U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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 August 31, 2003, or

[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
act of 1934 for the transition period from to

                          Commission File No. 000-31343

                                 OZOLUTIONS INC.
         (Name of Small Business Issuer as specified in its charter)

                Delaware                               98-0229321
    (State or Other Jurisdiction of                   (IRS Employer
     Incorporation or Organization)                Identification No.)

       30 Denver Crescent, Suite 200, Toronto, Ontario, Canada M2J 1G8
            (Address of Principal Executive Offices and Zip Code)

Issuer's Telephone Number:  (416) 490-0254

Securities registered under Section 12(b) of the Act:  None

Securities registered under Section 12(g) of the Act:  Common Stock, Par
Value $0.001

Check whether the issuer (1) filed all reports  required to be filed by sections
13 or 15(d) of the  Exchange  Act  during  the past 12 months  (or such  shorter
period  that the issuer 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 in response to Item 405 of
Regulation S-B in this form, and no disclosure will 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  amendment to
this Form 10-KSB. [X]

The issuer's revenues for its most recent fiscal year:  $143,636.

The aggregate  market value of voting stock held by  non-affiliates  computed on
the basis of the last sale price on December 31, 2003, was $1,700,000.

As of December 31, 2003,  the Registrant had  outstanding  34,004,226  shares of
Common Stock, par value $0.001.

Documents incorporated by reference:  None.



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                                TABLE OF CONTENTS

ITEM NUMBER AND CAPTION                                                    Page

Part I

1.    Description of Business                                                3

2.    Description of Properties                                              9

3.    Legal Proceedings                                                      9

4.    Submission of Matters to a Vote of Security Holders                    9

Part II

5.    Market for Common Equity and Related Stockholder Matters               9

6.    Management's Discussion and Analysis or Plan of Operation             10

7.    Financial Statements                                                  15

8.    Changes in and Disagreements with Accountants                         15
      on Accounting and Financial Disclosure

8A.   Controls and Procedures                                               16

Part III

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

10.   Executive Compensation                                                17

11.   Security Ownership of Certain Beneficial Owners and Management        19

12.   Certain Relationships and Related Transactions                        20

13.   Exhibits and Reports on Form 8-K                                      20

Signatures                                                                  22

                                       2

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                                     PART I

                         ITEM 1. DESCRIPTION OF BUSINESS

Our Company

     Ozolutions  Inc.,  a  Delaware  corporation,  is a company  engaged  in the
business of  distributing  ozone,  ultra violet and  activated  water  treatment
systems.  Ozone water  treatment  systems are based on  ozonation,  which is the
treatment of water with ozone gas to purify the water.  Ozone systems include an
ozone generator that applies an electrical discharge to oxygen or ambient air to
produce ozone, and a transfer system for injecting the ozone into a water stream
to oxidize or purify the water.

     Ultra Violet water  treatment  systems do not use chemicals and are capable
of disinfecting water faster than chlorine. UV disinfection takes place as water
flows  through an  irradiation  chamber  where  microorganisms  in the water are
inactivated as the UV light is absorbed preventing microbes from replicating.

     Activated water treatment  systems use water flow over ceramic  granules to
generate,  from the  resulting  friction,  electric  charges in the water.  This
activated  water  facilitates  the  removal of scale  build-up  in water  pipes,
enhances the  operation of water  purification  systems by softening the outside
surface of microorganisms, reduces energy costs, eliminates the use of corrosive
chemicals in equipment and is environmentally friendly.

     We have yet to generate  significant revenue from operations.  Revenues for
the year ended August 31, 2003 were $143,636.  We had a net loss of $607,564 for
the year  ended  August  31,  2003.  Ozolutions  has no  history  of  profitable
operations  on which to base a judgment  regarding  our future  operations.  Our
operations  and resulting cash flows are subject to all of the risks inherent in
an emerging business enterprise, which has not achieved profitability. There can
be no assurance  that product  sales made by us in the future will be at volumes
and prices sufficient for us to achieve and maintain profitable operations.

     Ozolutions' offices are located at 30 Denver Crescent,  Suite 200, Toronto,
Ontario, Canada M2J 1G8, where our telephone number is (416) 490-0254.

Hankin Products

     Hankin  Ozone  Systems,  LTD offers a variety of medium to large size ozone
process  equipment  for use in  treating  water  for  recreational,  industrial,
municipal and other  commercial  applications.  These would include swimming and
wave pool  facilities,  treatment of industrial  effluent,  treatment of cooling
tower water,  municipal water  treatment,  purification  of drinking water,  and
bottled water purification. The equipment consists of modules or component parts
that can be configured to meet the specific treatment needs of the customer.  In
unusual  applications,  Hankin can design custom  systems for the customer.  The
price for ozone process systems ranges from $30,000 for medium-sized  systems to
$200,000 for larger systems.

     The  EntrOzone is a smaller,  self-contained  multi  barrier  ozone process
system,  which also uses ultra violet and carbon  filtration to protect  against
the widest possible range of  contaminents.  Designed by Hankin for the consumer
market,  it incorporates the latest  electronics and  semi-conductor  technology
integrated  with a dielectric  assembly to provide a low-cost,  high  efficiency
ozone generator.  Perhaps the most  significant  feature of the EntrOzone is its

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great versatility.  Due to its size, weight and energy  consumption,  it is well
suited to a number of small ozone treatment  applications,  including laboratory
use, ultra pure water and residential/cottage use.

     The EntrOzone  comes cabinet  mounted with  connections  in the rear of the
unit.  Controls are front panel mounted for easy access.  Electrical  components
are maintained at a cool operating  temperature by a cabinet mounted fan. Tubing
and  fittings  in  contact  with  ozonated  gas are  constructed  of glass,  316
stainless steel or Teflon.

     When we place an order with  Hankin,  we will pay 50% of the total  invoice
price with the balance due net 30 days after delivery.  We believe we can obtain
delivery  of units  within 30 days of order,  so we plan on  placing  orders for
product  against  orders we receive from our dealers and direct sale  customers.
Dealers and  customers  are required to pay 50% of the invoice price at the time
of  ordering  with the  balance  due on the date of  delivery.  No units will be
ordered for a dealer or customer unless Ozolutions receives the initial deposit,
and units  will only be  delivered  against  payment of the  remaining  purchase
price.

     We have deposits and orders with Hankin for 25 EntrOzone  units, but Hankin
has delayed  delivery of these water  treatment  units because of ongoing design
and  development  work  believed  by  Hankin  to be  required  by  environmental
regulatory emphasis on multi-barrier  treatment systems.  The EntrOzone unit now
includes ozone treatment, ultra violet treatment, and a filtration system, which
combined offer  protection  against the widest  possible range of  contaminants.
Hankin has not been able to provide us with a production  commencement  date for
the EntrOzone.

     The EntrOzone  carries a one-year  warranty from Hankin against  defects in
material and  workmanship.  Defective  units can be returned to  Ozolutions  for
warranty repairs by Hankin or for replacement.

     In Ontario,  Canada,  Ozolutions is the exclusive  distributor for Hankin's
EntrOzone and related  products.  We do not hold marketing rights for any of the
larger Hankin systems in Ontario.  The  distribution  agreement for this smaller
system covering Ontario is for a term of three years commencing June 2001 and is
renewable for two additional three-year terms without minimum sale requirements.
We are required to use our best efforts to procure  orders in the  territory and
to maintain a sales force for that purpose.  Under the agreement we purchase the
EntrOzone  and  related   products  from  Hankin  at  published  prices  to  all
distributors  and, if there are no  published  prices,  at prices no higher than
those charged other distributors. We can also distribute the EntrOzone in Mexico
and the Caribbean but have not  developed  marketing  plans for the EntrOzone in
these areas.

     In Mexico and the Caribbean Zone (countries  located in or bordering on the
Caribbean Ocean with the exception of Mexico and Cuba) Ozolutions is entitled to
market,  on an exclusive  basis,  medium to large size Hankin  ozone  generating
equipment  systems  used for  water  treatment  in  various  applications.  Each
distribution  agreement is for a term of three years commencing June 2002 and is
renewable for two additional three-year terms. In order to obtain renewal of our
exclusive marketing rights in Mexico only, we must obtain at least CDN$1,000,000
(approximately  USD$770,000  based on current  exchange  rates) of sales in each
three-year  term of the  agreement..  Due to this condition in the  distribution
contract for Mexico,  we have focused on marketing Hankin products in Mexico and
expect we will  continue to do so through  the first six months of 2004.  We are
required to use our best  efforts to procure  orders in the  territories  and to
maintain a sales force in each territory. Each order or contract for purchase of
a Hankin system must be submitted to Hankin for final pricing and approval,  and
we receive a commission on the final  contract  price,  excluding any portion of
the price  attributable to consulting,  engineering and design services provided
by Hankin and post installation maintenance and repair.

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Our commission is

      *     10% of the first CDN$100,000 of the contract price  (approximately
      USD$77,000 based on current exchange rates),

      *     7.5% of the next  CDN$100,000  (approximately  USD$77,000 based on
      current exchange rates),

      *     6% of the next  CDN$300,000  (approximately  USD$231,000  based on
      current exchange rates),

      *     2% of the next  CDN$500,000  (approximately  USD$385,000  based on
      current exchange rates), and

      *     1% of any remaining amount.

     A  territory  fee of  CDN$50,000  (USD$37,000)  was  required to secure the
marketing rights in Mexico. Of this fee,  CDN$15,000  (USD$11,550) has been paid
and the balance is payable out of 10% of our commission earned on product sales.

     The President of Hankin has made a number of technical presentations on our
behalf to public  and  private  water  authorities  in Costa Rica  resulting  in
several large dollar ozone based water  treatment  system  proposals,  which are
currently under  consideration and may result in orders in 2004. The customer is
required to secure the project  financing.  Once done,  Ozolutions  will receive
adequate  funds to provide  Hankin with the working  capital to design and build
the necessary equipment and provide technical  supervision over installation and
testing on site.

ELCE Products

     ELCE  International's  water activation systems use water flow over ceramic
granules to  generate,  from the  resulting  friction,  electric  charges in the
water.  This activated water  facilitates the removal of scale build-up in water
pipes and enhances the operation of water purification  systems by softening the
outside  surface of  microorganisms.  ELCE products are also believed to enhance
plant productivity and extend the life of cut flowers. Initial tests with retail
wine making outlets  indicate that triple activated water improves the taste and
alcohol content of wine treated by ELCE technology.

     The ELCE water system is a stainless  steel container with inlet and outlet
pipes. The container holds the ceramic granules,  which are made up primarily of
natural  silica and  alumina.  When  attached to a water  source,  water  forced
through  the ELCE  water  system  sets the  ceramic  granules  in motion and the
interaction  of the granules in the water creates a  micro-electrolysis  effect.
This effect on the water leaving the system creates the apparent benefits of:

      *     Higher penetrating capability through cell membranes in living
      organisms and plants;

      *     Higher sanitary capability;

      *     Deodorizing effect

      *     Stronger dispersing capability;

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<PAGE>

      *     Reduced energy costs; and

      *     Elimination of toxic chemical cleaning costs.

     In January 2002, we acquired  from ELCE the exclusive  marketing  rights to
distribute its  water-activated  products in Canada. We issued 25,000 restricted
common shares and granted options to purchase 500,000 common shares at $0.50 per
share.

     In December 2002, the agreement with ELCE for the Canadian marketing rights
was verbally  amended to waive the  purchase of any units from  December 1, 2002
through February 28, 2003.  Beginning March 1, 2003,  Ozolutions would have been
required  to  purchase  105 units every three  months.  On  February  28,  2003,
Ozolutions  decided  that it  would  not  continue  with  the  monthly  purchase
commitments  for ELCE in Canada as the  testing  required  to sell the units was
taking much more time than was originally expected. As a result, Ozolutions lost
the exclusive  marketing  rights to distribute  the ELCE products in Canada.  In
addition, our distributor's discount on purchases was decreased from 40% to 30%.
In order to maintain  the existing  relationship  in Canada,  Ozolutions  issued
250,000  restricted  shares of Ozolutions  Inc. common stock to the President of
ELCE  International  pending a  renegotiation  of a new exclusive  agreement for
Canada  scheduled for early 2004 and  cancelled  the option to purchase  500,000
common shares at $0.50 per share.

     ELCE shrimp larvae and algae tests in Panama have been  discontinued  since
larvae,  once they are transferred into large outdoor locations,  do not produce
growth comparable to laboratory growth results and,  therefore,  the use of ELCE
units in this  application  is not  economically  feasible.  In  Peru,  once the
economic  climate  improves,  we expect to install  ELCE test units in ships and
factories  that  service  the  fishmeal  industry.  Once  these  tests have been
successfully  completed,  we believe fishmeal  operations in Peru will represent
major sales opportunities.

     Through our Canadian West Coast agent,  ELCE test units have been installed
for use in connection with self brew wine operations, nursery growing operations
and cut flower operations for enhanced shelf life.

     In Ontario,  an ELCE test unit has been installed in a dairy farm operation
where we expect  to  improve  milk  production.  Several  home  units  have been
installed where we expect to reduce circulatory  problems.  We have been working
very closely  with several  Ontario  mechanical  contractors  who have their own
significant  client base and the  technical  expertise to select and install the
appropriate ELCE equipment in conjunction with evaporative  condensers,  cooling
towers,  boilers  and heat  exchange  systems.  A similar  arrangement  is being
pursued with a West Coast  mechanical  contractor  who will also be testing both
boiler and  cooling/refrigeration  applications.  ELCE has  conducted  extensive
tests using water  activation with  evaporative  condensers and has demonstrated
significant  energy savings and  discontinuation  of corrosive  chemicals due to
ELCE's  ability to remove scale  buildup that can radically  decrease  operating
efficiency while increasing energy consumption.

UV Pure Products

     Ozolutions is currently  negotiating  distribution  agreements with UV Pure
Technologies  Inc. a Toronto based  manufacturer  of Ultra Violet drinking water
treatment  systems.  UV Pure products  have  exceeded NSF 55A rigorous  drinking
water  purification  standards,  which  means the system  will  disinfect,  as a
primary  disinfectant,  untreated water sources  containing  viruses,  bacteria,
cryptosporidium, giardia, legionella and E.coli. Certified to disinfect up to 13
US gallons  per minute or 50 litres per  minute,  the  Hallett 13 model uses two
high-output  UV lamps that target  pathogens  with ultra  violet  light from 360

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degrees.  This patented Crossfire  Technology uses dual smart UV sensors mounted
in air which cannot foul,  computerized  alarms with an automatic shut-off and a
fail-safe  valve,  which  ensures  that only safe water can enter the home.  The
Hallett 13 uses a rotating  stainless steel wiper blade to continually clean the
inside of the quartz tube eliminating fouling by minerals,  the need for a water
softener and the messy and difficult quartz cleaning chores of traditional ultra
violet systems. Once we have completed distribution  agreements with UV Pure, we
intend to distribute these UV systems in select markets in the United States and
Latin American  countries  focusing on homeowners who draw untreated  water from
wells and surface  waters like ponds,  lakes,  or rivers.  Payment terms for our
customers  will be a 50% deposit  upon order and the balance  upon  shipment-FOB
Toronto.

Marketing Strategy

     Historically,  ozone based water treatment  products were only available to
medium and larger sized  municipal,  industrial  and  institutional  users.  The
EntrOzone,  which is a new product  developed  by Hankin,  has the  potential to
increase  greatly  the  number of units  sold  because  it opens  the  market to
consumers and smaller commercial and institutional  customers.  We are currently
looking for dealers for the product.  Our  objective is to have dealers ready to
offer the EntrOzone when Hankin commences production.

     Ozolutions  intends to market  Hankin  systems in Mexico and the  Caribbean
Zone  primarily  to  national,   state,   and  local   governmental   units  and
municipalities  as a solution for their water treatment  needs.  These marketing
efforts will be  undertaken  primarily  by  management  and through  independent
contractors and consultants. We are now establishing our independent contractors
in  Mexico  and the  Caribbean  Zone and are  pursuing  directly  contacts  with
government officials responsible for water projects. These efforts have resulted
in the identification of sales opportunities in food processing, water bottling,
hotels,  hospitals, and industrial cooling towers. Mexico and the Caribbean Zone
represent new markets for Hankin where it has not previously  sold its large and
medium  size  water  treatment  systems.   Our  marketing  rights  give  us  the
opportunity to develop these markets for Hankin.

     We began our  marketing  efforts in Mexico and the  Caribbean  Zone in July
2000,  and have  identified a significant  number of potential  water  treatment
projects in Mexico. In this regard, we have identified a sub-distributor for our
products  in the La Region  Costa in Mexico.  We have yet to realize any revenue
from the sale of ozone water treatment  systems,  but we expect we will complete
sales of our first  systems  before  the end of 2004.  A system is sold when the
water  treatment unit is delivered and billed.  In the Caribbean  Zone,  several
large-scale  municipal  water  treatment  proposals  have been  submitted at the
request of local authorities.

     We have  aggressively  marketed the ELCE water system in Canada and in this
regard,  have set up a West Coast  distributor and are negotiating  with several
engineering  firms to represent  ELCE  products in Canada.  In Peru,  we will be
installing  ELCE units in the ships and  factories  that  service  the  fishmeal
industry. Once further tests have been successfully completed and local economic
conditions improve, we intend to make a focused marketing effort in the fishmeal
industry.

Competition

     Hankin  products  compete  with  similar  products  manufactured  by  other
multi-national  companies,  many of which have greater  financial  and marketing
resources than Ozolutions.  Ozonia, PCI Wedeco, Vivendi/US Filter and Mitsubishi
are the major competitors that offer medium and large size ozone water treatment
systems similar to the systems  offered by Hankin.  These companies are pursuing
the  market  for water  treatment  solutions  in areas  such as  Mexico  and the

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Caribbean Zone where there is a growing need for water treatment facilities, but
we have found no  evidence  that these  companies  have  captured a  significant
portion of the market for water  treatment  systems.  We believe we can  compete
with these companies based on price and product performance.

     The market for smaller  water  treatment  systems in Ontario is  fragmented
with a large number of companies  offering systems with differing  technologies.
The different  technologies used in available systems include filtration through
active carbon or other substances,  distillation,  ultra violet  treatment,  and
reverse  osmosis.  We have  found  no  evidence  that any one  technology  has a
significantly  greater  market share than the other.  Only one company,  OzoMax,
offers a product  similar to the EntrOzone.  The OzoMax is manufactured in China
in the form of a core unit with add on components that must be purchased to make
the product functional, while the EntrOzone comes complete as a fully integrated
unit.  Based  solely  on its own  examination  of the  products,  management  of
Ozolutions  believes the EntrOzone is superior in materials and  workmanship  to
the OzoMax.  Ozolutions  has not found any evidence that there is an established
dealer or service  network for the OzoMax in Ontario.  We believe we can compete
with other  small  water  treatment  systems  on the basis of price and  product
performance.

     With the  addition of the less  expensive  UV Pure ultra  violet  products,
Ozolutions  will be in a position  to offer two  alternatives  to the  homeowner
seeking  maximum  drinking  water  safety  using  both a  combination  of dealer
networks and direct selling.

Government Regulation

     Ozolutions  sales  activity  in various  countries  may be subject to local
business licensing requirements to the extent such requirements exist in a given
country. We do not believe these licensing  requirements represent a significant
barrier to our distribution business.  Generally, on sale of Hankin,Ultra Violet
or ELCE products in various countries,  Hankin , UV Pure or ELCE are responsible
for complying  with any import and  installation  regulations  applicable to the
systems  sold.  The  adoption  of  NAFTA  several  years  ago  has  removed  any
significant  barriers to the importation of Hankin, UV Pure and ELCE products in
the countries where we will be pursuing our sales efforts.

Employees

     As of  August  31,  2003,  Ozolutions  utilized  a total  of 3  consultants
including two  executives  and one part time clerical  employee.  Ozolutions has
experienced  no  work  stoppages  and  believes  that  its  relations  with  its
consultants are good.

About Ozolutions

     Ozolutions  was formed as a Delaware  corporation in January 1996 under the
name "Unipak  Process,  Inc." as a subsidiary of Aban Hytek,  Inc.  ("AHI").  It
received  certain  assets of AHI for its stock and the stock was spun-off to the
stockholders of AHI in connection with a business reorganization between AHI and
an unrelated party.

     In October 1999,  Ozolutions changed its name to Rico Resources 1999, Inc.,
in connection with its plan at that time to engage in the business of developing
a gold mining prospect in Costa Rica.  Following further study and evaluation of
the prospect,  management  determined  that the estimated yield of gold from the
prospect  would  not be  sufficient  based on  prevailing  gold  prices to cover
extraction costs and produce an acceptable profit.  Consequently,  this business
endeavor was abandoned.

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     In June 2000,  Ozolutions  acquired  marketing rights to products of Hankin
Atlas Ozone  Systems  Limited,  a Canadian  corporation,  from  1421209  Ontario
Limited, a Canadian corporation.  In connection with the acquisition, we changed
our name to Ozolutions Inc.

                        ITEM 2. DESCRIPTION OF PROPERTIES

     Ozolutions uses  approximately 400 square feet of office space at 30 Denver
Crescent,  Suite  200,  Toronto,  Ontario,  Canada  M2J  1G8,  provided  by  Max
Weissengruber,  one of its officers and directors, at no charge. We believe this
space will be adequate for our needs for at least the next 12 months. Ozolutions
rents  storage  space in Toronto on a  month-to-month  basis for  maintaining  a
limited inventory of product. The cost of this space is USD$300 per month.

                            ITEM 3. LEGAL PROCEEDINGS

     On June 5, 2002, Ozolutions entered into advisory agreements with the firms
of David  Michael,  LLC,  and Feng Shui  Consulting,  Inc.  The  purpose  of the
advisory  agreements  was to assist  Ozolutions  in  effecting  the  purchase of
businesses and assets relative to its business and growth strategy,  acquisition
of other operations or businesses,  general  business and financial  consulting,
and the introduction of Ozolutions to public relations firms and consultants and
others that may assist  Ozolutions in its plans.  For the services  described in
their respective  agreements,  the advisors were to receive shares of Ozolutions
common stock on the following schedule:  June 5, 2002 - 400,000 shares; November
5, 2002 - 200,000  shares;  December 5, 2002 - 200,000  shares;  March 5, 2002 -
150,000 shares. Pursuant to this schedule, 400,000 shares were issued to each of
the consulting  firms.  The agreements  were cancelled by Ozolutions on November
26, 2002,  and,  subsequently,  efforts were made to renegotiate  the agreements
without  success.  In June 2002,  David Michael,  LLC, and Feng Shui Consulting,
Inc.,  filed a suit in Federal  District  Court,  District of Utah,  case number
2:02CV-0538  ST, against  Ozolutions for breach of contract for failure to issue
additional  shares of common  stock under the  agreements.  Ozolutions  filed an
answer,  counter  claims,  and third party  complaint  denying  the  substantive
allegations  of the  complaint  and  asserting  breach of contract  and fraud in
connection  with  the  transaction.  The  parties  are now  pursuing  discovery.
Management  believes the suit is without merit and intends to vigorously  defend
its  position.  Management  does not believe the range of loss,  if any,  can be
reasonably estimated at this time.

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

     No matter was  submitted  to a vote of  security  holders in the year ended
August 31, 2003.

                                     PART II

        ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market and Stockholder Information

     The common stock of Ozolutions trades in the over-the-counter  market under
the symbol "OZLU." The following  table sets forth,  for the respective  periods
indicated,  the prices of the common stock in the  over-the-counter  market,  as
reported  and  summarized  on the OTC Bulletin  Board.  Such prices are based on
inter-dealer bid and asked prices,  without markup,  markdown,  commissions,  or
adjustments and may not represent actual transactions.

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Fiscal Quarter Ended               High Bid ($)               Low Bid ($)

November 30, 2001                     2.40                       0.32
February 28, 2002                     1.00                       0.21
May 31, 2002                          0.76                       0.09
August 31, 2002                       0.30                       0.09

November30,2002                       0.20                       0.08
February 28, 2003                     0.12                       0.08
May 31, 2003                          0.14                       0.05
August 31, 2003                       0.15                       0.02

     Since its  inception,  no  dividends  have been paid on our  common  stock.
Ozolutions intends to retain any earnings for use in its business activities, so
it is not expected  that any  dividends on the common stock will be declared and
paid in the foreseeable future.

     At August 31, 2003, there were approximately 1,895 holders of record of our
Common Stock.

Recent Sales of Securities

None

      ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

     Ozolutions  is  an   international   marketer  and   distributor  of  water
purification  systems using ozone, ultra violet and water activator  technology.
The markets we are  primarily  targeting  are Canada,  Mexico and the  Caribbean
zone, including Panama, Costa Rica, El Salvador and Peru.

Ozone Technology

     Ozolutions  purchased  the  distribution  rights  to Hankin  products  from
1421209 Ontario Limited for 8,000,000 shares of Ozolutions common stock, $17,217
cash paid at closing, and an additional $1,000,000 payable in installments.  The
8,000,000  shares of common stock were delivered to 1421209  Ontario  Limited in
November 2000. 1421209 Ontario Limited subsequently transferred 2,000,000 shares
to third  parties  and now holds  6,000,000  shares.  There  was no  affiliation
between  1421209  Ontario  Limited and  Ozolutions  prior to the purchase of the
distribution  rights.  Ozolutions  has offered to buy back  Ontario's  6,000,000
shares for return to Treasury for $82,000  which  transaction  is expected to be
concluded early in 2004 when Ozolutions anticipates receipt of the proceeds from
a major financing discussed under Financing of Proposed Acquisitions. Ozolutions
did not make any of the required cash payments related to the $1,000,000.

     In April 2002, the agreement with 1421209 Ontario Limited was cancelled and
the  obligation  of  $1,000,000  to 1421209  Ontario  Limited was no longer due.
Ozolutions  wrote-off the net marketing  rights of $762,743 and the  outstanding
obligation  of  $1,000,000,   and  recorded  an  extraordinary   gain  from  the
cancellation of the agreement of $237,257. Ozolutions then paid $50,000 directly
to Hankin for the same exclusive marketing rights.

                                       10

<PAGE>

     We have orders for 25 EntrOzone units but delivery of the water product has
been delayed  because of design and  development  work  believed by Hankin to be
required  by  environmental   regulatory  emphasis  on  multi-barrier  treatment
systems.  The  EntrOzone  unit  now  includes  ozone  treatment,   ultra  violet
treatment,  and a filtration system, which combined offer protection against the
widest possible range of contaminants.

     The  President  of Hankin has made a number of technical  presentations  to
public and private water  authorities  in Costa Rica  resulting in several large
dollar ozone based water treatment proposals currently under consideration.

Water-activated Technology

     In  August  2001,  we  acquired  non-exclusive  distribution  rights  to an
activated water system from ELCE International Inc. for Mexico and the Caribbean
Markets including Panama, Costa Rica, Ecuador and Jamaica. No fees were paid for
these rights.

     In January 2002, we acquired the exclusive  marketing  rights to distribute
the  water-activated  products  of ELCE in Canada  from ELCE.  We issued  25,000
restricted  common  shares to maintain  Canadian  rights and issued an option to
purchase  500,000 common shares to the President of ELCE  International at $0.50
per share  which  would  expire in February  2004.  In March  2002,  we obtained
exclusive  marketing  rights for Costa Rica for no  consideration.  However,  in
December of 2002, we did not meet the purchase  commitment  related to the Costa
Rican  agreement  and lost the rights to sell ELCE  products in Costa  Rica.  In
September 2003,  Ozolutions  approved the issuance of 250,000  restricted common
shares to the President of ELCE International and the cancellation of the option
to purchase  500,000  common  shares at $0.50 per share in order to maintain the
existing relationship in Canada.

     We had conducted promising ELCE shrimp larvae and algae laboratory tests in
Panama. However, once larvae were transferred to outdoor farms, similar gains in
size  and  health  were not  achieved  and the use of ELCE  units in the  shrimp
industry was proven to be uneconomical at the present time.

     In Peru,  we intend to  install  ELCE  units in ships  and  factories  that
service the fishmeal industry,  once general economic conditions  improve.  When
further tests have been successfully  completed,  we believe fishmeal operations
in Peru represent major sales opportunities.

     Through  our  Canadian  West Coast  agent  ELCE  units are being  tested in
nursery  locations  where initial  results show  improvements  in root, stem and
flower  growth of roses.  Trials with cut flowers also indicate  economic  shelf
life can be extended through ELCE water activation.  Year-long tests with retail
wine making outlets have indicated that taste and alcohol  content have improved
with the use of triple  activated  water.  Early in January 2004,  sales efforts
will  concentrate  on  sales  to  the  several  hundred  Canadian  outlets  of a
nationally franchised company.

     In   Ontario,    Ozolutions   is   vigorously   pursuing   alliances   with
consulting/service  engineering  firms and contractors  who service boiler,  air
conditioning  and  refrigeration  installations.   These  firms  have  both  the
technical  expertise and customer bases to install and monitor the effectiveness
of ELCE under Canadian  specific  conditions,  a major element in the successful
introduction of innovative water treatment technology.

                                       11

<PAGE>

     In 2004,  we will be  conducting  two  research  studies  using  ELCE water
activation  technology.  The Drinking  Water Research Group at the University of
Toronto will examine the  effectiveness  of ELCE water  activation in preventing
the  buildup of mineral  deposits on Ultra  Violet  systems.  Once this  fouling
occurs, Ultra Violet systems are not effective and normally have to be shut down
and deposits  removed.  If ELCE can keep Ultra Violet  systems free from mineral
contamination,  UV  systems  can  continue  to provide  effective  contamination
elimination without interruption.

     A large Agricultural Research Group will be conducting a study to determine
ELCE's  ability to increase milk yield in dairy cows.  Earlier  studies in Japan
have indicated that milk yield can improve by up to 10 percent when cows receive
ELCE activated  water. A 24-cow herd will be divided into an experimental  group
and a control group.  The  experimental  group will receive ELCE activated water
for a  predetermined  period and milk yield will be carefully  tracked while the
control group receives normal water.  Then the process will be reversed with the
control group now receiving ELCE activated  water while the  experimental  group
reverts to regular water consumption. At the end of the test period, comparisons
will  be  made  between  ELCE  activated   water  results  versus  normal  water
consumption with the assumption being that if the cows produce greater yields on
ELCE water,  no other factors could account for the documented  increase in milk
production.

UV Pure Products

     In order to provide viable  technology  and pricing  options to residential
customers  for  drinking  water  solutions,   Ozolutions  has  been  negotiating
distribution  agreements  with UV Pure, a Toronto  based  manufacturer  of ultra
violet products which have received NSF certification  under standard 55 A. Both
UV Pure's 13 US gallon per minute and 30 gallon per minute  models  will  safely
disinfect water, as a primary  disinfectant,  from untreated sources  containing
bacteria, E-coli, viruses and parasites such as giardia and cryptosporidium.

     UV Pure's  patented  CrossFire  Technology  uses two high  output UV lamps,
unlike  traditional  UV systems  which use a single lamp.  UV Pure's  design can
target pathogens from 360 degrees. Two smart sensors ensure that only safe water
can enter the home due to an  automated  shut-off  and a  fail-safe  valve  that
prevents contaminated water from entering the home.

     To prevent  fouling by  minerals in water,  a  stainless  steel wiper blade
keeps the quartz  reflecting  surface  clean and  eliminates  the need for water
softening equipment.

     We anticipate completing distribution agreements with UV Pure early in 2004
and intend to  distribute  these ultra violet home  treatment  systems in select
markets  in  Latin  America  and the  United  States.  We will  not be  building
significant  inventories but will order units based on customer orders.  Payment
terms for our  customers  will be a 50% deposit  upon  receipt of order with the
balance due upon shipment-FOB Toronto.

Financing of Proposed Acquisitions

     On May 22, 2002,  Ozolutions  had  originally  signed a letter of intent to
acquire the assets of Electrical Systems Engineering ("ESE"),an electrical parts
distribution company, and 100% of the outstanding common and preferred shares of
Specdex Inc., a California based software company with proprietary  distribution
oriented  technology.  However,  in  2003,  Ozolutions  decided  to  pursue  the
acquisition of U.S. based water treatment  distribution  companies and agreed to
terminate the original agreement with Specdex Inc.at no cost to either party.

                                       12

<PAGE>

     In April 2003,  Ozolutions  accepted a $5,000,000  financing  proposal from
U.S.Capital  Inc., a California  based  investment  banking firm.  The financing
commitment is comprised of the following elements:

     o    $2,500,000  will be provided in the form of secured  senior debt.  The
          debt has a 5 year term with a 10 year  amortization  and an  automatic
          option to extend for another 5 years.  Principal  and interest will be
          due at the end of 10 years.  The simple  interest  rate is 11.25 % per
          year.
     o    8,000,000  restricted common shares will be issued for $2,500,000 with
          a put option to buy back 4,000,000 shares for $1,250,000 at the end of
          5 years and  4,000,000  shares for  $1,250,000 at the end of 10 years.
          Ozolutions  will pay an annual  consulting  fee of 10% per year of the
          amount outstanding under this part of the financing agreement.
     o    Ozolutions has paid a $ 50,000  commitment fee to secure the financing
          which is expected to be concluded in January 2004.

     Ozolutions  believes that this long term financing will enable it to expand
its  sales  and  marketing   efforts  for  its  chemical  free  water  treatment
technologies and fund the acquisition of established  water treatment  companies
in the United States.

Results of Operations for the Years ended August 31, 2003 and 2002.

     For the year ended August 31,  2003,  Ozolutions  recorded  revenues in the
amount of $144,000 as compared to $135,000 in the prior year. All sales were for
the sale of ELCE products. Cost of goods sold for the year ended August 31, 2003
was $101,000 or 70.5% of sales compared to $98,000 or 72.8% of sales.

     Expenses for the year ended August 31, 2003 decreased  $181,000 to $479,000
from  $660,000 for the year ended August 31, 2002.  This decrease was mainly due
to a decrease in consulting fees of $74,000 due to a reduction in the consulting
agreements we implemented to promote  product sales and a reduction in technical
consulting agreements and a decrease in marketing/sales expenses of $185,000 due
to a decrease in amortization of marketing rights of $86,000 attributable to the
write off of the Hankin  Marketing  rights in April 2002 and the ELCE  marketing
rights in February  2003,  which  resulted in no additional  amortization  being
required.  Marketing expense and consulting fees have alsso decreased due to the
higher  expenses in 2002  related to the launch of the ELCE  products.  This was
offset  by  an  increase  in  bad  debt  expense  of  $63,000   related  to  the
establishment  of an  allowance  for  doubtful  accounts  and the  write  off of
uncollectible  accounts.  Other expenses for the year ended August 31, 2003 were
$171,000 and represented  the write off of the ELCE marketing  rights due to the
loss of exclusive rights as of February 28, 2003.

     The net loss from continuing  operations for the year ended August 31, 2003
decreased  by $16,000 to $608,000  from  $624,000  for the year ended August 31,
2002 mainly due to the factors discussed above.

     During the year ended August 31, 2002,  an  extraordinary  gain of $237,000
was  recorded  related to the  cancellation  of the  original  marketing  rights
agreement with 1421209 Ontario Limited for the Hankin products.

     The net loss for the year ended  August 31, 2003  increased  by $222,000 to
$608,000  from  $386,000  for the year ended  August 31, 2002 due to the factors
discussed above.

                                       13

<PAGE>

Liquidity and Capital Resources

     Ozolutions  operations used approximately  $342,000 in cash during the year
ended August 31, 2003.  Cash required during the year ended August 31, 2003 came
principally  from  advances  from a director and  stockholders  in the amount of
$119,000.

     As  previously  discussed,   Ozolutions  accepted  a  $5,000,000  financing
proposal from U.S.Capital  Inc., a California based investment  banking firm. It
is expected that  Ozolutions will be able to make its first drawdown of funds in
January or February 2004.

     Under  distribution  agreements  with  Hankin,  product  will be shipped by
Hankin  against  purchase  orders we place  either  directly  to the end user or
dealers.  Accordingly,  we do not require any significant  amount of capital for
Hankin inventory or facilities required to maintain and distribute inventory.

     We plan to keep ELCE purchases to a minimum and do not  anticipate  holding
large amounts of ELCE product  inventory at any one time. We have arranged for a
warehouse facility to store the ELCE inventory at $300 per month.

     UV Pure  products  will be ordered  when  Ozolutions  receives  orders from
customers  who will pay a 50% deposit upon  placement of orders with the balance
due upon shipment FOB Toronto.

     As  discussed  above  under  the  caption  "Item  3.  Legal   Proceedings,"
Ozolutions  is a party to one dispute.  Management  cannot  predict at this time
whether  Ozolutions  will  incur  any  liability  as  a  result  of  an  adverse
determination or ruling in this dispute.  Should  Ozolutions incur a substantial
liability as a result of this dispute,  it is likely Ozolutions' working capital
would be adversely affected.

     Ozolutions believes its general, selling and administrative expenses during
fiscal year 2004 will be  approximately  $400,000 of which $200,000 will be used
for marketing and sales expenses including:

     *    production of printed sales and marketing materials;

     *    advertising, promotion and trade show participation;

     *    travel  expenses   associated  with  advancing  current  and  proposed
          projects in Mexico and the Caribbean Zone; and

     *    travel  expenses that could be associated  with  potential  U.S. water
          treatment Company acquisitions.

     The remaining $200,000 is the estimated cost of clerical and management and
consulting staff and facilities required to operate over the next year.

Application of Critical Accounting Policies

     Ozolution's  financial  statements and  accompanying  notes are prepared in
accordance with generally accepted  accounting  principles in the United States.
Preparing  financial  statements  requires  management  to  make  estimates  and
assumptions  that affect the reported amounts of assets,  liabilities,  revenue,
and expenses.  These  estimates  and  assumptions  are affected by  management's

                                       14

<PAGE>

application of accounting policies.  Critical accounting policies for Ozolutions
include revenue  recognition,  impairment of marketing rights and accounting for
legal contingencies.

     Ozolutions  recognizes revenue in accordance with Staff Accounting Bulletin
No.101,  "Revenue Recognition in Financial  Statements." Sales are recorded when
products  are shipped to  customers.  Provisions  for  discounts  and rebates to
customers,  estimated  returns and allowances and other adjustments are provided
for in the same period the related sales are recorded.

     Ozolutions  evaluates its long-lived  assets for financial  impairment on a
regular basis in accordance with Statement of Financial Accounting Standards No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be Disposed Of." Ozolutions evaluates the recoverability of long-lived
assets not held for sale by measuring the carrying  amount of the assets against
the estimated  discounted  future cash flows  associated  with them. At the time
such  evaluations  indicate  that the  future  discounted  cash flows of certain
long-lived  assets are not  sufficient  to recover  the  carrying  value of such
assets, the assets are adjusted to their fair values.

     Ozolutions is subject to various legal proceedings and claims, the outcomes
of  which  are  subject  to  significant  uncertainty.  Statement  of  Financial
Accounting  Standards No. 5,  "Accounting for  Contingencies",  requires that an
estimated loss from a loss  contingency  should be accrued by a charge to income
if it is  probable  that an asset  has been  impaired  or a  liability  has been
incurred and the amount of the loss can be reasonably estimated. Disclosure of a
contingency  is required if there is at least a  reasonable  possibility  that a
loss has been incurred. Ozolutions evaluates, among other factors, the degree of
probability  of an  unfavorable  outcome  and the  ability to make a  reasonable
estimate of the amount of loss. Changes in these factors could materially impact
Ozolutions financial position or its results of operations.

Forward-Looking Statements

     All  statements,  other than statements of historical  fact,  which address
activities,  actions,  goals,  prospects,  or new  developments  that Ozolutions
expects or anticipates will or may occur in the future, including such things as
expansion   and  growth  of  its   operations   and  other  such   matters   are
forward-looking statements. Any one or a combination of factors could materially
affect  Ozolutions'  operations and financial  condition.  These factors include
competitive  pressures,  success or failure of  marketing  programs,  changes in
pricing and  availability  of products,  and conditions in the capital  markets.
Forward-looking  statements  made by  Ozolutions  are based on  knowledge of its
business and the environment in which it operates as of the date of this report.
Because  of the  factors  listed  above,  as well as other  factors  beyond  its
control, actual results may differ from those in the forward-looking statements.

                          ITEM 7. FINANCIAL STATEMENTS

     The financial  statements  of  Ozolutions  appear at the end of this report
beginning with the Index to Financial Statements on page 23.

           ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                       ACCOUNTING AND FINANCIAL DISCLOSURE

     Not applicable.

                                       15

<PAGE>

                        ITEM 8A. CONTROLS AND PROCEDURES

     As of  September  30,  2003  Ozolutions  carried out an  evaluation  of the
effectiveness  of the  design  and  operation  of its  disclosure  controls  and
procedures.  This  evaluation was carried out under the supervision and with the
participation  of management,  including our Chief  Executive  Officer and Chief
Financial Officer.  Based upon that evaluation,  our Chief Executive Officer and
Chief  Financial  Officer  concluded that  Ozolutions'  disclosure  controls and
procedures are effective. There have been no significant changes in our internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date we carried out the evaluation.

                                    PART III

    ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
              COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors and Officers

     The  following  table  sets  forth the  names,  ages,  and  positions  with
Ozolutions for each of the directors and officers of Ozolutions.

Name                       Age  Positions                               Since

Max Weissengruber          65   President and Director                April 2000

James A. Clemenger         47   Secretary and Director                April 2000

Douglas R. Robertson       65   Chief Financial Officer and Director  July 2001

     All directors hold office until the next annual meeting of stockholders and
until their successors are elected and qualify. Officers serve at the discretion
of the Board of Directors. We have no board committees and do not expect to form
board committees until our operations increase.  The following is information on
the business experience of each director and officer.

     Max  Weissengruber  has served as an executive  officer of Ozolutions since
April  2000.  He was  previously  a  Managing  Partner  and sole  owner of Acris
Partners of Toronto,  Ontario from May 1993 to March 2000.  Acris Partners was a
marketing  and  communications  consulting  firm  engaged  in  the  business  of
conducting employee surveys and developing  marketing  communications  materials
and customized training packages.

     James A.  Clemenger  has served as an  executive  officer  and  Director of
Ozolutions   since  April  2000.   Since  May  2000,  Mr.   Clemenger  has  been
self-employed  as a business  consultant.  From November 1999 to April 2000, Mr.
Clemenger was employed as a Sales Manager for Dynamex of Toronto, Ontario, where
he was  responsible  for  marketing  sales  programs  for Postal  Promotions,  a
specialized  high priority  courier  service based in Toronto.  From May 1997 to
October 1999, he provided  consulting  services to MacLeod Trading Inc. on Latin
America  trading   opportunities   and   development  of  product   distribution
strategies.

     Douglas R.  Robertson has served as Director of  Ozolutions  since 2001 and
Chief Financial  Officer of Ozolutions since July,  2003.Mr.  Robertson has been
general  manager of MTL Trading of Toronto,  Ontario since May 2001. MTL Trading
is engaged in the business of buying and selling meat and poultry products.  For

                                       16

<PAGE>

over five years prior to May 2001, Mr.  Robertson was the president and owner of
Robertson  Foods of  Toronto,  Ontario,  a company  engaged in the  business  of
exporting pork, beef and poultry.

Section 16(a) Filing Compliance

     Section 16(a) of the Securities  Exchange Act of 1934 requires officers and
Directors  of  Ozolutions  and  persons  who own  more  than  ten  percent  of a
registered class of Ozolutions'  equity  securities to file reports of ownership
and  changes in their  ownership  on Forms 3, 4, and 5 with the  Securities  and
Exchange Commission, and forward copies of such filings to Ozolutions.  Based on
the copies of filings received by Ozolutions during the most recent fiscal year,
the directors,  officers,  and beneficial owners of more than ten percent of the
equity  securities  of  Ozolutions  registered  pursuant  to  Section  12 of the
Exchange Act have filed on a timely basis all required Forms 3, 4, and 5 and any
amendments thereto.

Code of Ethics

     Ozolutions  has  adopted  a Code  of  Ethics  applicable  to its  principal
executive officer and principal financial officer, a copy of which is filed with
the Securities and Exchange Commission as an exhibit to this report.

Financial expert

     Ozolutions  does  not  have a  standing  audit  committee  of the  Board of
Directors.  Management  has  determined  not to establish an audit  committee at
present  because the limited  resources of Ozolutions and its limited  operating
activities do not warrant the formation of an audit  committee or the expense of
doing so.  Ozolutions  does not have a financial  expert serving on the Board of
Directors or employed as an officer based on  management's  belief that the cost
of  obtaining  the  services of a person who meets the  criteria for a financial
expert  under  Item  401(e)  of  Regulation  S-B is beyond  Ozolutions'  limited
financial  resources and the  financial  skills of such an expert are simply not
required or necessary for Ozolutions to maintain effective internal controls and
procedures for financial  reporting in light of the limited scope and simplicity
of accounting  issues  raised in its  financial  statements at this stage of its
development.

                         ITEM 10. EXECUTIVE COMPENSATION

Annual Compensation

     The following table sets forth certain information regarding the annual and
long-term  compensation  for services in all  capacities to  Ozolutions  for the
prior fiscal years ended August 31, 2003,  2002,  and 2001, of those persons who
were either the chief executive officer during the last completed fiscal year or
one of the other four most highly  compensated  executive officers as of the end
of the last  completed  fiscal year whose  annual  salary and  bonuses  exceeded
US$100,000.

                                                      Annual Compensation
Name and Principal Position         Fiscal Year            Salary ($)
---------------------------         -----------       -------------------
Max Weissengruber, President (1)       2003                 52,000
                                       2002                 44,000
                                       2001                 36,000

                                       17

<PAGE>

     Since July 1, 2000, Max Weissengruber has devoted  substantially all of his
time to getting the business of Ozolutions started.  Beginning in November 2001,
consulting  fees  were paid to Mr.  Weissengruber  in the  amount of $3,000  per
month.  This amount was increased to $4,000 per month in January 2002 and in May
2003,   was  increased  to  $5,000  per  month.   Prior  to  January  2002,  Mr.
Weissengruber  was not receiving any cash payments and  contributed his services
in the amount of $36,000 in 2001.  He  received $ 44,000 in cash in fiscal  2002
and $ 52,000 in cash and accruals in fiscal 2003.

     James A.  Clemenger  has not  devoted  any  material  amount of time to the
business  of  Ozolutions,  and we do not expect his time  commitment  to us will
change until our business develops and we begin recognizing  significant revenue
from product sales.

     Douglas Robertson reviews financial information in keeping with his role as
Chief Financial Officer.

     Officers and  directors  are  reimbursed  for travel  expenses  incurred in
connection with Ozolutions' business.

Stock Options

     There were no options granted to the executive officers or directors during
the fiscal year ended August 31,  2003.  In April 2003,  the  exercise  price of
existing  director  and  officers'  options was reduced  from $0.40 to $0.10 per
share exercisable until October 2004.

     The  following  table  sets  forth  certain  information  with  respect  to
unexercised options held by the Named Executive Officers. No outstanding options
held by the Named  Executive  Officers  were  exercised in the fiscal year ended
August 31, 2003.

                             Number of Securities      Value of Unexercised
                            Underlying Unexercised     In-the-Money Options
                                    Options           At Fiscal Year End ($)
                             at Fiscal YearEnd (#)              (1)
Name and Principal               Exercisable/              Exercisable/
Position                         Unexercisable             Unexercisable
------------------               -------------             -------------

Max Weissengruber                 475,000/-0-               $ 19,000/-0-
  President

Douglas Robertson                  50,000/-0-               $  2,000/-0-
  Chief Financial Officer

James Clemenger                   175,000/-0-               $  7,000/-0-
  Secretary

(1) This value is  determined  on the basis of the  difference  between the fair
market value of the securities  underlying the options and the exercise price at
August 31, 2003. The fair market value of Ozolutions' common stock at August 31,
2003,  is  determined by the average of the closing bid and asked prices on that
date, which was $ 0.14 per share.

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<PAGE>


           ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                                 AND MANAGEMENT

     The  following  table sets  forth as of  December  31 2003,  the number and
percentage  of the  outstanding  shares of common stock which,  according to the
information  supplied to Ozolutions,  were beneficially owned by (i) each person
who is  currently a director,  (ii) each  executive  officer,  (iii) all current
directors  and  executive  officers  as a group and (iv) each person who, to the
knowledge  of  Ozolutions,  is the  beneficial  owner  of  more  than  5% of the
outstanding common stock.  Except as otherwise  indicated,  the persons named in
the table have sole  voting  and  dispositive  power with  respect to all shares
beneficially owned, subject to community property laws where applicable.

                                      Amount and Nature of Beneficial Ownership

                                             Common              Percent
Name and Address                             Shares              of Class

1421209OntarioLimited(1)                   6,000,000              17.90
Carl Lavoie
134 Melrose Avenue
Toronto, Ontario CN M5M 1Y7

Max Weissengruber (2)(3)                    475,000                1.41
30 Denver Crescent, Suite 200
Toronto, Ontario, CN M2J 1G8

James A. Clemenger (2)(3)                   175,000                0.52
53 Duggan Avenue
Toronto, Ontario, CN M4V 1Y1

Douglas R. Robertson (2)(3)                  50,000                0.15
52189 Castlestone Court
Mississauga, Ontario CN L5B 1X9

All Executive officers and                  700,000                2.08
Directors as a Group (3 persons)
--------------------------------

(1)  To the best of our  knowledge,  Carl  Lavoie is the sole  owner of  1421209
     Ontario Limited.  Accordingly,  Mr. Lavoie may be deemed to have voting and
     investment control over the 6,000,000 shares of common stock held of record
     by 1421209 Ontario Limited. From 1991 to the present, Mr. Lavoie has served
     as a  Director  of  Financial  Services  with CB Richard  Ellis  Limited of
     Toronto, Ontario, where he has provided commercial mortgage and real estate
     transaction development and consulting services.

(2)  These  persons  are  all  of  the  directors  and  executive   officers  of
     Ozolutions.

(3)  The figures for each of these  persons  represent  only options to purchase
     common  shares that are vested or will vest within 60 days from the date as
     of which information is presented in the table. These figures represent the
     percentage  of ownership  of the named  individuals  assuming  each of them

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<PAGE>

     alone has exercised his options,  and percentage  ownership of all officers
     and  directors  as a  group  assuming  all  purchase  rights  held  by such
     individuals are exercised.

           ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Ozolutions uses  approximately  400 square feet of office space provided by
Max Weissengruber,  one of its officers and directors, at no charge.  Ozolutions
is of the  opinion  that the  value of the space  provided  is not  material  to
Ozolutions or its financial condition.

                  ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits: Copies of the following documents are included as exhibits to this
                                    report.

  SEC Ref. No.   Title of Document                                    Location

      3.1        Certificate of  Incorporation,  as amended October       *
                 22,
                 1999 and April 12, 2000

      3.2        By-Laws                                                  *

      10.1       Distribution Agreement with ELCE International          **
                 Dated August 18, 2001

      10.2       Distribution Agreement with ELCE International         ***
                 Dated January 15, 2002

      10.3       Distribution Agreement with ELCE International         ***
                 Dated March 1, 2002

      10.6       Form of Option Agreement issued to Directors            **

      14.1       Code of Ethics                                      This Filing

      31.1       Certification of the Chief Executive Officer        This Filing
                 pursuant to Section 302 of the Sarbanes-Oxley Act
                 of 2002

      31.2       Certification of the Chief Financial Officer        This Filing
                 pursuant to Section 302 of the Sarbanes-Oxley Act
                 of 2002

      32.1       Certifications of the Chief Executive Officer and   This Filing
                 Chief Financial Officer pursuant to Section 906
                 of the Sarbanes-Oxley Act of 2002

* These exhibits are  incorporated  herein by this reference to the Registration
Statement  on Form  10-SB,  as  amended  by  Amendment  No.'s  1, 2, 3, 4, and 5
thereto, filed with the Securities and Exchange Commission.

** These exhibits are incorporated herein by this reference to the Annual Report
on Form 10-KSB of Ozolutions for the year ended August 31, 2001,  filed with the
Securities and Exchange Commission.

                                       20

<PAGE>

*** These  exhibits  are  incorporated  herein by this  reference  to the Annual
Report on Form 10-KSB of  Ozolutions  for the year ended August 31, 2002,  filed
with the Securities and Exchange Commission.

Form 8-K Filings:  No reports on Form 8-K were filed  during the fiscal  quarter
ended August 31, 2003.

                                       21

<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.

                                           Ozolutions Inc.


Date: January 16, 2004                     By:  /s/ Max Weissengruber,
                                                Chief Executive Officer


Date: January 16, 2004                     By:  /s/ Douglas Robertson,
                                                Chief Financial Officer

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


Dated: January 16, 2004                   /s/ Max Weissengruber, Director


Dated: January 16, 2004                   /s/ James A. Clemenger, Director


Dated: January 16, 2004                   /s/ Douglas R. Robertson, Director




                                       22

<PAGE>



OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada


TABLE OF CONTENTS
--------------------------------------------------------------------------------


Independent Auditors' Report                                               F - 1

Balance Sheets at August 31, 2003 and 2002                                 F - 2

Statements of Changes in Stockholders' Equity for the
  Years Ended August 31, 2003 and 2002                             F - 3 - F - 4

Statements of Operations for the Years Ended
  August 31, 2003 and 2002                                                 F - 5

Statements of Cash Flows for the Years Ended
  August 31, 2003 and 2002                                         F - 6 - F - 7

Notes to Financial Statements                                     F - 8 - F - 18

                                       23

<PAGE>


                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors
  and Stockholders
Ozolutions Inc.
Toronto, Ontario Canada


     We have  audited the  accompanying  balance  sheets of  Ozolutions  Inc. (A
Delaware Corporation) as of August 31, 2003 and 2002, and the related statements
of operations,  changes in stockholders'  equity  (deficit),  and cash flows for
each of the two years in the period  ended  August  31,  2003.  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 of America.  Those standards  require that we plan
and perform the audit 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  that  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 Ozolutions Inc. (A Delaware
Corporation)  as of August 31, 2003 and 2002,  and the results of its operations
and its cash  flows for each of the two years in the  period  ended  August  31,
2003, in conformity with accounting  principles generally accepted in the United
States of America.

     The  accompanying   financial   statements  have  been  prepared   assuming
Ozolutions Inc. (A Delaware  Corporation)  will continue as a going concern.  As
discussed in Note G to the financial statements, the Company has incurred losses
that have resulted in a retained  deficit.  This  condition  raises  substantial
doubt about the Company's  ability to continue as a going concern.  Management's
plans regarding this matter are described in Note G. The financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.





/s/ Rotenberg & Company, LLP
Rotenberg & Company, LLP
Rochester, New York
  January 19, 2004

                                      F-1

<PAGE>

OZOLUTIONS INC.
(A DELAWARE CORPORATION)
Toronto, Ontario Canada
<TABLE>
<CAPTION>

BALANCE SHEETS
-------------------------------------------------------------------------------------

                                                                  (U.S. Dollars)

August 31,                                                      2003           2002
-------------------------------------------------------------------------------------

ASSETS

<S>                                                          <C>          <C>
Current Assets
Cash and Cash Equivalents                                    $       127  $   223,157
Accounts Receivable - Net of Allowance for Doubtful Accounts
                      of $35,020 and $-0-, Respectively          195,760      137,543
Inventory                                                        182,363      167,370
Prepaid Expenses and Deposits                                     50,000       98,500
-------------------------------------------------------------------------------------

Total Current Assets                                             428,250      626,570

Other Assets
Marketing Rights, Net of Accumulated Amortization                     --      200,815
Deposits                                                          27,292       32,532
-------------------------------------------------------------------------------------

Total Assets                                                 $   455,542  $   859,917
=====================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts Payable                                             $    66,658  $     7,117
Deferred Revenue                                                   7,037           --
Share Repurchase Commitment                                       81,699           --
Due to Director                                                   82,298       14,956
Due to Stockholders                                               56,501        4,811
-------------------------------------------------------------------------------------

Total Liabilities                                                294,193       26,884
-------------------------------------------------------------------------------------

Stockholders' Equity
Common Stock:  $.001 Par; 50,000,000 Shares Authorized;
               33,754,226 and 33,333,326 Issued and
               Outstanding, Respectively.                         33,754       33,333
Additional Paid-In Capital                                     1,752,975    1,817,516
Accumulated Deficit                                           (1,625,380)  (1,017,816)
-------------------------------------------------------------------------------------

Total Stockholders' Equity                                       161,349      833,033
-------------------------------------------------------------------------------------

Total Liabilities and Stockholders' Equity                   $   455,542  $   859,917
=====================================================================================
</TABLE>

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

                                      F - 2

<PAGE>

OZOLUTIONS INC.
(A DELAWARE CORPORATION)
Toronto, Ontario Canada

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------

                                                                               (U.S. Dollars)

                                                                               Additional                       Total
                                                     Number       Common         Paid-In      Accumulated    Stockholders'
                                                    of Shares      Stock         Capital        Deficit         Equity
--------------------------------------------------------------------------------------------------------------------------

<S>                                                 <C>          <C>           <C>            <C>             <C>
Balance - August 31, 2001                           19,799,133   $ 19,799      $   238,496    $  (631,394)    $ (373,099)

Shares Issued and Stock Options Granted as
  Consideration for Acquisition of Marketing
  Rights                                                25,000         25          237,975             --        238,000

Consulting Services Contributed by
  Officers/Directors/Consultants                            --         --            6,000             --          6,000

Consulting Services Paid by Shareholders on Behalf
  of the Corporation                                        --         --          135,000             --        135,000

Shares Issued to Consultants in Exchange for
  Services                                           1,300,000      1,300          148,700             --        150,000

Shares Issued under Stock Purchase Agreement        12,209,193     12,209        1,018,400             --      1,030,609

Cash Contribution of Capital                                --         --           13,217             --         13,217

Stock Options Granted - Compensation for Services
  Rendered                                                  --         --           11,750             --         11,750

Capital Contribution - Interest Expense                     --         --            7,978             --          7,978

Net Loss                                                    --         --               --       (386,422)      (386,422)
--------------------------------------------------------------------------------------------------------------------------

Balance - August 31, 2002                           33,333,326   $ 33,333      $ 1,817,516    $(1,017,816)    $  833,033
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                      F - 3

<PAGE>

OZOLUTIONS INC.
(A DELAWARE CORPORATION)
Toronto, Ontario Canada

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - continued
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------

                                                                               (U.S. Dollars)

                                                                               Additional                       Total
                                                     Number       Common         Paid-In      Accumulated    Stockholders'
                                                    of Shares      Stock         Capital        Deficit         Equity
--------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>          <C>           <C>            <C>              <C>
Balance - August 31, 2002                           33,333,326   $ 33,333      $ 1,817,516    $(1,017,816)     $ 833,033

Shares Issued to Consultants in Exchange for
  Services                                             300,000        300           14,700             --         15,000

Shares Issued under Former Stock Purchase Agreement    120,900        121             (121)            --             --

Commitment for Purchase of Shares for Cancellation          --         --          (81,699)            --        (81,699)

Capital Contribution - Interest Expense                     --         --            2,579             --          2,579

Net Loss                                                    --         --               --       (607,564)      (607,564)
--------------------------------------------------------------------------------------------------------------------------

Balance - August 31, 2003                           33,754,226   $ 33,754      $ 1,752,975    $(1,625,380)     $ 161,349
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                      F - 4

<PAGE>

OZOLUTIONS INC.
(A DELAWARE CORPORATION)
Toronto, Ontario Canada
<TABLE>
<CAPTION>

STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------------

                                                                     (U.S. Dollars)

Years Ended August 31,                                             2003          2002
--------------------------------------------------------------------------------------
<S>                                                         <C>           <C>
Revenues, Net                                               $  143,636    $  134,885

Cost of Goods Sold                                             101,239        98,234
--------------------------------------------------------------------------------------

Gross Profit                                                    42,397        36,651
--------------------------------------------------------------------------------------

Expenses
Bad Debts                                                       63,108            --
Consulting Fees                                                137,925       211,863
Marketing, Including Amortization of Marketing Rights          150,469       335,530
General and Administrative                                     124,813       104,959
Interest Expense                                                 2,579         7,978
--------------------------------------------------------------------------------------

Total Expenses                                                 478,894       660,330
--------------------------------------------------------------------------------------

Loss Before Other Expenses                                    (436,497)     (623,679)

Other Expenses
Loss on Impairment of Marketing Rights                         171,067            --
--------------------------------------------------------------------------------------

Loss Before Provision for Taxes                               (607,564)     (623,679)

Provision for Taxes                                                 --            --
--------------------------------------------------------------------------------------

Loss from Continuing Operations                               (607,564)     (623,679)

Extraordinary Items
Gain from Cancellation of Marketing Rights
  Agreement, Net of Income Taxes of $-0-                            --       237,257
--------------------------------------------------------------------------------------

Net Loss                                                    $ (607,564)   $ (386,422)
--------------------------------------------------------------------------------------

Weighted Average Number of Common Shares
  Outstanding - Basic and Diluted                           33,669,517    23,563,332
--------------------------------------------------------------------------------------

Income (Loss) per Common Share - Basic and Diluted
     Loss from Continuing Operations                        $    (0.02)   $    (0.03)
     Extraordinary Items                                          0.00          0.01
--------------------------------------------------------------------------------------

Net Loss                                                    $    (0.02)   $    (0.02)
--------------------------------------------------------------------------------------
</TABLE>

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

                                      F - 5


<PAGE>

OZOLUTIONS INC.
(A DELAWARE CORPORATION)
Toronto, Ontario Canada

<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------------

                                                                  (U.S. Dollars)

Years Ended August 31,                                          2003            2002
-------------------------------------------------------------------------------------

Cash Flows from Operating Activities

<S>                                                       <C>            <C>
Net Loss                                                  $(607,564)     $ (386,422)

Non-Cash Adjustments:
Amortization of Marketing Rights                             29,748         115,927
Bad Debts                                                    63,108              --
Compensation Expense on Stock Option Grants                      --          11,750
Consulting Services Paid by Shareholders                         --         135,000
Contributed Services                                             --           6,000
Gain from Cancellation of Marketing Rights Agreement             --        (237,257)
Interest on Director/Stockholder Loans                        2,579           7,978
Loss on Impairment of Marketing Rights                      171,067              --
Shares Issued to Consultants                                 15,000         150,000

Changes in Assets and Liabilities:
Accounts Receivable                                        (121,325)       (137,543)
Inventory                                                   (14,993)       (167,370)
Prepaid Expenses and Deposits                                48,500         (98,500)
Deposits                                                      5,240          23,760
Accounts Payable                                             59,541         (33,594)
Deferred Revenue                                              7,037         (34,000)
-------------------------------------------------------------------------------------

Net Cash Flows from Operating Activities                   (342,062)       (644,271)
-------------------------------------------------------------------------------------

Cash Flows from Investing Activities                             --              --
-------------------------------------------------------------------------------------

Cash Flows from Financing Activities
Advances from (Repayments to) Director                       67,342         (57,361)
Advances from (Repayments to) Stockholders                   51,690        (119,037)
Contribution by Stockholder                                      --          13,217
Proceeds from Stock Purchase Agreement                           --       1,030,609
-------------------------------------------------------------------------------------

Net Cash Flows from Financing Activities                    119,032         867,428
-------------------------------------------------------------------------------------

Net Change in Cash and Cash Equivalents                    (223,030)        223,157

Cash and Cash Equivalents - Beginning of Year               223,157              --
-------------------------------------------------------------------------------------

Cash and Cash Equivalents - End of Year                   $     127       $ 223,157
-------------------------------------------------------------------------------------
</TABLE>

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

                                      F - 6


<PAGE>


OZOLUTIONS INC.
(A DELAWARE CORPORATION)
Toronto, Ontario Canada

<TABLE>
<CAPTION>

STATEMENTS OF CASH FLOWS - continued
------------------------------------------------------------------------------------

                                                                  (U.S. Dollars)

Years Ended August 31,                                          2003           2002
------------------------------------------------------------------------------------

Supplemental Disclosures
------------------------------------------------------------------------------------

<S>                                                          <C>         <C>
Interest Paid                                                $   --      $      --
Income Taxes Paid                                            $   --      $      --
------------------------------------------------------------------------------------


Non-Cash Investing and Financing Activities
------------------------------------------------------------------------------------

Commitment for Purchase of Shares for Cancellation           $ 81,699    $      --
------------------------------------------------------------------------------------

Acquisition of Marketing Rights                              $     --    $ 238,000
Purchase Price Paid via Issuance of Common Stock                   --      (23,000)
Purchase Price Paid via Granting of Stock Options                  --     (215,000)
------------------------------------------------------------------------------------

Total Cash Paid for Marketing Rights                         $     --    $      --
------------------------------------------------------------------------------------

Write-Off of Marketing Rights - Net of Accumulated
Amortization                                                 $     --    $(762,743)
Cancellation of Obligation to 1421209 Ontario Limited              --    1,000,000
------------------------------------------------------------------------------------

Gain from Cancellation of Marketing Rights Agreement         $     --    $ 237,257
------------------------------------------------------------------------------------
</TABLE>

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

                                      F - 7

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada


NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


Note A -  The Company
          The Company was  incorporated  under the laws of the State of Delaware
          on January 10, 1996 as Unipak  Process,  Inc.  The name of the Company
          was changed to Rico Resources 1999, Inc. on October 22, 1999. On April
          12, 2000, the Board of Directors filed a Certificate of Amendment with
          the Secretary of the State of Delaware changing the name to Ozolutions
          Inc. On April 12, 2000, the Board of Directors amended the articles of
          incorporation  to increase the number of  authorized  shares of common
          stock from  20,000,000 to 50,000,000  shares of $.001 par value common
          stock. The Company's  principal office is located in Toronto,  Ontario
          Canada.

          Scope of Business
          The Company is an  international  marketer  and  distributor  of water
          purification systems using ozone and water activator  technology.  The
          markets the Company targets are Mexico; the Caribbean zone,  including
          Panama, Costa Rica, and Jamaica; Ecuador; Peru and Canada.

Note B -  Summary of Significant Accounting Policies
          Method of Accounting
          The Company maintains its books and prepares its financial  statements
          on the accrual basis of accounting.

          Cash and Cash Equivalents
          Cash and cash  equivalents  include  time  deposits,  certificates  of
          deposit,   and  all  highly  liquid  debt  instruments  with  original
          maturities  of three months or less.  The Company  maintains  cash and
          cash  equivalents at financial  institutions,  which  periodically may
          exceed federally insured amounts.

          Accounts Receivable and Allowance for Doubtful Accounts Accounts
          receivable are stated net of an allowance for doubtful  accounts.  The
          Company  estimates  the  allowance  based on its  analysis of specific
          balances and taking into consideration the age of past due accounts.

          Inventory
          Inventory consists of merchandise held for resale and is stated at the
          lower of cost or market using the first-in, first-out method.

          Revenue Recognition
          Sales are recorded when products are shipped to customers.  Provisions
          for  discounts  and  rebates  to  customers,   estimated  returns  and
          allowances and other  adjustments  are provided for in the same period
          the related sales are recorded.

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

          Loss Per Common Share
          Loss per common  share is computed in  accordance  with  Statement  of
          Financial  Accounting  Standards  No.  128,  "Earnings  Per Share," by
          dividing  income (loss)  available to common  stockholders by weighted
          average number of common shares outstanding for each period.
                                                                  - continued -

                                     F - 8

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada


NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


Note B -  Summary of Significant Accounting Policies - continued

          Income Taxes
          The Company  accounts for income taxes in accordance with Statement of
          Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
          using the asset and liability  approach,  which require recognition of
          deferred  tax  liabilities  and  assets  for the  expected  future tax
          consequences of temporary differences between the carrying amounts and
          the tax basis of such assets and  liabilities.  This  method  utilizes
          enacted  statutory  tax  rates in  effect  for the  year in which  the
          temporary  differences  are  expected to reverse  and gives  immediate
          effect to changes in income tax rates  upon  enactment.  Deferred  tax
          assets are recognized,  net of any valuation allowance,  for temporary
          differences  and net  operating  loss and tax credit  carry  forwards.
          Deferred  income tax  expense  represents  the change in net  deferred
          assets and liability balances.

          Marketing Rights
          Marketing  rights  represent  the exclusive  rights to distribute  the
          products of "ELCE International Inc." acquired from ELCE International
          Inc.  Contracts  were recorded at cost and were  amortized  over their
          useful lives.

          Impairment of Marketing Rights
          The Company evaluates its long-lived  assets for financial  impairment
          on  a  regular  basis  in  accordance   with  Statement  of  Financial
          Accounting  Standards  No.  144,  "Accounting  for the  Impairment  or
          Disposal   of   Long-Lived   Assets."   The  Company   evaluates   the
          recoverability of long-lived assets not held for sale by measuring the
          carrying amount of the assets against the estimated  discounted future
          cash flows associated with them. At the time such evaluations indicate
          that the future discounted cash flows of certain long-lived assets are
          not  sufficient  to recover the  carrying  value of such  assets,  the
          assets are  adjusted  to their fair  values.  Previously,  the Company
          applied the provisions of Statement of Financial  Accounting Standards
          No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
          Long-Lived  Assets to Be Disposed  Of". This  statement  required that
          long-lived assets and certain identifiable intangibles be reviewed for
          impairment whenever events or changes in circumstances  indicated that
          the carrying amount of an asset may not be recoverable. Recoverability
          of  assets to be held and used was  measured  by a  comparison  of the
          carrying  amount of an asset to future net cash flows  expected  to be
          generated by the asset.

Note C -  Marketing Rights
          Hankin Ozone Systems, LTD
          The Company purchased the exclusive marketing rights to distribute the
          products of "Hankin Ozone Systems, LTD" in Canada, the Caribbean,  and
          Mexico from 1421209 Ontario Limited.  The acquisition occurred on June
          21,  2000 in  which  Ozolutions  Inc.  received  the  rights  to begin
          distributing  the  products of Hankin  Ozone  Systems,  LTD and became
          obligated to 1421209  Ontario Limited for the purchase price described
          below.
                                                                   - continued -

                                      F - 9

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada


NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


Note C -  Marketing Rights - continued

          The original payment terms (subsequently  amended on November 7, 2000)
          were for  $1,017,217,  and the issuance of 8,000,000  common shares of
          Ozolutions  Inc.  The $17,217  was a  non-refundable  payment  paid to
          1421209  Ontario  Limited in June 2000.  The sum of  $550,000  and the
          delivery of 8,000,000 common shares of stock were payable on or before
          the 60th day following the qualification for trading of the Ozolutions
          Inc. common shares on a recognized United States Securities  Exchange,
          but in no case later than  November 21, 2000.  The sum of $250,000 was
          payable on or before the 150th day  following  the  qualification  for
          trading of the Ozolutions  Inc.  common shares on a recognized  United
          States Securities Exchange,  but in no case later than April 21, 2001.
          The  remainder  of the  purchase  price of $200,000  was payable on or
          before the 180th day  following the  qualification  for trading of the
          Ozolutions,   Inc.  common  shares  on  a  recognized   United  States
          Securities Exchange, but in no case later than April 21, 2001.

          On November 7, 2000 the  agreement  was amended to extend the original
          due  dates of the  purchase  price  installments  to allow  Ozolutions
          additional time to raise capital and to further  business  operations.
          The revised due dates of the installments are as follows:

          The sum of $550,000  was  payable on or before the 90th day  following
          the  qualification  for trading of Ozolutions  Inc. common shares on a
          recognized  United States  Securities  Exchange,  but in no case later
          than June 30, 2001,  and the delivery of  8,000,000  common  shares of
          stock  were  payable  on  or  before  the  30th  day   following   the
          qualification  for trading of the Ozolutions  Inc.  common shares on a
          recognized  United States  Securities  Exchange,  but in no case later
          than April 30, 2001.  The sum of $250,000 was payable on or before the
          150th day following the  qualification  for trading of the  Ozolutions
          Inc. common shares on a recognized United States Securities  Exchange,
          but in no case  later than  August  31,  2001.  The  remainder  of the
          purchase  price of  $200,000  was  payable  on or before the 180th day
          following the  qualification for trading of the Ozolutions Inc. common
          shares on a recognized  United States Securities  Exchange,  but in no
          case later than September 30, 2001.

          In November 2000, the 8,000,000  shares of common stock were delivered
          to 1421209 Ontario Limited. The Company has an agreement to repurchase
          6,000,000 of the  8,000,000  shares for  $81,699.  Such amount will be
          paid when the Company has the funds available.

          In  April  2002,  the  agreement  with  1421209  Ontario  Limited  was
          cancelled and the obligation of $1,000,000 to 1421209  Ontario Limited
          was no longer due. The Company  wrote-off the net marketing  rights of
          $762,743 and the outstanding obligation of $1,000,000, and recorded an
          extraordinary gain from the cancellation of the agreement of $237,257.
          The Company paid $50,000 directly to Hankin Ozone Systems, LTD for the
          same marketing  rights.  The Company  recorded the $50,000  payment to
          Hankin Ozone  Systems,  LTD as an expense during the year ended August
          31, 2002.
                                                                   - continued -

                                     F - 10

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada


NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


Note C -  Marketing Rights - continued

          ELCE International Inc.
          The Company purchased the exclusive marketing rights to distribute the
          water  activator  products of "ELCE  International  Inc."  ("ELCE") in
          Canada  from ELCE  International  Inc.  The  acquisition  occurred  on
          January 15, 2002 in which Ozolutions Inc. received the rights to begin
          distributing  the products of ELCE  International  Inc. For the rights
          received,  the Company issued 25,000  restricted  shares of Ozolutions
          Inc.  common  stock and  granted  options to purchase  500,000  common
          shares at $0.50 per share.  The options  had a one-year  term and have
          been  extended for one  additional  year.  The contract for the Canada
          territory was being amortized over the useful life of four years which
          represented  the  contractual  term of one year plus  three  automatic
          renewal extensions of one year each.

          The  agreement  was for one-year  with an automatic  renewal for three
          additional  years if all terms of the agreement were  fulfilled.  Such
          terms  required  the  purchase  of a minimum of 75 units  every  three
          months for the first year with a 30% increase in the minimum  purchase
          commitment  amount each year.  In addition,  the Company had to hire a
          technician,  appointed  by ELCE,  for one year  for  training  Company
          personnel.  Monthly salary,  lodging,  and incidental  expenses of the
          technician were the responsibility of the Company.

          In  December  2002,  the  agreement  with ELCE in Canada was  verbally
          amended  to waive the  purchase  of any units  from  December  1, 2002
          through February 28, 2003.  Beginning March 1, 2003, the Company would
          have been required to purchase 105 units every three months. All other
          terms of the agreement remained in place. The agreement was renewed in
          January 2003 for the first year of the three year renewal term.

          On  February  28,  2003,  the  Company  determined  that it would  not
          continue with the monthly purchase  commitments for ELCE in Canada. As
          a  result,  the  Company  lost  the  exclusive   marketing  rights  to
          distribute  the ELCE products in Canada.  In addition,  the previously
          agreed upon distributor's discount on purchases was decreased from 40%
          to 30%.  Based on the  above,  the  Company  wrote  off the  remaining
          carrying value of the exclusive  marketing rights at February 28, 2003
          which resulted in a charge to operations  during the year ended August
          31, 2003 in the amount of $171,067.

          The Company acquired the exclusive  marketing rights to distribute the
          water activator  products of "ELCE  International  Inc." in Costa Rica
          from ELCE International Inc. The acquisition occurred on March 1, 2002
          in which Ozolutions Inc. received the rights to begin distributing the
          products of ELCE  International  Inc.  The Company was not required to
          pay anything for this agreement.

          The agreement  was for a one-year  term with an automatic  renewal for
          three  additional  years if all terms of the agreement are  fulfilled.
          Such terms required the purchase of a minimum of ten units every month
          for  the  first  year  with a 30%  increase  in the  minimum  purchase
          commitment  amount each year.  In December  2002,  the Company was not
          able to meet the purchase commitment and the rights were lost.

          The contract for the Canada  territory  was being  amortized  over the
          useful life of four years which  represented the  contractual  term of
          one year plus three automatic renewal extensions of one year each.

                                                                   - continued -

                                     F - 11

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada


NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


Note C -  Marketing Rights - continued

          Marketing rights consisted of the following:

          ----------------------------------------------------------------------
          August 31,                                           2003         2002
          ----------------------------------------------------------------------

          ELCE International Inc.
          Canada Territory                                     $ --    $ 238,000
          Costa Rica Territory                                   --           --
          ----------------------------------------------------------------------

          Total Marketing Contracts                            $ --    $ 238,000
          Less:  Accumulated Amortization                        --       37,185
          ----------------------------------------------------------------------

          Net Marketing Contracts                              $ --    $ 200,815

          ----------------------------------------------------------------------
          Amortization expense amounted to $29,748 and $115,927 for the periods
          ended August 31, 2003 and 2002, respectively.

Note D -  Stockholders' Equity
          Initial Capitalization
          The  Company  had  most  of  its  organizational  costs  paid  by  the
          shareholders.  The  shareholders  paid $10,999 for these  services for
          which they received  10,999,133  shares of the Company's common stock.
          The value  assigned  to the shares was $.001 per share.  In  addition,
          certain  shareholders  made a cash  contribution  of $27,217 which was
          used as the down payment on the purchase of the  marketing  rights and
          territory  fees.  The  cash   contributions   have  been  recorded  as
          additional paid-in capital in the accompanying financial statements.

          Stock Purchase Agreement
          The Company entered into a Stock Purchase Agreement on October 1, 2002
          with First Chartered Capital  Corporation,  Inc. ("First  Chartered").
          First  Chartered  purchased stock of the Company for 30% of the market
          value on the date of purchase.  Through  August 31,  2003,  12,330,093
          restricted  common shares had been  purchased by First  Chartered with
          the Company receiving $1,030,609. The Company cancelled this agreement
          in August 2002.

                                     F - 12

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada


NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note E -  Consulting and Advisory Agreements
          On June 5, 2001, the Company entered into advisory agreements with the
          firms of David Michael LLC and Feng Shui Consulting,  Inc. The purpose
          of the advisory  agreements was to assist the Company in effecting the
          purchase of businesses and assets  relative to its business and growth
          strategy,  acquisition  of other  operations  or  businesses,  general
          business and financial consulting, and the introduction of the Company
          to public  relations  firms and consultants and others that may assist
          the  Company  in its  plans.  For  the  services  described  in  their
          respective  agreements,  the advisors would each be issued  restricted
          shares of Ozolutions Inc. common stock on the following schedule: June
          5, 2001 - 400,000 shares; September 5, 2001 - 200,000 shares; December
          5,  2001 -  200,000  shares;  March  5,  2002 -  150,000  shares.  The
          agreements were  subsequently  cancelled on February 19, 2002. On June
          5, 2001,  400,000 shares were issued to each of the firms. The Company
          charged  operations  in 2001 in the  amount of  $128,000  for the fair
          value of the  services  rendered.  A fair  value of the  common  stock
          awarded  could not be determined at the date of the award as the stock
          had not begun trading. No additional shares will be issued.

          In June 2002, David Michael LLC and Feng Shui Consulting, Inc. filed a
          suit  against the Company for breach of contract  for failure to issue
          additional  shares of common stock under the  agreements.  The Company
          filed  a  counter  claim  and  third  party   complaint   denying  the
          substantive  allegations  of the  complaint  and  asserting  breach of
          contract  and fraud in  connection  with the  transaction.  Management
          believes the suit is without  merit and intends to  vigorously  defend
          its position.  Management  does not believe the range of loss, if any,
          cannot be reasonably estimated at this time. Accordingly, no provision
          for possible loss has been made in these financial statements.

          On December 20, 2001, the Company  entered into an advisory  agreement
          with  inaVest,  Inc.  The purpose of the  agreement  was to assist the
          Company with public  relations,  communications,  and provide  general
          advisory and consulting  services.  The agreement was for three months
          with an automatic  renewal for an additional three months,  unless the
          Company cancelled the agreement during the original  three-month term.
          In  exchange  for  these   services,   shareholders   of  the  Company
          transferred  ownership of 550,000  shares of  Ozolutions  Inc.  common
          stock as payment,  in lieu of issuing new shares.  The Company charged
          operations  and additional  paid-in  capital for $135,000 for the fair
          value of services  rendered  during the year ended August 31, 2002. In
          May 2002,  the  agreement  was  mutually  cancelled by the Company and
          inaVest, Inc.
                                                                   - continued -

                                     F - 13

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada


NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


Note E -  Consulting and Advisory Agreements - continued

          On January 11, 2002, the Company  entered into a financial  consulting
          and investment banking agreement with Chapman, Spira & Carson LLC. The
          purpose  of the  agreement  was to assist  the  Company  with  general
          business and financial consulting and obtain equity and debt financing
          up to $2 million on terms  agreeable to the Company.  Upon the receipt
          of  the  initial   financing   proceeds,   the  Company  would  pay  a
          non-refundable  retainer  fee  of  $25,000  and  would  issue  200,000
          restricted  shares of Ozolutions Inc.  common stock. In addition,  the
          Company  would then begin to pay $5,000 per month for  consulting  and
          service fees for the  subsequent  24 months.  The Company  would pay a
          commission of 7 1/2% on any subsequent financing  arrangements and was
          obligated to issue an additional  1,000,000  shares of Ozolutions Inc.
          common stock upon  completion  of the full $2 million  financing.  The
          Company  had paid $3,000 of the $25,000  retainer  fee in advance.  In
          June 2002, Chapman, Spira & Carson LLC cancelled this agreement.

          In  June  2002,  Chapman,  Spira  &  Carson  LLC  made  a  demand  for
          arbitration through the American  Arbitration  Association as provided
          in the agreement claiming $50,000 in fees, plus nine percent interest,
          and 200,000  shares of the  Company's  common  stock.  On November 18,
          2002,  the Company had an  arbitration  hearing  regarding the Chapman
          issue.  At that  time,  the judge  sent both  parties  back to prepare
          additional information. Such information was presented on December 18,
          2002. In February 2003, the judge returned a verdict  against  Chapman
          and awarded the Company approximately $22,000. The amount has not been
          recorded in the  accompanying  financial  statements as the Company is
          uncertain that the payment will be made.

          On March 28,  2002,  the Company  entered  into a  strategic  business
          consulting and marketing services agreement with Monique Del Medico in
          Canada.  The purpose of the  agreement  was to assist the Company with
          marketing,   distribution,   and  product  promotion  strategies  with
          industrial,  commercial,  and institutional  customers in Canada.  The
          agreement  was  for  nine  months,   commencing   April  1,  2002  and
          terminating  December 31, 2002.  In exchange for these  services,  the
          Company  issued 700,000 shares of Ozolutions  Inc.  common stock.  The
          Company  charged  operations for $40,000 and $50,000 in 2003 and 2002,
          respectively,  for the fair value of  services  rendered,  and charged
          common  stock and  additional  paid-in  capital for $700 and  $89,300,
          respectively, in fiscal 2002.

          On July 17,  2002,  the  Company  entered  into a  strategic  business
          consulting and marketing services agreement with Adriana Quiras Solis.
          The purpose of the agreement was to assist the Company with marketing,
          distribution  and  product   promotion   strategies  with  industrial,
          commercial  and  institutional  customers  in the United  States.  The
          agreement was for six months, commencing July 15, 2002 and terminating
          January 1, 2003. In exchange for these  services,  the Company  issued
          600,000 shares of Ozolutions  Inc.  common stock.  The Company charged
          operations for $40,000 and $20,000 in 2003 and 2002,  respectively for
          the fair value of  services  rendered,  and charged  common  stock and
          additional  paid-in  capital for $600 and  $59,400,  respectively,  in
          fiscal 2002.

          In October 2002,  the Company  entered into an agreement with Cybertek
          Capital  Management  Inc.  ("Cybertek") or its assignees to distribute
          Ozolutions  products.  The  agreement  is for a five year  period.  In
          exchange for these  services,  the Company granted options to purchase
          2,000,000 common shares at $0.50 per share. The options will vest at a
          rate of 10% per  quarter  beginning  November  1, 2003 and have a five
          year term.  This  issuance  had no impact on the  Company's  financial
          statements.

                                     F - 14

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada


NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


Note F -  Related Party Transactions
          Certain  disbursements of Ozolutions Inc. have been paid by a director
          of the Company,  therefore a Due to Director  account has been set up.
          The  balance  at August  31,  2003 and 2002 is  $82,298  and  $14,956,
          respectively.  The amount due is non-interest  bearing and contains no
          formal  repayment terms. The Company has imputed interest at the prime
          rate  plus 1% and  charged  operations  with an  offsetting  credit to
          additional paid-in capital.

          Certain  disbursements  of  Ozolutions  Inc. have been paid by certain
          stockholders, therefore a Due to Stockholders account has been set up.
          The  balance  at  August  31,  2003 and 2002 is  $56,501  and  $4,811,
          respectively.  The amount due is non-interest  bearing and contains no
          formal  repayment terms. The Company has imputed interest at the prime
          rate  plus 1% and  charged  operations  with an  offsetting  credit to
          additional paid-in capital.

          In May 2003, the Company recognized  individual sales to a stockholder
          and to a director in the amount of $1,600 each.

          The Company used office space in a facility  owned by a stockholder at
          no cost.  The  estimated  fair  rental of the  office  space is deemed
          immaterial to the financial statements.

Note G -  Going Concern
          The Company's  financial  statements  have been presented on the basis
          that it is a going  concern,  which  contemplates  the  realization of
          assets and the  satisfaction  of  liabilities  in the normal course of
          business. The Company has reported net losses of $607,564 for the year
          ended August 31, 2003. As a result, there is an accumulated deficit of
          $1,625,380 at August 31, 2003.

          The  Company's  continued  existence is dependent  upon its ability to
          raise capital or to  successfully  market and sell its  products.  The
          financial  statements  do not  include any  adjustments  that might be
          necessary should the Company be unable to continue as a going concern.

Note H -  Stock Options
          The Company has a stock  option plan under which it may grant  options
          to  purchase  shares  of the  Company's  common  stock.  Options  vest
          immediately and have varying expiration dates.

          The Company has elected to follow Accounting  Principles Board Opinion
          (APBO)  No.  25 and  related  interpretations  in  accounting  for its
          stock-based  compensation made to its employees.  APBO No. 25 requires
          no recognition  of  compensation  expense for most of the  stock-based
          compensation arrangements provided by the Company, namely, broad-based
          employee  stock  purchase  plans and option  grants where the exercise
          price is equal to or less than the market  value at the date of grant.
          However,  APBO No. 25 requires recognition of compensation expense for
          variable  award  plans over the vesting  periods of such plans,  based
          upon the  then-current  market  values  of the  underlying  stock.  In
          contrast,  Statement of Financial Accounting Standards (SFAS) No. 123,
          Accounting for Stock-Based  Compensation,  as amended by SFAS No. 148,
          Accounting for Stock-Based  Compensation - Transition and Disclosure -
          an  amendment  of FASB  Statement  No. 123,  requires  recognition  of
          compensation  expense for grants of stock,  stock  options,  and other
          equity instruments,  over the vesting periods of such grants, based on
          the estimated  grant-date  fair values of those grants.  Stock options
          and awards made to directors, investors and consultants are subject to
          the provisions of SFAS No. 123.
                                                                   - continued -

                                     F - 15

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada

NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


Note H -  Stock  Options - continued

          Directors  During 2002, the Company  granted stock options for 425,000
          shares of common  stock to  directors  as  compensation  for  services
          rendered.  In  accordance  with SFAS No. 123,  the Company  recognized
          compensation  expense during 2002 of $11,750 for the fair value of the
          options at the date of the grant using a Black Scholes  option-pricing
          model.

          In October 2003, the Company  extended  options issued to directors in
          2002 by one year. In addition,  these options were repriced from $1.00
          to $0.40.  This had no impact on the statement of  operations  for the
          year ended August 31, 2003.

          In April 2003,  the Company  authorized  the  repricing  of options to
          purchase  700,000  shares of common  stock  from  $0.40 to $0.10.  All
          options repriced  maintained the same expiration terms. This repricing
          had no impact on the statement of operations for the year ended August
          31, 2003.

          Vendors  During 2002 the  Company  granted  stock  options for 500,000
          shares of common stock to vendors in exchange for marketing rights. In
          accordance  with SFAS No. 123, the Company  recorded  these  marketing
          rights at  $237,975  in 2002  which  represents  the fair value of the
          options  at the date of  grant  using a Black  Scholes  option-pricing
          model.

          The following assumptions were used:

          ----------------------------------------------------------------------
          August 31,
          ----------------------------------------------------------------------

          Weighted Average Fair Value of Options                         $ 0.25
          Weighted Average Exercise Price                                $ 0.45
          Expected Market Volatility                                       7.00%
          Risk Free Interest Rate                                          2.47%
          Expected Life (Years)                                            1.5
          Expected Dividend Yield                                          0.00%
          ----------------------------------------------------------------------

          Stock option transactions for the two years ending August 31, 2003 are
          summarized as follows:

          ----------------------------------------------------------------------
                                                                Weighted Average
                                     Outstanding   Exercisable   Exercise Price
          ----------------------------------------------------------------------

          At September 1, 2001          275,000       275,000       $ 1.00
          Granted                       925,000       925,000       $ 0.45
          ----------------------------------------------------------------------

          At August 31, 2002          1,200,000     1,200,000       $ 0.58
          Cancelled                    (500,000)     (500,000)      $ 0.50
          ----------------------------------------------------------------------

          At August 31, 2003            700,000       700,000       $ 0.10
          ----------------------------------------------------------------------

                                                                   - continued -

                                      F-16

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada

NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note H -  Stock Options - continued

          The following table summarizes  information  about fixed stock options
          outstanding at August 31, 2003:

          ----------------------------------------------------------------------
                                 Shares     Weighted Average    Weighted Average
          Exercise Price      Under Option    Remaining Life     Exercise Price
          ----------------------------------------------------------------------
              $ 0.10            700,000          1.12              $ 0.10
          ----------------------------------------------------------------------

          All of the above outstanding options are fully vested and exercisable.

Note I -  Income Taxes
          At August 31, 2003 and 2002, the Company had approximately  $2,638,777
          and $1,013,397,  respectively,  of net operating  losses available for
          Federal tax purposes,  which are  available to offset  future  taxable
          income. The net operating loss carry forwards begin to expire in 2011.
          The Company has fully  reserved for any future tax  benefits  from the
          net  operating  loss carry  forwards  since it has not  generated  any
          revenues  to date.  The  Company has no other  material  deferred  tax
          assets or liabilities for the periods presented.

Note J -  Fair Value of Financial Instruments
          The fair  value of cash and  cash  equivalents,  accounts  receivable,
          inventory,  prepaid expenses,  deposits,  accounts payable,  and share
          repurchase  commitment  approximated book value at August 31, 2003 and
          2002  because  their  maturity  is  generally  less  than  one year in
          duration.

          The fair value of due to director and due to stockholders could not be
          obtained  without  incurring  excessive  costs as they have no readily
          determinable market price.

Note K -  Proposed Acquisitions
          In May 2002,  the  Company  signed a letter of intent to  acquire  the
          assets of Electrical  Systems in  Engineering  ("ESE"),  an electrical
          parts  distribution  company,  and 100% of the outstanding  common and
          preferred  shares of Specdex Inc., a California based software company
          with  proprietary  distribution  oriented  technology.  In  2003,  The
          Company  agreed to terminate the original  agreement with Specdex Inc.
          at no  cost to  either  party.  As  proposed,  the  Company  will  pay
          approximately  $1,500,000  in  cash  to  acquire  the  assets  of ESE.
          Completion   of  these   transactions   is  subject  to  a  number  of
          contingencies,  including,  completion of due diligence  review of the
          parties  involved,  negotiation of definitive  agreements  between the
          parties,   and  arranging  for  the  financing  required  to  pay  the
          consideration for the companies and assets to be acquired.

                                     F - 17

<PAGE>


OZOLUTIONS INC.
(A Delaware Corporation)
Toronto, Ontario Canada


NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Note L -  Recently Issued Accounting Standards
          There are no recently  issued  accounting  standards that would have a
          material impact on the financial statements.

Note M -  Commitments
          In April 2003, the Company  accepted a $5,000,000  financing  proposal
          from U.S. Capital,  Inc., a California based investment  banking firm.
          The financing commitment is comprised of the following elements:

          o    $2,500,000  will be provided in the form of senior  secured debt.
               The debt has a 5 year  term  with a 10 year  amortization  and an
               automatic  option to extend for  another 5 years.  Principal  and
               interest  will be due at the end 10 years.  The  simple  interest
               rate is 11.25% per year.

          o    8,000,000  restricted common shares will be issued for $2,500,000
               with a put option to buy back 4,000,000  shares for $1,250,000 at
               the end of 5 years and 4,000,000 shares for $1,250,000 at the end
               of 10 years. The Company will pay an annual consulting fee of 10%
               per  year  of the  amount  outstanding  under  this  part  of the
               financing agreement.

          o    The  Company  has paid a $50,000  commitment  fee to  secure  the
               financing which is expected to be concluded in January 2004.

Note N -  Concentrations
          During 2003,  the two largest  customers  accounted for 34% and 32% of
          net sales.  Also,  52% of net sales  during  2003 were made to foreign
          customers.  As the  Company has just begun to sell its  products,  the
          Company  does not  believe  that  they are  dependent  on the  current
          customer base for future sales.

          The Company is dependent on a third-party vendor for all of its supply
          of water-activated  purification  systems. The Company is dependent on
          the ability of its supplier to provide  products on a timely basis and
          on favorable pricing terms. The loss of this supplier or a significant
          reduction  in product  availability  from this  supplier  could have a
          material adverse effect on the Company.  The Company believes that its
          relationship with this supplier is excellent.

Note O -  Subsequent Events
          In September 2003, the Company issued 250,000 restricted shares of the
          Company's  common stock to the  President of ELCE in order to maintain
          the  existing   relationship  in  Canada  for  the  ELCE  products.  A
          renegotiation of a new exclusive agreement for Canada is scheduled for
          early 2004. In  conjunction  with the issuance of the common stock the
          Company  cancelled  the option to purchase  500,000  common  shares at
          $0.50 per share.  The issuance of the stock will result in a charge to
          earnings in the amount of $10,000 in the quarter  ended  November  30,
          2003.

                                     F - 18