*As filed with the SEC on April 15,2002*

**Securities and Exchange Commission****Washington, D.C.  20549****Form 10-KSB**Annual Report Pursuant to SectIon 13 or 15(d)of the Securities Exchange Act of 1934

| For the Fiscal Year Ended December 31, 2001 |  | Commission File No. 0-24778 |
|---------------------------------------------|--|-----------------------------|

**National Health & Safety Corporation****(**Name of small business issuer in itscharter)

| **Utah**                                                      |  | **87-0505222**                      |
|---------------------------------------------------------------|--|-------------------------------------|
| (State or other jurisdiction of incorporationor organization) |  | (I.R.S. Employer IdentificationNo.) |

**3811 Bee Cave Road, Suite 210,Austin, Texas 78746**(Address of principal executive offices)Issuer's telephone no.: **  (512) 328-0433Securities registered pursuant to Section 12(b) of the Exchange Act:**None**Securities registered pursuant to Section 12(g) of the Exchange Act:**Common Stock, par value $0.001 per share

Check whether the issuer  (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and  (2) has been subject to such filing requirements for the past 90days.   Yes  [X]          No  [   ]Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and nodisclosure will be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporatedby reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  [X]State the issuer’s revenues for its most recent fiscal year:   $ 26,536At March 31, 2002, there were 198,905,365 shares of registrant’s Common Stock held by non-affiliates, with an aggregatemarket value of approximately $1,989,054, based on that day's closing price on the OTC Bulletin Board.Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Actafter the distribution of securities under a plan confirmed by a court.   Yes  [X]          No  [   ]At March 31, 2002, a total of 266,957,220 shares of registrant’s Common Stock were outstanding.DOCUMENTS INCORPORATED BY REFERENCE: The information required by Part III of this Report, to the extent not set forth herein, isincorporated by reference from the Registrant’s definitive proxy statement relating to the annual meeting of stockholders tobe held in May 2002, which definitive proxy statement will be filed with the Securities and Exchange Commission within120 days after the end of the fiscal year to which this Report relates.

**TABLE OF CONTENTS**
| **PART I**   |    |                                                                                                                                          | **1**  |
|--------------|--------------|------------------------------------------------------------------------------------------------------------------------------------------|--------|
|              |    |                                                                                                                                          |        |
| Item 1.      |    | Description of Business                                                                                                                  | 1      |
|              |    |   HealthVIP Healthcare Benefits DiscountProgram                                                                                | 1      |
|              |    |   Change of Management and Direction in2001                                                                                    | 1      |
|              |    |   Marketing and Distribution                                                                                                   | 4      |
|              |    |   Technology Systems Development during2001                                                                                    | 5      |
|              |    |   Historical Developments – BankruptcyProceedings                                                                        | 6      |
|              |    |   Healthcare Discount Programs – IndustryOverview                                                                        | 7      |
|              |    |   Competition                                                                                                                  | 10     |
|              |    |   Government Regulation                                                                                                        | 11     |
|              |    |   Employees                                                                                                                    | 11     |
| Item 2.      |    | Description of Property                                                                                                                  | 12     |
| Item 3.      |    | Legal Proceedings                                                                                                                        | 12     |
| Item 4.      |    | Submission of Matters to a Vote of SecurityHolders                                                                                       | 12     |
|              |    |                                                                                                                                          |        |
| **PART II**  |    |                                                                                                                                          | **12** |
|              |    |                                                                                                                                          |        |
| Item 5.      |    | Market Price of NHLT’s Common Stock and RelatedStockholder Matters                                                                 | 12     |
|              |    |   Dividend Policy                                                                                                              | 14     |
| Item 6.      |    | Management’s Discussion and Analysis of FinancialCondition and Results of Operations                                               | 14     |
|              |    |   Recent Accounting Pronouncements                                                                                             | 14     |
|              |    |   Results of Operations for the Twelve MonthsEnded December 31, 2001, as Compared to the Twelve Months Ended December 31, 2000 | 15     |
|              |    |   Net Operating Losses                                                                                                         | 15     |
|              |    |   Liquidity and Capital Resources                                                                                              | 16     |
|              |    |   Inflation                                                                                                                    | 16     |
|              |    |   Risk Factors and CautionaryStatements                                                                                        | 16     |
| Item 7.      |    | Financial Statements                                                                                                                     | 16     |
| Item 8.      |    | Changes in and Disagreements with Accountants                                                                                            | 17     |
|              |    |                                                                                                                                          |        |
| **PART III** |    |                                                                                                                                          | **17** |
|              |    |                                                                                                                                          |        |
| Item 13.     |    | Exhibits, Lists, and Reports on Form 8-K                                                                                                 | 17     |
| Signatures   |    |                                                                                                                                          | 19     |

**NATIONAL HEALTH & SAFETYCORPORATION**

**PART IItem 1.             Description of Business**National Health & Safety Corporation (“NHLT”) has provided discount healthcare products and services to the generalpublic since 1993.  NHLT offers discount healthcare services through a membership program, which it markets to the generalpublic.  NHLT does not offer health insurance; rather, it offers a healthcare discount program called HealthVIP throughHealthVIP, LLC, a single-member owned limited liability company of NHLT.  Prior to mid-2001, NHLT offered another discounthealthcare program called POWERx.In July 1999, NHLT filed for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code.  In January 2001, NHLTimplemented its confirmed plan of reorganization and emerged from bankruptcy.  More information on the bankruptcy andreorganization is contained in Historical Developments - Bankruptcy Proceedings, page 6.**HealthVIP Healthcare Benefits Discount Program**In June 2001, NHLT introduced a new healthcare benefits discount program called HealthVIP.  The benefits program operates in asimilar fashion as NHLT’s original POWERx benefits program, but NHLT relies exclusively on HealthVIP’s relationshipwith New Benefits, Inc. of Dallas, Texas, to provide maintenance of various healthcare provider networks, customer enrollment andfulfillment of memberships, and customer services to each member during the member’s membership period.  NHLT intends todistribute the HealthVIP program using a variety of marketing and selling strategies.**Change of Management and Direction in 2001** Since implementing its plan of reorganization in January 2001, NHLT changed its management team, instituted cost cutting measures,and signed the agreement with New Benefits, Inc. enabling NHLT to provide a broader range of services.  NHLT decided tooutsource the further development and provision of benefits services so that it could refocus NHLT on marketing and distribution ofthe HealthVIP program.  NHLT also replaced its former brand, POWERx, which had been developed prior to its bankruptcy andreorganization.*Management - Agreement with First Advisors, Inc.*Gary J. Davis became NHLT’s President, CEO and Chairman of the Board in January 2001, after the plan of reorganization wasimplemented. Additionally, Mr. Davis is the President of the general partner of IPA Investors, LP, which purchased 15,000,000 ofNHLT’s common shares for $200,000 as part of the reorganization.  Mr. Davis also acquired shares of NHLT’s stockindividually as a result of the exchange offer by NHLT for shares of MedSmart Healthcare Network, Inc., a company acquired in thereorganization.  See, Historical Developments - Bankruptcy Proceedings, page 6.  Mr. Davis has chosen to provide servicesto and to be compensated by NHLT through First Advisors, Inc. (“First Advisors”), a personal consulting and privateinvestment company wholly owned by Mr. Davis.On May 1, 2001, NHLT entered into a Management Services Consulting Agreement with First Advisors, in which Mr. Davis providesongoing operational support for NHLT in regard to implementation of its new business plan, management of the day-to-day operationsof NHLT and HealthVIP, LLC, and each company’s strategic and professional relationships and new business development. Theagreement was negotiated between First Advisors and the Board of Directors of NHLT other than Mr. Davis.   The Board ofDirectors approved the agreement, but Mr. Davis, who is a director and Chairman of the Board of NHLT and also the President ofFirst Advisors, abstained from the vote.Founded in 1996, First Advisors is a privately held corporation, wholly owned by Mr. Davis.  It sponsors investmentpartnerships, which invest in seed stage and early stage business ventures.  First Advisors provides business consultationservices, in areas such as marketing, sales, technology and corporate strategy to First Advisors’ portfolio companies andother third party clients.  The consulting agreement originally had a one year term; it has been extended through April 30,2003.  Either party may give 30 days notice of its desire to cancel the agreement.   Under the original terms of the consulting agreement, from May 1, 2001 through October 31, 2001, First Advisors was compensated byNHLT issuing a total of 7,500,000 shares of common stock, paid in equal monthly installments of 1,250,000 shares.  Theagreement was amended and now stipulates that NHLT will pay First Advisors the greater of $60,000 per month, or an amount equal to20% of the monthly gross consolidated profits of NHLT.  For the purposes of the consulting agreement, "gross profits" aredefined as all revenue generated by the NHLT and its subsidiaries, or single member owned entities, on all business facilitated byFirst Advisors, less any payable commissions to outside brokers, third party distributors and New Benefits, Inc., or its successorsor assigns.  Mr. Davis personally provides services under the consulting agreement with NHLT and thus is being compensatedthrough First Advisors.  He has not received a salary for his role as President and CEO of NHLT since March 14, 2001. Upon termination of the consulting agreement, NHLT will continue to pay 20% of the monthly gross consolidated profits on allcontracts that were originated or facilitated by First Advisors during the term of the consultingagreement.*Back Office Administration - Agreement with New Benefits, In**c.*On May 7, 2001, NHLT retained the services of New Benefits, Inc. (“New Benefits”) to facilitate the back officeadministration of HealthVIP, LLC, which operates NHLT’s new healthcare benefits discount program.  NHLT entered into theagreement with New Benefits to reduce the costs of developing and maintaining the technology, systems, and personnel required torun and support the necessary back office administration. New Benefits provides essentially the same services as those that NHLTand MedSmart previously endeavored to develop.  However, the expense of maintaining network contracts, technology systems, andcustomer support personnel was a determining factor in NHLT’s decision to utilize New Benefits, in lieu of the network thatNHLT and MedSmart previously tried to develop internally.  Additionally, New Benefits has the capacity to process significantvolumes of new memberships that NHLT expects to generate through new marketing initiatives.NHLT’s relationship with New Benefits enables NHLT to sell and distribute a large volume of HealthVIP programs quickly andefficiently, enabling prompt fulfillment of its contracts with future customers.*About New Benefits, Inc.*Founded in 1989, New Benefits is a privately held company in Dallas Texas and an established leader in designing, manufacturing andpackaging healthcare related products and services on a national basis.  New Benefits has pioneered a membership fulfillmentprocess that can be customized to meet each company's needs.  All of the benefits programs are supported by innovativetechnology, which is fully automated.  For example, New Benefits can generate up to 4,000 membership cards per hour - anamount that significantly exceeds NHLT’s current needs.   New Benefits' subsidiaries include Coast-to-Coast Vision,UHS Chiropractic, and Mail Order Pharmacy and they currently provide the following benefits: Vision Care, Retail & Mail OrderPharmacy, Dental Care, Chiropractic Care, Travel Assistance, Counseling Services, Nurse Hotline, Physician Care, Hearing Care,Vitamins & Nutritional Supplements and Medifile (medical information storage and retrieval).  The chairman and CEO of NewBenefits, Joel Ray, has more than 20 years experience in the ancillary healthcare benefits industry.  Currently, New Benefitsservices a membership base of more than 9 million cardholders.Under the terms of the agreement, New Benefits will furnish the provider network and process enrollment of members for HealthVIP,LLC.  It will provide fulfillment kits containing information for new members and will provide customer service for membersrecruited to its benefit network by HealthVIP.  The services offered by New Benefits are being marketed by HealthVIP, LLC, under the HealthVIP brand and other private labelbrands selected by affinity group partners of HealthVIP.  NHLT plans to offer additional private label brands in the future,depending on future customer needs and desires.  New Benefits sells the same services under other private label brands aswell.  NHLT’s contract with New Benefits contains non-circumvention protection for any prospective or actual customerNHLT registers with New Benefits.  This protection allows NHLT to offer the New Benefits program under NHLT’s ownHealthVIP or other private label brands. NHLT believes that working with New Benefits will allow NHLT to concentrate its resources on marketing and business developmentefforts that NHLT anticipates will significantly increase its membership base and revenue.

**Marketing and Distribution***Agreement with DM Benefit Group*On June 28, 2001, NHLT signed a marketing agreement with DM Benefit Group, LLC (“DM Benefit Group”), of Austin, Texas,to launch a marketing program targeted at selected credit unions throughout the United States.  NHLT chose DM Benefit Groupbecause it believes that the principal of DM Benefit Group, John Flynn, can successfully direct a marketing effort to creditunions.  He has more than 22 years' previous management experience with various credit unions.   Mr. Flynn commenced hisefforts at marketing the HealthVIP program in the Fall of 2001.*Agreement with Thomas Marketing Group* (www.thomasmarketing.org)On September 19, 2001, HealthVIP signed an agreement with Thomas Marketing Group of Whitefish, Montana. Thomas Marketing Group is anationally respected consulting firm for group and association membership benefit programs and customer retention programs.  Their benefit programs are designed primarily to add significant value to affinity groups, in addition to creating additionaleconomic opportunities for these organizations.Some of Thomas Marketing Group’s clients include Visa U.S.A., BASF Corporation, Carlson Marketing Group, and North AmericanOutdoor Group. HealthVIP was chosen by Thomas Marketing Group as a strategic business partner after being compared to numerousother discount health-care benefit providers.  The HealthVIP program has been introduced by Thomas Marketing Group to severalof its client relationships, and negotiations were pending as of March 31, 2002, for introduction of the HealthVIP program tomembers of these organizations. *Agreement with Flexible Benefit Service Corp.*(www.flexiblebenefit.com)HealthVIP, LLC signed an agreement with Flexible Benefit Service Corp. (“FBSC”) on January 10, 2002.  FBSC, a DesPlaines, Illinois-based company, is dedicated to meeting the healthcare benefit needs of companies nationwide by providingcomprehensive services in healthcare delivery systems and related employee fringe benefit programs. Their programs pursue aphilosophy of providing employers and employees with benefit programs that offer choices to meet individual needs and lifestyles.FBSC is recognized for its expertise as a specialist in the plan design, communication, implementation and administration offlexible benefit plans.With more than 12 years of experience, FBSC holds general agency agreements with the leading insurance carriers in the country,including Aetna, Blue Cross Blue Shield of Illinois, Fortis Health, MetLife, Golden Rule and Pacific Life. HealthVIP’s healthcare benefits discount program will be marketed in conjunction with FBSC’s Medical Savings Accountinsurance plans, targeted to small business employers and self employed individuals.  Information about the program will beavailable on a Website designed and developed by HealthVIP.  The program is anticipated to be marketed through initiativesutilizing email, direct mail and telemarketing, beginning in the second quarter of 2002, subject to additional capital being raisedby NHLT to support the program.*Agreement with US Capital, Inc.*(www.uscfinancial.com)HealthVIP, LLC signed an agreement with US Capital, Inc. on January 17, 2002.  US Capital utilizes proprietary technology toproduce direct mail pieces that target and attract pre-screened consumers. Responding consumers arrive ready to purchase theadvertised product or service within the desired time frame. US Capital sends out more than 1,000,000 pieces of targeted mail eachmonth on behalf of clients in the auto, travel, retail, and many other industries.  Under the terms of the agreement, eachcompany will utilize the other’s services in further enhancing their respective business goals of offering services in thedirect marketing of HealthVIP’s healthcare benefits discount program.**Technology Systems Development during 2001*****Corporate & Product Websit******es***As a result of a shift in its business strategy and the launch of the HealthVIP brand and program during 2001, NHLT reassessed itsneeds for updated technology systems and Internet properties.  During 2001, the following new websites weredeveloped: *NHLT.c**o**m* (www.nhlt.com) Designed for existing and prospective shareholders, the NHLT.com website provides information to keep these audiences informedabout NHLT, its services, and its business initiatives. NHLT.com features detailed information about NHLT’s history, management team, services, and the HealthVIP healthcarebenefits discount program. Additionally, the website includes a press room, an investor information section containing SEC filings,stock charts, and a news release notification service.*HealthVIP.c**om* (www.healthvip.com) HealthVIP.com provides information about the HealthVIP program to existing and prospective members (cardholders), as well asexisting and prospective brokers or distributors.  The site features detailed benefit descriptions, provider look-upcapabilities, frequently asked questions, and downloadable brochures about the HealthVIP program.Additionally, the e-commerce portion of the site, currently under development, will allow individuals to purchase a HealthVIP card,or any other private-labeled card that NHLT offers, directly from the site.In addition to the public portion of the site described above, existing brokers or distributors have access to a password-protectedextranet site.  The extranet provides access to the same functionality as described above, in addition to providing a varietyof sales support tools.

**Historical Developments – BankruptcyProceedings**NHLT spent the period from 1993 through June 1999 trying to develop a healthcare benefits discount program, calledPOWERx.   POWERx was a predecessor of NHLT’s current HealthVIP program.  NHLT attempted to use its internalstaff and resources to develop and market POWERx.  This effort proved unsuccessful, and on July 1, 1999, NHLT voluntarilyfiled for reorganization under Chapter 11 of the United States Bankruptcy Code in the Untied States Bankruptcy Court of the EasternDistrict of Pennsylvania (file no. 99-18339).  In 1999, with approval of the Bankruptcy Court, NHLT sold POWERx toMedSmart for $150,000 cash, paid in five installments in 1999 and 2000, plus an insignificant amount of royalty payments.Prior to the sale of POWERx to MedSmart, POWERx had not been a marketing success.  Total membership never generated sufficientrevenues to financially support NHLT’s operations.  NHLT had marketed POWERx to corporations, unions, associations,chambers of commerce, insurance companies and other organizations.  Prior to the reorganization, NHLT did not succeed inattracting the necessary financial and personnel resources to capture enough market share for a critical mass of cardholders.After MedSmart acquired POWERx, MedSmart concentrated its efforts in 1999 and 2000 on redeveloping the POWERx business model. Prior to NHLT’s acquisition of MedSmart as part of the bankruptcy reorganization, MedSmart developed an Internet andrelational database technology system to market and manage POWERx, developed an Internet Website to assist in marketing, andestablished a new customer service facility in Dallas, Texas.  During 2000, while MedSmart redesigned the business plan, newmarketing efforts virtually ceased.  MedSmart received minimal revenue from servicing the small base of existing POWERxcustomers.MedSmart also expressed interest in formulating a plan of reorganization for NHLT to emerge from bankruptcy.  NHLT’sdiscussions with MedSmart resulted in a Fourth Amended Plan of Reorganization (the “Plan”) that the Bankruptcy Courtconfirmed in November 2000 and that NHLT implemented in January 2001.  As part of the Plan, NHLT purchased all of theoutstanding shares of MedSmart for 130,000,000 shares of its common stock.  Also as part of the Plan, five investors, who wereaffiliated with MedSmart, purchased 45,000,000 shares of NHLT’s common stock for $600,000 cash in January 2001.  NHLTused approximately $300,000 of this money to pay allowed administrative claims from the bankruptcy and approximately $300,000 forworking capital to commence the restructuring of its business strategy.  The former MedSmart shareholders now own a majorityof NHLT’s common stock.The reorganization resulted in a restructuring of NHLT’s balance sheet and eliminated approximately $4.223 million of debt,as of March 31, 2001.  The reorganization allowed NHLT to restart its sales and development efforts with a limited amount ofnew operating capital, but NHLT needs additional operating capital to fully implement its business plan, and does not yet knowwhether its reorganized company will ultimately succeed.Jimmy E. Nix, Sr., played a key role in creating MedSmart and in developing NHLT’s Plan.  Mr. Nix had controlled amajority of the shares of MedSmart.  He expected to provide much of the $600,000 cash investment in NHLT to implement the Planand had expected to become the chief executive of NHLT after implementation of the Plan.  After the Bankruptcy Court confirmedits Plan, but before it was implemented, Mr. Nix passed away on December 4, 2000. After his death, NHLT had to locate newmanagement and capital resources to implement the Plan.  Mr. Gary J. Davis, who became NHLT’s chief executive officerafter the reorganization, agreed to arrange for management and a portion of the  $600,000 in financing called for in thePlan.  The Nix family, including Mr. Nix, Sr.’s son, Jimmy E. Nix II, provided additional financing, and Mr. Nix, II,joined MedSmart’s management and NHLT’s Board of Directors.  In connection with the reorganization, NHLT expandedthe Board of Directors to five members and the existing directors appointed three new directors.  All of the new directorswere affiliated with the investors who purchased stock for cash in implementing the Plan.**Healthcare Discount Programs – Industry Overvi****ew**Although the discount healthcare industry has been around for nearly 15 years, only recently have companies in the industry becomepart of the public’s consciousness through increased awareness of healthcare reform issues. The industry itself is highlyfragmented with hundreds, if not thousands, of companies offering discounts on a wide array of healthcare services andproducts.  However, only a handful of these companies offer discount programs that include multiple benefits in one packageand have made a push for significant penetration in the market of underinsured and uninsured consumers, which is NHLT’starget market.Most discount programs offer savings to the member of 30 to 50 percent off retail prices of the product or service beingoffered.  Additionally, the discount plans typically offer benefits that many traditional health insurance policies do notcover, such as laser vision correction, chiropractic care and cosmetic surgery.  Because discount programs are not insurance,there are no waiting periods, exclusions for pre-existing conditions, deductibles, paperwork to fill out, or other typicalrestrictions associated with a health insurance policy.The industry has grown as employer groups and consumers have sought to decrease their out-of-pocket expenditures onhealthcare.  In recent years, insurance benefit deductible costs increased dramatically.  A rising number of seniorcitizens either are not covered by insurance or cannot afford some healthcare or prescription drugs.  NHLT believes thatdiscount healthcare memberships constitute an affordable alternative for these consumers.Additionally, as employers examine their bottom line and the health benefit packages they offer their employees, they seek ways todecrease costs, yet maintain value-added benefits.  Healthcare discount programs can actually do both because they arevaluable to workers and are much less expensive than the cost of full coverage insurance.*Market Overvi**ew*The HealthVIP healthcare benefits discount program is designed to meet the needs of three general groups: employers wishing tocontrol or lower healthcare expenditures, while maintaining valuable benefits for their employees; uninsured individuals andfamilies who can afford a HealthVIP membership but cannot afford health insurance, and underinsured individuals and families, whowant to cover gaps in insurance costs by using HealthVIP benefits.*Employer Grou**ps*According to the Employer Health Benefits 2000 Annual Survey, conducted by the Kaiser Family Foundation and Health Research andEducational Trust (the “EHB Survey”), employer-based health insurance in the U.S. covers approximately 62% of allAmerican workers, with only 57% of small business (3-199 employees) employees having coverage. During the past decade, the natureof job-based coverage has changed extensively, largely as a result of decisions made by the nation’s employers and theirworkforce. For example, the percentage of American workers enrolled in conventional (also known as indemnity or fee-for-service)insurance plans declined dramatically from 73% in 1988 to 8% in 2000. At the same time, premium inflation declined every year from1989 to 1996, though it has been climbing since then.Despite lower healthcare inflation and, what was until 2001, the best economy since the 1960s, the percentage of Americans withjob-based insurance has barely risen since 1993.  Some analysts attribute this long-term decline to changing conditions in thelabor market, where the information revolution and the global economy have reduced the demand for less-skilled workers. Thisreduced demand has resulted in lower real wages for less-skilled workers and a reduction in the percentage of less-skilled workerswho enjoy health benefits from their employers.Key findings of the EHB Survey are as follows:            Premiums rise by an average of 8.3%            Health insurance premiums increased 8.3% between spring 1999 andspring 2000, 3.5            percentage points higher than the 1998–1999 increase.Premium increases accelerated for            all types of plans and in all regions. This is the highestincrease in premiums since 1993             and is more than five percentage points higher than the overallrate of inflation. Monthly             premiums average $202 for single coverage and $529 for familycoverage.            Premiums increased 9.6% for fully insured plans and 7.1% forself-insured plans,             suggesting that premiums are rising faster than underlyinghealthcare costs and that some             of the acceleration in the cost of insurance is therefore “catch-up” pricing, characteristic             of the health insurance underwriting cycle. The 7.1% rise inpremium-equivalents for             self-insured plans indicates strong growth in medical claimsexpenses, a measure of             underlying healthcare costs, and may indicate higher long-runincreases in healthcare             costs.           Employers take steps to shift the cost of healthinsurance            Employers, not employees, are also bearing the primary burden ofincreases in the cost of             coverage. Employees contribute less for single coverage todaythan they did in 1996,             both in absolute dollars ($37 versus $28) and as a percentageof monthly premiums (21%             to 14%). Over that same time period, worker contributions forfamily coverage have             remained statistically unchanged, and now average 27% of thepremium, or $138 per             month.            Cost is by far the most important factor cited by all smallemployers for not offering             health insurance            With premium increases on the rise, the predominance of cost asa factor in all small             firms’ decisions about whether to offer health insurancecould mean that the year 2000             increase in employer offering will be short-lived. In fact, onein five small firms that does             not now offer coverage previously did so.*Uninsured Individuals & Famili**es*According to a December 1999 study by the Health Insurance Association of America, approximately 44 million Americans, 18 percentof non-elderly, were without any health insurance coverage in 1998.The study also found that despite increases in the number of Americans covered through employment, the percentage of thosewho lack health insurance coverage continues to rise.  Lack of insurance is closely related to income, but ironically a vastnumber of the uninsured are employed, the study concluded.The following are several possible explanations for large numbers of uninsured Americans:           -            As a result of the 1996 welfare-reform law, more than 6 millionpeople have                       shifted from welfare to low-wage jobs with employers that eitheroffer no                       coverage whatsoever or charge too much for it.           -            Rising costs for coverage have outpaced workers' wages.           -            An increasing trend towards "non-standard" jobs such astemporary and part-time                       work that seldom offer healthcare coverage.           -            A decline in recent years in the percentage covered by theMedicaid program.NHLT believes that lack of health insurance coverage will continue to be a growing problem as NHLT moves farther into the newcentury, especially if economic growth continues to falter and healthcarecosts rise more rapidly thanexpected.  Under this scenario, as many as 60 million people, or almost one out of four non-elderly Americans, could lackhealth insurance by 2008, the study found.  If health insurance became more nearly universal, forexample if the U.S. adopted a comprehensive government healthcare system, demand for our services could drop.*Underinsured Individuals & Famili**es*The growing number of underinsured Americans has also become a real problem, according to Plunkett Research, Ltd., a leadingprovider of research and market analysis to corporate, library, academic and government markets.  In many cases, increasedlimitations on care covered by payers are resulting in coverage denial and cost-shifting to patients in the form of highco-payments.  Additionally, the practice of community rating of individual insurance premiums is becoming less standard, aspremiums are now sometimes adjusted for age and prior medical conditions, resulting in reduced coverage for the middle-aged.Rising costs may also force more employers to drop or reduce coverage, rather than expand it.  This is especially true forsmaller businesses, which have fewer financial resources to provide the coverage.  Another factor for the rising number ofunderinsured is the labor unions’ reduced bargaining power, on behalf of employees, to demand increased healthcarecoverage.The number of Americans that are underinsured is not easily determined.  To be sure, no one individual is insured to thefullest extent; therefore, everyone in the country is potentially underinsured.  NHLT however, is focused on targetingemployers or individuals in the underinsured market that currently have or are covered by a group health insurance policy, but mayhave gaps in the coverage such as a prescription drug plan, dental care, vision care, hearing care and chiropractic care.**Compet****ition**NHLT believes that the principal competitive factors in the healthcare benefits discount program industry include the ability toidentify, develop and offer innovative products and services, the quality and breadth of product and service programs offered,price, marketing expertise and the level and quality of customer service. In the managed healthcare industry today, numerous firmsoffer healthcare discount programs and benefits which provide services similar to, or which directly compete, with NHLT’sservices.  These include health maintenance organizations, preferred provider organizations, other discount medical andconsumer healthcare product and service discounters, large retailers, insurance companies and financial service institutions.*Competitive Advantag**es*With its reorganization in 2001, including a new management team, redefined corporate focus and strategy, an improved marketing anddistribution model and with the anticipation of obtaining adequate capitalization, NHLT believes it can benefit from the followingcompetitive advantages:           -            Freedom to Customize Plans.  As opposed to many ofNHLT’s competitors,                        HealthVIP distributors have the freedom to build customizedHealthVIP programs                        to address the needs of their various clients and targetmarkets.           -            Ability to Private Label.  In addition to theability to customize a HealthVIP                        plan to meet the needs of their target audiences, distributorsor clients also have                        the ability to private-label the HealthVIP card and fulfillmentkit materials to their                        specific organization.  This is an important aspect formany organizations, as it                        allows them to use HealthVIP to strengthen their relationshipwith their                        customers.           -            Inclusion of Proprietary or AdditionalPrograms.****  The HealthVIP program has                        a unique feature associated with its fulfillment process thatallows employers,                        associations, groups, or any other organization to includeinformation on up to                        three additional proprietary programs in the fulfillment kitsent to new members.                         These programs can be anything that the organization wishes topromote in                        addition to or supplementary to the HealthVIP benefits,including non-HealthVIP                        programs, newsletters, solicitations, etc.           -            Better Member Service.  HealthVIP will endeavor touse its outsourced member                        service department as a distinct competitive advantage. The state-of-the-art call                        center can assist members with questions, comments and providerlocation                        referrals. Additionally, 24-hour provider referrals areavailable via a toll-free                        automated system and on the Internet atwww.locateproviders.com.  HealthVIP                        can also set up private, toll-free member support phone numbersthat can be                        answered using any organization's name. The call center iscapable of managing                        numerous customized and general toll-free numbers answered bytrained                        representatives. In addition to multiple T-1 lines capable ofaccommodating                        concurrent volumes of incoming calls, the call center utilizes aself-monitoring                        call management system with automatic call distribution. Thecall center                        maintains a full-time, trained staff of customer servicerepresentatives available to                        handle virtually any member request Monday through Friday from8:00 a.m. to                        6:00 p.m. CST, and a 24-hour automated system for referrals toVision and                        Chiropractic providers.  This level of member service andcustomization is a step                        above what the majority of the competition provides and will bean important                        issue and selling point for the HealthVIP’s distributorsto use when marketing                        HealthVIP to their clients.**Government Regulati****on**NHLT’s HealthVIP healthcare benefits discount program requires it to comply with certain state regulations, changes in whichcould materially increase its operating costs.NHLT currently monitors its security and quality controls to ensure the privacy of information it collects from its members. Additionally, NHLT relies on New Benefits to review its marketing materials and to ensure that all marketing practices meet orexceed industry standards and all state and federal regulations. NHLT collects and maintains member data that is required toadminister its business activities, such as a member’s name, social security number, address, email address and billinginformation. Information used for marketing and modeling purposes, such as certain demographic, neighborhood and lifestyle isprocured from private company sources that specialize in aggregating such information for marketing purposes.  Additionally,information about members of affinity groups that distribute NHLT’s programs are procured from those groups, whose membershave given permission to allow their information to be made available to companies such as NHLT.**Employe****es**On March 31, 2002, NHLT had no full-time employees.  Day-to-day operations of NHLT and HealthVIP, LLC are carried out by FirstAdvisors pursuant to the Management Services Consulting Agreement between NHLT and First Advisors.  Company policy is approvedand governed by its Board of Directors and implemented by NHLT’s officers and First Advisors. **Item 2.            Description of Property**Upon implementation of the Plan, NHLT’s principal executive offices were relocated to 3811 Bee Cave Road, Suite 210, Austin,Texas 78746 (telephone number 512-328-0433).  NHLT subleased office space during 2001 from First Advisors as part of aconsulting agreement.  NHLT has amended its agreement with First Advisors and effective November 1, 2001, First Advisors is toprovide office space as part of its consulting services.  During the second quarter of 2001, MedSmart closed its offices inDallas, Texas and Philadelphia, Pennsylvania and moved all of its operations to Austin, Texas.  NHLT has relinquished theDallas and Philadelphia offices back to the respective landlords.  NHLT has accrued a liability for the rent remaining dueunder the terms of the lease for the Dallas office of $23,418, and has spoken with the leasing agent for the property about beingreleased from the lease obligation.  NHLT has accrued a liability for the remaining rent due under the lease terms for thePhiladelphia office of $69,898, and has corresponded with an agent for the landlord about being released from the leaseobligation.**Item 3.            Legal Proceedings**MedSmart has had a confession of judgment entered against it for $84,898 relating to its office lease in Philadelphia,Pennsylvania.  MedSmart has since paid $15,000 on the judgment and secured a sub-lessor for the property.On October 26, 2001, NHLT settled an outstanding lawsuit with the Stein Group.  In return for payment of $100,000 cash, NHLTissued a total of 13,093,964 shares of restricted common stock to the Stein Group and agreed to appoint a representative of theStein Group, Dennis Hawk, to its board of directors.  Settlement of this lawsuit will result in the elimination of $142,500 ofaccrued liabilities presently recorded on NHLT’s books.  On March 1, 2002, the Untied States Bankruptcy Court of theEastern District of Pennsylvania approved the settlement as of October 26, 2001.**Item 4.            Submission of Matters to a Vote of SecurityHolders**There were no matters submitted to a vote by NHLT’s Security Holders during the year ended December 31, 2001.**PART II****Item 5. Market Price of NHLT’s Common Stock and Related Stockholder Matters**NHLT’s Common Stock is traded in the over-the-counter market and quotations are published on the OTC Bulletin Board under thesymbol “NHLT,” and in the National Quotation Bureau, Inc. “pink sheets” under “National Health &Safety Corporation.”  Quotations on NHLT’s Common Stock set forth below do not constitute a reliable indication ofthe price that a holder of the Common Stock could expect to receive upon a sale of any particular quantity thereof.No trading market exists or is expected to develop for NHLT’s issued and outstanding Preferred Shares.The following table sets forth the range of quarterly high and low bid prices of the Common Stock for the last two calendar yearsas reported by the OTC Bulletin Board.  Prices reported represent prices between dealers, do not include retail markups,markdowns or commissions and do not necessarily represent actual transactions.
|      |    | 1st Quarter |    | 2nd Quarter |    | 3rd Quarter |    | 4th Quarter |
|------|--------------|-------------|--------------|-------------|--------------|-------------|--------------|-------------|
|      |    | High        |    | Low         |    | High        |    | Low         |    | High |    | Low |    | High |    | Low |
|      |    |             |    |             |    |             |    |             |    |  |    |  |    |  |    |  |
| 2000 |    | .32         |    | .05         |    | .15         |    | .07         |    | .26 |    | .11 |    | .17 |    | .06 |
| 2001 |    | .14         |    | .05         |    | .06         |    | .01         |    | .03 |    | .01 |    | .02 |    | .01 |

As of December 31, 2001, NHLT had issued and outstanding 263,540,140 shares of Common Stock and there were approximately 467shareholders of record, which figure does not take into account those shareholders whose certificates are held in the name ofbroker-dealers.Pursuant to and effective upon implementation of the Plan on January 22, 2001, several changes in NHLT's corporate structureoccurred.  All previously outstanding shares of stock, warrants and other interests in NHLT (other than the Common Stock) werecanceled, and NHLT authorized and issued the following new classes of securities:-           NHLT authorized the issuance of up to 500,000,000 common shares, parvalue $.001 and 50,000,000 shares of preferred stock, which may consist of one or more series.  Cumulative voting of anyshares of stock, whether common or preferred, is prohibited.-           NHLT authorized the issuance of up to 4,000,000 shares of Series APreferred Stock, par value $.001 per share, of which 1,923,853 shares have been issued.  Each Series A share has a $1.00liquidation preference and preference over Series B Preferred Stock, Common Stock and all other series of stock ranking junior toSeries A.  Each share of Series A is convertible, at the option of the holder, into 5 shares of Common Stock at such times andin such amounts as stated in the Certificate of Designation.  The holders of Series A stock are entitled to vote together withthe holders of Series B and Common Stock and are entitled to one vote for each share of Common Stock which would be held by them ifall of their shares of Series A were converted into shares of Common Stock.-           NHLT authorized and issued 600,000 shares of Series B PreferredStock, par value $.001 per share.  The Series B shares were issued in exchange for 14,363 shares of old NHLT Preferred Stockwhich were canceled upon Plan implementation.  Each Series B share has a $1.00 liquidation preference that is inferior toSeries A but in preference to Common Stock and all other series of stock ranking junior to Series B.  Each Series B share isconvertible at the option of the holder into five shares of Common Stock at such times and in such amounts as stated in theCertificate of Designation.  The holders of Series B stock are entitled to vote together with the holders of Series A andCommon Stock and are entitled to one vote for each share of Common Stock which would be held by them if all of their shares ofSeries B were converted into shares of Common Stock.-           NHLT authorized Class A and Class B warrants to be issued to eachholder of the Series A and Series B Preferred Stock.  There are 4,000,000 Class A warrants authorized; 1,923,853 Class Awarrants issued and outstanding, that allow the holder to purchase, for the exercise price of $1.00, expiring two years fromJanuary 22, 2001, one share of Common Stock plus one Class B warrant.  There are 4,000,000 Class B warrants authorized;entitling the holder to purchase, for an exercise price of $1.50, expiring three years from January 22, 2001, one share of CommonStock.  Presently, there are no Class B warrants outstanding.**Dividend Policy**NHLT has not declared or paid cash dividends or made distributions in the past, and NHLT does not anticipate that it will pay cashdividends or make distributions in the foreseeable future. NHLT currently intends to retain and reinvest future earnings to financeits operations.  Holders of the Preferred Shares are entitled to receive their redemption payments prior to NHLT paying anydividends on its other capital stock.**Item 6.            Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in thisForm 10-KSB.When the Plan was implemented in January 2001, NHLT received a cash infusion of $600,000 for payment of administrative claimsassociated with the Chapter 11 proceeding and for use as operating capital.  NHLT has since received an additional $107,640 incash.  These amounts have proved inadequate to fund NHLT’s operations.  Continued operation of NHLT will requireadditional debt or equity funding to enable it to properly deploy its HealthVIP product.  NHLT’s auditor’s reportcontains a “going concern” qualification. **Recent Accounting Pronouncements**In July 2001, the FASB issued SFAS 141, Business Combinations, and SFAS 142 Goodwill and Other Intangible Assets.  Thesepronouncements provide that all business combinations initiated after June 30, 2001, be accounted for using the purchase method andthat goodwill be reviewed for impairment rather than amortized, on an annual basis, beginning on January 1, 2002.  NHLT doesnot believe that the adoption of these pronouncements will have a material effect on its financial statements.  Any businesscombination transactions in the future would be accounted for under this guidance.

**Results of Operations for the Twelve Months EndedDecember 31, 2001, as Compared to the Twelve Months Ended December 31, 2000**During 2000 NHLT’s operations virtually ceased, as it was in chapter 11 proceedings and had sold POWERx to MedSmart (who wasnot affiliated with NHLT at the time).  NHLT had negligible revenues from sales and royalty, and also had negligible expensesother than general and administrative expense associated with the bankruptcy proceedings.  In early 2001, NHLT implemented itsPlan of Reorganization, acquired MedSmart, and reinstituted marketing efforts.  In mid 2001, NHLT changed its business plan tooutsource its membership services through New Benefits and to seek third party marketers to sell its membership cards.  As aresult, NHLT’s expenses dramatically increased in 2001 over 2000 in every category (except general and administrativeexpenses) when it restarted business operations.Total revenue of $26,536 for the year ended December 31, 2001 (“2001”) represents a 3,476% increase from total revenueof $742 for year ended December 31, 2000 (“2000”).  This increase is primarily attributed to the increase in salesin 2001 as a result of the consolidation with MedSmart and its sale of POWERx cards.  Cost of sales (as a percentage of totalrevenue) decreased from 25% for 2000 to 0% in 2001.  This decrease in 2001 occurred because NHLT had no sales of medicalsupplies in 2001.Operating expenses for 2001 increased 285% when compared with the same period for 2000.  This increase was primarily caused byNHLT’s consolidation with MedSmart in 2001.  NHLT’s primary expenses in 2000 were consulting fees and the salaryof its Chief Financial Officer.  In addition to its own salaries and consulting fees, MedSmart also had rent, depreciation,amortization, and impairment of intangible assets to record.Net other expense in 2001 was $19,048 from interest expense and the write-off of a receivable.  In 2000, NHLT had net otherincome of $9,589 primarily from financial services provided to an outside customer. **Net Operating Losses**NHLT has accumulated approximately $11,600,000 of net operating loss carry forwards as of December 31, 2001, which may be offsetagainst taxable income and income taxes in future years.  The use of these losses to reduce future income taxes will depend onthe generation of sufficient taxable income prior to the expiration of the net operating loss carry forwards.  Thecarry-forwards expire in the year 2018.  In the event of certain changes in control of NHLT, there will be an annuallimitation on the amount of net operating loss carry forwards which can be used.  No tax benefit has been reported in thefinancial statements for the year ended December 31, 2001, because NHLT believes the carry forward may expire unused. Accordingly, the potential tax benefits of the loss carry forward is offset by a valuation allowance of the same amount.

**Liquidity and Capital Resources**Historically, NHLT’s working capital needs have been satisfied primarily through its financing activities including privateloans and raising capital through the sale of securities.  Working capital at December 31, 2001, was a negative $753,900compared to a negative $4,896,888 at December 31, 2000.  Net cash used in operating activities was $704,177 in 2001, comparedto $156,220 in 2000.  This increase in net cash used in 2001, was due primarily to the increase in net loss.  NHLT alsorealized 707,640 from financing activities in 2001 compared to $154,550 in 2000.  This increase was primarily due to proceedsfrom the issuance of common stock in 2001.On April 9, 2002, NHLT issued 381,719 shares of Series A Preferred Stock as settlement of a general unsecured claim that theBankruptcy Court approved in 2001.  The liability eliminated with the settlement of this claim represented 49% of NHLT’stotal liabilities as of December 31, 2001.NHLT’s ability to meet its working capital needs and continuation as a going concern during fiscal 2002 will depend primarilyon its ability to obtain additional future financing and successful implementation of HealthVIP’s marketing, distribution andsale of HealthVIP cards and related products.As of December 31, 2001, NHLT had total assets of $1,162,178 and total stockholders’ equity of $385,577, compared to December31, 2000, at which time NHLT had total assets of $32,301 and total stockholders’ deficiency of $4,902,676.**Inflation**In the opinion of management, inflation has not had a material effect on the operations of NHLT.**Risk Factors and Cautionary Statements**Forward-looking statements in this report are made pursuant to the “safe harbor” provisions of the Private SecuritiesLitigation Reform Act of 1995.  NHLT wishes to advise readers that actual results may differ substantially from suchforward-looking statements.  Forward-looking statements involve risks and uncertainties that could cause actual results todiffer materially from those expressed in or implied by the statements, including, but not limited to, the following: the abilityof NHLT to continue as a viable concern post implementation of the Plan, the ability of NHLT to obtain financing in order toimplement its business plan and other risks detailed in NHLT’s periodic report filings with the Securities and ExchangeCommission.**Item 7.            Financial Statements**See, pages F-1, et seq., included herein.

**Item8.            Changes in and Disagreements with Accountants**Effective February 14, 2001, NHLT’s board of directors dismissed HJ & Associates, LLC (Formerly, Jones, Jensen, &Company) of Salt Lake City, Utah, as its independent public accountants.  HJ & Associates audited and reported onNHLT’s financial condition for the fiscal years ended December 31, 1995 through 1999.   Their reports for eachfiscal year contained a qualification regarding NHLT’s ability to continue as a going concern, in light of its history ofrecurring losses from operations.  There were no disagreements between NHLT and HJ & Associates on any matters ofaccounting principles or practices, financial statement disclosure or auditing scope and procedures which, if not resolved to thesatisfaction of HJ & Associates, would have caused HJ & Associates to make reference to the matter in their reports.Also effective February 14, 2001, the Board of Directors engaged Sprouse & Anderson, L.L.P. (formerly known as Sprouse &Winn, L.L.P.) of Austin, Texas as NHLT’s principal accountant.**Part III**The information called for by Part III of Form 10-KSB (consisting of Item 9 - Directors and Executive Officers of theRegistrant, Item 10 - Executive Compensation, Item 11 - Security Ownership of Certain Beneficial Owners and Management and Item 12- Certain Relationships and Related Transactions), to the extent not set forth herein under Item 1 - Business, is incorporated byreference from NHLT’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120days after the end of the fiscal year to which this Report relates.**Item 13.            Exhibits, Lists, and Reports on Form 8-K****(a)            Certain of the Exhibits set forth in the following indexare incorporated by reference.**
| 3.1(1)    | *   * | Amended and Restated Articles of Incorporation, filed withthe Utah Department of Commerce Division of Corporations and Commercial Code on January 22, 2001.                                                                                                         |
|-----------|----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           | *   * |                                                                                                                                                                                                                                                                     |
| 3.2(1)    | *   * | Bylaw Amendment, adopted on January 22, 2001.                                                                                                                                                                                                                       |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 4.1(1)    | *   * | Certificate of Designation for Series A Preferred Stock,filed with the Utah Department of Commerce Division of Corporations and Commercial Code on January 22, 2001.                                                                                                |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 4.2(1)    | *   * | Certificate of Designation for Series B Preferred Stock,filed with the Utah Department of Commerce Division of Corporations and Commercial Code on January 22, 2001.                                                                                                |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 4.3(1)    | *   * | Warrant Agreement, filed with the Utah Department ofCommerce Division of Corporations and Commercial Code on January 22, 2001.                                                                                                                                      |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 4.4(1)    | *   * | Class A Warrant Certificate, dated January 22,2001.                                                                                                                                                                                                                 |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 4.5(1)    | *   * | Class B Warrant Certificate, dated January 22,2001.                                                                                                                                                                                                                 |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 10.1(3)   | *   * | Management Services Agreement between National Health &Safety Corporation and First Advisors, Inc.                                                                                                                                                              |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 10.2(2,4) | *   * | Marketing Agreement between National Health & SafetyCorporation and New Benefits, Inc.  A Confidential Treatment Request has been submitted for parts of this contract and therefore sections have been redacted to maintain the confidentiality of them.  |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 10.3(2,4) | *   * | Commission Agreement between National Health & SafetyCorporation and New Benefits, Inc.  A Confidential Treatment Request has been submitted for parts of this contract and therefore sections have been redacted to maintain the confidentiality of them. |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 10.4(3)   | *   * | Renewal and Extension of Management Services ConsultingAgreement with First Advisors, Inc.                                                                                                                                                                          |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 22.1(3)   | *   * | Subsidiaries of the Registrant- MedSmart Healthcare Network,Inc. and HealthVIP, LLC.                                                                                                                                                                                |
|           | *   * |                                                                                                                                                                                                                                                                     |
| 24.1(3)   | *   * | Power of Attorney (see signature page)                                                                                                                                                                                                                              |

----------(1) Previously filed as an exhibit to NHLT’s report on Form 8-K dated January 22, 2001 and incorporated by referenceherein.(2) A Confidential Treatment Request has been submitted for parts of these contracts and therefore certain portions of the subjectexhibits have been omitted based upon that request for confidential treatment.  The non-public information has been filed withthe Commission.(3) Filed Herewith.(4) To be filed by amendment.**(b)            Reports on Form 8-K**None.

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Austin, State of Texas, on this12th day of April, 2002.**National Health & Safety Corporati****o****n**
| By: | *   * | *GaryDavis                                                * |
|-----|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     | *   * | Gary Davis, President and Chief Executive Officer                                                                                                                                                                                                                                                           |
|     | *   * |                                                                                                                                                                                                                                                                                                             |
| By: | *   * | *Jimmy E. NixII                                          *                                |
|     | *   * | Jimmy E. Nix II, Chief Accounting Officer                                                                                                                                                                                                                                                                   |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on April 12, 2002, by thefollowing persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | *   * | *GaryDavis                                               * |
|-----|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     | *   * | Gary Davis, Director and Chairman of the Board ofDirectors                                                                                                                                                                                                                                            |
|     | *   * |                                                                                                                                                                                                                                                                                                       |
|     | *   * |                                                                                                                                                                                                                                                                                                       |
| By: | *   * | *Eugene M.Rothchild                                *                                                                                  |
|     | *   * | Eugene M. Rothchild, Director                                                                                                                                                                                                                                                                         |
|     | *   * |                                                                                                                                                                                                                                                                                                       |
|     | *   * |                                                                                                                                                                                                                                                                                                       |
| By: | *   * | *James R.Kennard                                    *                                                             |
|     | *   * | James R. Kennard, Director                                                                                                                                                                                                                                                                            |
|     | *   * |                                                                                                                                                                                                                                                                                                       |
|     | *   * |                                                                                                                                                                                                                                                                                                       |
| By: | *   * | *Jimmy E. NixII                                        *                                      |
|     | *   * | Jimmy E. Nix II, Director                                                                                                                                                                                                                                                                             |
|     | *   * |                                                                                                                                                                                                                                                                                                       |
|     | *   * |                                                                                                                                                                                                                                                                                                       |
| By: | *   * | *Dennis J.Hawk                                        *                                       |
|     | *   * | Dennis J. Hawk, Director                                                                                                                                                                                                                                                                              |

  

**NATIONAL HEALTH & SAFETY CORPORATIONAND SUBSIDIARIES(A Development Stage Company)**TABLE OF CONTENTS

|                                                                  | PAGE   |
|------------------------------------------------------------------|------------------|
| INDEPENDENT AUDITORS’ REPORT                               | F - 1            |
| CONSOLIDATED FINANCIAL STATEMENTS                                |                  |
|   Consolidated Balance Sheet                           | F - 2            |
|   Consolidated Statements of Operations                | F - 3            |
|   Consolidated Statements of Stockholders’Equity | F - 4            |
|   Consolidated Statements of Cash Flows                | F - 6            |
|   Notes to Consolidated FinancialStatements            | F - 7            |

****

****

Board of Directors  National Health & Safety Corporation and Subsidiaries  (A Development Stage Company)INDEPENDENT AUDITORS' REPORTWe have audited the accompanying consolidated balance sheet of National Health & Safety Corporation and Subsidiaries (adevelopment stage company) (Company) as of December 31, 2001 and the related consolidated statements of operations, stockholders'equity and cash flows for the years ended December 31, 2001 and 2000 and from the inception of the development stage on January 1,1999 through December 31, 2001.  These consolidated financial statements are the responsibility of the Company’smanagement.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.We conducted our audit in accordance with U.S. generally accepted auditing standards.  Those standards require that we planand perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of materialmisstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in theconsolidated financial statements.  An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financialposition of National Health & Safety Corporation and Subsidiaries (a development stage company) as of December 31, 2001 and theresults of its operations and its cash flows for the years ended December 31, 2001 and 2000 and from the inception of thedevelopment stage on January 1, 1999 through December 31, 2001, in conformity with U.S. generally accepted accountingprinciples.The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.As discussed in Note 2, the Company has a working capital deficiency of $753,900, an accumulated deficit of $5,107,393 and a netloss for the year ended December 31, 2001 of $1,068,247.  These matters raise substantial doubt about the Company's ability tocontinue as a going concern. Management's plans in regard to these matters are partially described in Note 2.  Theaccompanying consolidated financial statements do not include any adjustment relating to the recoverability and classification ofasset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continueas a going concern. SPROUSE & ANDERSONAustin, TexasMarch 19, 2002

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**CONSOLIDATED Balance Sheet**DECEMBER 31, 2001ASSETS
| CURRENT ASSETS                                                                             |          |                                                              |
|--------------------------------------------------------------------------------------------|--------------------------------------------------|--------------------------------------------------------------|
|    Cash                                                                     |          | $      4,938                   |
|    Accounts receivable, net of allowance fordoubtful accounts of  $-0- |          |     182                                       |
|          TotalCurrent Assets                  |          |           5,120 |
|                                                                                            |          |                                                              |
| FIXED ASSETS, net                                                                          |          |           2,499 |
|                                                                                            |          |                                                              |
| OTHER ASSETS                                                                               |          |                                                              |
|    Goodwill, net                                                            |          | 1,151,966                                                    |
|    Deposits                                                                 |          |           2,593 |
|                                                                                            |          |                                                              |
| TOTAL ASSETS                                                                               |          | $ 1,162,178                                                  |

LIABILITIES AND STOCKHOLDERS’ EQUITY
| CURRENT LIABILITIES                                                                                                       |          |                                                              |
|---------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|--------------------------------------------------------------|
|    Accounts payable and accruedexpenses                                                                    |          | $    217,769                                  |
|    Accrued claims                                                                                          |          | 386,201                                                      |
|    Accounts payable-affiliate                                                                              |          | 116,631                                                      |
|    Notes payable-related party                                                                             |          | 36,000                                                       |
|    Long-term debt, current portion                                                                         |          |           2,419 |
|          TotalCurrent Liabilities                                            |          |      759,020                        |
|                                                                                                                           |          |                                                              |
| LONG-TERM-DEBT LIABILITIES                                                                                                |          |                                                              |
|    Long-term debt, net of currentportion                                                                        |          |        17,581             |
|          TotalLiabilities                                                    |          |      776,601                        |
|                                                                                                                           |          |                                                              |
| COMMITMENTS AND CONTINGENCIES                                                                                             |          |                                                              |
|                                                                                                                           |          |                                                              |
| STOCKHOLDERS’ EQUITY                                                                                                |          |                                                              |
|    Preferred stock; 50,000,000 sharesauthorized:                                                           |          |                                                              |
|    Preferred Stock Series A, $.001 par value;4,000,000 shares designated; 1,504,622 issued and outstanding |          | 1,505                                                        |
|    Preferred Stock Series B, $.001 par value;600,000 shares designated, issued and outstanding             |          | 600                                                          |
|    Common Stock; $0.001 par value,500,000,000 shares authorized; 263,540,140 shares issued and outstanding |          | 263,540                                                      |
|    Additional paid-in capital                                                                              |          | 5,227,325                                                    |
|    Accumulated deficit                                                                                     |          | (1,571,117)                                                  |
|    Deficit accumulated during the developmentstage                                                         |          |   (3,536,276)                                           |
|          TotalStockholders’ Equity                                     |          |      385,577                        |
|                                                                                                                           |          |                                                              |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                          |          | $ 1,162,178                                                  |

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**CONSOLIDATED Statements of Operations**

|                                                                                   |     | For the Years Ended December 31,       2001                    2000      |                    | From the Inception of the Development Stage on January 1, 1999 Through December 31,           2001          |
|-----------------------------------------------------------------------------------|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| REVENUE                                                                           |     |                                                                                                                                                                                                                                          |     |                                                                                                                                                                                                                 |     |  |
|    Sales - operations                                              |     | $      26,536                                                                                                                                                                                              |     | $          228                                                                                                                                                |     | $      107,104 |
|    Royalty revenue                                                 |     |               -0-                                                                                                                                                       |     |             514                                                                                                                                     |     |               514 |
|          TotalRevenue                |     | 26,536                                                                                                                                                                                                                                   |     | 742                                                                                                                                                                                                             |     | 107,618 |
| COST OF SALES                                                                     |     |               -0-                                                                                                                                                       |     |             185                                                                                                                                     |     |          41,230 |
| GROSS PROFIT                                                                      |     |        26,536                                                                                                                                                                                         |     |            557                                                                                                                                           |     |          66,388 |
| EXPENSES                                                                          |     |                                                                                                                                                                                                                                          |     |                                                                                                                                                                                                                 |     |  |
|    Salaries and related costs                                      |     | 331,264                                                                                                                                                                                                                                  |     | -0-                                                                                                                                                                                                             |     | 331,264 |
|    Professional services                                           |     | 94,645                                                                                                                                                                                                                                   |     | -0-                                                                                                                                                                                                             |     | 94,645 |
|    Rent                                                            |     | 131,588                                                                                                                                                                                                                                  |     | -0-                                                                                                                                                                                                             |     | 231,012 |
|    Depreciation and amortization                                   |     | 179,150                                                                                                                                                                                                                                  |     | -0-                                                                                                                                                                                                             |     | 181,228 |
|    Impairment of intangible assets                                 |     | 205,279                                                                                                                                                                                                                                  |     | -0-                                                                                                                                                                                                             |     | 205,279 |
|    General and administrative                                      |     |      133,809                                                                                                                                                                                                    |     |      279,439                                                                                                                                                                           |     |     2,654,485 |
|          TotalExpenses               |     |    1,075,735                                                                                                                                                                                                                   |     |      279,439                                                                                                                                                                           |     |     3,697,913 |
|    Loss from operations                                            |     | (1,049,199)                                                                                                                                                                                                                              |     | (278,882)                                                                                                                                                                                                       |     | (3,631,525) |
| OTHER  INCOME (EXPENSE)                                                      |     |                                                                                                                                                                                                                                          |     |                                                                                                                                                                                                                 |     |  |
|    Gain on sale of assets                                          |     | -0-                                                                                                                                                                                                                                      |     | -0-                                                                                                                                                                                                             |     | 142,697 |
|    Other                                                           |     | -0-                                                                                                                                                                                                                                      |     | 11,673                                                                                                                                                                                                          |     | 11,673 |
|    Bad debt expense                                                |     | (14,888)                                                                                                                                                                                                                                 |     | (2,084)                                                                                                                                                                                                         |     | (19,360) |
|    Interest expense                                                |     |          (4,160)                                                                                                                                                                                 |     |              -0-                                                                                                                               |     |        (39,761) |
|          TotalOther Income (Expense) |     |       (19,048)                                                                                                                                                                                             |     |          9,589                                                                                                                                                          |     |          95,249 |
| NET LOSS                                                                          |     | $(1,068,247)                                                                                                                                                                                                                             |     | $  (269,293)                                                                                                                                                                                          |     | $(3,536,276) |
| BASIC AND DILUTED LOSS PER SHARE                                                  |     | $         (.005)                                                                                                                                                                                 |     | $        (.005)                                                                                                                                                         |     |  |
| Weighted Average Shares Outstanding                                               |     | 234,898,637                                                                                                                                                                                                                              |     |   59,008,459                                                                                                                                                                                          |     |  |

SEE ACCOMPANYING NOTES TO FINANCIALSTATEMENTS

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**FROM THE INCEPTION OF THE DEVELOPMENT STAGE ON JANUARY 1, 1999 THROUGH DECEMBER 31, 2001

|                                                           | Preferred Stock                                |   | Preferred Stock-A                                    |   | Preferred Stock-B                                    |   | Common Stock                                         |   |                                                      |   |                                                      |   |                                                                                    |   |                                                      |
|-----------------------------------------------------------|------------------------------------------------|--------|------------------------------------------------------|--------|------------------------------------------------------|--------|------------------------------------------------------|--------|------------------------------------------------------|--------|------------------------------------------------------|--------|------------------------------------------------------------------------------------|--------|------------------------------------------------------|
|                                                           |                                                |   |                                                      |   |                                                      |   |                                                      |   |                                                      |   |                                                      |   |                                                                                    |   |                                                      |   |  |   |  |   | Deficit |   |  |
|                                                           | Shares                                         |   | Amount                                               |   | Shares                                               |   | Amount                                               |   | Shares                                               |   | Amount                                               |   | Shares                                                                             |   | Amount                                               |   | Additional Paid in Cap |   | Accumulated Deficit |   | AccumulatedDev. Stage |   | Total |
|                                                           |                                                |   |                                                      |   |                                                      |   |                                                      |   |                                                      |   |                                                      |   |                                                                                    |   |                                                      |   |  |   |  |   |  |   |  |
| Balance at December 31, 1998                              | 14,363                                    |   | $14                                             |   | -0-                                             |   | $-0-                                                 |   | -0-                                                  |   | $-0-                                                 |   | 52,454,994                                                                    |   | $52,455                                              |   | $8,512,687  |   | $(11,975,773) |   | $           -0-  |   | $(3,410,617) |
| Issuance of Common Stock in payment of debt               | -0-                                       |   | -0-                                             |   | -0-                                             |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | 3,095,000                                                                     |   | 3,095                                           |   | 211,905  |   | -0-  |   | -0-  |   | 215,000 |
| Issuance of Common Stock for services                     | -0-                                       |   | -0-                                             |   | -0-                                             |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | 1,640,024                                                                          |   | 1,640                                                |   | 220,165  |   | -0-  |   | -0-  |   | 221,805 |
| Issuance of Common Stock for cash                         | -0-                                       |   | -0-                                             |   | -0-                                             |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | 2,444,044                                                                     |   | 2,444                                           |   | 199,756  |   | -0-  |   | -0-  |   | 202,200 |
| Options issued below market price                         | -0-                                       |   | -0-                                             |   | -0-                                             |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                                           |   | -0-                                             |   | 420,000  |   | -0-  |   | -0-  |   | 420,000 |
| Net loss for the year ended December 31, 1999             |      -0-         |   |       -0-              |   |      -0-                    |   |      -0-                    |   |      -0-                    |   |     -0-                               |   |              -0-       |   |        -0-        |   |              -0- |   |                -0- |   | (2,198,736) |   |   (2,198,736) |
| Balance at December 31, 1999                              | 14,363                                         |        | 14                                                   |   | -0-                                                  |   |     -0-                               |   | -0-                                                  |   |   -0-                                           |   | 59,634,062                                                                    |        | $59,634                                              |   | 9,564,513  |   | (11,975,773) |   | (2,198,736) |   | (4,550,348) |
| Cancellation of Common Stock                              | -0-                                       |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |        | (830,346)                                                                          |   | (830)                                                |   | (82,205) |   | -0-  |   | -0-  |   | (83,035) |
| Net loss for the year ended December 31, 2000             |     -0-               |   |   -0-                                           |   |      -0-                    |   |      -0-                         |   |      -0-                    |   |    -0-                                     |   |              -0-  |        |       -0-         |   |             -0-  |   |                -0- |   |    (269,293) |   |    (269,293) |
| Balance at December 31, 2000                              | 14,363                                         |   | 14                                                   |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | 58,803,716                                                                         |        | 58,804                                               |  | 9,482,308 |  | (11,975,773) |  | (2,468,029) |  | (4,902,676) |
| Acquisition of MedSmart by NHLT as reverseacquisition     | -0-                                            |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | 130,000,000                                                                        |   | 130,000                                              |  | (7,034,427) |  | 10,404,656 |  | -0- |  | 3,500,229 |
| Conversion of NHLT preferred shareholders                 | (14,363)                                       |   | (14)                                                 |   | -0-                                                  |   | -0-                                                  |   | 600,000                                              |   | 600                                                  |        | -0-                                                                                |   | -0-                                                  |  | (586) |  | -0- |  | -0- |  | -0- |
| Issuance of Common Stock for antidilution                 | -0-                                            |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | 3,046,305                                                                          |        | 3,046                                                |  | 179,732 |  | -0- |  | -0- |  | 182,778 |
| Issuance of Series A Preferred Stock for creditors'claims | -0-                                            |   | -0-                                                  |   | 1,923,853                                            |   | 1,924                                                |   | -0-                                                  |   | -0-                                                  |   | -0-                                                                                |        | -0-                                                  |  | 1,921,929 |  | -0- |  | -0- |  | 1,923,853 |
| Issuance of Common Stock for cash per bankruptcyplan      |        -0-       |   |        -0-             |   |       -0-                   |   |        -0-             |   |       -0-                   |   |       -0-                   |   | 45,000,000                                                                         |   |   45,000                                        |  |      555,000 |  |       -0- |  |       -0- |  |      600,000 |
| Balance as of merger January 22, 2001                     |         -0- |   |        -0-             |   | 1,923,853                                            |   | 1,924                                                |   | 600,000                                              |   | 600                                                  |   | 236,850,021                                                                        |        | 236,850                                              |  | 5,103,956 |  | (1,571,117) |  | (2,468,029) |  | 1,304,184 |
| Issuance of Common Stock for services                     | -0-                                            |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |        | 7,500,000                                                                          |   | 7,500                                                |  | 22,500 |  | -0- |  | -0- |  | 30,000 |
| Conversion of Preferred Stock to Common Stock             | -0-                                            |   | -0-                                                  |   | (419,231)                                            |   | (419)                                                |   | -0-                                                  |   | -0-                                                  |   | 2,096,155                                                                          |        | 2,096                                                |  | (1,677) |  | -0- |  | -0- |  | -0- |
| Issuance of Common Stock for cash                         | -0-                                            |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | 14,093,964                                                                         |        | 14,094                                               |  | 93,546 |  | -0- |  | -0- |  | 107,640 |
| Issuance of Common Stock to Directors forservices         | -0-                                            |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | -0-                                                  |   | 3,000,000                                                                          |        | 3,000                                                |  | 9,000 |  | -0- |  | -0- |  | 12,000 |
| Net loss for the year ended December 31, 2001             |      -0-              |   |          -0- |   |          -0- |   |          -0- |   |          -0- |   |          -0- |   |          -0-                               |        |          -0- |  |          -0- |  |          -0- |  | (1,068,247) |  | (1,068,247) |
| Balance at December 31, 2001                              |      -0-              |   | $    -0-                         |   | 1,504,622                                            |   | $  1,505                                        |   | 600,000                                              |   | $    600                         |        | 263,540,140                                                                        |   | $263,540                                             |  | $5,227,325 |  | $(1,571,117) |  | $(3,536,276) |  | $ 385,577 |

SEE ACCOMPANYING NOTES TO FINANCIALSTATEMENTSSEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**CONSOLIDATED STATEMENTS OF CASH FLOWS**

|                                                                                                  |    | For the Years Ended December 31,                                              |    | From the Inception of the Development Stage on January 1, 1999 Through December 31, |
|--------------------------------------------------------------------------------------------------|--------------|-------------------------------------------------------------------------------|--------------|-------------------------------------------------------------------------------------|
|                                                                                                  |    | 2001                                                                          |    | 2000                                                                                |  | 2001 |
| **Cash Flows From Operating Activities**                                                         |    |                                                                               |    |                                                                                     |    |  |
|    Net loss                                                                       |    | $(1,068,247)                                                                  |    | $(269,293)                                                                          |    | $(3,536,276) |
|    Adjustments to reconcile net (loss) to netcash (used) by operating activities: |    |                                                                               |    |                                                                                     |    |  |
|         Bad debtexpense                                  |    | 14,888                                                                        |    | 2,084                                                                               |    | 19,360 |
|         Impairmentof intangible assets                   |    | 205,279                                                                       |    | -0-                                                                                 |    | 205,279 |
|         Depreciationand amortization                     |    | 179,150                                                                       |    | -0-                                                                                 |    | 181,228 |
|         Expensespaid with common stock                   |    | 42,000                                                                        |    | -0-                                                                                 |    | 683,805 |
|         Cancellationof stock                             |    | -0-                                                                           |    | (83,035)                                                                            |    | (83,035) |
|         Gain on saleof assets                            |    | -0-                                                                           |    | -0-                                                                                 |    | (142,697) |
| Changes in operating assets and liabilities:                                                     |    |                                                                               |    |                                                                                     |    |  |
|    Decrease in restricted cash                                                    |    | 14,212                                                                        |    | 36,692                                                                              |    | -0- |
|    Decrease in accounts receivable                                                |    | 1,544                                                                         |    | 7,858                                                                               |    | 15,787 |
|    Decrease in royaltiesreceivable                                                |    | -0-                                                                           |    | -0-                                                                                 |    | 41,000 |
|    Decrease in deposits                                                           |    | 4,000                                                                         |    | -0-                                                                                 |    | 13,298 |
|    Increase (decrease) in accounts payableand accrued expenses                    |    |       (97,003)                                  |    |    149,474                                                                |    |    1,049,350 |
|         Net Cash(Used) by Operating Activities           |    | (704,177)                                                                     |    | (156,220)                                                                           |    | (1,552,901) |
| **CASH FLOWS FROM FINANCING ACTIVITIES**                                                         |    |                                                                               |    |                                                                                     |    |  |
|    Proceeds from notes receivable                                                 |    | -0-                                                                           |    | 120,000                                                                             |    | 150,000 |
|    Proceeds from loans payable,stockholder                                        |    | -0-                                                                           |    | -0-                                                                                 |    | 48,000 |
|    Proceeds from notes payable - relatedparty                                     |    | -0-                                                                           |    | 34,550                                                                              |    | 503,663 |
|    Repayment of loans payable                                                     |    | -0-                                                                           |    | -0-                                                                                 |    | (57,000) |
|    Proceeds from issuance of commonstock                                          |    |       707,640                                   |    |           -0-                     |    |       909,840 |
|         Net CashProvided by Financing Activities         |    | 707,640                                                                       |    | 154,550                                                                             |    | 1,554,503 |
| **INCREASE (DECREASE) IN CASH**                                                                  |    | 3,463                                                                         |    | (1,670)                                                                             |    | 1,602 |
| **NET CASH, BEGINNING OF YEAR**                                                                  |    |           1,475                  |    |        3,145                                     |    |           3,336 |
| **NET CASH, END OF YEAR**                                                                        |    | $       4,938                              |    | $     1,475                                                |    | $        4,938 |
| **CASH PAID DURING THE YEAR FOR:**                                                               |    |                                                                               |    |                                                                                     |    |  |
|    Interest                                                                       |    | $       1,118                              |    | $           -0-              |    | $      17,715 |
|    Income taxes                                                                   |    | $            -0-       |    | $           -0-              |    | $            -0- |
| **NON - CASH FINANCING ACTIVITIES:**                                                             |    |                                                                               |    |                                                                                     |    |  |
|    Issuance of preferred stock in payment ofdebt /liabilities                     |    | $  1,923,853                                                             |    | $          -0-                    |    | $ 2,138,853 |
|    Issuance of common stock forservices                                           |    | $      42,000                                   |    | $          -0-                    |    | $    263,805 |
|    Issuance of common stock underantidilution agreement                           |    | $     182,778                                             |    | $          -0-                         |    | $    182,778 |
|    Options issued below marketvalue                                               |    | $             -0- |    | $          -0-                    |    | $    420,000 |
|    Cancellation of common stock                                                   |    | $             -0- |    | $    83,035                                                     |    | $      83,035 |
|    Conversion of MedSmart shares to NHLTshares                                    |    | $  1,795,208                                                             |    | $          -0-                         |    | $ 1,795,208 |
|    Goodwill acquired in acquisition of NHLTby MedSmart                            |    | $  1,207,301                                                             |    | $           -0-                   |    | $  1,207,301 |
|    Reverse acquisition equityadjustments                                          |    | $     497,720                                             |    | $           -0-                   |    | $    497,720 |

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial Statements****December 31, 2001******

**NOTE 1:            SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS OPERATIONS****a.   Nature of Organization**National Health and Safety Corporation (NHLT) was incorporated on March 23, 1989 and provides medical cost containment services toboth institutional and consumer markets.  MedSmart Healthcare Network, Inc. and HealthVIP are wholly owned subsidiaries ofNHLT whose principal business activities consist of the marketing and distribution of discount card medical benefit membershipsthough its distribution network.  Membership cards are designed to be a complementary benefit to most individual standardhealth insurance plans and corporate health and leisure benefit packages.On March 22, 1993 NHLT entered into a merger with State Policeman Annual Magazine, Inc. (State), whereby each share of theNHLT’s common and preferred stock was exchanged for one share of State’s common and preferred stock.  State is acompany which was organized under the laws of the State of Utah on May 14, 1983.  Pursuant to the merger agreement, Stateamended its Articles of Incorporation to change its name to National Health and Safety Corporation.  NHLT entered thedevelopment stage on January 1, 1999 per SFAS No. 7 because of the bankruptcy proceedings and the sale of NHLT’sassets.On July 1, 1999, NHLT filed a petition for relief under Chapter 11 of the federal bankruptcy laws in the United States bankruptcyCourt for the Eastern District of Pennsylvania, Case No. 99-18339.  Under Chapter 11, certain claims against NHLT in existenceprior to the filing of the petitions for relief under the federal bankruptcy laws were stayed while NHLT continued businessoperations as a debtor-in-possession.  These claims are reported in the December 31, 2000 balance sheet as "pre-petitionaccruals" in the amount of $4,344,951.  Claims secured against NHLT assets ("secured claims") also were stayed, although theholders of such claims had the right to move the Court for relief from the stay.  Secured claims amounted to $1,473,141 atDecember 31, 2000.  On August 21, 2000, NHLT filed the Fourth Amended Disclosure Statement with respect to the Fourth AmendedJoint Plan of Reorganization (the “Plan”) for its consideration by NHLT’s creditors and shareholders, andultimate approval by the Bankruptcy Court.On November 27, 2000 the Bankruptcy Court confirmed the Plan, and the Plan was implemented effective January 22, 2001.

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial Statements****December 31, 2001**

**NOTE 1:            SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS OPERATIONS (Continued)**Upon implementation of NHLT’s Bankruptcy Plan (Plan) on January 22, 2001, the shareholders ofMedSmart Healthcare Network, Inc. (MedSmart) acquired control of NHLT.  For accounting purposes this combination has beentreated as a “reverse acquisition”  in accordance  with APB 16, with MedSmart treated for accounting purposesas the acquiring company.  MedSmart acquired the 58,803,716 outstanding shares of common stock of NHLT at $.0133 per share fora total value of $782,090.  This value was determined based on the simultaneous exchange by the shareholders of MedSmart ofall the outstanding shares of MedSmart in consideration for the issuance of 130,000,000 NHLT common shares at an issuance price of$.0133 per share.  This per share price is consistent with the per share price of $.0133 paid for the issuance of 45,000,000common shares for cash consideration of $600,000 for the capital infusion required under the Plan.  This valuation is alsoconsistent with the total common stock and paid in capital of $1,795,208 which has been contributed into MedSmart as of the date ofimplementation of the Plan.  The Company’s results of operations include NHLT from January 22, 2001 through December 31,2001.**b.  Principles of Consolidation**The Accompanying consolidated financial statements include the accounts of NHLT and its wholly owned subsidiaries, MedSmartHealthcare Network, Inc., and HealthVIP, collectively the Company.  All significant intercompany accounts and transactionshave been eliminated in the consolidation. **c.  Accounts Receivable**Accounts receivable are shown net of an allowance for doubtful accounts of $-0-.  Bad debts are written off in the period inwhich they are deemed uncollectible.  Any bad debts subsequently recovered are recorded as income in the financial statementsin the period during which they are recovered.

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE 1:            SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS OPERATIONS(Continued)**

**d.  Property and Equipment**Property and equipment are stated at cost.  Depreciation is provided using the straight-line method over the estimated usefullives of the asset which range form 5 to 7 years.Expenses for repairs, maintenance and minor renewals are charged against to operations as incurred and expenses for major renewalsand betterment are capitalized.  The cost and accumulated depreciation of assets sold or retired are removed from therespective accounts with any gain or loss on disposal reflected in income.**e.  Goodwill**Goodwill represents excess of purchase price over fair value of assets acquired in acquisition of NHLT by MedSmart in the amount of$1,207,301.  This amount is being amortized over 20 years.  For the year ended December 31, 2001, amortization expensefor goodwill was $55,335.**f.  Earnings per share**

|                                          |     | Loss (Numerator)        |                    | Shares (Denominator) |                    | Per Share Amount |
|------------------------------------------|--------------------|-------------------------|--------------------|----------------------|--------------------|------------------|
| **For the Year Ended December 31, 2001** |     |                         |     |                      |     |                  |
| Net loss                                 |     | $(1,068,247)            |     | 234,898,637          |     | (.005)           |
|                                          |     |                         |     |                      |     |                  |
| **For the Year Ended December 31, 2000** |     |                         |     |                      |     |                  |
|                                          |     |                         |     |                      |     |                  |
| Net loss                                 |     | $   (269,293) |     | 59,008,459           |     | $(.005)          |

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE 1:            SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS OPERATIONS(Continued)**Basic earnings per share amounts are computed by dividing net income or loss by the weighted average number of common sharesoutstanding.  Diluted per-share amounts assume the conversion, exercise, or issuance of all potential common stock instrumentsunless the effect is anti-dilutive, thereby reducing the loss or increasing the income per common share.  As described in Note7 and 8, at December 31, 2001 the Company had options and warrants outstanding to purchase a total of 13,340,519 shares of commonstock, respectively, at weighted average exercise price of $0.23.  However, because the Company incurred a loss in 2001, theinclusion of those potential common shares in the calculation of diluted loss per-share would have an anti-dilutive effect. Therefore, basic and diluted per-share amounts are the same in 2001.**g.  Significant Audit Adjustments** During the fourth quarter the Company had audit adjustments totaling approximately $28,000 that increased the net loss for theyear.  Of this amount, $205,279 related to the impairment of intangible assets that was recognized in the fourth quarter (SeeNote 4).  In addition, the Company recognized bad debt expense of approximately $15,000 for receivables.  The Companyalso recognized approximately $65,000 in additional expense related to a judgment levied against the Company over an operatinglease for office space.  These amounts were offset by a reduction in expenses of $246,500 related to the valuation of commonstock issued for services.In addition, the Company reclassified $386,201 in preferred stock Series A to accrued claims as stock certificates were not issuedprior to January 1, 2002.**h.  Cash Equivalents**The Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE 1:            SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS OPERATIONS(Continued)****i.  Provision for Taxes**At December 31, 2001, the Company had net operating loss carryforwards of approximately $11,600,000 that may be offset againstfuture taxable income through 2018.  No tax benefit has been reported in the financial statements, because the Companybelieves the carryforwards may expire unused.  Accordingly, the potential tax benefits of the loss carryforwards are offset bya valuation allowance of the same amount.**j.  Estimates**The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management tomake estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reportingperiod.  Actual results could differ from those estimates.

**k.   Development Stage Company**The Company is a development stage company as defined by SFAS No. 7.  As a development stage company, the Company devotes mostof its activities to raising capital in order to implement its marketing and distribution plan.**l.  Revenue Recognition**The Company recognizes revenue from the sale of cards in the period that sales are made.  A reserve for revenue has been setupto offset any card refunds.  Each marketing initiative will have its own reserve rate based upon the experience of the Companyand industry norms.  The Company’s current overall rate is 1.5%.

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE 1:             SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS OPERATIONS(Continued)****m.  Recent Accounting Pronouncements**In July 2001 the FASB issued SFAS 141, *Business Combinations*, and SFAS 142 *Goodwill and Other IntangibleAssets*.  These pronouncements provide that all business combinations initiated after June 30, 2001 be accounted for usingthe purchase method and that goodwill be reviewed for impairment rather than amortized, on an annual basis, beginning on January 1,2002. The Company does not believe that the adoption of these pronouncements will have a material effect on its financialstatements.  Any business combination transactions in the future would be accounted for under this guidance.**n.  Reclassifications**Certain amounts have been reclassified to maintain consistency and comparability for all periods presented here in.**NOTE 2:             GOING CONCERN**The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets andthe satisfaction of liabilities in the normal course of business.  The Company has a working capital deficiency of $753,900 anaccumulated deficit of $5,107,393 as of December 31, 2001, and a net loss for the year then ended of $1,068,247.  Accordingly,its ability to continue as a going concern is dependent on obtaining capital and financing for its planned marketing anddistribution of memberships through the Company’s benefits network.  The Company plans to secure financing through thesale of its equity or issuance of debt.  However, there is no assurance that they will be successful in their efforts to raisecapital or secure other financing.  These factors among others raise substantial doubt about the Company’s ability tocontinue as a going concern.

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE 3:            FIXED ASSETS**Fixed assets consists of the following:
| Furniture and fixtures         |        | $4,371  |
|--------------------------------|--------------------------------------|---------|
|                                |        | 4,371   |
| Less: Accumulated depreciation |        | (1,872) |
|                                |        | $2,499  |

Depreciation expense for 2001 is $12,815.**NOTE 4:             IMPAIRMENT OF ASSETS**As a result of the acquisition of NHLT by MedSmart, the Company acquired certain licensing and software development costs. These intangible assets were being amortized over three (3) years.  As part of the evaluation of intangible assets at December31, 2001, the Company determined that the intangible assets were completely impaired as of that date.  The remaining bookvalue of such intangible assets has been written off and charged to expense on that date.**NOTE 5:             NOTES PAYABLE AND LONG-TERM DEBT**Note Payable-related party at December 31, 2001 consists of the following:

| Note payable to an affiliated limited partnership,accruing interest at 9% and due January 2002, unsecured. The note payable is a demand note that continues to accrue interest after maturity. |     | $    36,000 |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|---------------------------------|

Long-term debt at December 31, 2001 consists of the following:

| Note payable with an individual; interest at 5.5%. Principal and interest due in annual  installments of $3,519, maturing January 2008, unsecured. |     | $     20,000            |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|---------------------------------------------|
| Less current maturities                                                                                                                                      |     |       (2,419) |
| Long-term debt, net of current portion                                                                                                                       |     | $    17,581        |

****

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE 5:            NOTES PAYABLE AND LONG-TERM DEBT (Continued)**Principal payments on notes payable and long-term debt for each of the next five fiscal years and thereafter are as follows:

| Years Ending December 31,                |        |                          |
|------------------------------------------|--------------------------------------|--------------------------|
| 2002                                     |        | $38,419                  |
| 2003                                     |        | 2,552                    |
| 2004                                     |        | 2,693                    |
| 2005                                     |        | 2,841                    |
| 2006                                     |        | 2,997                    |
|      Thereafter |        |     6,498 |
|                                          |        | $56,000                  |

**NOTE 6:            PREFERRED STOCK** In 1992, NHLT entered into a stock exchange agreement with certain shareholders, whereby such stockholders agreed to exchangea certain number of their shares of the pre-split common stock of NHLT and certain other rights for 14,363 authorized shares of anew class of redeemable preferred stock.  When NHLT's Plan was implemented on January 22, 2001, holders of NHLT's 14,363shares of Preferred Stock exchanged their shares for 600,000 shares of new Series B Preferred Stock.****Upon implementation of the Plan, the Company authorized issuance of up to 50,000,000 shares of Preferred Stock, of which thefollowing series have been designated and issued:The Company designated up to 4,000,000 shares of Series A Preferred Stock, par value $.001 per share.  The Company has1,504,622 Series A shares issued and outstanding.  Each Series A share carries a $1.00 liquidation preference and preferenceover Series B Preferred Stock, Common Stock and all other series of stock ranking Junior to Series A.  Each Series A share isconvertible at the option of the holder, into 5 shares of Common Stock at such times and in such amounts as stated in theCertificate of Designation.  The holders of Series A stock are entitled to vote together with the holders of Series B andCommon Stock and are entitled to one vote for each share of Common Stock which would be held by them if all of their shares ofSeries A were converted into shares of Common Stock.

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE6:            PREFERRED STOCK  (Continued)**The Company designated and issued 600,000 shares of Series B Preferred Stock, par value $.001 pershare.  Each Series B share carries a $1.00 liquidation preference that is inferior to Series A but is preferred to CommonStock and all other series of stock ranking Junior to Series B.  Each Series B share is convertible at the option of theholder into five shares of Common Stock at such times and in such amounts stated in the Certificate of designation. The holders ofSeries B stock are entitled to vote for each share of Common Stock which would be held by them if all their shares of Series B wereconverted into shares of Common Stock.**NOTE 7:            STOCK OPTIONS**When  NHLT’s Plan was implemented on January 22, 2001, all outstanding options were canceled.  The Company sponsors a stock-based incentive compensation plan (the “Stock Plan”). The Company applies AccountingPrinciples Board (“APB”) Opinion No. 25 and related interpretations in accounting for the Plan. In 1995, the FASBissued SFAS No. 123 “Accounting for Stock-Based Compensation” which, if fully adopted by the Company, would change themethods the Company applies in recognizing the cost of the Stock Plan.  Adoption of the cost recognition provisions of SFASNo. 123 is optional and the Company has decided not to elect these provisions of SFAS No. 123.  However, pro forma disclosuresas if the Company adopted the cost recognition provisions of SFAS No. 123 are required by SFAS No. 123 and are presentedbelow. On July 2, 2001 the disinterested members of the Company’s Board of Directors unanimously adopted an Incentive Stock OptionPlan for certain of the management consultants under contract with First Advisors, Inc.  Total options for 25,000,000 sharesof common stock were approved and granted to a total of five management consultants providing services to the Company. Options for a total of 8,333,333 shares were vested at the time of grant.  The 16,666,667 total combined remaining optionsvest at the rate of twelve and one-half percent over each quarter for the next two years for each consultant, assuming continuedservice by the consultant.  In the event that the grantee is terminated without cause or the Company is sold or merged allremaining options vest.  In the event the grantee is terminated for cause, all unvested options will be canceled.  Theexercise price of each option was fixed at $.02 per share, the closing bid price for the Company’s common stock on the dateof adoption of the plan.  

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE7:            STOCK OPTIONS (Continued)**Out of the total options granted, Gary J. Davis, the Chief Executive Officer of the Company, was granted options totaling 9,000,000shares of which 3,000,000 were immediately vested.  The remaining balance of 6,000,000 options granted Mr. Davis vest at therate of 750,000 shares per quarter over the next two years.The following is a summary of stock option activity under the 2001 Incentive Stock Option Plan:

|                                          |     | Number of Shares |     | Wgtd. Avg.   Exercise Price |
|------------------------------------------|--------------------|-----------------------|--------------------|--------------------------------------------|
| Options outstanding at January 1, 2001   |     | -0-                   |     | $0.00                                      |
|      Granted    |     | 25,000,000            |     | 0.02                                       |
|      Canceled   |     | -0-                   |     | 0.00                                       |
|      Exercised  |     | -0-                   |     | 0.00                                       |
| Options outstanding at December 31, 2001 |     | 25,000,000            |     | $0.02                                      |

The fair value of each stock option granted in 2001 is estimated on the date of grant using the Black-Scholes option pricing-modelwith the following weighted-average assumptions: no dividend yield; risk-free interest rate of 7.25%; the expected lives of theoptions are five years; and volatility of 100%. The Black-Scholes option valuation model and other existing models were developed for use in estimating the fair value of tradedoptions that have no vesting restrictions and are fully transferable.  In addition, option valuation models require the inputof and are highly sensitive to subjective assumptions including the expected stock price volatility.

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE7:            STOCK OPTIONS (Continued)**The following table summarizes information about stock options outstanding and exercisable under the plan at December 31,2001:

|                                        OptionsOutstanding                                        |     |            OptionsExercisable           |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
| Range of ExercisePrices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     | Number Outstanding at December 31, 2001                                                                                                          |     | Wgtd. Avg. Remaining Contractual Life |     | Wgtd. Avg. Exercise Price |     | Number Exercisable at December 31, 2001 |     | Wgtd. Avg. Exercise Price |
| $0.00 - $0.02                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     | 25,000,000                                                                                                                                       |  | 4.50 |  | $0.02 |  | 10,416,666 |  | $0.02 |
|     Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     | 25,000,000                                                                                                                                       |  | 4.50 |  | $0.02 |  | 10,416,666 |  | $0.02 |

During 2001, the Company did not incur any compensation cost for options granted under the Plan as required under APB No. 25. Hadthe compensation cost for the Company’s compensation plans been determined consistent with SFAS No. 123, the Company 's netloss and net loss per common share for 2001 would approximate the pro forma amounts as shown below:

|                                                       |     |   2001                               |
|-------------------------------------------------------|--------------------|----------------------------------------------------------|
| Net loss                                              |     |                                                          |
|      As reported             |     | $(1,068,319)                                             |
|      SFAS No. 123 Charge     |     |      208,333               |
|      Pro Forma               |     | $(1,276,652)                                             |
| Net income (loss) per common share - basic anddiluted |     |                                                          |
|      As reported             |     | $         (.005) |
|      Pro Forma               |     | $         (.005) |

The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts.

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE8:            STOCK WARRANTS**When NHLT's Plan was implemented on January 22, 2001, all outstanding warrants were canceled.  As a part of the Plan, NHLTauthorized two new series of warrants.Class A warrants were issued to each holder of Series A and Series B Preferred Stock in the ratio of one warrant for eachshare.  There are 4,000,000 Class A warrants authorized; 1,923,853 Class A warrants issued and outstanding, that allow theholder to purchase, for the exercise price of $1.00, expiring two years from January 22, 2001, one share of Common Stock plus oneClass B warrant.  There are 4,000,000 Class B warrants authorized; entitling the holder to purchase, for an exercise price of$1.50, expiring three years from January 22, 2001, one share of Common Stock.  Presently, no Class B warrants areoutstanding.At the time of original issuance the Class A warrants were not assigned an initial value or any accretion as their estimated fairmarket value approximated zero.**NOTE 9:            RELATED PARTY TRANSACTIONS**On May 1, 2001, the Company approved a consulting agreement and retained First Advisors, Inc. ("First Advisors") of Austin, Texas,to provide business consultation services.  Under terms of the agreement, First Advisors will assist and advise MedSmart withthe specific goal of facilitating a high volume implementation of its medical discount program. First Advisors provides officespace to the Company under the management agreement.  First Advisors is a company controlled by Gary J. Davis, the ChiefExecutive Officer of the Company and an affiliate of the Company.  The consulting agreement was approved by a majority of thedisinterested Directors of the Company.  The consulting agreement is for an initial term of one year, however, upon thirtydays notice it may be canceled by either the Company or First Advisors.  Under terms of the consulting agreement FirstAdvisors is to receive payment for services in the form of common stock registered under Form S-8 at a rate of 1,250,000 shares permonth.  Effective November 1, 2001, the Company modified the agreement with First Advisors to pay on the first day of eachmonth the greater of  $60,000 or an amount equal to 20% of gross profit of the Company.  During 2001, $150,000 wasexpensed by the Company under this agreement and at December 31, 2001, the Company owed First Advisors $52,360 under thisagreement.  During the year ended December 31, 2001, an affiliated company paid certain legal and operating expenses for the Company.  Asof December 31, 2001, the Company owed $39,432 to the affiliate.

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE9:            RELATED PARTY TRANSACTIONS (Continued)**As of December 31, 2001, the Company still owes $24,839 to an affiliated company related to travel expenses incurred in conjunctionwith the NHLT bankruptcy.At December 31, 2001, the Company has a note payable of $36,000 with an affiliated company.  The note accrues interest at 9%and is due in January 2002.  See also Note 5.During 2001, the Company issued 1,500,000 shares of common stock to each of Eugene Rothchild and James Kennard, respectively. This stock bonus was issued as compensation for their efforts and work during the bankruptcy and reorganization of theCompany.  During the year NHLT recorded a general and administrative expense in the amount of $12,000 related to this stockissuance.  Both Mr. Rothchild and Mr. Kennard are directors of the Company.**NOTE 10:            PRO FORMA FINANCIAL INFORMATION**MedSmart was acquired by NHLT during the year ended December 31, 2001.  Noted below are the Pro Forma results of ConsolidatedNet Income of NHLT assuming MedSmart and NHLT had been combined at the beginning of the noted periods.

|                                              |     | Year Ended December 31,       2001        |     | Year Ended   December 31,       2000        |
|----------------------------------------------|--------------------|-----------------------------------------------------------------------------------------------------------------|--------------------|------------------------------------------------------------------------------------------------------------------------|
| Revenue                                      |     | $      26,536                                                                     |     | $     50,738                                                                                  |
| Income (Loss) from continuing operations     |     | (1,236,862)                                                                                                     |     | (1,343,546)                                                                                                            |
| Net Income (Loss) before Extraordinary Items |     | (1,255,910)                                                                                                     |     | (1,333,957)                                                                                                            |
| Extraordinary Items                          |     | 18,138                                                                                                          |     | -0-                                                                                                                    |
| Net Income (Loss)                            |     | (1,237,772)                                                                                                     |     | (1,333,957)                                                                                                            |
| Basic Net Income (Loss) per Share            |     | $       (.005)                                                               |     | $       (.005)                                                                      |

****

****

**NATIONAL HEALTH & SAFETYCORPORATION**(A Development Stage Company)**Notes to CONSOLIDATED Financial StatementsDecember 31, 2001**

**NOTE 11:            FAIR VALUES OF FINANCIAL INSTRUMENTS**The following listing of the estimated fair value of financial instruments is made in accordancewith the requirements of SFAS No. 107, “Disclosure About Fair Value of Financial Instruments”.  The carryingamounts and fair value of the Company's financial instruments are as follows:

|                     |     | December 31, 2001             |
|---------------------|--------------------|-------------------------------|
|                     |     | Carrying Amount               |     | Fair Values |
| Cash                |     | $  4,938                 |     | $  4,938 |
| Accounts receivable |     | $     110 |     | $     110 |
| Notes payable       |     | $56,000                       |     | $56,000 |

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financialinstruments:**Cash**The carrying amounts reported on the balance sheet for cash and cash equivalents approximate their fair value.**Accounts Receivable**The carrying amounts reported on the balance sheet for accounts receivable are reported at net realizable value. **Notes Payable**The fair values of notes payable are estimated using discounted cash flow analyses based on the Company’s incrementalborrowing rate as the discount rate.