SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
(Mark One)

(X)  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the Fiscal Year Ended June 30, 2000
                                       OR
( )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

Commission File No. 0-29895

                             Royce Biomedical, Inc.
                        --------------------------------
                 (Name of Small Business Issuer in its charter)

                Nevada                                      98-0206542
         ----------------------                        --------------------
         (State of incorporation)                        (IRS Employer
                                                       Identification No.)
      1100-1200 West 73rd Avenue
       Vancouver, British Columbia                              V6P 6G5
------------------------------------------             -----------------------
   (Address of Principal Executive Office)                     Zip Code

Registrant's telephone number,  including Area Code:  (604)-267-7080
Securities registered pursuant to Section  12(b) of the Act:  None
Securities  registered pursuant to Section 12(g) of the Act:

                                  Common Stock
                                (Title of Class)

Check whether the Registrant  (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports)  and (2) has been subject to such filing  requirements  for the past 90
days.
                                    X
                                   YES        NO

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best  of  the  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 Company's revenues during the year ended June 30, 2000 were $46,800.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Company,  (1,053,028  shares) based upon the average bid and asked prices of the
Company's common stock on September 14, 2000 was approximately $198,000

Documents incorporated by reference:      None

As of September 30, 2000 the Company had 3,364,138 issued and outstanding shares
of common stock.


<PAGE>


ITEM 1.  DESCRIPTION OF BUSINESS

     Royce  Biomedical,  Inc. (the  "Company") was  incorporated in the State of
Nevada on March 22, l995.

      Health care around the world is divided into two  segments,  diagnosis and
treatment.  This  segmentation  has  given  rise to two  separate  markets:  the
pharmaceutical  market for treatment and the medical  diagnostic testing devices
market for  diagnosis.  There is a rapidly  growing array of diagnostic  testing
devices  which have a high degree of  accuracy,  sensitivity,  and  specificity.
These testing  devices,  which provide  accurate and cost  effective  results in
minutes, are part of what is often referred to as the "point of care" market.

      Between  August 1995 and April 1998,  the  Company  manufactured  and sold
diagnostic  test kits  used to detect  pregnancy,  thyroid  disorders  and other
medical  conditions.  Between August 1995 and January 1998 the Company assembled
its diagnostic testing kits at a laboratory in Irvine,  California.  The Company
closed this facility in April 1998.

     At the present time the Company purchases  medical  diagnostic test systems
from American  manufacturers.  In September 1999 the Company signed an agreement
with Chembio  Diagnostic Systems Inc. for the manufacture of H. Pylori and other
diagnostic  testing kits. The H. Pylori  diagnostic kit  manufactured by Chembio
Diagnostics   Systems  Inc.,  is  considered  by  the  Company  and  independent
evaluators,  to be very accurate and sensitive.  It is a rapid two step test for
the detection of  antibodies to H. Pylori in human serum,  plasma or whole blood
and is used as an aid in the diagnosis of infection due to H. Pylori.

      In April 1999 the Company  signed an  agreement  with Xili  Pharmaceutical
Group,  Inc. ("Xili") of the People's Republic of China to market and distribute
H. Pylori  diagnostic  test kits supplied by the Company to Xili's  customers in
China.  In  addition  to  supplying  H.  Pylori  test kits to Xili,  the Company
provides clinical data and in-person training to Xili personnel.

      Reports  indicate that H. Pylori has infected  over 780 million  people in
China.  H.  Pylori  infection  is a main  cause  of  chronic  gastritis  (50-80%
detectable rate in China),  chronic active gastritis (over 90%),  duodenal ulcer
(95%),  and gastric ulcer (80%).  The early treatment of H. Pylori infection can
reduce  the  need for  invasive  endoscopy  and  long-term  traditional  therapy
associated with duodenal and gastric ulcers, as well as antral gastritis.

      Xili has a large sales force in China that services the medical purchasing
needs of clinics, laboratories,  hospitals, and consumers. Xili has more than 60
branch offices  throughout  China.  Xili has a strong working  relationship with
over 2000 hospitals in China, the Chinese Medical Association and several of the
largest drug stores and test kit  distributors  in China.  Xili is controlled by
Dr. Yan Xiao Wen, the Chairman of the Company's Board of Directors..

     In  November  1999  Xili  began  distributing  20,000 H.  Pylori  test kits
supplied  by the  Company to 100  hospitals  in China as  samples.  The  Company
believes that each hospital will use a minimum of 30 kits per day. The Company's
goal is to sell at least 10,000 test kits to each

<PAGE>

hospital  during the year 2000.  The  Company  expects to receive  approximately
$2.60 (net of product  and  distribution  costs) from the sale of each H. Pylori
testing kit.

      During the twelve  month  period  ending  December  31, 2000 the  Company,
through Xili, plans to market H. Pylori test kits to other hospitals in China. A
variety of other diagnostic test kits will be sampled in key hospitals in China.

      The Company will analyze the results of first year sales of H. Pylori test
kits. If sales results are encouraging,  the Company plans to assemble H. Pylori
test kit components in China to reduce costs. In this regard, Chembio Diagnostic
Systems has  indicated a  willingness  to sell the Company the  components  that
would allow the assembly of H. Pylori and other  diagnostic kits in China.  Xili
has agreed to supply the required assembly space in one of their  pharmaceutical
manufacturing plants.

      The  Company  may also  attempt to acquire  the rights to  manufacture  H.
Pylori test kits in China. Rather than building its own manufacturing  facility,
the  Company  would  pursue  the  acquisition  of  a  subsidiary  of  Xili  that
manufactures pharmaceutical products.

      Utilizing  marketing  research  conducted  by  Xili,  the  Company,  if it
believes suitable  opportunities  exists, will attempt to acquire the rights and
licenses  necessary  to  distribute  and/or  manufacture  additional  diagnostic
testing  kits which will detect the  presence of various  diseases,  infections,
viruses and other medical conditions. There can be no assurance that the Company
will be successful in these efforts. The Company does not know, and at this time
cannot predict, the cost of acquiring the rights to any new products.

      If the Company has success in the Chinese market,  the Company may explore
marketing and sales opportunities in other countries.

      All of the  Company's  sales have been to customers  outside of the United
States. For the foreseeable future, the Company does not plan to sell any of its
products in the United States.

      The Company's  executive offices are located at 1100-1200 West 73rd Avenue
Vancouver,  British Columbia V6P 6G5 CANADA.  The Company's  telephone number is
(604) 267-7080 and its facsimile number is (604) 267-7078.

Competition

      There are competitors  presently  operating in China but comparative tests
conducted by ImmunoReagent Products Inc. have shown the Company's products to be
superior.  The  field  in  which  the  Company  operates  is  subject  to  rapid
technological change and there can be no assurance that the Company will be able
to react and adapt to any such change or that  developments by competitors  will
not cause the products distributed by the Company to be obsolete.



<PAGE>


Regulation

      Foreign Regulation. The Company has licenses from the State Drug Authority
of the People's  Republic of China for the import and  distribution of H. Pylori
and TB test kits in China. The Company,  if suitable  opportunities  exist, will
attempt to acquire the rights and licenses  necessary to distribute  other types
of  diagnostic  test kits in China.  Although the process to secure a license is
relatively  expensive and time consuming,  the Company believes that having Xili
as a partner in China will assist the Company in future  dealings  with  Chinese
regulatory  agencies.  There is no  assurance  however  that the Company will be
successful in obtaining  licenses for the sale of additional  diagnostic testing
kits in China.

      In  order  to  be  sold  outside  the  United  States,   medical   device,
manufactured  in the United  States,  including  diagnostic  testing  kits,  are
subject to FDA permit  requirements  that are  conditioned  on  clearance by the
importing country's appropriate regulatory  authorities.  Many countries further
require  imported  medical  devices to comply  with  their own or  international
standards.  Although  the  Company  believes  its  products  can be  produced in
compliance  with the  regulations,  no assurance can be given that the Company's
products will continue to meet standards  which may be established  form time to
time by the Chinese or other foreign government.

      Regulation in the United States. The sale of medical devices are regulated
in the United States under the Federal  Food,  Drug and Cosmetic Act, the Public
Health  Service Act, and the laws of certain  states.  The Federal Food and Drug
Administration   (FDA)  exercises   significant   regulatory  control  over  the
manufacture of medical devices.

      Prior to the time a medical  device can be marketed in the United  States,
approval of the FDA must  normally be  obtained.  Certain  states  however  have
passed laws which allow a state agency  having  functions  similar to the FDA to
approve the testing and use of medical  devices within the state. In the case of
either FDA or state regulation, testing programs are typically required in order
to establish product safety and efficacy.

      FDA  regulations  pertain  not only to  medical  devices,  but also to the
processes and facilities used to manufacture such products. Among the conditions
for  marketing  products  cleared  by  the  FDA  is  the  requirement  that  the
prospective  manufacturer's quality control and manufacturing procedures conform
to the FDA's Good  Manufacturing  Practice  ("GMP")  regulations,  which must be
followed  at  all  times.  In  complying  with  standards  set  forth  in  these
regulations, manufacturers must continue to expend time, money and effort in the
areas of production and quality control to ensure full technical compliance. GMP
regulations  require adherence to strict quality control  procedures,  including
documentation of all aspects of the manufacturing  process,  to demonstrate that
products  are  made by a  "controlled"  process  that  ensures  consistency  and
reliability of the end product. Significant changes to the manufacturing process
require notification to the FDA, and all changes require documentation.  The FDA
has the right to conduct  inspections of the manufacturing  facility at any time
at its discretion.  To the extent all or a portion of the manufacturing  process
for a product is handled by an entity other than the  Company,  the Company must
similarly  receive FDA  approval  for the other  entity's


<PAGE>

participation   in   the   manufacturing    process.    Domestic   manufacturing
establishments are subject to inspections by the FDA and by other Federal, state
and local agencies and must comply with Good Manufacturing  Practices ("GMP") as
appropriate for  production.  In complying with GMP  regulations,  manufacturers
must  continue to expend time,  money and effort in the area of  production  and
quality control to ensure full technical compliance.

Stock Splits

      All  information  in this  registration  statement  has been  adjusted  to
reflect a  five-for-one  reverse split of the  Company's  common stock which was
effective May 11, 1998 and a three-for-one reverse split of the Company's common
stock which was effective May 30, 1999.

Employees

      As of  September  30,  2000,  the  Company  did  not  have  any  full-time
employees.  The Company plans to hire  employees as may be required by the level
of the Company's operations.


ITEM  2. DESCRIPTION OF PROPERTY

      See Item 1 of this report.

ITEM 3.  LEGAL PROCEEDINGS.
--------------------------

      The Company and Ken Pappas,  a director of the Company are defendants in a
lawsuit brought by Raymond Law in the Supreme Court of British Columbia, Canada.
In his complaint,  Mr. Law contends that Mr. Pappas,  while the President of the
Company, made certain misrepresentations to Mr. Law in connection with Mr. Law's
purchase  of  shares  of the  Company's  common  stock.  The  complaint  seeks a
judgement against the Company in the amount of $100,000.

      Other than the  foregoing,  the Company is not engaged in any  litigation,
and the  officers  and  directors  presently  know of no  threatened  or pending
litigation in which it is contemplated that the Company will be made a party.

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

         Not Applicable

ITEM 5. MARKET PRICE OF AND  DIVIDENDS  ON THE  REGISTRANT'S  COMMON  EQUITY AND
        OTHER SHAREHOLDER MATTERS.

         As of September 30, 2000, there were approximately 360 record owners of
the Company's Common Stock. The Company's Common Stock is traded on the National
Association  of Securities  Dealers OTC Bulletin  Board under the symbol "RYBO".

<PAGE>

Set forth  below are the range of high and low bid  quotations  for the  periods
indicated as reported by the NASD.  The market  quotations  reflect  interdealer
prices, without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions.

    The share prices shown in the table have been adjusted to reflect a five-one
reverse  stock  effective May 11, 1998 and a  three-for-one  reverse stock split
effective May 30, 1999.


            Quarter Ending              High           Low

                9/30/97                 $0.87          $0.35
               12/31/97                 $0.75          $0.34
                3/31/98                 $0.47          $0.24
                6/30/98                 $0.75          $0.13

                9/30/98                 $0.44          $0.07
               12/31/98                 $0.10          $0.02
                3/31/99                 $0.11          $0.04
                6/30/99                 $0.14          $0.06

                9/30/99                 $0.12          $0.10
               12/31/99                 $0.18          $0.06
                3/31/00                 $0.12          $0.06
                6/30/00                 $0.44          $0.06

      Holders of Common Stock are  entitled to receive such  dividends as may be
declared by the Board of Directors out of funds legally available  therefor and,
in the  event of  liquidation,  to share  pro  rata in any  distribution  of the
Company's  assets after  payment of  liabilities.  The Board of Directors is not
obligated to declare a dividend.  The Company has not paid any dividends and the
Company does not have any current plans to pay any dividends.

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

      At the present time the Company purchases medical  diagnostic test systems
from American  manufacturers.  In September 1999 the Company signed an agreement
with Chembio  Diagnostic Systems Inc. for the manufacture of H. Pylori and other
diagnostic testing kits.

      In April 1999 the Company  signed an  agreement  with Xili  Pharmaceutical
Group,  Inc. ("Xili") of the People's Republic of China to market and distribute
H. Pylori  diagnostic  test kits supplied by the Company to Xili's  customers in
China.  In  addition  to  supplying  H.  Pylori  test kits to Xili,  the Company
provides clinical data and in-person training to Xili personnel.

<PAGE>


      In November 1999 Xili began distributing 20,000 sample H. Pylori test kits
supplied by the Company to 100 hospitals in China. The Company believes that the
hospital will use a minimum of 30 kits per day. The Company's goal is to sell at
least 10,000 test kits to each hospital  between December 2000 and January 2001.
The  Company  expects  to  receive  approximately  $ 2.60  (net of  product  and
distribution costs) from the sale of each H. Pylori testing kit.

      During the twelve month period  ending June 30, 2001 the Company,  through
Xili, plans to market H. Pylori test kits to other hospitals in China.

      The Company will analyze the results of first year sales of H. Pylori test
kits. If sales results are encouraging,  the Company plans to assemble H. Pylori
test kit components in China to reduce costs. In this regard Chembio  Diagnostic
Systems Inc. has indicated a willingness to sell to the Company, components that
would allow the assembly of H. Pylori and other  diagnostic kits in China.  Xili
has agreed to supply the required assembly space in one of their  pharmaceutical
manufacturing plants.

      The  Company  may also  attempt to acquire  the rights to  manufacture  H.
Pylori test kits in China. Rather than building its own manufacturing  facility,
the  Company  would  pursue  the  acquisition  of  a  subsidiary  of  Xili  that
manufactures pharmaceutical products.

      Utilizing  marketing  research  conducted  by  Xili,  the  Company,  if it
believes suitable  opportunities  exists, will attempt to acquire the rights and
licenses necessary to distribute other types of diagnostic test kits in China.

      During  the year  ended  June 30,  2000 the  Company  had  gross  sales of
$46,800,  interest  income  of  $1,326,  and a net loss of  $(159,585).  However
substantially  all of the costs and  expenses  incurred  by the  Company  during
fiscal 2000 were prepaid by the Company during fiscal 1999. In addition,  during
fiscal 2000 the Company  received a $50,000 loan from an unrelated  third party.
As a result of the foregoing,  the Company's cash position increased by $100,254
during the year ending June 30, 2000.

      The Company does not have any available  credit,  bank  financing or other
external sources of liquidity. Due to historical operating losses, the Company's
operations have not been a source of liquidity.  In order to obtain capital, the
Company may need to sell  additional  shares of its common stock or borrow funds
from private lenders. During the year ending June 30, 2001 the Company will need
approximately  $3,000,000  in  additional  capital  for  the  acquisition  of  a
pharmaceutical manufacturing facility that will allow the Company to manufacture
H. Pylori test kits in China.  In  addition,  if during the year ending June 30,
2001, the Company  suffers  additional  losses,  the Company will need to obtain
additional  capital in order to continue  operations.  There can be no assurance
that the Company will be successful in obtaining additional funding.

ITEM 7.  FINANCIAL STATEMENTS

      See the financial statements attached to this report.

<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
------------------------------------------------------

      None.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

      The  following  sets forth  certain  information  concerning  the  present
management of the Company:

         Name                 Age         Position with Company

         Dr. Yan Xiao Wen     41          Chairman of the Board of Directors
         Kathy Jiang          42          President
         Gregory Sharpe       54          Vice President
         Ken Pappas           39          Director

     Dr. Yan Xiao Wen has been a director of the Company  since April 1999.  Dr.
Yan has been the President of Xili  Pharmaceutical  (Group) Inc., (Xili Beijing,
Xili Hebei, Xili Zaozhuang, Xili Hezhe, Xili Chongqing, Xili Hubai) and Xili USA
Inc. since December 1993.

     Kathy Jiang has been the  President  of the Company  since April 1999.  Ms.
Jiang was the Vice  President  of  Shandong  Canada  Trading  from March 1993 to
November 1998.

     Gregory Sharpe has been the Company's Vice President since April 1999. From
August 1991 to April 1998 Mr. Sharpe was the President of Harbourside College.

     Ken Pappas was the Company's  President  between August 1995 and June 1998.
Mr. Pappas has been a director of the Company  since March 1995.  Mr. Pappas has
been the  president  of the Knight and Day  Restaurants  and Hymark  Foods since
1986.

Consultant

     Dr.  Robert  Bohannon  is an  expert  in the  field of  immunoreagents  and
diagnostics  and  provides  consulting  services to the  Company.  Dr.  Bohannon
identifies leading diagnostic test kits through  independent  clinical analysis.
Dr. Bohannon also provides training to Xili's marketing and sales force.

ITEM 10.  EXECUTIVE COMPENSATION

      The following table sets forth in summary form the  compensation  received
by (i) the  Chief  Executive  Officer  of the  Company  and  (ii) by each  other
executive  officer of the Company who received in excess of $100,000  during the
fiscal years ended June 30, 1999 and June 30, 2000.



<PAGE>


                        Annual Compensation           Long Term Compensation
                 -------------------------------    ---------------------------
                                                      Re-                 All
                                           Other     stric-              Other
                                           Annual      ted               Com-
Name and                                   Compen-    Stock    Options   pensa-
Principal        Fiscal  Salary  Bonus     sation    Awards    Granted    tion
Position          Year     (1)    (2)       (3)        (4)       (5)      (6)
--------         ------  ------  -----     -------   ------    -------   ------

Kathy Jiang,      2000  $33,931    --        --        --       --          --
President and     1999  $12,000    --        --        --       --          --
Chief Executive
Officer since April 1999

Ken Pappas,
President and     1998     $ --    --        --        --   50,000          --
Chief Executive   1997     $ --    --        --        --       --          --
Officer prior to
 June 1998

(1) The dollar value of base salary (cash and non-cash) received.

(2) The dollar value of bonus (cash and non-cash) received.

(3) Any other annual  compensation not properly  categorized as salary or bonus,
including  perquisites  and other  personal  benefits,  securities  or property.
Amount in the table represents automobile allowances.

(4) During the period covered by the foregoing  table,  the shares of restricted
stock issued as compensation  for services.  The table below shows the number of
shares of the Company's Common Stock owned by the officers listed above, and the
value of such shares as of June 30, 2000.

         Name                       Shares            Value

         Kathy Jiang               100,000          $25,000
         Ken Pappas                 96,666          $24,166

(5) The shares of Common  Stock to be  received  upon the  exercise of all stock
options  granted  during  the period  covered  by the table.  In the case of Mr.
Pappas,  includes options granted to Knight & Day Restaurant Corp. Mr. Pappas is
a director  of Knight & Day  Restaurant  Corp.  All of the  options in the table
expired without being exercised.

(6) All other  compensation  received that the Company could not properly report
in any other column of the table including annual Company contributions or other
allocations to vested and unvested  defined  contribution  plans, and the dollar
value of any  insurance  premiums  paid by, or on behalf  of, the  Company  with

<PAGE>


respect to term life insurance for the benefit of the named  executive  officer,
and the full dollar value of the remainder of the premiums paid by, or on behalf
of, the Company.

      The  following  shows the  amounts  which the  Company  expects to pay its
officers  during the year ending June 30, 2001 and the time which the  Company's
executive  officers plan to devote to the Company's  business.  The Company does
not have employment agreements with any of its officers.

                                Proposed               Time to be Devoted
Name                          Compensation            To Company's Business

Dr. Yan Xiao Wen                   $-0-                        25%
Kathy Jiang                          *                         50%
Gregory Sharpe                 $30,000                         50%

      * Ms. Jiangs future compensation had not been determined as of October 25,
2000.

Options Granted During Fiscal Year Ending June 30, 2000

      The following tables set forth information concerning the options granted,
during  the fiscal  year ended June 30,  2000,  to the  Company's  officers  and
directors,  and the fiscal year-end value of all unexercised options (regardless
of when granted) held by these persons.  The options held by Mr. Sharpe were not
granted pursuant to the Company's stock option plans.

                                   Individual Grants
                --------------------------------------------------------
                                % of Total
                                  Options
                Granted to        Exercise
                 Options        Employees in    Price Per   Expiration
 Name           Granted (#)      Fiscal Year      Share        Date
------          -----------     ------------    ---------   ----------

N/A                None              N/A           N/A          N/A




     Aggregated  Option/SAR  Exercises in Last Fiscal Year and FY-End Option/SAR
Values


<PAGE>



                                                     Number of
                                                    Securities      Value of
                                                    Underlying     Unexercised
                                                    Unexercised    In-the-Money
                                                     Options at     Options at
                                                   June 30, 2000  June 30, 2000
                   Shares Acquired                  Exercisable/    Exercisable/
Name                 on Exercise   Value Realized  Unexercisable   Unexercisable

Gregory Sharpe            --            --            66,666/--         -/-

Long Term Incentive Plans - Awards in Last Fiscal Year

      None.

Employee Pension, Profit Sharing or Other Retirement Plans

      The Company does not have a defined benefit,  pension plan, profit sharing
or other  retirement  plan,  although  the Company may adopt one or more of such
plans in the future.

Compensation of Directors

      Standard  Arrangements.  At present the Company does not pay its directors
for attending  meetings of the Board of Directors,  although the Company expects
to adopt a  director  compensation  policy in the  future.  The  Company  has no
standard  arrangement pursuant to which directors of the Company are compensated
for any  services  provided  as a director  or for  committee  participation  or
special assignments.

      Other  Arrangements.  During the year ended June 30,  2000,  and except as
disclosed elsewhere in this registration  statement,  no director of the Company
received any form of compensation from the Company.

      See " Stock Option and Bonus Plans" below for information concerning stock
options and stock bonuses granted to the Company's officers and directors.

Stock Option and Bonus Plans

      The Company has an Incentive  Stock Option  Plan,  a  Non-Qualified  Stock
Option Plan and a Stock Bonus Plan. A summary  description of each Plan follows.
In some cases these three Plans are collectively referred to as the "Plans".

      Incentive  Stock Option Plan. The Incentive  Stock Option Plan  authorizes
the issuance of options to purchase up to 300,000 shares of the Company's Common
Stock,  less the number of shares already  optioned under both this Plan and the
Non-Qualified  Stock  Option  Plan.  The  Incentive  Stock  Option  Plan  became


<PAGE>

effective on September  15, 1999 and will remain in effect until  September  15,
2009 unless terminated earlier by action of the Board. Only officers,  directors
and  key  employees  of the  Company  may be  granted  options  pursuant  to the
Incentive Stock Option Plan.

      In order to  qualify  for  incentive  stock  option  treatment  under  the
Internal Revenue Code, the following requirements must be complied with:

        1. Options granted pursuant to the Plan must be exercised no later than:

         (a) The  expiration  of  thirty  (30)  days  after the date on which an
option holder's employment by the Company is terminated.

         (b) The  expiration  of one year  after  the  date on  which an  option
holder's employment by the Company is terminated,  if such termination is due to
the Employee's disability or death.

         2. In the event of an option  holder's death while in the employ of the
Company,  his  legatees or  distributees  may  exercise  (prior to the  option's
expiration) the option as to any of the shares not previously exercised.

         3.  The  total  fair  market  value  of  the  shares  of  Common  Stock
(determined  at the time of the grant of the option) for which any  employee may
be granted  options  which are first  exercisable  in any calendar  year may not
exceed $100,000.

         4. Options may not be exercised  until one year  following  the date of
grant.  Options  granted to an employee  then owning more than 10% of the Common
Stock of the Company may not be  exercisable  by its terms after five years from
the date of grant.

         5. The purchase  price per share of Common Stock  purchasable  under an
option is  determined  by the  Committee but cannot be less than the fair market
value of the Common Stock on the date of the grant of the option (or 110% of the
fair  market  value in the case of a person  owning the  Company's  stock  which
represents  more than 10% of the total  combined  voting power of all classes of
stock).

      Non-Qualified  Stock  Option  Plan.  The  Non-Qualified  Stock Option Plan
authorizes  the  issuance  of options to  purchase  up to 300,000  shares of the
Company's  Common Stock less the number of shares  already  optioned  under both
this Plan and the Incentive  Stock Option Plan. The  Non-Qualified  Stock Option
Plan became  effective  on  September  9, 1997 and will  remain in effect  until
September  9, 2007  unless  terminated  earlier by the Board of  Directors.  The
Company's employees,  directors, officers, consultants and advisors are eligible
to be granted  options  pursuant to the Plan,  provided  however  that bona fide
services must be rendered by such consultants or advisors and such services must
not be in connection  with the offer or sale of securities in a  capital-raising
transaction. The option exercise price is determined by the Committee but cannot
be less than the  market  price of the  Company's  Common  Stock on the date the
option is granted.


<PAGE>

      Options granted  pursuant to the Plan not previously  exercised  terminate
upon the date specified when the option was granted.

      Stock  Bonus  Plan.  Up to 100,000  shares of Common  Stock may be granted
under the Stock Bonus Plan.  Such shares may  consist,  in whole or in part,  of
authorized but unissued shares, or treasury shares.  Under the Stock Bonus Plan,
the  Company's  employees,  directors,  officers,  consultants  and advisors are
eligible to receive a grant of the Company's  shares;  provided,  however,  that
bona fide services must be rendered by consultants or advisors and such services
must  not  be  in  connection  with  the  offer  or  sale  of  securities  in  a
capital-raising transaction.

      Other  Information  Regarding the Plans. The Plans are administered by the
Company's  Board of  Directors.  The Board of  Directors  has the  authority  to
interpret the  provisions of the Plans and supervise the  administration  of the
Plans. In addition,  the Board of Directors is empowered to select those persons
to whom shares or options are to be granted,  to determine  the number of shares
subject to each grant of a stock bonus or an option and to determine  when,  and
upon what  conditions,  shares or options  granted  under the Plans will vest or
otherwise be subject to forfeiture and cancellation.

      In the discretion of the Board of Directors,  any option granted  pursuant
to the Plans may include installment exercise terms such that the option becomes
fully exercisable in a series of cumulating portions. The Board of Directors may
also  accelerate  the date upon which any option (or any part of any options) is
first  exercisable.  Any shares issued  pursuant to the Stock Bonus Plan and any
options granted pursuant to the Incentive Stock Option Plan or the Non-Qualified
Stock Option Plan will be forfeited if the "vesting" schedule established by the
Board of  Directors  at the time of the  grant  is not  met.  For this  purpose,
vesting  means the period  during which the employee  must remain an employee of
the Company or the period of time a  non-employee  must provide  services to the
Company.  At the time an employee ceases working for the Company (or at the time
a  non-employee  ceases to  perform  services  for the  Company),  any shares or
options not fully vested will be forfeited and  cancelled.  In the discretion of
the Board of Directors payment for the shares of Common Stock underlying options
may be paid through the delivery of shares of the Company's  Common Stock having
an aggregate  fair market value equal to the option price,  provided such shares
have  been  owned  by the  option  holder  for at least  one year  prior to such
exercise. A combination of cash and shares of Common Stock may also be permitted
at the discretion of the Board of Directors.

      Options  are  generally  non-transferable  except upon death of the option
holder.  Shares  issued  pursuant to the Stock Bonus Plan will  generally not be
transferable  until the  person  receiving  the  shares  satisfies  the  vesting
requirements imposed by the Board of Directors when the shares were issued.

      The Board of  Directors  of the Company may at any time,  and from time to
time,  amend,  terminate,  or suspend  one or more of the Plans in any manner it
deems  appropriate,  provided  that such  amendment,  termination  or suspension
cannot  adversely affect rights or obligations with

<PAGE>

respect to shares or options previously granted. The Board of Directors may not,
without shareholder  approval:  make any amendment which would materially modify
the  eligibility  requirements  for the Plans;  increase or  decrease  the total
number  of  shares of Common  Stock  which may be issued  pursuant  to the Plans
except in the case of a  reclassification  of the  Company's  capital stock or a
consolidation  or merger of the  Company;  reduce the minimum  option  price per
share;  extend the period for granting  options;  or materially  increase in any
other way the benefits  accruing to employees who are eligible to participate in
the Plans.

      The Plans are not qualified  under Section 401(a) of the Internal  Revenue
Code, nor are they subject to any provisions of the Employee  Retirement  Income
Security Act of 1974.

      Summary.  The following sets forth certain information as of September 30,
2000,  concerning  the stock options and stock  bonuses  granted by the Company.
Each option  represents the right to purchase one share of the Company's  Common
Stock.

                             Total        Shares                    Remaining
                             Shares    Reserved for       Shares     Options/
                            Reserved   Outstanding     Issued As     Shares
Name of Plan               Under Plan    Options      Stock Bonus   Under Plan
------------               ----------  ------------   -----------   ----------

Incentive Stock Option Plan  300,000         --            N/A       300,000
Non-Qualified Stock Option
  Plan                       300,000                       N/A       300,000
Stock Bonus Plans            150,000        N/A             --       150,000

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
-------------------------------------------------------------------------

          The  following  table  sets  forth  the  number of and  percentage  of
outstanding shares of common stock owned by the Company's officers, directors
and those  shareholders  owning  more  than 5% of the  Company's Common Stock as
of September 30, 2000.

                                    Shares of
Name and Address                Common Stock (1)        Percent of Class
----------------                ----------------      --------------------

Dr. Yan Xiao Wen                  2,022,222 (2)               66%
#205 - 1057 S.E. 17th Street
Fort Lauderdale, FL 33316, USA.

Kathy Jiang                         100,000                  3.1%
7531 Francis Rd.
Richmond, B.C. Canada V6Y 1A1



<PAGE>


Gregory Sharpe                       92,222                  2.7%
954 Roche Point Drive
North Vancouver, British Columbia
Canada, V7H 2T7

Ken Pappas                           96,666 (3)              2.9%
5940 Sandpiper Ct.
Richmond, British Columbia
CANADA  V7E-2P7

All officers and directors as     2,311,110                 71.7%
 a group (4 persons).

(1) Excludes  shares  issuable  prior to December  31, 2000 upon the exercise of
    options or warrants granted to the following persons:

Name                         Options exercisable prior to December 31, 2000

Gregory Sharpe                                  66,666

(2)  Represents  shares held by Xili USA, Inc., a corporation  controlled by Dr.
     Yan Xiao Wen

(3)  Includes  shares  held by Knight & Day  Restaurant  Corp.  Mr.  Pappas is a
     Director of Knight & Day Restaurant Corp.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      The  following  table  provides  information   concerning  shares  of  the
Company's common stock issued to the Company's  officers and directors since the
inception of the Company:

Date           Shares     Shareholder                   Consideration
----           ------     -----------                   -------------

03-25-95     133,333      Ken Pappas                       $  2,000
08-15-97       6,666      Ken Pappas                       Services Rendered
01-20-98      33,333      Knight & Day Restaurant Corp.    $125,000
09-21-98     100,000      Knight & Day Restaurant Corp.    $ 45,000
01-19-99      92,222      Gregory Sharpe                   Services Rendered
04-12-99   2,222,222      Xili USA, Inc.                   $300,000

      In September 1997 Ken Pappas returned 33,333 shares of common stock to the
Company.  These  shares  were  cancelled  and Mr.  Pappas  did not  receive  any
consideration for the return of these shares.

      Ken Pappas, a director of the Company,  is also a director of Knight & Day
Restaurant Corp.


<PAGE>

      In January 2000 Xili USA, Inc.  transferred 100,000 shares of common stock
to Kathy Jiang,  an officer and director of the Company,  and 100,000  shares of
common stock to an unrelated third party.

          Xili USA,  Inc. is  controlled  by Dr. Yan Xiao Wen, a director of the
Company.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

Exhibit
Number           Exhibit Name                                      Page Number

Exhibit 2        Plan of Acquisition, Reorganization, Arrangement,
                 Liquidation, etc.                                      None

Exhibit 3        Articles of Incorporation, as amended, and Bylaws      (1)
                                                                     --------

Exhibit 4        Instruments Defining the Rights of Security Holders

   Exhibit 4.1   Incentive Stock Option Plan                            (1)
                                                                     --------

   Exhibit 4.2   Non-Qualified Stock Option Plan                        (1)
                                                                     --------

   Exhibit 4.3   Stock Bonus Plan                                       (1)
                                                                     --------

Exhibit 5        Subscription Agreement                                 None

Exhibit 9        Voting Trust Agreement                                 None

Exhibit 10       Material Contracts                                     None

Exhibit 27       Financial Data Schedule                                ____

(1)  Incorporated  by  reference to the same  exhibit  filed with the  Company's
registration statement on Form 10-SB.



<PAGE>



                              ROYCE BIOMEDICAL INC.

                                  Vancouver, BC

                              FINANCIAL STATEMENTS

                        For the Year Ended June 30, 2000




<PAGE>


                             ROYCE BIOMEDICAL INC.
                         INDEX TO FINANCIAL STATEMENTS


Auditors' Report
Balance Sheet                                                     Exhibit "A"
Statement of Loss and Deficit                                     Exhibit "B"
Statement of Changes in Shareholders' Equity                      Exhibit "C"
Statement of Cash Flows                                           Exhibit "D"
Notes to Financial Statements                                     Exhibit "E"



                         ---------------------------


<PAGE>


                               AUDITORS' REPORT

 To The Shareholders of Royce Biomedical Inc.:

      We have audited the balance sheets of Royce Biomedical Inc. as at June 30,
2000 and 1999 and the statements of loss and deficit,  changes in  shareholders=
deficiency and cash flows for the years then ended.  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 audit in accordance  with  generally  accepted  auditing
standards.  Those standards  require that we plan and perform an audit to obtain
reasonable  assurance  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.

      In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at June 30, 2000 and 1999 and
the  results  of its  operations  and its cash flows for the years then ended in
accordance  with generally  accepted  accounting  principles  applied on a basis
consistent with the prior year.



                                          "Cinnamon Jang Willoughby & Company"
                                          Chartered Accountants
Burnaby, BC
September 11, 2000


Comments by Auditor for US Readers on Canada-US Reporting Difference

      In the  United  States,  reporting  standards  for  auditors  require  the
addition of an explanatory  paragraph when the financial statements are affected
by conditions and events that cast substantial doubt on the company's ability to
continue as a going concern,  such as those described in Note 7 to the financial
statements. Our report to the shareholders dated September 15, 2000 is expressed
in accordance with Canadian reporting  standards which do not permit a reference
to such events and conditions in the auditors'  report when these are adequately
disclosed in the financial statements.



                                          "Cinnamon Jang Willoughby & Company"
                                          Chartered Accountants
Burnaby, BC
September 11, 2000


<PAGE>



                                                                  Exhibit "A"
                              ROYCE BIOMEDICAL INC.
                                  Balance Sheet
                                  June 30, 2000
                                  (US Dollars)


Assets                                            2000              1999
------------------------------------------------------------------------------
Current:
   Cash                                    $   137,655      $     37,401
   Accounts receivable                             824                --
   Prepaid expenses and deposits                   513           200,513
------------------------------------------------------------------------------
                                               138,992           237,914
Product licence fees (Note 4)                       --                --
------------------------------------------------------------------------------
                                           $   138,992       $   237,914
------------------------------------------------------------------------------
Liabilities
------------------------------------------------------------------------------
Current:
   Accounts payable and accrued liabilities $   77,476      $     82,978
   Loan payable                                 50,000                --
------------------------------------------------------------------------------
                                               127,476            82,978
Loan payable to a related party (Note 5)        37,509            37,944
------------------------------------------------------------------------------
                                               164,985           120,922
------------------------------------------------------------------------------
Shareholders' Deficiency
------------------------------------------------------------------------------
Share Capital (Note 6)                          14,296            14,019
Contributed Surplus (Note 6)                 2,322,006         2,305,683
Deficit, per Exhibit _B_                     2,362,295         2,202,710
------------------------------------------------------------------------------
                                               (25,993)          116,992
Going Concern (Note 7)
Commitments (Note 8)
Contingency (Note 11)
------------------------------------------------------------------------------
                                           $   138,992       $   237,914
------------------------------------------------------------------------------

- See accompanying notes -


<PAGE>


                                                                  Exhibit "B"
                              ROYCE BIOMEDICAL INC.
                          Statement of Loss and Deficit
                        For the Year Ended June 30, 2000
                                  (US Dollars)


                                                  2000          1999
------------------------------------------------------------------------------
Sales                                         $ 46,800        $   --
Cost of Sales                                   18,000            --
------------------------------------------------------------------------------
Gross margin                                    28,800            --

Other income:
   Interest                                      1,326            --
------------------------------------------------------------------------------
                                                30,126            --
------------------------------------------------------------------------------
Expenses:
   Consulting fees                              77,940        51,341
   Office and sundry                             2,160         2,869
   Professional fees                            51,881        30,192
   Rent                                          5,820        26,662
   Stock transfer agents fees                    1,675         1,910
   Telephone                                     1,342         9,991
   Travel and promotion                         14,962        21,050
   Wages and benefits                           33,931        19,929
------------------------------------------------------------------------------
                                               189,711       163,944
------------------------------------------------------------------------------
Net Loss                                       159,585       163,944
Deficit, beginning                           2,202,710     2,038,766
------------------------------------------------------------------------------
Deficit, ending, to Exhibit _A_             $2,362,295    $2,202,710
------------------------------------------------------------------------------

Loss per share                                $     0.05    $     0.10
------------------------------------------------------------------------------

- See accompanying notes -

<PAGE>


                                                                  Exhibit "C"

                              ROYCE BIOMEDICAL INC.
                Statement of Changes in Shareholders' Deficiency
                        For the Year Ended June 30, 2000
                                  (US Dollars)


                                       Common Shares     Capital   Accumulated
                                      Shares    Amount   Surplus     Deficit
------------------------------------------------------------------------------

Balance at June 30, 1998          1,475,618  $  5,679 $1,796,639  $(2,038,766)
Shares issued for cash            6,886,667     6,887    358,247           --
Shares exchanged for debt to
   related parties                1,453,333     1,453    150,797           --
Reduction due to consolidation
   of 3 existing common shares
   into 1 common share effective
   May 10, 1999                  (6,543,702)       --         --           --
Net Loss, per Exhibit "B"                --        --         --     (163,944)
------------------------------------------------------------------------------
Balance at June 30, 1999          3,271,916    14,019  2,305,683   (2,202,710)
Shares issued for services
   rendered                          92,222       277     16,323           --
Net Loss, per Exhibit _B_                --        --         --     (159,585)
------------------------------------------------------------------------------
Balance at June 30, 2000, to
   Exhibit _A_                    3,364,138   $14,296 $2,322,006  $(2,362,295)
------------------------------------------------------------------------------

- See accompanying notes -


<PAGE>


                                                                  Exhibit "D"
                              ROYCE BIOMEDICAL INC.
                             Statement of Cash Flows
                        For the Year Ended June 30, 2000
                                  (US Dollars)


                                                  2000              1999
------------------------------------------------------------------------------
Operating Activities:
   Net Loss, per Exhibit _B_                 $(159,585)        $(163,944)

Changes in non-cash working capital -
  (Increase) Decrease in accounts receivable      (824)               --
   (Increase) Decrease in prepaid expenses
   and deposits                                200,000          (200,513)
 Increase (Decrease) in accounts payable
   and accrued liabilities                      (5,502)           (6,431)
     Increase (Decrease) in loan payable        50,000                --
------------------------------------------------------------------------------
Cash flows from (used in) operating activities  84,089          (370,888)
------------------------------------------------------------------------------
Financing Activities:
   Proceeds from issuance of common shares      16,600           517,384
   Repayment of bank loan                           --            (6,200)
   Repayment of loan payable                        --           (30,000)
   Repayment of loan to related party             (435)          (73,003)
------------------------------------------------------------------------------
Cash flows from financing activities            16,165           408,181
------------------------------------------------------------------------------
Net Increase in Cash                           100,254            37,293
Cash, beginning                                 37,401               108
------------------------------------------------------------------------------
Cash, ending                                 $ 137,655        $   37,401
------------------------------------------------------------------------------

Supplemental Disclosure of Cash Flow Information:
   Interest paid                                  $ --        $      229

   Non-cash  transaction  (1999 only) -
     1,453,333 common shares were issued in settlement
     of $152,251 debt to a related party.

- See accompanying notes -

<PAGE>



                                                                  Exhibit "E"
                              ROYCE BIOMEDICAL INC.
                          Notes to Financial Statements
                                  June 30, 2000
                                  (US Dollars)


1.  Principles of Accounting and General Information:

    These financial  statements have been prepared in accordance with accounting
    principles generally accepted in the United States.

    The company was incorporated on March 22, 1995 under the jurisdiction of the
    State of Nevada.

2.  Accounting Policies:

    a)  Cash -

        Cash consists of bank accounts and short-term  deposits  integral to the
        company's cash management.

    b)  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 amounts reported in the financial statements
        and  accompanying  disclosures.  Although  these  estimates are based on
        management=s  best  knowledge of current  events and actions the company
        may  undertake  in the  future,  actual  results  may  differ  from  the
        estimates.

    c)  Foreign Currency Translation -

        Assets and liabilities of Canadian operations are translated into United
        States  currency at exchange rates  prevailing at the balance sheet date
        for monetary items and at rates  prevailing at the transaction  date for
        non-monetary  items.  Revenue and  expenses,  except  amortization,  are
        converted at the average  exchange rates for the year.  Amortization  is
        converted at the same rate as the related assets.

        Foreign  exchange gains or losses on monetary assets and liabilities are
        included in operations.

3.  Financial Instruments:

    a)  Fair Values -

        Unless otherwise noted, cash, accounts payable and accrued  liabilities,
        loan payable and loan  payable to a related  party are stated at amounts
        that approximate their book value.



<PAGE>




                                                                 Exhibit "E"
                                ROYCE BIOMEDICAL INC.             Continued
                            Notes to Financial Statements
                                    June 30, 2000
                                    (US Dollars)


    b)  Liability Risk -

        The company does not have significant risk for the repayment of advances
        from a related party because under  agreements with other  shareholders,
        the related party has agreed not to demand repayment.



4.  Product Licence Fees:                                   2000        1999
------------------------------------------------------------------------------
    Product licence fees, at cost                        $10,000     $10,000
    Less:  Accumulated amortization                       10,000      10,000
------------------------------------------------------------------------------
                                                      $       --  $       --
------------------------------------------------------------------------------

5.  Loan Payable to a Related Party:                        2000        1999
------------------------------------------------------------------------------
    Knight & Day Restaurants Ltd. -
        The loan payable has no specific
        repayment terms and is non-interest
        bearing.  (See Note 3(b)).                       $37,509     $37,944
------------------------------------------------------------------------------

6.  Share Capital:

    Authorized -
    100,000,000 Common shares with a par value of $.001 each
      5,000,000 Preferred shares with a par value of $.001 each

                                                Common Shares     Contributed
    Issued and Outstanding -                 # Shares     Amount    Surplus
                                             --------     ------  -----------

    Balance at June 30, 1998                 1,475,618  $  5,679  $1,796,639
    Shares issued for cash                   6,886,667     6,887     358,247
    Shares exchanged for debt to related
      parties                                1,453,333     1,453     150,797
    Reduction due to consolidation of 3
      existing common shares into 1 common
      share effective May 10, 1999          (6,543,702)       --          --
------------------------------------------------------------------------------
    Balance at June 30, 1999                 3,271,916    14,019   2,305,683
    Shares issued in exchange for services
      rendered                                  92,222       277      16,323
------------------------------------------------------------------------------
    Balance at June 30, 2000                 3,364,138   $14,296  $2,322,006
------------------------------------------------------------------------------


<PAGE>


                                                              Exhibit "E"
                                                               Continued
                             ROYCE BIOMEDICAL INC.
                          Notes to Financial Statements
                                  June 30, 2000
                                  (US Dollars)



    The following options for the purchase of common shares are outstanding:

        Number of               Exercise                   Expiry
         Warrants                Price                      Date
------------------------------------------------------------------------------
           20,000                $10.50                 August 15, 2000
           33,333                  1.50               December 31, 2000
           33,333                  3.90               December 31, 2001
           83,333                  0.30               December 31, 2001

6.  Share Capital:  (Continued)

    Granting of stock  options to  employees  and  directors  may give rise to a
    charge to income for  compensation.  In  accordance  with APB 25 under which
    stock  options are  measured by the  intrinsic  value  method,  employee and
    director  compensation  cost is limited  to the excess of the quoted  market
    price at date of grant over the option price.  Alternatively,  in accordance
    with  SFAS-123,  stock  options  could be valued  using a fair market  value
    method  such as the  Black-Scholes  option  pricing  model.  At the date the
    options were granted, there were no available market prices,  therefore,  it
    is not possible to determine the value of the options.

    At June 30, 2000,  176,666 (1999 - 183,333)  common  shares were  restricted
    from trading.

7.  Going Concern:

    While the financial statements have been prepared on the basis of accounting
    principles  applicable to a going  concern,  the  occurrence of  significant
    losses  to  date  raises   substantial  doubt  upon  the  validity  of  this
    assumption.

    The company  has  experienced  significant  losses over the past five years,
    including  $159,585 in the current  year and has an  accumulated  deficit of
    $2,362,295 at June 30, 2000.  The company=s  continued  existence as a going
    concern  is  dependent  upon its  ability  to  continue  to obtain  adequate
    financing arrangements and to achieve and maintain profitable operations.

    If the going concern  assumption  was not  appropriate  for these  financial
    statements,  then  adjustments  may be necessary  in the  carrying  value of
    assets  and  liabilities,  the  reported  net  loss  and the  balance  sheet
    classifications used.

    The company has  financed  its  activities  primarily  from the  proceeds of
    various  share issues and loans from related  companies.  As a result of the
    company  being in the early  stages of  operations,  the  recoverability  of
    assets on the balance  sheet will be dependent on the  company=s  ability to
    obtain additional  financing and to attain a level of profitable  operations
    from the existing facilities in production and/or the disposition thereof.



<PAGE>




                                                               Exhibit "E"
                              ROYCE BIOMEDICAL INC.             Continued
                          Notes to Financial Statements
                                  June 30, 2000
                                  (US Dollars)


8.  Commitments:

    During the year ended June 30, 1997,  the company  issued shares to a number
    of investors in British Columbia, Canada at $1.42 ($2.00 Canadian). Pursuant
    to the British Columbia  Securities Act, an Offering  Memorandum should have
    accompanied  the  issuance  of  these  shares.  As this did not  occur,  the
    shareholders  were  offered the  opportunity  to rescind the purchase of the
    shares for a refund of the entire purchase price. Requests from shareholders
    to rescind  14,250  common  shares were  received  within the required  time
    limit.  The company is required to refund an amount of $20,357.  At June 30,
    2000,  these  amounts  have not been  repaid and are  included  in  accounts
    payable and accrued liabilities.

9.  Related Party Transactions:

    In  addition  to the  transactions  described  elsewhere  in  the  financial
    statements,  the company had the  following  transactions  with officers and
    directors of the company.

                                                            2000        1999
------------------------------------------------------------------------------
    Expenses -
        Consulting fees                                  $46,600     $26,706
        Wages                                             33,931      12,000

    These  transactions  are in the normal course of operations and are measured
    at the exchange amount, which is the amount of consideration established and
    agreed to between the parties.

10. Income Taxes:

    The company has net losses for income tax purposes  totalling  approximately
    $2,352,500 which may be applied against future taxable income. The potential
    benefit  arising  from these  losses has been  recognized  as a deferred tax
    asset.  To the extent that those  benefits may not be realized,  a valuation
    allowance  is provided  for.  The  company=s  deferred  tax  balances are as
    follows:

                                                            2000        1999
------------------------------------------------------------------------------
    Deferred tax asset, beginning of year               $767,550    $710,185
    Benefit of current year=s operating loss
    carried forward                                       51,715      57,365
------------------------------------------------------------------------------
    Deferred tax asset, end of year                      819,265     767,550
------------------------------------------------------------------------------
    Valuation allowance, beginning of year               767,550     710,185
    Current year=s provision                              51,715      57,365
------------------------------------------------------------------------------
    Valuation allowance, end of year                     819,265     767,550
------------------------------------------------------------------------------
                                                    $         -- $        --
------------------------------------------------------------------------------


<PAGE>

                                                              Exhibit _E_
                               ROYCE BIOMEDICAL INC.           Continued
                          Notes to Financial Statements
                                  June 30, 2000
                                  (US Dollars)


    As the  company has no history of profits,  management  believes  that it is
    more  likely  than not some or all of the  deferred  tax  asset  will not be
    realized and has provided a full  valuation  allowance  against the deferred
    tax asset. The right to claim these losses expire as follows:

                                                      2010     $173,000
                                                      2011      599,000
                                                      2012      748,000
                                                      2013      508,976
                                                      2014      163,944
                                                      2015      159,585


11. Contingency:

    The company is a defendant  in a lawsuit in which the  plaintiff is claiming
    $100,000 plus damages. It arose from the company being enjoined in the claim
    by the plaintiff against a director of the company.

    The company  does not  anticipate  that a loss will result;  accordingly  no
    provision has been made in the accounts for such occurrence.


12. Uncertainty Due to the Year 2000 Issue:

    The Year 2000 Issue arises because many computerized  systems use two digits
    rather than four to identify a year.  Date-sensitive  systems may  recognize
    the  year  2000 as 1900  or  some  other  date,  resulting  in  errors  when
    information  using  year  2000  dates is  processed.  In  addition,  similar
    problems  may  arise in some  systems  which  use  certain  dates in 1999 to
    represent  something  other  than a date.  Although  the  change in date has
    occurred,  it is not possible to conclude  that all aspects of the Year 2000
    Issue that may affect Royce  Biomedical  Inc.,  including  those  related to
    customers, suppliers, or other third parties, have been fully resolved.







<PAGE>



17


                                   SIGNATURES


    In accordance  with Section 13 or 15(a) of the Exchange Act, the  Registrant
has caused this Report to be signed on its behalf by the undersigned,  thereunto
duly authorized on the 10th day of October, 2000.


                                   ROYCE BIOMEDICAL, INC.

                                   By /s/
                                   ---------------------------------------
                                      Kathy Jiang, President and Principal
                                      Financial Officer

      Pursuant  to  the  requirements  of  the  Securities  Act  of  l933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated.

                                     Title                    Date

 /s/
------------------------
Dr. Yan Xiao Wen                    Director             October 10, 2000

/s/
------------------------
Kathy Jiang                         Director             October 10, 2000

/s/
------------------------
Ken Pappas                          Director             October 12, 2000