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

                                    FORM 10-K

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

         For the fiscal Year ended:    December 31, 1996

                                       OR

[ ]  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    33-55254-09

                          WASATCH PHARMACEUTICAL, INC.
                       (formerly UPSILON INDUSTRIES, INC.)

  NEVADA                                             87-0434293
(State or other jurisdiction of                  (I.R.S. Employer 
incorporation or organization)                Identification Number.)

 5340 South Cottonwood Lane, Salt Lake City, UTAH                84117
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code    (801) 424-2424

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

Securities registered pursuant to Section 12(g) of the Act:   NONE

         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),  and (2) has been subject to such
filing requirements for the past 90 days.
 [ ] Yes   [ X ] No

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of  Regulations  S-K  (ss.229.405  of this  chapter)  is not  contained
herein,  and will not be contained,  to the best of registrant's  knowledge,  in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
 [ X  ]

         As of August 22, 1997, there is no aggregate market value of the voting
stock held by non-affiliates of the registrant.

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

            Class                            Outstanding as of August 22, 1997
------------------------------------        -----------------------------------
$.001 PAR VALUE CLASS A COMMON STOCK                 1,000,000 SHARES

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE


<PAGE>
ITEM 1. Business

         The  company  was  incorporated  under the laws of the State of Utah on
April 14, 1986 and  subsequently  reincorporated  under the laws of the State of
Nevada on  December  30,  1993,  and is in the  development  stage.  The Company
intends to begin the process of investigating  potential business ventures which
in the opinion of  management,  will provide a source of eventual  profit to the
Company.  Such involvement may take many forms,  including the acquisition of an
existing  business  or  the  acquisition  of  assets  to  establish   subsidiary
businesses.  The  Company's  management  does not expect to remain  involved  as
management of an acquired business;  presently unidentified individuals would be
retained for such purposes.

         As an unfunded  venture,  the Company will be extremely  limited in its
attempts to locate potential business situations for investigation. However, the
Company's  officers,  directors and major  shareholder  have  undertaken to make
loans to the Company in amounts sufficient to enable it to satisfy its reporting
and other obligations as a public company, and to commence,  on a limited basis,
the process of  investigating  possible merger and acquisition  candidates,  and
that the  Company's  status as a  publicly-held  corporation  will  enhance  its
ability to locate such potential business ventures.

         No  assurance  can be given as to when the Company may locate  suitable
business  opportunities and such  opportunities may be difficult to locate.  The
Company intends not to allocate any incoming funds specifically, should there be
any in the future, to general use for the purpose of seeking,  investigating and
acquiring or becoming engaged in a business  opportunity.  Decisions  concerning
these  matters  may  be  made  by  management   without  the   participation  or
authorization of the shareholders.

         Management  anticipates  that due to its lack of funds, and the limited
amount of its resources,  the Company may be restricted to participation in only
one  potential  business  venture.  This  lack  of  diversification   should  be
considered a  substantial  risk because it will not permit the Company to offset
potential losses from one venture against gains form another.

         Business opportunities,  if any arise, are expected to become available
to the  Company  principally  from the  personal  contacts of its  officers  and
directors.  While it is not expected  that the Company will engage  professional
firms specializing in business  acquisitions or reorganizations,  such firms may
be  retained  if funds  become  available  in the  future,  and if  deemed to be
advisable.  Opportunities may thus become available from professional  advisers,
securities  broker-dealers,   venture  capitalists,  members  of  the  financial
community, and other sources of unsolicited proposals. In certain circumstances,
the  Company  may agree to pay a  finder's  fee or other  form of  compensation,
including  perhaps  one-time cash payments,  payments based upon a percentage of
revenues or sales volume,  and/or payments involving the issuance of securities,
for services provided by persons who submit a business  opportunity in which the
Company shall decide to  participate,  although no contracts or  arrangements of
this nature  presently  exist. The Company is unable to predict at this time the
costs of locating a suitable business opportunity.

         The Company will not restrict  its search to any  particular  business,
industry or  geographical  location,  and  reserves the right to evaluate and to
enter into any type of business  opportunity,  in any stage of their development
(including the upstart stages) in any location.  In seeking  business  ventures.
Management  can not be influenced  primarily by an attempt to take  advantage of
the anticipated or perceived appeal in specific  industry,  management group, or
product or  industry,  but rather will be motivated  by the  Company's  business
objective  of seeking  long term capital  appreciation  in their real value.  In
addition, the Exchange Act reporting requirements require the filing of the Form
8-K  disclosing  any  businesses   acquired  and  requires  certified  financial
statements of such companies.  These reporting  requirements  may  substantially
limit the businesses which may be available for possible acquisition candidates.

         The analysis of business  opportunities  will be undertaken by or under
the  supervision  of the Company's  management,  none of whom is a  professional
analyst and none of who have significant general business experience.  Among the
factors  which  management  will  consider  in  analyzing   potential   business
opportunities  are  the  available  technical,  financial  and  management  will
consider  in  analyzing  potential  business  opportunities  are  the  available
technical,  financial and managerial  resources:  working  capital and financial
requirements.  the history of operation, if any; future prospects; the nature of
present and anticipated competition; potential for further research, development
or exploration;  growth and expansion potential; profit potential; the perceived
public recognition or acceptance of products or services;  name  identification,
and other relevant factors.

                                        2

<PAGE>
         It is not  possible at present to predict the exact manner in which the
Company  may   participate  in  a  business   opportunity.   Specific   business
opportunities  will be reviewed  and,  based upon such review,  the  appropriate
legal structure or method of  participation  will be decided upon by management.
Such structures and methods may include,  without limitation,  leases,  purchase
and  sale  agreements,   license,   joint  ventures;  and  may  involve  merger,
consolidation  or  reorganization.  The Company may act  directly or  indirectly
through an interest in a partnership, corporation or reorganization. The Company
may act directly or indirectly through an interest in a partnership, corporation
or other form or organization.  However, it is most likely that the Company will
acquire a business venture by conducting a reorganization involving the issuance
of the Company's  restricted  securities.  Such a  reorganization  may involve a
merger (or combination  pursuant to state corporate  statutes,  where one of the
entities  dissolves  or is  absorbed  by  the  other),  or  it  may  occur  as a
consolidation,  where a new  entity is formed  and the  Company  and such  other
entity  combine  assets in the new  entity.  A  reorganization  may also  occur,
directly or indirectly, through subsidiaries, and there is no assurance that the
Company would be the surviving entity. Any such  reorganization  could result in
additional  dilution  to the book  value of the  shares and loss of control of a
majority of the  shares.  The  Company's  present  directors  may be required to
resign in connection with a reorganization.

         A  reorganization  may be structured in such a way as to take advantage
of certain beneficial tax consequences available in business reorganizations, in
accordance  with  provisions of the Internal  Revenue Code of 1986 (as amended).
Pursuant  to  such  a  structure,  the  number  of  shares  held  prior  to  the
reorganization  by all of the Company's  shareholders  might be less than 20% of
the  total  shares  to  be  outstanding  upon  completion  of  the  transaction.
Substantial  dilution of percentage  equity ownership may result to the giftees,
in the discretion of management.

         Generally,  the issuance of securities in a reorganization  transaction
would  be  undertaken  in  reliance  upon  one  or  more   exemptions  from  the
registration  provisions of applicable  federal  securities laws,  including the
exemptions  provided  for  non-public  or limited  offerings,  distributions  to
persons resident in only one state and similar exemptions provided by state law.
Shares issued in a reorganization  transaction based upon these exemptions would
be  considered  "restricted"  securities  under the 1933  Act,  and would not be
available  for  resale  for a period of one year,  in  accordance  with Rule 144
promulgated  under  the 1933 Act.  However,  the  Company  might  undertake,  in
consideration  with  such  a  reorganization  transaction  certain  registration
opinions in connection with such securities.

         The  Company  may  choose  to  enter  into  a  venture   involving  the
acquisition  of or  merger  with a  company  which  does  not  need  substantial
additional  capital but desires to establish a public  trading  market for their
securities.  Such a company may desire to consolidate  its  operations  with the
Company  through  a  merger,   reorganization,   asset  acquisition,   or  other
combination,  in order to avoid possible adverse consequences of undertaking its
own public offering. (Such consequences might include expense, time delays, loss
of voting control and the necessity of complying with various  federal and state
laws enacted for the  protection of  investors.)  In the event of such a merger,
the company may be required to issue significant  additional  shares, and it may
be  anticipated  that control over the Company's  affairs may be  transferred to
others.  It should also be noted that this type of business  venture  might have
the effect of depriving the giftees of the  purported  protection of federal and
state securities laws, which normally affect the process of a company's becoming
publicly held.

         It  is  likely  that  the   investigation  and  selection  of  business
opportunities  will be complex,  time-consuming  and extremely  risky.  However,
management believes that even though the Company will have limited capital,  the
fact that  their  securities  will be  publicly-held  will make it a  reasonably
attractive business prospect for other firms.

         As  part of  their  investigation  of  acquisition  possibilities,  the
Company's  management may meet with  executive  officers of the business and its
personnel;  inspect its facilities;  obtain independent analysis or verification
of the  information  provided,  and conduct other  reasonable  measures,  to the
extent permitted by the Company's  limited  resources and  management's  limited
expertise.  Generally,  the Company  intends to analyze and make a determination
based upon all available  information without reliance upon any single factor as
controlling.

<PAGE>
         In all likelihood,  the Company's  management will be  inexperienced in
the areas in which potential  businesses  will be investigated  and in which the
Company may make an acquisition or investment. Thus, it may become necessary for
the  Company  to retain  consultants  or  outside  professional  firms to assist
management  in-evaluating potential investments,  and to hire managers to run or
oversee the operations of its acquisitions or investments.  The Company can give
no assurance that it will be able to find suitable consultants or managers.  The
Company  intends not to employ any of its  affiliates,  officers,  directors  or
principal  shareholders as consultants.  The Company has no policy regarding the
use of

                                        3

<PAGE>
consultants, however, if management, in its discretion, determines that it is in
the best  interests of the Company,  management  may seek  consultants to review
potential  merger or acquisition  candidates.  It is anticipated  that the total
amount  of  fees  paid  to  any  consultant   would  not  exceed  $5,000.00  per
transaction.  The fee, it is anticipated,  would be paid by the potential target
company.  There are currently no contracts or agreements  between any consultant
and any companies that are searching for "shell"  companies with which to merge.
There have been no preliminary discussions or understandings between the Company
and any market maker regarding the participation of any such market maker in the
aftermarket  for  the  Company's  securities  inasmuch  as  no  market  for  the
securities  is  expected  to  arise  due to the lack of  transferability  on the
Company's  shares until an  acquisition is made and a Form 8-K is filed with the
Commission.

         It may be  anticipated  that the  investigation  of  specific  business
opportunities  and the  negotiation  time and execution of relevant  agreements,
disclosure  documents and other instruments will require substantial  management
time and attention, and substantial costs of accountants,  attorneys and others.
Should a decision  thereafter be made not to participate in a specific  business
opportunity,  it is likely that costs already expended would not be recoverable.
It is also  likely,  in the event a  transaction  should  eventually  fail to be
consummated, for any reason, that the costs incurred by the Company would not be
recoverable.  The Company's officers and directors are entitled to reimbursement
for all expenses  incurred in their  investigation of possible business ventures
on behalf of the Company,  and no assurance can be given that if the Company has
available funds they will not be depleted in such expenses.

         In addition to the severe limitations placed upon the Company by virtue
of its unfunded status,  the Company will also be limited,  in its investigation
of  possible  acquisitions,  by the  reporting  requirements  of the  Securities
Exchange Act of 1934, pursuant to which certain information must be furnished in
connection with any significant  acquisitions.  The Company would be required to
furnish,  with  respect  to any  significant  acquisition,  certified  financial
statements for the acquired company, covering one, two or three years (depending
upon the relative size of the acquisition).  Consequently, acquisition prospects
which do not have the requisite certified financial statements, or are unable to
obtain them, may be in appropriate for acquisition  under the present  reporting
requirements of the 1934 Act.

         The Company does not intend to take any action which would render it an
investment company under The Investment  Companies Act of 1940 (the "1940 Act").
the 1940 Act defines an investment  company as one which (1) invests,  reinvests
or  trades  in  securities  as its  primary  business,  (2)  issues  face-amount
certificates of the installment type or (3) invests,  reinvests,  owns, holds or
trades  securities  or owns or  acquires  investment  securities  having a value
exceeding 40 percent of the value of its total assets  (exclusive  of Government
securities  and cash  items) on an  unconsolidated  basis.  The above 40 percent
limitation may be exceeded so long as a company is primarily  engaged,  directly
or through  wholly-owned  subsidiaries,  in a business or businesses  other than
that of investing,  reinvesting,  owning,  holding or trading in  securities.  A
wholly-owned  subsidiary  is  defined  as one which is at least 95% owned by the
company.

         Neither the Company nor any of its officers or directors are registered
as investment  advisers under the Investment Advisers Act of 1940 (the "Advisers
Act"),  and so there is no  authority  to  pursue  any  course  of  business  or
activities  which  would  render  the  Company  or  its  management  "investment
advisers" as defined in the Advisers Act.  Management believes that registration
under  the  Advisers  Act  is not  required  and  that  certain  exemptions  are
available,  including  the  exemptions  for person  who may  render  advice to a
limited number or other persons and who may advise other persons  located in one
state only.

         The Company expects to encounter intense  competition in its efforts to
locate  suitable  business   opportunities  in  which  to  engage.  The  primary
competition  for  desirable  investments  may come from  other  small  companies
organized  and funded for  similar  purposes,  from small  business  development
corporations and from public and private venture capital  organizations.  As the
Company  will be  completely  unfunded,  it can  fairly  be said that all of the
competing  entities  will  have  significantly  greater  experience,  resources,
facilities,  contacts  and  managerial  expertise  than the  Company  and  will,
consequently,  be in a better position than the Company to obtain access to, and
to engage in, business opportunities.  Due to the lack of funds, the Company may
not be in a position to compete  with larger and more  experienced  entities for
business  opportunities  which are low-risk.  Business  opportunity in which the
Company may ultimately  participate  are likely to be highly risky and extremely
speculative.

                                        4
<PAGE>
ITEM 2. Properties.

         The Company owns no properties and utilizes space on a rent-free basis.
This  arrangement is expected to continue until such earlier time as the Company
become involved in a business venture which  necessitates its relocation,  as to
which no assurances can be given.  The Company has no agreements with respect to
the  maintenance  or future  acquisition  of office  facilities,  however,  if a
successful  merger/acquisition is negotiated,  it is anticipated that the office
of the Company will be moved to that of the acquired company.

ITEM 3. Legal Proceedings.

         Other than the matter  discussed in Form 10-K,  dated  December,  1994,
which was settled on September,  1994, no legal  proceedings  have been filed or
are expected to be filed against the Company.

ITEM 4. Submission of Matters to a Vote of Security Holders.

         No matter was  submitted to the Company's  security  holders for a vote
during the fiscal year ending December 31, 1996.

                                     PART II

ITEM 5. Market for Registrant's Common Equity and Related Stockholders Matters.

         There  currently is not a trading  market for the  Company's  $.001 par
value common stock nor has there been a trading  market for the Company's  stock
since its inception.

         As of December 31, 1996, there were 749 record holders of the Company's
common stock.  The Company has not previously  declared or paid any dividends on
its  common  stock  and does  not  anticipate  declaring  any  dividends  in the
foreseeable future.

ITEM 6. Selected Financial Data.

                          WASATCH PHARMACEUTICAL, INC.
                              SUMMARY OF OPERATIONS
                             DECEMBER, 1996 (000'S)


<TABLE>
<CAPTION>
                                      1996      1995       1994      1993      1992       1991
                                      ----      ----       ----      ----      ----       ----
<S>                                    <C>        <C>        <C>       <C>       <C>        <C>
Total Assets                           0          0          0         0         0          0
Revenues                               0          0          0         0         0          0
Operating Expenses                     0          0          0         0         0        (10)
         Net Earnings (Loss)           0          0          0         0         0        (10)
Per Share Data Earnings (Loss)         0          0          0         0         0          0
Average Common
         Shares Outstanding          1,000      1,000      1,000     1,000     1,000      1,000
</TABLE>



                                        5

<PAGE>
ITEM 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operation.

         The  Company  has had no  operational  history and has yet to engage in
business of any kind.  All risks inherent in new and  inexperienced  enterprises
are inherent in the Company's business.  The Company has not made a formal study
of the economic  potential of any  business.  At the present the Company has not
identified any assets or business opportunities for acquisition.

         The  Company  has no  liquidity  and  no  presently  available  capital
resources,  such as  credit  lines,  guarantees,  etc.  and  should a merger  or
acquisition prove unsuccessful, it is possible that the Company may be dissolved
by the State of Nevada for failing to file reports. Should management decide not
to  further  pursue its  acquisition  activities,  management  may  abandon  its
activities and the shares of the Company would become worthless.

         Based  on  current  economic  and  regulatory  conditions.   Management
believes that it is possible,  if not probable,  for a company like the Company,
without  assets or  liabilities,  to  negotiate a merger or  acquisition  with a
viable private company.  The opportunity arises principally  because of the high
legal  and  accounting   fees  and  the  length  of  time  associated  with  the
registration process of "going public".  However, should any of these conditions
change,  it is very possible that there would be little or no economic value for
anyone taking over control of the Company.

ITEM 8. Financial Statements and Supplementary Data.

         See Item 14.

ITEM 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.

         During  July of 1996,  the  Company  appointed  Andersen,  Andersen,  &
Strong, L.C. as its independent auditors. There were no disagreements during the
most recent two fiscal years and up to the date of dismissal of the  predecessor
auditor,  Smith & Company.  The decision was made by the Board of Directors.  No
other information in Section 229.304 of Regulation S-K is applicable.  In August
of 1997, the Company  reappointed  Smith & Company as its independent  auditors.
There were no  disagreements  during the most recent two fiscal  years and up to
the date of dismissal of the predecessor auditor, Andersen,  Andersen, & Strong,
L.C. The decision was made by the Board of Directors.

                                    PART III

ITEM 10. Directors and Executive Officers of the Registrant.

         The following  table shows the positions held by the Company's  officer
and director. The director was appointed in September, 1994 and will serve until
the next annual meeting of the Company's  stockholders,  and until his successor
has been elected and has  qualified.  The officer was appointed to his position,
and continues in such position, at the discretion of the director.

               Name                Age                          Position
         Mark Timothy               39                      President, Director

         MARK TIMOTHY,  has been Director of the Company since September,  1994.
In addition to his management  position with the Company, he has been an officer
of Timothy Chrysler Ford, Inc., a Utah-based automobile dealership.

ITEM 11. Executive Compensation

         The  Company  has  made no  arrangements  for the  remuneration  of its
officers  and   directors,   except  that  they  will  be  entitled  to  receive
reimbursement for actual, demonstrable out-of-pocket expenses,  including travel
expenses if any, made on the Company's  behalf in the  investigation of business
opportunities.  No  remuneration  has been  paid to the  Company's  officers  or
directors  prior  to the  filing  of  this  form.  There  are no  agreements  or
understandings  with  respect to the amount or  remuneration  that  officers and
directors  are expected to receive in the future.  Management  takes no salaries
from  the  Company  and  does  not  anticipate  receiving  any  salaries  in the
foreseeable  future. No present  prediction or representation  can be made as to
the  compensation  or other  remuneration  which may  ultimately  be paid to the
Company's

                                        6

<PAGE>
management,  since upon the successful  consummation of a business  opportunity,
substantial  changes  may  occur  in  the  structure  of  the  Company  and  its
management.  At such  time,  contracts  may be  negotiated  with new  management
requiring  the payment of annual  salaries or other  forms of  compensation  not
which cannot  presently be anticipated.  Use of the term "new management" is not
intended  to  preclude  the  possibility  that any of the  present  officers  or
directors  of the  Company  might be  elected  to  serve in the same or  similar
capacities  upon the Company's  decision to  participate in one or more business
opportunities.

         The Company's management may benefit directly or indirectly by payments
of consulting fees, payment of finders fees to others,  sales of insiders' stock
positions in whole or in part to a private company, the Company or management of
the  Company  or  through  the  payment of  salaries,  or any others  methods of
payments through which insiders or current investors receive funds, stock, other
assets or anything of value whether tangible or intangible.  There are no plans,
proposals, arrangements or understandings with respect to the sale of additional
securities to affiliates,  current  shareholders or others prior to the location
of a business opportunity.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management.

         The following  table sets forth,  as of December 31, 1994,  information
regarding the beneficial ownership of shares by each person known by the Company
to own five percent or more of the outstanding  shares, by each of the directors
and by the officers and directors as a group.


<TABLE>
<CAPTION>
                          Name & address               Amount of            Percent
  Title of Class      of beneficial owner        beneficial ownership      of Class
------------------   ---------------------      ----------------------    -----------
<S>                 <C>                                <C>                   <C>
  Common                Mark Timothy                   800,000               80%
                     5340 South Cottonwood
                    Salt Lake City, Utah 841
</TABLE>

ITEM 13. Certain Relationships and Related Transactions

         No officer,  director, nominee for election as a director, or associate
of such  officer,  director  or  nominee  is or has been in debt to the  Company
during the last fiscal year. However, the Company's officer, director, and major
shareholder,  has  made an oral  undertaking  to make  loans to the  Company  in
amounts sufficient to enable it to satisfy its reporting  requirements and other
obligations  incumbent on it as a public company, and to commence,  on a limited
basis, the process of investigating possible merger and acquisition  candidates.
The Company's  status as a publicly-held  corporation may enhance its ability to
locate  potential  business  ventures.  The loans will be interest  free and are
intended  to be repaid  at a future  date,  if or when the  company  shall  have
received  sufficient  funds  through  any  business  acquisition.  The loans are
intended to provide for the payment of filing fees,  professional fees, printing
and copying fees and other miscellaneous fees.

                                     PART IV

ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

         Financial Statements and Financial Statement Schedules.

         Financial Statements - December 31, 1996

         Reports on Form 8-K

         There were no reports on Form 8-K filed  during the fiscal  year ending
         December 31, 1996



                                        7

<PAGE>
                                   SIGNATURES

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

                                      WASATCH PHARMACEUTICAL, INC.



Dated: August 27, 1997                By:  /s/
                                           Mark Timothy, President and Director

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.



Dated:  August 27, 1997               By:  /s/
                                           Mark Timothy, President and Director


                                        8

<PAGE>
                                 SMITH & COMPANY
                          CERTIFIED PUBLIC ACCOUNTANTS

MEMBERS OF:                                10 WEST 100 SOUTH, SUITE 700
AMERICAN INSTITUTE OF                      SALT LAKE CITY, UTAH 84101
     CERTIFIED PUBLIC ACCOUNTANTS          TELEPHONE:  (801) 575-8297
UTAH ASSOCIATION OF                        FACSIMILE:  (801) 575-8306
     CERTIFIED PUBLIC ACCOUNTANTS          E-MAIL: smith&co@smithandcocpa.com

-------------------------------------------------------------------------------






                          INDEPENDENT AUDITOR'S REPORT


Board of Directors
Wasatch Pharmaceutical, Inc. (A Development Stage Company)

We have audited the accompanying balance sheets of Wasatch Pharmaceutical,  Inc.
(a development  stage company) as of December 31, 1996 and 1995, and the related
statements of operations,  changes in stockholders'  equity,  and cash flows for
the years ended December 31, 1996, 1995 and 1994 and for the period of April 14,
1986 (date of inception) to December 31, 1996.  These  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Wasatch Pharmaceutical, Inc. (a
development  stage  company) as of December 31, 1996 and 1995 and the results of
its operations, changes in stockholders' equity and its cash flows for the years
ended  December  31,  1996,  1995 and 1994 and for the period of April 14,  1986
(date of inception) to December 31, 1996 in conformity  with generally  accepted
accounting principles.


                                                  /s/ Smith & Company
                                                   CERTIFIED PUBLIC ACCOUNTANTS


Salt Lake City, Utah
August 5, 1997

                                       F-1

<PAGE>
                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                                 BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                                     12/31/96              12/31/95
                                                                                 -----------------     -----------------
             ASSETS
CURRENT ASSETS
<S>                                                                              <C>                   <C>              
         Cash in bank                                                            $               0     $               0
                                                                                 -----------------     -----------------

                      TOTAL CURRENT ASSETS                                                       0                     0

OTHER ASSETS
         Organization costs (Note 1)                                                             0                     0
                                                                                 -----------------     -----------------
                                                                                                 0                     0
                                                                                 -----------------     -----------------

                                                                                 $               0     $               0
                                                                                 =================     =================

             LIABILITIES & EQUITY
CURRENT LIABILITIES
         Accounts payable                                                        $               0     $               0
                                                                                 -----------------     -----------------

                      TOTAL CURRENT LIABILITIES                                                  0                     0

STOCKHOLDERS' EQUITY Common Stock $.001 par value:
          Authorized - 100,000,000 shares
          Issued and outstanding
          1,000,000 shares                                                                   1,000                 1,000
         Additional paid-in capital                                                          1,000                 1,000
         Deficit accumulated during
          the development stage                                                             (2,000)               (2,000)
                                                                                 -----------------     -----------------

                      TOTAL STOCKHOLDERS' EQUITY                                                 0                     0
                                                                                 -----------------     -----------------

                                                                                 $               0     $               0
                                                                                 =================     =================
</TABLE>

See Notes to Financial Statements.


                                       F-2

<PAGE>
                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                            STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                                                                       4/14/86
                                                 Year               Year              Year            (Date of
                                                 ended              ended             ended         inception) to
                                               12/31/96           12/31/95          12/31/94          12/31/96
                                          ----------------    --------------     --------------    --------------
<S>                                       <C>                 <C>                <C>               <C>           
Net sales                                 $              0    $            0     $            0    $            0
         Cost of sales                                   0                 0                  0                 0
                                          ----------------    --------------     --------------    --------------

                      GROSS PROFIT                       0                 0                  0                 0


General & administrative
 expenses                                                0                 0                  0             2,000
                                          ----------------    --------------     --------------    --------------

                  NET LOSS                $              0    $            0     $            0    $       (2,000)
                                          ================    ==============     ==============    ==============


Net income (loss) per weighted
 average share                            $            .00    $          .00     $          .00
                                          ================    ==============     ==============


Weighted average number of
 common shares used to compute
 net income (loss) per weighted
 average share                                  1,000,000         1,000,000          1,000,000
                                          ===============     =============      =============
</TABLE>







See Notes to Financial Statements.


                                       F-3

<PAGE>
                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY



<TABLE>
<CAPTION>
                                                                                                              Deficit
                                                                                                            Accumulated
                                                          Common Stock                  Additional            During
                                                         Par Value $0.001                Paid-in             Development
                                                     Shares            Amount            Capital               Stage
                                                 --------------    --------------    -----------------    --------------
<S>                                              <C>               <C>               <C>                  <C>           
Balances at 4/14/86 (Date of inception)                       0    $            0    $               0    $            0
  Issuance of common stock (restricted)
    at $.002 per share at 4/14/86                     1,000,000             1,000                1,000
         Net loss for period                                                                                      (1,950)
                                                 --------------    --------------    -----------------    --------------
Balances at 12/31/86                                  1,000,000             1,000                1,000            (1,950)
         Net loss for year                                                                                           (10)
                                                 --------------    --------------    -----------------    --------------
Balances at 12/31/87                                  1,000,000             1,000                1,000            (1,960)
         Net loss for year                                                                                           (10)
                                                 --------------    --------------    -----------------    --------------
Balances at 12/31/88                                  1,000,000             1,000                1,000            (1,970)
         Net loss for year                                                                                           (10)
                                                 --------------    --------------    -----------------    --------------
Balances at 12/31/89                                  1,000,000             1,000                1,000            (1,980)
         Net loss for year                                                                                           (10)
                                                 --------------    --------------    -----------------    --------------
Balances at 12/31/90                                  1,000,000             1,000                1,000            (1,990)
         Net loss for year                                                                                           (10)
                                                 --------------    --------------    -----------------    --------------
Balances at 12/31/91                                  1,000,000             1,000                1,000            (2,000)
         Net income for year                                                                                           0
                                                 --------------    --------------    -----------------    --------------
Balances at 12/31/92                                  1,000,000             1,000                1,000            (2,000)
         Net income for year                                                                                           0
                                                 --------------    --------------    -----------------    --------------
Balances at 12/31/93                                  1,000,000             1,000                1,000            (2,000)
         Net income for year                                                                                           0
                                                 --------------    --------------    -----------------    --------------
Balances at 12/31/94                                  1,000,000             1,000                1,000            (2,000)
         Net income for year                                                                                           0
                                                 --------------    --------------    -----------------    --------------
Balances at 12/31/95                                  1,000,000             1,000                1,000            (2,000)
         Net income for year                                                                                           0
                                                 --------------    --------------    -----------------    --------------

Balances at 12/31/96                                  1,000,000    $        1,000    $           1,000    $       (2,000)
                                                 ==============    ==============    =================    ==============
</TABLE>


See Notes to Financial Statements.


                                       F-4

<PAGE>
                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                            STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
                                                                                                              4/14/86
                                                        Year               Year              Year            (Date of
                                                       ended              ended             ended           Inception) to
                                                     12/31/96           12/31/95          12/31/94          12/31/96
                                                   --------------     --------------     --------------    --------------
OPERATING ACTIVITIES
<S>                                                <C>                <C>                <C>               <C>            
         Net income (loss)                         $            0     $            0     $           0    $       (2,000)
         Adjustments to reconcile
          net income (loss) to
          cash used by operating
          activities:
             Amortization                                       0                  0                 0                50
                                                   --------------     --------------    --------------    --------------

                      NET CASH USED BY
                      OPERATING ACTIVITIES                      0                  0                 0            (1,950)

INVESTING ACTIVITIES
         Organization costs                                     0                  0                 0               (50)
                                                   --------------     --------------    --------------    --------------

                      NET CASH USED BY
                      INVESTING ACTIVITIES                      0                  0                 0               (50)

FINANCING ACTIVITIES
         Proceeds from sale of
          common stock                                          0                  0                 0             2,000
                                                   --------------     --------------    --------------    --------------

                      NET CASH PROVIDED BY
                      FINANCING ACTIVITIES                      0                  0                 0             2,000
                                                   --------------     --------------    --------------    --------------

                      INCREASE IN CASH
                      AND CASH EQUIVALENTS                      0                  0                 0                 0

         Cash and cash equivalents
         at beginning of year                                   0                  0                 0                 0
                                                   --------------     --------------    --------------    --------------

                      CASH & CASH EQUIVALENTS
                      AT END OF YEAR               $            0     $            0    $            0    $            0
                                                   ==============     ==============    ==============    ==============
</TABLE>




See Notes to Financial Statements.


                                       F-5

<PAGE>
                          WASATCH PHARMACEUTICAL, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1996


NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
         Accounting Methods
         The Company  recognizes income and expenses based on the accrual method
         of accounting.

         Dividend Policy:
         The  Company  has not yet  adopted  any  policy  regarding  payment  of
         dividends.

         Organization Costs:
         The Company amortized its organization costs over a five year period.

         Income Taxes:
         The Company  records the income tax effect of  transactions in the same
         year that the  transactions  enter  into the  determination  of income,
         regardless of when the  transactions  are  recognized for tax purposes.
         Tax credits are  recorded in the year  realized.  Since the Company has
         not yet realized income as of the date of this report, no provision for
         income taxes has been made.

         In February,  1992, the Financial  Accounting  Standards  Board adopted
         Statement of Financial  Accounting  Standards No. 109,  Accounting  for
         Income Taxes, which supersedes substantially all existing authoritative
         literature for  accounting  for income taxes and requires  deferred tax
         balances  to be  adjusted to reflect the tax rates in effect when those
         amounts are expected to become payable or refundable. The Statement was
         applied in the  Company's  financial  statements  for the  fiscal  year
         commencing January 1, 1993.

         At December 31, 1996 a deferred tax asset has not been  recorded due to
         the  Company's  lack of  operations  to  provide  income to use the net
         operating loss carryover of $2,000 which expires as follows:

              Year Ended              Expires                 Amount

          December 31, 1986       December 31, 2001      $              1,950
          December 31, 1987       December 31, 2002                        10
          December 31, 1988       December 31, 2003                        10
          December 31, 1989       December 31, 2004                        10
          December 31, 1990       December 31, 2005                        10
          December 31, 1991       December 31, 2006                        10
                                                         --------------------
                                                         $              2,000
                                                         ====================

NOTE 2: DEVELOPMENT STAGE COMPANY
         The Company was  incorporated  as Upsilon,  Inc.  under the laws of the
         State of Utah on April 14, 1986 and has been in the  development  stage
         since incorporation. On December 30, 1993, the Company was dissolved as
         a Utah corporation and reincorporated in Nevada as Upsilon  Industries,
         Inc. On July 21,  1995,  the Company  changed its name to TTN  Capitol,
         Inc. and  subsequently,  on October 15, 1995,  the Company  changed its
         name to Wasatch Pharmaceutical, Inc.

NOTE 3: CAPITALIZATION
         On the date of incorporation,  the Company sold 1,000,000 shares of its
         common  stock to Capital  General  Corporation  for $2,000  cash for an
         average  consideration  of $.002 per share.  The  Company's  authorized
         stock includes 100,000,000 shares of common stock at $.001 par value.

NOTE 4: RELATED PARTY TRANSACTIONS
         The Company  neither owns or leases any real property.  Office services
         are provided,  without charge, by a principal  shareholder.  Such costs
         are immaterial to the financial statements, and, accordingly,  have not
         been  reflected  therein.  The officer and  director of the Company are
         involved in other business  activities  and may, in the future,  become
         involved  in  other  business  opportunities.  If a  specific  business
         opportunity  becomes  available,  such  person may face a  conflict  in
         selecting  between the Company and his other  business  interests.  The
         Company  has  not  formulated  a  policy  for  the  resolution  of such
         conflicts.
                                       F-6