation and amortization                                  $    (50,800)
Benefits from net operating loss carryforward                     4,858,400
Valuation allowance                                              (4,733,100)
Other                                                               (74,500)
                                                               -------------
Non-current deferred tax asset                                 $        -
                                                               =============

During 2001 and 2000, the valuation allowance increased $179,600 and $932,700
due to a continuing assessment of the Company's ability to realize its
deferred tax assets. A full valuation allowance has been placed on deferred
tax assets because sufficient uncertainty exists regarding their ultimate
utilization.


NOTE  8 -	COMMITMENTS

Leases - The Company leases office and warehouse space for $15,900 per month
under an operating lease expiring April 2002. Subsequent to December 31, 2001,
the Company renegotiated the lease for less space and extended the term to
April 2005 at $8,000 per month. The Company is responsible for substantially
all costs associated with repairs, maintenance, taxes, and insurance. Rent
expense totaled $191,200 and $204,000 for the years ended December 31, 2001 and
2000.

Future minimum lease payments are as follows:

                 Year Ending December 31,
                 ------------------------
                           2002                        $  123,650
                           2003                            96,000
                           2004                            96,000
                           2005                            28,000
                                                       -----------
                                                       $  343,650
                                                       ==========
______________________________________________________________________________

                                                                     Page F-11
<PAGE>

                                                 HEALTHY PLANET PRODUCTS, INC.
                                                 NOTES TO FINANCIAL STATEMENTS
______________________________________________________________________________


License agreements - The Company has entered into a licensing agreement with
the National Wildlife Federation that expires in August 2002. The agreement
calls for royalty payments of 5% of sales and is cancelable with 30 days
notice, as defined in the agreement. Options exist to extend the term of the
agreement for two additional two-year terms.


NOTE  9 -  MAJOR SUPPLIERS

During the years ended December 31, 2001 and 2000, the Company made 74% and 43%
of its purchases from two suppliers. Amounts due to these suppliers included in
accounts payable totaled $68,100 at December 31, 2001.


NOTE 10 -  CAPITAL STOCK

Series B preferred stock carried a cumulative annual dividend of $10.80 per
share and allowed the Company to redeem the stock upon 60 days notice, plus
cumulative but unpaid dividends. During 1997, the Company exercised its right
to redeem all outstanding shares and suspended the accumulation of dividends.
Redemption and cumulative dividends payable of $161,500 is accrued. The Company
is attempting to recover redeemed shares from one remaining shareholder.

Series D preferred stock has full voting rights at the rate of one vote per
share, and is convertible into common stock at the rate of one share of common
stock for each share of preferred. The preferred stock has a liquidating
preference of $5.11 per share and carries no dividend.


NOTE 11 -  STOCK OPTIONS AND WARRANTS

The Company has a stock option plan that provides for the granting of qualified
and non-qualified stock options, incentive stock options, stock appreciation
rights, restricted stock, restricted stock units, and dividend equivalents to
employees, consultants, and non-employee directors up to an aggregate of 400,000
shares of common stock, plus any stock reserved or unreserved under pre-existing
plans. This plan supercedes pre-existing plans. Awards under superceded plans
are included in the new plan. During 2001, 25,000 options were granted, no
options were exercised, and 25,000 options expired. At December 31, 2001, 66,671
common stock options were exercisable at a weighted-average exercise price of
$1.82. The exercise prices of the options range from $0.29 to $3.69. Options
have a remaining life of one to ten years.

The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for stock
options and warrants. Accordingly, no compensation expense has been recognized
for stock options and warrants issued. Had compensation cost for the Company's
options and warrants been determined based on the fair value at the grant date
consistent with the provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," the impact on the Company's
net loss and loss per share would have been insignificant.

The fair value of options and warrants is estimated on the date of grant using
the Black-Scholes option-pricing model, with the following weighted-average
assumptions used for grants in:

______________________________________________________________________________

                                                                     Page F-12
<PAGE>

                                                 HEALTHY PLANET PRODUCTS, INC.
                                                 NOTES TO FINANCIAL STATEMENTS
______________________________________________________________________________


                                              2001               2000
                                          ------------       ------------
Dividends                                       None              None
Expected volatility                           113.41%           143.84%
Risk free interest rate                          5.1%              6.0%
Expected life                               10 years          10 years

Options issued during 2001 and 2000 have an estimated weighted average fair
value of $0.27 and $0.49.

The activity of the stock option plan and warrants is as follows:
<TABLE>
<CAPTION>
                                            Weighted-                    Weighted-
                                Shares       Average         Shares       Average
                                Under        Exercise        Under        Exercise
                               Warrants       Price         Warrants       Price
                              ----------    ----------     ----------    ----------
<S>                            <C>             <C>           <C>            <C>
Balance, December 31, 1999     1,031,394       $2.10         160,000        $4.36
Granted                              -                        25,000         0.50
Exercised                            -                           -
Forfeited                            -                       (70,000)        6.08
                              ----------    ----------     ----------    ----------
Balance, December 31, 2000     1,031,394        2.10         115,000         2.47
Granted                              -                        25,000         0.29
Exercised                            -                           -
Forfeited                        (60,000)       5.00         (25,000)
                              ----------    ----------     ----------    ----------
Balance, December 31, 2001       971,394       $1.92         115,000        $1.23
                              ==========    ==========     ==========    ==========
</TABLE>


NOTE 12 -  MAJOR CUSTOMER

Sales to a major customer were approximately $559,300 and $491,500 during the
years ended December 31, 2001 and 2000, representing 19% and 11% of total
sales, respectively. At December 31, 2001, amounts due from this customer
included in accounts receivable was $208,300.


NOTE 13 -  EMPLOYEE BENEFIT PLAN

The Company has a 401(k) profit sharing plan covering all employees meeting
minimum service requirements. Plan contributions are discretionary. There were
no employer contributions for the years ended December 31, 2001 and 2000.

______________________________________________________________________________

                                                                    Page F-13
<PAGE>



                                                 HEALTHY PLANET PRODUCTS, INC.
                                                 NOTES TO FINANCIAL STATEMENTS
______________________________________________________________________________


NOTE 14 -	CONTINGENCY

In June 2000, the Sierra Club filed an arbitration proceeding against the
Company before the American Arbitration Association in San Francisco,
California. Sierra Club seeks damages in excess of $412,000, arising out of an
alleged breach of a licensing agreement by the Company, as well as a
declaration that the Sierra Club is entitled to future payments under the
contract. The Company has filed its answer to the arbitration claim, in which
it denied the allegations of the claim and set forth certain affirmative
defenses. The Company further set forth certain counterclaims against the
Sierra Club arising out of breaches by the Sierra Club of the same agreement.
A hearing date for the arbitration has been set in April 2002. The Company
believes that it has good and meritorious defenses to the claim and is
actively pursuing a settlement of the action. The Company believes that it
will be able to settle this matter without any material affect on its
financial position.

The Company is also a defendant to several collection actions brought by
various vendors incidental to the Company's business. Many of those claims are
disputed and the Company continues to seek ways to resolve these lawsuits on a
reasonable basis.


NOTE 15 -	EXTRAORDINARY ITEM

During the year ended December 31, 2001, the Company negotiated reduced
payments on payables to several vendors. The resulting gain from amounts
forgiven by vendors of $321,400, or $0.08 per share, is presented as an
extraordinary item. Payments included a combination of cash and equipment. The
fair value of equipment transferred approximated the net book value at the
date of transfer.


______________________________________________________________________________

                                                                     Page F-14