U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-QSB

|X|   QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
      OF 1934
      For the quarter ended June 30, 2001

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
      For the transition period from            to

                          Commission File No. 000-25107

                        THERMOELASTIC TECHNOLOGIES, INC.
                        --------------------------------
                 (Name of Small Business Issuer in its Charter)

            COLORADO                                        51-0387926
            --------                                        ----------
 (State or Other Jurisdiction of                      (I.R.S. Employer I.D. No.)
  incorporation or organization)

                      5466 Canvasback Rd., Blaine, WA 98230
                    (Address of Principal Executive Offices)
                    Issuer's Telephone Number: (360) 371-5061

Check whether the Issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Company was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. (1) Yes |X| No
(2) Yes |X| No

(APPLICABLE ONLY TO CORPORATE ISSUERS)

State the number of shares outstanding of each Issuer's classes of common
equity, as of the latest practicable date: June 30, 2001:
Common Stock - 20,598,164

                       DOCUMENTS INCORPORATED BY REFERENCE

A description of any "Documents Incorporated by Reference" is contained in Item
6 of this report.

Transitional Small Business Issuer Format  Yes |_| No |X|
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

A financial statement, unaudited and included herein, beginning on page F-1
(Exhibit 99.0), is incorporated herein by this reference.

The Financial Statements of the Company required to be filed with this 10-QSB
Quarterly Report were prepared by management and commence on the following page,
together with related Notes. In the opinion of management, these Financial
Statements fairly present the financial condition of the Company, but should be
read in conjunction with the Financial Statements of the Company for the year
ended September 30, 2000 previously filed with the Securities and Exchange
Commission.

Item 2. Management's Plan of Operations

The Company is in its initial stages of development with minor revenues and
income and is subject to all the risks inherent in the creation of a new
business. Since the Company's principal activities to date have been limited to
organizational activities, prospect development, and acquisition of interests,
it has no record of any material revenue- producing operations. Consequently,
there is no operating history upon which to base an assumption that the Company
will be able to achieve its business plans.

When used in this Form 10-QSB, the words "anticipate", "estimate", "expect",
"project" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions including the possibility that the Company=s proposed plan of
operation will fail to generate projected revenues. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected.

PRINCIPAL PRODUCT

ThermoElastic Technologies, Inc., a development stage entity (the "Company" or
"TTI"), was incorporated on January 21, 1999, in the State of Delaware to carry
on the business of marketing and distributing a new generation acrylic, known as
Biocompatible Intraoral Thermo Elastic Material ("BITEM"), which is anticipated
to be sold to dental related businesses and other allied fields throughout the
world. On July 15, 1999, the Company entered into a reverse acquisition
agreement with LPR Cybertek ("LPR") to become a publicly traded company
incorporated under the laws of the State of Colorado. The goal of the Company is
to market products throughout specified geographical locations in the dental
field. Licensing agreements will be entered into with qualified companies and
individuals to expand its use into other diverse areas and products. During the
quarter ended March 31, 2001, the Company acquired the exclusive right to
distribute DISIFIN in the United States and Canada. DISIFIN is a solid cleaning
product used as a disinfectant in the medical, dental and food processing
industries.

The Company has a subsidiary, ThermoElastic Technologies (CANADA), Inc. which
was organized in June, 1999. The subsidiary is inactive and no financial
activities have occurred in the subsidiary. The Company is in the development
stage of operations. Certain shareholders of the Company have contributed their
free trading stock in satisfaction of certain of the Company's debts and
obligations. The Company has agreed to replace these shares with shares of
restricted stock. As of June 30, 2001, the Company is obligated to issue 505,000
shares of its common stock, which shares are valued at $37,270.

During the current year, the Company has received $70,000 in unsecured loans
from an unaffiliated party. The loan is payable on demand and bears interest at
6%. The loan may be repaid in cash or through the issuance of shares of The
Company's common stock, which must be freely tradeable, at the lender's option.
The proceeds of the loan were used to pay the Company's expenses as well as
paying for the distribution rights for DISIFIN.
<PAGE>

The Company, over the next twelve months, intends to market and distribute
dental applications in the United States and internationally and to utilize the
World Wide Web in the implementation of its planned business operations. The
Company shall conduct new product research and development as funds allow.
Management possesses the experience to implement its business plan. No
significant equipment purchases are planned over the next twelve months.

During the quarter ended June 30, 2001, the Company issued and registered
560,000 shares of its common stock as compensation for consultants who provided
various services for the Company. In addition, during this quarter, the Company
also issued an additional 750,000 shares of its common stock as compensation for
other consultants.

RESULTS OF OPERATIONS

For the three months ended June 30, 2001, the Company had revenues of $2,001 and
its expenses were $532,992, resulting in a net loss for the quarter of
($530,991) compared to net revenues of $954 and expenses of $180,419 for the
quarter ended June 30, 2000, which resulted in a net loss for the quarter of
($179,373). The net loss per share for the three month periods ended June 30,
2001 and 2000 was ($.03) and ($.01), respectively.

For the nine months ended June 30, 2001, the Company had net revenues of $2,604
and its expenses were $1,077,748, resulting in a net loss for the nine month
period of ($1,075,144) compared to net revenues of ($4,063) and expenses of
$725,268 for the nine month period ended June 30, 2000, which resulted in a net
loss for the quarter of ($729,331). The net loss per share for the nine month
periods ended June 30, 2001 and 2000 was ($.06) and ($.04), respectively.

Since January 30, 1995 (inception) to June 30, 2001, the Company has had total
net revenues of $4,430 and expenses of $1,935,409. During that period, the
Company has expensed $591,411 of development costs.

The Company's total assets at June 30, 2001 were approximately $705,000 compared
to assets of approximately $285,000 at September 30, 2000. The Company's current
assets at June 30, 2001 were approximately $378,000 and consisted primarily of
prepaid consulting fee expenses of approximately $325,000. The Company's other
assets at June 30, 2001 consisted of its product rights to BITEM and DISIFIN
totaling $325,000. The Company's current assets at September 30, 2000 were
approximately $32,000 and consisted primarily of prepaid expenses totaling
approximately $30,000. The Company's other asset at September 30, 2000 was its
product rights in BITEM of $250,000.

The Company's current liabilities at June 30, 2001 were approximately $1,600,000
compared to current liabilities of approximately $900,000 at September 30, 2000.
Part of the difference is attributable to the Company's increased expenses and
increased accounts payable to related entities. The current liabilities of the
Company at June 30, 2001 consist of account payables to related entities of
approximately $1,226,000, trade payables of approximately $117,000, product
rights payable of $125,000, loans payable of approximately $90,000 and common
stock reimbursements of approximately $37,000. Its current liabilities at
September 30, 2000 consisted of accounts payable of approximately $708,000 to
related entities, trade accounts payable of $102,000, products rights payable of
$75,000 and accrued liabilities of approximately $12,000.

Total shareholders' (deficit) increased from ($612,993) at September 30, 2000 to
a deficit of ($889,874) at June 30, 2001.

LIQUIDITY

ThermoElastic currently has no material commitments for capital expenditures
except for its obligations with respect to BITEM and DISIFIN.

The Company will use the proceeds from raising capital or borrowing money to pay
its
<PAGE>

expenses and to further its business plan. The Company expects to use any
proceeds received from the exercise of the Series A and B Warrants to expand
operations. However, there can be no assurances that the warrants will be
exercised or that the Company's sales will meet its growth expectations. Should
either of these fail to occur, the Company may elect to (i) reduce the planned
expansion of operations or (ii) pursue other financing alternatives such as a
rights offering, warrant exercise or borrowings. The Company's planned growth
and profitability could be delayed or diminished if the two options listed above
are not implemented.

Over the next two years, the Company's liquidity is dependent on increased
revenues from operations, additional infusions of capital and debt financing.
The Company believes that additional capital and debt financing in the next six
months will allow the Company to commence its marketing and sales efforts and
thereafter result in revenue and greater liquidity in the long term. However,
there can be no assurances that the Company will be able to obtain additional
equity or debt financing in the future, if at all.

PART II - OTHER INFORMATION

Items 1, 2, 3, 4 and 5. Not applicable.

Item No. 6 B Exhibits and Reports on Form 8-K

(a)   No reports on Form 8-K were filed during the quarter ended June 30, 2001.

(b)   Exhibits

99 Financial Statements for the periods ended June 30, 2001 and 2000

                                   SIGNATURES

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

August 20, 2001
                                    THERMOELASTIC TECHNOLOGIES, INC


                                    By: /s/  Kenneth B. Liebscher
                                       ----------------------------
                                    Kenneth B. Liebscher, President


                                    By: /s/  A. William Nicholls
                                       ----------------------------
                                    A. William Nicholls, CFO
<PAGE>

                        THERMOELASTIC TECHNOLOGIES, INC.
                                 AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                        CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001
<PAGE>

                                TABLE OF CONTENTS

                                                                        Page No.
                                                                        --------

INDEPENDENT ACCOUNTANTS' REVIEW REPORT ................................     1

FINANCIAL STATEMENTS

       Consolidated Balance Sheets.....................................     2

       Consolidated Statements of Comprehensive (Loss).................     3

       Consolidated Statements of Operations...........................     4

       Consolidated Statement of Stockholders' (Deficit)...............   5 - 7

       Consolidated Statements of Cash Flows...........................   8 - 9

       Notes to Financial Statements...................................  10 - 20

<PAGE>

                     INDEPENDENT ACCOUNTANTS' REVIEW REPORT

To the Board of Directors and Stockholders
ThermoElastic Technologies, Inc. and Subsidiary
(Development Stage Companies)

We have reviewed the accompanying consolidated balance sheet of ThermoElastic
Technologies, Inc. and Subsidiary (Development Stage Companies) as of June 30,
2001, and the related statements of comprehensive (loss), operations, and cash
flows for the nine months ended June 30, 2001 and 2000, and for the period from
January 30, 1995 (date of inception) to June 30, 2001 and the statement of
stockholders' (deficit) from January 30, 1995 to June 30, 2001 in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of
ThermoElastic Technologies, Inc. and Subsidiary.

A review consists principally of inquiries of company personnel and analytical
procedures applied to fdata. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, wdo not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 17 to the
financial statements, the Company is awaiting government approval of its
product, has incurred significant losses and needs additional working capital.
These conditions raise doubt about its ability to continue as a going concern.
Management's plans regarding these matters are described in Note 17. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.

We have audited, in accordance with auditing standards generally accepted in the
United States of America, the balance sheet of ThermoElastic Technologies, Inc.
and Subsidiary as of September 30, 2000, and the related statements of
comprehensive (loss), operations, stockholders' (deficit) and cash flows for the
year then ended (not presented herein); and in our report dated December 21,
2000 we expressed an unqualified opinion on those financial statements, with an
additional comment that there were conditions which raised substantial doubt
about the Company's ability to continue as a going concern. In our opinion, the
information set forth in the accompanying balance sheet as of September 30,
2000, is fairly stated in all material respects in relation to the balance sheet
from which it has been derived.


Moffitt & Company, P.C.
Scottsdale, Arizona

August 16, 2001
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                           CONSOLIDATED BALANCE SHEETS
                      JUNE 30, 2001 AND SEPTEMBER 30, 2000

                                   ASSETS

                                                     June 30,     September 30,
                                                        2001          2000
                                                    (Unaudited)    (Audited)
                                                    -----------   -------------
CURRENT ASSETS
       Cash and cash equivalents                     $ 31,943       $    805
       Accounts receivable                              2,579            507
       Travel advances                                  2,397          1,000
       Inventory                                       13,339              0
       Prepaid expenses
          Consulting fees                             325,017              0
          Other                                         2,762         29,505
                                                     --------       --------

              TOTAL CURRENT ASSETS                    378,037         31,817
                                                     --------       --------

OFFICE FURNITURE AND COMPUTERS
       Cost                                             3,679          3,679
       Less accumulated depreciation                    1,717          1,199
                                                     --------       --------

              NET PROPERTY AND EQUIPMENT                1,962          2,480
                                                     --------       --------

OTHER ASSETS
       Product rights
           Bitem                                      250,000        250,000
           Disifin                                     75,000              0
                                                     --------       --------

              TOTAL OTHER ASSETS                      325,000        250,000
                                                     --------       --------

              TOTAL ASSETS                           $704,999       $284,297
                                                     ========       ========

<PAGE>

                     LIABILITIES AND STOCKHOLDERS' (DEFICIT)

<TABLE>
<CAPTION>
                                                            June 30,     September 30,
                                                              2001           2000
                                                          (Unaudited)      (Audited)
                                                          -----------    --------------
<S>                                                       <C>            <C>
CURRENT LIABILITIES
       Accounts payable
          Trade                                           $   116,488    $   101,598
          Related entities                                  1,226,254        708,343
          Common stock reimbursements                          37,270             35
       Accrued liabilities                                        286         12,314
       Loans payable                                           89,575              0
       Product rights payable                                 125,000         75,000
                                                          -----------    -----------
               TOTAL CURRENT LIABILITIES                    1,594,873        897,290

CONTINGENCIES                                                      --             --
                                                          -----------    -----------

STOCKHOLDERS' (DEFICIT)
       Preferred stock, par value $.0001 per share
            Authorized 20,000,000 shares
            0 shares issued and outstanding                         0              0
       Common stock, par value $.0001 per share
            Authorized 100,000,000 shares
            Issued and outstanding
              June 30, 2001 - 20,598,164 shares                 2,060              0
              September 30, 2000 - 17,338,164 shares                0          1,734
       Paid in capital in excess of par value of stock      1,566,383        762,209
       Deficit accumulated during development stage        (2,447,597)    (1,372,453)
       Accumulated other comprehensive loss
          (primarily cumulative translation adjustment)       (10,720)        (4,483)
                                                          -----------    -----------

            TOTAL STOCKHOLDERS' (DEFICIT)                    (889,874)      (612,993)
                                                          -----------    -----------

            TOTAL LIABILITIES AND
              STOCKHOLDERS' (DEFICIT)                     $   704,999    $   284,297
                                                          ===========    ===========
</TABLE>

       See Accompanying Notes and Independent Accountants' Review Report.


                                       2
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
         FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2001 AND 2000 AND
           FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
                                  JUNE 30, 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                                        January 30,
                                                        Three Months Ended                Nine Months Ended           1995 (Date of
                                                             June 30,                         June 30,                Inception) to
                                                   ---------------------------     ------------------------------        June 30,
                                                       2001            2000            2001              2000              2001
                                                   -----------     -----------     -------------     ------------     -------------
<S>                                                <C>             <C>             <C>               <C>              <C>
NET (LOSS)                                         $  (530,991)    $  (179,373)    $  (1,075,144)    $   (729,331)    $  (1,930,979)

OTHER COMPREHENSIVE (LOSS)
       Foreign currency translation adjustments         (4,447)         (3,807)           (6,237)         (15,014)          (10,080)
                                                   -----------     -----------     -------------     ------------     -------------

NET COMPREHENSIVE (LOSS)                           $  (535,438)    $  (183,180)    $  (1,081,381)    $   (744,345)    $  (1,941,059)
                                                   ===========     ===========     =============     ============     =============
</TABLE>

       See Accompanying Notes and Independent Accountants' Review Report.


                                       3
<PAGE>

          THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                   (DEVELOPMENT STAGE COMPANIES)
               CONSOLIDATED STATEMENTS OF OPERATIONS
  FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2001 AND 2000 AND
    FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
                           JUNE 30, 2001
                            (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                                 January 30,
                                                 Three Months Ended                Nine Months Ended            1995 (Date of
                                                     June 30,                          June 30,                 Inception) to
                                            -----------------------------     -----------------------------       June 30,
                                                2001            2000              2001            2000              2001
                                            ------------     ------------     ------------     ------------    --------------
<S>                                         <C>              <C>              <C>              <C>              <C>
REVENUE                                     $      2,001     $        954     $      2,950     $      3,370     $     8,285

COST OF SALES                                          0              (92)             346            7,433           3,855
                                            ------------     ------------     ------------     ------------     -----------

   GROSS PROFIT (LOSS)                             2,001            1,046            2,604           (4,063)          4,430
                                            ------------     ------------     ------------     ------------     -----------

EXPENSES
   Development costs to related entities               0                0                0                0         591,411
   General and administrative                     71,642           12,719          184,005           83,067         743,905
   Consulting fees                               461,350          167,700          893,743          642,201         600,093
                                            ------------     ------------     ------------     ------------     -----------

        TOTAL EXPENSES                           532,992          180,419        1,077,748          725,268       1,935,409
                                            ------------     ------------     ------------     ------------     -----------

NET (LOSS)                                  $   (530,991)    $   (179,373)    $ (1,075,144)    $   (729,331)    $(1,930,979)
                                            ============     ============     ============     ============     ===========

NET (LOSS) PER COMMON SHARE

   Basic and diluted                        $       (.03)    $       (.01)    $       (.06)    $      (.04)
                                            ============     ============     ============     ===========

WEIGHTED AVERAGE NUMBER OF
 COMMON SHARES OUTSTANDING

   Basic and diluted                          19,059,830       17,338,164       19,059,830       17,338,164
                                            ============     ============     ============     ===========
</TABLE>

       See Accompanying Notes and Independent Accountants' Review Report.


                                       4
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
           FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
                                  JUNE 30, 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                          Deficit
                                                                                          Paid in       Accumulated     Accumulated
                                      Preferred Stock             Common Stock           Capital in      During the        Other
                                    -------------------      ----------------------    Excess of Par    Development    Comprehensive
                                    Shares       Amount      Shares          Amount    Value of Stock      Stage           Loss
                                    ------       ------      ------          ------    --------------   -----------    -------------
<S>                                    <C>   <C>            <C>            <C>          <C>               <C>           <C>
AT DATE OF INCEPTION                    0     $        0             0     $      0     $          0      $      0      $        0

JANUARY 30, 1995 - COMMON STOCK
  ISSUED TO FOUNDERS FOR
  SERVICES                              0              0    13,760,000        1,376           (1,176)            0               0

AUGUST 1, 1995 - COMMON STOCK
  ISSUED FOR CASH                       0              0     1,720,000          172            9,828             0               0

DECEMBER 15, 1995 - COMMON STOCK
  ISSUED FOR CASH                       0              0       860,000           86            4,914             0               0

NET (LOSS) FOR THE YEAR ENDED
  DECEMBER 31, 1995                     0              0             0            0                0        (8,606)              0
                                   ------     ----------    ----------     --------     ------------      --------      ----------

     BALANCE, DECEMBER 31, 1995         0              0    16,340,000        1,634           13,566        (8,606)              0

FEBRUARY 10, 1996 - COMMON STOCK
  ISSUED FOR SERVICES                   0              0       860,000           86            4,914             0               0

NET (LOSS) FOR THE YEAR ENDED
  DECEMBER 31, 1996                     0              0             0            0                0       (10,202)              0
                                   ------     ----------    ----------     --------     ------------      --------      ----------

     BALANCE, DECEMBER 31, 1996         0              0    17,200,000        1,720           18,480       (18,808)              0

NET (LOSS) FOR THE YEAR ENDED
  DECEMBER 31, 1997                     0              0             0            0                0          (824)              0
                                   ------     ----------    ----------     --------     ------------      --------      ----------

     BALANCE, DECEMBER 31, 1997         0              0    17,200,000        1,720           18,480       (19,632)              0

CAPITAL CONTRIBUTED TO THE
  CORPORATION                           0              0             0            0           10,000             0               0

NET (LOSS) FOR THE SHORT-YEAR
  ENDED SEPTEMBER 30, 1998              0              0             0            0                0        (6,760)              0
                                   ------     ----------    ----------     --------     ------------      --------      ----------

     BALANCE, SEPTEMBER 30, 1998        0     $        0    17,200,000     $  1,720     $     28,480      $(26,392)     $        0
</TABLE>

       See Accompanying Notes and Independent Accountants' Review Report.


                                       5
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
          CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) (CONTINUED)
           FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
                                  JUNE 30, 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                          Deficit
                                                                                          Paid in       Accumulated     Accumulated
                                         Preferred Stock             Common Stock        Capital in      During the        Other
                                       --------------------      --------------------  Excess of Par    Development   Comprehensive
                                       Shares        Amount      Shares        Amount  Value of Stock       Stage          Loss
                                       ------        ------      ------        ------  --------------   -----------   -------------

<S>                                  <C>            <C>         <C>             <C>        <C>            <C>             <C>
JULY 15, 1999, COMMON STOCK
   DIVIDEND PAYABLE IN PREFERRED
   STOCK                             1,650,000      $     165            0     $    0     $ 164,835      $  (165,000)    $     0

JULY 15, 1999 REDEMPTION OF
   PREFERRED STOCK FOR CASH         (1,650,000)          (165)           0          0      (164,835)               0           0

JULY 15, 1999, MERGER WITH
   THERMOELASTIC TECHNOLOGIES,
   INC                                       0              0            0          0       732,385                0           0

FOREIGN CURRENCY TRANSLATION
   ADJUSTMENT                                0              0            0          0             0                0      (5,121)

NET (LOSS) FOR THE YEAR ENDED
   SEPTEMBER 30, 1999                        0              0            0          0             0         (472,071)          0
                                     ---------      ---------   -----------    ------     ---------      -----------     -------

      BALANCE, SEPTEMBER 30, 1999            0              0   17,200,000      1,720       760,865         (663,463)     (5,121)

FAIR VALUE OF OFFICE RENT
   DONATED BY STOCKHOLDER                    0              0            0          0         1,358                0           0

FRACTIONAL SHARES OF STOCK                   0              0      138,164         14           (14)               0           0

FOREIGN CURRENCY TRANSLATION
   ADJUSTMENT                                0              0            0          0             0                0         638

NET (LOSS) FOR THE YEAR ENDED
   SEPTEMBER 30, 2000                        0              0            0          0             0         (708,990)          0
                                     ---------      ---------   -----------    ------     ---------      -----------     -------

      BALANCE, SEPTEMBER 30, 2000            0      $       0   17,338,164     $1,734     $ 762,209      $(1,372,453)    $(4,483)
</TABLE>

       See Accompanying Notes and Independent Accountants' Review Report.


                                       6
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
          CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) (CONTINUED)
           FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
                                  JUNE 30, 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                           Deficit
                                                                                         Paid in         Accumulated    Accumulated
                                      Preferred Stock              Common Stock         Capital in       During the       Other
                                     ------------------        ---------------------   Excess of Par     Development   Comprehensive
                                     Shares      Amount        Shares         Amount   Value of Stock       Stage           Loss
                                     ------      ------        ------         ------   --------------    -----------   -------------
<S>                                      <C>    <C>          <C>            <C>          <C>            <C>             <C>
JANUARY, 2001 - COMMON STOCK
 ISSUED FOR SERVICES                      0     $      0      1,625,000     $      162   $   489,838    $          0    $      0

MARCH, 2001 - COMMON STOCK
 ISSUED FOR CASH BY EXERCISING
 OPTIONS                                  0            0        325,000             33        45,467               0           0

MARCH, 2001 - EXCESS OF FAIR
 MARKET OF OPTIONS ISSUED OVER
 OPTION PRICE                             0            0              0              0        80,000               0           0

APRIL 1 TO JUNE 30, 2001
 COMMON STOCK ISSUED FOR
   SERVICES                               0            0        560,000             56        83,944               0           0
   CASH                                   0            0        750,000             75       104,925               0           0

FOREIGN CURRENCY TRANSLATION
 ADJUSTMENT                               0            0              0              0             0               0      (6,237)

NET (LOSS) FOR THE NINE MONTHS
 ENDED JUNE 30, 2001                      0            0              0              0             0      (1,075,144)          0
                                    -------     --------     ----------     ----------   -----------    ------------    --------

     BALANCE, JUNE 30, 2001               0     $      0     20,598,164     $    2,060   $ 1,566,383    $ (2,447,597)   $(10,720)
                                    =======     ========     ==========     ==========   ===========    ============    ========
</TABLE>

       See Accompanying Notes and Independent Accountants' Review Report.


                                       7
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED JUNE 30, 2001 AND 2000 AND
           FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
                                  JUNE 30, 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                        January 30,
                                                             Nine Months Ended         1995 (Date of
                                                                 June 30,              Inception) to
                                                        --------------------------        June 30,
                                                           2001             2000            2001
                                                        -----------      ---------     -------------
<S>                                                     <C>              <C>            <C>
CASH FLOWS FROM OPERATING
   ACTIVITIES:
       Net (loss)                                       $(1,075,144)     $(729,331)     $(2,282,597)
       Adjustments to reconcile net (loss)
        to net cash (used) by operating activities:
          Depreciation                                          519            152            1,718
          Fair value of rent                                      0              0            1,358
          Common stock issued for services                  654,000              0          659,200
       Changes in operating assets and liabilities:
          Accounts receivable                                (2,072)        (2,731)          (3,579)
          Travel advances                                    (1,397)             0           (1,397)
          Inventory                                         (13,339)             0          (13,339)
          Prepaid expenses                                 (298,274)       722,333         (327,779)
          Accounts payable                                  570,035              0        1,380,011
          Accrued liabilities                               (12,028)             0              286
          Product rights payable                                  0              0           75,000
                                                        -----------      ---------      -----------
          NET CASH (USED) BY OPERATING
            ACTIVITIES                                     (177,700)        (9,577)        (511,118)
                                                        -----------      ---------      -----------
CASH FLOWS FROM INVESTING
   ACTIVITIES:
       Purchase of product rights                           (25,000)             0         (255,000)
       Purchase of property and equipment                         0              0           (3,679)
                                                        -----------      ---------      -----------
          NET CASH (USED) BY INVESTING
             ACTIVITIES                                     (25,000)             0         (258,679)
                                                        -----------      ---------      -----------

CASH FLOWS FROM FINANCING
   ACTIVITIES:
       Issuance of common stock                             150,500              0          887,885
       Redemption of preferred stock                              0                        (165,000)
       Proceeds from loans payable                           89,575              0           89,575
                                                        -----------      ---------      -----------

          NET CASH PROVIDED BY FINANCING
             ACTIVITIES                                     240,075              0          812,460
                                                        -----------      ---------      -----------

EFFECT OF EXCHANGE RATE CHANGES
   ON CASH AND CASH EQUIVALENTS                              (6,237)       (15,014)         (10,720)
                                                        -----------      ---------      -----------
</TABLE>

       See Accompanying Notes and Independent Accountants' Review Report.


                                       8
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
              FOR THE NINE MONTHS ENDED JUNE 30, 2001 AND 2000 AND
           FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
                                  JUNE 30, 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                January 30,
                                                          Nine Months Ended    1995 (Date of
                                                              June 30,         Inception) to
                                                       ---------------------      June 30,
                                                         2001         2000          2001
                                                       --------     --------   -------------
<S>                                                    <C>          <C>           <C>
NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                                $ 31,138     $(24,591)     $ 31,943

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                                      805       26,926             0
                                                       --------     --------      --------

CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                                       $ 31,943     $  2,335      $ 31,943
                                                       ========     ========      ========

SUPPLEMENTAL DISCLOSURE OF
   CASH FLOW INFORMATION

       Cash paid for interest                          $  1,556     $      0      $  1,753
                                                       ========     ========      ========

       Cash paid for taxes                             $      0     $      0      $      0
                                                       ========     ========      ========

SCHEDULE OF NON-CASH INVESTING
   AND FINANCING ACTIVITIES

       Common stock issued for services                $654,000     $      0      $659,200
                                                       ========     ========      ========

       Purchase of product rights through issuance
          of common stock                              $      0     $      0      $ 20,000
                                                       ========     ========      ========

       Fair value of office rent donated by
          stockholders                                 $      0     $      0      $  1,358
                                                       ========     ========      ========

       Purchase of product rights                      $ 50,000     $      0      $ 50,000
                                                       ========     ========      ========
</TABLE>

       See Accompanying Notes and Independent Accountants' Review Report.


                                       9
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 1      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            Nature of Business and History of Company

            On January 30, 1995, the Company was organized under the name of
            L.P.R. Cybertek to engage in any lawful corporate undertaking,
            including, but not limited to, select mergers and acquisitions. On
            July 15, 1999, the Company entered into a merger agreement with
            ThermoElastic Technologies, Inc. whereby ThermoElastic Technologies,
            Inc. was merged into L.P.R. Cybertek and L.P.R. Cybertek's name was
            then changed to ThermoElastic Technologies, Inc.

            The Company is presently developing two operations as follows:

                  BITEM

                        The Company is developing, marketing and distributing a
                        new generation acrylic, known as Biocompatable Intraoral
                        Thermo Elastic Material (BITEM) which is anticipated to
                        be sold to dental related businesses and other allied
                        fields throughout the world.

                  DISIFIN

                        The Company purchased the rights to distribute Disifin
                        in the United States and Canada. Disifin is a solid
                        cleaning product used as a disinfectant in the medical,
                        dental and food processing industries.

            On June 14, 1999, the Company organized ThermoElastic Technologies
            (Canada), Inc., a 100% owned Canadian subsidiary. As of June 30,
            2001, the subsidiary was inactive and no financial activities have
            taken place in the subsidiary.

            Principles of Consolidation

            The consolidated financial statements include the accounts of
            ThermoElastic Technologies, Inc. and its wholly owned subsidiary
            ThermoElastic Technologies (Canada), Inc.

            There were no inter-company transactions between the companies.

            Cash and Cash Equivalents

            For purposes of the statement of cash flows, the Company considers
            all highly liquid debt instruments purchased with an original
            maturity of three months or less to be cash equivalents.

            Inventory

            Inventory is stated at the lower of cost (determined on the
            first-in, first-out-method) or market.

       See Accompanying Notes and Independent Accountants' Review Report.


                                       10
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 1      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

            Property and Equipment

            Property and equipment are stated at cost. Major renewals and
            improvements are charged to the asset accounts while replacements,
            maintenance and repairs, which do not improve or extend the lives of
            respective assets, are expensed. At the time property and equipment
            are retired or otherwise disposed of, the assets and related
            depreciation accounts are relieved of the applicable amounts. Gains
            or losses from retirements or sales are credited or charged to
            income.

            The Company depreciates its property and equipment for financial
            reporting purposes using the accelerated methods based upon an
            estimated useful life of five years.

            Accounting Estimates

            Management uses estimates and assumptions in preparing financial
            statements in accordance with generally accepted accounting
            principles. Those estimates and assumptions affect the reported
            amounts of assets and liabilities, the disclosure of contingent
            assets and liabilities, and the reported revenues and expenses.
            Actual results could vary from the estimates that were used.

            Income Taxes

            Provisions for income taxes are based on taxes payable or refundable
            for the current year and deferred taxes on temporary differences
            between the amount of taxable income and pretax financial income and
            between the tax basis of assets and liabilities and their reported
            amounts in the financial statements. Deferred tax assets and
            liabilities are included in the financial statements at currently
            enacted income tax rates applicable to the period in which the
            deferred tax assets and liabilities are expected to be realized or
            settled as prescribed in FASB Statement No. 109, Accounting for
            Income Taxes. As changes in tax laws or rate are enacted, deferred
            tax assets and liabilities are adjusted through the provision for
            income taxes.

            Net (Loss) Per Share

            The Company adopted Statement of Financial Accounting Standards No.
            128 that requires the reporting of both basic and diluted earnings
            (loss) per share. Basic earnings (loss) per share is computed by
            dividing net income (loss) available to common stockholders by the
            weighted average number of common shares outstanding for the period.
            Diluted earnings (loss) per share reflects the potential dilution
            that could occur if securities or other contracts to issue common
            stock were exercised or converted into common stock. In accordance
            with FASB 128, any anti- dilutive effects on net loss per share are
            excluded.

       See Accompanying Notes and Independent Accountants' Review Report.


                                       11
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 1      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

            Disclosure About Fair Value of Financial Instruments

            The Company estimates that the fair value of all financial
            instruments at June 30, 2001, as defined in FASB 107, does not
            differ materially from the aggregate carrying values of its
            financial instruments recorded in the accompanying balance sheet.
            The estimated fair value amounts have been determined by the Company
            using available market information and appropriate valuation
            methodologies. Considerable judgement is required in interpreting
            market data to develop the estimates of fair value, and accordingly,
            the estimates are not necessarily indicative of the amounts that the
            Company could realize in a current market exchange.

            Long-Lived Assets

            Statement of Financial Accounting Standards No. 121, "Accounting for
            the Impairment of Long- Lived Assets and for Long-Lived Assets to be
            Disposed Of," requires that long-lived assets be reviewed for
            impairment whenever events or changes in circumstances indicate that
            the carrying amount of the asset in question may not be recoverable.
            This standard did not have a material effect on the Company's
            results of operations, cash flows or financial position.

            Foreign Currency Translation

            The financial statements of the Company are measured using the local
            currency as the functional currency. Assets and liabilities of these
            companies are translated at exchange rates as of the balance sheet
            date or historical acquisition date, depending on the nature of the
            account. Revenues and expenses are translated at average rates of
            exchange in effect during the year. The resulting cumulative
            translation adjustments have been recorded as a separate component
            of stockholders' equity. Foreign currency tranaction gains and
            losses are included in consolidated net income. The financial
            statements are presented in United States of America dollars.

NOTE 2      DEVELOPMENT STAGE OPERATIONS

            As of June 30, 2001, the Company was in the development stage of
            operations. According to the Financial Accounting Standards Board of
            the Financial Accounting Foundation, a development stage Company is
            defined as a company that devotes most of its activities to
            establishing a new business activity. In addition, planned principal
            activities have not commenced, or have commenced and have not yet
            produced significant revenue.

            The Company expensed $591,411 of development costs from January 30,
            1995 to June 30, 2001.

       See Accompanying Notes and Independent Accountants' Review Report.


                                       12
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 3      PROPERTY RIGHTS

            BITEM

            The Company has entered into an exclusive agreement with Apple
            Dental Ventures (a related entity) to acquire the rights and related
            privileges to manufacture, market, distribute and sell by retail,
            wholesale or any other method, the "BITEM" products. These products
            are protected by U.S., Canadian and European patents, and all
            divisional patents for non-dental applications, along with
            improvements, variations and changes to these patents for the entire
            world for a term which is the longer of 25 years or the life of the
            patents or any extension or amendments of the patents.

            The license agreement has been capitalized at a cost of $250,000.
            Payments for the license agreement are $50,000 at the time of
            initial funding, $20,000 in common stock, three payments of $35,000
            every 2 months, and $75,000 at the end of one year. At June 30,
            2001, $75,000 remained in product rights payable.

            DISIFIN

            The Company obtained an exclusive agreement with a German
            manufacturer to distribute the Disifin products in the United States
            of America and Canada. The Company is required to perform the
            following during the duration of the agreement:

                  1.    Purchase all products from the manufacturer.
                  2.    Sell all manufacturer's products.
                  3.    Sell minimum fixed quantities for each year of the
                        agreement.
                  4.    Establish and maintain a depot with a complete range of
                        contractual products.
                  5.    Maintain an appropriate after-sales and repair service
                        for the contractual products.
                  6.    Renegotiate prices yearly.

            The contract is for an unlimited period of time and can be
            terminated by either party within a term of two years.

            AMORTIZATION

            Product rights on both products will begin being amortized once
            business activities commence.

NOTE 4      ACCOUNTS PAYABLE, RELATED ENTITIES

            The Company is related to the following entities through common
            officer positions and stock ownership:

       See Accompanying Notes and Independent Accountants' Review Report.


                                       13
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 4      ACCOUNTS PAYABLE, RELATED ENTITIES (CONTINUED)

                    Gritell International Limited     $  654,973
                    Trilock Financial Corporation        263,410
                    Vista Developments Ltd.              262,500
                    Harvard Investment Group Ltd.         24,033
                    Other                                 21,338
                                                      ----------

                                                      $1,226,254
                                                      ==========

NOTE 5     COMMON STOCK REIMBURSEMENTS

            Various stockholders have given their free-trading stock to
            consultants for the Company. The Company has agreed to replace the
            shares given by the stockholders with restricted shares. The Company
            is obligated to issue 505,000 shares of stock which are valued at
            $37,270.

NOTE 6      LOAN PAYABLE

            The Company received $70,000 of unsecured loans from International
            Corporate Structures. The loans are payable on demand and bears
            interest at 6%. The loans are repayable in cash or free- trading
            stock, at the lender's option.

NOTE 7      COMMITMENTS

            The Company has entered into the following consulting agreements:

                  Gritell International Limited (A Related Entity)

                        1.    Date - February 8, 1999.
                        2.    Term - Ten years.
                        3.    Compensation in US dollars.
                              First year - $13,334 per month.
                              Second and third year - $20,000 per month.
                              Fourth and fifth year - $33,334 per month.
                              Automobile lease and cellular telephone
                              reimbursement.
                        4.    Income tax reimbursements - All income taxes which
                              accrue to Gritell as a result of the compensation
                              shall be paid by the Company.
                        5.    Services to perform - Management, business and
                              financial advice to the Board of Directors.
                        6.    The agreement was amended on April 1, 1999,
                              whereby Gritell will, until it sees fit to do
                              otherwise, accept the payment of $6,000 per month,
                              provided that the balance shall accrue to
                              Gritell's benefit and shall be paid to Gritell as
                              and when it, in its sole discretion, shall demand
                              payment of the accrued balance. The Company has
                              accrued for the deferred payments and included the
                              amounts in accounts payable.

       See Accompanying Notes and Independent Accountants' Review Report.


                                       14
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 7     COMMITMENTS (CONTINUED)

                  Trilock Financial Corporation (A Related Entity)

                        1.    Date - February 22, 1999.
                        2.    Term - Ten years.
                        3.    Compensation in US dollars.
                              First year - $6,666 per month.
                              Second and third year - $10,000 per month.
                              Fourth and fifth year - $16,666 per month.
                              Automobile lease and cellular telephone
                              reimbursement.
                        4.    Income tax reimbursements - All income taxes which
                              accrue to Trilock as a result of the compensation
                              shall be paid by the Company.
                        5.    Services to perform - Management, business and
                              financial advice to the Board of Directors.
                        6.    The agreement was amended on April 1, 1999,
                              whereby Trilock will, until it sees fit to do
                              otherwise, accept the payment of $3,000 per month,
                              provided that the balance shall accrue to
                              Trilock's benefit and shall be paid to Trilock as
                              and when it, in its sole discretion, shall demand
                              payment of the accrued balance. The Company has
                              accrued for the deferred payments and included the
                              amounts in accounts payable.

                  Gulf Atlantic Publishing, Inc. (A Non-related Entity)

                        1.    Date - February 18, 2000.
                        2.    Compensation in US dollars.
                              A.  262,500 free trading shares issued by certain
                                  stockholders of the Company.
                              B.  Company agrees to issue 262,500 shares of
                                  restricted common stock.
                        3.    Services to provide - Mailings and website
                              advertising.

                  Rainbow Communications, Inc. (A Non-related Entity)

                        1.    Date - February 18, 2000.
                        2.    Compensation in US dollars.
                              A.  87,500 free trading shares issued by certain
                                  stockholders of the Company.
                              B.  Company agrees to issue 87,500 shares of
                                  restricted common stock.
                        3.    Services to provide - Advertising.

                  Apple Dental Ventures (A Related Entity)

                  The Company entered an exclusive agreement with Apple Dental
                  Ventures to acquire the rights and related privileges to
                  manufacture, market, distribute and sell by retail, wholesale
                  or any other method, the "BITEM" products.

       See Accompanying Notes and Independent Accountants' Review Report.


                                       15
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 7      COMMITMENTS (CONTINUED)

            For granting this exclusive license, Apple Dental Ventures will
            receive, the following:

                  1.    A royalty calculated as follows:
                        5% of the first $25,000,000 in gross annual income, and
                        3.5% of the next $25,000,000 in gross annual income, and
                        2.5% of gross annual income exceeding $50,000,000.
                  2.    A consulting agreement for a 3-year term commencing
                        December 28, 1998, and payable at a maximum of Canadian
                        $60,000 (US $39,200 as of June 30, 2001) per year for
                        further research and development of new products,
                        marketing and training. This agreement shall be
                        renewable on mutual consent for two successive periods
                        of two years.

                  3.    The right to purchase 100,000 common shares, par value
                        of $.0001 per share, at $.20 per share, or $20,000. This
                        right has been exercised as of the date of these
                        financial statements.

                  4.    A two-year option to purchase 100,000 common shares at
                        $.0001 per share.

            Vista Development Ltd. (A Related Entity)

                  1.    Date - February 2, 1999.
                  2.    Compensation in US dollars.
                        $150,000 per year, payable monthly.
                        Commission of 1% on annual gross sales or five percent
                        of operating profit, whichever is the lesser.
                  3.    Services to provide - Consulting for worldwide and
                        multi-industry marketing.
                  4.    Performance based options on terms to yet be agreed upon
                        to be available from a pool of two million common shares
                        to be set aside for performance of this option plan.
                  5.    Advisory Board - Members of the Advisory Board would be
                        entitled to an option to acquire 25,000 shares of common
                        stock at the end of their two year term at 50% of the
                        current market price.

            Diamonds-In-The Rough.Com LLC

                  1.    Date - February 15, 2001.
                  2.    Compensation - 40,000 shares of free-trading shares of
                        the Company's stock . The Company has agreed to replace
                        this stock with 60,000 shares of restricted stock.
                  3.    Services to provide -Mass e-mails of the Company's
                        products and services.
                  4.    Term-One year.

       See Accompanying Notes and Independent Accountants' Review Report.


                                       16
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 7      COMMITMENTS (CONTINUED)

            LBI Group, Inc.

                  1.    Date - January 29, 2001.
                  2.    Compensation - Options to acquire 500,000 shares of the
                        Company's stock for .14(cent) per share. LBI exercised
                        325,000 shares on the option.
                  3.    Locate and negotiate acquisitions for the Company.
                  4.    Term - Twelve months.

            Larix International Corporation

                  1.    Date - January 26, 2001.
                  2.    Compensation - 1,500,000 shares of the Company's common
                        stock.
                  3.    Services to provide - General corporation consulting and
                        planning - locate and negotiate acquisitions for the
                        Company.
                  4.    Term - Eighteen months.

            Vincent Barone

                  1.    Date - January 29, 2001.
                  2.    Compensation - 250,000 options to Company's stock at
                        .14(cent) per shares.
                  3.    General corporation consultation.
                  4.    Term - Twelve months.
                  5.    Options to acquire stock.

            Chief Executive Officer

                  Twenty four month employment agreement from October 16, 2000.

                  The agreement requires an annual salary of $100,020 plus stock
                  issuances as follows:

                        62,500 shares of stock on April 11, 2001, July 11, 2001,
                        October 11, 2001, January 11, 2002, April 11, 2002 and
                        July 11, 2002

            The Company is also required to establish a management incentive
            option program based upon performance on terms to be decided upon.

NOTE 8      INTEREST

            Interest expense for the nine months ended June 30, 2001 was $1,556.

NOTE 9      RESEARCH AND DEVELOPMENT

            The Company incurred research and development costs of $12,561 for
            the nine months ended June 30, 2001.

       See Accompanying Notes and Independent Accountants' Review Report.


                                       17
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 10     INCOME  TAXES

            Significant components of the Company's deferred tax assets and
              liabilities are as follows at June 30, 2001:

<TABLE>
<S>                                                                             <C>
               Deferred tax assets:

                    Net operating loss carryforward                             $    488,000

                    Less valuation allowance                                         488,000
                                                                                ------------

                    Net deferred tax assets                                     $          0
                                                                                ============

               Deferred tax liabilities                                         $          0
                                                                                ============

            A reconciliation of the valuation allowance is as follows:

               Balance, October 1, 2000                                         $    240,700

               Addition to allowance for the nine months ended
                 June 30, 2001                                                       247,300
                                                                                ------------

               Balance, June 30, 2001                                           $    488,000
                                                                                ============
</TABLE>

NOTE 11     PREFERRED STOCK

            The preferred stock is non-voting and non-participating.

NOTE 12     STOCK OPTIONS

            The Company has the following stock options outstanding as of June
            30, 2001:

                                                                     Option
                                                   Shares             Price
                                                 -----------     ---------------

               Apple Dental Ventures                100,000              $.0001
                                                                      Per share

               Vista Development Ltd - Advisory                  50% of current
                 Board                               25,000        market price
                                                    -------

                                                    125,000
                                                    =======

       See Accompanying Notes and Independent Accountants' Review Report.


                                       18
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 13     STOCK WARRANTS

            The Company has the following warrants outstanding as of June 30,
            2001:

                                                 Number         Expiration
                 Series          Price          of Shares          Date
                 ------          -----          ---------       -----------

                    A          $    2.00         666,400     December 31, 2001

                    B          $    3.00         666,400     December 31, 2001

            The Company may redeem the warrants at $.01 per warrant.

NOTE 14     NET OPERATING LOSS CARRYFORWARDS

            The Company has the following net operating loss carryforwards:

                         Tax Year                 Amount         Expiration Date
                     ------------------       --------------     ---------------

                     December 31, 1995        $        8,396          2010
                     December 31, 1996                 6,821          2011
                     December 31, 1997                   381          2012
                     September 30, 1998                6,439          2018
                     September 30, 1999              472,284          2019
                     September 30, 2000              708,990          2020
                     December 31, 2000               163,568          2020
                     June 30, 2001                 1,075,144          2021
                                              --------------
                                              $    2,442,023
                                              ==============

NOTE 15     OPERATING LEASES

            The Company leases two vehicles under operating leases with four -
            year terms and monthly payments of $1,142.

            Future minimum lease payments under the vehicle leases are as
            follows:

                June 30, 2001                                         $   10,284
                June 30, 2002                                             13,712
                June 30, 2003                                              2,824
                                                                      ----------
                                                                      $   26,820
                                                                      ==========

            Rent expense for the nine months ended June 30, 2001 and 2000
            totaled $10,284.

       See Accompanying Notes and Independent Accountants' Review Report.


                                       19
<PAGE>

                 THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
                          (DEVELOPMENT STAGE COMPANIES)
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

NOTE 16     CONTINGENCIES

            In the Company's contracts with Gritell International Limited and
            Trilock Financial Corporation, the Company agreed to reimburse
            Gritell International Limited and Trilock Financial Corporation for
            any income taxes that might accrue to them on the compensation they
            receive. The amount of the tax, if any, is not known and the Company
            has not accrued any liability for this contingency.

NOTE 17     GOING CONCERN

            These financial statements are presented on the basis that the
            Company is a going concern. Going concern contemplates the
            realization of assets and the satisfaction of liabilities in the
            normal course of business over a reasonable length of time. The
            Company is in the development stage of operations and has incurred
            losses of $2,282,597 from inception. In addition, the Company's
            sources of working capital were supplied by loans from related
            entities.

            The Company is awaiting the United States Food and Drug
            Administration approval to sell the "BITEM" product which will
            enable it to market its "BITEM" product to the public.

NOTE 18     UNAUDITED FINANCIAL INFORMATION

            The accompanying financial information as of June 30, 2001 is
            unaudited. In management's opinion, such information includes all
            normal recurring entries necessary to make the financial information
            not misleading.

       See Accompanying Notes and Independent Accountants' Review Report.


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