<PAGE>
                                      10-K
                                  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, 2002
                                       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 No. 0-21015

                      CELL TECH INTERNATIONAL INCORPORATED
             (Exact Name of Registrant as Specified in its Charter)

           Delaware                                          22-3345046
(State or other Jurisdiction of                           (I.R.S. Employer
Incorporation or Organization)                           Identification No.)

           565 Century Court
         KLAMATH FALLS, OREGON                                  97601
(Address of Principal Executive Offices)                      (Zip Code)

       Registrant's Telephone Number, including Area Code: (541) 882-5406

        Securities Registered Pursuant to Section 12(b) of the Act: None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                     COMMON STOCK, PAR VALUE $0.01 PER SHARE
                                (Title of Class)

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 Regulation S-K 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. |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X ] State the aggregate market
value of the voting stock held by non-affiliates of the registrant. The
aggregate market value shall be computed by reference to the price at which the
stock was sold, or the average bid and asked prices of such stock, as of a
specified date within 60 days prior to the date of filing. The aggregate market
value of the 800,000 shares of registrant's voting stock held by non-affiliates
of the registrant was $176,000 as of June 30, 2002, based on the closing price
of the registrant's common stock on the National Quotation Bureau's Pink Sheets
or $0.22 per share. The number of shares outstanding of the registrant's sole
class of common stock, par value $0.01 per share, as of March 31, 2003, the
latest practicable date, was 10,640,895. DOCUMENTS INCORPORATED BY REFERENCE
None.

<PAGE>


                      CELL TECH INTERNATIONAL INCORPORATED
                             FORM 10-K ANNUAL REPORT
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>                                                                                                    <C>
CELL TECH INTERNATIONAL INCORPORATED ...............................................................    I

PART I .............................................................................................    2

    ITEM 1.  BUSINESS                                                                                   2
    ITEM 2.  PROPERTIES                                                                                20
    ITEM 3.  LEGAL PROCEEDINGS                                                                         20
    ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                       22

PART II ............................................................................................   23

    ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                     23
    ITEM 6.  SELECTED FINANCIAL DATA                                                                   25
    ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION      27
    ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                39
    ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                               40
    ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE      40

PART III ...........................................................................................   41

    ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                        41
    ITEM 11. EXECUTIVE COMPENSATION                                                                    43
    ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                            49
    ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                            50
    ITEM 14. CONTROLS AND PROCEDURES


PART IV ............................................................................................   51

    ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K                         51

SIGNATURES .........................................................................................   57
</TABLE>

                                        i


<PAGE>


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of our statements under "Business," "Properties," "Legal Proceedings,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Quantitative and Qualitative Disclosures about Market Risk," the
Notes to Consolidated Financial Statements and elsewhere in this report
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements are subject to certain events, risks and uncertainties that may
be outside our control. Some of these forward-looking statements include
statements of:

- management's plans, objectives and budgets for its future operations and
future economic performance;

- capital budget and future capital requirements;

- meeting future capital needs;

- realization of any deferred tax assets;

- the level of future expenditures;

- impact of foreign currency translations;

- impact of recent accounting pronouncements;

- the outcome of regulatory and litigation matters; and

- the assumptions described in this report underlying such forward-looking
statements. Actual results and developments may materially differ from those
expressed in or implied by such statements due to a number of factors,
including:

- those described in the context of such forward-looking statements;

- future product development and manufacturing costs;

- changes in our incentive plans;

- timely development and acceptance of new products;

- the markets of our domestic and international operations;

- the impact of competitive products and pricing;

- the political, social and economic climate in which we conduct operations; and

- the risk factors described in other documents and reports filed with the
Securities and Exchange Commission. In some cases, forward-looking statements
are identified by terminology such as "may," "will," "should," "could," "would,"
"expects," "plans," "intends," "anticipates," "believes," "estimates,"
"approximates," "predicts," "potential" or "continue" or the negative of such
terms and other comparable terminology.

Although we believe that the expectations reflected in these forward-looking
statements are reasonable, it cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor anyone else
assumes responsibility for the accuracy and completeness of such statements and
is under no duty to update any of the forward-looking statements after the date
of this report.


                                       1

<PAGE>


                                     PART I

ITEM 1. BUSINESS.

OVERVIEW

We are a natural and nutritional products company and we develop and distribute
a wide range of products made with Aphanizomenon flos-aquae (trade name Super
Blue Green(R) Algae) ("SBGA") and other nutrients and ingredients through a
network of independent distributors ("Distributors"). We currently offer
twenty-two different products intended to appeal to health-conscious consumers.
Our products are divided into five product lines including Daily Health
Maintenance, Digestive Health, Defensive Health, Powdered Drinks and Snacks, and
Animal and Plant Food.

We harvest SBGA and manufacture several of our products at our modern production
facilities in Klamath Falls, Oregon. We market our products through independent
Distributors located in all fifty states, the District of Columbia, Guam, Puerto
Rico, American Samoa, the Virgin Islands, Federated States of Micronesia,
Marshall Islands, Northern Mariana Islands, Palau and Canada. We encourage our
Distributors to recruit interested people as new Distributors for our products.
These recruits are placed beneath the recruiting Distributor in the "network"
and are referred to as the distributor's "downline" or "network." Distributors
earn commissions on sales by their organizations as well as retail profits on
the sales they generate directly. We assist Distributors in establishing their
own businesses and provide support programs such as a comprehensive,
information-packed website (www.celltech.com), audio and videotapes for
training, empowerment teams, seminars and an annual convention called the August
Celebration.

HISTORY AND ORGANIZATION

nless otherwise specifically stated, references to "we" and "us" in this Form
10-K (the "Report") refer: (a) for periods prior to our reorganization, to the
historical operations of HumaScan and (b) for periods following our
reorganization, to the operations of Cell Tech International Incorporated,
including its wholly owned subsidiaries The New Earth Company, Inc. ("NEC") and
The New Algae Company, Inc. ("NAC").

We were formed under the name "HumaScan Inc." in 1994 to manufacture and market
in the United States and Canada a device called the BreastAlert(TM) Differential
Temperature Sensor, a non-invasive, easy to use, adjunctive test for use as part
of a breast disease monitoring program (the "BreastAlert Device"). We commenced
shipments of the BreastAlert Device in December 1997. In November 1998, we
announced that we werein the process of evaluating various strategic
alternatives, as we did not have adequate resources for the completion of
clinical trials and marketing of the BreastAlert Device. Before the end of 1998,
as a result of the lack of adequate financing, we terminated all employees and
suspended all operations, focusing substantially all of our efforts on obtaining
new financing and/or restructuring the business. The Board of Directors then
entered into consulting agreements with three former key employees to negotiate
settlement agreements with Scantek Medical, Inc. ("Scantek") to terminate the
license agreement and negotiate settlements with other creditors, and explore
the possibilities for restructuring and/or reorganizing the business.


<PAGE>

In March 1999, we concluded a settlement agreement with Scantek that terminated
the license for the technology used in the BreastAlert Device. Certain assets
related to the licensed business were transferred to Scantek and additional
shares of common stock were issued to Scantek and an affiliated company as
consideration for release of all obligations concerning the license agreement
and equipment supply agreements. We also received a cash payment from Scantek,
which was applied to some of our other outstanding obligations.

On July 16, 1999, we entered into an Agreement and Plan of Reorganization with
Daryl J. Kollman and Marta C. Carpenter (formerly know as Marta C. Kollman). The
agreement provided for the exchange of all the outstanding shares of NEC and NAC
for shares of our common stock and preferred stock that together represented, on
August 6, 1999, approximately 92% of our outstanding common stock (including the
common stock issuable upon conversion of the preferred stock). The
reorganization was completed on August 6, 1999. On August 10, 1999, we changed
our name to Cell Tech International Incorporated.

Cell Tech, Inc. and NEC were formed in 1982 and 1988, respectively, to develop
and distribute products made from a unique natural strain of blue green algae
growing in massive quantities in Upper Klamath Lake in southern Oregon - the
algae we now call SBGA. In 1990, NAC was formed and acquired the assets of Cell
Tech, Inc. and began doing business under the trade name Cell Tech. Through
1999, NAC housed the sales organization, and provided the research and
development and administrative functions of our business, while NEC handled the
harvesting and manufacturing of our products. Beginning in 2000, NAC took over
these functions and NEC became inactive.

EXECUTIVE OFFICES

Our principal executive offices are located at 565 Century Court, Klamath Falls,
Oregon 97601; our telephone number at that address is (541) 882-5406; and our
internet address is www.celltech.com.

INDUSTRY OVERVIEW

The Natural Foods Merchandiser reports that the natural foods and nutrition
industry topped $64 billion in 2002. The Nutrition Business Journal has
predicted that the nutritional products industry will continue to grow at 4% to
6% annually through 2004. The Natural Foods Merchandiser has also reported that
overall sales of natural foods and nutritional products grew approximately 7% in
2002. Most of this growth was in the functional foods sector (including
nutrition bars and drinks) and the sports nutrition sector.

The growth of traditional supplements, including herbals, continued to decline
in 2002.

The primary distribution channels in the nutritional supplements industry
consist of mass-market retailers (including mass merchandisers, drug stores,
supermarkets, discount and convenience stores), health and natural food stores,
direct sales and mail order organizations, practitioners and the Internet.
Natural foods retail is the largest of these channels, accounting for almost 50%
of total sales, according to The Natural Foods Merchandiser. The Mass-market
retail channel includes food stores, drugstores and mass merchandisers. Direct
selling accounted for about 15% of sales during 2002.

<PAGE>

The Nutrition Business Journal also reported that the potential for natural and
healthier products to penetrate mainstream product categories looks
promising--and is still largely untapped. Dietary supplements sales of $16.7
billion are less than 10% of over-the-counter medicine and prescription drug
sales. Natural and organic food sales of $11.8 billion represent barely 2% of
the U.S. food industry (only 1.5% when food service is included). Functional
foods sales at $17.2 billion, even when broadly defined as manufactured foods
with any ingredient added specifically for health purposes, still account for
only 3.5% of the U.S. food industry. Natural personal care products, even more
loosely and broadly defined than natural food, had sales of $3.6 billion in 2000
and are just 10% of total health & beauty care spending. The $50 billion
nutrition industry accounted for just 7% of the $680 billion food, medicine,
health and personal care products market in the United States in 2000.

The international nutritional supplement market is more fragmented than the
domestic market. As a result, industry data is not readily available. However,
many of the demographic and other trends and events present in the domestic
market are also present in the international market.

GROWTH STRATEGY

Public awareness of the positive effects of nutritional supplements on health
has been heightened in the last several years by widely publicized reports and
medical research findings indicating a correlation between the consumption of
nutrients and the reduced incidence of certain diseases. The United States
government and universities generally have increased sponsorship of research
relating to nutritional supplements. For example, Congress has established an
Office of Alternative Medicine and an Office of Dietary Supplements within the
National Institutes of Health to foster research into alternative medical
treatment modalities and the role of dietary supplements in maintaining health
and preventing disease, respectively. However nutritional supplement sales have
been and may continue to be affected by questions about the efficacy and safety
of such supplements. The recent controversies over the efficacy of St. John's
Wort and Kava, and the recent concerns about the safety of Ephedra illustrate
this point.

However, we believe that the aging of the United States population, together
with a corresponding increased focus on preventative health care measures, will
continue to result in increased demand for certain nutritional supplement
products despite negative publicity of the type described above. According to
the United States Bureau of the Census, the 35-and-older age group of consumers,
which represents a large majority of the regular users of vitamin and mineral
supplements, is projected to grow significantly faster than the general United
States population through 2010.

Our growth strategy is to capitalize on the increased interest in nutritional
supplements described above by increasing product sales through existing
distribution channels in the U.S. and Canada and by expanding into new markets.
In particular, we believe that we may realize our growth by achieving the
following:

- We will introduce new products complementary to our current product lines. Our
product development strategy is to expand our existing product lines to
complement our current products. We have introduced five new products, the BG
Bar, NaturaLighttm (for healthy weight management), ImmuSuntm (for immune system
support), Containtm (for the relief of occasional

<PAGE>

heartburn) and OsteoSuntm (for healthy bone support) and we are actively working
on introducing additional products.

- We intend to introduce alternative distribution channels through infomercials.
Our ability to establish distribution through infomercials will be dependent
upon our ability to increase our working capital in order to pay for the costs
associated with infomercials. Our product distribution strategy is to provide
complementary marketing methods for our Distributors. We have introduced a
revised compensation plan and other promotion and recognition programs to
provide additional incentives to our Distributors. Our ability to increase sales
is significantly dependent on our ability to attract, motivate and retain
Distributors. We utilize an innovative marketing program that we believe is
competitive with programs offered by many other network marketing companies.
This program provides financial incentives, including several forms of
commission (bonus), optional Distributor training and support, no sign-up costs,
inventory requirements, and low monthly purchase requirements. We intend to
reach potential new Distributors through increased advertising, teleconferencing
and regional sales and training meetings. Successful management of Distributors
supports the marketing of products as well as the recruitment of new
Distributors.

- We intend to tackle international markets by entering into marketing
distribution agreements for Europe and Asia. We believe that growth potential
exists in international markets and will seek to enter into international
distribution agreements.

- We intend to engage government relations personnel to assist our international
expansion. We will engage government relations personnel throughout the world
who will take a systematic, proactive approach to working with government and
licensing agencies in new markets to ensure that our products and distribution
model are in compliance with all local laws and regulations. We will utilize
outside market consultants and work with private organizations throughout the
world to prepare for introducing our products in diverse markets.

- We intend to seek to enter into agreements and joint ventures with strategic
partners. We believe that opportunities exist with various strategic partners
that may improve our ability to market and distribute our products, enter into
new markets and provide our Distributors with new products that complement our
existing product lines.

PRODUCT OVERVIEW

Our product line consists primarily of consumable products that are targeted to
those consumers with an interest in natural alternatives for health and
nutrition. In developing our product line, we have emphasized quality, purity,
potency, and safety. We offer a line of approximately twenty products that can
be divided into five categories, including Daily Health Maintenance, Digestive
Health, Defensive Health, Powdered Drinks and Snacks, and Animal and Plant Food,
as further described below the chart.

<PAGE>


The following chart lists our products and the categories targeted by each, as
of March 31, 2003

------------------------------------------------------------------------
Daily Health    Digestive     Defensive    Powered Drinks     Animal and
Maintenance       Health        Health       and Snacks       Plant Food
------------------------------------------------------------------------
Super Blue Green(R) Alpha Sun(R)    X               X
------------------------------------------------------------------------
Super Blue Green(R) Omega Sun(R)    X               X
------------------------------------------------------------------------
Acidophilus                    X
------------------------------------------------------------------------
Bifidus                    X
------------------------------------------------------------------------
Spectrabiotic(R)                    X
------------------------------------------------------------------------
Internal Cleansing System                    X
------------------------------------------------------------------------
Super Blue Green(R) Enzyme                    X
------------------------------------------------------------------------
SBG Anytime     X              X             X
------------------------------------------------------------------------
Super Q10     X              X             X
------------------------------------------------------------------------
Super Sprouts & Algae     X              X             X
------------------------------------------------------------------------
Alpha Gold Promoting Physical Well-being     X                      X
------------------------------------------------------------------------
Omega Gold Enhancing Mental Well-being     X                        X
------------------------------------------------------------------------
Super Sun Smoothies                                                 X
------------------------------------------------------------------------
Mazama Mix                                                 X
------------------------------------------------------------------------
Cell Tech Essentials     X              X             X
------------------------------------------------------------------------
Super Blue Green(R) Animal Food                                     X
------------------------------------------------------------------------
NaturaLight                                  X
------------------------------------------------------------------------
OsteoSun                                  X
------------------------------------------------------------------------
ImmuSun                                  X
------------------------------------------------------------------------
Contain                                  X
------------------------------------------------------------------------
BG Bar     X              X             X              X
------------------------------------------------------------------------
PLANeT Food(R)                                        X
------------------------------------------------------------------------


<PAGE>

DAILY HEALTH MAINTENANCE

- Super Blue Green(R) Alpha Sun(R). Alpha Sun(R) is whole, complete algae.
Because its cell walls contain a high percentage of floridan starch, it provides
natural sugars critical to the health and vitality of tissues and cells. Alpha
Sun(R) also contains high concentrations of easily assimilated vital minerals.
It is available in capsules and tablets.

- Super Blue Green(R) Omega Sun(R). Omega Sun(R) is the heart of the algae with
the cell wall carefully removed through a special separation process. This
super-concentrated food contains a higher overall amino acid content than Alpha
Sun(R). It is a source of raw materials for building the neuro-peptides
associated with brain activity. It is available in capsules and tablets.

- Cell Tech Essentials. Cell Tech Essentials, named for our most essential
products, is a repackaging of them. It attains a new level of convenience and
effectiveness and, at $40.00 per bag, a new level of value. Each bag contains 30
packets and each packet contains the following capsules: one Alpha Sun(R), one
Omega Sun(R), one Acidophilus, one Bifidus, and two Enzymes.

- NaturaLight. NaturaLight is a herbal supplement designed to work with the
metabolism to help users reach their weight loss goals. Formulated with enzymes,
botanicals, and other complementary ingredients, this product works with user's
metabolisms to help them reach their weight loss goals. We believe that this
herbal supplement can be used exclusively, or used in concert with any other
weight loss program. We believe that, combined with proper diet and exercise,
NaturaLight can help reduce cravings, increase energy, and improve mental
clarity and attitude. The goal of this new product is to help the body reduce
fat and lose weight while maintaining lean muscle mass. It is available in
capsules.

- SBGAnytime. SBGAnytime supplies Super Blue Green Algae in a convenient
chewable form, providing support to body and mind any time. It's designed for
people on the go, young (and not-so-young) finicky eaters, and those who have
difficulty swallowing capsules and tablets. Each wafer contains a 150 mg mix of
Alpha Sun(R) and Omega Sun(R) Algae, orange juice, honey, and other natural
sweeteners.

- BG Bar. BG Bar is a food bar made with quality organic ingredients, fortified
with sprouted grains, greens, and Super Blue Green Algae(R). It has an almond
butter texture with minced almonds on top. We believe that consumers will find
it attractive and a useful source of nutrition. Each bar weighs 56 grams.

DIGESTIVE HEALTH

- Acidophilus. Acidophilus (Lactobacillus acidophilus) is the first of our
probiotic products and operates in the small intestine. Without proper
cleansing, the small intestine can fill with wastes and harmful by-products that
impair natural digestive functions. Our Acidophilus helps process food quickly
and eliminate waste. It is a single-strain beneficial bacterium called DDS-1a
Acidophilus, which helps keep harmful bacteria out by colonizing the walls of
the small intestine and by secreting substances that prevent the growth of
unfriendly bacteria. Each capsule is carefully micro blended with 85 milligrams
of Super Blue Green(R) Omega Sun(R) Algae.

- Bifidus. Bifidus (Bifidobacterium bifidum) is the second of our probiotic
products. While Acidophilus serves the small intestine, Bifidus is for the large
intestine. The large intestine absorbs the water from food and passes the
remaining waste out of the body. A good intestinal flora in the large intestine
can help prevent gas, bloating and diarrhea. Our Bifidus helps repopulate the
large intestine with friendly bacteria, restoring the healthful environment it
needs to do its job well. Each capsule is micro blended with 85 milligrams of
Super Blue Green(R) Omega Sun(R) Algae.

<PAGE>

- Spectrabiotic(R). Spectrabiotic(R) is designed to complement Acidophilus and
Bifidus in providing a complete system for building and maintaining healthy
intestinal flora. In the Spectrabiotic(R) formula, eight key "good bacteria" are
micro blended with 85 milligrams of Super Blue Green(R) Omega Sun(R) Algae,
providing the entire digestive tract with probiotic support, especially when
combined with a regular program of Acidophilus and Bifidus. Spectrabiotic(R)
also contains Jerusalem artichoke, acerola, and rose hips.

- Internal Cleansing System. The New Seasons Cleansing System is a two-product
program that is designed to assist the body's natural elimination systems. The
Herbal Formula supports the processes that remove toxins from the tissues of the
body; then the Fiber Formula helps the body eliminate those toxins.

- Super Blue Green(R) Enzymes. Our Super Blue Green(R) Enzymes contains a full
range of food enzymes to help break down all types of foods, including fats,
carbohydrates, protein and fiber. Super Blue Green(R) Enzymes is micro blended
with 25 milligrams of Alpha Sun(R), adding specific vitamins and minerals many
enzymes need for optimum functioning.

- Super Sprouts & Algae. Super Sprouts & Algae is a unique product combining the
nutritional benefits of three "superfoods" from three natural environments --
land, lake and sea: a super concentration of custom-grown wheat sprouts; Super
Blue Green(R) Alpha Sun(R) Algae; and Super Red Beta Algae (Dunaleilla salina),
a strain of marine algae. These three superfoods together supply the body with
antioxidant nutrition to neutralize the effects of highly unstable, reactive
molecules known as free radicals. Two tablets of Super Sprouts & Algae provide
over 100% of the RDA for vitamin A. Each tablet contains 540 milligrams of wheat
sprouts, 60 milligrams of Super Blue Green(R) Alpha Sun(R) Algae and 25
milligrams of Super Red Beta Algae.

- Super Q10. Super Q10 contains Super Blue Green(R) Alpha Sun and a special
enzyme enhancer called coenzyme Q10. This nutrient has been shown to be
beneficial for functioning of the heart, muscles, and the nervous and immune
systems. It is especially important in helping the mitochondria, or powerhouses
of cells, to generate energy. Super Q10 is a synergistic combination of pure
premium coenzyme Q10 with 85 milligrams of Super Blue Green(R) Alpha Sun(R)
Algae and is a way to assist cells in converting nutrients into energy.

DEFENSIVE HEALTH

- Alpha Gold. Promoting Physical Well-being. Alpha Gold contains a carefully
chosen group of ingredients, each with documented health benefits, that works
synergistically with Super Blue Green(R) Algae to facilitate overall good
health. Alpha Gold contains bee pollen to increase stamina, vitality and
athletic performance; noni to help stimulate the immune system; turmeric to help
protect against environmental contaminants; and gluten-free sprouted wheat grass
juice, which contributes a variety of assimilative enzymes. This product is
available in capsules or powder.

- Omega Gold. Enhancing Mental Well-being. In addition to the ingredients found
in Alpha Gold, Omega Gold also contains ginkgo biloba, which increases
circulation to the brain and has effects upon memory, clarity and mental
alertness. Siberian ginseng is added to stimulate both mental and physical
performance. This product is available in capsules or powder.

- ImmuSun. A natural part of the human diet for thousands of years, the complex
carbohydrate WGPtm beta glucan used in ImmuSun has been shown to fortify the
immune system.

- Contain. For occasional heartburn, there is now have a healthy choice. Contain
is formulated with a superior combination of alginate (from seaweed), Super Blue
Green Algae, enzymes, and other soothing natural ingredients.

 - OsteoSun. A new,
natural, and unique non-calcium dietary supplement, which is scientifically
proven to promote bone health.*


                                        8

--------------------------------------------------------------------------------
<PAGE>

POWDERED DRINKS AND SNACKS

- Super Sun Smoothies. Super Sun Smoothies are all-vegetable powder shake mixes.
We make Super Sun Smoothies with premium ingredients that are dairy free and
contain no preservatives, yeast artificial flavorings or colorings. They also
provide the "superfood" benefits of 500 milligrams of Super Blue Green(R) Alpha
Sun(R) and 500 milligrams of Omega Sun(R) Algae blended into every scoop.

- Mazama Mix. Mazama Mix is a nutrient-rich green drink derived from all-natural
whole food sources. It contains minerals and trace minerals that we believe are
essential for the proper functioning of the body. This product is designed to
help enhance overall health, vitality and energy levels.

ANIMAL AND PLANT FOOD

- Super Blue Green(R) Animal Food. Super Blue Green(R) Animal Food is a blend of
coarse-grade Alpha Sun(R) and Omega Sun(R) Algae, providing the fundamental
building blocks for strengthening the immune system of animals. The broad
spectrum of organic minerals, vitamins, amino acids, enzymes and the supply of
beta carotene and chlorophyll found in Super Blue Green(R) Algae is readily
absorbed by animals. Super Blue Green(R) Animal Food is sprinkled over the pets'
food.

- PLANeT FOOD(R). PLANeT FOOD(R) is designed to add trace minerals and other
components to soils. It is a mixture of volcanic rock dust from Colorado and
algae from Klamath Lake and is sold for use on potted plants, lawns, gardens,
and trees and for composting. The Food and Drug Administration has not evaluated
these statements. These products are not intended to diagnose, treat, cure, or
prevent any disease.

DISTRIBUTORS AND OUR NETWORK MARKETING SYSTEM

Our products are distributed through a network marketing system of Distributors.
Distributors are independent contractors who purchase products directly from us
for resale to retail consumers. Distributors may elect to work on a full-time or
a part-time basis. We believe that our network marketing system is well suited
to marketing our nutritional supplements and other products because sales of
such products are strengthened by ongoing personal contact between retail
consumers and Distributors, most of whom use our products. Currently, we have


<PAGE>

Distributors in all fifty states, the District of Columbia, Guam, Puerto Rico,
American Samoa, Virgin Islands and Canada.

Each Distributor has the opportunity to sponsor additional Distributors, which
can enhance the original Distributor's income, as described below. Each new
Distributor that is sponsored, as well as his or her own "downline" groups,
becomes a member of the Distributor's network or "downline."

COMMISSION SYSTEM

We currently offer two categories of membership. The first category is called a
"Distributor" and the other is called a "Preferred Customer." Distributors are
interested in receiving commissions for their own purchases as well as for
purchases made by members enrolled in their "downline." A Preferred Customer is
a customer who is interested in consuming our products, but is not interested in
the business opportunity we offer to our Distributors. Many Preferred Customers
eventually become Distributors. Both categories of membership purchase our
products at wholesale prices. Distributors are compensated through a Distributor
commission system that encourages both retail selling and sales organization
management.

Distributors may derive income from several sources. First, Distributors may
receive revenues by purchasing our products at wholesale prices and selling them
to customers at retail prices. Second, Distributors earn the right to receive
bonuses (commissions) based upon purchases by members of their "downline" or
sales marketing organization. Each new Distributor that a Distributor sponsors
becomes a member of his selling organization or "downline." The Distributors
that a Distributor directly sponsors are referred to as his "first generation"
or "first level."

In June 2002, we revised our commission system to better suit our long-term
growth objectives of attracting new Distributors and appropriately rewarding the
Distributors that work to increase their business with us. Our goal was to
redistribute our commission expense to those Distributors who demonstrate to us
that they are actively contributing to our growth. We believe we have designed a
commission system that is suited to achieve these goals as is demonstrated by
the decrease in commission expense from 47.8% of revenue in 2001 to 44.6% of
revenue in 2002. The changes to our system that took effect in June 2002, are as
follows:

- The personal volume percentage paid to Members was reduced to 5% from 10%.
This change did not affect titles above Member. Once a Member reaches the title
of Representative, the commission on personal volume is 15% and 5% on any volume
of Members in the Representative's network.

- Generation 4, 5, and 6 payout percentages were reduced to 3%, 2%, and 1% from
4%, 3%, and 2%, respectively. The titles of Amethyst, Ruby and Sapphire were not
affected by this change.

The first level is "Member" and the highest level is
"Executive." Distributors may attain "Member" status by purchasing any product
from Cell Tech. There are two intermediary levels between Member and Executive:
Representative and Leader. A Distributor achieves higher levels in the bonus
structure primarily through increased purchases by Distributors sponsored
directly by them (their first level) and in their personal group. The
requirements for a Distributor to reach the first "Executive" level are

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monthly personal purchases of at least $100 and monthly group volume of $500.
For each "Executive" level attained thereafter, the Distributor must maintain
monthly personal purchases of at least $100 and monthly group volume of at least
$500. The program is such that each month a Distributor must qualify at that
level to be paid at that level. The advantage to this is that the Distributors
must remain active in purchasing and sponsoring to retain their bonuses, but if
they do not qualify in a certain month, their income is only reduced that one
month.

The Distributor commission system includes three kinds of bonuses, as described
below:

Standard Bonus. The standard bonus is available to any Distributor who has an
"active" status with us. Distributors may attain the title of "Assistant Leader"
by purchasing a minimum of $50 of products in a month. The percentages used to
determine the bonus and the number of levels in the organization the Distributor
receives bonuses upon is based on the individual's title with us. The standard
bonus grants rebates to the Distributor as he consumes and sells our products to
others.

Executive Generation Bonus. A second form of bonus is available to those who
have Executives in their downline. Based on the number of "Executives" they have
at each level, and assuming certain minimum personal purchases each month,
Distributors receive a percentage of such Executives' standard bonus as an
additional bonus.

Blue-Green Diamond Bonus. Finally, those Executives attaining the highest levels
in our structure are eligible to receive an additional bonus called the
"Blue-Green Diamond Bonus" which is a percentage of the gross commissionable
sales volume for the year.

We believe that the opportunity of Distributors to earn bonuses contributes
significantly to our ability to retain our productive Distributors. The
Distributor commission system encourages promotion to higher commission levels
by enabling Distributors to earn commissions on a deeper sales base (i.e., more
levels of their organization). We believe this will encourage sponsoring growth
(depth) in an organization and not just acquiring customers personally.

To become a Distributor, a person must simply sign an agreement to comply with
our policies and procedures. No investment is necessary to become a Distributor.
We consider, as of February 28, 2003, approximately 37,000 of our Distributors
to be "active," that is, an individual Distributor who has ordered at least $50
of our products during the preceding six-month period.

TRAINING

We support opportunity meetings in various key cities and participate in
motivational and training events in various market areas, designed to inform
prospective and existing Distributors about our product line and selling
techniques. Distributors give presentations relating to their experiences with
our products and the methods by which they have developed their own organization
of Distributors. Motivation is offered to participants in the form of
recognition, promotions, excursions and tours, which are intended to foster an
atmosphere of excitement throughout the Distributor organization. Prospective
Distributors are educated about the structure, dynamics and benefits of our
network marketing system.


<PAGE>

We continually develop marketing strategies and programs to motivate
Distributors. These programs are designed to increase Distributors' monthly
product sales and the recruiting of new Distributors.

DISTRIBUTOR SUPPORT

As part of our program to maintain constant communication
with our Distributor network, we offer the following support programs to our
Distributors:

- Associations/Teams/Advisory Board. Several associations and teams support
Distributors' efforts, including the Leadership Alliance, an association of
thoseDistributors having reached the top levels of our Marketing Plan, which was
formed in order to allow interaction among the Network's "top level" group for
discussion of business issues, development of solutions and methods to improve
the sales success and growth of downlines and the Network as a whole. In
addition, the Field Advisory Board is an advisory team representing the entire
field organization and brings issues, recommendations, and other ideas to us for
discussion. The Field Advisory Board participates in bi-monthly teleconferences
with our marketing and operations executives.

- August Celebration. For the past thirteen years, we have sponsored and held
the August Celebration, which is our annual convention.

- Ordering Support. We offer a variety of methods to order product and support
materials, including toll-free telephone operator access, "Order Express" (a
toll-free automated telephone system that Distributors can call 24 hours a day
to place orders or to access their records), and our website at
http://www.celltech.com.

- Information Support. Distributors may learn more about our products, our
history, distributor organization building, management techniques and related
matters through our website. In addition, we produce color catalogues and
brochures for our Distributors and produce a monthly publication called
"Networker's Edge" focused on business building. We also maintain our ATG
Technologies Voice Mail System, which includes options for broadcasting messages
to our Distributors via temporary, permanent and super groups. A direct access
telephone line allows Distributors to access our most recent announcements sent
through the ATG Technologies System to our Network. Finally, a 24-hour toll-free
"Fax-on-Demand" system provides Distributors with news bulletins, product
literature and articles of interest via facsimile.

RESEARCH AND DEVELOPMENT

We spent approximately $193,310 on research and development in 2002, $190,884 in
2001 and $456,098 in 2000. We continually seek to identify, develop and
introduce innovative, effective and safe products. Sixteen new products have
been introduced since 1997. Management believes that our ability to introduce
new products increases our Distributors' product visibility and competitiveness
in the marketplace. We also continuously evaluate "existing" products for
viability and it is our policy to discontinue products that are not selling
satisfactorily.

New product ideas are derived from a number of sources, including trade
publications, scientific and health journals, management, independent
consultants, and our sponsored university research projects. We maintain our own
quality assurance/quality control staff, consisting of two full time employees
as of March 31, 2002 and December 31, 2001, but rely upon independent

<PAGE>

research, consultants and others for ingredient research, development and
formulation services. When we identify a new product concept or when an existing
product must be reformulated for introduction into a new or existing market, the
new product concept or reformulation is generally submitted to our suppliers for
technological development and implementation. In addition, prior to introducing
products into our markets, our scientific consultants, legal counsel and other
representatives investigate product formulation matters as they relate to
regulatory compliance and other issues.

In 2002, we began formulating and testing three new products, ImmuSun, Contain
and OsteoSun, designed to compliment our existing product line and began selling
them to our Distributors in June 2002, October 2002 and February 2003,
respectively.

ImmuSun. ImmuSun, an all-natural supplement, contains the active ingredient
WGP(TM) beta glucan, a patented form of the complex carbohydrate beta glucan,
which is found in the cell walls of baker's yeast (Saccharomyces cerevisiae).
Scientists discovered the immune-boosting properties of beta glucan in the
1960s. Since then, they have documented its potential as an immunity booster in
numerous studies conducted at such prestigious research institutions as
Massachusetts Institute of Technology, Harvard University, and Johns Hopkins
University.

These studies have proven WGP beta glucan's ability to activate macrophages, a
type of white blood cell that is the body's first line of defense. Macrophages
circulate throughout the body engulfing and digesting foreign antigens, thus
triggering a cascading effect that mobilizes the body's arsenal of defenses. The
result is a stronger immune system.

Contain. Contain's orange-flavored chewable tablets are made with a superior
combination of alginate (from seaweed), Super Blue Green Algae, enzymes, and
other soothing natural ingredients that join forces to help "contain" stomach
acid. Upon contact with gastric juices, the proprietary blend of plant extracts
and other natural ingredients creates a temporary gel barrier that helps keep
gastric contents from seeping into the esophagus. Meanwhile, the enzymes in the
formulation work in the stomach to aid in the efficient breakdown of food,
helping to minimize occasional indigestion at the outset.

Contain differs from similar products on the market because it is formulated
with enzymes to help reduce indigestion and also Contain includes Omega Sun
algae for added nutritional value. Contain acts only mildly to neutralize
stomach acid--rather, it relieves symptoms of occasional heartburn naturally, by
forming a protective buffer to help keep stomach acid where it belongs. Contain
offers an ideal combination of beneficial ingredients that can help alleviate
the stressful effects of occasional heartburn.

OsteoSun. Calcium alone is often not enough to maintain bone health.. Studies
have shown that OsteoSun can significantly increase bone mineral density.
OsteoSun's ingredients include a patented formulation of red yeast rice, a
natural food product that - in this formulation only - has been certified by the
International Bone Laboratories as "bone active." This is the only formulation
of this natural product that has been certified for bone health.

OsteoSun also contains Super Blue Green Omega Sun algae, which, in addition to
all its other benefits, aids the assimilation of red yeast rice and other
helpful nutrients.

<PAGE>

We are currently developing additional products, including new antioxidants,
weight management, and energy products. In addition to the introduction of
single products, we are also focusing on promoting groups of products to be
taken in conjunction with each other to address the specific needs an individual
may have (such as weight loss, stress or daily wellness).

PRODUCT WARRANTIES AND RETURNS

Our product warranties and policy regarding returns of products are similar to
those of other companies in our industry. Any consumer, who is not satisfied
with any of our products, may return it to the Distributor from whom they
purchased it from within 90 days of their purchase. The Distributor is required
to refund the purchase price to the consumer. The Distributor may then return
the unused portion of the product to us for an exchange of equal value. If a
Distributor requests a refund in lieu of an exchange, we will issue a check or
credit the appropriate amount to the Distributor's credit card.

We warrant all of our products against defect.

RAW MATERIALS AND SUPPLIERS

Our primary raw material is Aphanizomenon flos-aquae, which we harvest from
Upper Klamath Lake using modern technology. Upper Klamath Lake produces
approximately 200 million pounds of SBGA each year. When we need to harvest, we
typically harvest algae once or twice a year, timing our harvests to coincide
with the greatest density of algae.

In 2001, for the first time ever, we began harvesting on Upper Klamath Lake by
the use of a unique (patent pending) on-lake harvester. As a result of this
method of harvesting, we can gather Aphanizomenon flos-aquae directly from the
lake. This development of our harvesting techniques made harvesting possible in
a drought year when the availability of water in the canals was nonexistent or
questionable, because of the nationally reported water crisis in the Klamath
Basin. We believe that harvesting directly from Upper Klamath Lake is both
cost-effective and provides us with excellent yields, utilizing the new
harvester that we conceived, designed and built. We have applied for a design
patent on our harvester, as we believe that the technology utilized with this
new harvest system is effective, special and unique.

Processing of SBGA is a complex process including the following:

- Screening. We filter fresh algae out of the water with fine mesh screens.

- Primary Separation. Primary separators remove everything suspended in the lake
water, which concentrates the algae by removing virtually all extracellular
water.

- Freezing. We quickly freeze the algae, converting it into slabs at a
temperature of -30(degree) Fahrenheit.

- Drying. We gently remove all cellular water in a low temperature environment,
converting the algae into a dry, stable medium that retains vital nutrients.

- Powdering and Bottling. We sift and grind the algae to a fine powder, which
can be encapsulated or tabletized and sealed to retain freshness and viability.

In years when there has been no harvest, we rely on our inventory of frozen and
freeze-dried SBGA. As of December 31, 2002, we had 900,157 pounds of frozen
algae inventory for use in capsules and tablets and 1,660,511 pounds of frozen
algae for use with vendor products. We had not harvested algae since 1998 due to
excess inventory in relation to sales; however, in July 2001, we commenced
harvesting SBGA and in 2002 we expanded our harvesting capacity ten-fold. We
believe that our present rate of inventory consumption only partially reflects
the demand that we anticipate as we implement our growth strategy. Although the
availability of new algae that we may harvest from Upper Klamath Lake may change
from year to year, we believe that our existing inventory is adequate for
several years.

From time to time a toxic species of algae called Microcystis aeruginosa blooms
in Upper Klamath Lake and can contaminate a portion of our harvest of SBGA with
microcystin, a toxin. We have worked with state and federal agencies to
establish prudent safety precautions, and test each batch of algae we harvest
for microcystin levels before releasing it for production. We believe our
harvest methods help us to minimize the amount of Microcystis aeruginosa in the
harvested material, thus increasing the total amount of algae that we can
release for production.

We encapsulate and bottle algae in-house. We also purchase vitamins, nutritional
supplements and other products and ingredients from parties that manufacture
such products to our specifications and standards. During 2002, 2001 and 2000,
one vendor supplied approximately 45%, 55% and 27%, respectively, of the
products that we purchased. This vendor was our source of enzymes and
probiotics. We place significant emphasis on quality control with all of our
products. All nutritional supplements, raw materials and finished products are
subject to sample testing, weight testing and purity testing by independent
laboratories. In the event of loss of any of our sources of supply, we believe
that suitable replacement sources of similar products and product ingredients
exist and are available to us.

TRADEMARKS AND SERVICE MARKS

Most products are packaged under our "private label." At December 31, 2002, we
have six trademarks registered with the United States Patent and Trademark
Office and one trademark application pending, and three trademarks registered
and one application pending with the Canadian Intellectual Property Office of
Trade Marks. In addition, we have registered trademarks in eleven foreign
countries (and one application pending in a twelfth) for the mark "Planet Food."
While we believe customer identification with our name and brand is important,
we feel that our primary competitive edge arises from our Distributor network
and our strategic location which allows us to process algae immediately after
its harvest, and not from any proprietary technology.

We do not have a registered trademark for the name "Cell Tech." As of the date
of this Annual Report on Form 10-K, no other person has claimed infringement
based on our use of the name "Cell Tech," but there can be no assurance that
such a claim would not be made in the future. A British company in a different
business than ours has a United States trademark registration for the name "Cell
Tech" and it has not objected to our use of the name.

COMPETITION

The nutritional supplements industry is large and intensely competitive. We
compete with other companies that manufacture and market retail nutritional
products to health-conscious consumers, including General Nutrition Companies,
Inc., Solgar Vitamin and Herb Company, Inc., Twinlab Corporation and Weider
Nutrition International, Inc. Many of our competitors in this market have longer
operating histories and greater name recognition and financial resources than
us.

In addition, nutritional supplements can be purchased in a wide variety of
distribution channels. While we believe that many consumers appreciate the
convenience of ordering products from home through a sales person, the buying
habits of many consumers accustomed to purchasing products through traditional
retail channels are difficult to change. We offered our products, on a limited
test basis, via infomercials in May 2001 and suspended them in July 2001 due to
a lack of financial resources. We intend to resume airing infomercials when we
have adequate financial resources. Our product offerings in each product
category are also relatively small compared to the wide variety of products
offered by many other nutritional product companies.

There are several companies that harvest algae from the Upper Klamath Lake.
However, we are the largest harvester and the supply of algae is substantially
more than the total amount harvested by all companies. We also have access to
Upper Klamath Lake that is in close proximity to our freezer facility.

We also compete in the nutritional supplements market and for new Distributors
with other retail, multi-level marketing and direct selling companies in the
nutritional supplements industry by emphasizing the proprietary nature, value,
and the quality of our products and the convenience of our distribution system.
We also compete with other direct selling organizations, many of which have
longer operating histories and greater name recognition and financial resources
than us. They include Amway Corporation, Nu Skin Enterprises, Inc., Body Wise
International, Inc., Herbalife International, Inc., Mannatech Incorporated,
Rexall Showcase International, and Forever Living Products, Inc. We compete for
new Distributors on the basis of our compensation plan and our proprietary and
quality products. We believe that many more direct selling organizations will
enter the market place as this channel of distribution expands over the next
several years. We also compete for the commitment of our Distributors. Given
that the pool of individuals interested in direct selling tends to be limited in
each market, the potential pool of Distributors for our products is reduced to
the extent other network marketing companies successfully recruit these
individuals into their businesses.

GOVERNMENT REGULATION GENERAL

We are subject
to laws, governmental regulations, administrative determinations, and court
decisions on the federal, state, and local levels. These regulations pertain to
a variety of issues related to us. First, they pertain to the formulation,
manufacturing, packaging, labeling, distribution, importation, sale and storage
of our products and taxation of our Distributors, which in some instances may
impose an obligation on us to collect the taxes and maintain appropriate
records. Second, the regulations pertain to product claims and advertising, both
by us and by our


<PAGE>

Distributors, for whom we are responsible. Finally, certain regulations pertain
to our network marketing system.

PRODUCT REGULATION

Several governmental agencies regulate certain aspects of our products,
including formulation, manufacturing, packaging, storing, labeling, advertising,
distribution, and sales. These agencies include the Food and Drug Administration
("FDA"), the Federal Trade Commission ("FTC"), the Consumer Products Safety
Commission, the Department of Agriculture, the Environmental Protection Agency,
and the Postal Service. In addition, various state and local agencies can
regulate us in areas where our products are manufactured, distributed, and sold.

The FDA regulates the formulation, manufacture, packaging, storage, labeling,
promotion, distribution, and sale of foods, dietary supplements, and
over-the-counter drugs, including those we distribute. With respect to the
preparation, packaging and storage of our supplements, FDA regulations require
that our suppliers and we meet relevant good manufacturing practice regulations.

The Dietary Supplement Health and Education Act of 1994 ("DSHEA") revised
certain provisions of the Federal Food, Drug and Cosmetic Act ("FFDCA")
concerning the composition and labeling of dietary supplements. We believe that
DSHEA is generally favorable to the dietary supplement industry. The legislation
creates a new statutory class of "dietary supplements," which includes vitamins,
minerals, herbs, and amino acids. DSHEA applies with certain limitations to
dietary ingredients that were on the market before October 15, 1994. With
respect to dietary supplements that contain dietary ingredients not on the
market before October 15, 1994, DSHEA requires further evidence. This evidence
must show that the supplement contains only those ingredients that have been in
the food supply or other evidence of use or safety. Manufacturers of dietary
supplements must make a "statement of nutritional support," which is a statement
describing certain types of product performance characteristics. In making such
a statement, we must have substantiation that the statement is truthful and not
misleading and must make a disclaimer within the statement. Finally, we must
notify the FDA of the statement no later than 30 days after it is first made.

In January 2000, the FDA published a final rule that defines the types of
statements that can be made concerning the effect of a dietary supplement on the
structure or function of the body pursuant to the DSHEA. Under the DSHEA,
dietary supplement labeling may bear "structure/function" claims, which are
claims that the products affect the structure or function of the body, without
prior FDA review. They may not, without prior FDA review, bear a claim that they
can prevent, treat, cure, mitigate or diagnose disease (a disease claim). The
new final rule describes how the FDA will distinguish disease claims from
structure/function claims. In February 2001, the FDA issued a notice requesting
comments on the types of information that should be included in guidance on
applying the regulations on statements made for dietary supplements concerning
the effect of a dietary supplement on the structure or function of the body. No
guidance document has been issued to date, and the Company has continued its
ongoing efforts to ensure that its dietary supplement product labeling complies
with the requirements of the "Structure/Function" final rule, which became
effective in February of 2000.

FFDCA classifies the majority of our products as "dietary supplements." The FDA
issued regulations governing the labeling and marketing of dietary supplement
products in September

<PAGE>

1997. These regulations covered several issues. First, they covered the
identification of dietary supplements, as well as their nutrition and ingredient
labeling. Second, they covered the terminology to be used for nutrient content
claims, health content claims, and statements of nutritional support. Third,
they covered the labeling requirements for dietary supplements that claim to be
"high potency" and "antioxidant." Fourth, they covered notification procedures
for statements on dietary supplements. Finally, the regulations covered the
pre-market notification procedures for new dietary ingredients in dietary
supplements. The notification procedures became effective in October 1997. The
labeling requirements became effective in March 1999 and we revised our product
labels to reflect the new requirements. We continue to secure substantiation of
our product performance claims and to notify the FDA of certain types of
performance claims made for our products. Our substantiation program involves
compiling and reviewing scientific literature, including our own university
research that is pertinent to the ingredients contained in our products.

Dietary supplements are subject to the Nutrition, Labeling and Education Act
("NLEA"), as well as the associated regulations. These regulate health claims,
ingredient labeling, and nutrient content claims, which characterize the level
of a nutrient in the product. NLEA prohibits the use of any health claim for
dietary supplements unless the claim is supported by significant scientific
agreement and is pre-approved by the FDA.

STATE REGULATION

As a result of certain conditions, a toxic strain of algae called Microcystis
aeruginosa occasionally blooms in Klamath Lake and can contaminate a portion of
our harvest of blue-green algae with microcystin, a toxin. In 1994, we began to
test the algae harvested at this facility for possible contamination. The
existence of Microcystis aeruginosa has been regularly measured at various
levels. In the absence of established regulatory criteria for determining an
acceptable level of microcystin (the actual toxin), we sponsored an assessment
of risk and set our own standards for determining whether a particular batch of
algae is acceptable for human consumption. Algae that does not meet our
standards and cannot be used in alternative non-human consumable products is
isolated and not used in production.

On October 23, 1997, the Oregon Department of Agriculture issued an
Administrative Rule on the sale of blue-green algae, which stated, "the agency
has decided to adopt the 1 microgram per gram (1 ppm) level of microcystin in
blue-green algae." This ruling may have an impact on our ability to process and
distribute the raw algae harvested and finished goods produced. Such ruling may
also decrease the amount of salable inventory and may, therefore, have an
adverse impact on our ability to realize the carrying value of our inventories.
We have recognized that an impairment of our inventory may exist and therefore
have recorded our best estimate of the effect by establishing a reserve for
$4,000,000 at December 31, 2002, for the possible effects of inventories, which
may become unsaleable under this Rule. The Oregon Department of Agriculture has
taken no regulatory actions against our products under this Rule to date.

FOREIGN MARKETS

In 1999 Health Canada issued a warning about the safety of blue green algae
products due to concerns about microcystin. While we believe our products are
safe and comply with Canadian rules, the adverse publicity from the Health
Canada warning adversely affected our sales in Canada. Such warning may occur in
the future and could have an adverse affect on our business.

<PAGE>

In Canada, both national and provincial law regulates our network marketing
system. Under Canada's Federal Competition Act, we must make sure that any
representations relating to Distributor compensation made to prospective
distributors constitute fair, reasonable and timely disclosure and that it meets
other legal requirements of the Federal Competition Act. Our revised
compensation plan is being reviewed and we will submit it to the appropriate
Canadian authorities. All Canadian provinces and territories, other than Ontario
have legislation requiring that we register or become licensed as a direct
seller within that province. Licensing is designed to maintain the standards of
the direct selling industry and to protect the consumer. Some provinces require
that both our Distributors and we be licensed. We are in the process of
obtaining all of the required provincial or territorial direct sellers'
licenses.

--------------------------------------------------------------------------------
REGULATION OF ADVERTISING

We are unable to make any claim that any of our nutritional supplements will
diagnose, cure, mitigate, treat, or prevent disease. DSHEA, however, permits
substantiated, truthful, and non-misleading statements of nutritional support to
be made in labeling, such as statements describing general well-being resulting
from consumption of a dietary ingredient or the role of a nutrient or dietary
ingredient in affecting or maintaining a structure or a function of the body.
The FDA recently issued a proposed rule concerning these issues.

The FTC similarly requires that any claims be substantiated. The FTC exercises
jurisdiction over the marketing practices and advertising of all our products.
In years past, the FTC has instituted enforcement actions against several
dietary supplement companies for false and misleading marketing practices. This
has resulted in consent decrees and monetary payments by the companies involved.
We have not been the subject of FTC enforcement action with respect to our
advertising. However, there is no assurance that the FTC will not subject us to
inquiry in the future.

Through our manuals, seminars and other training materials and programs, we
attempt to educate our Distributors as to the scope of permissible and
impermissible activities in each market. We also investigate allegations of
Distributor misconduct. However, our Distributors generally are independent
contractors, and we are unable to monitor directly all of their activities. As a
consequence, we cannot be sure that our Distributors comply with applicable
regulations. Misconduct by Distributors could have, a material adverse effect on
us in a particular market or in general.

We are unable to predict the nature of any future laws, regulations,
interpretations or applications, nor can we predict what effect additional
governmental regulations or administrative orders, when and if promulgated,
would have on our business in the future. They could, however, require: (1) the
reformulation of some products not able to be reformulated; (2) imposition of
additional record keeping requirements; (3) expanded documentation of the
properties of some products; (4) expanded or different labeling; and (5)
additional scientific substantiation regarding product ingredients, safety or
usefulness.

NETWORK MARKETING SYSTEM REGULATION

Our Distributor commission system constitutes a network marketing system. A
number of federal and state statutes and regulations apply to this system,
including those administered by

<PAGE>

the FTC. The legal requirements that apply to network marketing organizations
ensure that product sales are ultimately made to consumers. Further, they ensure
that advancement within the organizations be based on the sales of products,
rather than from the recruitment of additional Distributors, investment in the
organization, or non-retail sale criteria. Where required by law, we must obtain
regulatory approval of our network marketing system. If such approval is not
required, the favorable opinion of local counsel will suffice. Finally, in
addition to these regulations, the FTC regulates trade practices related to
network marketing systems.

EMPLOYEES

At February 28, 2003, we employed approximately 85 persons, of which 4 were
part-time. These numbers do not include our Distributors, who are generally
independent contractors rather than our employees. None of our employees are
represented by a labor union and we have never experienced any business
interruption as a result of any labor disputes. We believe that our relationship
with our employees is good.

INDUSTRY SEGMENTS AND EXPORT SALES

We have no assets outside of the United States. Our business consists of one
industry segment and is grouped into two geographic areas: United States and
Canada. The following table (dollars in thousands), summarizes the product sales
revenues from customers in each of the two geographic regions:

(Dollars in Thousands)           2002               2001              2000
                                 ----               ----              ----
United States             $24,696    94.3%   $28,310    94.3%   $36,796    94.4%
Canada                    $ 1,498     5.7%   $ 1,702     5.7%   $ 2,181     5.6%
                          -------   -----    -------   -----    -------   -----
Total                     $26,194   100.0%   $30,012   100.0%   $38,977   100.0%
                          =======   =====    =======   =====    =======   =====

We believe that our profit margin on export sales is not significantly different
from that realized on sales in the United States. All foreign product sales
transactions are consummated in U.S. dollars.

ITEM 2. PROPERTIES.

Currently, our headquarters and all of our operating facilities are located in
Klamath Falls, Oregon. We lease approximately 250,000 square feet of office,
processing, freezer and storage space directly from our principal shareholders
or their affiliates. Most of these leases are year-to-year, although we do rent
some space on a month-to-month basis and one lease will expire in 2005. We
believe that the space leased from our shareholders and their affiliate is
rented to us at

<PAGE>

below or at fair market rates. We also lease an additional 21 acres from an
independent third party, on which we have built our algae processing and storage
facility. Our lease with the independent third party will terminate in 2020, at
which time we have the option to renew for an additional 25 years. At the
termination of such lease, ownership of the facility will revert to the lessor.

We believe that the above-described properties will provide sufficient space to
meet our currently planned future needs and that comparable space is readily
available to meet any unforeseen circumstances.

ITEM 3. LEGAL PROCEEDINGS.

On February 6, 1998, Oregon Freeze Dry, Inc., a vendor, filed a complaint
against the Company alleging that the Company wrongfully terminated its contract
with OFD. On December 20, 2002 a settlement agreement between the parties was
signed and the lawsuit was dismissed. The parties agreed that the Company will
pay $1,885,917 to Oregon Freeze Dry, Inc. Payments are to be $50,000 per month.
No interest will accrue to this note as long as the Company is timely in its
note payments. $1,478,275 is included in notes payable at December 31, 2002. As
of December 31, 2002, the Company is current on its payment obligations to
Oregon Freeze Dry, Inc. Additionally, the Company is obligated to use Oregon
Freeze Dry, Inc for all of its freeze-drying needs. If the Company chooses to
use a bulk drying method other than freeze drying, then the Company will pay a
fee of 25 cents per pound to Oregon Freeze Dry, Inc for a period of up to 10
years, but not to exceed $2,500,000 for algae dried using such alternative
method.

On January 16, 2001, we filed an action against Glenn Foods in the Circuit Court
of Klamath County alleging, among other things, that Glenn Foods breached an
agreement with us for the manufacture of our SBG Square Meal Bars and BG Bites
by failing to produce our products according to our specifications, refusing to
turn over our formula, and failing to refund our money. We are seeking monetary
damages of approximately $226,345 for all causes specified in our complaint. The
matter is presently in the discovery phase and no trial date has been scheduled.

      In October of 2001, Teachers for Truth in Advertising filed an action in
the Superior Court of Tulare County, California alleging that Cell Tech
Products, Inc. engaged in unfair business practices and misleading advertising.

      In January 2003, the Superior Court of Tulare County issued a Tentative
Decision stating that Teachers for Truth in Advertising was entitled to an
injunction prohibiting Cell Tech from making deceptive representations in its
advertising or literature disseminated in California and ordering Cell Tech to
refund the purchase price paid by California customers for Cell Tech's algae
products from the date four years prior to the filing of the action through the
trial date in November of 2002.

In response to the Tentative Decision, Cell Tech's counsel filed a Request for
Statement of Decision on January 23, 2003. On February 20, 2003, the Superior
Court issued its Final Decision, which essentially affirms the Tentative
Decision. Plaintiff has submitted a proposed judgment to the court consistent
with the Tentative and Final Decisions. The parties have agreed to mediate this
matter on May 9, 2003 before a retired Orange County Superior Court judge.
Should the mediation fail, and upon notice of entry of judgment, the Company
intends to file post-judgment motions to vacate the judgment and for new trial.
Should those motions be denied, the Company intends to file an appeal. The
refund to California customers, if required to be made in accordance with the
Final Decision, will be in an amount that would have a material adverse impact
on Cell Tech's business and financial position.


On January 28, 2002, we terminated our lease between NAC and Klamath Cold
Storage, Inc. , a corporation owned by our principal shareholders, Daryl Kollman
and Marta C. Carpenter. On February 19, 2002, Daryl Kollman, on behalf of
himself and as an officer of Klamath Cold Storage, Inc., filed two separate
Notice of Claim of Lien upon Chattels (the "Possessory Liens") against us and
our wholly owned subsidiary, NAC and/or NEC, in the County of Klamath, State of
Oregon, claiming a lien upon us and our wholly owned subsidiaries by alleging
among other things, that we owe him and Marta C. Carpenter approximately
$508,246 in past due rent and that we owe Klamath Cold Storage, Inc
approximately $576,232 in past due rent for our use of certain real property
owned by him and Marta C. Carpenter, our President and Chief Executive Officer,
and Klamath Cold Storage, Inc. Through the possessory liens, Daryl Kollman is
claiming that we are not entitled to remove any of our property from the
premises and that the properties will be subject to foreclosure proceedings. We
do not believe that Daryl Kollman will prevail in this matter and we have
retained legal counsel to represent us.

On March 27, 2002, the Nature Conservancy filed an action against Cell Tech in
the Circuit Court for the State of Oregon for Klamath County, alleging, among
other things, that Cell Tech's wholly owned subsidiary, The New Earth Company,
was in default on a promissory note and a trust deed. The Nature Conservancy was
seeking $375,000, the principal amount due under the promissory note, plus
interest and certain leasehold rights. We have previously recorded the net
present value of the promissory note, which has a balance of $313,790 and has
been included in the current portion of long-term debt in the December 31, 2002
consolidated balance sheet. An agreement was signed and the court action
dismissed in January 2003. The net effect of this will be to increase net income
during the first quarter of 2003 by $161,956.

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

None.

<PAGE>

                                     PART II

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

PRICE RANGE OF COMMON STOCK

On August 14, 1996, HumaScan completed its initial public offering and our
common stock began trading on the NASDAQ Small Cap Market under the symbol
"HMSC." Prior to the IPO there was no established public trading market for our
common stock. On March 4, 1999, our common stock was delisted from the NASDAQ
Small Cap Market and commenced trading on the OTC Bulletin Board. On August 10,
1999, as part of our reorganization, we executed a 1 for 10.8520933 reverse
stock split and changed our name to Cell Tech International Incorporated,
trading symbol "EFLI." On July 24, 2000, trading in our common stock on the OTC
Bulletin Board was suspended due to the fact that our 1934 Act filings were past
due and our common stock was subsequently quoted on the National Quotation
Bureau's Pink Sheets. The following table lists the bid prices at the end of
each period obtained from the National Quotation Bureau's Pink Sheet service and
is adjusted for subsequent stock dividends and stock splits. Prices do not
include retail mark-ups, mark-downs or commissions and may not represent actual
transactions. Trading in our common stock is limited and sporadic and such
quotations should not of themselves be deemed to constitute an established
public trading market.

                                           High Bid Price for  Low Bid Price for
                                                Period ($)        Period ($)
                                           -------------------------------------

2002

First Quarter ........................             .40                .20
Second Quarter .......................             .45                .20
Third Quarter ........................             .52                .17
Fourth Quarter .......................             .50                .20
                                           -------------------------------------

2001

First Quarter ........................            .30                .13
Second Quarter .......................            .65                .14
Third Quarter ........................            .68                .20
Fourth Quarter .......................            .52                .14

At December 31, 2002, 10,640,895 shares of our common stock were issued and
outstanding and were held by approximately 141 stockholders of record.

<PAGE>

DIVIDENDS

In 1999, before our reorganization, we distributed certain real estate valued at
$1,050,000 to Marta C. Carpenter and Daryl J. Kollman, and paid previously
declared dividends of $7.6 million to Marta C. Carpenter and Daryl J. Kollman.
We do not plan to pay dividends on our common stock in the foreseeable future.
The payment of dividends in the future will depend on the evaluation by our
Board of Directors of such factors as it deems relevant at the time and
restrictions imposed by the terms of our debt obligations, if any. Currently,
the Board of Directors believes that all of our earnings, if any, should be
retained for the development of our business.

RECENT SALES OF UNREGISTERED SECURITIES

On October 19, 1999, we sold 1,157,895 shares of our common stock and warrants
to purchase 1,157,895 shares of our common stock in a private placement to
Zubair Kazi for $1,515,625, net of fundraising costs of $134,375. In connection
with this transaction, we also issued warrants to purchase 150,000 and 100,000
shares of our common stock to Pacific Basin Capital and Richard Wade,
respectively. Each warrant has a 5-year term and an exercise price of $1.425 per
share. We also issued 50,000 shares of our common stock, at fair market value
that amounted to $134,375, to Pacific Basin Capital for its services. The
transaction above involved an investment by one person who is an accredited
investor, as that term is used in Regulation D, and did not involve a general
solicitation. The above transaction was effected pursuant to Section 4(2) of the
Securities Act of 1933.

We are obligated to issue to Kazi additional Purchased Securities, as penalties
and interest, for any delay in filing our next registration statement beyond 120
days after October 19, 1999. As of March 31, 2003, we have not filed a
registration statement and consequently, Mr. Kazi is entitled to an additional
2,923,273 shares of common stock/warrants as of December 31, 2002. As of March
31, 2003, we have not yet issued to Mr. Kazi any of these additional securities
but have accrued the liability of $568,000 for their issuance in our financial
statements.

We are obligated, upon the effective date of our next registration statement
(First reset date), to issue additional securities to Mr. Kazi in accordance
with the following reset rights:

- If the ratio of $1.425 per share divided by the average closing bid price for
the last twenty trading days prior to the first reset date (the first reset
ratio) is greater than the ratio of $1.425 divided by the average closing bid
price for the last twenty days prior to the execution of the Term Sheet, or
September 13, 1999 (the Initial Ratio), on the first reset date, then we shall
issue to Mr. Kazi additional securities so that the initial ratio and the first
reset ratio are equal and pursuant to the following formula:

- Amount of additional purchased securities = ((First Reset Ratio)/(Initial
Ratio)-1) times 1,157,895.

- In addition, if Kazi holds any purchased warrants for the period covered by
the last three reset dates, the exercise price of these purchased warrants shall
be reduced by the following formula:

- Exercise price of purchased warrants = ((Initial Ratio)/(First Reset Ratio))
times $1.425.

<PAGE>

- Kazi is entitled to five additional reset dates that will occur as follows:

- The next three reset dates will occur each three months after the first reset
date.

- The next two subsequent reset dates will occur each six-month period
thereafter.

Since we have not yet filed our first registration statement, the first reset
date has not yet occurred.


<PAGE>


EQUITY COMPENSATION PLANS

Below represents information concerning our equity compensation plans as of
December 31, 2002:

<TABLE>
<CAPTION>
                                        Number of Securities to be     Weighted-Average Exercise
                                         Issued Upon Exercise of            Options, Price         Number of Securities Remaining
                                      Outstanding Options, Warrants         of Outstanding          Available for Future Issuance
           Plan Category                        and Rights                Warrants and Rights      Under Equity Compensation Plans
------------------------------------ --------------------------------- ------------------------- ---------------------------------
<S>                                             <C>                        <C>                            <C>
Equity Compensation Plans Approved               25,802                    $3.05 - $142.49                  -0-
by Security Holders
------------------------------------ --------------------------------- ------------------------- ---------------------------------
Equity Compensation Plans Not                    90,000                     $0.16 - $0.20                 610,000
Approved by Security Holders
------------------------------------ --------------------------------- ------------------------- ---------------------------------
Total                                           115,802                                                   610,000
------------------------------------ --------------------------------- ------------------------- ---------------------------------
</TABLE>

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.

The selected financial data as of and for the five years ended December 31, 2002
have been derived from our audited consolidated financial statements and related
notes. The selected financial and operating data should be read in conjunction
with Management's Discussion and Analysis of Results of Operations and Financial
Condition and the consolidated financial statements and related notes.

<TABLE>
<CAPTION>
Years ended December 31,

                                                  2002            2001            2000            1999               1998
                                                  ----            ----            ----            ----               ----
($ in thousands, except per share data)

RESULTS OF OPERATIONS

<S>                                       <C>             <C>             <C>             <C>                <C>
Revenue                                   $     26,194    $     30,012    $     38,977    $     54,488       $     74,071
Gross Profit                                    16,731          20,488          27,488          39,739             54,581
Gross Profit after Commissions                   5,040           6,146           9,855          15,306             21,026
Operating Income (Loss) from Operations         (3,518)         (5,000)         (2,436)         (4,439)             1,670
Net Income (Loss) before Taxes                  (3,497)         (5,015)         (2,784)         (4,141)             2,296
Net Income (Loss)                               (3,497)         (5,015)         (2,784)         (4,141)             2,296
Net Income (Loss) per common share
Basic                                            (0.27)          (0.47)          (0.26)          (0.45)               .26
Diluted                                          (0.27)          (0.47)          (0.26)          (0.45)               .26

Weighted Average Shares Outstanding
Basic                                       12,864,643      10,640,895      10,640,895       9,280,431          8,683,000
Diluted                                     12,864,643      10,640,895      10,640,895       9,280,431          8,683,000
Cash dividend per common share                    0.00            0.00            0.00            0.82(1)            0.00

SELECTED BALANCE SHEET DATA

Cash & Cash
Equivalents                                         --              --              --              --              1,502
Current Assets                                   3,259           2,788           3,881           5,505             19,961
Total Assets                                    15,814          19,975          27,250          32,815             41,099
Current Liabilities                              7,542           9,225          11,223          13,938              8,577
Total Liabilities                                8,561           9,225          11,485          14,266              9,376
Shareholders' Equity                             7,252          10,750          15,765          18,549             31,723
</TABLE>

----------

(1)   In 1999, before our reorganization, we paid a previously declared dividend
      of $7.6 million to Marta C. Carpenter and Daryl J. Kollman. See
      "Dividends."


<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.

From time to time, we or our representatives have made or may make
forward-looking statements, orally or in writing, including in this Report. Such
forward-looking statements may be included in, without limitation, press
releases, oral statements made with the approval of one of our authorized
executive officers and filings with the Securities and Exchange Commission. The
words or phrases "anticipates," "believes," "expects," "intends," "will
continue," "estimates," "plans," "projects," or similar expressions are intended
to identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.

Our forward-looking statements are subject to certain risks, trends, and
uncertainties that could cause actual results to vary materially from
anticipated results, including, without limitation, market acceptance of our
marketing and merchandising concepts, changes in political and general market
conditions, demand for and market acceptance of new and existing products,
availability and development of new products, increased competition, our failure
to attain satisfactory outside financing and adverse weather conditions at Upper
Klamath Lake. These factors are discussed in further detail below under "Risks
and Uncertainties." Should any one or more of these risks or uncertainties
materialize, or should any underlying assumptions prove incorrect, actual
results may vary materially from those discussed herein as expected, believed,
estimated, intended or anticipated. We undertake no obligation to revise or
publicly release the results of any revisions to these forward-looking
statements.

CRITICAL ACCOUNTING POLICIES

We have identified the policies below as critical to our business operations and
the understanding of our results of operations. The impact and any associated
risks related to these policies on our business operations is discussed
throughout management's Discussion and Analysis of Financial Condition and
Results of Operations where such policies affect our reported and expected

<PAGE>

financial results. For a detailed discussion on the application of these and
other accounting policies, see Note 1 in the Notes to the Consolidated Financial
Statements in Item 14 of this Annual Report on Form 10-K, beginning on page 62.
Note that our preparation of this Annual Report on Form 10-K requires us to make
estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our
financial statements, and the reported amounts of revenue and expenses during
the reporting period. There can be no assurance that actual results will not
differ from those estimates.

 - IMPAIRMENTS OF LONG-LIVED ASSETS

We record impairment losses on long-lived assets used in operations when events
and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amount of those items. Our cash flow estimates are based on
historical results adjusted to reflect our best estimate of future market and
operating conditions. The net carrying value of assets not recoverable is
reduced to fair value. Our estimates of fair value represent our best estimate
based on industry trends and reference to market rates and transactions.

 - INVENTORY

We value our inventory at the lower of the actual cost to purchase and/or
manufacture the inventory or the current estimated market value of the
inventory. We regularly review inventory quantities on hand and record a
provision for excess and obsolete inventory based primarily on our estimated
forecast of product demand and production requirements for the future.

Additionally, our estimates of future product demand may prove to be inaccurate,
in which case we may have understated or overstated the provision required for
excess and obsolete inventory. In the future, if our inventory is determined to
be overvalued, we would be required to recognize such costs in our cost of goods
sold at the time of such determination. Likewise, if our inventory is determined
to be undervalued, we may have over-reported our costs of goods sold in previous
periods and would be required to recognize such additional operating income at
the time of sale.

Although we make every effort to ensure the accuracy of our forecasts of future
product demand, any significant unanticipated changes in demand or technological
developments could have a significant impact on the value of our inventory and
our reported operating results. We have experienced, and may continue to
experience, significant fluctuations in sales and operating - results from
quarter to quarter.

 - SALES INCENTIVES

In November 2001, the Emerging Issues Task Force ("EITF") issued EITF Issue No.
01-09, "Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendor's Products," which addresses the accounting for
consideration given by a vendor to a customer or a reseller of the vendor's
products. In April 2001, the EITF reached a consensus on EITF Issue No. 00-25,
"Vendor Income Statement Characterization of Consideration Paid to a Reseller of
the Vendor's Products," which provides guidance on the income statement
classification of consideration from a vendor to a reseller in connection with
the reseller's purchase of the vendor's products or to promote sales of the
vendor's products. The Company pays commissions to its distributors as
compensation for sales and marketing activities and based on their personal


<PAGE>

sales volumes and the sales of distributors they have recruited into the
Company's network. Accordingly, the Company classifies these expenses as a cost
and not a reduction of revenue.

 - CONTINGENCIES

We determine whether to disclose and accrue for loss contingencies based on an
assessment of whether the risk of loss is remote, reasonably possible or
probable and where reasonable estimates can be made of the amount of potential
loss, of the materiality of the loss contingency, in accordance with Statement
of Financial Accounting Standards No. 5 ("SFAS 5"), "Accounting for
Contingencies." Our assessment is developed in consultation with outside
advisors and is based on an analysis of possible outcomes under various
strategies. Loss contingency assumptions involve judgments that are inherently
subjective and frequently involve matters that are in litigation, which by its
nature is unpredictable. We believe that our loss contingency assumptions are
sound, but because of the subjectivity involved and the unpredictable nature of
the subject matter at issue, our assumptions may prove to be incorrect, which
could materially impact our consolidated financial statements in future periods.

GENERAL

We are a network marketing company and we develop and distribute a wide range of
products made with Aphanizomenon flos-aquae (trade name Super Blue Green(R)
Algae) and other nutrients and ingredients through a network of independent
distributors ("Distributors"). We currently offer twenty different products
intended to appeal to health-conscious consumers. Our products are divided into
five product lines including Daily Health Maintenance, Digestive Health,
Defensive Health, Powdered Drinks and Snacks, and Animal and Plant Food.

RESULTS OF OPERATIONS

Our results of operations for the periods described below are not necessarily
indicative of results of operations for future periods, which depend upon
numerous factors including our ability to attract and retain new Distributors,
enter new markets and to introduce additional and new products into our markets.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

Net sales for the year ended December 31, 2002 were $26,193,747, a decrease of
12.7% from net sales of $30,012,076 for the year ended December 31, 2001. The
decrease in sales is directly related to a decrease in orders for the same
period partially offset by an increase in the average order size to $123 from
$116 over the same period. The number of distributors in 2002 decreased to an
average of 43,761, which was 17% lower than the average of 52,761 distributors
in 2001. Sales of our food supplement products are made through a multi-level
marketing network of distributors, so sales are positively linked with the
number of distributors.

Gross profit represents net sales less the cost of goods sold, which includes
the cost of harvesting blue-green algae from Klamath Lake, the cost of other
materials, direct labor expenses, an allocation of overhead costs, amortization,
and depreciation. Gross profit decreased to 64% from 68% of net sales between
the years ended December 31, 2002 and 2001, respectively. The decrease in the
gross profit margin is due to the recording of an additional reserve of $3.1
million

<PAGE>

for potentially unsaleable inventories. We determined that the sales of our
plant food and agricultural products was less than previously anticipated and
recorded this reserve against the carrying value of our inventory designated for
plant food and agricultural uses. The decrease in the gross profit margin as a
result of recording the additional reserve for potentially unsaleable inventory
was offset by a decrease in depreciation expense previously recorded on the
harvest site fixed assets. This depreciation expense was suspended when the
decision was taken by management to cease harvesting of algae on the A-Canal and
classifying certain of the fixed assets as "held for sale". The related
depreciation expense that was not recorded in 2002 was $1,144,370. In addition,
as a result of the Company harvesting algae in 2002, certain harvest costs have
been capitalized in ending inventory whereas in prior years when no harvesting
of algae took place, such costs were expensed. Costs capitalized in ending
inventory in 2002 were approximately $585,450.

Gross profit after commissions represents gross profit less commission expense.
Commission expense for 2002 and 2001 was 45% and 48% of net sales, respectively.
We are a multi-level marketing organization. Distributors make up our sales
force. Distributors buy algae products for their own consumption plus they
actively recruit other distributors into our network. Distributors are paid
commissions based upon their personal sales volumes and the sales of
distributors beneath them in their network. During the year ended December 31,
2001, we implemented a new commission structure in an attempt to attract and
retain new Distributors.

Operating expenses include shipping and handling expenses, selling expenses,
research and development expenses and general and administrative expenses. In
total, operating expenses decreased $2,539,392 or 22.8% to $8,606,309 for the
twelve months ended December 31, 2002 from $11,145,701 for the twelve months
ended December 31, 2001. The components of operating expenses are discussed
below.

- Shipping and handling expenses includes purchasing, receiving, and materials
management. Shipping and handling expenses decreased $160,352 or 9%, to
$1,703,807 in 2002 from $1,864,159 in 2001. The decrease was due to a decrease
in freight expenses and supplies in 2002 due to the overall decrease in sales
volumes, partially offset by an increase in postal rates. Shipping and handling
expenses as a percent of net sales increased to 7% for the year ended December
31, 2002 from 6% for the year ended December 31, 2001.

- Selling expenses includes order operator and distributor services expenses,
marketing and promotion expenses, and the expenses of the Office of the
President and CEO. Selling expenses decreased $269,286 or 7% between 2002 and
2001 to $3,790,696 from $4,059,982. This decrease was primarily due to a
decrease in leased equipment costs, consulting expenses, merchant expense,
utilities and depreciation costs of $324,518 partially offset by an increase in
insurance expense of $79,852. Selling expenses were 14% of sales for the years
ended December 31, 2002 and December 31, 2001, respectively.

- Research and development expenses increased 1% to $193,310 in 2002 from
$190,884 in 2001, which constituted 0.7% and 0.6% of net sales, respectively. -
General and administrative expenses decreased by $443,682 or 18% between 2002
and 2001 to $1,997,054 from $2,440,736.

- General and administrative expenses averaged 7.6% and 8.1% of sales for the
years ended December 31, 2002 and December 31, 2001, respectively. The decrease
between 2002 and 2001 is attributable to a decrease of $479,751 in costs
associated with

<PAGE>

licenses, insurance and depreciation expense partially offset by an increase in
legal fees of $102,475.

- Asset write-downs decreased by $1,716,412 or 66% from $2,589,940 for the year
ended December 31, 2001 to $873,528 for the year ended December 31, 2002. An
additional reserve was recorded during the year ended December 31, 2002 to
adequately reserve for the deteriorating value of fixed assets identified as
being held for sale, and was ascertained by having an independent appraisal done
of that equipment.

Other income decreased to $285,661 for the year ended December 31, 2002 from
$606,962 for the year ended December 31, 2001 principally due to a decrease in
sundry income collected from Distributors and by the additional recording of
fair value cost of penalty shares and warrants to be issued to an investor in
the amount of $243,120. Interest expense decreased to $265,047 in 2002 from
$622,235 in 2001. This decrease was due to the assignment of the Company's
previous financing facility to La Jolla Loans during the third quarter ended
September 30, 2002, resulting in the elimination of previously required minimum
interest payments.

Net loss for 2002 decreased 30% to $3,497,387 from $5,015,350 reported in the
prior year or a loss of $0.27 per share for 2002 compared to a loss of $0.43 per
share for 2001. The decrease was primarily due to: reduced commission expense as
a result of the changes to the commission structure during 2002, reduced
operating expenses as a result of the cost-cutting efforts of management in
2002, and the reduced asset write-down expense of approximately $1.7 million
during 2002. The decrease in these expenses was offset by the increase in cost
of sales as previously described.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Net sales for the year ended December 31, 2001 were $30,012,076, a decrease of
23.0% from net sales of $38,976,663 for the year ended December 31, 2000. The
decrease in sales is directly related to a decrease in orders for the same
period with a decrease in the average order size to $116 from $124 over the same
period. The average number of distributors in 2001 decreased to an average of
52,948 in 2001, which was 13% lower than the average of 60,899 distributors in
2000. Sales of our food supplement products are made through a multi-level
marketing network of distributors, so sales are positively linked with the
number of distributors.

Gross profit represents net sales less the cost of goods sold, which includes
the cost of harvesting blue-green algae from Klamath Lake, the cost of other
materials, direct labor expenses, an allocation of overhead costs, amortization,
and depreciation. Gross profit decreased to 68% from 71% of net sales between
the years ended December 31, 2001 and 2000, respectively. The decrease in the
gross profit margin is due to spreading out the fixed cost component of cost of
goods sold over a decreased revenue base.

Gross profit after commissions represents gross profit less commission expense.
Commission expense for 2001 and 2000 was 48% and 45% of net sales, respectively.
We are a multi-level marketing organization. Distributors make up our sales
force. Distributors buy algae products for their own consumption plus they
actively recruit other distributors into our network. Distributors are paid
commissions based upon their personal sales volumes and the sales of
distributors


<PAGE>

beneath them in their network. During the year ended December 31, 2001, we
implemented a new commission structure in an attempt to attract and retain new
Distributors.

Operating expenses include shipping and handling expenses, selling expenses,
research and development expenses and general and administrative expenses. In
total, operating expenses decreased $1,146,316 or 9.3% to $11,145,701 for the
twelve months ended December 31, 2001 from $12,292,017 for the twelve months
ended December 31, 2000. The components of operating expenses are discussed
below.

- Shipping and handling expenses includes purchasing, receiving, and materials
management. Shipping and handling expenses decreased $233,210 or 11%, to
$1,864,159 in 2001 from $2,097,369 in 2000. The decrease was due to a decrease
in freight expenses in 2001 due to the overall decrease in sales. Shipping and
handling expenses as a percent of net sales increased to 6% for the year ended
December 31, 2001 from 5% for the year ended December 31, 2000.

- Selling expenses includes order operator and distributor services expenses,
marketing and promotion expenses, and the expenses of the Office of the
President and CEO.

- Selling expenses decreased $1,278,212 or 24% between 2001 and 2000 to
$4,059,982 from $5,338,194. This decrease was primarily due to a decrease in
salaries and compensation, consulting expenses and utility costs of $1,102,406.
Selling expenses were 14% of sales for the years ended December 31, 2001 and
December 31, 2000, respectively.

- Research and development expenses decreased 58% to $190,884 in 2001 from
$456,098 in 2000, which constituted 0.6% and 1% of net sales, respectively.

- General and administrative expenses decreased by $1,823,231 or 43% between
2001 and 2000 to $2,440,736 from $4,263,967. For the year ended December 31,
2001, general and administrative expenses averaged 8% of sales while they were
11% of sales for the year ended December 31, 2000. The decrease between 2001 and
2000 is attributable to additional costs incurred in 2000 relating to the early
repayment of the outstanding balance of the loan from the former owner of Cell
Tech, a decrease in legal and consulting fees incurred during 2001, and a
decrease in costs associated with the consolidation of office space and leased
facilities that occurred in 2000.

- Asset write-downs increased by $2,453,559 or 1,799% from $136,381 to
$2,589,940. The increase is due to management's decision not to utilize certain
equipment located at the canal harvest site in the foreseeable future and
represents the costs of the unnecessary assets and license rights that relate to
the Harvest Site.

Other income increased to $606,962 for the year ended December 31, 2001 from
$421,045 for the year ended December 31, 2000 principally due to an increase in
sundry income collected from Distributors offset by recording the fair value
cost of penalty shares and warrants to be issued to an investor in the amount of
$117,000. Interest expense decreased slightly to $622,235 in 2001 from $768,492
in 2000. This decrease was due to various fees paid to the current lender,
partially offset by a decrease in interest expense resulting from a decrease in
the outstanding debt in 2001 versus 2000.

Net loss for 2001 increased 80% to $5 million from $2.8 million reported in the
prior year or $0.47 per share for 2001 compared to $0.26 per share for 2000. The
increase was primarily due

<PAGE>

to: (1) decreases in retail sales and (2) the write-down of approximately $2.6
million in assets, which contributed $0.24 per share of the total $0.47 per
share loss.

LIQUIDITY AND CAPITAL RESOURCES

We have historically met our working capital and capital expenditure
requirements, including funding for expansion of operations, through net cash
provided by operating activities.

CASH FLOWS

Net cash flows provided by operating activities for the year ended December 31,
2002 amounted to $1,277,926 compared to cash flows provided by operations of
$1,372,836 for the year ended December 31, 2001. The decrease in cash flows
provided by operations is primarily due to sales revenue decreasing at a faster
rate than the associated expenses and working capital requirements to sustain
those revenues.

Cash flows used for investing activities for the year ended December 31, 2002
was $577,301, net of $7,250 of proceeds from sales of equipment. This is an
increase of $370,639 from net cash used for investing activities of $206,662 for
the year ended December 31, 2001, due to an increase in equipment purchases
related to the construction of the on-lake harvester during the fiscal year
ended December 31, 2002.

Net cash flows used for financing activities was $700,625 for the year ended
December 31, 2002 versus net cash provided by financing activities of $1,166,174
during 2001. This change is principally due to a decrease in the bank overdraft
balance at December 31, 2002 of $295,097, and an increase in proceeds of debt,
net of repayments, offset by an increase in payment of related party debt.

We do not plan to pay dividends on our common stock in the foreseeable future.
The payment of dividends in the future will depend on the evaluation by our
Board of Directors of such factors as it deems relevant at the time and
restrictions imposed by the terms of our debt obligations, if any. We are
currently restricted from paying dividends pursuant to a Loan and Security
Agreement with La Jolla Loans. Currently, the Board of Directors believes that
all of our earnings, if any, should be retained for the development of our
business.

Working capital deficit at December 31, 2002 amounted to $4,282,898, a decrease
of $2,154,288 from a working capital deficit of $6,437,186 as of December 31,
2001. At December 31, 2002, we had a bank overdraft of $468,008 versus a bank
overdraft of $763,105 as of December 31, 2001.

LINE OF CREDIT In June 1999, we entered into a $15 million Line of Credit
Agreement with a financial institution. The agreement has four parts: Receivable
Loans, Advances and Inventory Loans, Term Loans, and Equipment Acquisition
Loans. The Receivable Loans and the Advances and Inventory Loans incurred
interest at a rate equal to the prime rate plus 2.5% per annum, effectively 7.5%
at December 31, 2001, and expired June 30, 2002. The Term Loans and Equipment
Acquisition Loans incurred interest at a rate equal to the prime rate plus 2.75%
at December 31, 2002, and were repayable in 60 monthly installments by July 1,
2004.

<PAGE>

In September 2002, our financing facility with Coast Business Credit was
purchased by and assigned to La Jolla Loans, Inc. In connection with this
transaction, Coast Business Credit's security interest in real and personal
property and all associated security and loan documents were assigned to La
Jolla Loans. At the same time, we entered into a Forbearance and Extension
Agreement with La Jolla Loans. Under the terms of the forbearance agreement, La
Jolla Loans will not declare a default until June 30, 2003, when the entire
principal is due. The forbearance period may be extended to June 30, 2004 if we
pay a $75,000 renewal fee. Interest of $24,500 at an effective rate of 14% is
payable monthly along with additional monthly impound payments of approximately
$65,000 to be used to pay insurance, property taxes and lease payments on
collateralized property during the forbearance period. La Jolla Loans has also
agreed to defer, during the forbearance period, the difference between the
minimum interest payment of $45,000 under the agreement with Coast Business
Credit and the $24,500 minimum interest payments under the forbearance
agreement. If we fully perform under the terms and conditions of the forbearance
agreement and no default occurs during the forbearance period, La Jolla Loans
will release us from any obligation to pay minimum monthly interest payments in
excess of $24,500. The outstanding principal balance at December 31, 2002 is
$2,100,000.

We are in compliance with all loan covenants as of March 31, 2003. We have
classified all outstanding debt to the lender as a current liability.

GOING CONCERN

We have experienced recurring net losses and have negative working capital at
December 31, 2002 and March 31, 2003. In September 2002, our financing facility
with Coast Business Credit was purchased by and assigned to La Jolla Loans, Inc.
At the same time, we entered into a Forbearance and Extension Agreement with La
Jolla Loans. Under the terms of the forbearance agreement, La Jolla Loans will
not declare a default until June 30, 2003, when the entire principal is due. The
forbearance period may be extended to June 30, 2004 if we pay a $75,000 renewal
fee. There can be no assurance that additional financing will be available when
the extension period ends. We are also experiencing some difficulty in
generating sufficient cash flows to meet our obligations on a month-to-month
basis. These conditions give rise to substantial doubt about our ability to
continue as a going concern.

Our financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. Our financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should we be unable to continue as a going concern. Our continuation as a going
concern is dependent upon our ability to generate sufficient cash flows to meet
our obligations on a timely basis.

<PAGE>

We are continuing our efforts to raise both debt and equity financing. However,
there can be no assurance that we will be able to service additional financing
or that if such financing is available, whether the terms or conditions would be
acceptable to us.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, Financial Accounting Standards Board (FASB) issued Statement No.
143 (SFAS No. 143), "Accounting for Asset Retirement Obligations," effective for
fiscal years beginning after June 15, 2002. The Statement requires entities to
record the fair value of a liability for an asset retirement obligation in the
period in which it is incurred. When the liability is initially recorded, the
entity capitalizes a cost by increasing the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its present value each
period, and the capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement. The
adoption of SFAS No. 143 is not expected to have a material effect on the
Company's financial position or results of operations.

In April 2002, FASB issued Statement No. 145 (SFAS No. 145), "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" effective on or after May 15, 2002. This Statement rescinds SFAS
No. 4 and an amendment of that Statement, and SFAS No. 64. This Statement also
rescinds SFAS No. 44. This Statement amends SFAS No. 13, to eliminate an
inconsistency between the required accounting for certain lease modifications
that have economic effects that are similar to sale-leaseback transactions. This
Statement also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe their applicability
under changed conditions. The adoption of SFAS No. 145 did not have a material
effect on the Company's financial position or results of operations.

In June 2002, FASB issued Statement No. 146 (SFAS No. 146), "Accounting for
Costs Associated with Exit or Disposal Activities," effective for activities
that are initiated after December 31, 2002, with early application encouraged.
This Statement addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The adoption of SFAS No. 146 is not expected to have a material
effect on the Company's financial position or results of operations.

In October 2002, FASB issued Statement No. 147 (SFAS No. 147), "Acquisitions of
Certain Financial Institutions, An Amendment of FASB Statements No. 72 and 144
and FASB Interpretation No. 9," effective for acquisitions on or after October
1, 2002. SFAS No. 72, and FASB Interpretation No. 9, provided interpretive
guidance on the application of the purchase method to acquisitions of financial
institutions. Except for transactions between two or more mutual enterprises,
this Statement removes acquisitions of financial institutions from the scope of
both SFAS No. 72 and FASB Interpretation 9 and requires that those transactions
be accounted for in accordance with SFAS No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets." Thus, the requirement in
paragraph 5 of SFAS No. 72 to recognize (and subsequently amortize) any excess
of the fair value of liabilities assumed over the fair value of tangible and
identifiable intangible assets acquired as an unidentifiable intangible asset no
longer applies to acquisitions within the scope of SFAS No. 147. In addition,


<PAGE>

SFAS No. 147 amends SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," to include in its scope long-term customer-relationship
intangible assets of financial institutions such as depositor-and
borrower-relationship intangible assets and credit cardholder intangible assets.
Consequently, those intangible assets are subject to the same undiscounted cash
flow recoverability test and impairment loss recognition and measurement
provisions that Statement 144 requires for other long-lived assets that are held
and used. The adoption of SFAS No. 147 did not have a material effect on the
Company's financial position or results of operations.

In December 2002, FASB issued Statement No. 148 (SFAS No. 148), "Accounting for
Stock-Based Compensation -- Transition and Disclosure -- An Amendment of FASB
Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for
Stock-Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
Company is required to follow the prescribed format and provide the additional
disclosures required by SFAS No. 148 in its annual financial statements for the
year ended December 31, 2002 and must also provide the disclosures in its
quarterly reports containing condensed financial statements for interim periods
beginning with the quarterly period ended March 31, 2003. The adoptionof SFAS
No. 148 is not expected to have a material effect on the Company's financial
position or results of operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have not entered into any transactions using derivative financial instruments
or derivative commodity instruments. We believe our exposure to market risk
associated with other financial instruments is not material.

RISKS AND UNCERTAINTIES

VARIABILITY OF RESULTS

Our annual sales peaked at approximately $200 million in 1996. Subsequent to
1996, sales have decreased substantially each year. There can be no assurance
that we will return to generating profits on either a quarterly or annual basis.
We have experienced a continual downward trend in sales although the rate of
decline is less than in previous years. Many factors accounted for the past
decrease in sales, including low productivity of independent distributors, loss
of services of certain existing distributors, and competition. Our inability to
adjust our operating expenses to fully compensate for the decrease in sales
contributes to our small profit margins.

Consequently, we have experienced a significant decrease in working capital
since the end of 1998. We are facing difficulties generating sufficient cash
flow to timely meet our financial obligations.

<PAGE>

EFFECTS OF CLINICAL STUDIES, SCIENTIFIC REVIEW, AND PUBLICITY

We believe that the increasing interest generally in vitamins, nutritional
supplements and similar products is driven by national media attention to recent
scientific research that highlights potential health benefits of consuming
certain vitamins and nutritional supplements. While we have concluded from
extensive independent research that SBGA, the principal ingredient in our
products, has nutritional value, consumer demands for nutritional supplements
are generally dependent on publicized scientific findings. Consumer perception
of the values of vitamins and nutritional supplements would be altered should
future studies report that nutritional and alternative medicine is in any way
either harmful or not beneficial to health.

Moreover, any future publicity relating to illnesses or other adverse effects
resulting from consumers' use of certain nutritional products, which existing
and potential customers might associate with our products, could have an adverse
effect on our business.

CONSUMER DEMAND FOR NEW & INDIVIDUAL PRODUCTS

Our ability to introduce safe, new and innovative products contributed to the
growth of our business in the nutritional supplement market. We have expended
and will expend a significant amount of resources on the research and
development of such products. The success of these products is, however,
conditioned upon different factors, including consumers' acceptance of
innovative products and our compliance with governmental regulatory laws. We
cannot be certain that sales of new products that we introduce into the markets
will achieve success in the future, as there is no assurance that consumers will
continue to accept such products or that we can obtain regulatory approvals for
them.

SUPPLY OF RAW MATERIALS; CONDITIONS AFFECTING HARVEST

We harvest our own SBGA in Upper Klamath Lake, the only place in the world where
SBGA grows in the massive quantities sufficient for harvesting. Although we may
not depend on third-party suppliers for sources, our reserve of SBGA is
determined by the growth of Aphanizomenon flos-aquae in the lake. Aphanizomenon
flos-aquae has flourished in Upper Klamath Lake because of Upper Klamath Lake's
protected environment, abundance of minerals, natural nitrogen, clean water and
regular sunshine. Despite a water shortage in 2000 and 2001, which precluded a
harvest from the "A" canal, we began harvesting directly from Upper Klamath Lake
in July 2001 through the use of a uniquely designed harvester. In 2002, we
acquired additional harvest capacity to increase our ability to harvest directly
from Upper Klamath Lake. We cannot assure the absence of future adverse weather
conditions disturbing the growth of Aphanizomenon flos-aquae.

As a result of certain conditions Microcystis, a toxic algae, occasionally
blooms in Klamath Lake at the same time blue-green algae is harvested. The
Company regularly tests the algae it harvests for possible contamination. Algae
that does not meet the Company's standards is not used in products for human or
animal consumption. In 1997, the Oregon Department of Agriculture issued an
administrative rule that created a standard of 1 microgram per gram (1 ppm) of
Microcystis in products for human consumption that contain blue-green algae. The
Oregon Department of Agriculture has raised no questions about the Company's
products under this rule.

<PAGE>

In some years, the presence of Microcystis may reduce the quantity of algae that
the Company can harvest.

We constructed a modern SBGA processing system that is continually improved and
updated. Potential unexpected system failures may, however, interrupt production
and reduce sales revenue. System failures may result from events beyond our
control, including natural disasters such as fires and unexpected weather
changes, intentional acts of break-ins and sabotage, and similar misconduct.

COMPETITION--PRODUCTS, PRICING, AND MARKETING; INTELLECTUAL PROPERTY PROTECTION

The market for nutritional supplements and personal care products is highly
competitive at all stages of distribution. Most of our competitors in the
business of development, manufacture, and marketing of vitamins and other
nutritional supplements, including large pharmaceutical companies, have greater
product offerings, longer operating histories in the markets and superior
financial capabilities than us. We face intense competition with numerous
companies in traditional retail channels, such as drug store chains, independent
drug stores, supermarkets, and health and natural food stores. Although the
practice of ordering products from home is becoming increasingly popular,
consumers are more accustomed to purchasing products through these traditional
sales channels.

Although we now have trademark protection for a number of our product labels in
the United States and in some foreign countries, and are currently pursuing
registration of other trademarks, we do not have trademark registration for the
name "Cell Tech." Moreover, we do not have patent protection for our products.
Any unlawful or lawful use of our trade names or the ingredient Super Blue
Green(R) Algae to manufacture similar products by competitors could have a
material adverse effect on our business.

RETENTION AND PRODUCTIVITY OF DISTRIBUTORS

We rely almost exclusively on a network marketing system of independent
Distributors to sell our products. The success of our operations depends on our
ability to attract new Distributors and maintain business relationships with
existing Distributors. We compete with other network marketing companies for
Distributors and can experience high turnover among our Distributors. Because
some of these companies may have a longer history of operations and superior
resources, their ability to appeal to a large base of Distributors is greater.
There can be no assurance that existing Distributors will not terminate their
services to us or that the number of Distributors for our products will remain
steady or increase.

Moreover, our revenue is dependent on the ability of the Distributors to attract
and retain customers. A decrease in the productivity of existing Distributors
would adversely affect our financial conditions. We cannot assure you that the
Distributors will maintain or increase their productivity. We also cannot
accurately predict the future productivity of the Distributors since their
operations depend on their ability to sponsor, train, and motivate new
Distributors.

<PAGE>

REGULATION OF DISTRIBUTORS AND NETWORK MARKETING SYSTEM

Since the Distributors in the network marketing system are not our employees,
they are not subject to the same degree of supervision and management as our
employees. While the services of the Distributors to our business are governed
by certain contractual rules of conduct, it is difficult to monitor or control
the conduct of the sales associates of Distributors marketing our products.
Violations of our policies and rules by sales associates in dealing with
customers could reflect negatively on our products and operations, and harm our
business reputation.

Furthermore, extensive federal, state, and local laws that regulate direct
selling activities govern our network marketing system. We believe that our
marketing practices have been and are consistent with such laws, but we cannot
provide assurance that any future changes to laws and regulations of any
particular jurisdiction will not affect our operations. We could also be held
civilly or criminally accountable on the basis of vicarious liability as a
result of the actions of independent Distributors. We are not aware of any such
actions of independent distributors.

DEPARTURE OF DISTRIBUTORS

Certain Distributors have severed their ties with us and are now competing
against us. This will adversely affect us in that these Distributors will no
longer be generating revenues for us and furthermore, the departing Distributors
can be expected to divert business to our competitors.

ALTERNATIVE CHANNELS OF DISTRIBUTION

On May 18, 2001, we commenced, on a limited test basis, sales through
infomercials and discontinued them on July 1, 2001 due to our limited financial
resources. This alternative distribution strategy is designed to provide a
complementary marketing method for our Distributors. While we believe the
infomercials will complement the sales efforts of our Distributors, there can be
no assurance that it will have its intended effect with our Distributors and
could create conflicts with our Distributors that could result in the loss of
many of our Distributors, which in turn would mean a decline in our sales volume
and would be detrimental to our business and result in losses from our
operations. However, our tests results, and the responses that we have received
from Distributors, indicate that there are no conflicts with our present
distribution methods. Moreover, such a program requires an investment in
producing the infomercial videos. We have discontinued airing such infomercials
until we have sufficient funds to continue broadcasting.

MANAGEMENT OF OPERATIONS

Limitations on our ability to attract additional key management personnel as we
grow could be materially adverse to our business and financial conditions. Our
location in Klamath Falls, Oregon is a limiting factor on our ability to attract
key management personnel when we need it, particularly in the areas of marketing
and information systems.

For similar reasons, we may face difficulty in recruiting a permanent Chief
Financial Officer. Our limited ability to attract such personnel could be
materially adverse to our business and financial conditions.

<PAGE>

In addition, since we will need additional managers who have key strategic
skills, we could be confronted with new personnel challenges as our business
expands. The future success of our business and financial conditions will depend
significantly on our ability to add key management personnel in a timely and
cost effective manner.

LIEN ON KOLLMAN'S STOCK

Our common stock owned by majority shareholders Daryl J. Kollman and Marta C.
Carpenter, is the subject of a tax lien filed by the Internal Revenue Service
for income taxes due from them arising from taxable income attributed from NEC
and NAC prior to our reorganization. The lien is subordinated in favor of the
lender for the Term Loan.

DISPUTE BETWEEN PRINCIPAL SHAREHOLDERS

Daryl Kollman and Marta C. Carpenter, shareholders who together own
approximately 82% of our outstanding shares of common stock, have filed divorce
proceedings. Daryl Kollman and Marta C. Carpenter jointly, and their affiliate
Klamath Cold Storage Co., are lessors of substantially all of our facilities,
including office space, processing and freezer storage space. Although one lease
is in effect until 2005, we lease the rest of these facilities on a
month-to-month or year-to-year basis. The disposition of these properties
pursuant to the divorce could have an adverse or disruptive effect on our
operations. Daryl Kollman is no longer actively involved in management and has
been unwilling to execute personal guarantees on our behalf, as he has done in
the past. On May 14, 2001, Marta C. Carpenter petitioned the Circuit Court for
the State of Oregon with a motion seeking, among other court orders, to enjoin
Daryl Kollman from interfering with any future loan applications of Marta C.
Carpenter or us and a self executing judgment provision whereby the court would
sign a loan application on behalf of Daryl Kollman. The court held that Daryl
Kollman is to cease and desist from any such endeavors of interfering with our
loan applications during the pendency of the dissolution proceedings and is
prohibited from writing letters or communicating orally with any lending
institutions unless requested to do so by the institution. The court also held
that Daryl Kollman, if presented with loan documents to sign and if he objects
to those documents in form or content, he must first raise it with the court.

On January 29, 2002, the Court issued its written Order after the matter was
heard before the court at trial on December 10, 11, and 12, 2001. The Court
ruled that Marta Carpenter and Daryl Kollman were each entitled to an equal
division of their respective stock ownership in Cell Tech, thus resulting in no
change in our current ownership. The Court also ruled Daryl Kollman and Marta
Carpenter's joint ownership in certain real property assets leased by us from
them will be divided equally in each property and that they must sell the
properties and improvements to pay the indebtedness to the Internal Revenue
Service. Any remaining proceeds after the payment of Federal and State taxes
applicable to the sale will be shared equally.

We do not believe the Court Order issued on January 29, 2002, will have a
material impact on our business since we believe that we can maintain our
favorable leases in the event of the sale of the properties or provide for an
adequate transition to other properties for the orderly continuation of our
business.

<PAGE>

IMPACT OF GOVERNMENT REGULATION

The formulation, manufacture, labeling, and advertising of our products are
subject to extensive federal, state, and local governmental regulation. We have,
from time to time, received formal and informal inquiries from governmental
regulators about our business and compliance with existing laws. We have on
occasions altered our product formulas and revised our labeling and promotion
practices to comply with such laws. To enforce statutes and regulations,
governmental agencies may initiate investigations, issue warning letters and
cease and desist orders, impose corrective measures, seek injunctive relief or
product seizure, impose civil penalties, or pursue criminal prosecution.
Therefore, any future repeal, amendment, or narrow interpretations of current
statutes or regulations that render our current practices noncompliant could
substantially hinder our ability to maintain or increase our stream of
distribution, or to introduce new products into the markets. We cannot predict
the nature of any of such future laws, regulations, or interpretations, or what
kind of impact they might have on our business. Future laws and regulations
requiring the reformulation, discontinuance, or re-labeling of any of our
products to comply with new standards could interrupt our product distribution
and potentially harm our business. Even if future governmental actions or
investigations in our business do not halt the manufacture of any of our
products, they could create negative publicity, thereby harming our business.

UNCERTAINTIES IN THE INTERNATIONAL MARKETS

Our operations growth strategy involves expanding product sales into the
international markets in Europe and Asia. We believe that there is a potential
for growth internationally, but our ability to enter these markets effectively
may be limited by various factors, which include varying domestic regulations,
responsiveness of government authorities, cultural differences and political
uncertainties. We cannot provide assurance that consumers in any of our
potential new international markets will be receptive to our nutritional
supplement and personal care products. We also cannot assure you that we will be
able to reformulate our products or adjust our labeling and promotion practices
to comply with foreign laws and regulations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We have not entered into any transactions using derivative financial instruments
or derivative commodity instruments and believe that our exposure to market risk
associated with other financial instruments is not material. Our primary market
risks include fluctuations in interest rates.

Our management believes that fluctuation in interest rates in the near term
would not materially affect our consolidated operating results, financial
position or cash flows as we have limited risks related to interest rate
fluctuations.

Marta C. Carpenter and Daryl J. Kollman have sole voting and investment power
with respect to their shares. The Internal Revenue Service has a security
interest in all of their shares pursuant to a Notice of Determination dated June
18, 1999, under the terms of which the shares are held in trust and will be
released upon the payment of Marta C. Carpenter and Daryl J. Kollman's federal
income tax liabilities for various specified years. Marta C. Carpenter and Daryl
J. Kollman will sell their shares as needed and allowed by federal and state
securities laws to make

<PAGE>

quarterly payments to the Internal Revenue Service. Marta C. Carpenter and Daryl
J. Kollman retain all voting rights incident to their shares while the shares
are held in trust.

The Internal Revenue Service may seize Marta C. Carpenter and Daryl J. Kollman's
shares from trust if Marta C. Carpenter and Daryl J. Kollman fail to timely cure
a default upon their commitments to the Internal Revenue Service under the
Notice of Determination. The Internal Revenue Service would thereafter proceed
to sell or judicially foreclose some or all of the shares for payment of Marta
C. Carpenter and Daryl J. Kollman's tax liabilities as allowed by applicable
law.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our Consolidated Financial Statements together with the Report thereon of BDO
Seidman, LLP, independent auditors, and the Supplementary Data required by this
Item 8, are included elsewhere in Item 14.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers are as follows:

Name                             Age                     Position
----                             ---                     --------
Marta C. Carpenter                57        Chief Executive Officer, President
                                            and Director

Justin Straus                     32        Chief Operating Officer and Director

Victor M. Bond                    51        Vice President, Marketing and
                                            Strategy

Donald P. Hateley (1)(2)          45        Chairman of the Board

Christopher J. Blaxland (1)(2)    61        Director

Donald M. Anderson (1)(2)         54        Director

----------

(1)   Member of the Compensation Committee.

(2)   Member of the Audit Committee.

Marta C. Carpenter has served as our Chief Executive Officer, President and as a
director since August 1999. She co-founded NEC in 1988 and NAC in 1990 and has
served as their President and as a director of both companies since that time.
Prior to joining us, Ms. Carpenter also researched, harvested and marketed algae
to consumers. Ms. Carpenter has been a member of the Board of Directors of the
Dan O'Brien Foundation since 1995 and has served as its Secretary since 1997.

Justin Straus has served as a director since August 1999 and has served as our
Chief Operating Officer from August 2000 to the present. From January 1998 to
August 2000, he served as our Vice President and Director of Sales and from
October 1999 to August 2000, he served as our Vice President of Customer
Fulfillment and fulfilled the function of Chief Operating Officer until his
appointment to that position. He joined NAC in 1984 as a harvest site employee
where he participated in the design, construction and preparation of the NAC
harvest site. After holding a variety of positions in NAC, he served as the Vice
President/Director of Sales from December 1994 to January 1998.

Victor M. Bond has served as our Vice President of Marketing and Strategy since
January 2001. From October 1999 to December 2000, he was a consultant to us that
performed the functions of

<PAGE>

the Office of Vice President, Marketing and Strategy. From 1991 to 1999, he was
President of ChangeNet, which developed and implemented change management
services and communications programs for corporations and his clients included
Xerox, Otis Elevator, and Dura Pharmaceuticals. Prior to ChangeNet, he worked
with and held executive positions with International Business Machines
Corporation including Director of Marketing and Director of Strategy.

Donald P. Hateley has served as our Chairman of the Board since August 1999.
From 1994 to the present, he has been the Managing Director of InterCap
Partners, a boutique investment banking firm located in Los Angeles, California
that specializes in corporate finance, mergers and acquisitions and financial
advisory matters. From 1996 to the present, he has been an attorney with Hateley
& Hampton, a Los Angeles-based law firm that specializes in corporate, tax, real
estate and securities law. Mr. Hateley is also a California licensed certified
public accountant and real estate broker.

Dr. Christopher J. Blaxland has served as a director since September 1998. He
was Chief Executive Officer and a director of HumaScan from September 1 to
December 22, 1998; from December 22, 1998 to August 6, 1999 he was Chief
Executive Officer and director in a consultant capacity of HumaScan until the
Reorganization. From May 1999 until December 2001, Dr. Blaxland served as the
Chief Operating Officer of PTC Therapeutics, Inc., a development stage
biopharmaceutical company, and has worked as a business consultant. From
September 1993 through December 1997, he was the President of Cell Pathways,
Inc., a development stage biopharmaceutical company.

Dr. Donald M. Anderson has served as a director since August 1999. He has served
as a consultant to NAC on scientific matters since 1993, and became a director
of NAC in July 1999. He is a Senior Scientist at the Woods Hole Oceanographic
Institution in Massachusetts, has served in that capacity since 1991 and has
been on the scientific staff since 1978, after receiving his Ph.D. from the
Massachusetts Institute of Technology. Dr. Anderson is a recognized expert on
toxic and harmful algal blooms and has been the director of the U.S. National
Office on Marine Biotoxins and Harmful Algal Blooms since 1993.

BOARD OF DIRECTORS MEETINGS AND COMMITTEES

Our Board of  Directors  held six  meetings in 2002,  four  meetings in 2001 and
eight  meetings in the year 2000.  We maintain a standing  Audit  Committee  and
Compensation  Committee,  but do not maintain a standing  nominating  committee.
Donald Hateley,  Chris Blaxland and Donald Anderson serve on the Audit Committee
and on the Compensation  Committee.  There are no family relationships among our
directors or executive officers,  except that Ms. Carpenter is the mother of Mr.
Straus.  The board of directors has not yet formally  designated  someone as the
audit committee  financial expert serving on the Audit Committee  because it has
not had  sufficient  time to  ensure  effective  compliance  with the new  rules
requiring this designation.  However, the Board of Directors intends to formally
designate a financial expert in the near future.

Section 16(a) Beneficial Ownership Reporting Compliance


To our knowledge, based solely on a review of Section 16(a) forms furnished to
us, we believe that our directors, executive officers and ten percent beneficial
owners complied with all Section 16(a) reporting requirements during 2002 except
for Daryl Kollman.

The Board of  Directors  has not yet  formally  adopted  a code of  ethics  that
applies to the Company's principal executive,  financial and accounting officers
because it has not had sufficient time to consider this matter. The Board itends
to formally adopt a code of ethics for these officers in the near future.

                                       42
<PAGE>

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

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth, for the year ended December 31, 2002,
compensation paid by us to (a) each person serving as our Chief Executive
Officer during 2002 and (b) each of our other most highly compensated executive
officers (the "named executive officers") during 2002 who served as an executive
officer on December 31, 2002.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                          Annual Compensation
                         Long Term Compensation                                Awards                       Payouts
                         ----------------------                                ------                       -------
       (a)             (b)        (c)             (d)            (e)            (f)               (g)          (h)          (i)
       Name                                                     Other        Restricted       Securities
       and                                                     Annual          Stock          Underlying      LTIP       All Other
    Principal                                                  Compen-       Awards(s)         Options/      Payouts      Compen-
     Position          Year     Salary ($)      Bonus ($)     sation ($)         ($)            SARs (#)        ($)       sation ($)
    ----------         ----     ----------      ---------     ----------   ----------------     --------    ---------   ----------
<S>                    <C>       <C>                <C>        <C>
Marta C. Carpenter,    2002      290,000            0          0
CEO & President
                       2001      290,000            0          3,000(1)
                       2000      290,000            0          3,000(1)
Victor M. Bond, Vice
President, Marketing
& Strategy             2002      180,000            0          0
                       2001      180,000            0          0
                       2000      180,000            0          0
Justin Straus, Chief
Operating Officer,
Secretary and
Treasurer              2002      114,529            0          0
                       2001      110,000            0          0
                       2000      110,000            0          0
</TABLE>

----------

(1)   Estimated dollar value of pickup owned by Cell Tech and used by Ms.
      Carpenter.

<PAGE>

The following table summarizes the number of shares and the terms of stock
options we granted to the named executive officers in our 2002 fiscal year.

                      OPTIONS/SAR GRANTS DURING YEAR ENDED
                                DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                                Individual Grants
                                                                                                  Potential Realizable
                                    Number of      % of total                                      Value at Assumed
                                   Securities    Options/SARs                                    Annual Rates of Stock
                                   Underlying     Granted to    Exercise or                     Price Appreciation for
                                  Options/SARs   Employees in   Base Price                        Option Term
Name                       Year    Granted (#)   Fiscal Year     ($/Share)    Expiration Date     5%($)      10%($)
----                       ----    -----------   -----------     ---------    ---------------     ------------------
<S>                        <C>          <C>           <C>           <C>             <C>           <C>         <C>
Marta C. Carpenter         2002         0             0             N/A             N/A           N/A         N/A
Victor M. Bond             2002         0             0             N/A             N/A           N/A         N/A
Justin Straus              2002         0             0             N/A             N/A           N/A         N/A
</TABLE>


                                       43

<PAGE>

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

The following table sets forth information concerning the number and value of
unexercised options held by each of the named executive officers as of December
31, 2002. None of the named executive officers exercised options in 2002.

                        AGGREGATE YEAR-END OPTION VALUES
                               (DECEMBER 31, 2002)

<TABLE>
<CAPTION>
                                              Number of securities  underlying            Value of unexercised in-the-money
                                         unexercised options at fiscal   year-end (#)      options at fiscal year-end ($)(1)
                                         ------------------------------------------       ---------------------------------
          Name                Year          Exercisable           Unexercisable          Exercisable           Unexercisable
          ----                ----          -----------           -------------          -----------           -------------
<S>                           <C>                <C>                   <C>                     <C>                    <C>
Marta C. Carpenter            2002               0                     0                       0                      0
Victor M. Bond                2002               0                     0                       0                      0
Justin Straus                 2002               0                     0                       0                      0
</TABLE>


----------

(1)   Represents the difference between the aggregate market value at December
      31, 2002 and 2001, as applicable, of our common stock (based on a last
      sale price of $0.20 and $0.16 on each such date, respectively) and the
      options' aggregate exercise price.

BOARD COMMITTEES; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Our Audit Committee conducted four meetings during 2002 and no meetings in 2001
and 2000, respectively. The committee reviews the scope of the independent
annual audit, the independent public accountants' letter to the Board of
Directors concerning the effectiveness of our internal financial and accounting
controls and the Board of Directors' response to that letter, if deemed
necessary.

Our Compensation Committee oversees our executive compensation program and makes
recommendations to our full Board of Directors regarding changes in
compensation. It also administers our stock option plans. The committee held one
meeting during each of 2001 and 2000 and no compensation committee meetings were
held in 2002.

Donald P. Hateley, chairman of the board of directors, Chris Blaxland, a
director and Dr. Donald M. Anderson, a director, served on the Compensation
Committee in 2002. Marta C. Carpenter, our Chief Executive Officer, President
and a director, Chris Blaxland, a director and Dr. Donald M. Anderson, a
director, served on the Compensation Committee in 2001.


<PAGE>

INTRODUCTION TO REPORT OF COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors (the "Committee") is
composed of Messrs. Blaxland, Anderson and Hateley. The Committee is responsible
for the establishment and oversight of the Company's executive compensation
programs. The following report of the Committee discusses generally the
Company's executive compensation objectives and policies and their relationship
to the Company's performance in 2002.

EXECUTIVE COMPENSATION PHILOSOPHY AND OBJECTIVES

Our executive compensation program is designed to attract, retain and motivate
highly effective executives and to reward sustained corporate and individual
performance with an appropriate base annual salary and incentive compensation.
We seek to increase management ownership of our common stock and to link
executive compensation with stockholder value, achievement of business
objectives and corporate profitability.

Our compensation philosophy is to compensate our executive officers at
market-competitive levels for achieving planned performance. Market comparisons
include general industry norms, nutritional supplements manufacturers companies,
and a selected group of direct selling companies that are approximately the same
size as us. More emphasis is placed on general industry than the nutritional
supplement industry norms.

COMPENSATION PROGRAM COMPONENTS

Consistent with our executive compensation objectives, our compensation for our
senior management, including the Chief Executive Officer, consists of three
components: an annual base salary, annual cash incentive awards and long-term
incentive awards. During the year ended December 31, 2002, our compensation of
our senior executives consisted of annual base salary. No cash incentive awards
were paid in 2002.

Annual Base Salary. Base salaries for executive officers are determined with
reference to a salary range for each position. Salary ranges are determined by
evaluating a particular employee's position and comparing it with what were
believed to be representative prevailing norms for similar positions in
similarly sized companies. Within this salary range, an executive's initial
salary level is determined largely through Committee judgment, based on the
experience of our members. Salaries were set at a level to attract, retain and
motivate superior executives.

Long-Term Incentive Awards. Long-term incentive compensation will be provided by
the grant of options to purchase shares of our Common Stock under the 2000 Plan,
if amended, or a successor or additional stock option plan to be approved by our
Board of Directors. In considering the awards, the Committee takes into account
such factors as prevailing norms for the ratio of options outstanding to total
shares outstanding, the effect on maximizing long-term stockholder value, and
vesting and expiration dates of each executive's outstanding options.

THE COMPENSATION COMMITTEE

Donald P. Hateley
Chris J.M. Blaxland
Donald M. Anderson


<PAGE>

COMPENSATION OF DIRECTORS

Members of our Board of Directors who are our officers are not separately
compensated for serving on the Board of Directors. We pay directors who are not
our employees an annual retainer of $40,000 ($30,000 if the director does not
attend at least 3/4 of the Board meetings held), an additional $10,000 to the
Chairman of the Board, $5,000 for each Board committee on which the director
serves, a meeting fee of $1,500 ($500 if attendance is by telephone), and
reimbursement of reasonable expenses. In addition, in February 2000, we adopted
the 2000 Stock Incentive Plan that provides that each non-employee director will
receive on the date of each annual meeting of our stockholders options to
purchase 10,000 shares of our common stock under terms more fully described
below.

Upon the Board's adoption of our 2000 Stock Incentive Plan, again in 2002 for
our fiscal year ended December 31, 2001, and under its terms, we granted to each
of Donald Hateley, Christopher Blaxland and Donald Anderson a 10-year option to
purchase 15,000 shares of our common stock, in each of 2000, 2001 and 2002, at
an exercise price as provided by our Board of Directors which is equal to the
fair market value of our common stock on the date on which the options are
granted. These options are fully exercisable as of the date of their grant.

STOCK OPTIONS

2000 Stock Incentive Plan. The Board of Directors adopted our 2000 Stock
Incentive Plan in February 2000 for the purpose of securing for us and our
shareholders the benefits arising from the ownership of restricted shares of our
common stock, stock appreciation rights, and stock options by directors who are
not employees (Donald Hateley, Christopher Blaxland and Donald Anderson are our
current non-employee directors), officers, other key employees and consultants
to us and our subsidiaries who are expected to contribute to our future growth
and success. We have not granted restricted shares or stock appreciation rights
under the plan. As stated above, we have granted options under the plan for an
aggregate of 90,000 shares to our eligible non-employee directors. We may not
grant awards under the plan after February 2010. The plan is subject to
shareholders approval.

The plan provides for the issuance of up to 700,000 shares of our common stock.
Under the plan, we may grant awards to key employees and will annually grant an
option to purchase 10,000 shares of our common stock to our eligible
non-employee directors, as described below. The Board of Directors administers
the plan, which, subject to the terms of the plan, determines the key employees
who will receive awards and the terms of the awards granted.

Under the plan, provided that a sufficient number of shares remain available for
grant, non-employee directors serving on the Board of Directors immediately
following each annual meeting of shareholders (including those elected at the
meeting), are automatically granted a 10-year option to purchase 10,000 shares
of our common stock at an exercise price equal to the fair market of the common
stock on the annual meeting date. These options become exercisable with respect
to 1/3 of the shares underlying the option on the date of grant, 2/3 of such
shares one year later and all of such shares two years later, in each case
assuming the recipient's continuous service as a director during that time.

1996 Stock Incentive Plan. HumaScan adopted a 1996 Stock Incentive Plan in June
1996. The provisions of the 1996 plan were substantially similar to the
provisions of our 2000 Stock

<PAGE>

Incentive Plan except that the 1996 plan provides for the issuance of up to
64,504 shares of our common stock. We will make no further awards under the 1996
plan, but options to purchase 25,802 shares remain outstanding and exercisable
under the plan at a weighted average exercise price of between $3.05 and $142.49
per share.

Other Options. We have issued options outside of our stock option plans to
certain officers, directors, employees and consultants. We granted options to
purchase (a) 13,131 shares in February 1996 with a five-year term and an
exercise price of $57.84 per share, (b) 1,382 shares in March 1998 with a
ten-year term and an exercise price of $98.69 per share, and (c) 4,607 shares to
a consultant with a 5 year term and an exercise price of $14.98. We granted
4,216 shares in prior years that have been exercised. All of these options,
except for the options exercised, remain outstanding and are fully exercisable.
In September 1996, we also granted options to purchase an aggregate of 691
shares with a 10-year term and an exercise price of $65.11 to five former
non-employee directors. These options are outstanding and exercisable.



                                       47

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information regarding ownership of our
capital stock as of March 31, 2003, by (i) each person known to us to
beneficially own more than 5% of the shares of our outstanding common stock,
(ii) each of our directors, (iii) each of the named executive officers, and (iv)
all of our directors and executive officers as a group.

<PAGE>


                                                  Percent of        Number
                                                    Shares            of
                                                 Beneficially       Shares
Name and Address of Beneficial Owner               Owned (1)      Outstanding
------------------------------------               ---------      -----------

Marta C. Carpenter                                    21.9%      4,341,498(2)
  565 Century Court
  Klamath Falls, Oregon 97601

Daryl J. Kollman                                      21.9%      4,341,498(3)
  5248 Timber Branch Way
  San Diego, CA 92130

Victor M. Bond                                           *               0
  565 Century Court
  Klamath Falls, Oregon 97601

Donald P. Hateley                                      1.7%        345,000(4)
  1800 Century Park East
  Los Angeles, California 90067

Dr. Christopher J. Blaxland                              *          47,764(5)
  509 County Line Road
  Radnor, Pennsylvania 19087

Donald M. Anderson                                       *          47,949(6)
  6 Arrowhead Lane
  Marion, MA 02738

Justin Straus                                            *               0
  565 Century Court
  Klamath Falls, Oregon 97601

Zubair Kazi                                           41.1%      8,162,336(7)
  3671 Sunswept Drive
  Studio City, California 91604

All executive officers and directors as a group (6 persons)          (8)

----------
* Less than 1% of the outstanding shares.

(1)   A person is considered to "beneficially own" any shares (a) over which
      such person exercises sole or shared voting or investment power, or (b) of
      which such person has the right to acquire ownership at any time within 60
      days (e.g., through exercise of stock options). Voting and investment
      power relating to the shares referenced in the table above is exercised
      solely by the beneficial owner, except as indicated otherwise.


                                   49

<PAGE>

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

(2)   The Internal Revenue Service has a security interest in all of Marta C.
      Carpenter and Daryl J. Kollman's shares pursuant to a Notice of
      Determination dated June 18, 1999 under the terms of which the shares are
      held in trust and will be released upon the payment of Marta C. Carpenter
      and Daryl J. Kollman's federal income tax liabilities for various
      specified years. Ms. Carpenter will sell her shares as needed and allowed
      by federal and state securities laws to make quarterly payments to the
      Internal Revenue Service. Ms. Carpenter retains all voting rights incident
      to her shares while the shares are held in trust. The Internal Revenue
      Service may seize Ms. Carpenter's shares from trust if Marta C. Carpenter
      and Daryl J. Kollman fail to timely cure a default upon their commitments
      to the Internal Revenue Service under the Notice of Determination. The
      Internal Revenue Service would thereafter proceed to sell or judicially
      foreclose some or all of the shares for payment of Marta C. Carpenter and
      Daryl J. Kollman's tax liabilities as allowed by applicable law.

(3)   The Internal Revenue Service has a security interest in all of Mr.
      Kollman's shares pursuant to a Notice of Determination dated June 18, 1999
      under the terms of which the shares are held in trust and will be released
      upon Marta C. Carpenter and Daryl J. Kollman's payment of their federal
      income tax liabilities for various specified years. Mr. Kollman will sell
      his shares as needed and allowed by federal and state securities laws to
      make quarterly payments to the Internal Revenue Service. Mr. Kollman
      retains all voting rights incident to his shares while the shares are held
      in trust. The Internal Revenue Service may seize Mr. Kollman's shares from
      trust if Marta C. Carpenter and Daryl J. Kollman fail to timely cure a
      default upon their commitments to the Internal Revenue Service under the
      Notice of Determination. The Internal Revenue Service would thereafter
      proceed to sell or judicially foreclose some or all of the shares for
      payment of Marta C. Carpenter and Daryl J. Kollman's tax liabilities as
      allowed by applicable law.

(4) Represents warrants to purchase 300,000
shares of common stock held by Hateley & Hampton, a Professional Law
      Corporation of which Donald P. Hateley is a President, co-founder and a
      shareholder and 30,000 shares Mr. Hateley has the right to acquire
      pursuant to options exercisable within 60 days.

(5)   Represents 45,764 shares Dr. Blaxland has the right to acquire pursuant to
      options exercisable within 60 days.

(6)   Includes 45,000 shares Mr. Anderson has the right to acquire pursuant to
      options exercisable within 60 days.

(7)   Includes 1,157,895 shares already issued to Kazi and an additional
      2,923,273 shares issuable to Mr. Kazi under various covenants to his
      existing shares and 1,157,895 issuable to Mr. Kazi upon the exercise of
      his warrants and 2,923,273 shares issuable to Mr. Kazi under various
      covenants upon the exercise of his warrants.

(8)   Includes 345,000 shares issuable upon the exercise of warrants and 47,764
      shares issuable upon the exercise of options within 60 days. See footnotes
      4 through 6 above.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

We lease approximately 250,000 square feet of office, processing, freezer and
storage space directly from Marta C. Carpenter and Daryl Kollman, our principal
shareholders, or their affiliate, Klamath Cold Storage, Inc. Most of these
leases are year-to-year, although we do rent some space on a month-to-month
basis and one lease will expires in 2005. We believe that the space we lease
from Marta C. Carpenter and Daryl Kollman and Klamath Cold Storage, Inc and the
rent we pay to them is at below or at fair market values. Rental payments to
Marta C. Carpenter and Daryl Kollman or Klamath Cold Storage, Inc in 2002 were
$740,097. We currently owe Marta C. Carpenter and Daryl Kollman or Klamath Cold
Storage, Inc $531,146 in accrued rental payments and we show it on our balance
sheet as a related party payable.

In 2002, we also received $192,762 in management fees and other income from
Klamath Cold Storage, Inc.

ITEM 14. CONTROLS AND PROCEDURES

      (a) Evaluation of disclosure controls and procedures

      The term "disclosures controls and procedures" refers to the controls and
      procedures of a company that are designed to ensure that information
      required to be disclosed by a company in the reports that it files under
      Rules 13a - 14 of the Securities and Exchange Act of 1934 (the "Exchange
      Act") is recorded, processed, summarized and reported within the required
      time periods. Within 90 days prior to the date of filing this report (the
      "Evaluation date"), we carried out an evaluation under the supervision and
      with participation of our Chief Executive Officer of the effectiveness of
      our disclosure controls and procedures. Based on that evaluation, our
      Chief Executive Officer has concluded that, as of the Evaluation Date,
      such controls and procedures were effective in ensuring that required
      information will be disclosed on a timely basis in our periodic reports
      filed under the Exchange Act.


      (b) Changes in internal controls

      There were no significant changes to our internal controls or in other
      factors that could significantly affect these controls subsequent to the
      date of such evaluation, and there were no corrective actions required
      with regard to significant deficiencies and weaknesses.


                                       50

<PAGE>

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

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) Exhibits required by Item 601 of Regulation S-K

(a)(1) and (2) Financial Statements. The Financial Statements and Schedules are
listed in the Index to Financial Statements on page F-1 of this Form 10-K.

(a)(3) Exhibits:

(Exhibit Number   Description
---------------   -----------

(2)   Plan of Acquisition, Reorganization, Arrangement, Liquidation or
      Succession

      (2.1)       Agreement and Plan of Reorganization, dated July 16, 1999,
                  among the Company, Daryl J. Kollman and Marta C. Kollman
                  (filed as Exhibit 2.1 without schedules and exhibits to the
                  Current Report on Form8-K on August 2, 1999 and incorporated
                  by reference)

(3)   Articles of Incorporation and Bylaws

      (3.1)       Certificate of Incorporation, as amended (filed as Exhibit 3.1
                  to the Registration Statement for Small Business on Form SB-2
                  on June 21, 1996 and incorporated by reference)

      33          (3.2) Certificate of Amendment of Certificate of Incorporation
                  (filed as Exhibit 3.1(a) to the Current Report on Form 8-K on
                  November 19, 1999 and incorporated by reference)

      (3.3)       Certificate of Designations, Preferences and Rights of Series
                  B Convertible Preferred Stock (filed as Exhibit 3.1 to the
                  Current Report on Form 8-K on August 2, 1999 and incorporated
                  by reference)

      (3.4)       Amended and Restated Bylaws (filed as Exhibit 3.2 to the
                  Registration Form for Small Business on Form SB-2 on June 21,
                  1996 and incorporated by reference)

(4)   Instruments Defining the Rights of Security Holders

      (4.1)       Loan and Security Agreement, dated June 21, 1999, by and among
                  The New Earth Company, The New Algae Company and Coast
                  Business Credit (filed as Exhibit 4.1 to the Current Report on
                  Form 8-K on November 19, 1999 and incorporated by reference)


                                       51
<PAGE>

--------------------------------------------------------------------------------
      (4.2)       Continuing Guaranty, dated August 6, 1999 (filed as Exhibit
                  4.2 to the Current Report on Form 8-K on November 19, 1999 and
                  incorporated by reference)

      (4.3)       Form of Common Stock Certificate (filed as Exhibit 4.1 to the
                  Amendment to Registration Statement for Small Business on Form
                  SB-2/A on July 26, 1996 and incorporated by reference)

      (4.4)       Form of Series A Preferred Stock Certificate (filed as Exhibit
                  4.2 to the Amendment to Registration Statement for Small
                  Business on Form SB-2/A on July 26, 1996 and incorporated by
                  reference)

      (4.5)       Form of Warrant to Purchase Shares of Common Stock to be
                  issued to Andromeda Enterprises, Inc. or its designees,
                  Hateley & Hampton or its designees and Wharton Capital
                  Partners, Ltd. (filed as Exhibit 4.1 to the Current Report on
                  Form 8-K on August 2, 1999 and incorporated by reference)

      (4.6)       Nonqualified Stock Option Agreement between the Company and
                  Physicians World Communications Group (filed as Exhibit 4.9 to
                  the Quarterly Report on Form 10-Q for the quarterly period
                  ended September 30, 1998 and incorporated by reference)

      (4.7)       Warrant to Purchase Shares of Common Stock issued to Scantek
                  Medical, Inc. as of May 15, 1998 (filed as Exhibit 4.7 to the
                  Quarterly Report on Form 10-Q for the quarterly period ended
                  September 30, 1998 and incorporated by reference)

      (4.8)       Warrant to Purchase Shares of Common Stock issued to Zigmed,
                  Inc. as of May 15, 1998 (filed as Exhibit 4.8 to the Quarterly
                  Report on Form 10-Q for the quarterly period ended September
                  30, 1998 and incorporated by reference)

      (4.9)       Representative's Warrant Agreement between the Company and
                  Keane Securities Co., including Form of Warrant Certificate
                  (filed as Exhibit 4.3 to the Amendment to Registration
                  Statement for Small Business on Form SB-2/A on July 26, 1996
                  and incorporated by reference)

                                       52

<PAGE>

--------------------------------------------------------------------------------
      (4.10)      Form of Warrant Certificate for March Bridge Warrants (filed
                  as Exhibit 4.4 to the Registration Statement for Small
                  Business on Form SB-2 on June 21, 1996 and incorporated by
                  reference)

      (4.11)      Nonqualified Stock Option Agreements with Certain Officers
                  (Donald Brounstein, James Whidden, Whidden & Associates, Inc.,
                  Amy Lewis, and Everett Lautin) (filed as Exhibit 4.5 to the
                  Registration Statement for Small Business on Form SB-2 on June
                  21, 1996 and incorporated by reference)

      (4.12)      Form of Private Warrants issued in connection with May Private
                  Placement (filed as Exhibit 4.6 to the Registration Statement
                  for Small Business on Form SB-2 on June 21, 1996 and
                  incorporated by reference)

(10)  Material Contracts

      (10.1)      General Release, dated January 25, 2000 between the Company
                  and Donald Brounstein (filed as Exhibit 10.1 to the Annual
                  Report on Form 10-K for the year ended December 31, 2000 and
                  incorporated by reference)

      (10.2)      Settlement Agreement, dated May 15, 1998, between the Company
                  and Scantek Medical, Inc. (filed as Exhibit 10.16 to the
                  Quarterly Report on Form 10-Q for the quarterly period ended
                  June 30, 1998 and incorporated by reference)

      (10.3)      Settlement Agreement, dated May 15, 1998, between the Company
                  and Zigmed, Inc. (filed as Exhibit 10.17 to the Quarterly
                  Report on Form 10-Q for the quarterly period ended June 30,
                  1998 and incorporated by reference)

      (10.4)      Employment Agreement between the Company and Dr. Chris J. M.
                  Blaxland, dated as of September 1, 1998 (filed as Exhibit
                  10.18 to the Quarterly Report on Form 10-Q for the quarterly
                  period ended September 30, 1998 and incorporated by reference)

      (10.5)      Employment Agreement between the Company and Donald
                  Brounstein, dated January 1, 1996 (filed as Exhibit 10.8 to
                  the Registration Statement for Small Business on Form SB-2 on
                  June 21, 1996 and incorporated by reference)

      (10.6)      Employment Agreement between the Company and James J. Whidden
                  (filed as Exhibit 10.9 to the Registration


                                       53

<PAGE>

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

                  Statement for Small Business on Form SB-2 on June 21, 1996 and
                  incorporated by reference)

      (10.7)      Employment Agreement between the Company and Kenneth S.
                  Hollander, dated June 3, 1996 (filed as Exhibit 10.10 to the
                  Registration Statement for Small Business on Form SB-2 on June
                  21, 1996 and incorporated by reference)

      (10.8)      Consulting Agreement, dated March 1, 1996, between the Company
                  and Don Anderson (filed as Exhibit 10.8 to the Annual Report
                  on Form 10-K for the year ended December 31, 2000 and
                  incorporated by reference)

      (10.9)      Exclusive Supply and Distribution Agreement between the
                  Company and Physician Sales & Services, Inc., as amended
                  (filed as Exhibit 10.1 to the Amendment to Registration
                  Statement for Small Business on Form SB-2/A on July 26, 1996
                  and incorporated by reference)

      (10.10)     License Agreement, dated October 20, 1995, between the Company
                  and Scantek Medical, Inc., as amended (filed as Exhibit 10.2
                  to the Registration Statement for Small Business on Form SB-2
                  on June 21, 1996 and incorporated by reference)

      (10.11)     Construction Contract between the Company and Zigmed, Inc.
                  (filed as Exhibit 10.3 to the Registration Statement for Small
                  Business on Form SB-2 on June 21, 1996 and incorporated by
                  reference)

      (10.12)     Lease, dated June 11, 1996, between the Company and the Moen
                  Organization, Inc. (filed as Exhibit 10.14 to the Registration
                  Statement for Small Business on Form SB-2 on June 21, 1996 and
                  incorporated by reference)

      (10.13)     Lease Termination Agreement, dated February 2, 1999, between
                  the Company and the Moen Organization, Inc. (filed as Exhibit
                  10.13 to the Annual Report on Form 10-K for the year ended
                  December 31, 2000 and incorporated by reference)

      (10.14)     Intentionally omitted

      (10.15)     Commercial Lease Agreement, dated July 1, 1995, between and
                  among The New Earth Company, Daryl Kollman and Marta Kollman
                  (filed as Exhibit 10.15 to the Annual Report


                                       54


<PAGE>

--------------------------------------------------------------------------------
                  on Form 10-K for the year ended December 31, 2000 and
                  incorporated by reference)

      (10.16)     Commercial Lease Agreement, dated August 15, 1995, between and
                  among The New Algae Company, Daryl Kollman and Marta Kollman
                  (filed as Exhibit 10.16 to the Annual Report on Form 10-K for
                  the year ended December 31, 2000 and incorporated by
                  reference)

      (10.17)     Ground Lease Agreement, dated December 9, 1995, between and
                  among The New Earth Company, Emil Nobel and Mary Ann Nobel
                  (filed as Exhibit 10.17 to the Annual Report on Form 10-K for
                  the year ended December 31, 2000 and incorporated by
                  reference)

      (10.18)     Commercial Lease Agreement, dated May 1, 1996, between and
                  among The New Algae Company, Daryl Kollman and Marta Kollman
                  (filed as Exhibit 10.18 to the Annual Report on Form 10-K for
                  the year ended December 31, 2000 and incorporated by
                  reference)

      (10.19)     Commercial Lease Agreement, dated September 1, 1996, between
                  Klamath Cold Storage, Inc. and The New Earth Company,
                  including Sublease between The New Earth Company and The New
                  Algae Company (filed as Exhibit 10.19 to the Annual Report on
                  Form 10-K for the year ended December 31, 2000 and
                  incorporated by reference)

      (10.20)     Voting and Stockholders' Rights Agreement, dated May 15, 1996
                  (filed as Exhibit 10.4 to the Registration Statement for Small
                  Business on Form SB-2 on June 21, 1996 and by this reference
                  incorporated herein)

      (10.21)     Agreement to Issue Warrants, dated March 19, 1996, between the
                  Company and Udi Toledano (filed as Exhibit 10.5 to the
                  Registration Statement for Small Business on Form SB-2 on June
                  21, 1996 and by this reference incorporated herein)

      (10.22)     Agreement to Issue Warrants, dated March 19, 1996, between the
                  Company and Herbert V. Turk (filed as Exhibit 10.6 to the
                  Registration Statement for Small Business on Form SB-2 on June
                  21, 1996 and by this reference incorporated herein)

      (10.23)     Non-Negotiable Warrant Certificate between the Company and
                  Physician Sales & Service, Inc. (filed as Exhibit 10.7 to



<PAGE>

                  the Registration Statement for Small Business on Form SB-2 on
                  June 21, 1996 and by this reference incorporated herein)

      (10.24)     HumaScan, Inc. Non-Employee Director Stock Option Plan (filed
                  as Exhibit 10.12 to the Registration Statement for Small
                  Business on Form SB-2 on June 21, 1996 and by this reference
                  incorporated herein)

      (10.25)     Form of Indemnification Agreement between the Company and its
                  Executive Officers and Directors (filed as Exhibit 10.15 to
                  the Annual Report for Small Business on Form 10KSB40 for the
                  fiscal year ended December 31, 1997 and by this reference
                  incorporated herein)

      (10.26)     The Company's 2000 Stock Incentive Plan (filed as Exhibit
                  10.26 to the Annual Report on Form 10-K for the year ended
                  December 31, 2000 and incorporated by reference)

(16)  Letter from KPMG, dated November 2, 1999, agreeing with the statements
      contained in the Company's Form 8-K, dated November 2, 1999 (filed as
      Exhibit 16 to the Current Report on Form 8-K on November 22, 1999 and by
      this reference incorporated herein)

(21)  List of the Company's Subsidiaries (filed as Exhibit 21 to the Annual
      Report on Form 10-K for the year ended December 31, 2000 and incorporated
      by reference)

(99)  Additional Exhibits

      (99.1)      Internal Revenue Service Notice of Determination, dated July
                  18, 1999 (filed as Exhibit 99.2 to the Current Report on Form
                  8-K on November 19, 1999 and by this reference incorporated
                  herein)

      (99.2)      Pledge and Escrow Agreement between and among Daryl Kollman
                  and Marta Kollman, the Internal Revenue Service and West Coast
                  Trust Co., Inc. (filed as Exhibit 99.3 to the Current Report
                  on Form 8-K on November 19, 1999 and by this reference
                  incorporated herein) (99.3) Certification pursuant to 18 U.S.C
                  Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.


(b) Reports on Form 8-K. None.

<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, in the City of Klamath
Falls, State of Oregon on April 15, 2003.

                      CELL TECH INTERNATIONAL INCORPORATED.


By: /s/ Marta C.  Carpenter
    ---------------------------------
    Marta C. Carpenter, Chief Executive
    Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons on behalf of the registrant and in the capacities indicated
have signed this report below:

           Signature                        Title                      Date
           ---------                        -----                      ----


By: /c/ Marta C. Carpenter        President and Chief Executive      , 2003
    -----------------------         Officer and Director
    Marta C. Carpenter           (principal executive officer,
                               principal financial officer and
                                principal accounting officer)

By: /s/ Donald P. Hateley           Chairman of the Board           , 2003
   ------------------------
    Donald P. Hateley


By: /s/ Justin Straus            Vice President of Customer         , 2003
   ------------------------       Fulfillment and Director
    Justin Straus


By: /s/ Chris J.M. Blaxland                Director                 , 2003
   ------------------------
    Chris J.M. Blaxland


By: /s/ Donald M. Anderson                 Director                 , 2003
   ------------------------
    Donald M. Anderson



<PAGE>

                            CERTIFICATION PURSUANT TO
                SECTION 302(A) OF THE SARBANES-OXLEY ACT OF 2002

I, Marta C. Carpenter, certify that:

1.    I have reviewed this annual report on Form 10-K of Cell Tech International
      Incorporated;

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

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

4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I
      have:

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

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

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

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

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

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

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

                          CELL TECH INTERNATIONAL INCORPORATED



                          Marta C. Carpenter
                          Chief Executive Officer and Chief Accounting Officer
                          Dated: April 15, 2003


<PAGE>

                                                                    Exhibit 99.3
                            Certification pursuant to
                             18 U.S.C. Section 1350
                              As adopted pursuant to
                  Section 906 of the Sarbanes-oxley act of 2002

      In connection with the annual report of Cell Tech International
Incorporated (the "Company") on Form 10-K for the year ended December 31, 2002
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Marta C. Carpenter, Chief Executive Officer and Chief Accounting
Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

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

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


                                  ------------------------------------
                                  Marta C. Carpenter
                                  Chief Executive Officer and Chief Accounting
                                        Officer

                                  DATED: April 15, 2003

<PAGE>

                             CELL TECH INTERNATIONAL
                          INCORPORATED AND SUBSIDIARIES


                        CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000





<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<PAGE>

       Report of Independent Certified Public Accountants         F-3


       Consolidated Financial Statements

            Consolidated Balance Sheets                           F-4

            Consolidated Statements of Operations                 F-5

            Consolidated Statements of Shareholders' Equity       F-6

            Consolidated Statements of Cash Flows                 F-7


       Notes to Consolidated Financial Statements                 F-8




                                      F-74
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders of
Cell Tech International Incorporated and Subsidiaries
Klamath Falls, Oregon

We have audited the accompanying consolidated balance sheets of Cell Tech
International Incorporated and Subsidiaries as of December 31, 2002 and 2001,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended December 31, 2002.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cell Tech
International Incorporated and Subsidiaries as of December 31, 2002 and 2001,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has experienced recurring losses, has a
negative working capital at December 31, 2002, is experiencing difficulty in
generating sufficient cash flows to meet its obligations and faces potential
significant adverse litigation. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plan in regard to
these matters is also described in Note 2. The accompanying financial statements
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.

BDO SEIDMAN

Los Angeles, California
February 28, 2003



<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                              --------------------------
                                                                                   2002         2001
                                                                              ------------   -----------
ASSETS (Note 7)

<S>                  <C>                                                       <C>           <C>
CURRENT ASSETS
   Receivables (Note 3)                                                        $   372,011   $   327,083
   Current portion of inventories (Note 4)                                       2,300,000     2,000,000
   Prepaid expenses                                                                586,662       460,860
                                                                               -----------   -----------
Total current assets                                                             3,258,673     2,787,943

LONG-TERM INVENTORIES, net of current portion (Note 4)                           3,824,298     7,304,778
PROPERTY AND EQUIPMENT, net of accumulated depreciation (Note 5)                 6,801,389     7,318,683
IDLE PROPERTY AND EQUIPMENT, net (Note 5)                                        1,382,570     2,271,305
OTHER ASSETS (Note 6)                                                              546,846       292,092
                                                                               -----------   -----------
Total assets                                                                   $15,813,776   $19,974,801
                                                                               ===========   ===========
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Bank overdraft                                                              $   468,008   $   763,105
   Accounts payable                                                                594,329     2,527,078
   Commissions payable                                                             970,315     1,219,136
   Sales taxes payable                                                              69,797        82,343
   Accrued payroll and related liabilities                                         291,140       252,944
   Other accrued expenses                                                        1,848,070     1,133,438
   Current portion of long-term debt (Note 7)                                    2,872,145     2,160,986
   Related party payable (Note 12)                                                 427,767     1,086,099
                                                                               -----------   -----------
Total current liabilities                                                        7,541,571     9,225,129
                                                                               -----------   -----------
LONG-TERM LIABILITIES
   Long-term debt, net of current portion (Note 7)                               1,019,920            --
                                                                               -----------   -----------
Total liabilities                                                                8,561,491     9,225,129
                                                                               -----------   -----------

COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)

SHAREHOLDERS' EQUITY
   Series A convertible preferred stock - no par value; 4,175,000 shares
      authorized; none issued and outstanding                                           --            --
   Series B convertible preferred stock - no par value; 800,000 shares
      authorized; none issued and outstanding                                           --            --
   Undesignated preferred stock - no par value; 1,825,000 shares authorized;
      none issued and outstanding                                                       --            --
   Common stock - $.01 par value; 50,000,000 shares authorized, 10,640,895
      shares issued and outstanding (Notes 9 and 10)                               106,409       106,409
   Additional paid-in capital                                                    2,299,696     2,299,696
   Retained earnings                                                             4,846,180     8,343,567
                                                                               -----------   -----------
Total shareholders' equity                                                       7,252,285    10,749,672
                                                                               -----------   -----------
Total liabilities and shareholders' equity                                     $15,813,776   $19,974,801
                                                                               ===========   ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                         Years ended December 31,
                                                                         ------------------------
                                                                    2002            2001           2000
                                                               ------------    ------------    ------------

<S>                                                            <C>             <C>             <C>
SALES                                                          $ 26,193,747    $ 30,012,076    $ 38,976,663

COST OF SALES                                                     9,462,601       9,524,517      11,488,802
                                                               ------------    ------------    ------------

GROSS PROFIT                                                     16,731,146      20,487,559      27,487,861

COMMISSIONS                                                      11,690,752      14,341,935      17,632,344
                                                               ------------    ------------    ------------

GROSS PROFIT AFTER COMMISSIONS                                    5,040,394       6,145,624       9,855,517

SHIPPING AND HANDLING EXPENSES                                    1,703,807       1,864,159       2,097,369

SELLING EXPENSES                                                  3,790,696       4,059,982       5,338,194

RESEARCH AND DEVELOPMENT                                            193,310         190,884         456,098

GENERAL AND ADMINISTRATIVE                                        1,997,054       2,440,736       4,263,967

ASSET WRITE-DOWN (Notes 5 and 6)                                    873,528       2,589,940         136,389
                                                               ------------    ------------    ------------

OPERATING LOSS                                                   (3,518,001)     (5,000,077)     (2,436,492)

OTHER INCOME (Note 13)                                              285,661         606,962         421,045

INTEREST EXPENSE                                                   (265,047)       (622,235)       (768,492)
                                                               ------------    ------------    ------------

NET LOSS                                                       $ (3,497,387)   $ (5,015,350)   $ (2,783,939)
                                                               ------------    ------------    ------------

BASIC AND DILUTED LOSS PER SHARE                               $      (0.27)   $       (.43)   $      (0.26)
                                                               ============    ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING USED TO
    CALCULATE BASIC AND DILUTED LOSS PER SHARE                   12,864,643      11,755,888      10,640,895
                                                               ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                     Common Stock            Additional
                                -------------------------     Paid-In        Retained       Shareholders'
                                  Shares        Amount        Capital        Earnings         Equity
                                ----------   ------------   ------------   ------------    ------------

<S>                             <C>          <C>            <C>            <C>             <C>
BALANCES, December 31, 1999     10,640,895   $    106,409   $  2,299,696   $ 16,142,856    $ 18,548,961
Net loss                                --             --             --     (2,783,939      (2,783,939
                                ----------   ------------   ------------   ------------    ------------
BALANCES, December 31, 2000     10,640,895        106,409      2,299,696     13,358,917      15,765,022
Net loss                                --             --             --     (5,015,350      (5,015,350
                                ----------   ------------   ------------   ------------    ------------
BALANCES, December 31, 2001     10,640,895        106,409      2,299,696      8,343,567      10,749,672
Net loss                                --             --             --     (3,497,387      (3,497,387
                                ----------   ------------   ------------   ------------    ------------
BALANCES, December 31, 2002     10,640,895   $    106,409   $  2,299,696   $  4,846,180    $  7,252,285
                                ==========   ============   ============   ============    ============
</TABLE>

                See accompanying summary of accounting policies


                                      F-6
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                           Years ended December 31,
                                                                                  -----------------------------------------
                                                                                      2002           2001           2000
                                                                                  -----------    -----------    -----------

<S>                                                                               <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                                      $(3,497,387)   $(5,015,350)   $(2,783,939)
    Adjustments to reconcile net loss to cash
      provided by (used for) operating activities:
        Depreciation and amortization                                               1,162,726      2,607,668      3,347,670
        (Gain) loss on sale of fixed assets                                            (1,827)       (15,175)        60,693
        Reserve for potentially unsaleable inventories                              3,100,000             --             --
        Impairment of fixed assets and intangibles                                    873,528      2,589,940        136,381
        Changes in assets and liabilities:
           Receivables                                                                (44,928)       208,062        (45,494)
           Inventories                                                                 80,480      1,871,221      2,355,388
           Prepaid expenses                                                          (125,802)       290,165       (112,205)
           Other assets                                                              (305,851)       (70,374)       (36,159)
           Accounts payable                                                          (454,474)      (370,606)    (1,305,316)
           Commissions payable                                                       (248,821)      (649,999)    (2,527,240)
           Sales tax payable                                                          (12,546)       (30,645)       (61,527)
           Accrued payroll and payroll related liabilities                             38,196        (39,883)      (125,135)
           Other accrued expenses                                                     714,632         (2,188)       532,871
                                                                                  -----------    -----------    -----------

Net cash provided by (used for) operating activities                                1,277,926      1,372,836       (564,012)
                                                                                  -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of property and equipment                                               (584,551)      (253,662)      (145,493)
    Proceeds from sale of equipment                                                     7,250         47,000          4,094
                                                                                  -----------    -----------    -----------

Net cash used for investing activities                                               (577,301)      (206,662)      (141,399)
                                                                                  -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
    Bank overdraft                                                                   (295,097)      (547,446)     1,062,967
    Payments on long-term debt                                                     (1,847,196)      (963,357)    (1,099,026)
    Proceeds from debt financing                                                    2,100,000             --             --
    Net proceeds (repayments) from related party debt                                (658,332)       344,629        741,470
                                                                                  -----------    -----------    -----------

Net cash provided by (used for) financing activities                                 (700,625)    (1,166,174)       705,411
                                                                                  -----------    -----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       --             --             --

CASH AND CASH EQUIVALENTS, beginning of year                                               --             --             --
                                                                                  -----------    -----------    -----------

CASH AND CASH EQUIVALENTS, end of year                                            $        --    $        --    $        --
                                                                                  ===========    ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for:
      Interest                                                                    $   250,190    $   602,570    $   779,424
                                                                                  ===========    ===========    ===========
</TABLE>

                See accompanying summary of accounting policies


                                      F-7
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

NOTE 1 -- SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

Cell Tech International Incorporated, The New Algae Company (NAC), and The New
Earth Company (NEC), collectively the "Company", are engaged in the production
and marketing of food supplement products made with blue-green algae harvested
from Klamath Lake, Oregon. The Company uses a multi-level distributor network
throughout the United States and Canada to distribute its products. The Company
commenced operations as NAC in 1982 and subsequently formed NEC to further its
operations. In 1990 NAC purchased the assets of Cell Tech, Inc. and then began
doing business under the trade name "Cell Tech".

BASIS OF CONSOLIDATION

The accompanying consolidated financial statements of the Company include the
accounts of the Holding Company and its subsidiaries NAC and NEC. Intercompany
transactions and balances have been eliminated on consolidation.

MANAGEMENT ESTIMATES

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

CASH AND CASH EQUIVALENTS

The Company considers all liquid investments with an original maturity of three
months or less to be cash equivalents.

INVENTORIES

Work in progress, finished goods and sales aids inventories are stated at the
lower of cost or market. The Company uses a weighted average method to determine
cost for work in progress and finished goods based upon normal harvesting
volumes (see Note 4). Cost of work in progress and finished goods includes
direct labor and an allocation of overhead costs. Sales aids consist of video
tapes, audio tapes, brochures and other promotional items sold by the Company to
its distributors. Inventory which is not anticipated to be sold within the
subsequent year is classified as a non-current asset.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of 40 years for buildings
and 3 to 10 years for machinery and


                                      F-8
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

equipment as well as furniture and fixtures. Additions, renewals and
improvements are capitalized. Expenditures for maintenance, repairs and minor
renewals and improvements are charged to expense. Upon sale or retirement of
property and equipment, the cost and related accumulated depreciation are
removed from the accounts, and the resulting gain or loss is recorded in
operations.

The Company evaluates impairment of its property and equipment on an individual
asset basis or by logical groupings of assets whenever circumstances indicate
that the carrying value may not be recoverable. Assets deemed to be impaired are
written down to their fair value using discounted future cash flows and, if
available, comparable market values. Gains on disposal of long-lived assets are
recognized when earned, which is generally at the time of closing. If a loss on
disposal is expected, such losses are recognized when the assets are
reclassified as assets held for sale.

GOODWILL AND OTHER INTANGIBLE ASSETS

Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). Under
SFAS 142, goodwill and intangible assets with indefinite lives are no longer
amortized but will be reviewed annually, or more frequently if impairment
indicators arise, for impairment. Other intangible assets with finite lives,
consisting of trademarks with a carrying value of $57,302 at January 1, 2002,
will continue to be amortized over their estimated useful lives of 10 years. As
of the date of the adoption of the new accounting standards, there was no
remaining goodwill to be amortized.

FINANCIAL INSTRUMENTS

The Company estimates the fair value of its monetary assets and liabilities
based upon the existing interest rates related to such assets and liabilities
compared to the current market rates of interest for instruments of a similar
nature and degree of risk. The fair value of debt is estimated using discounted
cash flow analyses, based on the Company's incremental borrowing rates for
similar types of borrowing arrangements. The fair value of the Company's debt at
December 31, 2002 and 2001 approximates carrying value.

REVENUE RECOGNITION

The Company recognizes revenue from the sale of its products upon shipment, at
which time title passes. The Company estimates an allowance for sales returns
based on historical experience with product returns.

SHIPPING AND HANDLING FEES AND COSTS

The Company bills customers for shipping and handling costs. The amounts billed
are included in sales and totaled $1,263,622, $1,443,692 and $1,711,031 in 2002,
2001 and 2000, respectively. The related costs for shipping and handling goods
shipped by the Company to customers are included in a separate caption, shipping
and handling expenses, in the statements of operations.


                                      F-9
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

SALES INCENTIVES

In November 2001, the Emerging Issues Task Force ("EITF") issued EITF Issue No.
01-09, "Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendor's Products," which addresses the accounting for
consideration given by a vendor to a customer or a reseller of the vendor's
products. In April 2001, the EITF reached a consensus on EITF Issue No. 00-25,
"Vendor Income Statement Characterization of Consideration Paid to a Reseller of
the Vendor's Products," which provides guidance on the income statement
classification of consideration from a vendor to a reseller in connection with
the reseller's purchase of the vendor's products or to promote sales of the
vendor's products. The Company pays commissions to its distributors as
compensation for sales and marketing activities and based on their personal
sales volumes and the sales of distributors they have recruited into the
Company's network. Accordingly, the Company classifies these expenses as a cost
and not a reduction of revenue. There was no effect on the consolidated
financial position, results of operations or cash flows as a result of
implementation of this pronouncement.

INCOME TAXES

The Company accounts for income taxes using the liability method whereby the
Company recognizes deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Company's financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statements carrying amounts and tax basis of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse. The Company records a valuation allowance to reduce deferred tax
assets to the amount that is more likely than not to be realized.

IMPAIRMENT OF LONG-LIVED ASSETS

On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Asset," ("SFAS No. 144"), which, for impaired assets or long-lived assets to be
disposed of, supercedes SFAS No. 121. The adoption of SFAS No. 144 did not
affect the financial position or results of operations.

The Company accounts for the impairment of long-lived assets to be held and
used, when indications of impairment are present, by evaluating the carrying
value in relation to the operating performance and future undiscounted cash
flows of the underlying business. Long-lived assets held for disposal are
reported at the lower of their carrying value or fair value less costs to sell
(see Notes 5 and 6).

STOCK OPTION PLAN

Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation", encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issues to Employees" (APB No. 25), and related
Interpretations. Accordingly, for employee options, the Company records expense
in an amount equal to the quoted market price on the grant date over the option
price. The Company provides pro forma disclosures of net earning and earnings
per share, as if the fair value


                                      F-10
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

based method of accounting had been applied. Stock based compensation paid to
non-employees is recorded at fair value using the Black Scholes options pricing
model (see Note 9).

SEGMENT REPORTING

The Company operates in one segment, which is the production and sale of food
supplement products made from blue green algae.

EARNINGS PER SHARE

The computations of the weighted-average common shares used in the computation
of basic and diluted net income (loss) per share is based on 12,864,643,
11,755,888 and 10,640,895 shares for the years ended December 31, 2002, 2001 and
2000. Potential dilutive securities were not included in the EPS calculation
since their effect would be antidilutive. In accordance with SFAS No. 128,
"Earnings Per Share", the Company has included in weighted average common shares
2,923,273 shares for the year ended December 31, 2002 earned by Mr. Zubair Kazi
but not yet issued (see Note 10). Potential dilutive securities consisted of
outstanding stock options and convertible preferred stock and common stock
purchase warrants.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, Financial Accounting Standards Board (FASB) issued Statement No.
143 (SFAS No. 143), "Accounting for Asset Retirement Obligations," effective for
fiscal years beginning after June 15, 2002. The Statement requires entities to
record the fair value of a liability for an asset retirement obligation in the
period in which it is incurred. When the liability is initially recorded, the
entity capitalizes a cost by increasing the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its present value each
period, and the capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement. The
adoption of SFAS No. 143 is not expected to have a material effect on the
Company's financial position or results of operations.

In April 2002, FASB issued Statement No. 145 (SFAS No. 145), "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" effective on or after May 15, 2002. This Statement rescinds SFAS
No. 4 and an amendment of that Statement, and SFAS No. 64. This Statement also
rescinds SFAS No. 44. This Statement amends SFAS No. 13, to eliminate an
inconsistency between the required accounting for certain lease modifications
that have economic effects that are similar to sale-leaseback transactions. This
Statement also amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings, or describe their applicability
under changed conditions. The adoption of SFAS No. 145 did not have a material
effect on the Company's financial position or results of operations.

In June 2002, FASB issued Statement No. 146 (SFAS No. 146), "Accounting for
Costs Associated with Exit or Disposal Activities," effective for activities
that are initiated after December 31, 2002, with early application encouraged.
This Statement addresses financial


                                      F-11
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The adoption of
SFAS No. 146 is not expected to have a material effect on the Company's
financial position or results of operations.

In December 2002, FASB issued Statement No. 148 (SFAS No. 148), "Accounting for
Stock-Based Compensation -- Transition and Disclosure -- An Amendment of FASB
Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for
Stock-Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. The
Company is required to follow the prescribed format and provide the additional
disclosures required by SFAS No. 148 in its annual financial statements for the
year ended December 31, 2002 and must also provide the disclosures in its
quarterly reports containing condensed financial statements for interim periods
beginning with the quarterly period ended March 31, 2003. The adoptionof SFAS
No. 148 is not expected to have a material effect on the Company's financial
position or results of operations.

In November 2002, the FASB issued Interpretation No. 45 ("FIN No. 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 expands on the
accounting guidance of Statements No. 5, 57, and 107 and incorporates without
change the provisions of FASB Interpretation No. 34, which is being superseded.
FIN No. 45 will affect leasing transactions involving residual guarantees,
vendor and manufacturer guarantees, and tax and environmental indemnities. All
such guarantees will need to be disclosed in the notes to the financial
statements starting with the period ending after December 15, 2002. For
guarantees issued after December 31, 2002, the fair value of the obligation must
be reported on the balance sheet. Existing guarantees will be grandfathered and
will not be recognized on the balance sheet. The Company has determined that
there has been no impact due to the application of FIN No. 45 on our financial
position and results of operations.

NOTE 2--GOING CONCERN

During 2002 the Company was able to obtain new financing that allowed it to
repay the borrowings under the former line of credit. As of December 31, 2002
the Company is in compliance with 'the loan covenants under the new loan
agreement. Additionally, management has introduced several new products and
advertising campaigns in order to increase revenues and reverse the trend of net
losses in 2002 and prior years. Although management believes that progress was
made during 2002 on issues affecting the Company's ability to continue as a
going concern, the Company has experienced recurring net losses, has negative
working capital at December 31, 2002 and faces potential significantly adverse
litigation (Note 10). These conditions give rise to substantial doubt about the
Company's ability to continue as a going concern.

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of


                                      F-12
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

business. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flows to meet
its obligations on a timely basis.

The Company is continuing its efforts to raise both debt and equity financing.
However, there can be no assurance that the Company will be able to service
additional financing, or that if such financing is available, whether the terms
or conditions would be acceptable to the Company.


                                      F-13
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

NOTE 3 -- RECEIVABLES

As revenues are generally paid with credit cards and thereby collected at the
time of shipment, the Company does not record trade accounts receivable.
Receivables consist of the following:

<TABLE>
<CAPTION>
                                                                         December 31,
                                                                ----------------------------
                                                                     2002            2001
                                                                ------------    ------------

<S>                                                             <C>             <C>
Credit card deposits in transit                                 $    303,746    $    239,618

Miscellaneous receivables                                             68,265          87,465
                                                                ------------    ------------

                                                                $    372,011    $    327,083
                                                                ============    ============

NOTE 4 -- INVENTORIES
</TABLE>
<TABLE>
<CAPTION>
Inventories consist of the following:                                    December 31,
                                                                ----------------------------
                                                                     2002            2001
                                                                ------------    ------------

<S>                                                             <C>             <C>

Work in progress                                                $  9,520,527    $  9,524,882
Finished goods                                                       588,586         654,759
Sales aids                                                            15,185          25,137
                                                                ------------    ------------
                                                                  10,124,298      10,204,778
Less reserve for potentially unsaleable inventories (Note 12)     (4,000,000)       (900,000)
                                                                ------------    ------------

                                                                   6,124,298       9,304,778
Less current portion                                              (2,300,000)     (2,000,000)
                                                                ------------    ------------
                                                                $  3,824,298    $  7,304,778
                                                                ============    ============
</TABLE>

During 2001 and 2000, the Company curtailed the volume of algae harvested.
Accordingly, the Company experienced excess processing capacity that was not
fully utilized. As a result, the Company incurred costs aggregating $4.1 million
and $4.5 million, representing negative volume variances in 2001 and 2000,
respectively. During 2002 the Company resumed the harvest of algae. Accordingly,
the negative volume variance was reduced to $1.6 million in 2002. Such costs are
included in cost of sales for 2002, 2001 and 2000.

Certain of the Company's inventory is marketable only to the agricultural
market. Sales in this market have been less than anticipated and management has
recognized that an impairment of inventory may exist. The Company has
established reserves of $4,000,000 and $900,000 at December 31, 2002 and 2001,
respectively.

Inventories that are in excess of the following year's estimated sales have been
classified as long-term inventories.



                                      F-14
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

NOTE 5 -- PROPERTY AND EQUIPMENT

Property and equipment consist of the following:          December 31,
                                                 ------------------------------
                                                   2002                2001
                                               ------------        ------------

Land and improvements                          $     17,817        $     17,817
Buildings and improvements                        6,254,180           6,403,785
Furniture and fixtures                              741,754             752,921
Machinery and equipment                           8,894,246           8,228,088
                                               ------------        ------------
                                                 15,907,997          15,402,611
Less accumulated depreciation                    (9,106,608)         (8,083,928)
                                               ------------        ------------
                                               $  6,801,389        $  7,318,683
                                               ============        ============

Depreciation expense aggregated $1,111,629, $2,386,418 and $2,459,190, for 2002,
2001 and 2000, respectively.

The Company has ceased utilizing the harvest site on the A canal of the Klamath
Irrigation District (KID) for an indefinite period of time. The Company will
continue to utilize the building on the adjacent leased property and certain of
the equipment in other production areas and will continue to record depreciation
expense for these assets. Some of the equipment located on the canal site cannot
be relocated or used for other purposes and has been written-off.

Idle property and equipment consists of machinery and equipment with a carrying
value of $1,382,570 and $2,271,305, a cost of $9,981,028 and $7,338,735, and
accumulated depreciation and valuation reserve of $8,598,458 and $5,067,430 at
December 31, 2002 and 2001, respectively. The Company is actively attempting to
sell these assets and as a result, the assets have been written down to their
fair value and no depreciation has been recorded on these assets since the date
they were identified as being held for sale. The assets held for sale have not
been separately classified as "Held for Sale" in accordance with SFAS No. 144
because management has concluded that, while a sale is probable, a transfer and
completed sale is not likely to occur within one year.

The financial statements for the years ended December 31, 2002 and 2001 include
adjustments due to the impairment of fixed assets of $873,529 and $2,589,940,
respectively.

NOTE 6 -- OTHER ASSETS

<TABLE>
<CAPTION>
Other assets consist of the following:                                  December 31,
                                                                     -------------------
                                                                       2002       2001
                                                                     --------   --------
<S>                                                                  <C>        <C>
Trademarks, net of accumulated amortization of $38,978 and $33,623   $ 57,196   $ 57,302
Deposits                                                               55,441     75,466
Restricted cash                                                       198,963    159,324
Loan Fees                                                             235,246         --
                                                                     --------   --------
                                                                     $546,846   $292,092
                                                                     ========   ========
</TABLE>

Amortization expense aggregated $51,097, $221,250 and $888,480 for 2002, 2001
and 2000, respectively


                                      F-15
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

NOTE 7 -- LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                       --------------------------
                                                                                          2002            2001
                                                                                       -----------    -----------

<S>                                                                                    <C>            <C>
Receivable loans, advances and inventory loans, secured by substantially all of
   the assets of the Company, interest at the prime rate plus 2.5% per annum
   (7.5% at
   December 31, 2001), repaid in 2002                                                  $        --    $   633,852

Term loans and equipment acquisition loans, secured by substantially all of the
   assets of the Company, interest at prime rate plus 2.75% (7.75% at December
   31,
   2001) and repaid in 60 monthly installments                                                  --      1,213,344


Term loan secured by substantially all of the assets of the Company, effective rate
   of interest is 14%.  Payment is due in full in June 2003.  It can be extended for
   one year at that date if the Company is in compliance with all loan covenants         2,100,000             --

Note payable to a nonprofit organization, secured by rights of property and
   leasehold improvements, with annual payments of $75,000 including interest at
   6.25%, maturing July 19, 2005 (see Note 10)                                             313,790        313,790

Note payable to vendor issued in exchange for cancellation of accounts payable
   to vendor. Note requires 37 monthly payments of $50,000 that began on October
   11, 2002 and a final payment of $35,917 due on November 1, 2005, with an
   implied
   discount rate of 11.13%                                                               1,478,275             --
                                                                                       -----------    -----------

                                                                                         3,892,065      2,160,986

Less current portion                                                                    (2,872,145)    (2,160,986)
                                                                                       -----------    -----------

                                                                                       $ 1,019,920    $        --
                                                                                       ===========    =========
</TABLE>

In June 1999, the Company entered into a $15 million Line of Credit Agreement
with a financial institution. The agreement has four parts: Receivable Loans,
Advances and Inventory Loans, Term Loans, and Equipment Acquisition Loans. The
Receivable Loans and the Advances and Inventory Loans incurred interest at a
rate equal to the prime rate plus 2.5% per annum and expired June 30, 2002. The
Term Loans and Equipment Acquisition Loans incurred interest at a rate equal to
the prime rate plus 2.75% and were repayable in monthly installments.

In September 2002, the Company's financing facility with Coast Business Credit
was purchased by and assigned to La Jolla Loans, Inc. In connection with this
transaction, Coast Business Credit's security interest in real and personal
property and all associated security and loan documents were assigned to La
Jolla Loans. At the same time, the Company entered into a Forbearance and
Extension Agreement with La Jolla Loans. Under the terms of the forbearance
agreement, La Jolla Loans will not declare a default until June 30, 2003, when
the entire principal is due. The forbearance period may be extended to June 30,


                                      F-16
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

2004 if the Company pays a $75,000 renewal fee. Interest of $24,500 at an
effective rate of 14% is payable monthly along with additional monthly impound
payments of approximately $65,000 to be used to pay insurance, property taxes
and lease payments on collateralized property during the forbearance period. La
Jolla Loans has also agreed to defer, during the forbearance period, the
difference between the minimum interest payment of $45,000 under the agreement
with Coast Business Credit and the $24,500 minimum interest payments under the
forbearance agreement. If the Company fully performs under the terms and
conditions of the forbearance agreement and no default occurs during the
forbearance period, La Jolla Loans will release the Company from any obligation
to pay minimum monthly interest payments in excess of $24,500. The outstanding
principal balance at December 31, 2002 is $2,100,000. The Company is in
compliance with all loan covenants as of December 31, 2002.

The Company has classified all outstanding debt to the lender as a current
liability.

NOTE 8 -- INCOME TAX

The Company is subject to Federal income taxes subsequent to June 20, 1999. As
the Company has experienced operating losses for the years 2002, 2001 and 2000,
no income tax has been provided for.

At December 31, 2002, the Company had state and federal net operating loss
carryforwards available to offset future taxable income of approximately $11.5
million that expire at various dates through 2022.

The primary components of temporary differences which compose the Company's net
deferred tax assets and liabilities as of December 31, 2002 and 2001 are as
follows:

                                                           December 31,
                                                   ----------------------------
                                                       2002            2001
                                                   -----------      -----------

Deferred tax assets (liability):
   Inventory adjustments                           $ 1,600,000      $   645,000
   Accrued expenses                                    211,000          308,000
   Litigation reserve                                  595,000          633,000
   Other                                                18,000           38,000
                                                   -----------      -----------

Current deferred tax assets, net                     2,424,000        1,624,000
                                                   -----------      -----------

Net operating losses and credits                     4,150,000        3,790,000
Property and equipment                                (695,000)        (464,000)

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

Non-current deferred tax assets, net                 4,845,000        3,326,000
                                                   -----------      -----------

Net deferred tax assets                              7,269,000        4,950,000
Less: valuation allowance                           (7,269,000)      (4,950,000)
                                                   -----------      -----------

                                                   $        --      $        --
                                                   ===========      ===========


                                      F-17
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

The Company annually evaluates the realization of the net deferred tax asset,
taking into consideration prior earnings history, projected operating results
and the reversal of temporary tax differences. At December 31, 2002 and 2001,
the Company recorded a valuation allowance as a result of the uncertainty
relating to the realizability of the net deferred tax asset.

NOTE 9 -- STOCK OPTIONS AND WARRANTS

WARRANTS

On August 6, 1999, the Company issued warrants to purchase shares of its common
stock to the following parties for their services as follows:

                                         Number of        Exercise
                                         Warrants          Price           Term
                                         --------         -------         ------

Andromeda                                 100,000         $1.3337         5 year
Hateley & Hampton                         300,000         $0.0749         5 year
Wharton Capital                           267,000         $0.0749         5 year

On October 19, 1999, the Company sold 1,157,895 shares of its common stock with
warrants to purchase 1,157,895 shares of its common stock in a private placement
to Mr. Zubair Kazi (see Note 12) for $1,515,625, net of fundraising costs of
$134,375. In connection with this transaction, the Company also issued warrants
to purchase 150,000 and 100,000 shares of its common stock to Pacific Basin and
Richard Wade, respectively. Each warrant has a 5-year term and an exercise price
of $1.425 per share. The Company also issued 50,000 shares of its common stock,
at fair market value which amounted to $134,375, to Pacific Basin Capital for
their services. Warrant activity during the years ended December 31, 2001, 2000
and 1999 is summarized as follows:

                                                  Shares              Price
                                                ----------       ---------------

Outstanding at December 31, 1999                 2,268,324       $ 0.075 - 84.65

      Granted                                           --                    --
                                                ----------       ---------------

Outstanding at December 31, 2000                 2,268,324         0.075 - 84.65

      Granted                                           --                    --
      Expired                                     (128,926)                   --
                                                ----------       ---------------

Outstanding at December 31, 2001                 2,139,398         0.075 - 84.65
      Granted                                           --                    --
      Expired                                           --                    --
                                                ----------       ---------------

Outstanding at December 31, 2002                 2,139,398       $ 0.075 - 84.65
                                                 =========       ===============

The above warrants have a weighted average remaining contractual life of 1.6
years.


                                      F-18
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

1996 STOCK INCENTIVE PLAN

In June 1996, the Company adopted the 1996 Stock Incentive Plan (the 1996 Plan)
pursuant to which the Company's Board of Directors may grant stock options to
officers, key employees, and consultants. The 1996 Plan authorizes grants of
options to purchase up to 64,504 shares of authorized but unissued common stock.
Stock options are granted with an exercise price equal to the stock's fair
market value at the date of grant. The stock option activity is as follows:

                                                    Shares            Price
                                                    ------       ---------------

Outstanding, December 31, 1999                      25,802       $ 3.05 - 142.49
      Granted                                           --                    --
      Expired                                           --                    --
      Exercised                                         --                    --
                                                    ------       ---------------

Outstanding, December 31, 2000                      25,802         3.05 - 142.49
      Granted                                           --                    --
      Expired                                           --                    --
      Exercised                                         --                    --
                                                    ------       ---------------

Outstanding, December 31, 2001                      25,802         3.05 - 142.49
      Granted                                           --                    --
      Expired                                           --                    --
      Exercised                                         --                    --
                                                    ------       ---------------

Outstanding, December 31, 2002                      25,802       $ 3.05 - 142.49
                                                    ======       ===============

The above options have a weighted average remaining contractual life of 2.5
years.

In addition to the options provided for in the 1996 Plan, in early 1996, 13,131
options were issued to certain officers, employees and consultants at an
exercise price of $57.84 per share, each with a five-year term. All the
outstanding options related to these grants expired in 2001. The Company granted
691 options to certain former directors on September 25, 1996 to replace certain
options, which terminated upon resignation of such directors in connection with
the Company's initial public offering. These 691 options have an exercise price
of $65.11 per share and a ten-year term. During 1998, 1,382 stock options were
issued to a director, at an exercise price of $98.65 per share and a ten-year
term. During 1998, 4,607 stock options were issued to a consultant at an
exercise price of $14.98 and a five-year term. Outstanding options at December
31, 2002 have a weighted average remaining contractual life of 1.54 years.

THE 2000 STOCK INCENTIVE PLAN

On February 14, 2000, the Board of Directors approved a new stock incentive plan
(the 2000 Plan). The 2000 Plan is for the benefit of employees, consultants and
non-employee directors of the Company and its subsidiaries. The maximum number
of shares with respect to which stock options or stock appreciation rights may
be granted or awarded as restricted stock under the 2000 Plan is 700,000 shares
in aggregate of common stock of the Company.


                                      F-19
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

The 2000 Plan provides for options to purchase 15,000 shares of common stock of
the Company to be automatically granted to each Non-Employee Director who was
serving as a member of the Board of Directors on the date the 2000 Plan was
adopted (Initial Non-Employee Director Options). The 2000 Plan also provides for
10,000 shares of common stock of the Company to be automatically granted to each
Non-Employee Director, who is serving on or elected to the Board of Directors at
each annual meeting of the stockholders of the Company after the date the 2000
Plan is adopted (Regular Non-Employee Director Options). The options issued are
Non-Qualified Options.

During December 2002, 45,000 options were granted to Non-Employee Directors
under the 2000 Plan. These options have an exercise price of not less than 100%
of the fair market value of the stock at the date of the grant.

(PRO FORMA DISCLOSURE

The pro forma net loss and net loss per share as if compensation cost was
computed based on the fair value at the grant date computed under SFAS No. 123
for employee stock options has not been presented because it is not
significantly different from the historical results.

NOTE 10 -- COMMITMENTS AND CONTINGENCIES

MICROCYSTIS

As a result of certain conditions, Microcystis, a toxic algae occasionally
blooms in Klamath Lake at the same time blue-green algae is harvested. The
Company regularly tests the algae it harvests for possible contamination. Algae
that does not meet the Company's standards is not used in products for human or
animal consumption.

In 1997, the Oregon Department of Agriculture issued an administrative rule that
created a standard of 1 microgram per gram (1 ppm) of Microcystis in products
for human consumption that contain blue-green algae. The Oregon Department of
Agriculture has raised no questions about the Company's products under this
rule.

In some years, the presence of Microcystis may reduce the quantity of algae that
the Company can harvest.

LITIGATION

On February 6, 1998, Oregon Freeze Dry, Inc. (OFD), a vendor, filed a complaint
against the Company alleging that the Company wrongfully terminated its contract
with OFD. On December 20, 2002 a settlement agreement between the parties was
signed and the lawsuit was dismissed. The parties agreed that the Company will
pay $1,885,917 to OFD. Payments are to be $50,000 per month. The settlement has
been accounted for in terms of SFAS I5 and as a result the original payable has
been retained as the liability and interest has been imputed on the note at
11.13% per annum. $1,478,275 is included in notes payable at December 31, 2002.
As of December 31, 2002, the Company is current on its payment obligations to
OFD. Additionally, the Company is obligated to use Oregon Freeze Dry, Inc for
all of its freeze-drying needs. If the Company chooses to use a bulk drying
method other than freeze drying, then the Company will


                                      F-20
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

pay a fee of 25 cents per pound to OFD for a period of up to 10 years, but not
to exceed $2,500,000 for each pound of algae dried using such alternative
method.

On January 16, 2001, the Company filed an action against Glenn Foods in the
Circuit Court of Klamath County alleging, among other things, that Glenn Foods
breached an agreement with the Company for the manufacture of SBG Square Meal
Bars and BG Bites by failing to produce products according to Company
specifications, refusing to turn over the formula, and failing to refund the
money. The Company is seeking monetary damages of approximately $226,345 for all
causes specified in the complaint. The matter is presently in the discovery
phase and no trial date has been scheduled.

In October of 2001, Teachers for Truth in Advertising filed an action in the
Superior Court of Tulare County, California alleging that Cell Tech Products,
Inc. engaged in unfair business practices and misleading advertising. In January
2003, the Superior Court of Tulare County issued a Tentative Decision stating
that Teachers for Truth in Advertising was entitled to an injunction prohibiting
Cell Tech from making deceptive representations in its advertising or literature
disseminated in California and ordering Cell Tech to refund the purchase price
paid by California customers for Cell Tech's algae products from the date four
years prior to the filing of the action through the trial date in November 2002.

In response to the Tentative Decision, Cell Tech's counsel filed a Request for
Statement of Decision on January 23, 2003. On February 20, 2003, the Superior
Court issued its Final Decision, which essentially affirms the Tentative
Decision. Plaintiff has submitted a proposed judgment to the court consistent
with the Tentative and Final Decisions. Upon entry of judgment, Cell Tech
intends to file post-judgment motions and an appeal. The refund of California
customers, if required to be made in accordance with the Final Decision, will be
in an amount that would have a material adverse impact on Cell Tech's business
and financial position.

On January 28, 2002, the Company terminated its lease with Klamath Cold Storage,
Inc. ("KCS"), a corporation owned by the principal shareholders, Daryl Kollman
and Marta Carpenter. On February 19, 2002, Daryl Kollman, on behalf of himself
and as an officer of KCS, filed two separate Notice of Claim of Lien upon
Chattels (the "Possessory Liens") against the Company and its wholly owned
subsidiary, NAC and/or NEC, in the County of Klamath, State of Oregon, claiming
a lien upon them by alleging among other things, that the Company owes him and
Marta Carpenter approximately $508,246 in past due rent and that the Company
owes KCS approximately $576,232 in past due rent for the use of certain real
property owned by him and Marta Carpenter, the Company's President and Chief
Executive Officer, and KCS. Through the Possessory Liens, Daryl Kollman is
claiming that the Company is not entitled to remove any of our property from the
premises and that the properties will be subject to foreclosure proceedings. The
Company does not believe that Daryl Kollman will prevail in this matter and has
retained legal counsel to represent the Company.

On June 6, 2002, Mr. Kollman filed a lawsuit in the name of KCS in the Circuit
Court for the state of Oregon to evict Cell Tech from property owned by KCS. In
this lawsuit, Mr. Kollman also alleges that Cell Tech has not paid approximately
$1,050,000 in rent. Marta Carpenter is seeking to stop the evictions and the
Company is resisting Mr. Kollman's attempt to evict it. The Company intends to
vigorously defend this lawsuit. The Company cannot predict the amount of


                                      F-21
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

loss, if any, which could result from this lawsuit, but an unfavorable outcome
could have a material adverse impact upon its financial condition.

On March 27, 2002, the Nature Conservancy filed an action against Cell Tech in
the Circuit Court for the State of Oregon for Klamath County, alleging, among
other things, that Cell Tech's wholly owned subsidiary, The New Earth Company,
was in default on a promissory note and a trust deed. The Nature Conservancy was
seeking $375,000, the principal amount due under the promissory note, plus
interest and certain leasehold rights. The Company has previously recorded the
net present value of the promissory note, which has a balance of $313,790 and
has been included in the current portion of long-term debt in the December 31,
2002 consolidated balance sheet. An agreement was signed and the court action
dismissed in January 2003. The net effect of this will be to increase net income
during the first quarter of 2003 by $161,956.

On October 7, 2002, Daryl Kollman, one of Cell Tech's principal shareholders,
filed a lawsuit against Cell Tech and certain of its officers, directors and
counsel in the Circuit Court for the State of Oregon for Klamath County. The
complaint makes a number of individual and derivative claims. Mr. Kollman makes
two claims against Cell Tech. First, Mr. Kollman alleges that Cell Tech breached
an agreement to register its stock for public sale and seeks damages in an
amount to be proven at trial, but not less than $9,282,000. Second, Mr. Kollman
claims that Cell Tech conspired with Marta C. Car
penter (formerly known as Marta
C. Kollman), a principal shareholder and the President, Chief Executive Officer
and a director of Cell Tech; Donald P. Hateley, Chairman of the Board of
Directors of Cell Tech; and others to prevent the registration of Mr. Kollman's
stock and to cause other financial injury to him. As a result, Mr. Kollman seeks
$32,931,976 against the defendants. Mr. Kollman also seeks millions of dollars
in damages on his own behalf and on behalf of Cell Tech against Marta Carpenter,
Mr. Hateley and others based on a variety of legal theories, many of which
either have been or are being litigated in other cases. The Company intends to
vigorously defend the direct claims asserted in this lawsuit, and is currently
evaluating the claims that Mr. Kollman has asserted on Cell Tech's behalf. The
Company cannot predict the amount of loss, if any, that could result from this
lawsuit, but does not believe that an unfavorable outcome would have a material
adverse impact upon its financial condition, cash flow, or results of
operations.

The Company is also involved in various legal matters arising in the normal
course of business. In the opinion of management, the Company's liability, if
any, arising from legal proceedings related to these matters is not expected to
have a material effect on the consolidated financial statements of the Company.

LIEN ON COMPANY STOCK

The Company stock owned by majority shareholders Daryl J. Kollman and Marta C.
Carpenter, is the subject of a tax lien filed by the Internal Revenue Service
for income taxes due from them arising from taxable income attributed from the
Company. The lien is subordinated in favor of the lender for the Term Loan (Note
7).


                                      F-22
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

DISPUTE BETWEEN PRINCIPAL SHAREHOLDERS

Daryl Kollman and Marta C. Carpenter, shareholders who together own
approximately 82% of our outstanding shares of common stock, divorced during
2002. Daryl Kollman and Marta Carpenter jointly, and their affiliate Klamath
Cold Storage Co., are lessors of substantially all of our facilities, including
office space, processing and freezer storage space. Although one lease is in
effect until 2005, we lease the rest of these facilities on a month-to-month or
year-to-year basis. The Court ruled Daryl Kollman and Marta Carpenter's joint
ownership in these real property assets will be divided equally in each property
and that they must sell the properties and improvements to pay the indebtedness
to the Internal Revenue Service. The disposition of these properties pursuant to
the divorce could have an adverse or disruptive effect on our operations, if the
party who purchases a particular property elects to significantly increase rents
or terminate any such lease arrangement at the end of the then current lease
term. In addition, compliance with discovery requests may also have a disruptive
effect on our business and operations, and it may be necessary for our Chief
Executive Officer, Marta Carpenter, to spend a portion of her time devoted to
handling matters related to the divorce decree. Moreover, Daryl Kollman is no
longer actively involved in management and has been unwilling to execute
personal guarantees on our behalf, as he has done in the past. On May 14, 2001,
Marta Carpenter petitioned the Circuit Court for the State of Oregon with a
motion seeking, among other court orders, to enjoin Daryl Kollman from
interfering with any future loan applications of Marta Carpenter or us and a
self executing judgment provision whereby the court would sign a loan
application on behalf of Daryl Kollman. The court subsequently held that Daryl
Kollman is to cease and desist from any such endeavors of interfering with our
loan applications during the pendency of the dissolution proceedings and is
prohibited from writing letters or communicating orally with any lending
institutions unless requested to do so by the institution. The court also held
that Daryl Kollman, if presented with loan documents to sign and if he objects
to those documents in form or content, he must first raise it with the court.

On January 29, 2002, the Court issued its written Order after the matter was
heard before the court at trial on December 10, 11, and 12, 2001. The Court
ruled that Marta Carpenter and Daryl Kollman were each entitled to an equal
division of their respective stock ownership in our Company, thus resulting in
no change in our current ownership. Any remaining proceeds from the sale of real
estate after the payment of Federal and State taxes applicable to the sale will
be shared equally.

The Company does not believe the Court Order issued on January 29, 2002, will
have a material impact on our business since we believe that we can maintain our
favorable leases in the event of the sale of the properties or provide for an
adequate transition to other properties for the orderly continuation of our
business.

COVENANTS RELATED TO THE PRIVATE PLACEMENT TO MR. ZUBAIR KAZI

In connection with the sale of 1,157,895 common shares to a private investor in
1999, the Company made certain promises to the investor. In the event that the
consolidated shareholders' equity of the Company is less than $20,000,000 at
December 31, 1999 and the first reset date (see below), the Company shall
immediately issue to Mr. Zubair Kazi additional common stock and warrants. The
amount shall equal 1,157,895 multiplied by the percentage by which the
shareholders' equity is less than $20,000,000. The Company did not maintain a
shareholders' equity of $20,000,000 at December 31, 1999 and as a result,
681,798 shares and 681,798 warrants were due to Mr. Kazi as of December 31,
2000. As of December 31, 2002, there were 2,923,273


                                      F-23
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

shares and 2,923,273 warrants due to Mr. Kazi. The accrued liability related to
the issuance of these shares and warrants is $568,359and has been accounted for
in the financial statements.

The shares sold were to be registered within 120 days of the sale. Additional
penalties will accrue until such time that the shares are registered.

Also, if within one year after October 19, 1999 the Company sells its common
stock at a price less than $1.425 per share in an event other than in a
registered underwriting, the Company shall immediately issue to Mr. Zubair Kazi
such additional shares of common stock and warrants so that Mr. Zubair Kazi
maintains his percentage shareholdings as if he had purchased shares of common
stock at the reduced purchase price. The Company did not sell any common stock
during the one year period ended October 19, 2000 or for the year ended December
31, 2000.

The Company is obligated, upon the effective date of its' next registration
statement (First reset date), to issue additional purchased securities in
accordance with the following reset rights:


                                      F-24
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

-     If the ratio of $1.425 per share divided by the average closing bid price
      for the last twenty trading days prior to the first reset date (the first
      reset ratio) is greater than the ratio of $1.425 divided by the average
      closing bid price for the last twenty days prior to the execution of the
      Term Sheet, or September 13, 1999 (the Initial Ratio), on the first reset
      date, then the Company shall issue to the investor additional purchased
      securities so that the initial ratio and the first reset ratio are equal
      and pursuant to the following formula:

      o     Amount of Additional Purchased Securities = ((First Reset
            Ratio)/(Initial Ratio)-1) times 1,157,895.

-     In addition, if the investor holds any Purchased Warrants for the period
      covered by the last three reset dates, the exercise price of these
      Purchased Warrants shall be reduced by the following formula:

      o     Exercise Price of Purchased Warrants = ((Initial Ratio)/(First Reset
            Ratio)) times $1.425.

-     The investor is entitled to five additional reset dates which will occur
      as follows:

      o     The next three reset dates will occur each three months after the
            first reset date.
      o     The next two subsequent reset dates will occur each six-month period
            thereafter.

Since the Company has not filed its first registration statement, the first
reset date has not yet occurred.

LEASES

The Company has noncancelable operating leases (Note12), primarily for
facilities space, office equipment and phone systems, which expire over the next
five years and thereafter. Future minimum lease payments under operating leases
are summarized as follows:

Years ending December 31,                                                Amount
-------------------------                                               --------

      2003                                                              $157,322
      2004                                                               101,863
      2005                                                                54,300
Thereafter                                                                 3,000
                                                                        --------

                                                                        $316,485
                                                                        ========

Rent expense for 2002, 2001 and 2000 aggregated $841,712, $1,178,496 and
$1,366,149, respectively.

NOTE 11 -- EMPLOYEE BENEFIT PLAN

Effective June 1, 1994, the Company established a 401(k) Employee Savings Plan
which allows eligible employees to contribute up to 15% of their compensation
annually. The plan allows for Company matching at the discretion of management.
Each employee receives a pro rata allocation of the discretionary matching based
on the employee's compensation in relation to the


                                      F-25
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

compensation of all participants entitled to profit sharing contributions. The
Company matching aggregated $47,459, $52,614 and $60,134 in 2002, 2001 and 2000,
respectively.


                                      F-26
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

NOTE 12 -- RELATED PARTY TRANSACTIONS

The lease agreements described and summarized in Note 12 include certain
building and equipment leases in which the lessors are shareholders of the
Company. Rental payments to the shareholders for 2002, 2001 and 2000 aggregated
$766,910, $1,127,855 and $1,149,528, respectively.

The amount payable to a related party at December 31, 2002 and 2001 is due to
the President of the Company and relates to unpaid rent on properties owned by
the President.

The Company also received management fees and other income of $192,762 and
$196,218 from its shareholders during 2002 and 2001, respectively, which is
included in other income in the consolidated statement of operations.

The Company paid consulting fees to a director of $31,873, $32,500 and $32,500
during 2002, 2001 and 2000, respectively.

NOTE 13 -- OTHER INCOME

Other income insists of the following:

                                                  Years ended December 31,
                                            -----------------------------------
                                               2002         2001         2000
                                            ---------    ---------    ---------

August celebration sales                    $  18,024    $  16,058    $  27,750
Genealogy fee income                           74,811      102,924      163,648
Interest income                                32,831       37,981       57,507
Miscellaneous income (expense)                208,526      313,846      286,916
Management fee income from a related party    192,762      196,217      195,917
Stock penalties                              (243,120)     (75,239)    (250,000)
Gain (loss) on disposal of assets               1,827       15,175      (60,693)
                                            ---------    ---------    ---------
                                            $ 285,661    $ 606,962    $ 421,045
                                            =========    =========    =========

NOTE 14 -- CONCENTRATION OF CUSTOMERS AND SUPPLIERS

No customers accounted for more than 10% of sales during the years ended
December 31, 2002, 2001 and 2000. One vendor supplied approximately 45%, 55% and
27% of the products that the Company purchased for the years then ended.


                                      F-27
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                FOR YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

NOTE 15 -- QUARTERLY RESULTS (UNAUDITED)

Quarterly results for the years ended December 31, 2002 and 2001 are reflected
below:

<TABLE>
<CAPTION>
                                                     FIRST          SECOND         THIRD(A)      FOURTH(B)
                                                     -----          ------         --------      ---------
<S>                                               <C>            <C>            <C>            <C>
2002
----

Revenue                                           $ 7,105,704    $ 6,755,115    $ 6,450,651    $ 5,882,277
Operating income/(loss)                           $   141,410    $     2,867    $(2,960,149)   $  (702,129)
Net income/(loss)                                 $   109,073    $    52,487    $(2,971,264)   $  (687,683)
Net income/(loss) per share - basic and diluted   $       .01    $       .01    $      (.23)   $      (.06)

2001
----

Revenue                                           $ 8,062,064    $ 7,603,248    $ 7,278,704    $ 7,068,060
Operating loss                                    $  (935,474)   $  (706,956)   $  (437,693)   $(2,919,954)
Net loss                                          $(1,048,261)   $  (748,594)   $  (423,908)   $(2,794,587)
Net loss per share - basic and diluted            $      (.09)   $      (.06)   $      (.04)   $      (.24)
</TABLE>

(a) Includes third quarter adjustments.

During the third quarter of 2002, the Company recorded an adjustment that
decreased its net income by $3,100,000. The adjustment was to record an
additional provision for unsaleable inventories.

(b) Includes fourth quarter adjustments.

During the fourth quarter of 2002, the Company recorded an adjustment that
increased its net loss by $873,529. The adjustment was a charge to Write-down
expense for the impairment of certain Property, Plant & Equipment.




                                      F-28
<PAGE>