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, 2001


         [ ]      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

               310 East 4500 South, Suite 450, Murray, Utah 84107
               --------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (801) 266-4668
                                 --------------
                 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 Par  Value,35,379,834  shares  issued and
outstanding, which excludes 18,906,500 shares the have been issued as collateral
on Company  obligations  or are being held by third  parties for future  private
placements.

<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 footnotes 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
Registrant's 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,  2001 and the
audited  balance sheet of the  Registrant as of December 31, 2000 along with the
related unaudited statements of operations, changes common stockholders' deficit
and cash flows for the six month and three month periods ended June 30, 2001 and
2000 and from inception  (September 7, 1989) through June 30, 2001, are attached
hereto.

Operating  results  for the  period  ended  June 30,  2001  are not  necessarily
indicative of the results that can be expected for the year ending  December 31,
2001.

This  report  contains   forward-looking   statements  that  involve  risks  and
uncertainties.  Actual results could differ  materially  from those discussed in
the forward-looking  statements as a results of certain factors, including those
risk factors  discussed  more fully in the Company's  annual report (Form 10KSB)
for December 31, 2000.


The following financial statements are included in this report:

         Consolidated Balance Sheet as of June 30, 2001 and
           December 31, 2000   .........................................   F-1

         Consolidated Statements of Operations for the six months
           and the quarters Ended June 30, 2001and 2000 and from
           inception (September 7, 1989) through June 30, 2001..........   F-2

         Consolidated Statements of Changes in Common Stockholders'
           (Deficit) for the six and three month periods ended
           June 30, 2001 and 2000........................................  F-3

         Consolidated Statements of Cash Flows for the six months and
           the quarters ended June 30, 2001and 2000 and from inception
           (September 7, 1989) through June 30, 2001.....................  F-4

         Notes to the Consolidated Financial Statements..................  F-5

                                       2
<PAGE>
<TABLE>
<CAPTION>
                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                           CONSOLIDATED BALANCE SHEET
                PERIOD ENDED JUNE 30, 2001 AND DECEMBER 31, 2000

                                                                           June 30,     December 31,
                                                                             2001           2000
                                                                          ----------    ------------
                                                                          (Unaudited)
           <S>                                                            <C>            <C>
                                     ASSETS

           CURRENT ASSETS
           Cash                                                           $   10,503     $      230
           Accounts receivable - trade                                         4,532          2,388
           Inventory                                                         275,856        158,471
           Prepaid expenses                                                  107,750         30,158
                                                                          ----------     ----------
           Total Current Assets                                              398,641        191,248
                                                                          ----------     ----------

           PROPERTY AND EQUIPMENT
           Office fixtures and equipment                                     139,891         76,062
           Leasehold improvements                                             64,544         60,002
           Internet system and equipment                                      37,063         37,063
           Machinery and equipment                                            36,713         24,671
                                                                          ----------     ----------
                                                                             278,211        197,798
           Less accumulated depreciation                                     (81,772)       (54,368)
                                                                          ----------     ----------

           Net Property and Equipment                                        196,439        143,430
                                                                          ----------     ----------

           OTHER ASSETS
           Intangibles - net of amortization                                  50,775         54,288
           Deposits                                                           29,361         27,786
                                                                          ----------     ----------
           Total Other Assets                                                 80,137         82,074
                                                                          ----------     ----------

           TOTAL ASSETS                                                   $  675,217     $  416,752
                                                                          ==========     ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

           CURRENT LIABILITIES
           Accounts payable - trade                                       $  566,324     $  534,929
           Accrued interest                                                  877,250        648,291
           Accrued salaries                                                  865,699        828,036
           Payroll taxes                                                     165,040         88,384
           Other accrued expenses                                                262         42,884
           Notes and advances currently due:
           Short-term shareholder advances                                   207,043        153,790
           Vendors                                                           112,333        112,333
           Stockholders and others                                         2,004,617      1,817,642
                                                                          ----------     ----------

           Total Liabilities                                               4,798,568      4,226,289
                                                                          ----------     ----------

           STOCKHOLDERS' DEFICIT
           Preferred stock, $0.001 par value, 1,000,000
             shares authorized 49,258 issued and outstanding                      49             49
           Common stock, $0.001 par value, 100,000,000 shares
             authorized, 54,286,334 and 27,405,518, respectively,
             shares issued and outstanding                                    54,286         27,406
           Additional paid-in capital                                      5,457,860      3,910,666
           Accumulated development stage deficit                          (9,529,957)    (7,746,308)
                                                                          ----------     ----------
                                                                          (4,017,761)    (3,808,187)
           Less shares issued for future transactions                       (105,589)        (1,350)
                                                                          ----------     ----------
           Total Stockholders' Deficit                                    (4,123,351)    (3,809,537)
                                                                          ----------     ----------

           TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                    $  675,217     $ 416,752
                                                                          ==========     ==========
</TABLE>
                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      ------------------------------------
                                   (Unaudited)


                                                                                                                Cumulative
                                                        For the Six Months Ended     For the Quarter Ended        Amounts
                                                                June 30,                   June 30,            From Inception
                                                        ------------------------    ------------------------     To June 30,
                                                           2001         2000          2001          2000             2001
                                                        -----------   ----------    ----------    ----------     -----------
<S>                                                      <C>          <C>           <C>           <C>            <C>
REVENUES
Professional fee income                                  $    5,455   $    2,700    $    2,509    $    1,320     $   242,459
Product sales                                                27,928       11,290         7,175         4,987         500,590
                                                        -----------   ----------    ----------    ----------     -----------
                                                             33,383       13,990         9,684         6,307         743,049
                                                        -----------   ----------    ----------    ----------     -----------

SKIN CARE TREATMENT AND PRODUCT EXPENSES
Cost of products sold                                         9,868        2,291         3,576         1,024          65,673
Salaries                                                    129,048       93,089        66,597        45,059         979,086
Employee leasing                                                  -            -             -             -         218,745
Payroll taxes                                                     -        9,784             -         5,258         112,671
Physicians fees                                              13,500       17,182         7,200        12,832         312,350
Rent                                                         38,477       18,142        17,229         9,096         286,875
Advertising                                                  20,836        3,337        20,836         3,337         238,396
Depreciation                                                 17,303        2,525        13,012         1,258          17,303
Other                                                        59,108       11,269        23,903         5,854         211,139
                                                        -----------   ----------    ----------    ----------     -----------
                       Total                                288,140      157,619       152,353        83,716       2,442,238

GENERAL AND ADMINISTRATIVE EXPENSE                        1,231,828      542,691       449,182       354,545       5,768,189
INTEREST                                                    297,065      141,744       189,942        70,873       1,652,862
                                                        -----------   ----------    ----------    ----------     -----------

                                                          1,817,033      842,054       791,477       509,134       9,863,289
                                                        -----------   ----------    ----------    ----------     -----------
LOSS FROM CONTINUING OPERATIONS
  BEFORE INCOME TAXES                                    (1,783,650)    (828,064)     (781,793)     (502,826)     (9,120,240)

LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX                     -            -             -             -         (409,717)
                                                        -----------   ----------    ----------    ----------     -----------

NET LOSS BEFORE INCOME TAXES                             (1,783,650)    (828,064)     (781,793)     (502,826)     (9,529,957)

PROVISION FOR INCOME TAXES                                        -            -             -             -               -
                                                        -----------   ----------    ----------    ----------     -----------

NET LOSS                                                $(1,783,650)  $ (828,064)   $ (781,793)   $ (502,826)    $(9,529,957)
                                                        ===========   ==========    ==========    ==========     ===========

Loss per share before discounted operations             $     (0.05)  $    (0.07)   $    (0.02)   $    (0.04)
Loss per share from discounted operations                        -            -             -             -
                                                        -----------   ----------    ----------    ----------

BASIC LOSS PER COMMON  SHARE                            $     (0.05)  $    (0.07)   $    (0.02)   $    (0.04)
                                                        ===========   ==========    ==========    ==========
BASIC WEIGHTED AVERAGE
  SHARES OUTSTANDING                                     32,908,775   11,587,629    34,658,022    11,958,301
                                                        ===========   ==========    ==========    ==========
</TABLE>
                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
          CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' (DEFICIT)
                                   (Unaudited)






                                                    Preferred      Common Stock        Additional   Accumulated        Total
                                                      Stock   ----------------------   Paid - In    Development    Stockholders'
                                                      Amount     Shares       Amount    Capital    Stage Deficit    (Deficit)
                                                      ------     ------       ------    -------    -------------    ---------
<S>                                                    <C>    <C>           <C>       <C>          <C>          <C>
Balance forward December 31, 2000                      $ 49   27,405,517    $ 27,406  $ 3,910,666  $(7,746,308) $ (3,808,187)
Shares issued in connection with:
Consulting fees                                                1,094,338       1,094      241,109            -       242,203
Loan extensions                                           -      131,000         131        9,039            -         9,170
Securities sold for cash                                  -    2,589,691       2,590      941,475            -       944,064
Restricted shares issued principal officers for
unrestricted shares returned to the Company               -    1,030,000       1,030      222,070            -       223,100

Change in shares issued as loan collateral                -      139,000         139            -            -           139

Change in shares issued for future sale                   -    1,917,500       1,918            -                      1,918

Net loss for the quarter ended March 31, 2001             -            -           -            -   (1,001,856)   (1,001,856)
                                                       ----  -----------    --------  -----------  -----------  ------------

Balance March 31, 2001 of stockholders'
equity - per committed contracts                         49   34,307,046      34,307    5,324,359   (8,748,164)   (3,389,449)

Shares issued in connection with:
Consulting fees                                           -      225,000         225       15,525            -        15,750
Securities sold for cash                                  -      135,500         135       26,965            -        27,100
Services rendered                                         -       48,000          48        3,312            -         3,360
Restricted shares issued principal officers for
unrestricted shares returned to the Company               -      570,788         571      102,171            -       102,742
Lender claims on defaulted loan                                3,500,000       3,500            -            -         3,500

Cost of Raising Funds                                     -                               (14,471)           -       (14,471)

Change in shares issued as loan collateral                -   13,500,000      13,500            -            -        13,500

Change in shares issued for future sale                   -    2,000,000       2,000            -            -         2,000

Net loss for the quarter ended June, 2001                 -            -           -            -     (781,793)     (781,793)
                                                       ----  -----------    --------  -----------  -----------  ------------

Balance June 30, 2001 of stockholders'
equity-per committed contracts                           49   54,286,334      54,286    5,457,860   (9,529,957)   (4,017,762)
                                                       ----  -----------    --------  -----------  -----------  ------------

Common shares issued for future consideration
Shares issued as collateral for Company obligations       -  (14,989,000)    (14,989)           -            -       (14,989)
Shares issued for future sale                             -   (3,917,500)     (3,918)     (86,682)           -       (90,600)
                                                       ----  -----------    --------  -----------  -----------  ------------

                     Total                                -  (18,906,500)    (18,907)     (86,682)           -      (105,589)
                                                       ----  -----------    --------  -----------  -----------  ------------

Net equity June 30, 2001                               $ 49   35,379,834    $ 35,379  $ 5,371,178  $(9,529,957) $ (4,123,351)
                                                       ====  ===========   =========  ============ ==========================
</TABLE>
                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)


                                                                                                                 Cumulative
                                                         For the Six Months Ended     For the Quarter Ended       Amounts
                                                                June 30,                     June 30,          From Inception
                                                        ----------------------------   -----------------------   To June 30,
                                                           2001             2000          2001         2000         2001
                                                           ----             ----          ----         ----         ----
<S>                                                     <C>             <C>            <C>          <C>          <C>
Cash Flow from Operating Activities
Net loss                                                $(1,783,650)    $   (828,064)  $ (831,769)  $ (502,827)  $(9,529,958)
Adjustments to reconcile net (Loss) to net cash
used by operating activities:
Depreciation and depletion                                   38,036            4,829       23,051        2,495        99,493
Depreciation and losses on fixed asset disposals
Clinic assets                                                     -                -            -            -        15,234
Oil and gas assets                                                -                -            -            -         4,189
Loss on disposal of oil and gas properties                                         -            -            -       382,933
Expenses paid with common shares                             696,985           1,366       92,184            -     1,309,690
Increase (decrease) in working capital
(Increase) decrease in receivables                           (2,144)            (950)      (1,254)        (380)       (4,532)
(Increase) decrease in inventory                           (117,385)          (4,405)      34,173        1,025      (275,856)
(Increase) decrease in prepaid expenses                     (77,592)           7,705       12,275       12,724      (107,750)
Increase (decrease) in accounts payable                      31,393           66,606       79,979       51,795       566,323
Increase (decrease) in accrued interest                     228,959           98,782      176,371       62,110       877,250
Increase (decrease) in other accruals                        71,696           12,504      (11,362)      20,866     1,031,001
                                                        -----------     ------------   ----------   ----------   -----------
Net cash used by operating activities                      (913,701)        (641,627)    (426,353)    (352,191)   (5,631,983)
                                                        -----------     ------------   ----------   ----------   -----------

Cash Flow from Investing Activities
Purchase of fixed assets                                    (80,412)         (17,412)      (7,250)      (2,338)     (264,421)
(Increase) decrease in other assets                          (8,695)         (43,600)     (11,433)     (13,800)      (90,770)
                                                        -----------     ------------   ----------   ----------   -----------
Net cash provided (used) by investing activities            (89,107)         (61,012)     (18,683)     (16,138)     (355,191)
                                                        -----------     ------------   ----------   ----------   -----------

Cash Flow from Financing Activities
Proceeds from borrowings                                    690,847          333,271      417,000      233,100     4,291,374
Expenses paid by shareholder                                      -                -            -            -        38,323
Repayment of loans                                         (450,618)        (101,263)     (82,285)     (38,164)   (1,368,849)
Proceeds from sale of common shares                         787,324          467,404      129,842      166,484     2,825,089
Capital contributed by shareholder                                -                -            -            -       154,800
Collection of share subscriptions                                 -                -            -            -       141,726
Exercised stock options                                           -                -            -            -       125,250
Redemption of common shares                                       -                -            -            -       (20,409)
Cost of raising capital                                     (14,471)               -      (14,471)           -      (201,945)
                                                        -----------     ------------   ----------   ----------   -----------
Net cash provided by financing activities                 1,013,082          699,412      450,086      361,420     5,997,677
                                                        -----------     ------------   ----------   ----------   -----------

NET INCREASE (DECREASE) IN CASH                              10,273           (3,227)       5,050       (6,909)       10,503
Balance at beginning of period                                  230           10,038        5,452       13,720             -
                                                        -----------     ------------   ----------   ----------   -----------
Balance at end of period                                $    10,503     $      6,811   $   10,503   $    6,811   $    10,503
                                                        ===========     ============   ==========   ==========   ===========
</TABLE>
                                      F-4
<PAGE>

                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                  June 30, 2001
                                   (Unaudited)


NOTE 1 - NATURE AND HISTORY OF THE BUSINESS

These consolidated financial statements include Wasatch Pharmaceutical,  Inc. (a
development  stage  company)  (Wasatch  or the  Company),  and its wholly  owned
subsidiaries, Medisys Research Group, Inc. American Institute of Skin Care, Inc.
and AISC Online, 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 January 26,
2001,  AISC Online,  Inc. (AISC Online) was  incorporated as a wholly owned Utah
subsidiary of Wasatch to market and sell Wasatch products over the Internet.

For  the  purpose  of  this  financial  presentation  "Cumulative  Amounts  From
Inception"  shall mean  September  7, 1989,  which was the  commencement  of the
Company's operations.

The Statement of Operations  for the six months and quarters ended June 30, 2001
and 2000 and for the period from inception  (September 7, 1989) through June 30,
2001,  the Statement of Changes in  Stockholders  Deficit for the six months and
quarters  ended June 30, 2001 and 2000 and the Balance Sheet as of June 30, 2001
are unaudited but include, in the opinion of management, all of the adjustments,
consisting  only  of  normal  recurring   adjustments,   necessary  for  a  fair
presentation of the results for these periods and the financial  condition as of
that date. Historical interim results are not necessarily  indicative of results
that may be expected for any future period.

NOTE 2 - CHANGES IN PRESENTATION

Certain  financial  presentations  for the periods  presented for 2000 have been
reclassified to conform to the 2001 presentation.

NOTE 3 - GOING CONCERN

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

NOTE 4 - INVENTORIES

Inventories are valued at the lower of average costs or market and are comprised
of the following:

                                                  June 30,         December 31,
                      Type of Inventory             2001               2001
                                                ------------     --------------

                Empty bottles and boxes         $    181,294       $     - 0 -
                Finished treatment solutions          42,262            11,327
                Treatment kits                        16,608             - 0 -
                Video instruction for kits            35,692            45,523
                Inventory in transit - bottles         - 0 -           101,621
                                                ------------       -----------
                             Total              $    275,856       $   158,471
                                                ============       ===========

                                      F-5
<PAGE>

                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                   (Unaudited)


NOTE 5 - INTANGIBLE ASSETS

Intangible assets are valued at the lower of net realizable value to the Company
or cost and are comprised of the following:


                                              June 30,         December 31,
              Type of Asset                     2001               2001
              -------------                     ----               ----

       Trademark application costs         $      25,966      $      18,846
       Product development costs                  42,530             42,530
                                           -------------      -------------
                     Total cost                   68,496             61,376

       Product development amortization          (17,721)            (7,088)
                                           -------------      -------------
                 Net carrying value        $      50,775      $      54,288
                                           =============      =============

The trademark  application  is pending but when it is granted the costs incurred
will be amortized over their statutory  lives.  Video production costs represent
the costs of producing instructional treatment videos for the company's products
and are charged to operations as they are used.  Product  development  costs are
the  costs  of  developing  product  names,  bottles  and  strategy  and will be
amortized over eighteen months.

Intangible  assets  are  periodically   reviewed  for  impairment  based  on  an
assessment  of future cash  flows.  All  intangible  assets are  amortized  on a
straight-line basis.

NOTE 6 - COMMON STOCK ISSUED AND OUTSTANDING

The  following  table  reflects the financial  accounting  for all common shares
issued. In accordance with generally accepted accounting principles, the Company
treats  common  shares   issued  as  both  issued  and   outstanding   when  the
consideration  for those  shares has been  determined  and when the  transaction
giving rise to that consideration has been completed. Until all the elements for
a completed  transaction are existent,  such common shares are not considered as
issued and outstanding. Consequently, the Company uses the classification Shares
Issued for Future  Transactions,  which includes shares issued as collateral and
shares issued for future sale, to identify those types of common share issues.

At June 30, 2001 and December 31, 2000 the common shares  considered issued were
54,286,334  and  27,405,517  and  the  common  shares   considered   issued  and
outstanding were 35,379,834 and 26,055,517, respectively.

For   financial   reporting   purposes,   the  common   shares  issued  for  the
aforementioned  incomplete  transactions  and those held by third party trustees
are not treated as  outstanding  in the  determination  of average common shares
outstanding  and net book value per share.  However,  the  Company  does  record
shares  issued for future  transactions  at a nominal value ($.001 per share) in
the financial statements.

                                      F-6
<PAGE>

                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                   (Unaudited)


NOTE 6 - COMMON STOCK ISSUED AND OUTSTANDING (Continued)

Following is a  reconciliation  of the shares issued by the transfer agent,  the
types of transactions  resulting in the  aforementioned  excluded shares and the
shares that are considered  issued and  outstanding  for financial  presentation
purposes at June 30, 2001 and December 31, 2000.

                                                        June 30,   December 31,
                    Type of Share Transaction             2001         2000
                    -------------------------             ----         ----

         Shares issued by transfer agent               54,380,032    26,282,167

         Add (deduct) Shares held in trust by the
           transfer agent                                 (93,698)     (206,650)
         Shares for option arrangement                               (2,500,000)
         Shares to be issued to meet
           contractual commitments                                    3,830,000
                                                       ----------    ----------

         Shares recorded in financial statements       54,286,334    27,405,517
                                                       ----------    ----------

         Add (deduct) Shares for future sales and
           obligations Shares issued under investment
           contract                                    (2,000,000)
         Shares for option arrangement                 (1,917,500)
         Shares issued to and held by vendors          (1,100,000)   (1,100,000)
         Shares issued to and held by lenders         (13,889,000)     (250,000)
                                                       ----------    ----------
         Shares issued for future transactions        (18,906,500)   (1,350,000)
                                                       ----------    ----------
         Shares issued and outstanding                 35,379,834    26,055,517
                                                       ==========    ==========


The shares held in trust by the  transfer  agent at December  31, 2000  (206,650
common  shares) are not recorded in the financial  statements in as much as they
represent  shares  that have been set aside by the  Company  but not  issued for
specifically  committed or completed  transactions.  At December 31, 2000, these
shares were allocated and set aside for a specific investment company in Europe.
At June 30, 2001, 93,698 of these common shares remained set aside and unsold.

In December 2000, the Company entered into a consulting  agreement that provides
the following services for a period of one year:

         o        Marketing  and  promotion  of  Wasatch's   products  over  the
                  Internet

         o        Developing an  interactive  network of physicians  and clinics
                  that are prospective partners or clients

         o        General business consulting and assistance.

As  compensation  for  services,  the  consultant  was granted  stock options to
purchase 4,100,000 shares of common stock in the following amounts and prices:

         o        100,000 shares exercisable at $.001 per share

         o        2,400,000 shares exercisable at $.25 per share

         o        1,600,000 shares exercisable at a 70% of the closing bid price
                  on the exercise date but not less than $.37 per share.

                                      F-7
<PAGE>

                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                   (Unaudited)


NOTE 6 - COMMON STOCK ISSUED AND OUTSTANDING (Continued)

During December 2000, options for 2,500,000 common shares were exercised and the
shares were issued with an agreement  that the  exercise  price would be paid in
the future.  During the first quarter of 2001, options for 1,600,000 shares were
exercised  and the shares were issued based upon the future  payment of exercise
price. During the first quarter of 2001, payments totaling $513,100 was received
for  2,082,500  shares and 100,000  shares were released at par value ($.001 per
share.)

The contract has been  accounted  for based on the  difference  between the fair
value of shares under option ($.32 per share) at the date of the grant,  and the
exercise  price for those shares ($.001 per share for 100,000  shares,  $.25 per
share  for  2,500,000  shares  and $.37 per  share for  1,600,000  shares.)  The
discount on the 2,500,000 shares ($.07 per share) was recorded  retroactively to
the  commencement  of the first quarter of 2001 at $199.900 to be amortized over
the remaining twelve months of the consulting agreement.

Also in the second  quarter of 2001,  the Company  executed a private  placement
contract  with a Canadian  investment  company and  allocated  2,000,000  common
shares to be placed by that company.

At June 30, 2001,  3,917,500  common  shares  remain as a commitment  for future
sales and obligations.

At December 31, 2000,  the shares to be issued to meet  contractual  commitments
include 3,750,000 common shares due under the Convertible  Debenture settlement,
more fully  discussed  elsewhere in this filing,  and an issue of 80,000  common
shares for legal services under a contractual  obligation due December 31, 2000.
These shares were issued during the first quarter of 2001.

The shares issued to and held by lenders is comprised of the following:

         In the fourth quarter of 2000,  the Company  executed a contract with a
         supplier to provide bottles for its product.  The value of the contract
         was  approximately  $180,000 and the Company  issued  1,000,000  common
         shares to provide collateral for future  performance.  During this same
         period, the Company executed a real estate lease agreement for its Salt
         Lake City  facilities  and  100,000  common  shares  were issued to the
         lessor as  collateral  against  future  performance.  The shares issued
         under these two contracts remain as collateral at June 30, 2001.

         At December  31,  2000,  a lender  held  250,000  restricted  shares as
         collateral  under a loan that was defaulted in 1998.  Those  collateral
         shares are unchanged and remain outstanding at June 30, 2001.

         In the first  quarter of 2001,  the Company  issued  93,000 shares to a
         private  investor as  collateral  on a loan of $20,000 to an investment
         company who assists the Company in finding qualified  investors for the
         private sale of its securities.  That loan is in default but the lender
         has taken no action to perfect its lien and security.

         In the first  quarter of 2001,  the Company  issued  46,000 shares to a
         private  investor  as  collateral  on a loan  of  $10,000  made  to the
         Company.  That loan is in default but the lender has taken no action to
         perfect its lien and security.

         On April 18, 2001,  Gary Heesch,  the CEO of the Company entered into a
         loan transaction to borrow $182,000, for the Company's benefit, on a 40
         day term  note.  The  Company  received  the funds and agreed to assume
         responsibility  for the  obligations  under  the  promissory  note.  In
         addition,  the  Company  issued  4,000,000  shares  to  the  lender  as
         collateral on the loan.  The promissory  note was not liquidated  under
         its  repayment  terms and the  lender  asserted  its  rights  through a
         notification  filing  with the SEC that  states  they are the owners of
         3,500,000  shares  of  the  Company's  common  stock.  The  Company  is
         currently negotiating with the lender for repayment on the note and the
         return of all or a portion of the forfeited  collateral.  In as much as
         the  asserted  collateral  shares  are in the hands of the  lender  and
         negotiations  are  incomplete,   the  Company  has  retained  the  debt
         obligation in its financial statements and the 3,500,000 million shares
         are  considered  issued and  outstanding  and 500,000  shares remain as
         issued for collateral.

                                      F-8
<PAGE>

                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                 Notes to the Consolidated Financial Statements
                                   (Unaudited)


NOTE 6 - COMMON STOCK ISSUED AND OUTSTANDING (Continued)

On April 4,  2001,  the  Company  borrowed  $100,000  from a trust  created by a
shareholder.  The note  was in  default  at June  30,  2001and  the  Company  is
negotiating a  liquidation  plan on the  obligation  and the return of 1,000,000
common shares given as collateral.  The note and the collateral  continued to be
reflected as outstanding in the financial statement.

On June 20, 2001, the Company borrowed $300,000 from a private investment group.
The  note  is due  September  18,  2001  and  is  collateralized  by  12,000,000
restricted common shares of the Company.

NOTE 7 - GENERAL AND ADMINISTRATIVE EXPENSES

General  and  administrative  expenses  for  the  comparative  calendar  six and
three-month  periods of 2001 and 2000 and from  inception  through June 30, 2001
are as follows:
<TABLE>
<CAPTION>
                                                                                        Cumulative
                                                                                          Amounts
                                                                                           From
                                       Six Months Ended          Three Months Ended      Inception
                                           June 30,                   June 30,           to June 30,
                                       2001         2000         2001         2000          2001
                                       ----         ----         ----         ----          ----
<S>                                 <C>             <C>         <C>           <C>       <C>
     Officer's compensation         $   320,000     $111,720    $ 160,000     $ 55,470  $ 2,144,962
     Profession services                569,663      286,750      181,030      194,514    1,463,104
     Financing related costs            137,886       60,556       38,234        3,975      521,370
     Travel                              29,468        7,022       18,131        1,149      141,413
     Telephone                           11,927        5,431        5,364        3,559       92,198
     Insurance                            2,135        2,647        2,135        2,547       18,700
     Postage                             15,996          863       15,996          845       36,807
     Payroll tax interest                     0            0            0            0       36,569
     Other                              144,753       67,702       28,292       92,486    1,313,066
                                    -----------     --------    ---------     --------  -----------
                                    $ 1,131,878     $542,691    $ 449,182     $354,545  $ 5,768,189
                                    ===========     ========    =========     ========  ===========
</TABLE>

NOTE 7 - SUBSEQUENT EVENT

On August 7, 2001,  the Company  entered into a three year  marketing  agreement
with  Entertainment  Direct TV, Inc.  (EDTV).  The  agreement  calls for EDTV to
develop and manage an e-mail  marketing  campaign  to  introduce  the  Company's
family of products into the market place. The marketing services include website
development,  creation and  distribution of the marketing  messages,  reporting,
tracking,  analysis and database  development.  Compensation  for the  marketing
services  will be $20,000 in cash and common stock valued at $150,000 to be paid
over a ninety day period.

                                      F-9
<PAGE>

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

OVERVIEW

         The Company has developed  proprietary  technology for the treatment of
various  skin  disorders,   including  acne,   eczema,   and  psoriasis.   After
successfully  completing  controlled  clinical studies,  the company established
prototype  clinics to  duplicate  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
Company owned clinics across the country.  The 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 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  Internet  and  clinic
operations.  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 had been seeking funding to establish an Internet presence,
open  additional  clinics  in  major  metropolitan  areas  and  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, an advertising  campaign and a physician referral program,  revenues could
be substantially increased with an established  infrastructure that is operating
at 5% to 10% of clinic capacity.

LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 2001 the Company  had  current  assets of $263,000  current
liabilities of $4,798,600  resulting in a working capital deficit of $4,535,600,
which is a $500,500  increase in the deficit  that existed at December 31, 2000.
The increase in the working capital  deficit is due to the Company's  continuing
infrastructure  investment  that results in an operating  loss of $1,683,700 and
$731,800 for the six-month  and  three-month  periods ended June 30 2001.  These
operating  losses were financed  with  substantial  borrowings  and common stock
issues.

         The principal asset increases were in inventory ($117,400), prepaid
consulting fees ($99,950), and furniture and fixtures for corporate offices
($78,000.) The new inventory is additional treatment bottles and increased
treatment solutions prepared for sale. The majority was financed by vendors.

         There was additional shareholder investment of $787,300 ($129,700 in
the second quarter) and common stock issued for goods and services totaling
$270,500 ($19,100 in the second quarter.) The Company borrowed $690,800
(including officer and shareholder advances of $192,800) on short-term
obligations during the first half of 2001 ($417,000 during the second quarter).
During this period $311,000 was repaid on two short-term notes and $139,600 of
the monies advanced by the two principal officers was repaid.

         In addition,  at June 30, 2001,  officers and executives of the company
have accumulated unpaid annual compensation  totaling $865,700.  This represents
the annual  compensation  approved for the  management but unpaid as a result of
inadequate resources.

RESULTS OF OPERATIONS

         For the three months ended June 30, 2001, the Company's revenues
remained nominal at $9,700. Revenues for the six months ended June 30, 2001 were
$33,400, an increase of 239% when compared to the same period for the prior
year. The Company's operating expenses (includes the clinics and internet sales)
increased $130,130 in the first six months of 2001, as compared to the first six
months of 2000. The comparable second quarter operations saw these operating
expenses increase 82%. The increases reflect the emphasis on ramping up the
marketing and sales efforts for the Internet division and the Utah clinics.

         The Company's corporate general and administrative expenses increased
$689,100 to $1,231,800 for the two quarters of 2001 when compared to the same
quarters of 2000. These increases are attributable to officers compensation (up
$208,200 with added executives), increased executive and contract staff costs in
preparation of commencing the clinic and Internet sales and marketing programs
(an increase in staff and costs of $282,900) and the many costs of funding the
Company's business start up operations. The G&A for the comparable quarters of
2001 and 2000 increase $95,000 because of increase executive salary accruals.

                                       3
<PAGE>

         The Company had a net loss of $731,800  for the second  quarter of 2001
as compared  to a loss of $502,800 in the same period of 2000.  The year to date
loss for 2001,  when  compared  to six  months of 2000,  increased  $855,600  to
$1,683,700  due to a large loss in quarter one of 2001.  Roughly 50% of the year
to date loss was funded by issuing common stock for goods and services.

         The Company  anticipates that the losses will continue until it obtains
the  funding  that will  enable  management  to fully  implement  the  Company's
business plan.

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Convertible Debenture Settlement - On April 19, 2000, the Company entered into a
securities  purchase  agreement  with a  private  investment  group  to  provide
long-term  capital funding.  Under the agreement,  the investment group provided
$180,000 in cash and received a 3 year  $200,000 8%  convertible  debenture.  In
June  2000,  the  Company's  management  concluded  not to pursue  this  funding
opportunity  because of  operational  restrictions  and changes  demanded by the
investment group that were not in the original agreement.

The private  investment  group and the Company  entered  into  negotiations  and
reached an  agreement  on  November 7, 2000.  Under the terms of the  settlement
agreement,  the Company  delivered 750,000 shares of the Company's common stock,
and agreed to repay the private  investment group the original $180,000 borrowed
and a  monetary  and stock  premium  to set aside the  original  agreement.  The
premium escalated if the Company was not able to meet its commitment.

The Company was unable to meet the repayment requirements and by January 5, 2001
the premium resulted in a total obligation of $350,000 cash and 1,500,000 shares
of the Company's common stock.

The settlement  agreement was amended on January 16, 2001 and required the issue
of an  additional  3,500,000  shares of the Company  common stock to  completely
rescind the original  agreement  and the initial  settlement  arrangement.  Even
though the Company  issued these shares in January  2001,  management  concluded
that  conditions  precedent  required  this  transaction  to be  included in the
December 31, 2000 financial statements.

A condition of the  settlement  agreement was for the Company to register all of
the shares issued to the private investment group. The SEC made the registration
statement effective April 12, 2001.

On May 15,  2000,  a demand  letter was  received  by the Company to pay off the
mortgage of a former officer of the Company, Lee Hale, in the approximate amount
of $400,000.  In September 1998, while serving as interim President (not CEO) of
the Company,  he refinanced his personal  residence and signed the mortgage note
as  President  of  the  Company.   This  was  done  without  the   knowledge  or
authorization  of the  Company.  Because the  mortgage  company did not obtain a
board  authorization to obligate the Company and the Company received no benefit
from the transaction,  the Company feels the claim is entirely without merit and
will not have a material  adverse effect on the Company.  A lawsuit was filed on
December 15, 2000 and that suit is presently in the discovery stage.

Other Legal  Proceedings - The Company is a party to one other legal  proceeding
that is covered by  liability  insurance,  the  outcome of which will not have a
material adverse effect on the Company.

                                       4
<PAGE>

ITEM 2.  CHANGES IN SECURITIES

         On April 3, 2001, Wasatch  Pharmaceutical sold 60,500 restricted shares
of common  stock to 2  investors.  The net  proceeds  from  these  sales,  after
deducting commissions and costs, were $7,223.70.  These sales of securities were
exempt from  registration  under the  Securities  Act  pursuant to Section  4(2)
thereof. To the best of Wasatch's  knowledge,  each investor is sophisticated in
financial  investments and received a variety of financial and other information
about  Wasatch  in  connection  with the  investor's  due  diligence.  No public
solicitation or general advertising was done in connection with these sales.

         On April 4, 2001,  the Company  issued  1,000,000  shares of restricted
common stock to the Adelman  Trust to be used as  collateral  on a $100,000 loan
made to the  Company on that same date.  The shares of common  stock were issued
pursuant an exemption  from  registration  under Section 4(2) of the  Securities
Act. To the best of Wasatch's  knowledge,  the Trust manager(s) is sophisticated
in  financial  investments  and  received  a  variety  of  financial  and  other
information  about Wasatch including that filed with the Securities and Exchange
Commission.

         On April 11, 2001,  the Company issued  4,000,000  shares of restricted
common stock to North Coast  Investments  as  collateral on a loan for $182,000.
The  Company  defaulted  on the  loan,  and  North  Coast  Investments  obtained
possession  of the  4,000,000  shares on May 31, 2001.  To the best of Wasatch's
knowledge,  North Coast  Investments'  management is  sophisticated in financial
investments  and received a variety of  financial  and other  information  about
Wasatch including that filed with the Securities and Exchange Commission.

         On April 11, 2001,  the Company  entered into a written  agreement with
Thomson Kernaghan Company, an investment banking firm, that grants Kernaghan the
right to purchase up to 2,000,000 shares of the Company's common stock. The sale
of shares was exempt from  registration  under the  Securities  Act  pursuant to
Section 4(2) thereof.  To the  Company's  knowledge,  Kernaghan's  management is
sophisticated  in financial  investments and received a variety of financial and
other information about Wasatch in connection with its due diligence.

         On  April  23,  2001,  under  the  terms of the  investment  commitment
contract described above, Thomson Kernaghan Company advanced $225,000 in cash to
Wasatch.  Of the total,  $102,172  went toward the  purchase  of 518,898  common
shares and  $122,258 was  retained by the Company as an advance  against  future
purchases. The 518,898 common shares were unrestricted shares contributed to the
Company by Gary Heesch  (304,848 common shares) and David Giles,  CFO,  (214,050
common shares) from common shares they held. The shares were  contributed  under
an exchange  agreement  between Mr. Heesch and Mr. Giles,  where by, on June 15,
2001,  the shares  relinquished  were  respectively  replaced  with  335,333 and
235,455 restricted  shares.  These sales and exchanges of securities were exempt
from registration under the Securities Act pursuant to Section 4(2) thereof.  To
the best of Wasatch's  knowledge,  each investor is  sophisticated  in financial
investments  and received a variety of  financial  and other  information  about
Wasatch in connection  with the  investor's  due  diligence.  Mr. Heesch and Mr.
Giles,  principal  officers if Wasatch,  have access to Wasatch's  financial and
business  information  and are  very  familiar  with  Wasatch's  operations  and
financial  condition.  No public solicitation or general advertising was done in
connection with these sales

         On April 11, 2001, Wasatch Pharmaceutical sold 35,000 restricted shares
of common  stock to 2  investors.  The net  proceeds  from  these  sales,  after
deducting commissions and costs, were $4,200.00.  These sales of securities were
exempt from  registration  under the  Securities  Act  pursuant to Section  4(2)
thereof. To the best of Wasatch's  knowledge,  each investor is sophisticated in
financial  investments and received a variety of financial and other information
about  Wasatch  in  connection  with the  investor's  due  diligence.  No public
solicitation or general advertising was done in connection with these sales

                                       5
<PAGE>

         On April 30,  2001,  the Company  issued  25,000  shares of  restricted
common  stock to  Applied  Management  Corp  for  consulting  services  under an
agreement  dated  February  27,  2001.  The shares of common  stock were  issued
pursuant an exemption  from  registration  under Section 4(2) of the  Securities
Act. To the best of Wasatch's  knowledge,  Applied's management is sophisticated
in  financial  investments  and  received  a  variety  of  financial  and  other
information about Wasatch and had access to the Company's reports filed with the
Securities and Exchange Commission.

         On April 30, 2001,  the Company  issued  100,000  shares of  restricted
common stock to  Princeton  Research for  consulting  services  under a contract
dated May 1, 2001. The shares of common stock were issued  pursuant an exemption
from  registration  under  Section  4(2) of the  Securities  Act. To the best of
Wasatch's  knowledge,  Princeton's  management  is  sophisticated  in  financial
investments  and received a variety of  financial  and other  information  about
Wasatch and had access to the Company's  reports filed with the  Securities  and
Exchange Commission.

         On April 30,  2001,  the Company  issued  24,000  shares of  restricted
common stock to Pipeline  Capital for loan brokering  services  rendered under a
contract dated August  28,2000.  The shares of common stock were issued pursuant
an exemption from registration  under Section 4(2) of the Securities Act. To the
best of Wasatch's knowledge,  the managers of Pipeline Capital are sophisticated
in  financial  investments  and  received  a  variety  of  financial  and  other
information about Wasatch and had access to the Company's reports filed with the
Securities and Exchange Commission.

         On May 14, 2001, Wasatch  Pharmaceutical  sold 40,000 restricted shares
of common  stock to 2  investors.  The net  proceeds  from  these  sales,  after
deducting commissions and costs, were $4,800.00.  These sales of securities were
exempt from  registration  under the  Securities  Act  pursuant to Section  4(2)
thereof. To the best of Wasatch's  knowledge,  each investor is sophisticated in
financial  investments and received a variety of financial and other information
about  Wasatch  in  connection  with the  investor's  due  diligence.  No public
solicitation or general advertising was done in connection with these sales

         On May 16, 2001, the Company issued 24,000 shares of restricted  common
stock to Pipeline Capital as additional compensation for loan brokering services
rendered pursuant to a contract dated August 28,2000. The shares of common stock
were issued  pursuant an exemption from  registration  under Section 4(2) of the
Securities  Act. To the best of  Wasatch's  knowledge,  the managers of Pipeline
Capital are  sophisticated  in financial  investments  and received a variety of
financial  and other  information  about Wasatch and had access to the Company's
reports filed with the Securities and Exchange Commission.

         On June 6, 2001, the Company issued 100,000 shares of restricted common
stock to Jeff Twait for  consulting  services  under an agreement  dated May 18,
2001.  The  shares of common  stock  were  issued  pursuant  an  exemption  from
registration  under Section 4(2) of the Securities Act. To the best of Wasatch's
knowledge,  Mr. Twait is sophisticated  in financial  investments and received a
variety of financial and other  information  about Wasatch and had access to the
Company's reports filed with the Securities and Exchange Commission.

         On June 19, 2001,  the Company issued  12,000,000  shares of restricted
common stock to Collier  Management  Company as  collateral  on a $300,000  loan
commitment  made to the Company in June 2001.  Prior to June 30, $175,000 of the
commitment  was funded and on July 6, 2001 the Company  received  the  remaining
$125,000.  The shares of common  stock were issued  pursuant an  exemption  from
registration  under Section 4(2) of the Securities Act. To the best of Wasatch's
knowledge,   management  of  Collier  Management  Company  is  sophisticated  in
financial  investments and received a variety of financial and other information
about Wasatch and had access to the Company's  reports filed with the Securities
and Exchange Commission.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES  - None.

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

                                       6
<PAGE>

ITEM 5.  OTHER INFORMATION

         On January 8, 2001, the Company filed an SB-2 registration statement to
register 11,426,297 Class A shareholder  warrants  exercisable at $.50 per share
and  11,426,297  Class B shareholder  warrants  exercisable  at $2.00 per share.
These warrants were issued to shareholder of record  February 23, 2001 who owned
shares  that had been  issued  prior to June 22,  2000 on a basis of one Class A
warrant and one Class B warrant for each two shares owned.  The registration for
these warrants and the underlying  shares became  effective April 12, 2001. This
filing also registered  3,500,000 million shares issued to Aspen Capital as part
of the final settlement agreement dated January 16, 2001.

         On July 6, 2001,  the Company filed an SB-2  registration  statement to
register 2,134,989 Class A warrants  exercisable at $.50 per share and 2,134,989
Class B warrants  exercisable  at $2.00 per  share.  The  registration  of these
additional  warrant became necessary when the Company determined that Depository
Trust Company could not accurately identify the shareholders holding their stock
in "street"  name,  who were entitled to receive the warrants.  This filing also
registered  2,000,000  common  shares which have been  offered to two  executive
officers of the Company as stock options under a Common Stock Purchase Agreement
in  exchange  for 2  million  warrants  assigned  to the  Company  to be used as
collateral on a loan. The exercise prices on the stock options correspond to the
exercise  price on the  warrants.  The SEC has not  declared  this  registration
effective.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

      (a) Exhibits  -  None

      (b) Reports on Form 8-K  - None


                                   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: August 20, 2001


By: /s/ David K. Giles
   ----------------------------------
   David K. Giles, Chief Financial
   Officer & Corporate Secretary

                                       7