SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended: December 31, 2002

                        Commission File Number: 000-27931

                          DESERT HEALTH PRODUCTS, INC.
             (Exact name of registrant as specified in our charter)

Arizona                                                      86-0699108
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

8221 E. Evans Rd
Scottsdale Arizona                                           85260
(Address of principal executive offices)                     (Zip Code)

        Registrant's telephone number including area code: (480) 951-1941

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

          Securities registered pursuant to Section 12 (g) of the Act:
                         Common Stock, $0.001 par value
                                (Title of Class)

            Indicate by check mark whether the registrant (a) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

            Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB |_|.

            For the fiscal year ended December 31, 2002, the Registrant's
revenues were approximately $133,075. As of December 31, 2002, the aggregate
market value of Registrant's voting stock held by non-affiliates was
approximately $2,031,694.

            The number of shares of Common Stock, $0.001 par value, outstanding
on December 31, 2001 was 12,113,821 shares.

                    Documents incorporated by reference: None
          Transitional Small Business Disclosure Format Yes |_| No |X|

<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                           FOR THE FISCAL PERIOD ENDED
                                December 31, 2002

                                 Index to Report
                                 On Form 10-KSB

PART I                                                                      Page

Item 1.  Business                                                            3
Item 2.  Properties                                                          11
Item 3.  Legal Proceedings                                                   11
Item 4.  Submission of Matters to a Vote of Security Holders                 12

PART II

Item 5.  Market for Registrant's Common Equity and
           Related Stockholder Matters                                       12
Item 6.  Management's Discussion and Analysis of Financial Condition
           And Results of Operation                                          12
Item 7.  Financial Statements and Supplementary Data                         16
Item 8.  Changes in and Disagreements With Accountants on Accounting and
           Financial Disclosure                                              16

PART III

Item 9.  Directors and Executive Officers of the Registrant                  16
Item 10. Executive Compensation                                              18
Item 11. Security Ownership of Certain Beneficial Owners
           And Management                                                    20
Item 12. Certain Relationships and Related Transactions                      21

PART IV

Item 13. Exhibits, Financial Statement Schedules and Reports
           On Form 8-K                                                       21
Item 14. Controls and Procedures                                             23

Signatures                                                                   24

            This form 10-KSB contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are based on certain assumptions, are
subject to significant risks and uncertainties, and may be identified by
reference to a future period or periods or by the use of forward-looking
terminology such as "may", "will", "believe", "expect", "anticipate",
"continue", or similar terms or variations on those terms or the negative of
those terms. These forward-looking statements are based on management's
expectations as of the date hereof, and the Company does not undertake any
responsibility to update any of these statements in the future. Actual future
performance and results could differ materially from that contained in or
suggested by these forward-looking statements as a result of factors set forth
in this Form 10-KSB (including those sections hereof incorporated by reference
from other filings with the Securities and Exchange Commission), in particular
as set forth in the 'Management's Discussion and Analysis' under Item 6.


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<PAGE>

            In this form 10-KSB references to "Desert Health", "the Company",
"we", "us", and "our" refer to Desert Health Products, Inc.

PART I

ITEM 1. BUSINESS

Overview

            Desert Health Products, Inc., an Arizona corporation, was formed in
1991. Desert Health is engaged in the packaging, sale and distribution of
branded and store brand (private label) vitamins, nutritional supplements, skin
care and animal care products. Desert Health has focused its marketing and
registration efforts primarily in the foreign marketplace. This is a very time
consuming and expensive project, but the nutraceutical and nutritional
supplement market is growing at a faster pace internationally than the domestic
market. One of the many rewards of having customers in the international market
is that once the registrations are in place, the customer becomes a partner in
developing that market in the long-term.

            However, now that the international market is somewhat established
and starting to grow, the Company is starting to develop a customer base in the
United States and Canada specializing at present with companies that have
existing markets and sales force. In November 2002, the Company acquired a
company specializing in network marketing of nutritional supplements and skin
care products in the US. This company purchases all its products from Desert
Health Products, Inc.

            Joanne Cavanagh, H.N.T., A.H.G., National Director of Sales, is on
the Company's staff as an on-site nutrition therapist. Ms. Cavanagh has
certifications in the fields of Nutrition, Supplements, Stress Management,
Nutrition Therapies, Weight Management and Western Herbalism. Ms. Cavanagh
provides insight into special formulations and developments in the natural
products industry. The ability to provide education and information to both the
wholesale and retail divisions has increased our potential to penetrate numerous
markets. Attendance at the nation conferences of both the Athletic Trainers
Association and the Diabetic Educators has already produced increased leads and
potential sales.

            Desert Health markets over 200 products, which are packaged under
various labels and bottle counts. They are sold in Vitamin and Mineral
combinations, Chinese Herbal Products, Specialty Supplements, Weight Management
Products, Herbal/Botanical Products, FemAid Product Support Systems, Ayurvedic
Products, Skin Care Products, Pet Care Products, and Water Purification
Products, with varying potency levels in tablets and chewable and gelatin
encapsulated capsules ("soft gels"). The Company has traditionally outsourced
its raw materials manufacturing.

            On January 26, 2000, pursuant to an Acquisition Agreement and Plan
of Merger entered into by and between Desert Health and Intercontinental Capital
Fund, Inc., (Intercontinental) a Nevada corporation, (a company subject to the
reporting requirements of the Securities and Exchange Act of 1934) all of the
outstanding shares of common stock of Intercontinental were exchanged for
400,000 shares of common stock of Desert Health, restricted under Rule 144 of
the Securities Act of 1933, in a transaction in which Desert Health was the
successor and took on the reporting requirements of Intercontinental Capital
Fund, Inc.

Subsequent Events

            On February 7, 2003, an officer of the Company returned 425,000
shares of the Company's stock as repayment for the note receivable listed in
Note C of the financial statements for $208,917 plus the accrued interest of
$76,946.


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<PAGE>


Products and Product Development

            Desert Health's products are marketed under its customers' store
brands (private label) as well as under the Company's own brands.

            Desert Health introduces new products and reformulates existing
products on an ongoing basis in response to consumer trends and emerging
scientific evidence. Product concepts are generally developed by Desert Health's
management, key employees and consultants. Desert Health also develops and
formulates new products based on customers' requests and responds to changes in
existing product brands by reformulating existing products and redesigning
packaging.

            The Company's product lines include:

      o     Vitamin, Mineral and Antioxidant combinations.

      o     Chinese Herbal formulas based on classic Chinese formulas originally
            developed through 3000 years of medical practice as well as current
            clinical and laboratory studies. These products embody Chinese
            medicine's basic philosophy of balance, integrating prevention and
            treatment of illness while enhancing well-being and quality of life.
            These products were individually formulated by Dr. Henry Han, who
            draws from over 20 years of clinical experience and research to
            design formulas to be agreeable to the typical body type of
            westerners.

            Dr. Henry Han is a consultant and an advisor to the Company and is
            the agent in charge of The Company's office facility in Beijing,
            China. This office enables The Company to supply to its worldwide
            customer base the finest in Chinese herbs, standardized to Dr. Han's
            requirements.

      o     Specialty Supplements - The Company uses current scientific research
            to create innovative specialty supplements. We search worldwide to
            find the naturally derived ingredients utilized to formulate these
            powerful products. All of these supplements contain targeted
            nutrition ingredients to provide safe and effective remedies for
            common ailments.

      o     Weight Management Products - In response to the obesity epidemic in
            the United States and elsewhere in the world, the Company has
            developed a line of products to assist in weight reduction and
            management. The Company's weight loss products incorporate natural
            ingredients, which help to reduce appetite, accelerate metabolism,
            diminish carbohydrate cravings, and encourage fat loss, so that
            weight loss may be achieved.

      o     Herbal/Botanical Products - The Company's herbs and other botanical
            products are created from premium raw materials. We utilize only
            botanical ingredients cultivated from reputable growers with strict
            quality standards. Our formulas blend the traditional wisdom of
            cultures across the globe, and modern science.

      o     FemAid Products Support Systems - FemAid is a comprehensive
            nutritional program formulated for women of all ages, but especially
            for women suffering from pre-menstrual syndrome (PMS), perimenopause
            and menopause. Today, a growing number of women are asking for more
            natural products and approaches whenever possible. Although there is
            not a lack of products available there is a lack of guidance and
            support in terms of how much, when, and in what combinations
            supplements should be taken in order to be truly beneficial.

            The FemAid line provides guidance for the consumer by recommending a
            distinct combination of natural products for each hormonal phase.
            The FemAid line is a combination of nutritional supplements, phyto
            (plant) hormones and herbs to help women maintain optimal health and
            alleviate uncomfortable symptoms resulting from hormonal and
            nutritional imbalance.


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<PAGE>

      o     Ayurvedic Products - For over five thousand years, a health system
            referred to as 'Ayurveda', meaning 'the science of life', has been
            practiced in India. This system of natural medicine uses a holistic
            approach to healing using specialized herbal formulas to balance the
            body. The Company's Ayurvedic herbal formulas blend the traditional
            ancient wisdom with the finest current scientific research and
            manufacturing methods.

      o     Skin/Personal Care Products - The condition and appearance of one's
            skin is one of the first things that people notice. The Company
            offers some of the most innovative skin care technology available
            anywhere. Desert Health's skin care and personal care products are
            designed to maintain and protect the natural inheritance of youthful
            smoothness and the radiant vitality of healthy skin. The Company
            specializes in state of the art formulations that meet the industry
            standards and qualifications from all natural accepted products to
            Beta/Alpha Hydroxy items.

      o     Pet Care Products - Desert Health has researched and developed a
            complete line of pet care products for good nutrition and grooming
            for your pets. The philosophy behind our Pet Care line is to provide
            for the health and well being of pets by using natural raw materials
            with no negative side effects. The products are formulated using
            such ingredients as aloe vera, active essential oils, efficacious
            herbs, natural emollients and other natural ingredients. Of these
            agents aloe vera is a key ingredient for the health and beauty of
            pets. Only 100% natural liquid aloe vera is used in these products.
            The aloe vera is carefully cold processed in liquid form to preserve
            the efficacy of the fresh product.

      o     Water Purification - Desert Health Products, Inc., provides ten
            above-counter and below-counter water purification systems with
            support documents and replacement parts. Benefits and features of
            these systems are that they are cost effective, control bacterial
            growth, are easily installed, are low maintenance, have compact
            designs, are multi-purpose, are simple, have a limited one year
            warranty, and produce great tasting water.

New Products

      o     Burn and Scald Relief - This product was formulated under the
            guidance of traditional Chinese Medicine and Western Medicine. It is
            made from all natural Chinese Herbs and is patented in China. Burn
            and Scald Relief is for external use only. Desert Health's Burn and
            Scald Relief is one of many pearls in Chinese Medicine. It resolves
            the complexity of problems that occur when treating burns and scalds
            in the traditional way. It also gives birth to the new era of
            treating all kinds of burns and scalds without pain, festering,
            infection and scarring. The treatment has an immediate effect and
            the healing time is drastically reduced.

            Burn and Scald Relief has won many awards in China and elsewhere.
            These include the Brussels Eureka '98, Merite De L'Invention.

      o     Desert Health's Foot Care - A Skin Conditioning System - A new and
            innovative product designed specifically to treat the dry skin and
            other skin conditions often associated with diabetes. This topical
            skin care system is formulated to provide deep skin moisturization,
            enhance healthy looking skin, and make the skin feel fresh again. It
            is a two-phased natural product and is doctor recommended, often
            showing results starting with the first application.

            Following a daily regimen will help to remove dirt and debris from
            the surface of the feet and reduce the likelihood of contamination.
            Phase One also contains an incredible exfoliant, which removes
            excess dead or dry skin. Phase Two contains an antioxidant, which
            fights free radicals that may harm cells, and helps maintain the
            skin's own natural flexibility and elasticity. It enhances natural
            skin repair and strengthens the skin's own natural defenses. The
            potent skin conditioner helps reduce skin irritation caused by dry
            skin and stimulates the skin's own microcirculation. The special
            invigoration increases the skin's own microcirculation to deliver a


                                                                               5
<PAGE>


            special blend of moisturizers to distressed skin. The long lasting
            moisturizer re-moisturizes the skin.

            Numerous conditions may benefit from the use of this product.
            Individuals who have dry, cracked, and/or skin irritation as well as
            vascular insufficiency or diabetic skin conditions have used Desert
            Health's Foot Care to enhance healthy looking skin.

      o     Snore Relief - Snore Relief is a unique combination of all natural
            herbs and enzymes that help reduce disturbing snoring. There have
            been no reported side effects and eighty-six percent of users have
            reported good to excellent results when taking this formulation.

      o     Allergy Relief - This allergy formula is a unique combination of all
            natural herbs and enzymes that gently work together to assist in
            symptomatic relief of allergies and sinusitis.

      o     Anti-Aging - At the end of the second quarter 2003, Desert Health
            anticipates offering to the international community a line of
            anti-aging products developed by nationally known dermatologists
            exclusively for Desert Health Products, Inc. The product line will
            include facial creams, anti-wrinkle creams, and cellulite creams.
            This product line will be supported by published documents.

      o     Children's Chewable Multi-Vitamins - These vitamins are available in
            cherry, orange and grape flavors, supplying the required nutritional
            needs of active children.

Desert Health Products, Inc., is against animal testing on cosmetic products and
ingredients. We do not test our products or ingredients on animals, nor do we
commission others to do so.

Manufacturing and Packaging

            Desert Health has contracts with manufacturers that have FDA
approved facilities, GMP registration and in some cases, when necessary, topical
drug licenses. Thus, the Company is able to contract package for companies
around the world to meet their needs.

Marketing and Distribution Strategies

            Desert Health's strategy is to build relationships with distributors
and retail operators. Desert Health Products, Inc., is developing a niche market
by focusing on the mid-size companies that need branded or private label
products in affordable volumes. Desert Health's in-house packaging and contract
packaging agreements enable the Company to provide multiples of various sizes
and bottles to meet the requirements of its customers.

Global Sales

            Desert Health will continue to capitalize on the global
opportunities created by the increasing worldwide recognition of the benefits of
vitamins and nutritional supplements and the perception that 'Made in USA'
products are the safest and highest quality products obtainable.

            Desert Health's office in Beijing, China, located at 501 Tian An
Building, Nanheyan Hualong St. Dongcheng District, has an experienced staff that
is aggressively promoting the Company to many areas of the huge Chinese market.
At the present time the Company's products are either being tested or registered
in Beijing, Shanghai and Guangzhou China.


                                                                               6
<PAGE>


Industry Overview

Domestic Market

            Surveys find that the majority of Americans depend on dietary
supplements to maintain good health. As a result, the dietary supplement
industry generates billions of dollars in sales annually in the United States,
making it one of the most dynamic sectors of the United States economy.

            According to the Natural Marketing Institute (NMI), which monitors
consumer trends in the marketplace, demand for dietary supplements corresponds
with a strategic shift in how consumers view health and wellness. More than ever
before, consumers feel empowered to manage their health and are either actively
using supplements or are researching information about them.

            For this reason, new survey research conducted for the Dietary
Supplement Information Bureau finds that dietary supplements have become an
American standard. Three in five consumers - (59%) - take supplements on a
regular basis. Corresponding to the dramatic growth of herbal products over the
past few years the survey found that almost one in four Americans (23 %)
regularly uses herbs and specialty supplements.

            Minerals consist of 8% of the supplement market. Nutrition Business
Journal reports that sales of minerals reached $1.4 billion in 2000. Within this
category the biggest seller is calcium, which comprised half of all mineral
sales, followed by iron, magnesium, chromium, zinc, selenium and potassium.

International Market

            According to a recent IMS Health study, the worldwide market for
over-the-counter products reached a value of USD 40.8 billion in 1999. The
European OTC market ranks second to North America with sales of USD 10.9 billion
and a 27% market share. Studies also show that the European population is
increasingly health conscious. People are taking more responsibility for their
physical welfare. The growth in information concerning health, particularly on
the Internet, has led to explosive growth in the consumption of so-called
self-medication products. Other trends contributing to the growth in this market
include increased availability of vitamins and nutritional supplements,
increasing disposable income and a tendency for consumers to buy products under
the motto "prevention is better than a cure."

            Vitamins and nutrition supplements are marketed to appeal to various
groups, including: health conscious; those with an increased health risk due to
hereditary or genetic factors; those who eat nutritionally inadequate meals; the
physically active; children, women of child-bearing age and pregnant women;
people on a weight reducing diet; and smokers.

            Vitamins and nutrition supplements are primarily distributed through
pharmacies and drugstores and over the Internet.

            Based on our research we believe that the market will increase by
five to six percent in the next three years.

            In Asia, the United States is an important player. Based on trade
statistics, health supplements' imports from the United States showed a steady
growth. The marketplace is generally very receptive to American products. While
the market is highly competitive and indeed saturated, best prospects are those
supplements that are innovative with scientifically proven benefits, focused on
preventive care. Natural, holistic (i.e. wellness-focused), enzymatic formulae,
anti-oxidants, bone-mineral enhancement formulae, brain-foods, vanity-related
and those that provide a quick "pick-me-up" for sports enthusiasts are
increasing in popularity. "Nutraceuticals," a recently coined term that refers
to natural and herbal remedies that are manufactured and packaged in capsule
form, is fast gaining acceptance. Multi-vitamins and vitamin C supplements are
traditionally popular with the mass market.


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<PAGE>


            Market expansion is estimated to be between three percent and five
percent annually as more Asians include supplements in their diet, with a view
to overall health improvement.

Source and Availability of Raw Materials

            Desert Health Products, Inc. constantly searches worldwide with the
help of its advisors for the finest quality raw materials in order to guarantee
that the Company continues to provide the most active finished product to its
customers.

            The Company has not experienced any material adverse effect on its
business as a result of shortages of raw materials or packaging materials used
in the manufacture of its products. An unexpected interruption or a shortage in
supply could adversely affect the Company.

Quality Control

            Tablets and capsules are purchased from manufacturing operations,
which include modern quality control laboratories and testing facilities. When
products are ready for bottling, automated equipment counts the tablets or
capsules, inserts them into bottles, applies a cap, (which includes a
tamper-resistant inner seal), affixes a label and adds a tamper-resistant outer
safety seal. All of this is done according to Good Manufacturing Practice
regulations for dietary supplements. Finished blended powders and bulk products
undergo the same quality control.

Major Customers

            For the years ended December 31, 2002 and 2001, a significant volume
of sales was concentrated with three customers. These accounted for 63% of sales
during fiscal 2002. In 2001 these three customers accounted for 54% of sales. If
these customers, or any of the Company's other major customers substantially
reduce their volume of purchases from Desert Health, results of operations could
be materially adversely affected.

Competition

            The market for vitamins and other nutritional supplements is highly
competitive in all of the Company's channels of distribution. The marketplace
for private label business is extremely price sensitive with service levels,
quality, innovative packaging, marketing and promotional programs and uniqueness
of products being the key factors influencing competitiveness.

            The Company believes that there are also numerous companies
competing for nutritional product lines in its geographical markets. As most
companies are privately held, the Company is unable to precisely assess the size
of its competitors or where it stands with respect to sales volume in brands.
Most competitors are substantially larger than Desert Health and have greater
financial resources, which could impact our success. Desert Health derives a
competitive benefit of having spent several years establishing import rights
into various countries.

International Sales

            Sales of the Company's products outside of North America represented
approximately 71% and 83% in fiscal 2002 and 2001, respectively. The Company
expects that international sales will continue to represent a significant
portion of its sales. International sales and operations may be subject to risks
such as the imposition of governmental controls, export license requirements,
restrictions on the export of critical ingredients, currency exchange
fluctuations, generally longer receivable collection periods, political
instability, trade restrictions, changes in tariffs, difficulties in staffing
and managing international operations, potential insolvency of international
distributors and difficulty in collecting accounts receivable. There can be no
assurance that these factors will not have an adverse effect on the Company's
future international sales and, consequently, on the Company's business,
operating results and financial condition.


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<PAGE>


Government Regulation

            The processing, formulation, packaging, labeling and advertising of
the Company's products are subject to regulation by one or more Federal
agencies, including the Food and Drug Administration (FDA), the Federal Trade
Commission, the Consumer Product Safety Commission, the United States Department
of Agriculture and the United States Environmental Protection Agency. These
activities are also regulated by various agencies of the states, localities and
countries in which Desert Health's products are sold. In addition, the Company
markets certain of its products in compliance with the guidelines promulgated by
the United States Pharmacopoeia Convention, Inc., (USP) and other voluntary
standard organizations.

            The FDA in particular, is primarily responsible for regulation of
the labeling, manufacture and sale of nutritional supplements, which the FDA
believes to be unapproved drugs or food additives rather than food supplements.
These products are primarily regulated by the FDA under the auspices of the
Federal Food, Drug and Cosmetic Act ("FFDCA"). Under the FFDCA, most dietary
supplements are currently regulated as foods, which require no approval from the
FDA prior to marketing. Therefore, the regulation of dietary supplements is far
less restrictive than that imposed upon manufacturers and distributors of
prescription drugs. Dietary supplements, however, must be labeled correctly to
avoid being misbranded under the FFDCA. Health claims made by nutritional
supplement companies with respect to their product are specifically regulated by
the FDA. If such products make unapproved health claims, the FDA may consider
them as unapproved drugs, which require approval by the FDA prior to marketing.

            The Dietary Supplemental Health and Education Act (DSHEA) recognizes
the importance of good nutrition and the availability of safe dietary
supplements in preventive health care. DSHEA amends the Federal Food, Drug and
Cosmetic Act by defining dietary supplements, which include vitamins, minerals,
nutritional supplements and herbs, as a new category of food, separate from
conventional food. Under DSHEA, the FDA is generally prohibited from regulating
such dietary supplements as food additives or drugs. It requires the FDA to
regulate dietary supplements so as to guarantee consumer access to beneficial
dietary supplements, allowing truthful and proven claims. Generally, dietary
ingredients that were on the market before October 15, 1994 may be sold without
FDA pre-approval and without notifying the FDA. However, new dietary ingredients
(those not used in dietary supplements marketed before October 15, 1994) require
premarket submission to the FDA of evidence of a history of their safe use, or
other evidence establishing that they are reasonably expected to be safe. There
can be no assurance that the FDA will accept the evidence of safety for any new
dietary ingredient that the Company may decide to use, and the FDA's refusal to
accept such evidence could result in regulation of such dietary ingredients as
food additives, requiring the FDA pre-approval based on newly conducted, costly
safety testing.

            DSHEA also authorizes the FDA to promulgate Good Manufacturing
Practice regulations for dietary supplements, which would require special
quality controls for the manufacture, packaging, storage and distribution of
supplements. The Company believes that its facilities and those of independent
third party manufacturers have completed significant facility renovations that
should allow the Company to comply with the new regulations. DSHEA further
authorizes the FDA to promulgate regulations governing the labeling of dietary
supplements including claims for supplements pursuant to recommendations made by
the Presidential Commission on Dietary Supplement Labels.

            The Company's products which are sold in Canada are further subject
to Canadian government regulation under that country's Food and Drug Act and the
regulations thereunder (the "Canadian Act"), which includes regulatory approvals
of applicable products through a drug identification number and general
proprietary number by Health Canada. The loss of a particular drug
identification number or general proprietary number would adversely affect the
Company's ability to continue to sell the particular product to which the drug
identification number or general proprietary number was assigned. Material
non-compliance with the provisions of the Canadian Act may result in the loss of
a drug identification number or general proprietary number or the seizure and
forfeiture of the particular products, which are sold in non-compliance with the
Canadian Act.


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<PAGE>


            In addition, the Company cannot predict whether new legislation or
regulations governing the Company's activities will be enacted by legislative
bodies or promulgated by agencies regulating the Company's activities, or what
the effect of any such legislation or regulations on The Company's business
would be.

            Overseas, registration is mandatory in each country prior to
distribution. This process may take from several months to over a year to
complete. The Company, at any one time, may have several products waiting
approval for registration and eventual distribution. The Company can provide no
assurance as to the timing of such approvals.

Trademarks

            Desert Health owns or has applied for trademarks registered with the
United States Patent and Trademark Office. Additionally, the Company has
registered the Desert Health trade name and logo as Class 5 in the following
countries: Argentina, Brazil, Canada, Egypt, France, Germany, Hong Kong,
Indonesia, Italy, Malaysia, Mexico, Norway, Spain, Sweden, Taiwan, Britain and
Northern Ireland. Federally registered trademarks have a perpetual life, as long
as they are renewed on a timely basis and used properly as trademarks, subject
to the rights of third parties to seek cancellation of the trademarks. Desert
Health believes that its registered and unregistered trademarks and other
proprietary rights are valuable assets and believes they have significant value
in the marketing of its products. Desert Health vigorously protects its
trademarks against infringement.

Research and Development

            Desert Health does not conduct primary research for the development
of new ingredients. Instead, Desert Health's research efforts are focused on
developing new products in response to market trends and consumer demands.
Desert Health's staff also continually reformulates existing Desert Health
products in response to changes in nationally advertised brand formulas in order
to maintain product comparability.

            Desert Health believes that flexibility and innovation with respect
to new products are crucial factors in competing for market share in the field
of nutritional supplements. By monitoring market trends and by avoiding
short-lived 'fad' items, the Company is able to anticipate significant consumer
demand for certain types of products. The Company develops high-quality new
products on an ongoing basis, capitalizing on the emerging science relative to
nutritional products as well as shifts in consumer demand. Thus, while the
introduction of new products does not entail the expenditure of significant
funds by the Company for scientific research and for the development of
ingredients, considerable time and effort are devoted to market research
activities, product formulations and packaging.

Product Liability/Insurance

            Desert Health, as a distributor of products that are ingested, faces
an inherent risk of exposure to product liability claims. Accordingly, the
Company maintains product liability insurance coverage and requires each of its
suppliers to carry product liability insurance covering the Company. While
management believes that its insurance coverage is adequate, there can be no
assurance that any judgment against the Company will not exceed liability
coverage. A judgment significantly in excess of the amount of insurance coverage
would have a material adverse effect on the Company.

Employees

            As of December 31, 2002, the Company had 7 full time employees at
our headquarters in Scottsdale, Arizona, USA and an additional three employees
in the Company's offices in Beijing, China. None of our employees are subject to
any collective bargaining agreement. Consultants are utilized as needed in
marketing and sales. Commissioned personnel include persons the Company may hire
from time to time in sales and marketing.


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<PAGE>


            Our proposed personnel structure can be divided into three broad
categories: (1) management and professional, (2) administrative, and (3) project
personnel. As in most small companies, the divisions between these three
categories are somewhat indistinct, as employees are engaged in various
functions as projects and workload demands.

            The Company is dependent upon the services of Johnny Shannon,
Chairman and President of the Company. Mr. Shannon currently has an Employment
Agreement with the Company, which will expire January 31, 2004. The Company's
future success also depends on our ability to attract and retain other qualified
personnel, for which competition is intense. The loss of Mr. Shannon or the
Company's inability to attract and retain other qualified employees could have a
material adverse effect on the Company.

Additional Information

            We are subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, will
file reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information may be inspected at public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street
N.W., Washington D.C. 20549; Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and 5670 Wilshire Boulevard, Los Angeles,
California 90036. Copies of such material can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street N.W.,
Washington, D.C. 20549 at prescribed rates. For further information, the SEC
maintains a website that contains reports, proxy and information statements, and
other information regarding reporting companies at (http://www.sec.gov).

ITEM 2. PROPERTIES

            The Company's main offices are located at 8221 East Evans Road,
Scottsdale, Arizona, USA, and its telephone number is 480.951.1941, Fax Number:
480.661.7163. E-mail address: info@deserthealth.com. The facility is a leased
11,000 square foot building. These headquarters are adequate for marketing
efforts domestically and internationally. The Company anticipates it may require
additional space in the future, but anticipates no difficulty in obtaining such
space in its immediate vicinity at favorable rates. The Company pays rent at the
rate of $11,066.00 per month.

            The Company has an office in Beijing, China in the Dongcheng
District and pays rent of USD 954.25 per month.

ITEM 3. LEGAL PROCEEDINGS

            On March 5, 2003, the Company instituted suit in the Arizona
Superior Court, Maricopa County, against a Phoenix-based marketer of health care
products, seeking unspecified damages for fraud and misrepresentation arising
from a product licensing and marketing agreement.

            On January 27, 2003, the U.S. District Court dismissed a suit by the
Company for unfair competition and trademark violations by a competitor. The
Company has taken an appeal of the order of dismissal.

            On March 3, 2003, the Company produced records in compliance with a
suit brought by a former consultant and shareholder who asserted rights to view
certain corporate records under Arizona law. The Arizona Superior Court
thereafter dismissed the suit. On March 14, 2003, the plaintiff moved for
reinstatement of the case for the purpose of seeking an award of attorney's
fees.

            On November 12, 2002, the Company was named in a suit by holders of
various promissory notes. As to one of the plaintiffs, the Company asserts a
counterclaim for breach of fiduciary duty, conversion, and wrongful interference
with business relations. The Company intends to vigorously pursue its
counterclaim, and intends to honor its loan commitments to the claimants not
implicated in the counterclaim.


                                                                              11
<PAGE>


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

            No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of our fiscal
year ended December 31, 2002.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

            The Company's Common Stock is traded in the over-the-counter
            securities market through the National Association of Securities
            Dealers Automated Quotation Bulletin Board System, under the symbol
            "DHPI". The following table sets forth the quarterly high and low
            bid prices for the Company's Common Stock as reported by the OTC:BB.
            for the last six quarters. The quotations reflect inter-dealer
            prices, without retail mark-up, markdown or commission, and may not
            necessarily represent actual transactions.

                               Average High              Average Low

September 2001                    .5133                     0.47
December 2001                     .333                      0.2933
March 2002                        .31                       0.2866
June 2002                         .23                       0.2133
September 2002                    .2866                     0.2766
December 2002                     .2033                     0.2033

            As of December 31, 2002, we had 12, 113,821 shares outstanding held
by approximately 348 stockholders of record.

            The Company has never declared or paid dividends on its Common
Stock. The Company intends to follow a policy of retaining earnings, if any, to
finance the growth of the business and does not anticipate paying any cash
dividends in the foreseeable future. The declaration and payment of future
dividends on the Common Stock will be at the sole discretion of the Board of
Directors and will depend on the Company's profitability and financial
condition, capital requirements, statutory and contractual restrictions, future
prospects and other factors deemed relevant.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

            The following discussion and analysis should be read in conjunction
with our Financial Statements and the notes thereto appearing elsewhere in this
document.

RISK FACTORS AND CAUTIONARY STATEMENTS

            This report contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results and events


                                                                              12
<PAGE>


could differ materially from those projected, anticipated, or implicit, in the
forward-looking statements as a result of the risk factors set forth below and
elsewhere in this report.

            With the exception of historical matters, the matters discussed
herein are forward looking statements that involve risks and uncertainties.
Forward looking statements include, but are not limited to, statements
concerning anticipated trends in revenues and net income, the date of
introduction or completion of the Company's products, projections concerning
operations and available cash flow. The Company's actual results could differ
materially from the results discussed in such forward-looking statements. The
following discussion of the Company's financial condition and results of
operations should be read in conjunction with the Company's financial statements
and the related notes thereto appearing elsewhere herein.

Cautionary Statement Regarding Forward-looking Statements

            The Company's Form 10KSB, The Company's Annual Report to
Shareholders, this or any other Form 10QSB of the Company or any other written
or oral statements made by or on behalf of the Company may include
forward-looking statements which reflect the Company's current views with
respect to future events and financial performance. The words "believe",
"expect", "anticipate", "intends", "estimate", "forecast", "project" and similar
expressions identify forward-looking statements.

            The Company wishes to caution investors that any forward-looking
statements made by or on behalf of the Company are subject to uncertainties and
other factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors include, but are not limited
to the Risk Factors listed below (many of which have been discussed in prior SEC
filings by the Company). Though the Company has attempted to list
comprehensively these important factors, the Company wishes to caution investors
that other factors could in the future prove to be important in affecting the
Company's results of operations. New factors emerge from time to time and it is
not possible for management to predict all of such factors, nor can it assess
the impact of each such factor on the business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.

            Investors are further cautioned not to place undue reliance on such
forward-looking statements as they speak only of the Company's views as of the
date the statement was made. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

Risk Factors

            Our operating results are difficult to predict in advance and may
fluctuate significantly, and a failure to meet the expectations of analysts or
our stockholders would likely result in a substantial decline in our stock
price.

            Factors that are likely to cause our results to fluctuate include
the following:

      o     The gain or loss of significant customers or significant changes in
            purchasing volume;

      o     The amount and timing of our operating expenses and capital
            expenditures;

      o     Changes in the volume of our product sales and pricing concessions
            on volume sales;

      o     The timing, rescheduling or cancellation of customer orders;

      o     The varying length of our sales cycles;

      o     Our ability to specify, develop, complete, introduce and market new
            products and bring them to volume production in a timely manner;

      o     The rate of adoption and acceptance of new industry standards in our
            target markets;

      o     The effectiveness of our product cost reduction efforts and those of
            our suppliers;

      o     Changes in the mix of products we sell; and

      o     Changes in the average selling prices of our products.


                                                                              13
<PAGE>


            There is a limited public market for our common stock. Although our
common stock is listed on the OTC Bulletin Board, there is a limited volume of
sales, thus providing a limited liquidity into the market for our shares. As a
result of the foregoing, stockholders may be unable to liquidate their shares
for any reason.

            Our success depends heavily upon the continued contributions of
Johnny Shannon, our President, whose knowledge, leadership and technical
expertise would be difficult to replace. The Company has an Employment Agreement
with Mr. Shannon that expires January 31, 2004. Additionally, The Company has
key man insurance in the amount of $500,000 on Mr. Shannon.

            To grow our business successfully and maintain a high level of
quality, we will need to recruit, retain and motivate additional highly skilled
sales, marketing, and finance personnel. If we are not able to hire, train and
retain a sufficient number of qualified employees, our growth will be impaired.
In particular, we will need to expand our sales and marketing organizations in
order to increase market awareness of our products and to increase revenue.

            In addition, as a company focused on the development of complex
products, we will need to hire additional staff of various experience levels in
order to meet our product roadmap. .

            We are subject to various risks associated with technological change
and if we do not adapt our products to the changes our business will be
adversely affected

            Our performance will partially depend on our ability to enhance our
existing services, and respond to technological advances and emerging industry
standards and practices on a timely and cost-effective basis. We cannot predict
if we will use new methodologies effectively or adapt our products to consumer,
vendor, advertising or emerging industry standards. If we were unable, for
technical, legal, financial or other reasons, to adapt in a timely manner in
response to changing market conditions or customer requirements, our business,
results of operations and financial condition could be materially adversely
affected.

            If we need additional financing, we may not be able to raise further
financing or it may only be available on terms unfavorable to our stockholders
or us.

            We believe that our available cash resources will be sufficient to
meet our anticipated working capital and capital expenditure requirements for at
least twelve months. We might need to raise additional funds, however, to
respond to business contingencies, which could include the need to:

      o     Fund more rapid expansion;

      o     Fund additional marketing expenditures;

      o     Develop new products or enhance existing products;

      o     Enhance our operating infrastructure;

      o     Hire additional personnel;

      o     Respond to competitive pressures; or

      o     Acquire complementary businesses or technologies.

      If we raise additional funds through the issuance of equity or convertible
      debt securities, the percentage ownership of our stockholders would be
      reduced, and these newly issued securities might have rights, preferences
      or privileges senior to those of existing stockholders. Additional
      financing might not be available on terms favorable to us, or at all. If
      adequate funds were not available or were not available on acceptable
      terms, our ability to fund our operations, take advantage of unanticipated
      opportunities, develop or enhance our products or otherwise respond to
      competitive pressures would be significantly limited.


                                                                              14
<PAGE>


Overview

            The Company's auditors report reflects the fact that without
realization of additional capital, it would be unlikely for us to continue as a
going concern.

            As a result of our deficiency in working capital at December 31,
2002, and other factors, our auditors have included a paragraph in their report
regarding substantial doubt about our ability to continue as a going concern.

Results of Operations

            Period from January 1, 2002 to December 31, 2002

            Revenues. Revenues for the year ended December 31, 2002 were
$133,075, a decrease of $228,280 or 63% decrease from $361,355 for the year
ended December 31, 2001. This decrease was principally attributable to the
continued consequences of the events of September 11, 2001 and the necessary
reformulation of the Foot and Body care product to meet domestic and
international labeling and registration requirements. This and the strength of
the United States dollar against foreign currencies has created a geopolitical
environment in which Desert Health is maintaining an international presence by
continuing support of existing registrations internationally and at the same
time aggressively developing a market with its proprietary formulas in North
America.

            General and Administrative. General and administrative, legal and
consulting expenses for the year ended December 31, 2002, were $1,567,701 which
was a decrease over the $2,184,395 for the year ended December 31, 2001. This
decrease was primarily the result of decreased expenses related to: (i)
decreased amortization expense; (ii) focusing expense and energy towards
developing the domestic markets. Goodwill and other intangible assets were not
amortized in 2002. Statement 142 was implemented requiring goodwill and other
intangible assets to be adjusted to fair value by recording the net present
value of management's estimate of future cash flows expected to be generated by
the intangible or goodwill over the next three years. For the year ended
December 31, 2002, impairment losses related to goodwill and other intangibles
was $386,111 and $95,230 respectively, and are reported as other income and
expenses on the consolidated statements of operations and accumulated deficit.
See Note A- "Summary of Significant Accounting Policies".

            Net loss for the Company was $2,211,703 for the year ended December
31, 2002 as compared to net loss of $1,752,597 for the year ended December 31,
2001. This increase was the result of increasing activity and related additional
expenses discussed above.

Liquidity and Capital Resources

            As indicated in the Company's financial statements attached, the
Company's gross revenue was not sufficient to meet its operating expenses for
the year ended December 31, 2002. In addition, as of December 31, 2002, the
Company's current liabilities exceeded its current assets by $1,310,041. These
factors create an uncertainty regarding the Company's ability to continue as a
going concern. Management believes they have strong support from international
clients. Registrations in various countries around the world are continuing to
be approved. Desert Health's newly formulated Foot and Body Care product now
being presented to the global market. Additionally a new burn and scald relief
product is being presented to police and fire department agencies.

            The Company is also in the final stages of formulating an anti-aging
product, which is anticipated to be ready for the market in May of 2003.

            Management is in the process of supplementing anticipated
international business by means of development of a network marketing
organization in the United States. The Company has acquired a wholly owned
subsidiary, Royal Products, Inc., and employed selected management towards this
goal. The official launch of sales by Royal Products, Inc., to the public, is
scheduled for May 2003. The Company has


                                                                              15
<PAGE>


hand picked top management from the legal and marketing segment of the network
marketing industry, and believes that entering this growing industry will
contribute to cash flow projections.

            Furthermore, the Company is positioning itself in the lucrative
North American market. The Company believes that trademark and logo
registrations under Class 5 filed in Mexico and Canada will contribute to the
presence of the Company's products in the network marketing, private label and
branded label markets.

            Many of the Company's international development agreements and
registrations are in the final phases with companies located in the Czech
Republic, Sweden, Turkey, China and Korea.

            Management believes the events as described above will bring
liquidity and profitability to the Company in the coming year. We believe
exclusive marketing rights to the new health products, and other products being
negotiated for, will bring significant volume and profitability.

            Since inception, the Company has financed its cash flow requirements
through debt financing, issuance of common stock for cash and services, and
minimal cash balances. As the Company continues its marketing activities in
Europe, Asia and North America, it may continue to experience net negative cash
flows from operations, pending receipt of sales revenues, and will be required
to obtain additional financing to fund operations through common stock offerings
and bank borrowings to the extent necessary to provide its working capital.

            Over the next twelve months, the Company intends to increase its
revenues by acquiring a market position primarily with the Foot and Body Care
product and the Burn and Scald Relief product to its target markets. The Company
will continue to increase the number of its employees, and expand its facilities
where necessary to meet product development and completion deadlines. The
Company believes that existing capital and anticipated funds from operations
will not be sufficient to sustain operations and planned expansion in the next
twelve months. Consequently, the Company will be required to seek additional
capital in the future to fund growth and expansion through additional equity or
debt financing or credit facilities. Considering the state of market conditions,
no assurance can be made that such financing would be available, and if
available it may take either the form of debt, equity, or a combination thereof.
The down turn in the capital market will substantially impact the Company's
ability to sell securities in planned amounts and in turn its ability to meet
its capital requirements. In either case, the financing could have a negative
impact on the financial condition of the Company and its shareholders.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            See "Index to Financial Statements" and Financial Statement
schedules appearing on Page 21 of this Form 10-KSB.

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

            No changes to report.

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT: COMPLIANCE WITH
        SECTION 16(a) OF THE EXCHANGE ACT.

            The following table sets forth the names, positions with the Company
and ages of the executive officers and directors of the Company. Directors shall
be elected at the Company's annual meeting of shareholders and each director
shall hold office for a term of one year and until their successors shall have
been duly chosen and shall have qualified. The board elects officers and their
terms of office are, except to the extent governed by employment contract, at
the discretion of the Board.


                                                                              16
<PAGE>


     Name                   Age    Title

Johnny Shannon              66     Chief Executive Officer, Chairman, President,
                                     and Director
Georgia Aadland             65     Secretary/Treasurer and Director
Thor Lindvaag               55     Director, Sr. Vice President of International
                                     Marketing
Lawrence G. Olson           61     Director
William T. Walker, Jr.      70     Director

Duties, Responsibilities and Experience

Johnny Shannon has been President and a Director of the Company since 1996. From
1984 - 1996 Mr. Shannon served as an officer, director and shareholder with
several nutritional supplement companies.

Georgia Aadland has been Secretary/Treasurer of the Company since 1997 and a
Director of the Company from 1991 to 1996 and from 1998 to present.

Thor Lindvaag has been Director and Senior Vice President of International
Marketing of the Company since 1996. From 1991 - 1996, Mr. Lindvaag was
President of Trim and Fit International. From 1988 - 1991, he was the managing
Director of Arizona Health Holding.

Lawrence G. Olson, Director of the Company, is currently an officer and director
of Olson Precast of Arizona, Inc. Mr. Olson has been a director of several
public companies, including the Phoenix National Bank. Mr. Olson graduated from
the School of Engineering at the University of Southern California in 1959.

William T. Walker, Jr., Director of the Company, has over forty years experience
in the capital markets industry. Mr. Walker has been a member of the board of
the Securities Industry Association, Chairman of the California District
Securities Industry Association, Governor of the Pacific Stock Exchange,
President of the Bond Club of Los Angeles, and a member of the American Stock
Exchange Advisory Committee. Mr. Walker graduated from Culver Military Academy,
and attended Stanford University and served in the United States Air Force.

LIMITATION OF LIABILITY OF DIRECTORS

            The By-laws of the Company provide as follows: " Except as
hereinafter stated otherwise, the Corporation shall indemnify all of its
officers and directors, past, present and future, against any and all expenses
incurred by them, and each of them including but not limited to legal fees,
judgments and penalties which may be incurred, rendered or levied in any legal
action brought against any or all of them for or on account of any act or
omission alleged to have been committed while acting within the scope of their
duties as Officers or Directors of this Corporation."

            However, insofar as indemnification for liabilities arising under
the Securities Act of 1933 as amended may be permitted to directors and officers
of the Company pursuant to the foregoing provisions, or otherwise, it is the
opinion of the Securities and Exchange Commission that such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.

BOARD OF DIRECTORS COMMITTEES AND COMPENSATION

The Board of Directors acts as our audit committee. Due to the size of the
Company, it cannot at this time appoint a director who meets all of the
requirements and qualifications of a financial expert pursuant to the
regulations promulgated under the Securities Exchange Act of 1934, as amended.

The Company has not formally adopted a Code of Ethics. The Company anticipates
that it will adopt a Code of Ethics during 2003.


                                                                              17
<PAGE>


Compensation Committee Interlocks and Insider Participation

            The Board of Directors does not have a Compensation Committee. The
Board of Directors through Johnny Shannon, President and Chairman, oversaw the
compensation of our executive officers.

Board of Director's Report on Executive Compensation

            General. As noted above, our Board of Directors does not have a
Compensation Committee and, accordingly, during the fiscal year ended December
31, 2002, the Board of Directors, through the Chairman and President, reviewed
and approved the compensation of our executive officers.

            Loans. In fiscal 2002, our Board of Directors granted no loans to
any officers or directors of the Company.

            Overall Policy; Significant Factors. During fiscal 2002, our
continued entrance into the international market, which brings with it all the
normal capital requirements to sustain growth, influenced the compensation
decisions made by the Board of Directors in respect to our executive officers.
Therefore, certain stock compensation may be granted at times in lieu of
salaries, commissions and for services rendered. This practice may be extended
into the future on a case-by-case basis and accordingly filed with the
Securities and Exchange Commission. Finally, as we continue to mature, certain
additions to the executive staff will be required. As we are required to seek
talent in outside market, we will be required to provide a competitive
compensation package.

            As overall policy, however, the Board continues to believe that
long-term compensation tied to the creation of stockholder value should
constitute a significant component of the compensation to be earned by our
executive officers. In this respect, it will be the Board's policy to attempt to
restrain base cash compensation (subject to competitive pressures), while
providing the incentive for Management to increase stockholder value by
providing such officers with significant numbers of market-price stock that will
not confer value upon the officers unless and until the Company's share price
rises. The Board of Directors expects that stock options will constitute a
significant component of the compensation package provided to executive
officers.

            The Board believes that cash bonuses are, at times, appropriate
based upon the performance of the Company's business compared to our internal
expectations and general business conditions.

            Section 16 (a) Beneficial Ownership Reporting Compliance

            Section 16 (a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires Desert Health executive officers and directors,
and persons who beneficially own more than ten percent of Desert Health's common
stock, to file initial reports of ownership and reports of changes in ownership
with the SEC. Executive officers, directors and greater than ten percent
beneficial owners are required by SEC regulations to furnish Desert Health with
copies of all Section 16 (a) forms they file. Based upon a review of such copies
of such forms furnished to Desert Health and written representations from Desert
Health executive officers and directors, Desert Health believes that during
fiscal 2002 all forms 3 and 4 were filed on a timely basis for Desert Health
executive officers and directors. Forms 5 for Mr. Shannon and Ms. Aadland were
filed late.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth the compensation of the Company's executive
officers and directors during each of the fiscal years since inception of the
Company. The remuneration described in the table does not include the cost to
the Company of benefits furnished to the named executive officers, including
premiums for health insurance and other benefits provided to such individual
that are extended in connection with the


                                                                              18
<PAGE>


conduct of the Company's business. The value of such benefits cannot be
precisely determined, but the executive officers named below did not receive
other compensation in excess of the lesser of $50,000 or 10% of such officer's
cash compensation exclusive of loans footnoted herein.

            The Company has Employment Agreements with Johnny Shannon, Georgia
Aadland and Thor Lindvaag, all of which expire January 31, 2004.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                               Long Term Compensation

                                    Annual Compensation                 Awards                         Payouts

      (a)             (b)      (c)       (d)            (e)              (f)              (g)            (h)         (i)
                                                                      Restricted       Securities
     Name                                          Other Annual         Stock          Underlying       LTIP      All other
 and Principal                Salary    Bonus      Compensation        Award(s)       Options/SARs     Payouts   Compensation
   Position          Year      ($)       ($)            ($)              ($)              (#)            ($)         ($)

<S>                  <C>        <C>       <C>        <C>             <C>                   <C>            <C>         <C>
Johnny Shannon       2002       0         0          $258,509        0                     0              0           0
(1) CEO,
Chairman             2001       0         0          $143,863        75,000 shares         0              0           0
President, and
Director             2000       0         0          $112,777                              0              0           0


Georgia Aadland      2002       0         0          $ 44,300        0                     0              0           0
Secretary/
Treasurer            2001       0         0          $ 38,400        75,000 shares         0              0           0
And
Director             2000       0         0          $ 38,500        0                     0              0           0


Thor Lindvaag        2002       0         0          $ 95,762        0                     0              0           0
(2) Director,
Vice President       2001       0         0          $ 49,675        75,000 shares         0              0           0
of Intn'l
Marketing            2000       0         0          $ 56,894        0                     0              0           0
</TABLE>

      (1)   On February 7, 2003, Mr. Shannon returned 425,000 shares of the
            Company's stock to be held as treasury stock as repayment for a note
            receivable and accrued interest. See Note C-Notes Receivable.

      (2)   A loan at 8.5% APR interest was received by Thor Lindvaag in the sum
            of $3,000 for year ended December 31, 2000, and the sum of $24,760
            for the year ended December 31, 1999. The amount


                                                                              19
<PAGE>

            of those loans with accrued interest is included in the compensation
            for Mr. Lindvaag in 2002. No loans were made to Mr. Lindvaag in 2001
            or 2002.

      Compensation of Directors

            All directors will be reimbursed for expenses incurred in attending
Board or committee meetings. Mr. Walker was paid $10,000 in each of 2002 and
2001 and $5,000 in 2000 for consulting services.

Options, Grants and Exercises in 2002

            No executive offers were granted stock options or exercised options
in 2002.

               Aggregate Options/SAR Exercises in Last Fiscal Year
                         and FY-End Options/SAR Values

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
(a)                  (b)            (c)         (d)                                      (e)
--------------------------------------------------------------------------------------------------------------------------
Name                 Shares         Value       Number of Securities Underlying          Value of Unexercised in the Money
                     Acquired       Realized    Unexercised Options/SARs at FY-End (#)   Options/SARs at FY-End ($)
                     On Exercise
                     ($)            ($)         Exercisable/Unexercisable                Exercisable/Unexercisable
--------------------------------------------------------------------------------------------------------------------------
<S>                  <C>                        <C>                                      <C>
Johnny Shannon       0              --          1,000,000(1)                             $20,000(2)
--------------------------------------------------------------------------------------------------------------------------
Georgia Aadland      0              --            500,000(1)                             $10,000(2)
--------------------------------------------------------------------------------------------------------------------------
Thor Lindvaag        0              --            500,000(1)                             $10,000(2)
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

      1.    All options are currently exercisable.

      2.    Amounts based on closing price of $.27 per share as of March 27,
            2003.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners.

            The following table sets forth certain information as of December
31, 2002, with respect to the beneficial ownership of common stock by (i) each
person who to the knowledge of the Company, beneficially owned or had the right
to acquire more than 10% of the outstanding common stock, (ii) each director of
the Company and (iii) all executive officers and directors of The Company as a
group.

Name of Beneficial Owner (1)                  Number                Percent
                                              Of Shares             Of Class (2)
Johnny Shannon (3)                            5,396,080                 45
Georgia Aadland                                 405,400                  3
Thor Lindvaag                                   255,000                  2
Lawrence G. Olson                               152,500                  1
William T. Walker, Jr.                          100,000                  1

All Directors & Officers as a Group           6,308,980                 52

      (1)   As used in this table, "beneficial ownership" means the sole or
            shared power to vote, or to direct the voting of, a security, or the
            sole or shared investment power with respect to a security (i.e.,
            the power to dispose of, or to direct the disposition of, a
            security). In addition for purposes of this


                                                                              20
<PAGE>


            table, a person is deemed, as of any date, to have "beneficial
            ownership" of any security that such person has the right to acquire
            within 60 days after such date.

      (2)   Figures are rounded to the nearest percentage. Less than 1% is
            reflected as 0%.

      (3)   Johnny Shannon holds 1,000,000 shares of Preferred stock with 10:1
            preferential voting rights.

                      Equity Compensation Plan Information
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                Number of securities to      Weighted average
                                be issued upon exercise      exercise price of       Number of securities
                                of outstanding options,     outstanding options,    remaining available for
       Plan Category              warrants and rights        warrants and rights        future issuance
-----------------------------------------------------------------------------------------------------------
                                          (a)                        (b)                      (c)
-----------------------------------------------------------------------------------------------------------
<S>                                     <C>                         <C>                       <C>
Equity compensation plans
  approved by security holders            None                       N/A                      N/A
-----------------------------------------------------------------------------------------------------------
Equity compensations not
  approved by security holders          2,000,000                   $0.25                     N/A
-----------------------------------------------------------------------------------------------------------
           Total                                                    $0.25                     N/A
-----------------------------------------------------------------------------------------------------------
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            Insider Relationships: Jonathan Gotcher, Vice President/Internet
Development and Marketing, is the grandson of the Chairman and President, Johnny
Shannon.

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

      (a)   Documents filed as part of this Report

            1.    Financial Statements:

                  A.  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                      1. Independent Auditors Report

                      2. Financial Statements:

                           Balance Sheet                                       2
                           Statements of Operation and Accumulated Deficit     3
                           Statements of Changes in Stockholders Equity        4
                           Statements of Cash Flows                            5
                           Notes to Consolidated Financial Statements     6 - 11

            All schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.

            2.    During the fiscal year 2002, the Company filed the following
                  8-K's: None

            3.    Subsequent to the end of the fiscal year the Company filed the
                  following reports on Form 8-K: Form 8-K filed January 10, 2003

            4.    Exhibits


Exhibit Number                    Description

(1)               N/A


                                                                              21
<PAGE>

(2)(1)            Acquisition Agreement and Plan of Merger with Intercontinental
                  Capital Fund, Inc., (Incorporated by Reference)

(3)(i)(2)         Articles of Incorporation

                        A.    Articles of Incorporation for Desert Health
                              Products, Inc., (Incorporated by Reference)

                        B.    Amended Articles of Incorporation for Desert
                              Health Products, Inc., (Incorporated by Reference)

(3)(ii)(2)        Bylaws

                              Bylaws of Desert Health Products, Inc.
                              Incorporated by Reference

(4)(2)            Instruments defining the rights of security holders:

(4)(i)                  (a)   Articles of Incorporation for Desert Health
                              Products, Inc. (Incorporated by Reference.)

                        (b)   Amended Articles of Incorporation for Desert
                              Health Products, Inc., (Incorporated by Reference)

                        (c)   Bylaws of Desert Health Products, Inc.
                              (Incorporated by Reference)

(5)               N/A

(8)               N/A

(9)               N/A

(10)              Material Contracts

                        1.    (3) Separation and Distribution Agreement between
                              Desert Health Products, Inc., and Royal Phoenix
                              (Incorporated by Reference)

                        2.    (2) Product Marketing and Distribution Agreement
                              between Desert Health products, Inc., and GH
                              Associates, Inc. (Incorporated by Reference)

                        3.    (2) Agreement regarding Dr. Harris's Original
                              Perfect Feet Formula (Incorporated by Reference)

                        4.    (2) Exclusive Distribution Agreement between
                              Desert Health Products, Inc., and Silmarc Pharma
                              s.r.l. in Italy. (Incorporated by Reference)

                        5.    (2) Exclusive Distribution Agreement between
                              Desert Health Products, Inc. and Snore Formula
                              Inc. (Incorporated by Reference)

                        6.    (2) Modification of Contract between Desert Health
                              Products, Inc. and Snore Formula Inc.
                              (Incorporated by Reference)

                        7.    (4) Agreement regarding Dr. Harris's Original
                              Diabetic Feet Formula (Incorporated by Reference)

                        8.    (4) Employment Agreement between Desert Health
                              Products, Inc. and Johnny Shannon (Incorporated by
                              Reference)

                        9.    (4) Employment Agreement between Desert Health
                              Products, Inc. and Georgia Aadland (Incorporated
                              by Reference)

                        10.   (4) Employment Agreement between Desert Health
                              Products, Inc. and Thor Lindvaag (Incorporated by
                              Reference)

(11)              N/A

(13)              N/A

(15)              N/A

(16)              N/A

(17)              N/A

(18)              N/A

(19)              N/A

(20)              N/A

(21)              N/A

(22)              N/A

(23)              Consent of Desert Health's Auditor

(24)              N/A

(25)              N/A

(26)              N/A

(99)              Cautionary Statement Regarding Forward Looking Statements


                                                                              22
<PAGE>

(1)   Filed in a Form 8-K on March 15, 2000.

(2)   Filed in a Form 10-KSB on April 3, 2001.

(3)   Filed in a Form 8-K on October 31, 2000.

(4)   Filed in a Form 10-KSB March 29, 2002

Item 14. CONTROLS AND PROCEDURES

      (a)   Under the supervision and with the participation of our management,
            including our Chief Executive Officer and Chief Financial Officer,
            we conducted an evaluation of the effectiveness of design and
            operation of our disclosure controls and procedures, as such term is
            defined under Rule 13a-14(c) promulgated under the Securities
            Exchange Act of 1934, as amended, within the 90 days prior to the
            filing date of this report. Based on their evaluation, our Chief
            Executive Officer and Chief Financial Officer concluded that our
            disclosure controls and procedures are effective as of the
            evaluation date.

      (b)   There have been no significant changes (including corrective actions
            with regard to significant deficiencies or material weaknesses) in
            our internal controls or in other factors that could significantly
            affect these controls subsequent to the date of the evaluation
            reference in paragraph (a) above.


                                                                              23
<PAGE>


                                   SIGNATURES

            Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on our behalf by the undersigned, thereunto duly authorized.

DESERT HEALTH PRODUCTS, INC.                        DATED:  March 31, 2003


By: /S/ Johnny Shannon
    ------------------
        Johnny Shannon
        President

            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.

DESERT HEALTH PRODUCTS, INC.
(Registrant)

Signature                        Title                            Date


/S/ Johnny Shannon               Chief Executive Officer,         March 31, 2003
--------------------------       Chief Financial Officer and
Johnny Shannon                   President


/S/ Georgia Aadland              Secretary/Treasurer              March 31, 2003
--------------------------
Georgia Aadland


/S/ Thor Lindvaag                Director                         March 31, 2003
--------------------------
Thor Lindvaag


/S/ Lawrence Olson               Director                         March 31, 2003
--------------------------
Lawrence Olson


/S/ William T. Walker, Jr.       Director                         March 31, 2003
--------------------------
William T. Walker, Jr.


                                                                              24
<PAGE>


    CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

I, Johnny Shannon, certify that:

      1.    I have reviewed this annual report on Form 10-KSB of Desert Health
            Products, Inc.;

      2.    Based on my knowledge, this annual report does not contain any
            untrue statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this annual report;

      3.    Based on my knowledge, the financial statements, and other financial
            information included in this annual report, fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the registrant as of, and for, the periods presented
            in this annual report;

      4.    I am responsible for establishing and maintaining disclosure
            controls and procedures (as defined in Exchange Act Rules 13a-14 and
            15d-14) for the registrant and have:

            a)    designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

            b)    evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date")'
                  and

            c)    presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

      5.    I have disclosed, based on our most recent evaluation, to the
            registrant's auditors and the registrant's board of directors,
            acting as an audit committee:

            a)    all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and report
                  financial data and have identified for the registrant's
                  auditors any material weaknesses in internal controls: and

            b)    any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

      6.    I have indicated in this annual report whether or not there were
            significant changes in internal controls or in other factors that
            could significantly affect internal controls subsequent to the date
            of our most recent evaluation, including any corrective actions with
            regard to significant deficiencies and material weaknesses.

Date: March 31, 2003

                             By: /S/ Johnny Shannon
                                 ------------------
                                 Johnny Shannon
         Chief Executive Officer, Chief Financial Officer and President


                                                                              25
<PAGE>


                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Desert Health Products, Inc., (the
"Company") on Form 10-KSB for the period ended December 31, 2002, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), each
of the undersigned, in the capacities and on the dates indicated below, hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

      1.    The Report fully complies with the requirements of Section 13 (a) or
            15 (d) of the Securities Exchange Act of 1934; and

      2.    The information contained in the Report fairly presents, in all
            material respects, the financial condition and results of operation
            of the Company.

By:  /s/ Johnny Shannon
     ------------------

Johnny Shannon                                              Date: March 31, 2003
Chief Executive Officer
Chief Financial Officer
President


                                                                              26
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2002 and 2001


<PAGE>


                                TABLE OF CONTENTS

INDEPENDENT AUDITOR'S REPORT                                                 1

FINANCIAL STATEMENTS

           Consolidated Balance Sheets                                       2

           Consolidated Statements of Operations                             3

           Consolidated Statements of Changes in Stockholders' Equity        4

           Consolidated Statements of Cash Flows                            5-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                  7-14



<PAGE>


                          INDEPENDENT AUDITOR'S REPORT

Board of Directors and Stockholders
Desert Health Products, Inc.

I have audited the accompanying consolidated balance sheets of Desert Health
Products, Inc. as of December 31, 2002 and 2001, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.

I conducted my audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that I plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Desert Health Products, Inc. as of
December 31, 2002 and 2001, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note M to the
financial statements, the Company has suffered substantial recurring losses from
operations that raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note M. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.


/s/ James E. Raftery CPA PC
James E. Raftery CPA PC

February 10, 2003
Mesa, Arizona

<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                           CONSOLIDATED BALANCE SHEETS
                                  December 31,

<TABLE>
<CAPTION>
                                                                                   2002           2001
                                                                               -----------    -----------
                                     ASSETS
Current Assets
<S>                                                                            <C>            <C>
    Cash                                                                       $    55,515    $    52,090
    Accounts receivable, net                                                        16,961             --
    Notes receivable                                                               208,917        377,825
    Interest receivable                                                             76,946         77,840
    Inventory                                                                      179,040        131,088
    Advances                                                                         2,500          1,671
    Prepaid expenses                                                                25,000         54,905
                                                                               -----------    -----------
         Total Current Assets                                                      564,879        695,419

Property and Equipment, net                                                        105,579        117,476

Other Assets
      Intangibles, net                                                           1,285,322      1,248,472
      Goodwill, net                                                                233,645        445,511
      Deposits                                                                      15,846         10,000
                                                                               -----------    -----------
                                                                                 1,534,813      1,703,983
                                                                               -----------    -----------
                                                                               $ 2,205,271    $ 2,516,878
                                                                               ===========    ===========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
    Accounts payable and accrued expenses                                      $   240,363    $   251,302
    Deferred revenue                                                                56,000         40,000
    Interest payable                                                               309,633        157,735
    Dividends payable                                                               32,206             --
    Current portion of long term debt                                            1,236,718      1,051,537
                                                                               -----------    -----------
         Total Current Liabilities                                               1,874,920      1,500,574

Long Term Liabilities
    Long term debt payable, net of current portion                                 328,183        390,683
                                                                               -----------    -----------
         Total Liabilities                                                       2,203,103      1,891,257

Stockholders' Equity
    Preferred Stock, convertible, $.001 par value, 10,000,000 shares
       authorized and 1,708,500 and 1,338,500 shares issued and outstanding
         as of December 31,  2002 and 2001, respectively                             1,708          1,338
    Common stock, $.001 par value, 25,000,000 shares
       authorized and 12,113,821 and 9,010,321 shares issued and outstanding
         as of December 31, 2002 and 2001, respectively                             12,114          9,010
    Subscriptions receivable                                                     1,466,000        474,000
    Additional paid in capital in excess of par value                            4,801,076      4,176,094
    Accumulated deficit                                                         (6,278,730)    (4,034,821)
                                                                               -----------    -----------
                                                                                     2,168        625,621
                                                                               -----------    -----------
                                                                               $ 2,205,271    $ 2,516,878
                                                                               ===========    ===========
</TABLE>

                 See accompanying notes to financial statements


                                      -2-
<PAGE>


                           DESERT HEALTH PRODUCTS, INC
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                            Years Ended December 31,

                                                         2002           2001
                                                     -----------    -----------

Revenue, net                                         $   133,075    $   361,355

Cost of Sales                                             70,062        177,869
                                                     -----------    -----------
    Gross Profit                                          63,013        183,486

Operating Expenses                                     1,567,701      2,184,395
                                                     -----------    -----------
                                                      (1,504,688)    (2,000,909)

Other Income (Expense)
    Interest expense                                    (252,660)      (149,405)
    Interest income                                       28,103         35,390
    Loan inducement fees                                 (49,695)       (50,350)
    Bad debt expense                                     (24,506)       (32,551)
    Miscellaneous expense                                (19,595)        (5,772)
    Miscellaneous income                                  32,500        341,000
    Settlement fees                                      (50,000)            --
    Loss on disposal of assets                            (1,540)            --
    Impairment of intangibles                            (95,230)            --
    Impairment of goodwill                              (386,111)            --
                                                     -----------    -----------
                                                        (818,734)       138,312
                                                     -----------    -----------
    Loss from operations before extraordinary item    (2,323,422)    (1,862,597)

Extraordinary Item
    Forgiveness of debt                                  111,719        110,000
                                                     -----------    -----------
Net Loss                                             $(2,211,703)   $(1,752,597)
                                                     ===========    ===========
Weighted Average Earnings Per Common Share           $     (0.23)   $     (0.21)
                                                     ===========    ===========

               See accompanying notes to the financial statements


                                      -3-
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     Years ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                     Convertible
                                   Preferred Stock           Common Stock
                                ---------------------   ----------------------  Additional     Stock
                                            Par Value                Par Value    paid-in   subscription  Accumulated
                                 Shares     $.001 sh      Shares     $.001 sh     Capital    receivable     Deficit        Total
                                ---------   ---------   ----------   ---------  ----------  ------------  ------------  -----------
<S>                             <C>          <C>        <C>          <C>        <C>          <C>          <C>           <C>
Balances, December 31, 2000     1,273,500    $  1,273    8,067,971    $ 8,068   $3,605,328   $  226,000   $(2,259,144)  $ 1,581,525

Shares issued in 2001 for:
     Fees                          65,000          65      667,350        667      371,041           --            --       371,773
     Cash                              --          --      150,000        150       74,850           --            --        75,000
     Subscription receivable           --          --      125,000        125      124,875      248,000            --       373,000
Net loss for year ended
  December 31, 2001                    --          --           --         --           --           --    (1,752,597)   (1,752,597)
                                ---------    --------   ----------    -------   ----------   ----------   -----------   -----------
Balances, December 31, 2001     1,338,500       1,338    9,010,321      9,010    4,176,094      474,000    (4,011,741)      648,701

Shares issued in 2002 for:
     Fees                         350,000         350    3,047,500      3,048      587,058           --            --       590,456
     Cash                          40,000          40           --         --       19,960           --            --        20,000
     Conversions                  (20,000)        (20)      20,000         20           --           --            --            --
     Subscription receivable           --          --       36,000         36       17,964      992,000            --     1,010,000
Dividends                              --          --           --         --           --           --       (32,206)      (32,206)
Prior Period Adjustment                                                                                       (23,080)      (23,080)
Net loss for year ended
  December 31, 2002                    --          --           --         --           --           --    (2,211,703)   (2,211,703)
                                ---------    --------   ----------    -------   ----------   ----------   -----------   -----------
Balances, December 31, 2002     1,708,500    $  1,708   12,113,821    $12,114   $4,801,076   $1,466,000   $(6,278,730)  $     2,168
                                =========    ========   ==========    =======   ==========   ==========   ===========   ===========
</TABLE>

               See accompanying notes to the financial statements


                                      -4-
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            Years Ended December 31,

<TABLE>
<CAPTION>
                                                                    2002           2001
                                                                -----------    -----------
<S>                                                             <C>            <C>
Cash Flows from Operating Activities
    Cash received from customers                                $    86,608    $   361,377
    Cash paid to suppliers and employees                         (1,332,417)    (1,363,435)
    Interest income                                                     192             --
    Miscellaneous income                                             32,500        341,000
    Miscellaneous expense                                           (49,595)            --
    Interest expense                                                (95,362)       (27,941)
                                                                -----------    -----------
         Net Cash Provided (Used) in Operating Activities        (1,358,074)      (688,999)

Cash Flows from Investing Activities
    Purchase of furniture and equipment                              (7,990)       (19,879)
    Purchase of intangibles                                         (12,080)      (381,387)
    Proceeds (payments) on notes receivable                         (16,431)           490
                                                                -----------    -----------
         Net Cash (Used) by Investing Activities                    (36,501)      (400,776)

Cash Flows from Financing Activities
    Purchase of common and preferred stock                               40            276
    Proceeds (payments) on stock subscription receivable          1,010,000         (7,000)
    Increase in additional paid in capital                           11,960        199,725
    Proceeds from loans                                             376,000        852,652
                                                                -----------    -----------
         Net Cash Provided  by Financing Activities               1,398,000      1,045,653
                                                                -----------    -----------
         Net Increase (Decrease) in Cash and Cash Equivalents         3,425        (44,122)

Beginning Cash and Cash Equivalents                                  52,090         96,212
                                                                -----------    -----------
Ending Cash and Cash Equivalents                                $    55,515    $    52,090
                                                                ===========    ===========
</TABLE>

               See accompanying notes to the financial statements


                                      -5-
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2002

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Desert Health Products, Inc.
(the "Company") is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principals
and have been consistently applied in the preparation of the financial
statements.

Nature of Operations

The Company was incorporated in the state of Arizona on July 21, 1991 to provide
innovative supplements and health solutions to the global marketplace. The
Company has grown from the humblest of beginnings in the Arizona desert to a
company with a global vision to educate, asses and deliver nutritional products
to a global market place. The worldwide nutritional industry is one of the
fastest growing sectors of the global economy. The Company has a commitment to
purity, quality, research, information and support. Desert Health Products, Inc.
has global distribution capabilities and offers a choice of turnkey or
customized private label options. This combined with professionally derived
formulations enables the Company to offer products to fill any market niche. On
October 31, 2002 the Company acquired all the capital stock of Royal Products,
Inc (f.k.a. JonDar Corp.), a Nevada corporation incorporated in 1991. Royal
Product Inc.'s principal business activity is to provide network marketing and
is under contract to purchase all of its products from Desert Health Products,
Inc.

Basis of Consolidation

The consolidated financial statements include the accounts of Royal Products,
Inc., a wholly owned subsidiary. All significant intercompany accounts and
transactions have been eliminated in the consolidation.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with an initial maturity of three months or
less to be cash equivalents.

Inventories

Inventories consist primarily of health food supplements and vitamin products
and are stated at the lower of cost (first-in, first-out) or market value.
Market cost represents the lower of replacement cost or estimated net realizable
value.

Deferred Revenue

Payments received from product sales that have not been shipped to the customer
are recorded as deferred revenue.

Shipping and Handling Costs

Operating expenses include $18,902 and $19,689 in shipping costs for the years
ended December 31, 2002 and 2001, respectively.

Depreciation

Depreciation is computed by using the straight-line method for financial
reporting purposes and the accelerated cost recovery method for federal income
tax purposes. Depreciation expense for financial reporting purposes was $20,842
and $19,698 for the years ended December 31, 2002 and 2001, respectively.


                                      -6-
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2002

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the bases of certain assets and
liabilities for financial and tax reporting. The deferred taxes represent the
future tax return consequences of those differences, which will either be
taxable when the assets and liabilities are recovered or settled.

Intangible Assets

Intangible assets consist of costs of developing websites, trademarks,
registrations, goodwill and other general intangibles and were amortized either
on a straight-line rate of three to eight years in 2001, or if the asset's life
is indefinite, no amortization was recorded. Amortization expense was $654,020
for the year ended December 31, 2001.

Goodwill and other intangible assets were not amortized in 2002. Statement of
Financial Accounting Standards No. 142 was implemented requiring goodwill and
other intangible assets to be adjusted to fair value by recording an impairment
loss when applicable. Fair value of each intangible and goodwill was determined
by calculating the net present value of management's estimate of future cash
flows expected to be generated by the intangible or goodwill over the next three
years. For the year ended December 31, 2002 impairment losses related to
goodwill and other intangibles was $386,111 and $95,230, respectively, and are
reported as other income and expenses on the consolidated statements of
operations and accumulated deficit. Intangible assets which did not have
positive estimated future cash flows were considered impaired and the carrying
value was adjusted as listed in Note D. These particular assets were; websites,
trademarks, registrations, loan inducement fees, and a charter membership.

Revenue and Cost Recognition

Revenues are recognized when earned, and expenses are recognized when incurred.
The Company generally recognizes revenue upon shipment of its products in
accordance with the terms and conditions of firm orders placed with the Company
by its customers. The application of Staff Accounting Bulletin 101 did not have
a material affect on the Company's financial position or results of operations.

Use of Estimates

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

Advertising Costs

The Company expenses advertising costs as they are incurred. Advertising costs
for the years ended December 31, 2002 and 2001 were $14,951 and $23,627,
respectively.

Trade Accounts Receivable

Trade accounts receivable is recorded net of an allowance for expected losses of
$14,915 and $30,000 for the year ended December 31, 2002 and 2001, respectively.
The allowance is estimated from historical performance and projection of trends.


                                      -7-
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2002

NOTE B - GOING CONCERN AND MANAGEMENT'S PLAN

As indicated in the accompanying financial statements, the Company's gross
revenue is not sufficient to meet its operating expenses for the year ended
December 31, 2002. Additionally, as of that date the Company's current
liabilities exceeded its current assets by $1,410,041. Those factors create an
uncertainty regarding the Company's ability to continue as a going concern.
Management of the Company has developed the following plan to reduce its
liabilities and increase its gross revenues.

Management believes they have strong support from their international clients
and registrations from various countries around the world are continuing to be
approved. This coupled with the exclusive marketing rights for a newly
formulated product geared to helping diabetic foot problems and a new burn and
scald relief product. The burn and scald relief product is being presented to
some of the top police and fire department agencies in Arizona through another
corporation. The Company is also in the final stage of formulating an anti-aging
product which should be ready for the market in May of 2003. Management is in
the process of supplementing anticipated international business by means of
development of a multi-level marketing organization in the United States. The
Company has acquired a wholly owned subsidiary, Royal Products, Inc. and
employed selected management towards this goal. The official launch of sale by
Royal Products, Inc. to the public is scheduled for March 2003. The Company has
hand picked top management from the legal and marketing segment of the network
marketing industry, and believes that entering this growing industry will
contribute to cash flow projections. Furthermore, the Company is positioning
itself in the lucrative North American market. Registrations filed in Mexico and
Canada will contribute to the presence of the Company's products in the network
marketing, private label and branded label markets. The Company is negotiating
an agreement with a Texas based corporation, to supply twenty products from its
portfolio under their label and logo. As of February 26, 2003 this corporation
has notified the Company that it has entered into an agreement with two grocery
store chains , one of which has seventy-two stores in Texas, and the other
services a five state area to purchase twelve of the company's products. Many of
the Company's international development agreements and registrations are in the
final phases with companies located in the Czech Republic, Sweden, Turkey, China
and Korea. Lastly, management has entered into an agreement with an individual
to provide monthly funding to the Company in order to stabilize expenditures.

Management believes the agreements entered into as described above will bring
liquidity and profitability to the Company in the coming year. They believe
exclusive marketing rights to the new health products, and other products they
are negotiating for, will bring significant volume and profitability. They also
feel that potential royalties should be extremely profitable for several years.

The ability of the Company to continue as a going concern is dependent upon the
aforementioned ability to raise additional outside capital and/or significantly
increase its market share to achieve profitability. The financial statements do
not include any adjustments that might be necessary if the Company is unable to
continue as a going concern.

NOTE C - NOTES RECEIVABLE

                                                               2002       2001
                                                             --------   --------
Notes receivable to an officer and director of the Company
Interest was imputed at the rate of 8.5%                     $208,917   $377,825
                                                             ========   ========

      Interest receivable was $76,946 and $77,840 for the years ended December
31, 2002 and 2001, respectively.

On February 7, 2003 an officer of the Company returned 425,000 shares of the
Company's stock to be held as treasury stock as repayment for the note
receivable and accrued interest listed above. The aforementioned transaction
would value the treasury shares at $.67 per share, the trading price as of
February 7, 2003 was $.45 per share. Because there was no additional stated or
unstated consideration in addition to the capital stock the entire purchase
price was accounted for as the cost of the treasury shares.


                                      -8-
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2002

NOTE D - PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Expenditures for maintenance and
repairs are charged against operations. Renewals and betterments that materially
extend the life of the assets are capitalized.

Property and equipment are summarized by major classifications as follows:

                                                       2002             2001
                                                   -----------      -----------
Equipment, 3-7 year life                           $   105,019      $    97,000
Leasehold Improvements, 5-39 year life                  60,572           60,572
Less:  Accumulated Depreciation                        (60,012)         (40,096)
                                                   -----------      -----------
                                                   $   105,579      $   117,476
                                                   ===========      ===========
NOTE E - INTANGIBLE ASSETS

For the year ended December 31,
                                                       2002             2001
                                                   -----------      -----------
Patents, trademarks, & registrations               $ 1,415,818      $ 1,307,237
Websites                                                28,911           25,411
Exclusive marketing rights                             530,000          530,000
Charter membership                                      25,000           25,000
Loan inducement fees                                     8,125            8,125
Customer list                                           20,000               --
                                                   -----------      -----------
                                                     2,027,853        1,895,773
Less accumulated amortization                         (647,301)        (647,301)
Impairment losses                                      (95,230)              --
                                                   -----------      -----------
                                                   $ 1,285,322      $ 1,248,472
                                                   ===========      ===========

NOTE F- GOODWILL

For the years ended December 31,
                                                       2002             2001
                                                   -----------      -----------
Goodwill                                           $ 1,123,245      $   949,000
Less accumulated amortization                         (503,489)        (503,489)
Impairment losses                                     (386,111)              --
                                                   -----------      -----------
                                                   $   233,645      $   445,511
                                                   ===========      ===========


                                      -9-
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2002


NOTE G - GOODWILL AND OTHER INTANGIBLE ASSETS (Adoption of Statement 142)

For the years ended December 31,

<TABLE>
<CAPTION>
                                                                 2002            2001
                                                             ------------    ------------
<S>                                                          <C>             <C>
Reported net loss before extraordinary item                  $ (2,323,422)   $ (1,862,597)
Add back: Patents, trademarks & registrations amortization             --          83,455
Add back: Website amortization                                         --           6,390
Add back: Charter membership amortization                              --           8,334
Add back: Loan inducement fee amortization                             --           2,708
Add back: Goodwill amortization                                        --         553,133
                                                             ------------    ------------
Adjusted net loss before extraordinary item                  $ (2,223,422)   $ (1,208,577)
                                                             ============    ============

 Reported net loss per share before extraordinary item       $     (.2417)   $     (.2201)
 Patents, trademarks & registrations amortization                      --           .0099
 Website amortization                                                  --           .0008
 Charter membership amortization                                       --           .0010
 Loan inducement fee amortization                                      --           .0003
 Goodwill amortization                                                 --           .0654
                                                             ------------    ------------
 Adjusted net loss before extraordinary item                 $     (.2417)   $     (.1427)
                                                             ============    ============
</TABLE>

NOTE H - CONCENTRATIONS

For the years ended December 31, 2002 and 2001, a significant volume of sales
were concentrated with three customers. Of the total revenue for the years ended
December 31, 2002 and 2001, 63% and 54% or $80,540 and $157,600 were received
from those customers, respectively.

NOTE I - INCOME TAXES

The Company has loss carry forwards totaling $6,106,607 that may be offset
against future taxable income. If not used, the carry forwards will expire as
follows:

              December 31,
          -------------------
                  2016                         $        3,337
                  2017                                 86,270
                  2018                                 17,000
                  2019                                600,000
                  2020                              1,500,000
                  2021                              1,700,000
                  2022                              2,200,000
                                               --------------
                                               $    6,106,607
                                               ==============

Taxable losses for the years ending December 31, 2002 and 2001 are estimated to
be $2,200,000 and $1,700,000, respectively. Ordinarily, the Company would record
an extraordinary item in each year, representing the deferred tax benefit that
could be realized when those tax losses are applied against future taxable
income. We estimate the extraordinary item would be $2,000,000 and $1,000,000
for the years ended December 31, 2002 and 2001, respectively. However, the
deferred tax benefit would only be realized in future years with taxable income.
Any future tax benefit that might be realized has been offset by a 100%
allowance due to the uncertainty regarding the Company's ability to continue as
a going concern.


                                      -10-
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2002

NOTE J -LONG TERM DEBT

Long-term notes payable consists of the following: at December 31,

<TABLE>
<CAPTION>
                                                                2002              2001
                                                            -----------       -----------

<S>                                                         <C>               <C>
      Unsecured notes payable to various individuals,
      payable in quarterly interest only installments of
      $41,151, bearing interest at rates of 10% to 16%
      per annum. Maturity dates range from December 31,
      2001 to June 20, 2004.                                $ 1,170,683       $   912,683

      Notes payable to various individuals, payable in
      quarterly interest only installments of $3,750,
      bearing interest at a rate of 12% per annum.
      Secured by 125,000 shares of Desert Health
      Products, Inc. Preferred Stock. Maturity dates
      range from September 22, 2001 to September 29,
      2003.                                                     125,000           125,000

      Note payable to an individual, payable in
      semi-annual interest only installments of $2,322,
      bearing interest at a rate of 15% per annum.
      Personally guaranteed by an officer of the
      Corporation.                                               18,700            18,700

      Unsecured, non-interest bearing demand note
      payable to an individual.                                   5,000            37,000

      Unsecured notes payable to various individuals,
      payable in monthly interest only installments of
      $916, bearing interest at rates of 10% to 30% per
      annum.                                                     70,000            72,418

      Unsecured, demand note payable, with a single
      $1,000 interest installment due at maturity of
      June 20, 2001.                                             15,000            15,000

      Note payable to an individual, payable in monthly
      interest only installments of $500, bearing
      interest at a rate of 12% per annum. Personally
      guaranteed by an officer of the Corporation.               50,000            50,000

      Unsecured, demand note payable, with a single
      $11,250 interest installment due at maturity.              75,000            75,000

      Note payable to a bank, bearing interest at 8.75%
      per annum.                                                     --               901

      Unsecured, non-interest bearing note payable to an
      individual.                                                23,018            23,018

      Demand note payable, non-interest bearing, secured
      by intangible assets of the Corporation.                       --           100,000

      Demand note payable to an individual, note was
      payable on May 10, 2001, note is accruing interest
      at a rate of $50 per day until principal balance
      is paid.                                                   12,500            12,500
                                                            -----------       -----------
      Total Notes Payable                                     1,564,901         1,442,220
      Less Current Maturities                                (1,236,718)       (1,051,537)
                                                            -----------       -----------
                                                            $   328,183       $   390,683
                                                            ===========       ===========
</TABLE>


                                      -11-
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2002


NOTE J -LONG TERM DEBT(CONT'D)

Of the Company's $1,564,901 in debt obligations, $824,218 is in default, and the
Company is delinquent on quarterly interest payments on the long-term portion of
debt of $328,183. The Company is currently in negotiations to reduce $628,183 of
its debt that is currently in default and the accrued interest of $192,042
related to that debt through the issuance of 900,000 shares of non-convertible
preferred stock. Lastly, $737,500 of notes payables have an option to convert to
shares of common stock at eighty-percent of the bid price.

NOTE K - MISCELLANEOUS INCOME

Miscellaneous income consists of $30,000 and $325,000 for the sale of marketing
rights, both domestic and foreign for certain DHPI products, and $2,500 and
$16,000 in legal settlement fees for the years ended December 31, 2002 and 2001,
respectively.

NOTE L - RELATED PARTY TRANSACTIONS

For the years ended December 31, 2002 and 2001 the Company paid $638,167 and
$541,038, respectively, as independent contractor fees to officers, directors,
and relatives of officer's of the Corporation. Additionally, in 2002 the Company
purchased Royal Products, Inc. a wholly owned subsidiary from an individual who
is a majority shareholder, director, and officer of the Company for 2,000,000
shares of Desert Health Products, Inc. stock, valued at $221,000. In 2001, the
Company purchased intangible assets in the amount of $275,000 from this same
individual at this individual's cost.

NOTE M - PRIOR PERIOD ADJUSTMENT

The prior year's financial statements have been restated due to an overstatement
of expenses in the prior year. Expenses were accrued in the prior year but
subsequent payments for these expenses were not applied to the accrual. The
correction has no affect on the results of the current year's activities,
however, the cumulative affect increases net income and decreases accounts
payable in the prior year by $17,783. Additionally a prior period adjustment in
the amount of $23,080 has been recorded for an unaccrued loan inducement fee and
over stated accounts payable in 2000. The adjustment has no affect on the
current or prior year's activities; however the cumulative affect from both
these adjustments increases accumulated deficit by $5,297.

NOTE N - COMPENSATED ABSENCES

The Company has not accounted for compensated absences because currently it
cannot be reasonably estimated, but believes the amount to be immaterial.

NOTE O - COMMITMENTS

As of December 31, 2002 the Company is under written obligation to issue 15,000
shares of Desert Health Products, Inc.'s common stock, valued at $13,300 as loan
inducement fees to various individuals.

The Company has written agreements with several individuals to pay royalties
between $.02 and $.50 per unit of Burn & Scald sold, to be paid quarterly for
twelve months. Sales of Burn & Scald have not commenced as of December 31, 2002.


                                      -12-
<PAGE>


                          DESERT HEALTH PRODUCTS, INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2002

NOTE O - COMMITMENTS (CONT'D)

The Company conducts its operations from facilities under a three year
non-cancelable operating lease expiring January 31, 2005. Additionally, the
Company leases office space at its Beijing, China branch under a one year
renewable lease. The following is the future minimum rental payments as of:

             December 31,
                 2003                             $ 133,838
                 2004                               112,838
                 2005                                 9,403
                                                  ---------
                                                  $ 256,079
                                                  =========

Total rent expense for the years ended December 31, 2002 and 2001 was $133,564
and $130,285 respectively.

NOTE P - SUBSCRIPTIONS RECEIVABLE

On December 31, 2002 subscriptions receivable consisted of $431,000 for 400,000
shares of un-issued common stock and 200,000 shares of un-issued preferred
stock, and $1,035,000 for 1,035,000 shares of un-issued and unauthorized class
of preferred stock. The Company is currently in the process of filing all the
required documents in order to issue this new class of preferred stock which
will have a specified dividend rate of 12%. As of December 31, 2002 accrued
dividends payable was $32,206.

NOTE Q - EXTRAORDINARY ITEM

The Company was released of its obligation to pay $111,719 and $110,000 in
obligations payable during 2002, and 2001, respectively.

NOTE R - CONTINGENCIES

The Company is currently in dispute with four lenders on the default of certain
terms of agreements and amounts claimed in default. The Company intends to
vigorously pursue certain counterclaims for breach of fiduciary duty, conversion
and wrongful interference with business relations. The litigation is in the
early stages with no significant discovery of court rulings to date.


                                      -13-