<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C.

                                   FORM 10-QSB


[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange
     Act of 1934.

     FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

                           HAMILTON-BIOPHILE COMPANIES
               (Exact Name of Company as Specified in its Charter)

           NEVADA                      0-11969                 22-2408186
(State or other jurisdiction of      (Commission             (IRS Employer
 incorporation or organization)      File Number)         Identification Number)

7321 Roseville Road, Suite 10, Sacramento, California         95842
(Address of principal executive office)         (Zip Code)

Company's telephone number, including area code (916) 331-3300


          (Former Name or Former Address, if Changed Since Last Report)
                  MEHL/Biophile International Corporation
                  4127 N.W. 27th Lane
                  Gainsville, Florida 32606

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

          Securities registered pursuant to section 12(g) of the Act:
                           Common Stock, no par value

Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of the preceding 12
months (or for such short period that the Registrant is required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days. Yes [ ] No [X]

The number of shares outstanding of the Registrant's class of common stock as of
September 30, 2001 is 14,232,242

                          HAMILTON-BIOPHILE COMPANIES

                                     Index

PART I. FINANCIAL INFORMATION:

     Item 1. Financial Statements:

          Balance Sheet as of September 30, 2001 Income and Expenses as of
          September 30, 2001 Last 30 days, and Year to Date

<PAGE>

     Item 2. Management's History of Operational Changes
     Item 3. Management's Discussion of Operational Plans
     Item 4. Management's Discussion of Ongoing Operations
     Item 5. Product Lines and Development Status
     Itme 6. Marketing Discussions.


     PART II. LEGAL MATERS, MERGERS AND ACQUISTIONS:
     Part III. Management
     Part IV. Forward Looking statements

PART I. FINANCIAL STATEMENTS:

                          Hamilton-Biophile Companies
                     Balance Sheet as of September 30, 2001
                                  (unaudited)

                                     ASSETS
<TABLE>
<S>                                                                     <C>
CURRENT ASSETS:
         Cash & equivalents                                               $     30,359
         Accounts Receivable                                                   166,001
         Finished Goods Inventory                                              416,920
         Notes Receivable                                                      100,891
                                                                          ------------
                  Total Current Assets                                    $    714,171

PROPERTY & EQUIPMENT  Net of Depreciation
         Office Equipment & Furnishing net of depreciation                $     31,375
         Patents & Patent Rights Net of Depreciation of 445,844                220,001
                                                                          ------------
                  Total Assets                                            $    965,547

                             LIABILITIES AND EQUITY

CURRENT LIABILITIES:
         Accounts Payable and sales tax                                   $     14,911
LONG TERM LIABILITIES:
         Notes Payable, 3 year term                                            437,951
                                                                          ------------
                  TOTAL LIABILITIES                                       $    452,863

STOCKHOLDER'S EQUITY:
         Common Stock, 60,000,000 authorized, no par
         Shares Outstanding   48,404,829 before 1 for 8 reverse split
                               6,050,604 after reverse split
         Shares for Preferred  1,285,100 (retried preferred)
         Issued for Creditors  6,896,538 (at ten cents per dollar)
         TOTAL SHARES AFTER REVERSE SPLIT:  14,232,242

CAPITAL:
         Beginning Balance, Equity                                        $  1,666,677
         Common Stock                                                       13,329,798
         Paid-in-Capital                                                    31,482,366
         Retained Earnings, Accumulated Deficit                            (46,185,133)
                                                                          ------------
         TOTAL STOCKHOLDER'S EQUITY                                       $    263,708
                                                                          ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                                $    965,547
                                                                          ------------
</TABLE>

(see notes to financial statements)

<PAGE>

                          HAMILTON-BIOPHILE COMPANIES
                            STATEMENT OF OPERATIONS
                                  (unaudited)

<TABLE>
<CAPTION>
                                                           Nine Months Ending
                                                           September 30, 2001
<S>                                                        <C>
REVENUES                                                       $ 705,325

COSTS OF REVENUES                                                362,775
                                                               ---------
GROSS MARGIN                                                   $ 342,550

OPERATING EXPENSES                                               327,435
                                                               ---------
OPERATING PROFIT BEFORE TAXES                                  $  15,115
                                                               ---------
INCOME TAXES                                                       - 0 -
                                                               ---------
PROFITS APPLICABLE TO COMMON SHARES (Year to Date)                15,115


<CAPTION>
                                                           Three Months Ending
                                                           September 30, 2001
<S>                                                        <C>
REVENUES                                                       $  63,845

COSTS OF REVENUES                                                 33,458
                                                               ---------
GROSS MARGIN                                                   $  30,387

OPERATING EXPENSES                                                44,410
                                                               ---------
OPERATING LOSS BEFORE TAXES                                    $ (14,023)
                                                               ---------
INCOME TAXES                                                       - 0 -
                                                               ---------
NET LOSS PER COMMON SHARE (Three months)                       $ (14,023)
</TABLE>

NOTES AND BASIS OF PRESENTATION:

     The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Regulation
S.B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.

<PAGE>

Management has prepared the financial statements with information retained from
operations which were suspended during an involuntary chapter 7 bankruptcy
proceeding filed by a major creditor and dismissed by the court. Subsequently, a
chapter 11 reorganization was required to properly determine the assets,
liabilities and ownership rights. Business and accounting records from
operations prior to the chapter 11 resolution of all rights, duties and
ownership were not able to be independently verified. The accounting policies
used in the preparation of these financial statements have taken into account
the reduction or elimination of debt from the chapter 11 plan of reorganization,
the changes to depreciation, and applicable changes in assets and liabilities as
ordered by the Court.

It is the opinion of management that the bankruptcy court orders have adequately
set forth and conclusively settled the rights, duties and ownership of the
Company and are now set forth in these financial statements. Accordingly, any
errors or omissions in the prior operating reports, business records or
financial records, if any, will not affect the Company or its ownership.

The company elected to supply its chapter 11 filings as notice required under
law, and has been granted exemption from filing prior 10-k and 10-Q under the
1933 Act. Operating results for the three months and nine months ended September
30,2001 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2001.

Item 2. Management's History of Operational Changes

     A.   The Company. Hamilton-Biophile Companies, a Nevada corporation, was
          formerly named Mehl/Biophile International Corporation, and prior to
          such name, was named Selvac Corporation. On January 3, 2001 the
          Company filed a petition for Chapter 11 reorganization in US
          Bankruptcy Court, Eastern District of California, to effectuate a
          determination of its assets, liabilities, contractual rights, duties
          and ownership. Under the terms of the approved plan of reorganization,
          all approved creditors will be paid in full from the operations of the
          company within three years.

     B.   The Business of the Company is to develop, manufacture, market and
          sell a variety of different products, and to acquire interests in
          other companies with product related interests. A complete list of the
          company's products and potential products is set forth in this report
          by Management.

     C.   Prior Years. Prior to June 1996, the Company had been involved in a
          number of different products. On June 4, 1996 the Company, then named
          Selvac Inc., merged with Classy Lady by Mehl of Puerto Rico to expand
          its line to include Laser Hair Removal and other potential products.
          The name was changed to Mehl/Biophile International Corporation as
          part of the merger.

     D.   Move to Sacramento. In 1998, after the Company was unable to meet its
          obligations and became insolvent, it discharged all employees and
          ceased operations. A petition for an involuntary bankruptcy was filed
          by the major secured creditor, and the Company was also being sued by
          Clearwater Funds for misrepresentation of facts in connection with its
          loans to the Company. Certain members of the Board of Directors
          suggested a rescue plan by Mr. Gregory Gilbert, who proposed to take
          over operations, resolve all debts to the extent possible, and save as
          much of the company as was possible. To begin this process, the
          Corporation changed its name to

<PAGE>

          "Hamilton-Biophile Companies" and relocated to Sacramento, California,
          where it currently remains co-located with Hamilton-Clarke Industries.

     E.   The Prior Secured Lender. In 1998, Clearwater Funds filed the petition
          for an involuntary Chapter 7 liquidation (bankruptcy). Clearwater
          owned a perfected security interest in all of the assets of the
          Company to secure its debt of over $10,000,000. Mr. Gilbert, after
          negotiations with the Board of Directors, submitted his plan to save
          the Company from liquidation by taking over operations, continuing the
          pending case for patent infringement, and bringing new products into
          the Company through Hamilton- Clarke Industries, among other sources.
          The bankruptcy court then dismissed the Involuntary Bankruptcy case
          filed by Clearwater Funds and Mr. Gilbert arranged for the full
          settlement of the secured loan and debt owed to Clearwater Funds.
          Under the terms of the settlement agreement with Clearwater Funds, the
          Company agreed to cooperate in a pending case against it and its board
          of directors. It also continued operations of its RF hair removal
          business, terminated its laser business, agreed to share in a pending
          patent appeal, and paid Clearwater Funds 4,000,000 shares of common
          stock of the Company. This eliminated over $10,000,000 in secured
          debt, eliminated the pending case alleging misrepresentation by the
          Company's former CEO, and allowed the Company to keep its Finally Free
          hair remover product line; a lawsuit against IGEA; and a small number
          of shares in a Laser manufacturing company which was itself entered
          Bankruptcy in the United Kingdom.

     F.   The New Operations. Due to the Involuntary Bankruptcy, the Company
          ceased all operations, fired all of its employees, and moved what
          remained of the secured property into warehouses in Florida. In
          furtherance of the plan for reorganization, on January 3, 2000, the
          Company filed a voluntary petition for "Reorganization" under Chapter
          11 of the Bankruptcy Code. Management believes that the Chapter 11
          Reorganization was the only available way for the Company to
          consolidate its debt, terminate the pending laser business actions,
          and provide financial statements. As part of the Chapter 11 filing,
          the Company re-established two product lines, and had expanded its
          sales from zero to approximately $65,000 per month.

     G.   Secured Necessary Support to Resume Operations. After moving to
          Sacramento, for approximately 14 months, the Company prepared for its
          reorganization by securing the support of suppliers and marketing
          personnel, as well as negotiating with the major creditors of the
          Company. The Company entered into the following agreements:

          1)   United Productions was and is the primary vendor for hair removal
               equipment. With the support of Mr. David Walsh, CEO, of United
               Productions, the Company was able to avoid the cost of purchasing
               inventory, with United receiving payment for product when the
               Company was paid by its customers. This delayed payment system
               enabled the Company to restart is RF Hair Removal (Finally Free)
               business. United Productions has continued to work with the
               Company, and provides the Company with a source of manufacturing
               consumer electronics products.

          2)   Biophile Corporation. Biophile Corporation, was a shareholder in
               MEHL/Biophile and continues to be a shareholder of
               Hamilton-Biophile Companies. This company has agreed to help
               expand the consumer and liposome product lines of the Company. It
               has supplied designer creams and lotions to the specifications of
               the Company, which

<PAGE>

               provides the Company with products without having to incur the
               expense of development and manufacture. It has licensed the
               Company with a new type of product, the first of which has been
               successful in pilot studies in curing athlete's foot, ringworm
               and scalp ringworm. Biophile has a large staff of dermatologists
               and scientists who provide the Company with this business
               advantage and opportunity.

          3)   Dr. Nardo Zaias, the inventor of several patents used by the
               Company, agreed to forego his royalties on patents related to the
               RF hair removal systems, and agreed to serve as an unpaid advisor
               to the Company for its new product lines. As the Company becomes
               more profitable, Dr. Zaias will become a consultant, and is now
               on the Board of Directors of the Company.

          4)   Skolnick and Associates is the current marketing group for the RF
               hair removal and consumer product line. They have provided sales
               support and other services without requiring that their costs be
               advanced by the Company. They also provided certain artwork, web
               services, and supplies as the Company's restarted business. They
               continue to both train the talent working with the Company on its
               Television sales.

          5)   Major Lenders and Creditors the Company secured the agreement of
               a great majority of its creditors and lenders, who and which
               agreed to take restricted common stock in lieu of payment,
               thereby reducing the debt of the company to a manageable figure
               (see financial information).

          6)   Management Team Non-Payment. As a necessary part of the building
               of the Company from no assets and over $12,000,000 in debt, into
               a currently viable company, it was determined that the Company
               would have insufficient funds to pay its Management Team for at
               least one year, and possibly more. The Management Team, led by
               Mr. Gilbert, agreed not to receive a salary during the
               reorganizational period, and only receive payment at a modest
               level when and if the Company could pay. To date, the management
               team is not receiving a salary, but expects to be able to receive
               salaries in the near future when operational income allows.

          7)   Suppliers and Providers. This strategy of obtaining early
               acceptance of the Chapter 11 Reorganization, by obtaining the
               support of its suppliers and management, and effectually starting
               operations without significant additional loans or capital was
               key to the success of the Company. Without the assistance of
               Management, Mr. Walsh, and others, the plan would not have been
               possible.

          8)   Terminated Laser Hair Removal Business. Prior to the filing of
               the Chapter 11 Reorganization, the laser hair removal business
               was terminated due to a lack of sales. Reasons for terminating
               included the newly realized requirement for a physician to be on
               site in many States; several claims of personal injury as a
               result of laser damage to patients' skin; and the inability for
               the Company to have any laser patent protection. The Company's
               hair laser patent had been adjudicated as not valid in 1998, and
               the appeal of that judgment was lost. Management has never
               considered returning to the laser industry for these, and other
               reasons.

          9)   The Laser Patent Payment. One of the assets of the Company in the
               reorganization was an agreement by Palamar to pay $500,000 for a
               license if the laser patent appeal was successful. However, the
               appeal was lost, and with all further appeals exhausted, the
               payment potential was lost, leaving no patent value in the laser
               hair

<PAGE>

               removal business. Clearwater Funds had supported the costs and
               fees on the appeal, and thus suffered another loss when the
               appeal was denied. Counsel for the Company had indicated that
               they thought the appeal had great merit and would likely win.
               Ultimately they were incorrect, thus closing for the Company the
               last issue on laser hair removal.

          10)  The Lawsuit in New York. Also, as of the date of filing, the
               Company had filed an action against a competitor for patent
               infringement of its RF hair remover system, using the same law
               firm as had represented the Company on the patent Appeal. The
               firm was obtained when Mr. Mehl was CEO. New management became
               dissatisfied with that firm, and dismissed the suit in New York
               against its competitor, without prejudice to the re-filing of the
               suit in California. That suit is part of the reorganizational
               plans of the Company, and is expected to be brought in California
               as funds are available.

          11)  Remaining Assets. The primary assets of the Company, as of the
               filing of the reorganization, consisted solely of its business
               operations in Sacramento. The Company was in the process of
               rebuilding, starting with the Hair Removal products, and using
               the expanded relationships with Biophile Corporation and
               Hamilton-Clarke Industries.

Item 3. Mangement's Discussion of Operational Plans The following is
        management's summary of the current plans for operations. Certain
        aspects of the new product plans are omitted due to the need for
        commercial confidentiality.

     a.   Operational Sales. The Company currently sells its RF Hair remover
          system, with patches, (Finally Free) under an agreement with United
          Productions Inc., which supplies the inventory and receives payment
          for that product after payment from the sales are received by the
          Company. Due to this outside financing of the inventory, the margins
          and net income from sales of the Hair Removal line is believed to be
          less than is normally obtained in consumer product business. The
          holding costs of United are significant, reducing the amount made by
          both the Company and United. Management believes that more
          Capitalization for the Company would change the final costs of the
          products, and the Company could increase its margin of profit by pre-
          paying for inventory. Additional products and the effective costs of
          sales are reviewed in the section "Combined Product List".

     b.   Accurate Financials and SEC Filings. A significant reason for the
          filing of the Chapter 11 Reorganization proceedings on January 3,
          2000, was the inability of the Company to provide the necessary data
          and appraisals for accurate accountings required by NASDAQ and the
          SEC. The Company's accountants were unpaid when the Clearwater Fund
          involuntary bankruptcy took place. New CPA firms were unwilling to
          provide an audited financial statement without a physical inspection,
          inventory, and appraisal of the assets lost during the time Mr. Mehl
          was President. The cost of this service was quoted as over $600,000,
          with no certainty that any final audit opinion could ever be given
          even after the fees were paid. Thus, only a court ordered
          Reorganization where all assets, liabilities and ownership issues were
          determined would provide the necessary certainty for audited financial
          statements. In addition, the Company's accountants had noted
          significant unknown accounting "reserves" for losses caused by the

<PAGE>

          dealing by Mr. Mehl with companies in which he personally owned a
          significant interest. The $600,000 for accountants was unavailable,
          and in the opinion of Management, would have been an unacceptable
          waste of funds to pay for such an audit without any assurance of any
          particular result. Seemingly accurate books had been kept by the
          Company internal accountants and comptrollers, allowing Management the
          ability to reconstruct the company's financials. During the Chapter 11
          Proceedings the Company has been exempted and excused from filing its
          SEC reports, but expects to file all reports from this filing forward.
          Management has also elected to change the Company to a calendar year
          accounting.

     c.   Successful Plan, First Year Profitable. On April 28, 2001 the Chapter
          11 Plan for Reorganization was ordered "Approved" by the Court. 2001
          has apparently become the first year of operations where the Company's
          income exceeds expenses, since the Mehl family was in charge of the
          Company's operations. With the judicial confirmation of the Company's
          debts, a simple and relatively inexpensive audit for SEC and NASDAQ
          filing requirements is now allowed. Also, with the new judicial start
          given to the Company, the SEC filings can be limited to activities
          after January 2001, thereby making the Company's compliance reasonably
          possible. Management also believes that there will be no need for a
          retrospective audit, as the exact amount of the assets, liabilities
          and ownership have been set forth by the Court Order. The Company
          expects to be a fully reporting NASDAQ company, and expand as set
          forth in the Ongoing Expansion section.

Item 4. Management's Discussion of Ongoing Operations.

As a general proposition, the Company has been able to operate without obtaining
lines of credit or major financing. Cash flow has been achieved by restricted
fixed expenses and the commitment of management, working for extended periods
without any pay. The Goal is for the Company to become a large multiple product
line company, starting with NASDAQ "Small Cap" status, and moving to full
trading. Management believes that this goal can be achieved by expanding the
current product line and commercializing the Company's other products. The
Company's plans for expansion by acquiring other company interests is also a
potential means to meet the goals of Management. The following is a prospective
description by Management of the Company's products and expansion strategies:

     a.   Relationship With Biophile Corporation And Pan Cosmeceuticals. In
          1998, at the time of Mr. Gilbert's initial negotiations with the
          Company (then "Mehl/Biophile), Mr. Gilbert announced a plan for the
          saving of the Company from its insolvency and operating loss of $41
          million, by filing a reorganization, obtaining new products with the
          help of existing relationships, and instituting new management. Key to
          the reorganization was the plan to use the company's relationship with
          the Biophile Corporation (one of the largest cosmetic manufacturing
          companies in Thailand), to bring new businesses into the Company, and
          also take advantage of both the Company's Net Operating Loss (NOL) and
          its public company status, as a means for providing value to both
          creditors and shareholders alike. This basic plan began in 1998 and
          continues basically unchanged with the continued support of Biophile
          Thailand. Key to this plan was the assumption that Biophile did not
          want the name "Biophile" associated with any failures, and would thus
          do more than could be expected of a more disinterested investor.
          Management reports

<PAGE>

          that this assumption has proved to be correct, as Biophile has
          provided extensive scientific, product, and financial assistance.

     b.   New License of Liposome Technology. In addition to the general
          cosmetic and cosmeceutical support provided by Biophle Corporation,
          the Company has become the exclusive licensee of a new line of
          products using sophisticated liposomes, including a new anti-fungal
          product which has proved in pilot studies in two countries to be an
          effective cure for athlete's foot, ringworm and scalp ringworm with
          one single application, and requiring only one application.

     c.   Relationship With Hamilton-Clarke Industries. Also at the time of the
          initial negotiations in 1998, Mr. Gilbert intended to merge the
          Company with Hamilton Clarke Industries, a Sacramento based company
          with several product lines which are different from those of the
          Company. Mr. Gilbert was and is the CEO of both the Company and
          Hamilton-Clarke Industries. In anticipation of a successful court
          ordered reorganization, on March 22, 2001, the name of the company was
          changed to Hamilton-Biophile Companies, with the NASDAQ symbol of
          "HCHB". A coordinated approach toward hopefully using the best of both
          companies has been undertaken. Management also believes that this
          initial approach of combining the strengths of both companies has
          proved valid, providing collocation and management economies.

     d.   General Fiscal Changes. As a result of the changes in operations by
          current Management, during the 14 months prior to the Chapter 11
          proceedings, the Company converted $10 million of the $12 million in
          debt into common shares, and eliminated its problematic Laser division
          with its associated losses. It did so with minimal overhead and
          expense. In the Approved Plan of Reorganization, the Company converted
          over $1,600,000 of creditors debt into stock at a rate equal to four
          times the then current trading price of the shares, and has reduced
          debt (total liabilities) to what is currently under $462,863.

     e.   Payments to Prior Creditors. The first payment of debt was
          successfully made, and Creditors of the pre-reorganization received a
          cash payment of 10% of their debt with the confirmation of the plan.
          These creditors amounting to $437,952 will receive one-half of the
          operating profit, until paid, for the next three years.

     f.   No New Creditors. Apart from the pre-reorganization creditors, there
          exists only credit card, incidental debts, and minimal operating debts
          incurred by the Company, with accounts receivable far exceeding the
          total of that debt.

     g.   Basic Approach to Expansion. The Company has expand its products and
          operations with the basic approach of using its operational income for
          expansion, as well as using innovative methods to develop new
          products. Management believes that the Company's earnings are the most
          important goal, and the key to making the Company commercially
          attractive. Management intends to avoid making expenditures which are
          not directly related to the development of greater earnings. As a
          general Corporate philosophy, the Company is dedicated to an
          "earnings-based" valuation to increase the Company's worth.

     h.   Acquisition of New Products. In 2001 the Company developed a marketing
          program for its major lines of consumer products, related to creams
          and lotions. With design criteria set forth by the Company, Biophile
          Corporation (of Thailand) developed new high-tech creams and lotions
          for the Company's initial marketing. Biophile Corporation is committed
          to innovative dermatological products and is working exclusively with
          HCHB for entry of these products into the US market. The President of
          Biophile (Thailand) is a U.S. trained Dermatologist (Medical Doctor).
          Biophile sponsors high quality products and provides grants for

<PAGE>

          physicians to work with the National Institutes of Health (NIH).
          Biophile Corporation is a shareholder of the Company, and wishes to
          see the Company it prosper for a number of reasons, not the least of
          which is the desire to manufacture for U.S. sales. (See Product Lines
          and Development Status)

     i.   Development of New Products. As a result of its presence on TV and in
          catalogue sales, the Company's management believes it will be able to
          successfully introduce new products. One new product line in
          development is a cellulite machine that removes cellulite in a more
          consumer friendly way, and without the discomfort of current vacuum
          based machines. Other new products and the new pharmaceutical
          compounds are set forth in the listed Product Lines. The company will
          use its available resources for both intellectual property protection
          and design help. Other confidential products are likewise ready to be
          developed and deployed by the Company.

Item 5. Product Lines and Development Status

The following is a list of the major product groups, and management's brief
description of the status of their development and sale. Products are both those
of Hamilton-Biophile Companies, and those of Hamilton-Clarke Industries. No
certainty of any particular success can be assured in connection with these
products, and the description is provided for a basic outline of the products
the Company hopes to commercialize.

     a.   CONSUMER PRODUCTS:

          1)   The Finally Free Hair Removal System. This is a current product
               which is being sold chiefly through live television. Marketing
               also includes catalogue and direct sales. This is a very
               long-term selling product, with relatively new "patches"
               attached. This is the only known product of its kind with
               clinical trials showing that the product works as designed.
               Performance distinguishes it from other products which have tried
               to copy the Finally Free with some success. The profit margins of
               this product line has been adversely affected by "knock off'
               products, and the product may be nearing the end of its current
               design life cycle. It is sold on The Shopping Channel
               distribution system. QVC live television and in catalogues.
               Management views this product as a viable product for the next
               few years. Management does not know if this product can be
               re-packaged or improved for another period of relatively large
               sales.

          2)   The Micro -vapor Facial System. This rotating brush and vapor
               system uses treated pads to clean and refresh the face with
               moisture delivered through the pads. The Company has a large
               number of products in inventory (10,000 units and many pads)
               which it acquired from the His or Her operations. Although this
               product is not "new" looking in its current caddy, with the
               addition of a new transformer, and new creams, the system may be
               used for selling the new "Eleaf by Dermatologists" line of
               products. It also allows the Company to offer more than one
               machine in connection with the new creams business.

          3)   The "Eleaf by Dermatologists", Facial and Skin Toning System,
               including New Creams. The Eleaf product line and skin toning
               system include new skin care products developed by Biophile
               Corporation. These are the first to be "Phyto Active" which are
               all natural, and have no animal or petrochemical products.
               Management believes that the marketing of this product will show
               it to be truly superior to other very successful products. The
               Eleaf system includes a Total Rejuvenation Cream, a number

<PAGE>

               of liposome Micro Encapsulation products, and other products that
               are suitable for sale with or without any equipment such as the
               Company's firming machine or its micro vapor facial machine.

          4)   "PhytoActive" Eleaf by Dermatologists products are natural plant
               products with natural vitamin and protection systems. They are
               clean feeling and not "greasy." With no "animal or petroleum"
               based compounds, they do not cause irritation. Because they are
               made "by Dermatologists", the products hope to enjoy superior
               initial acceptance by the public. Initial limited Company tests
               show that once a customer tries these products, they become very
               attached to the products whether delivered with one of the
               Company's machines, or just used alone. This acceptance is
               expected to influence the way that the Company attempts to
               develop sales. Also included with the Company's products is
               facial waterproof sunscreen, which feels dry and silky, while
               protecting skin with SPF 45, effective for both UVA and UVB long
               wave. This non-greasy product feels like makeup foundation,
               something that is new to the industry. The Eleaf by
               Dermatologists line is ready for sale, has commercial buyers
               including the Shopping Channel and QVC asking for samples. The
               Company is waiting for only its final artwork, the final jar
               selection to begin sales.

          5)   The Eleaf Cellulite Removal System. The Company has a new design
               for a cellulite removal machine which management believes can be
               used in a more friendly way than prior cellulite removal systems.
               The market for this product is very large, and patent protection
               probable according to the Company's initial patent search. A
               prototype design has been completed, and outside engineering is
               expected to finish the production design. There are no current
               sales for this unit and no certainty that sales will result.

          6)   The Wrinkle Removal Machine. The Company has a prototype wrinkle
               eraser machine which appears to stimulate natural collagen
               production and help build or retain the fat layer which is lost
               with aging. The machine is expected to be launched after the
               Cellulite machine depending upon the success of the product in
               its initial trails. No certainty of any particular success can be
               assured at this early developmental stage. However, the prototype
               has provided management with sufficient initial results so as to
               cause management to take the product to the next step.

          7)   Bruise and Pain Machine. The Company has obtained a partial
               prototype (one side) of a machine which helps to stops bruises
               and can be used to start painless Intravenous (IV) lines for
               hospital and clinic patients. This machine was designed outside
               the company, and may be used for starting insulin pump accesses,
               and providing relief where a fast local anesthesia machine may be
               useful. The basic mechanism for the machine has been developed,
               and the next step is to build the second side of the machine and
               begin testing.

          8)   Complete Lines of Cosmeticuticals. The Company hopes to be able
               to use its Eleaf distribution system to roll out a complete line
               of other cosmeticuticals. The marketing system which is being
               instituted for the first products will apply to the entire line,
               showing a "scientific, non- greasy," approach toward better
               products.

          9)   Antifungal Liposome Pharmaceutical. On July 12, 2001, the Company
               became the Exclusive Licensee of an antifungal compound being
               patented with the help of the Company, and made with a new type
               of liposomes, expected to be a very successful product. The
               Company cannot be sure that the product will not require other
               licenses, as some of the compounds intended to be used in the
               Company's liposomes are not owned by the Company. The product has
               already shown excellent abilities to treat "ringworm" and is
               expected to be the best product for athlete's foot, a

<PAGE>

               very large market. The next step is to use the initial pilot
               studies to design a protocol for FDA tests. Approximately
               $300,000 is expected to be required for the FDA related tests.
               The Company will obtain this funding with a new offer or with a
               venture partnership with a large pharmaceutical company. The
               makers of products that can be delivered in the Company's new
               liposome delivery system may provide multiple product lines.

     b.   Commercial Product Lines

          1)   Motorsports Products. Hamilton-Clarke has developed a new
               manifold for the Ford Modular engine, the most popular engine
               being sold. Because of the success of this manifold to deliver
               meaningful changes in horsepower, the Company hopes to use its
               good results to expand its products and services line to other
               platforms such as the Ford Truck and the two-valve modular
               engine.

          2)   Permanent Pothole Patching Vehicle. Covered elsewhere, this
               vehicle is currently being modified to meet the specifications of
               a pending interested buyer of the vehicles. The McClellan Park
               facilities which are the next location of the Company, will allow
               for large scale production of this and other related business.
               This project will require additional funding for it to become
               profitable.

          3)   Hydraulic Sifting Bucket. The Company has designed, produced, and
               begun to market a hydraulically actuated sifting bucket that
               sifts useable dirt "fines" leaving the rock and trash in the
               bucket for dumping. The design of this product is fully developed
               and extensively field tested, demonstrating reliable, superior
               work in a construction setting. The China Lake division of the
               Company is expected to help market this product.

          4)   McClellan AFB Hydraulics. McClellan Air Force Bace closed, with
               the ground transfer to the County of Sacramento, as of July 13th,
               2001. Hamilton-Clarke is the official contractor for the removal,
               re-use and re-sale of sophisticated equipment used in the repair
               and testing of hydraulic equipment. The first phase of this
               agreement provided for $130,000 in removal fees, and an agreement
               to jointly market and sell the equipment relocated to the
               Company's new leased facilities on McClellan Park. This
               agreement, and its anticipated follow up contracts allows the
               Company to successfully bid on federal, state and local projects
               relating to equipment re-use.

          5)   Vacuum Filter Press. The Company has been the manufacturing
               sponsor for the Chico State Department of Agriculture studies on
               using vacuum filter press technology to turn farm waste into
               inert fertilizer using a low energy, no emissions system. The
               Company hopes to make vacuum filter presses for large
               applications. No certainty of any particular level of sales is
               assured.

          6)   Air Cleaning and Germicidal for HVAC and Mail Opening Systems.
               The Company has a newly developed relationship with L&H Airco, an
               engineering based international HVAC designer of systems
               (Professional Engineers). L&H Airco has informed the Company that
               it would like to use the Company's McClellan plant to manufacture
               to specifications, a mail sorting table which captures air around
               the mail sorting and opening area and uses the patented
               germicidal anti-bacterial air cleaners which have been approved
               for spores handlers, including tuberculosis, a bacteria like
               anthrax. Management believes this system to be the only FDA
               approved UV system applicable to mail opening.

<PAGE>

          7)   Hand-held Microwave Sterilizer. The Company has filed a patent
               application (provisional) for the use of its hand held design for
               a microwave sterilizer which can be put over suspected items or
               areas. Microwaves then denature proteins which are potential
               health threats to personnel. There is no certainty that this
               system will be approved for sale or accepted by the public.

          8)   TrueValue Depot. The Company has acquired the right to open a
               TrueValue "Depo" in Fairfield California, in an area not
               currently served. The location of the site is unique, and is part
               of the strategy of having a True Value store is to roll out sales
               across the USA with Hamilton-Clarke and Hamilton-Biophile sites
               located on or near military facilities. While no certainty of any
               result is assured, management believes that it can occupy a
               meaningful part of a specialized market.

          9)   Flowers and Plants. The Company has contacts in both Thailand and
               Puerto Rico, where the Company expects to purchase commercial
               quantities of patented flowers and plants for resale in the USA.
               Early samples show that there are unusual plants which can be the
               specialty of the Company. The Company has designed rocks which
               are attractive holders for its plants.

          10)  Storm Drain Filters. The Company has developed a new design for
               storm drain filters which the Company believes will be required
               in many cities under new federal water guidelines. This filter is
               made of Stainless Steel and is seemingly superior to other known
               storm drain filters. First flush filtering in storm drains is
               believed to be an important way to reduce water pollution. This
               product line is not expected to be large, but complements the
               manufacturing abilities of the Company. There minimal current
               sales levels of this product, and as such it must be developed if
               it is to have any success.

          11)  Other High Tech Products. The Company, due to its ability to
               interact with its associated civil service personnel, has
               acquired licensed to two high-tech products, one for better
               visibility in fog, using low cost optics, and one for the
               destruction of an active tornado using electro-mechanical means.
               These products are being developed by the Company using the
               personnel who invented or are improving the products, and do not
               require significant additional capital to finish development.

          12)  HiEnergy Microdevices. The Company expects to continue to examine
               a manufacturing relationship with HiEnergy Microdevices, which
               would seem to be an opportunity for the Company to manufacture a
               new neutron beam chemical and biological weapons detection
               system. No assumption of any particular activity can be made.

Item 6. Marketing Discussions

Marketing is divided into two sections, the Consumer Market, and the Commercial
Market. By having both types of products, the Company seeks to avoid being
limited in its scope. With a number of different products, and different selling
seasons, the Company hopes to expand and contract to match the sales
opportunities for its products. With its Motorsports division, it may also
develop name recognition while making profits on its engine related products and
services.

1)   CONSUMER PRODUCTS. Marketing consumer products can be very expensive.
     Advertisement costs are very high, except for "participation" systems,
     where the advertiser has its own customer base, and will take part of the
     profits from the sale of product. A basic assumption of this

<PAGE>

     strategy is the belief that the products which the Company is now able to
     sell, will out-perform the competition. Thus, follow-on sales, by word of
     mouth, and "mall" sales are expected to be part of the marketing program.
     Other factors include:

     a.   The Company does not want to, nor does it have the advertising budget
          to purchase skin care magazine advertisements as does Lancome, Revlon,
          and Este Lauder. This type of advertising is usually required for
          retail store "shelf" sales. However, the Company does have existing TV
          sales and special claims of superior performance that these other
          companies do not currently have.

     b.   The Company, with the help of Biophile, has acquired several
          innovative machines for showing the difference between its products,
          and those of the competition. The marketing of new products will focus
          on "Dermatology", "Science" and "Phyto Active" non-animal and
          non-petrochemical products as demonstrated by "Head-to-head"
          comparisons to the most expensive creams made; photographs; the
          "Facial Skin Analyzer" and "Before and After" photographs depicting
          the benefits of the Company's products.

     c.   Currently, sales are most extensively found by selling to The Shopping
          Channel and QVC (television). For such sales, the Company pays a
          customary ten percent commission to the full time outside sales
          organization, Skolnick and Associates. Part of the Company's intended
          market is the Tanning Spas, Special Spas and Natural Food Stores (the
          larger of these also carry skin care and personal care products).

     d.   The Company hopes to safely make aggressive new claims for its
          products, perhaps using the term "Cosmeceuticals" to distinguish
          itself from other products. Most companies avoid making claims of a
          direct nature due to their inability to show that their products do
          achieve the claimed results. The Company will exercise caution in
          making claims, but expects to have data to support its marketing
          statements. The Company will use the Biophile scientists to perform
          clinical trials and examine the benefits of the products which are
          expected to be statistically relevant.

     e.   In 1999, a short term "infomercial" pilot was used to determine the
          success of two minute cable network advertisements. Company learned
          that one and two minute advertisements do not effectively replace a
          live TV show or longer infomercials of ten to fifteen minutes.
          Management and the outside sales staff believe, due to the success on
          The Shopping Channel, and by QVC, that a full fifteen to thirty minute
          infomercial would be a financial success for both the Finally Free and
          the Eleaf by Dermatologists product lines. Also, since the Company
          effectively sells its products at a "retail price" on infomercial
          sales, with the retail price sales being twice the income of current
          wholesale prices, the Company may achieve greater sales with retail
          driven by TV. The Company does not have sufficient funds to run a full
          infomercial and is seeking affiliations to allow this type of
          marketing.

     f.   The company has developed new types of packaging for the new line of
          Eleaf by Dermatologists liposome products. Management believes this
          will increase the perceived value of the product and gain customer
          approval. The new packaging line is part of an overall new marketing
          approach whereby the Facial Skin Analyzer, the Facial Machine
          (steamer) and the new Electro Stimulation machines will be marketed.

     g.   The Company expects to be able to market the Cellulite machine still
          in development as an additional Eleaf product, helping to give name
          recognition to the existing Finally Free hair removal system, and the
          Eleaf cream lines. The cellulite machine is expected to be sold under

<PAGE>

          the Eleaf name, although the final decision will be based upon market
          acceptance of the Eleaf brand.

     h.   The Company expects to marketing the new Antifungal Liposome compound
          by either a joint venture with a large pharmaceutical company, or in
          connection with its own antifungal. Two large companies have indicated
          strong interest in the new treatment which is currently in the initial
          stages of clinical trial development. Using the existing channels of
          distribution will allow for a proper commercial rollout. Clinical
          trials and regulatory approval are required for these new products.

2)   COMMERCIAL PRODUCT MARKETING:

     a.   Marketing Motorsports has begun, and accomplished by getting various
          motorsports celebrity endorsements, which also leads to editorials in
          engine and racing magazines. The Company will specialize in the Ford
          Modular Engine, the most popular engine in trucks today, as well as
          the engine which Ford has selected to be its next long-term line. HCI
          Motorsports is already known for its remarkable accomplishment of
          horsepower increases over stock manifolds. Both Dealer and Direct
          Sales systems are being used to market the line.

     b.   Marketing the Pothole Patching Vehicle is expected to take place by
          lending a vehicle to a targeted customer, and then seeking the
          purchase of the vehicle if satisfied. This requires that vehicles be
          made for inventory, and not on order. The potential buyers of the
          vehicle are known, and easily contacted. Management believes that
          these potential buyers are highly motivated to try any system which is
          not expensive and provides a year-round permanent patching system. The
          Company plans to keep the initial costs as low as possible, consistent
          with historical marketing in this particular industry. Costs can be
          kept lower with the lower overhead of the Company doing business at
          its new location, the now closed McClellan Air Force Base. Lower
          retail cost of this vehicle is designed to allow for market
          penetration, and reduce competition incentives. Additional
          relationships are necessary for this product to be a success.

     c.   Marketing the Hydraulic Sifting Bucket is currently being accomplished
          by the China Lake division of Hamilton-Clarke, where the advance
          technology center for the US Navy is located. The China Lake personnel
          believe that they can market and build the hydraulic bucket until
          sales require the higher production level facilities at McClellan
          Park. Marketing is accomplished by demonstration and advertisement in
          "Rock and Dirt" magazine. This unit is not protected by patent, but is
          seen as a source of sales for the foreseeable future.

     d.   Marketing the Vacuum Filter Press technology is currently beginning
          with proposals through Superior Resources Company of Sacramento. The
          Company expects to make any machines sold on a by-order basis, with
          prepayment of hard costs for the manufacture. The Company's joint
          tests in Chico with the Department of Agriculture and the Chico State
          University are completed, and The Company is awaiting its first
          commercial sales.

     e.   Marketing the air sanitizer mail opening desk and HVAC air handlers is
          planned to be handled by both the Company and L&H Airco. This is a new
          project line, made possible with the move to McClellan Park. The
          Company expects to enjoy a reasonable profit margin on each system
          sold to a market which sees Mail as a potential health hazards. There
          are no sales to date, and because this is a start-up market for the
          Company, there is no certainty that there will be sales.

<PAGE>

     f.   The TrueValue Depot is a concept for a larger TrueValue Hardware
          store. The Company has received the right to lease land at an ideal
          location with very high market ratings in Fairfield, California. Being
          part of the TrueValue cooperative buying system allows the Company to
          expand into other military bases and posts, providing something for
          both the woman (consumer) and the man (hardware) to enjoy. The Company
          plans to begin a building and opening program in the fall and winter
          of 2002-2003.

     g.   Marketing the Commercial Plants sent to the Company from Thailand and
          Puerto Rico only requires that the Company have a location for product
          to be trans-shipped, and personnel to contact and deliver the plants
          to retail sellers in the Western USA. Marketing is expected to
          continue on a commission basis, eliminating much of the personnel
          costs and providing incentive for the marketing personnel.

     h.   Marketing for the other products follow the usual and traditional
          lines of the product. For example, the fog visibility system is
          expected to be marketed to automobile and truck supply companies by
          the Motorsports division. Management is considering short run TV when
          and if the product becomes successful. The Company basically seeks to
          shift as much of its administrative and marketing costs to a variable
          costs approach, and reduce its fixed and overhead costs. Management
          generally believes that by having as many costs as are possible remain
          variable with the flow of product, the Company can be both cost
          efficient and productive.

Part II  LEGAL MATTERS, MERGERS AND ACQUISITIONS

     a.   Marketing is expected to continue on a commission basis, eliminating
          much of the personnel costs and providing incentive for the marketing
          personnel.Marketing for the other products follow the usual and
          traditional lines of the product. For example, the fog visibility
          system is expected Hamilton-Clarke Industries. As a result of the
          operations by current Management, the Company has obtained the right
          to acquire all of the stock of Hamilton-Clarke Industries under the
          following general terms:

          i.   All shares of Hamilton-Clarke Industries, approximately 14
               million shares, will be exchanged for Preferred shares in the
               Company called "HCI Preferred" on a one share of Hamilton-Clarke
               common for one share of HCI Preferred. Hamilton-Clarke Industries
               (herein "HCI") will thus become a subsidiary of the Company
               (HCHB).

          ii.  The Company will receive five percent of the total number of
               shares of common Hamilton-Clarke in the acquisition, in
               consideration of the merger, and without any further payment for
               such shares. HCI Preferred shares shall be entitled to all
               beneficial income and rights from the operations of HCI as a
               separate Subsidiary of Debtor HCHB. The companies will then work
               together to develop products in their respective fields. The HCI
               Preferred shareholders can be converted to one share of HCHB
               common for each share of HCI Preferred, or such other ratio as
               the two entities can agree. In the alternative, HCI Preferred
               shareholders may vote, by majority, to "spin off" from Debtor in
               which event it will become its own public entity, and HCHB will
               retain its 5% ownership thereof as a fee for allowing HCI to
               become a public company.

<PAGE>

          iii. HCI and the Company have a majority of the same Officers and
               Directors. A mutually beneficial relationship has existed between
               the companies for the last 18 months in that HCI provides the
               fulfillment and marketing personnel for the new products of the
               Company and share the costs of the facilities. It is anticipated
               that a formal merger will take place as the Company so votes.

     b.   Acquisition of Pothole Patching Vehicle Business. One of the product
          lines which has been under development for years, and is now ready for
          production and sale, is the permanent pothole patching vehicle. A more
          complete description of the business is provided elsewhere. The
          Company intends to acquire the current assets of the business named
          Loadmaster. A subsequent funding of the project is anticipated to
          require $300,000 which will be used for the making of another vehicle
          and its demonstration in New York or other areas. That funding, when
          acquired, will also pay for the soft costs associated with the
          intellectual properties protection and initial tooling. The Company
          expects to use its new McClellan AFB facilities to make the equipment,
          which are sufficient for all anticipated levels of commercial
          production of the vehicle.

     c.   Potential Purchase of Shares of HiEnergy Microdevices. The Company is
          reviewing the potential of purchasing approximately $500,000 of shares
          in HiEnergy Microdevices, Inc., a privately owned "high tech" company
          with certain technology which is compatible to that of both HCHB and
          HCI. Should HCHB not acquire HiEnergy Microdevices, no changes in the
          income and expense projections would take place, as an investment in
          HiEnergy will be a long term strategy for growth during the first
          three to five years. No decision has been made as to whether such
          investment should be made.

     d.   McClellan Park. McClellan Park is the now closed McClellan Air Force
          Base, which was one of the most successful manufacturing and repair
          facilities in the world. Under law, when a base closes, all equipment
          becomes part of the local government, except the equipment which is
          "mission specific" and thus suitable only for that particular military
          work. In the case of McClellan, the equipment which was used for
          manufacture of products is available to the Company as part of its
          facilities lease, on the basis of merely paying for the rental of the
          space, and the salvage value of the equipment, over 10 years. The
          equipment is owned by the Company when its lease ends, or the salvage
          value is paid. Management believes that this may allow the Company to
          avoid the costs of capitalizing the extensive equipment that the
          Company needs for its facilities. Since the Company has an ongoing
          relationship with McClellan Park, the rental rates are extremely
          advantageous, twenty cents per foot per month, for the manufacturing
          area, and ten cents per foot for the 50,000 square foot storage and
          motorsports building. The Company believes that there are additional
          benefits to renting space at McClellan, including personnel and
          facilities benefits. Because the Company has excellent amounts of
          space at McClellan Park, the Company intends to co-locate with
          entities with which it can enter into business relationships. A basic
          approach to any co-location or venture is that the Company will not
          incur significant expense for any co-location without a source of the
          funds in business operations.

     e.   Operating Loss Carry Forward. The extensive losses during the years
          prior to the current Management provide one benefit to the Company.
          Management believes that the Net Operating Loss of approximately

<PAGE>

          $41,000,000 can be used to offset income so that the Company will not
          owe federal income taxes for the income offset by the NOL.

     f.   Extensive Ownership of the Company's Stock by Market Makers and Street
          Houses. There are currently 6 reported market makers for HCHB stock.
          Additionally, there are several large Street Houses listed in the list
          of owners, who may have acquired the shares in their providing of
          losses for their customers. There are over 1000 shareholders of the
          Company. This allows Management to believe that the Company will have
          wide based support for its success and turnaround.

     g.   Corporate Identity. The Company has a relatively unique identity of
          how a company with millions of dollars in debt can be turned around,
          to the benefit of the creditors and the shareholders alike, using
          innovative financing, and significant work. In order to set the
          example of commitment to the Company and its growth, during the
          reorganization process the officers of the Company have substantially
          deferred all payment of salary or compensation, pending the outcome of
          the reorganization.

b.   LEGAL ACTIONS and ASSETS

     a.   Prior Creditors. As a result of the successful operations, all
          approved creditors are now, instead of experiencing a total loss,
          expected to receive a total payment of 100% of their approved claims.
          Over seventy-five percent (75%) of all approved creditor's claims have
          been paid with stock at ten cents per share, four times over the
          trading value, due to the apparent belief of those creditors that the
          Company has real value and potential for growth.

     b.   The Dismissal of The Suit in New York, with California Available. The
          suit against a providers of "knock-off" products owned by the Company
          was the subject of a claim in the reorganization. Since an action in
          California for the patent infringement and unfair trade practices was
          made possible by the reorganization, the Company dismissed its case in
          New York. The patent infringement action covers a number of years,
          including times when there were valid "tweezers" patent, as well as
          the current "patch" and "cream" patents. All are related to the radio
          frequency (not laser) hair removal products. The unfair competition
          relates to claims of effectiveness which were false, and which made
          the sale of Debtor's products more difficult. The passage of time has
          affected the ability of the Company to collect by lawsuit, and there
          is some question as to whether the intended defendant will be able to
          respond in damages if the suit is successful. The decision on whether
          or not to sue in California has not been made, and further delays may
          make that suit unattractive.

     c.   The Action Against the Estate of Mehl. A planned legal action against
          Thomas Mehl, Sr., (his estate, and successors) is being reviewed by
          counsel as well as settlement of the Mehl claim for unpaid royalties.
          Management believes that the Estate of Thomas Mehl, Sr. is obligated
          to the Company for what appears to be the improper actions of Mr.
          Mehl, the former president of the Company, who claimed to have large
          laser sales in order to obtain loans and sales of shares, from, among
          others, Clearwater Funds. An action against Mr. Mehl and his estate
          was filed by Clearwater Funds, as Mr. Mehl was not part of the
          settlement between Clearwater and Debtor. Since the actions of Mr. and
          Mrs. Mehl caused the Company to be sued and become insolvent through
          misrepresentations of fact, the Company does not believe it is legally
          or ethically indebted to the Mehl family. In addition, Mr. Mehl was
          the only employee of the company's predecessor, Classy Lady, and as
          such, when he entered into a license for intellectual properties, he
          did so by entering into a license with himself. This

<PAGE>

          has caused the Company's counsel to assert that the Company has
          ownership of all intellectual properties, and work for hire rights
          under patent ownership laws. Mr. Mehl also entered into several
          contracts where he was both a representative of the Company and had
          personal interests with the other side of the contract, spending
          hundreds of thousands of dollars for His or Hers of Puerto Rico, Inc.,
          without legal authority. He and Mrs. Mehl were the largest owners of
          shares in His or Hers, and he did not obtain the approval of the Board
          of Directors of Debtor for such investment into his own company. Mr.
          Mehl is also believed to have received funds and property from the
          Company through charging against a company named C B Laboratories, for
          items and costs which were not incurred or paid to CB Labs. Current
          Management believes that there is ample evidence of the actions of Mr.
          Mehl to warrant suit, but is uncertain of being able to collect
          anything with a judgment. Accordingly, at the request of Management,
          the Company's attorneys are reviewing the advisability of suit.

     d.   License of Certain Prior Patents. Mr. Thomas Mehl, Sr., and Mr. Anton
          Clemens are the named co-inventors of a recently (August 2000) patent
          which is related to a facial machine, now named the Micro Vapor
          Machine, licensed to His or Hers of Puerto Rico, Inc. The Company has
          become the exclusive distributor for these products, and has acquired
          much of the old inventory with the help of Mr. Walsh. The Company
          believes that there is no royalty due to the Mehl family for several
          reasons, and is selling product subject to a potential royalty fee,
          due to Mr. Anton Clemens. The Company has researched the contract
          history and learned that the patent for the Facial Machine was
          actually invented by Mr. Clemens when he and the company, His or Hers,
          were under contract. Thus, His or Hers became the owner of the
          patentable ideas of Mr. Clemens as he developed this Facial Machine.
          The Company has obtained a copy of the agreement which His or Hers
          entered into with Mr. Clemens, and this has revealed the fact that Mr.
          Mehl had no right to direct Mr. Clemens to assign any interest to Mr.
          Mehl personally (which he did), as opposed to leaving the patent
          rights for the Facial Machine in His or Hers. Of note is the fact that
          Mr. Mehl had no formal training in product development, whereas Mr.
          Clemens is an engineer, has been a product designer for major
          companies throughout the world, an is a somewhat famous inventor.
          Thus, Management is reasonably certain, having discussed these matters
          with Mr. Clemens that Mr. Tom Mehl, Sr. has no claim to royalties from
          the sale of the Facial Machine, when he improperly arranged for the
          patent to be issued in Mr. Mehl's name, and not the company. Mr. Mehl,
          again entered into a license with himself, whereby he executed a
          license of the Facial Machine patent to His or Hers (also owned in
          great part by Mr. Mehl) and then proceeded to have the Company pay for
          the development work and other costs. The Company thus believes that
          it is entitled to market the facial machine without any payment to Mr.
          Mehl or his heirs, having received the right to market from His or
          Hers. However, should Debtor be incorrect, the amount of the royalties
          to be paid are minimal (less than $5,000) and should it come to pass
          that the Company is not able to sell the Facial Machine, Management
          believes that this would not materially change the Company's business.

     e.   HCI-Impel Dispute. Hamilton-Clarke Industries currently has a dispute
          with the former Impel Industries which was a new product for oxygen
          cutting that did not, in the opinion of that management, offer a
          product that could be protected by patent. In addition, Management
          believes the inventor of that product misrepresented the status of his
          patent, and that misrepresentation was discovered with additional

<PAGE>

          patent were being sought. In dispute is approximately $80,000.
          Management of Hamilton-Clarke believes that the case has merit for the
          benefit of Hamilton-Clarke, but collection by HCI is uncertain and
          questionable.

Part III. MANAGEMENT

Management has worked for over two years with little salary on the part of the
Corporate Secretary, and no salary for the other officers and directors. As a
result of the court order, 231,250 shares have been paid for management
services, and there exists a plan whereby approximately 10% of the company's
outstanding shares are contained in a bonus pool for future services, to be
vested over four years of service at the direction of the board of directors.

a.   CEO: Mr. Gregory Gilbert is the CEO of both Hamilton-Biophile Companies and
     Hamilton-Clarke Industries, having founded Hamilton-Clarke and having
     rescued Hamilton-Biophile Companies. Mr. Gilbert has extensive experience
     in Business and Law. A complete copy of his resume is available from the
     Company.

b.   CFO: Mr. John Fitzgerald is the Chief Financial Officer for both companies,
     and has experience in carefully managing funds and cash flow so as to
     maximize the growth of the Company and minimize the expenses. A complete
     resume is available through the Company.

c.   Secretary: Mr. Edward P. Iaconis is the Corporate Secretary for the
     Company. A complete resume is available through the Company.

d.   V.P., Marketing: Richard Craft is the VP Sales, He is instrumental in
     obtaining information on competition, and developing the new product lines
     methods of marketing.

e.   V.P., Motorsports, Cole Cuttler is well known developer of engine parts,
     and heads the Motorsports division, having developed the "Modular Mongoose"
     which has received magazine article acclaim.

f.   G.M., Motorsports, Robert Betteridge runs the day to day and parts resale
     business of the Motorsports division.

The Company expects to use its variable costs model to acquire as much of the
personnel it needs to conduct its business. This is anticipated because the
Company has elected to act with a minimum of recapitalization until the value of
the Company's stock becomes in line with management's appraisal of the Company's
worth.

Part IV. Forward Looking Statements:

     This Form 10-QSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21B of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Factors that might cause such
a difference include those discussed below.

     The Company's future results of operations initially depend to a
substantial degree on the ability of the Company to: Generate revenue through
the implementation of its new marketing programs; Obtain regulatory approval for
its consumer and dermatology products, which cannot be assured; obtain
additional capital for development and sales of its products which cannot be
assured; Successfully market and sell its consumer products in the United States
and abroad.

     No assurance can be given that the Company will succeed in any or all of
the above. The ability of the Company to generate revenues from its new products
will in part depend on the public's acceptance of the use of its products for
which there can be no assurance. It will also be dependent upon the strength of
the Company's competitors and the ability of those competitors to sell products
into the same target markets as those of the Company. The Company's existing or

<PAGE>

potential competitors have or may have substantially greater research and
development capabilities, clinical, manufacturing, regulatory and marketing
experience and financial and managerial resources than the Company.

     Further, the Company's future results may depend upon the Company's ability
to successfully defend its intellectual property rights and in particular on the
outcome of the current litigation against Palomar which alleges infringement of
the Zaias patent. No assurances can be given that the Company will able to
successfully defend its intellectual property.

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.

                                    HAMILTON-BIOPHILE COMPANIES
                                                 Registrant

Date: October 25, 2001              By: /s/ Gregory F. Gilbert
                                        -----------------------------
                                        Name: Gregory F. Gilbert
                                        Title: President, CEO