UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

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

                  For the quarterly period ended June 30, 1998

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

        For the transition period from _______________to_________________

                         Commission file number: 0-22899

                          Wasatch Pharmaceutical, Inc.
               (Exact name of registrant as specified in charter)

               Utah                                          84-0854009
            ----------                                    -----------------
    State or other jurisdiction of                   (I.R.S. Employer I.D. No.)
    incorporation or organization

                    714 East 7200 South, Midvale, Utah 84047
               (Address of principal executive offices) (Zip Code)

                                 (801) 566-9688
                 Issuer's telephone number, including area code

                                 Not Applicable
              (Former name, former address, and former fiscal year,
                         if changed since last report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such  reports).  Yes [X] No [ ] and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the last practicable date.

         Class A Common Stock,  $.001-  7,013,094  issued and  outstanding as of
June 30, 1998 (This amount includes 56,477 shares paid for but unissued awaiting
appropriate  documentation  and excludes  2,505,343 shares subscribed to but not
paid for and 200,000  shares held in trust as  collateral  on a loan made to the
Company.)

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

         The Registrant's  unaudited financial  statements have been prepared in
accordance  with the  instructions  to Form  10-QSB  pursuant  to the  rules and
regulations of the Securities and Exchange  Commission  and,  therefore,  do not
include all information and foot notes necessary for a complete  presentation of
the financial  position,  results of operations,  cash flows, and  stockholder's
equity in conformity  with  generally  accepted  accounting  principles.  In the
opinion  of  management,   all  adjustments  considered  necessary  for  a  fair
presentation  of the results of  operations  and  financial  position  have been
included and all such adjustments are of a normal recurring nature.

         The unaudited  balance sheet of the Registrant as of June 30, 1998, and
the related audited balance sheet of the Registrant as of December 31, 1997, the
unaudited  related  statements of operations  and cash flows for the three month
and six month periods ended June 30, 1998 and 1997 and from inception (September
7, 1989) through June 30, 1998, are attached hereto and  incorporated  herein by
this reference.

         Operating  results for the  quarter and six months  ended June 30, 1998
are not necessarily  indicative of the results that can be expected for the year
ending December 31, 1998.

         The following financial statements are included in this report:

         Consolidated Balance Sheet as of June 30, 1998 and
           December 31, 1997............................................... F-1

         Consolidated Statements of Operations for the Six Months and
           Quarter ended June 30, 1998, 1997, and from inception
           (September 7, 1989) through June 30, 1998....................... F-2

         Consolidated Statements of Changes in Common Stockholders'
           (Deficit) for the Six Months and Quarter ended June 30, 1998.... F-4

         Consolidated Statements of Cash Flows for the Six Months and
           Quarter ended June 30, 1998, 1997, and from inception
           (September 7, 1989) through June 30, 1998....................... F-5

         Notes to the Consolidated Financial Statements...................  F-7

                                       2
<PAGE>

ITEM 2. MANAGEMENT  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITIONS AND RESULTS
        OF OPERATIONS

OVERVIEW

         The Company has  proprietary  technology  for the  treatment of various
common skin disorders,  including acne, eczema, and psoriasis.  After completing
successful clinical studies, prototype clinics were established with the goal of
duplicating  the success  rates  achieved  in the  clinical  environment  and to
establish  medical,   business  and  administrative  procedures  that  could  be
duplicated  in an Internet  network of patients and doctors and through  Company
clinics  across the country.  Two prototype  treatment  clinics are currently in
operation in Utah. Although the Company has confirmed the technology through the
successful  treatment of hundreds of patients  over the last three years and has
set up the business and administrative  procedures, the clinics have not reached
a profitable level due to the lack of funds for advertising and marketing.

         To this date, the Company has not had the resources to fully  implement
its plan for the development and expansion of its clinic  operation.  Due to the
lack of working capital,  the Company's  financial  statements  contain a "going
concern"  disclosure,  which  places  into  question  the  Company's  ability to
continue  without  substantial  increases  in revenues or  additional  long-term
financing.

         The Company is seeking  funding to establish  an Internet  presence and
open additional  clinics in major  metropolitan  areas as well as launch a major
advertising and marketing  campaign to support each of its business  strategies.
Based on successful historical models,  management concludes that through direct
patient treatment on the Internet,  working with health insurance  companies and
HMOs  and  supplemented  by a  physician  referral  program,  revenues  could be
increased  substantially  with the  infrastructure in place that is operating at
10% to 15% of clinic capacity.

LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 1998, the Company had current assets of $10,842 and current
liabilities of $1,950,814,  generating a working  capital deficit of $1,939,972,
which is a 15.4% increase from December 31, 1997. The increase in the deficit is
due to the Company's  operating loss of $324,151 for the six-month  period ended
June 30,  1998.  The  deficit  was  financed  with new  borrowings  of  $140,858
(including $98,724 in the first quarter),  additional  shareholder investment of
$61,453  (including $26,154 in the first quarter),  and creditor  forbearance of
$86,426 (including $35,409 in the first quarter).

RESULTS OF OPERATIONS

         During the first six months  ending  June 30,  1998,  the  Company  had
revenues  of $40,651  compared  to $47,985  during the same six months of 1997,a
decrease of $ 7,334 or 15.3%.  The  Company's  operating  expenses  increased by
17.0% or $18,144 in the first six months of 1998, as compared to the same period
in 1997.  This was primarily due to an increase in clinic  salaries in the first
quarter of 1998).

         General and  administrative  expenses decreased $8,054 from $183,548 in
the first six months of 1997 due to sharply curtailed  professional services and
officers'  compensation  in the second  quarter of 1998. The fees paid to obtain
financing ($35,011) substantially offset these decreases.

         Interest  expense  the first  six  months  of 1998 was  $64,742  versus
$47,004  in  1997.  The  increase  is  attributable  to  increased  indebtedness
($140,000 for the six month period)

For the first half of 1998 the Company had a net loss of $324,151  compared to a
net loss of $297,496 in the same period of 1997.  The Company  anticipates  that
the losses will continue  until funding is obtained  which will it to launch its
business plan and strategies.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS  -  None.

ITEM 2.  CHANGES IN SECURITIES

         During the second  quarter  the  following  common  share  transactions
occurred:

         a.       Issued  165,000  restricted  common  shares to  creditors  for
                  extensions of due dates.
         b.       Issued  200,000  restricted  common  shares  as  interim  loan
                  collateral to be returned at debt satisfaction.
         c.       Issued   761,000   restricted   common  shares  for  fees  and
                  commissions in connection with fund raising efforts.

         The  common  shares  were  issued in  reliance  on the  exemption  from
registration  provided  by Section 4 (2) of the  Securities  Act of 1934 and the
"Safe Harbor" of Regulation D, Rule 504.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES  -  None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS  -  None.

ITEM 5.  OTHER INFORMATION  -  None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

              (a) Exhibits.

                  Exhibit
                  Number:    Exhibit
                    27       Financial Data Schedule (included only in the
                             electronic filing of this document).

              (b) Reports on Form 8-K

         On May 29,  1998,  The Company  filed the  following  report on Form 8K
describing a change in management.

                                     Summary

         The board of  directors,  pursuant to its meeting on December 31, 1997,
appointed  Leland  Hale as  President  and Chief  Operating  Officer  of Wasatch
Pharmaceutical,  Inc..  Mr.  Hale's  background  includes  Vice  President of US
Operations for Teesyn International Inc. and other top management experience.

         Gary V. Heesch, former President will continue as Chairman of the Board
and Chief Executive Officer.

         Announcement  of the  appointment  was made in a press  release May 19,
1998.

                                       3
<PAGE>

         On May 29, 1998,  The Company filed the  following  report on Form 8K/A
amending  its  filing of March 9, 1998  describing  the  disposition  of certain
assets.

                                     Summary

         February  23,  1998,  Wasatch  Pharmaceutical,  Inc.  entered  into  an
agreement  with  Mountaineer  Gas  Transmission,  Inc.,  a  Nevada  corporation,
registered  to do business in West  Virginia  ("Mountaineer"),  wherein  Wasatch
exchanged its 25% working  interest in 50 gas wells located in Pleasants,  Wood,
and Ritchie  Counties,  West Virginia for 1,800,000 shares of restricted  common
stock of Wasatch, which was returned to the treasury and subsequently canceled.

         The  Company had  purchased  the 50 gas wells in  November,  1996 in an
effort to enhance  its cash flows.  The cash flows did not come as expected  and
the Company  determined  that an  investment in the oil and gas business did not
fit in with its  long-term  strategy of setting up and  operating a medical skin
care business.

Other Events - Amendment

         Due to the  sale of its  oil and gas  assets,  Wasatch  no  longer  has
sufficient  net  tangible  assets to preclude it from being  characterized  as a
"penny  stock".  Therefore,  pursuant to SEC Rule  3a51-1,  the common  stock of
Wasatch is now defined and considered a "penny stock".

                                       4
<PAGE>

SIGNATURES

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

WASATCH PHARMACEUTICAL, INC.

Dated: April 14, 2000

By: /s/ David K. Giles
    --------------------------
    David K. Giles
    Principal Accounting Officer

                                       5
<PAGE>

<PAGE>
<TABLE>
<CAPTION>
                                        WASATCH PHARMACEUTICAL, INC.
                                       ( A Development Stage Company)
                                        Consolidated Balance Sheets

                                                                           June 30,           December 31,
                                                                             1998                 1997
                                                                      -------------------   ------------------
                                                                         (Unaudited)
CURRENT ASSETS
<S>                                                                         <C>               <C>
    Cash                                                                           $ 230             $ 14,259
    Accounts receivable - trade                                                    6,847                7,839
    Inventory                                                                      3,165                3,642
    Prepaid expenses                                                                 600               15,663
                                                                      -------------------   ------------------
       Total Current Assets                                                       10,842               41,403
                                                                      -------------------   ------------------
PROPERTY AND EQUIPMENT
    Furniture and office equipment                                                41,554               41,554
       Less accumulated depreciation                                             (25,077)             (21,662)
                                                                      -------------------   ------------------
    Net Property and Equipment                                                    16,477               19,892
                                                                      -------------------   ------------------
OTHER ASSETS                                                                       1,075                  875
                                                                      -------------------   ------------------
    TOTAL ASSETS                                                                $ 28,395             $ 62,170
                                                                      ===================   ==================

CURRENT LIABILITIES
    Accounts payable - trade                                                   $ 230,028            $ 229,234
    Accrued interest                                                             293,851              229,484
    Other accrued expenses                                                       219,557              198,293
    Notes and advances currently due
       Short-term shareholder loans                                               15,657               31,581
       Vendors                                                                   112,333              112,333
       Stockholders                                                            1,079,388              921,388
                                                                      -------------------   ------------------
TOTAL LIABILITIES                                                              1,950,814            1,722,313
                                                                      -------------------   ------------------
STOCKHOLDERS' EQUITY
    Preferred stock, $0.001 par value, 1,000,000
    shares authorized 49,258 issued & outstanding
       Series A                                                                       49                   49
    Common stock, $0.001 par value, 50,000,000
     shares authorized, 9,718,437 shares and
     9,225,763 shares issued and outstanding.                                      9,718                9,226
    Additional paid-in capital                                                 1,281,960            1,792,421
    Accumulated development stage deficit                                     (3,090,100)          (2,765,949)
                                                                      -------------------   ------------------
                                                                              (1,798,374)            (964,253)
       Less note receivable stockholder                                         (124,045)            (695,890)
                                                                      -------------------   ------------------
    Total Stockholder's Equity                                                (1,922,419)          (1,660,143)
                                                                      -------------------   ------------------
    TOTAL LIABILITIES AND
        STOCKHOLDERS' EQUITY                                                    $ 28,395 $           $ 62,170
                                                                      ===================   ==================
</TABLE>
            The accompanying footnotes are an integral part of these
                             financial statements.

                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                          WASATCH PHARMACEUTICAL, INC.
                         (A Development Stage Company)
                      Conslidated Statement of Operations
                                  (Unaudited)

                                                                             For The
                                                                         Six Months Ended                  For The
                                                                             June 30,                    Period From
                                                                -----------------------------------      Inception To
                                                                     1998               1997            June 30, 1998
                                                                ----------------   ----------------   -------------------
REVENUES
<S>                                                               <C>                <C>                  <C>
     Professional fee income                                           $ 14,337           $ 16,738             $ 199,185
     Product sales                                                       26,314             31,247               395,253
                                                                ----------------   ----------------   -------------------
        TOTAL REVENUES                                                   40,651             47,985               594,438
                                                                ----------------   ----------------   -------------------
OPERATING EXPENSES
     Cost of products sold                                                2,670              2,667                45,748
     Salaries                                                            74,708             59,140               399,429
     Employee leasing                                                         -                  -               218,745
     Payroll taxes                                                        6,535              6,035                39,694
     Physicians fees                                                     19,200             21,000               216,868
     Rent                                                                17,165             16,264               152,308
     Advertising                                                         (1,176)             1,944               211,376
     Depreciation                                                         2,629              3,385                26,628
     Other                                                                2,835             (4,013)               59,716
                                                                ----------------   ----------------   -------------------
        Total Operating expenses                                        124,566            106,422             1,370,512

GENERAL & ADMINSTRATIVE EXPENSE                                         175,494            183,548             1,543,303
INTEREST                                                                 64,742             47,004               361,004
                                                                ----------------   ----------------   -------------------
                    TOTAL EXPENSES                                      364,802            336,974             3,274,819
                                                                ----------------   ----------------   -------------------
INCOME (LOSS) BEFORE DISCONTINUED
     OPERATIONS AND THE PROVISION
     FOR INCOME TAXES                                                  (324,151)          (288,989)           (2,680,381)

LOSS FROM DISCONTINUED OPERATIONS                                             -             (8,507)             (409,718)
                                                                ----------------   ----------------   -------------------
NET INCOME (LOSS) BEFORE
    PROVISION FOR INCOME TAXES                                         (324,151)          (297,496)           (3,090,099)

Provision for Income Taxes                                                    -                  -                     -
                                                                ----------------   ----------------   -------------------
NET INCOME (LOSS)                                                     $(324,151)         $(297,496)          $(3,090,099)
                                                                ================   ================   ===================
NET (LOSS) PER COMMON SHARE                                            $ (0.034)          $ (0.046)             $ (0.518)
                                                                ================   ================   ===================
WEIGHTED AVERAGE SHARES OUTSTANDING                                   9,464,303          6,496,829             5,965,841
                                                                ================   ================   ===================
</TABLE>
            The accompanying footnotes are an integral part of these
                             financial statements.

                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                          WASATCH PHARMACEUTICAL, INC.
                         (A Development Stage Company)
                      Conslidated Statement of Operations
                                  (Unaudited)
                                                                                  For The
                                                                             Three Months Ended                 For The
                                                                                  June 30,                  Period From
                                                                    -------------------------------------    Inception To
                                                                          1998                1997           June 30, 1998
                                                                    -----------------   -----------------   ----------------
REVENUES
<S>                                                                      <C>                 <C>              <C>
     Professional fee income                                                 $ 6,765             $ 9,490          $ 199,185
     Product sales                                                            12,810              16,248            395,253
                                                                    -----------------   -----------------   ----------------
             TOTAL REVENUES                                                   19,575              25,738            594,438
                                                                    -----------------   -----------------   ----------------
OPERATING EXPENSES
     Cost of products sold                                                     1,248               1,648             45,748
     Salaries                                                                 37,899              40,637            399,429
     Employee leasing                                                              -                   -            218,745
     Payroll taxes                                                             3,100               3,660             39,694
     Physicians fees                                                           9,000              10,800            216,868
     Rent                                                                      5,447               8,229            152,308
     Advertising                                                                (543)                  -            211,376
     Depreciation                                                              1,314               1,698             26,628
     Other                                                                       471                  30             59,716
                                                                    -----------------   -----------------   ----------------
         Total Operating expenses                                             57,936              66,702          1,370,512
GENERAL& ADMINSTRATIVE EXPENSE                                                95,981             100,991          1,543,303
INTEREST                                                                      29,522              25,183            361,004
                                                                    -----------------   -----------------   ----------------
             TOTAL EXPENSES                                                  183,439             192,876          3,274,819
                                                                    -----------------   -----------------   ----------------
INCOME (LOSS) BEFORE DISCONTINUED
     OPERATIONS AND THE PROVISION
     FOR INCOME TAXES                                                       (163,864)           (167,138)        (2,680,381)

LOSS FROM DISCONTINUED OPERATIONS                                                  -              (3,857)          (409,718)
                                                                    -----------------   -----------------   ----------------
NET INCOME (LOSS) BEFORE
    PROVISION FOR INCOME TAXES                                              (163,864)           (170,995)        (3,090,099)

Provision for Income Taxes                                                         -                   -                  -
                                                                    -----------------   -----------------   ----------------
NET INCOME (LOSS)                                                         $ (163,864)         $ (170,995)$      $(3,090,099)
                                                                    =================   =================   ================
NET (LOSS) PER COMMON SHARE                                                 $ (0.018)           $ (0.026)          $ (0.518)
                                                                    =================   =================   ================
WEIGHTED AVERAGE SHARES OUTSTANDING                                        8,863,734           6,655,934          5,965,841
                                                                    =================   =================   ================
</TABLE>
            The accompanying footnotes are an integral part of these
                             financial statements.

                                       F-3
<PAGE>
<TABLE>
<CAPTION>
                          WASATCH PHARMACEUTICAL, INC.
                         (A Development Stage Company)
                       Conslidated Statement of Cash Flows
                                  (Unaudited)


                                                                          For The
                                                                      Six Months Ended             For The
                                                                           June 30,              Period From
                                                               ------------------------------    Inception, To
                                                                   1998            1997         June 30, 1998
                                                               --------------  --------------  -----------------
    CASH FLOWS FROM OPERATING
       ACTIVITIES
<S>                                                               <C>             <C>            <C>
       Net Income (Loss)                                          $ (324,151)     $ (297,496)    $ (3,090,100)
       Adjustments to Reconcile Net Income
       (Loss) to Net Cash Provided (Used)
        by Operating Activities
       Depreciation                                                    3,415           5,472           27,414
       Gain (loss) on asset disposal                                       -               -
          Clinic assets                                               (5,413)              -          394,605
          Oil and gas assets                                               -               -                -
       Expenses paid with common shares                                1,150           5,448            1,150
       Increase (decrease) in working capital                              -               -
       (Increase) decrease in receivables                              6,936 #        (1,588)            (903)
       (Increase) decrease in related party receivable                     -         (22,133)               -
       (Increase) decrease in inventory                                  434 #        (3,982)          (3,208)
       (Increase) decrease in prepaid expenses                        15,063               -             (600)
       Increase (decrease) in accounts payable                           794 #        24,319          230,029
       Increase (decrease) in accrued interest                        64,367 #        36,859          293,851
       Increase (decrease) in other accruals                          21,265 #        32,477          219,557
                                                               --------------  --------------  ---------------
    Net Cash Provided (Used) by
       Operating Activities                                         (216,140)       (220,624)       1,928,205
                                                               --------------  --------------  ---------------
    CASH FLOWS FROM INVESTING
       ACTIVITIES
       Purchase of fixed assets
       Clinics                                                             -         (35,041)         (27,764)
      (Increase) decrease in other assets                               (200)         (7,202)          (1,075)
                                                               --------------  --------------  ---------------
    Net Cash Provided (Used) by
       Investing Activities                                             (200)        (42,243)         (28,839)
                                                               --------------  --------------  ---------------
    CASH FLOWS FROM FINANCING
       ACTIVITIES
       Proceeds from borrowings                                      216,644          55,000        1,409,678
       Expenses paid by shareholder                                        -               -           38,323
       Repayment of loans                                            (75,786)         (5,000)        (198,539)
       Proceeds from sale of common shares                            10,000               -          358,205
       Capital contributed by shareholder                                  -               -          154,800
       Collection of share subscriptions                              51,453          80,000          151,014
       Common shares exchanged for debt                                    -               -           12,318
       Exercised stock options                                             -         125,000          125,250
       Redemption of common shares                                         -            (755)         (20,409)
       Costs of raising funds                                              -               -          (73,366)
                                                               --------------  --------------  ---------------
    Net Cash Provided (Used) by
       Financing Activities                                          202,311         254,245        1,957,274
                                                               --------------  --------------  ---------------
    NET INCREASE (DECREASE) IN
       CASH AND CASH EQUIVALENTS                                     (14,029)         (8,622)             230
    CASH AND CASH EQUIVALENTS
       At Beginning of Period                                         14,259          11,990                -
                                                               --------------  --------------  ---------------
       At End of Period                                                $ 230         $ 3,368            $ 230
                                                               ==============  ==============  ===============
</TABLE>
             The accompanying footnotes are an integral part of this
                             financial information.

                                       F-4
<PAGE>
<TABLE>
<CAPTION>
                          WASATCH PHARMACEUTICAL, INC.
                         (A Development Stage Company)
                       Conslidated Statement of Cash Flows
                                  (Unaudited)
                                                                 For The
                                                            Three Months Ended                For The
                                                                 June 30,                   Period From
                                                       -----------------------------        Inception To
                                                           1998            1997             June 30, 1998
                                                       -------------   -------------     ------------------
CASH FLOWS FROM OPERATING
   ACTIVITIES
<S>                                                       <C>             <C>            <C>
   Net Income (Loss)                                      $(163,864)      $(170,995)     $ (3,090,100)
Adjustments to Reconcile Net Income
   (Loss) to Net Cash Provided (Used)
   by Operating Activities
    Depreciation                                              1,709           2,880            27,414
    Gain (loss) on asset disposal                                 -               -
       Clinic assets                                         (5,413)              -           394,605
       Oil and gas assets                                         -               -                 -
    Expenses paid with common shares                          1,107           5,450             1,150
    Increase (decrease) in working capital                        -               -
    (Increase) decrease in receivables                        6,632          (2,517)             (903)
    (Increase) decrease in related party receivable               -         (22,133)                -
    (Increase) decrease in inventory                          1,204           1,555            (3,208)
    (Increase) decrease in prepaid expenses                       -               -              (600)
    Increase (decrease) in accounts payable                   6,326           3,052           230,029
    Increase (decrease) in accrued interest                  31,719          15,182           293,851
    Increase (decrease) in other accruals                    12,215               -           219,557
                                                       -------------   -------------   ---------------

Net Cash Provided (Used) by
    Operating Activities                                   (108,365)       (167,526)        1,928,205
                                                       -------------   -------------   ---------------
CASH FLOWS FROM INVESTING
   ACTIVITIES
   Purchase of fixed assets
    Clinics                                                       -          (9,945)          (27,764)
  (Increase) decrease in other assets                          (200)            245            (1,075)
                                                       -------------   -------------   ---------------
Net Cash Provided (Used) by
    Investing Activities                                       (200)         (9,700)          (28,839)
                                                       -------------   -------------   ---------------
CASH FLOWS FROM FINANCING
   ACTIVITIES
    Proceeds from borrowings                                 75,348           1,630         1,409,678
    Expenses paid by shareholder                                  -               -            38,323
    Repayment of loans                                      (33,215)              -          (198,539)
    Proceeds from sale of common shares                           -               -           358,205
    Capital contributed by shareholder                            -               -           154,800
    Collection of share subscriptions                        35,300          50,000           151,014
    Common shares exchanged for debt                              -               -            12,318
    Exercised stock options                                       -         125,000           125,250
    Redemption of common shares                                   -           2,762           (20,409)
    Costs of raising funds                                        -               -           (73,366)
                                                       -------------   -------------   ---------------
Net Cash Provided (Used) by
    Financing Activities                                     77,433         179,392         1,957,274
                                                       -------------   -------------   ---------------
NET INCREASE (DECREASE) IN
   CASH AND CASH EQUIVALENTS                                (31,132)          2,166               230
CASH AND CASH EQUIVALENTS
    At Beginning of Period                                   31,362           1,202                 -
                                                       -------------   -------------   ---------------
    At End of Period                                          $ 230         $ 3,368             $ 230
                                                       =============   =============   ===============
</TABLE>
            The accompanying footnotes are an integral part of these
                             financial statements.

                                       F-5
<PAGE>
<TABLE>
<CAPTION>
                          WASATCH PHARMACEUTICAL, INC.
                         (A Development Stage Company)
                     Conslidated Statement of Equity Changes
                            For Each Quarter of 1998
                                   (Unaudited)

                                                 Preferred       Common Stock           Additional      Accumulated        Total
                                                   Stock    ----------------------       Paid - In      Development    Stockholders'
                                                  Amount     Shares        Amount         Capital      Stage Deficit       Equity
                                                 ---------  ----------   ---------      ------------  ---------------    -----------
<S>                                                <C>      <C>           <C>           <C>            <C>              <C>
First Quarter

Stockholders equity-per committed contracts
    Balance December 31, 1997                      $ 49     9,225,763     $ 9,226       $ 1,792,421    $(2,765,949)     $ (964,253)
    Shares issued for note extensions                          43,334          43                                               43
    Shares  sold for cash                                      73,340          73             9,928                         10,001
    Exchange of preferred shares held for
        investment for originally issued shares              (750,000)       (750)                                            (750)
    Charge for per share price reduction of
        shares held under subscription notes                                               (520,390)                      (520,390)
    Net loss for the three months ended
        March 31, 1998                                                                                    (160,287)       (160,287)
                                                   ----     ---------     -------       -----------    -----------    ------------
Stockholders Equity March 31, 1998 including
    commitments for future transactions              49     8,592,437       8,592         1,281,959     (2,926,236)     (1,635,636)
    Shares issued for loan extensions                         165,000         165                                              165
    Shares issued as interim loan collateral to
        be return at debt satistaction                        200,000         200                                              200
    Shares issued as transaction commissions                  761,000         761                                              761
    Net loss for the three months ended
        June 30, 1998                                                                                     (163,864)       (163,864)
                                                   ----     ---------     -------       -----------    -----------    ------------
Stockholders Equity June 30, 1998 including
    commitments for future transactions              49     9,718,437       9,718         1,281,959     (3,090,100)     (1,798,374)

Shares issued for future transactions                      (2,705,343)     (2,705)         (121,340)                      (124,045)
                                                   ----     ---------     -------       -----------    -----------    ------------
Stockholders Equity June 30, 1998                  $ 49     7,013,094     $ 7,013       $ 1,160,619    $(3,090,100)   $ (1,922,419)
                                                   ====     =========     =======       ===========    ===========    ============
</TABLE>
                           The Accompanying footnotes
              are an integral part if this financial information.

                                       F-6
<PAGE>

                          WASATCH PHARMACEUTICAL, INC.
                        (A Development Stage Registrant)

                 Notes to the Consolidated Financial Statements
                                   (Unaudited)

NOTE 1 - NATURE AND HISTORY OF THE BUSINESS

         The consolidated  financial statements include Wasatch  Pharmaceutical,
Inc. (a  development  stage  company)  (Wasatch or the Company),  and its wholly
owned subsidiaries,  Medisys Research Group, Inc. and American Institute of Skin
Care, Inc.

         Medisys  Research  Group,  Inc.,  a  Utah  corporation,  (Medisys)  was
incorporated  on  September  7, 1989 for the  purpose  of  developing  treatment
programs for various skin disorders.  On January 21, 1994, American Institute of
Skin Care,  Inc.  (AISC) was  incorporated  as a wholly owned Utah subsidiary of
Medisys to administer the skin treatment programs developed by Medisys.

         On December 29, 1995, Ceron Resources Corporation and Medisys completed
an  Agreement  and  Plan  of  Reorganization  whereby  Ceron  issued  85% of its
outstanding  shares  of  common  stock in  exchange  for all of the  issued  and
outstanding  common  stock  of  Medisys  and the  name was  changed  to  Wasatch
Pharmaceutical, Inc.

         The  acquisition of Medisys by Ceron was accounted for as a purchase by
Medisys because the shareholders of Medisys control the surviving company. There
was no adjustment to the carrying value of the assets or liabilities of Ceron in
as much as its market value  approximated  the carrying value of net assets.  In
summary,  Ceron is the  acquiring  entity for legal  purposes and Medisys is the
surviving entity for accounting purposes.

         For the purpose of this financial  presentation  "Inception" shall mean
September 7, 1989, which was the commencement of Medisys operations.

         Disposition  of Oil and Gas Business - On November  20,  1996,  Wasatch
exchanged 2,000,000 of its common shares for a 25% interest in fifty oil and gas
wells  located  in  western  West  Virginia.  Under the terms of the  agreement,
Wasatch's  was entitled to 25% of the revenues and incurred 25% of the operating
expenses  from the wells.  The  property  operator  holds a  vendor's  lien that
entitles it to offset future revenues against accumulated operating deficits not
covered by revenues.

         At the time they were acquired,  the properties  were not  economically
productive.  The  transaction  was based on the property  developer  raising the
funds to increase  productivity  in each of the wells in 1997. The Company would
not bear any of the enhanced  production costs. There were no costs incurred for
reworking wells in 1997 or 1996.

         In  accordance  with  generally  accepted  accounting   principles  for
non-monetary  transactions,  the  acquired  properties  were  recorded at a fair
market  value that was derived  from the cash price for  comparable  recoverable
reserves but is not in excess of risk discounted future net revenues.

         In third quarter of 1997,  Wasatch called upon the oil and gas property
developer to demonstrate its ability to meet  commitments  under the acquisition
agreement.  The  developer  acknowledged  that  they  were  unable  to meet  the
contractual commitments..

         In November 1997, the Wasatch Board of Directors authorized  management
to exchange the Company's  West Virginia oil and gas  properties  for the common
shares issued by Wasatch.  Negotiations commenced and an acceptable solution was
reached in February 1998.  Under the agreed upon exchange  arrangement,  Wasatch
would  return  title to the fifty oil and gas wells  acquired  in  exchange  for
1,800,000  of the  original  shares  issued and a release  from all  obligations
associated  with the oil and gas  operations.  In  addition,  Wasatch  agreed to
forgive a $520,390 debt owed it for the purchase of common stock by an affiliate
of the developer.

                                       F-7
<PAGE>

                          WASATCH PHARMACEUTICAL, INC.
                        (A Development Stage Registrant)

                 Notes to the Consolidated Financial Statements
                                   (Unaudited)

NOTE 1 - NATURE AND HISTORY OF THE BUSINESS (Continued)

         The exchange  transaction results in a loss on disposal of a segment of
business.  Consequently, the loss from the exchange and the loss from operations
are retroactively included in the loss from discontinued  operations at December
31, 1997.

NOTE 2 - CHANGES IN PRESENTATION

         Certain  financial  presentations  for the second quarter and first six
months of 1997 have been reclassified to conform to the 1998 presentation.

NOTE 3 - GENERAL AND ADMINISTRATIVE EXPENSES

         General and  administrative  expenses for the comparative  calendar six
month and three month  periods  ended and from  inception  through June 30, 1998
are:
<TABLE>
<CAPTION>
                                      SIX MONTHS ENDED         THREE MONTHS ENDED         INCEPTION
                                            JUNE 30,                 JUNE 30,             TO JUNE 30,
                                       1998         1997         1998         1997           1998
                                   ------------- ----------- ------------- ------------   ------------
<S>                                  <C>         <C>           <C>          <C>            <C>
      Officer's compensation           $ 70,777    $ 81,092      $ 36,535     $ 48,267       $679,047
      Legal and accounting               25,609      43,267        12,321       27,491        240,387
      Finders fee                        15,011           0         7,761            0         15,011
      Travel                              6,271      10,070         1,625        5,075         70,245
      Telephone                           6,465       7,660         2,826        3,399         54,333
      Insurance                             716         357           261          195         15,773
      Postage                             1,812           0           937            0         15,395
      Payroll tax penalties                   0           0             0            0         16,433
      Other                              28,834      41,102         6,465       16,564        416,679
                                   ------------- ----------- ------------- ------------   ------------
                                      $ 155,498   $ 183,548      $ 75,981    $ 100,991     $1,523,303
                                   ============= =========== ============= ============   ============
</TABLE>

NOTE 5 - GOING CONCERN

         The  Registrant's  financial  statements are prepared  using  generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business.  However,  the  Registrant  is in the  development  stage  and has not
established  a source of revenues  sufficient to allow it to continue as a going
concern.  The Registrant is seeking an agreement to raise short-term funding and
plans to seek long-term  funding through a stock offering.  Management  believes
that  sufficient  funding  will be  raised  to meet the  operating  needs of the
Registrant during the remainder of development stage.

                                       F-8