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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A

            [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 each 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 Rule 12b-2 of the Act). Yes [   ] No [X]

     The aggregate market value of the 800,000 shares of registrant's voting
stock held by non-affiliates of the registrant as of June 30, 2002 (the last day
of the registrant's most recently completed second fiscal quarter) was
approximately $176,000 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 July 25, 2003, the latest practicable
date, was 13,974,087.

                       DOCUMENTS INCORPORATED BY REFERENCE

None.


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<CAPTION>


                      CELL TECH INTERNATIONAL INCORPORATED

                             FORM 10-K ANNUAL REPORT

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                TABLE OF CONTENTS
<S>                                                                                                             <C>


PART I............................................................................................................1


   ITEM 1.  BUSINESS..............................................................................................1

   Item 2.  Properties...........................................................................................16

   ITEM 3.  LEGAL PROCEEDINGS....................................................................................16

   Item 4.  Submission of Matters to a Vote of Securities Holders................................................17


PART II..........................................................................................................17


   ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................17

   Item 6.  Selected Financial Data..............................................................................19

   Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operation.................20

   ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..........................................30

   ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................................................31

   ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................31

PART III.........................................................................................................31


   Item 10. Directors and Executive Officers of the Registrant...................................................31

   Item 11.  Executive Compensation..............................................................................33

   Item 12.  Security Ownership of Certain Beneficial Owners and Management......................................38

   Item 13.  Certain Relationships and Related Transactions......................................................39

   ITEM 14. CONTROLS AND PROCEDURES..............................................................................39


PART IV..........................................................................................................40


   ITEM 15.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K...................................40


SIGNATURES.......................................................................................................44



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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:

o    management's  plans,  objectives and budgets for its future  operations and
     future economic performance;
o    capital budget and future capital requirements;
o    meeting future capital needs;
o    realization of any deferred tax assets;
o    the level of future expenditures;
o    impact of recent accounting pronouncements;
o    the outcome of regulatory and litigation matters; and
o    the assumptions  described in this report  underlying such  forward-looking
     statements.
o    Actual results and developments may materially  differ from those expressed
     in or implied by such statements due to a number of factors, including:
o    those described in the context of such forward-looking statements;
o    future product development and manufacturing costs;
o    changes in our incentive plans;
o    timely development and acceptance of new products;
o    the markets of our domestic and international operations;
o    the impact of competitive products and pricing;
o    the political,  social and economic climate in which we conduct operations;
     and
o    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.

                                       ii

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                                     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.
We divide our products 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.
We place these recruits beneath the recruiting Distributor in the "network" and
we refer to them 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

Unless otherwise specifically stated, references to "we" and "us" in this Form
10-K/A (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"). NEC is now an inactive corporation.

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(TM) Device in December 1997. In November 1998, we
announced that we were in 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,
because 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.

In March 1999, we concluded a settlement agreement with Scantek that terminated
the license for the technology used in the BreastAlert Device. We transferred
certain assets related to the licensed business to Scantek and we issued
additional shares of common stock 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 we 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 known 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). We completed the reorganization on August 6, 1999. On August 10, 1999,
we changed our name to Cell Tech International Incorporated.

                                       1
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Marta C. Carpenter and Daryl J. Kollman formed Cell Tech, Inc. and NEC 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, Ms.
Carpenter and Mr. Kollman formed NAC, 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, and our telephone number at that address is (541) 882-5406. Our
internet address is www.celltech.com, however, the information on our website
does not constitute part of this Annual Report on Form 10-K/A and is not
incorporated herein. You may obtain, free of charge, our annual, quarterly and
current reports, and any amendments thereto on the Securities and Exchange
Commission's website at www.sec.gov.

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.

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.

Due to the greater fragmentation that exists in the international nutritional
supplement market compared to the domestic market, 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

In the last several years, widely publicized reports and medical research
findings, indicating a correlation between the consumption of nutrients and the
reduced incidence of certain diseases, have heightened the public awareness of
the positive effects of nutritional supplements on health. The United States


                                       2
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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, questions about the efficacy and
safety of nutritional supplement may have and may continue to affect sales 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. The United
States Bureau of the Census, projects the 35-and-older age group of consumers,
which represents a large majority of the regular users of vitamin and mineral
supplements, 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:

o             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, NaturaLight(TM) (for
              healthy weight management), ImmuSun(TM) (for immune system
              support), Contain(TM) (for the relief of occasional heartburn) and
              OsteoSun(TM) (for healthy bone support) and we are actively
              working on introducing additional products.

o             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 (as defined
              below).

o             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.

o             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.

o             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 comply 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.

o             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 we target to


                                       3
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consumers interested 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-two products that we divide 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.

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

<S>                                                   <C>             <C>       <C>            <C>              <C>
                                                  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
Acidolphilus                                                         x
Bifudus                                                              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(TM)                                         X                        X
OsteoSun(TM)                                                                     X
ImmuSun(TM)                                                                      X
Contain(TM)                                                                      X
BG Bar                                                  X            X           X              X
PLANeT Food(R)                                                                                                  X
</TABLE>

DAILY HEALTH MAINTENANCE
o             SUPER BLUE GREEN(R) ALPHA SUN(R). Super Blue Green(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. Super Blue
              Green(R) Alpha Sun(R) also contains high concentrations of easily
              assimilated vital minerals. It is available in capsules and
              tablets.

o             SUPER BLUE GREEN(R) OMEGA SUN(R). Super Blue Green(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 Super Blue
              Green(R) 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.

o             CELL TECH ESSENTIALS. Cell Tech Essentials, named for our most
              essential products, is a repackaging of such products. It attains
              a new level of convenience and effectiveness and a new level of


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              value. Each bag contains 30 packets and each packet contains the
              following capsules: one Super Blue Green(R) Alpha Sun(R), one
              Super Blue Green(R) Omega Sun(R), one Acidophilus, one Bifidus,
              and two Super Blue Green(R) Enzymes.

o             NATURALIGHT(TM). NaturaLight(TM) 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 consumers can use this herbal supplement exclusively, or use
              it in concert with any other weight loss program. We believe that,
              combined with proper diet and exercise, NaturaLight(TM) 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.

o             SBGANYTIME. SBGAnytime supplies Super Blue Green(R) 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 Super Blue
              Green(R) Alpha Sun(R) and Super Blue Green(R) Omega Sun(R) Algae,
              orange juice, honey, and other natural sweeteners.

o             BG BAR. BG Bar is a food bar made with quality organic
              ingredients, fortified with sprouted grains, greens, and Super
              Blue Green(R) Algae. 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

o             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.

o             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.

o             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.

o             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.

o             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 Super
              Blue Green(R) Alpha Sun(R), adding specific vitamins and minerals
              many enzymes need for optimum functioning.

                                       5
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o             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.
o             SUPER Q10. Super Q10 contains Super Blue Green(R) Alpha Sun(R) 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

o             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.

o             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. We add Siberian ginseng
              to stimulate both mental and physical performance. This product is
              available in capsules or powder.

o             IMMUSUN(TM). A natural part of the human diet for thousands of
              years, the complex carbohydrate WGP(TM) beta glucan used in
              ImmuSun(TM) has been shown to fortify the immune system.

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

o             OSTEOSUN(TM). A new, natural, unique and scientifically proven
              non-calcium dietary supplement, formulated to promote bone
              health.1

POWDERED DRINKS AND SNACKS

o             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 Super Blue Green(R) Omega Sun(R) Algae blended
              into every scoop.

o             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. We designed this product to help enhance overall
              health, vitality and energy levels.

_________

1The Food and Drug  Administration  has not  evaluated  the  statements  we make
regarding any of our products. We do not intend any of our products to diagnose,
treat, cure, or prevent any disease.


                                       6
<PAGE>


ANIMAL AND PLANT FOOD

o             SUPER BLUE GREEN(R) ANIMAL FOOD. Super Blue Green(R) Animal Food
              is a blend of coarse-grade Super Blue Green(R) Alpha Sun(R) and
              Super Blue Green(R) 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.

o             PLANeT FOOD(R). We designed PLANeT FOOD(R) to add trace minerals
              and other components to soils. It is a mixture of volcanic rock
              dust from Colorado and algae from Klamath Lake for use on potted
              plants, lawns, gardens, and trees and for composting.

DISTRIBUTORS AND OUR NETWORK MARKETING SYSTEM

We distribute our products 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 ongoing
personal contact between retail consumers and Distributors, most of whom use our
products, strengthen sales of such products. Currently, we have 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
sponsored Distributor, 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. We call the first category a
"Distributor" and the other 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.

We compensate our Distributors 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." We refer to the Distributors
that a Distributor directly sponsors 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:

o             We reduced the personal volume percentage paid to Members 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.

                                       7
<PAGE>

     o    We reduced generation 4, 5, and 6 payout percentages to 3%, 2%, and 1%
          from 4%,  3%,  and 2%,  respectively.  We did not affect the titles of
          Amethyst, Ruby and Sapphire by this change.

The first level is "Member" and the highest level is "Executive." Distributors
may attain "Member" status by purchasing any product from us. 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 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 for us to pay 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, we only reduce their income that one month.

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

o             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. We base the percentages used to determine the
              bonus and the number of levels in the organization the Distributor
              receives bonuses upon on the individual's title with us. The
              standard bonus grants rebates to the Distributor as he consumes
              and sells our products to others.

o             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.

o             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. We offer motivation to participants in the form of recognition,
promotions, excursions and tours, which we intend 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.

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

                                       8
<PAGE>




DISTRIBUTOR SUPPORT

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

o             ASSOCIATIONS/TEAMS/ADVISORY BOARD. Several associations and teams
              support Distributors' efforts, including the Leadership Alliance,
              an association of those Distributors 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.

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

o             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.

o             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. We have introduced sixteen
new products 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.

We derive new product ideas 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 research,
consultants and others for ingredient research, development and formulation
services. When we identify a new product concept or when we must reformulate an
existing product for introduction into a new or existing market, we generally
submit the new product concept or reformulation 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(TM),
Contain(TM) and OsteoSun(TM), designed to compliment our existing product line
and began selling them to our Distributors in June 2002, October 2002 and
February 2003, respectively.



                                       9
<PAGE>


IMMUSUN(TM). ImmuSun(TM), 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(TM) 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(TM). Contain(TM)'s orange-flavored chewable tablets are made with a
superior combination of alginate (from seaweed), Super Blue Green(R) 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(TM) differs from similar products on the market because it is formulated
with enzymes to help reduce indigestion and also Contain(TM) includes Super Blue
Green(R) Omega Sun(R) algae for added nutritional value. Contain(TM) 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(TM) offers an ideal combination of beneficial
ingredients that can help alleviate the stressful effects of occasional
heartburn.

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

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

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.

                                       10
<PAGE>

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. Because 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:

     o    SCREENING.  We filter  fresh  algae  out of the  water  with fine mesh
          screens.

     o    PRIMARY SEPARATION.  Primary separators remove everything suspended in
          the lake water, which concentrates the algae by removing virtually all
          extracellular water.

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

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

     o    POWDERING AND BOTTLING.  We sift and grind the algae to a fine powder,
          which we can encapsulate or tabletize and seal 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

We package most products 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.

                                       11
<PAGE>

We do not have a registered trademark for the name "Cell Tech." As of the date
of this Annual Report on Form 10-K/A, no other person has claimed infringement
based on our use of the name "Cell Tech," but there can be no assurance that it
would not make such a claim 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, greater name recognition and financial resources than us.

In addition, consumers can purchase nutritional supplements 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.

Several companies 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 based on 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 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 we manufacture, distribute and sell our products.

                                       12
<PAGE>

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 we make it.

In January 2000, the FDA published a final rule that defines the types of
statements companies can make 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. Without prior FDA review, a product may not bear a claim that
it 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. To
date, the FDA has not issued a guidance document, and we have continued our
ongoing efforts to ensure that our 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 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 use of terminology
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 significant scientific agreement supports the claim
and the FDA pre-approves it.


                                       13
<PAGE>


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. We have
regularly measured, at various levels, the existence of Microcystis aeruginosa.
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
that we cannot use 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 therefore, may 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 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. After a review of our
revised compensation plan, 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. They design the licensing to maintain the standards of the
direct selling industry and to protect the consumer. Some provinces require
licenses for both our Distributors and us. We are in the process of obtaining
all of the required provincial or territorial direct sellers' licenses.

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.

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 the substantiation of any claims. 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.



                                       14
<PAGE>

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.
Consequently, 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. However, they could require: (1) the
reformulation of some products we may not able to reformulate; (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 the FTC. The legal requirements that apply to
network marketing organizations ensure the ultimate sale of products 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 we group it 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:
<TABLE>
<CAPTION>

<S>                                           <C>                       <C>                       <C>
(DOLLARS IN THOUSANDS)                        2001                      2001                      2000
                                              ----                      ----                      ----

United States                           $26,696        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%
                                        =======       ======      =======       ======      =======       ======

</TABLE>

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


                                       15
<PAGE>




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 stockholders
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 we lease the space from our shareholders and their affiliate at
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 us alleging that we wrongfully terminated a contract with it. On
December 20, 2002, the parties signed a settlement agreement and they dismissed
the lawsuit. The parties agreed that we will pay $1,885,917 to it. Payments are
to be $50,000 per month. No interest will accrue to this note as long as we are
timely in the note payments. $1,478,275 is included in notes payable at December
31, 2002. As of December 31, 2002, we are current on the payment obligations to
them. Additionally, we are obligated to use them for all of our freeze-drying
needs. If we chooses to use a bulk drying method other than freeze-drying, then
we will pay a fee of 25 cents per pound to them 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 the court has not set a trial
date.

In October of 2001, Teachers for Truth in Advertising filed an action in the
Superior Court of Tulare County, California alleging that we, erroneously sued
as 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 us from making deceptive representations in its
advertising or literature disseminated in California and ordering us to refund
the purchase price paid by California customers for our 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, our previous 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 agreed to mediate
this matter on May 9, 2003, before a retired Orange County, California Superior
Court judge, reached a confidential settlement, and have agreed to submit the
proposed confidential settlement to the Court for approval within 60 days. The
parties have filed a motion with the Court to approve the terms of the
confidential settlement, vacate the judgment and seal portions of the Court's
file. Should the Court fail to approve the terms of the confidential settlement,
and upon notice of entry of judgment, we intend to file post-judgment motions to
vacate the judgment and for new trial. Should the court deny those motions, we
intend to file an appeal. If we are required to make the refund to California
customers, in accordance with the final decision, it will be in an amount that
would have a material adverse impact on our 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 stockholders, Daryl Kollman
and Marta C. Carpenter. On February 19, 2002, Mr. 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


                                       16
<PAGE>

other things, that we owe him and Ms. 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 Ms.
Carpenter, our President and Chief Executive Officer, and Klamath Cold Storage,
Inc. Through the possessory liens, Mr. 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 Mr. 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 us in the
Circuit Court for the State of Oregon for Klamath County, alleging, among other
things, that our wholly owned subsidiary, The New Earth Company (which is now
inactive), 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. The parties signed a settlement agreement
and the court dismissed the action 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 SECURITIES HOLDERS.

None.

                                     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, the NASDAQ Small Cap Market delisted our common
stock and it 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, the NASD suspended trading in our common stock on the
OTC Bulletin Board because our 1934 Act filings were past due and the National
Quotation Bureau's Pink Sheets subsequently quoted our common stock. 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 you should not deem such quotations
to constitute an established public trading market.

                                   HIGH BID PRICE            LOW BID PRICE
                                   FOR PERIOD ($)           FOR PERIOD ($)
                                 --------------------      ------------------
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 July 31, 2003, 13,974,087 shares of our common stock were issued and
outstanding and approximately 141 stockholders of record held our stock.



                                       17
<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 Ms. Carpenter and Mr. 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 we should retain all of our earnings, if any, 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 defined by Regulation D of the Securities Act of 1933, as amended,
and did not involve a general solicitation. We effected the above transaction
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

We are obligated to issue to Mr. 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 June 30, 2003, we had not filed a
registration statement and consequently, Mr. Kazi was entitled to an additional
3,333,192 penalty shares of common stock and warrants. During the second quarter
of 2003, we issued to Mr. Kazi 3,333,192 shares of common stock and we converted
the accrued liability of $624,860 to equity. Warrants to purchase an additional
3,333,192 shares of common stock are also due to Mr. Kazi and have not yet been
issued .During the second quarter of 2003, an additional liability was
recognized under the agreement in the amount of $22,974 related to the issuance
of these shares and warrants, based on the fair value of the securities and has
been accounted for in our second quarter financial statements. We have accrued
and will continue to accrue additional penalties until the shares are
registered. The additional expense for the three months ended June 30, 2003, was
$22,974 and 222,092 shares and 222,092 warrants are issuable to Mr. Kazi.

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:

          o    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:

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

Kazi is entitled to five additional reset dates that 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 we have not yet filed our first registration statement, the first reset
date has not yet occurred.



                                       18
<PAGE>


EQUITY COMPENSATION PLANS

Below represents information concerning our equity compensation plans as of
December 31, 2002:
<TABLE>
<CAPTION>

                                                       (A)                   (B)                     (C)
<S>                                                    <C>                    <C>                    <C>
                                             -----------------------  ---------------------  ---------------------
                                                                                             NUMBER OF SECURITIES
                                                                                             AVAILABLE FOR FUTURE
                                             NUMBER OF SECURITIES TO    WEIGHTED-AVERAGE     ISSUANCE UNDER EQUITY
                                             BE ISSUED UPON EXERCISE    EXERCISE PRICE OF     COMPENSATION PLANS
                                             OF OUTSTANDING OPTIONS,  OUTSTANDING OPTIONS,   (EXCLUDING SECURITIES
                                               WARRANTS AND RIGHTS    WARRANTS AND RIGHTS    REFLECTED IN COLUMN (a))

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

Equity Compensation Plans
   Approved by Shareholders.............               25,802          $3.05 - $142.49            38,702
Equity Compensation Plans Not
   Approved by Shareholders.............              135,000           $0.15 - $0.50             565,000
                                                      -------                                     -------
Total...................................              160,802                                     603,702
                                                      =======                                     =======

ITEM 6.  SELECTED FINANCIAL DATA.

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

                                                                            Years ended December 31,
                                               ------------- ------------ ------------- ----------- ------------
                                                   2002         2001          2000         1999        1998
                                                   ----         ----          ----         ----        ----
($ in thousands, except per share data)
RESULTS OF OPERATIONS
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)         0.26
   Diluted                                           (0.27)       (0.47)        (0.26)      (0.45)         0.26
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      41,099       46,224
Current Liabilities                                   7,542        9,225        11,223       8,577       12,526
Total Liabilities                                     8,561        9,225        11,485      14,266        9,376
Shareholders' Equity                                  7,252       10,750        15,765      18,549       31,723
-------------------------
(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."

</TABLE>

                                       19
<PAGE>


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

From time to time, our representatives or we 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. We discuss these factors 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
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 15 of this Annual Report on Form 10-K/A, beginning on page
F-8. Note that our preparation of this Annual Report on Form 10-K/A 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 we estimate to generate by those assets are less than
the carrying amount of those items. We base our cash flow estimates on
historical results adjusted to reflect our best estimate of future market and
operating conditions. We reduce the net carrying value of assets not recoverable
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.

                                       20
<PAGE>

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. We pay commissions to our distributors as compensation for
sales and marketing activities and based on their personal sales volumes and the
sales of distributors they have recruited into our network. Accordingly, we
classify 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." We develop our assessment 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-two different products
intended to appeal to health-conscious consumers. We divide our products 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. We
directly relate the decrease in sales 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. We make sales of our food supplement products through a multi-level
marketing network of distributors, so we positively link sales with the number
of distributors.

                                       21
<PAGE>



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 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. We suspended this depreciation expense when
management made the decision 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 we did not record in 2002 was $1,144,370. In addition,
because of our harvesting algae in 2002, we have capitalized certain harvest
costs in ending inventory whereas in prior years when no harvesting of algae
took place, we expensed such costs. 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. We discuss the components of operating expenses below.

o             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.

o             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.

o             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.

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

o             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.

                                       22
<PAGE>

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 we owe to an investor for
$243,120. Interest expense decreased to $265,047 in 2002 from $622,235 in 2001.
This decrease was due to the assignment of our 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
because of the changes to the commission structure during 2002, reduced
operating expenses because of the cost-cutting efforts of management in 2002,
and the reduced asset write-down expense of approximately $1.7 million during
2002. We offset the decrease in these expenses 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. We
directly relate the decrease in sales 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. We make sales of our food supplement products through a multi-level
marketing network of distributors, so we positively link sales 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 and 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 $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. We discuss the components of operating expenses below.

o             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.

o             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.

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<PAGE>

o             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.

o             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.

o             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 we owe to an investor for $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 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
we should retain all of our earnings, if any, for the development of our
business.

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<PAGE>

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.

In September 2002, La Jolla Loans, Inc. ("La Jolla Loans") purchased and took an
assignment of our financing facility with Coast Business Credit. In connection
with this transaction, Coast Business Credit assigned its security interest in
real and personal property and assigned all associated security and loan
documents 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. We may extend the forbearance period 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, La Jolla Loans
purchased and took an assignment of our financing facility with Coast Business
Credit. 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. We may extend the forbearance period 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.

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.


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<PAGE>


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 incurs it. When we initially record the liability, the entity
capitalizes a cost by increasing the carrying amount of the related long-lived
asset. Over time, we accrete the liability to its present value each period, and
we depreciate the capitalized cost 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. We do not expect
the adoption of SFAS No. 143 to have a material effect on our 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 our 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 we initiate 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)." We do not expect the adoption of SFAS No. 146 to have a
material effect on our 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 we account for
those transactions 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,
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 we hold
and use. The adoption of SFAS No. 147 did not have a material effect on our
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. We
are required to follow the prescribed format and provide the additional
disclosures required by SFAS No. 148 in our 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. We do not expect the
adoption of SFAS No. 148 to have a material effect on our financial position or
results of operations.

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<PAGE>

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 compensate fully 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 satisfy our financial obligations.

EFFECTS OF CLINICAL STUDIES, SCIENTIFIC REVIEW, AND PUBLICITY

We believe that the national media attention to recent scientific research that
highlights potential health benefits of consuming certain vitamins and
nutritional supplements drives the increasing interest generally in vitamins,
nutritional supplements and similar products. 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. However, different factors, including consumers'
acceptance of innovative products and our compliance with governmental
regulatory laws, conditions the success of these products. 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, we determine our reserve of
SBGA 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 with a uniquely designed harvester. In 2002, we added 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.

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<PAGE>

As a result of certain conditions Microcystis, a toxic algae, occasionally
blooms in Klamath Lake at the same time blue-green algae is harvested. We
regularly test the algae we harvest for possible contamination. Algae that does
not meet our 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 our products under this rule. In some
years, the presence of Microcystis may reduce the quantity of algae that we 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.

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 certain contractual rules of conduct govern the services of the
Distributors to our business, 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.

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<PAGE>



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. A court could also hold
us civilly or criminally accountable based on vicarious liability because 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, we can expect the
departing Distributors 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. We designed this alternative distribution strategy 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.

In addition, since we will need additional managers who have key strategic
skills, new personnel challenges could confront us 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 CARPENETER'S AND 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 Internal Revenue Service has
subordinated the lien 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. Mr. Kollman and Ms. 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. Mr. Kollman is no
longer actively involved in management and has been unwilling to execute


                                       29
<PAGE>

personal guarantees on our behalf, as he has done in the past. On May 14, 2001,
Ms. Carpenter petitioned the Circuit Court for the State of Oregon with a motion
seeking, among other court orders, to enjoin Mr. Kollman from interfering with
any future loan applications of Ms. Carpenter or us and a self executing
judgment provision whereby the court would sign a loan application on behalf of
Mr. Kollman. The court held that Mr. Kollman is to cease and desist from any
such endeavors of interfering with our loan applications during the pendency of
the dissolution proceedings and the order prohibits him from writing letters or
communicating orally with any lending institutions unless requested to do so by
the institution. The court also held that Mr. 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 court heard
the matter 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 common stock, thus resulting in no change in
our current ownership. The Court also ruled Mr. Kollman and Ms. Carpenter will
equally divide their joint ownership in certain real property assets leased by
us from them in each property and that they must sell the properties and
improvements to pay the indebtedness to the Internal Revenue Service. They will
equally share any remaining proceeds after the payment of Federal and State
taxes applicable to the sale.

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.

IMPACT OF GOVERNMENT REGULATION

The formulation, manufacture, labeling, and advertising of our products are
subject to extensive federal, state, and local governmental regulation. From
time to time, we have received formal and informal inquiries from governmental
regulators about our business and compliance with existing laws. On occasions,
we have 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 various factors, which include varying domestic
regulations, responsiveness of government authorities, cultural differences and
political uncertainties may limit our ability to enter effectively these
markets. 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.


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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 a trust holds the shares and the Internal
Revenue Service will release them upon the payment of Ms. Carpenter and Mr.
Kollman's federal income tax liabilities for various specified years. Ms.
Carpenter and Mr. Kollman will sell their shares as needed and allowed by
federal and state securities laws to make quarterly payments to the Internal
Revenue Service. Ms. Carpenter and Mr. Kollman retain all voting rights incident
to their shares while the trust holds the shares.

The Internal Revenue Service may seize Marta C. Carpenter and Daryl J. Kollman's
shares from trust if Ms. Carpenter and Mr. 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 Ms. Carpenter and
Mr. 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.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

DIRECTORS AND EXECUTIVE OFFICERS

Our directors and executive officers are as follows:
<TABLE>
<CAPTION>


<S>                                 <C>                      <C>
NAME                                 AGE                 POSITION

Marta C. Carpenter                    57      Chief Executive Officer, President, Chief Accounting
                                              Officer and Director
Justin Straus (2)                     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

</TABLE>
---------------
(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


                                       31
<PAGE>

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 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 ten 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.

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 who has not filed his initial Form 3.


                                       32
<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.

<TABLE>
<CAPTION>


                                                        SUMMARY COMPENSATION TABLE

                                                                                           LONG TERM COMPENSATION
                                                                                   ------------------------- ------------
                                                    ANNUAL COMPENSATION                      AWARDS            PAYOUTS
                                             ------------ ------------ ------------ ------------ ------------ ------------
<S>                                             <C>           <C>           <C>           <C>       <C>
             (A)                    (B)          (C)          (D)          (E)          (F)          (G)          (H)          (I)

                                                                          OTHER
             NAME                                                        ANNUAL     RESTRICTED   SECURITIES               ALL OTHER
             AND                                                         COMPEN-       STOCK     UNDERLYING      LTIP       COMPEN-
          PRINCIPAL                                                      SATION      AWARD(S)     OPTIONS/      PAYOUTS      SATION
           POSITION                YEAR      SALARY ($)    BONUS ($)       ($)          ($)       SARS (#)        ($)          ($)
------------------------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ --------

Marta C. Carpenter                 2002        290,000         0            0            0            0            0            0
     Chief Executive Officer       2001        290,000         0        3,000(1)         0            0            0            0
     & President                   2000        290,000         0          3,000          0            0            0            0

Victor Bond                        2002        180,000         0            0            0            0            0            0
     Vice President of             2001        180,000         0            0            0            0            0            0
     Marketing & Strategy          2000        180,000         0            0            0            0            0            0

Justin Straus                      2002        114,529         0            0            0            0            0            0
     Chief Operating Officer       2001        100,000         0            0            0            0            0            0
                                   2000        100,000         0            0            0            0            0            0
-----------------------


(1) Estimated dollar value of pickup truck owned by us and used by Ms.
Carpenter.

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

             OPTIONS/SARS GRANTS DURING YEAR ENDED DECEMBER 31, 2002

                                                                                              POTENTIAL REALIZABLE
                                                                                                VALUE AT ASSUMED
                                                                                                 ANNUAL RATES OF
                                                                                            STOCK PRICE APPRECIATION
                                                     INDIVIDUAL GRANTS                           FOR OPTION TERM(4)
                                           --------------------------------------------------  -------------------------

                                        NUMBER OF       % OF
                                        SECURITIES      TOTAL
                                        UNDERLYING    OPTIONS/
                                         OPTIONS/       SARS        EXERCISE
                                           SARS      GRANTED TO      OR BASE
                                         GRANTED      EMPLOYEES       PRICE      EXPIRATION
NAME                                    (#)(1)(2)   IN FISCALYEAR   ($/SH)(3)       DATE        5% ($)      10% ($)
--------------------------------------  ----------  -------------  -----------  ------------  ----------  -----------

Marta C.                                    0             0            N/A          N/A          N/A          N/A
Carpenter.........................
Justin                                      0             0            N/A          N/A          N/A          N/A
Straus....................................
Victor                                      0             0            N/A          N/A          N/A          N/A
Bond....................................
</TABLE>

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


                                       33
<PAGE>
<TABLE>
<CAPTION>

                        AGGREGATE YEAR END OPTION VALUES
                               (DECEMBER 31, 2002)


                                                              NUMBER OF SECURITIES         VALUE OF UNEXERCISED
                                                             UNDERLYING UNEXERCISED       IN-THE-MONEY OPTIONS AT
                                                              OPTIONS AT 12/31/02             12/31/02 ($)(1)
                                                          ----------------------------  ---------------------------


                                       SHARES
                                     ACQUIRED
                                         ON
                                     EXERCISE       VALUE
NAME                                    (#)       REALIZED     UNEXERCISABLE  EXERCISABLE    UNEXERCISABLE  EXERCISABLE
<S>                                    <C>           <C>           <C>            <C>             <C>           <C>
-----------------------------------  ----------  -----------  -------------- ------------   -------------  ------------

Marta C.                                 0            0            0             0              0             0
Carpenter....................
Justin                                   0            0            0             0              0             0
Straus...............................
Victor                                   0            0            0             0              0             0
Bond...............................
</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' aggregrate 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 we did not hold any compensation
committee meetings 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.

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 our executive compensation programs. The
following report of the Committee discusses generally our executive compensation
objectives and policies and their relationship to our performance in 2002.

EXECUTIVE COMPENSATION PHILOSOPHY AND OBJECTIVES

We designed our executive compensation program 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. We place more emphasis on general industry rather than the
nutritional supplement industry norms.


                                       34
<PAGE>

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. We did not pay any cash
incentive awards in 2002.

ANNUAL BASE SALARY. Base salaries for executive officers are determined with
reference to a salary range for each position. We determine salary ranges by
evaluating a particular employee's position and comparing it with what were
believe 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. We will provide Long-term incentive compensation 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 that our Board of
Directors will approve. 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

COMPENSATION OF DIRECTORS

We do not separately compensate members of our Board of Directors who are our
officers 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.



                                       35
<PAGE>


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 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. 4,216 shares
that we granted in prior years 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.



                                       36
<PAGE>


PERFORMANCE MEASUREMENT COMPARISON*

The rules and regulations of the SEC require the presentation of a line graph
since the common stock has been registered under Section 12 of the Exchange Act
comparing the yearly percentage change in our cumulative stockholder return to
(i) the cumulative total return of a broad market equity index and (ii) the
cumulative return of either a published industry index or a self-constructed
group of peer issuers that we believe is relevant to a comparative understanding
of its performance.

We have used the NASDAQ  Market  (U.S.) and a peer group.  The  publicly  traded
companies in our peer group are Mannatech,  Inc.,  Market America,  Inc.,  Usana
Health Sciences,  Inc., Nature's Sunshine Products,  Inc., Reliv  International,
Inc. and Nu Skin Enterprises Inc.

                       [GRAPHIC OMITTED][GRAPHIC OMITTED]

* The material in this graph is not "solicitation material," is not deemed filed
with the SEC, and is not incorporated by reference in any of our filings under
the Securities Act or the Exchange Act, whether made before or after the date
hereof and irrespective of any general incorporation language in any filing.
Research Data Group, Inc. has provided the information in the graph.

<TABLE>
<CAPTION>

                                                    12/31/97   12/31/98   12/31/99    12/31/00   12/31/01   12/31/02
<S>                                                  <C>            <C>    <C>           <C>         <C>      <C>
                                                    --------   --------   --------    --------   --------   --------
Cell Tech International
Incorporated.................                          100.00       0.74      16.18       17.83       2.46       2.46
NASDAQ Stock Market
(U.S.).........................                        100.00     140.99     261.49      157.77     125.16      86.53
Peer
Group.........................                         100.00      84.43      38.10       21.26      36.12      48.70
---------------------
</TABLE>

                                       37
<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 July 25, 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.

<TABLE>
<CAPTION>

                                                                              PERCENT OF          NUNBER
                                                                                SHARES              OF
                                                                             BENEFICIALLY         SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER                                           OWNED(1)         OUTSTANDING
--------------------------------------------------------------------------  --------------    ---------------
<S>                <C>                                                          <C>                  <C>

    Marta C. Carpenter                                                                23.3%         4,341,498(2)
       565 Century Court
       Klamath Falls, Oregon 97601

    Daryl J. Kollman                                                                  23.3%         4,341,498(3)
       5534 South Sixth Street, PMB #225
       Klamath Falls, Oregon 97603

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

    Donald P. Hateley                                                                  1.9%           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

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

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

    Zubair Kazi                                                                       48.3%         8,982,174(7)
       3671 Sunswept Drive
       Studio City, California 91604

       All executive officers and directors as a group (6 persons)                    53.9%         4,782,211(8)
-----------------------
     * Less than one percent.

(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). Except as
         otherwise indicated, voting and investment power relating to the shares
         referenced in the table above is exercised solely by the beneficial
         owner.
</TABLE>


                                       38
<PAGE>


(2)  The  Internal  Revenue  Service has a security  interest in all of Marta C.
     Carpenter'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 Ms.  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.  While the trust
     holds the shares Ms.  Carpenter  retains all voting rights  incident to her
     shares.  The Internal Revenue Service may seize Ms. Carpenter's shares from
     trust if Ms.  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 Ms.
     Carpenter and Mr. Kollman's tax liabilities as allowed by applicable law.

(3)  The  Internal  Revenue  Service has a security  interest in all of Daryl J.
     Kollman's shares pursuant to a Notice of Determination  dated June 18, 1999
     under the terms of which the trust  holds the  shares  and,  upon  Marta C.
     Carpenter and Mr. Kollman's payment of their federal income tax liabilities
     for various  specified years,  will be released.  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 trust holds the shares.  The
     Internal  Revenue Service may seize Mr.  Kollman's shares from trust if Ms.
     Carpenter  and Mr.  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 Ms.
     Carpenter and Mr. 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 45,000 shares Mr.
     Hateley has the right to acquire pursuant to options  exercisable within 60
     days of July 25, 2003.

(5)  Represents  45,764 shares Dr. Blaxland has the right to acquire pursuant to
     options exercisable within 60 days of July 25, 2003.

(6)  Includes  45,000 shares Mr.  Anderson has the right to acquire  pursuant to
     options exercisable within 60 days of July 25, 2003.

(7)  Includes 4,491,087 shares already issued to Kazi and and 4,491,087 issuable
     to Mr. Kazi 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 of July 25,
     2003. 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 Ms. Carpenter and Mr. Kollman and Klamath Cold Storage, Inc and the rent we
pay to them is at below or at fair market values. Rental payments to Ms.
Carpenter and Mr. Kollman or Klamath Cold Storage, Inc in 2002 were $740,097. We
currently owe Ms. Carpenter and Mr. 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.


                                       39
<PAGE>

ITEM 14. CONTROLS AND PROCEDURES.

(a) Under the supervision and with the participation of our management,
including our chief executive officer and chief accounting officer, we evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures, as such term is defined under Rule 13a-14(c) promulgated under the
Securities Exchange Act of 1934, as amended, within the 90 day period prior to
the filing date of this report. Based on this evaluation, our chief executive
officer and chief accounting officer concluded that our disclosure controls and
procedures were effective as of that date.

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

                                     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. We have listed the Financial Statements and
Schedules in the Index to Financial Statements on page F-1 of this Form 10-K/A.

(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 Form 8-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)

(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) (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)


                                       40
<PAGE>

(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)

(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)


                                       41
<PAGE>

(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  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 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)

                                       42
<PAGE>


(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 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)

(31)              Certifications pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002

(31.1)            Certification pursuant to Item 601(b)(31) of Regulation S-K,
                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
                  of 2002, of the Chief Executive Officer of Cell Tech
                  International Incorporated*

(31.2)            Certification pursuant to Item 601(b)(31) of Regulation S-K,
                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
                  of 2002, of the Chief Accounting Officer of Cell Tech
                  International Incorporated*

(32)              Certification pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002

(32.1)            Certification pursuant to 18 U.S.C. Section 1350, as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002, of the Chief Executive Officer of Cell Tech
                  International Incorporated*

(32.2)            Certification pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of
                  the Chief Accounting Officer of Cell Tech International
                  Incorporated*


                                       43
<PAGE>

(99)              Additional Exhibits

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


(b)               Reports on Form 8-K.

                  None.

*        Filed herewith.

                                   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 August 14, 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:
<TABLE>
<CAPTION>


<S>              <C>                                        <C>                                 <C>
               SIGNATURE                                 TITLE                                  DATE

By:/s/ Marta C. Carpenter                    President and Chief Executive                 August 14, 2003
  -----------------------
                                                 Officer and Director
     Marta C. Kollman                      (principal executive officer and
                                             principal accounting officer)

By: /s/ Donald P. Hateley                        Chairman of the Board                     August 14, 2003
    ---------------------

     Donald P. Hateley

By: /s/ Justin Straus                           Chief Operating Officer                    August 14, 2003
    -----------------

     Justin Straus

By: /s/ Chris J.M. Blaxland                            Director                            August 14, 2003
    -----------------------

     Chris J.M. Blaxland

By: /s/ Donald M. Anderson                             Director                            August 14, 2003
    ----------------------

     Donald M. Anderson

</TABLE>
                                       44
<PAGE>







                      CELL TECH INTERNATIONAL INCORPORATED

                                AND SUBSIDIARIES


                        CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

                                      F-1



<PAGE>



                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





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-2

<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.






Los Angeles, California
February 28, 2003

                                      F-3

<PAGE>
<TABLE>
<CAPTION>


                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


                                                                                             December 31,
                                                                                   ---------------------------------
                                                                                        2002               2001
                                                                                   --------------     --------------
<S>                                                                                     <C>                 <C>

ASSETS (Note 7)

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 HELD FOR SALE, 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 condolidated financial statements.


                                      F-4
<PAGE>
<TABLE>
<CAPTION>



                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                          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>

<TABLE>
<CAPTION>


                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY




                                                   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 notes to consolidated financial statements.

                                      F-6

<PAGE>
<TABLE>
<CAPTION>



                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOW



                                                                                   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 notes to consolidated financial statements.
                                      F-7

<PAGE>



                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 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


                                      F-8
<PAGE>
                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

                                      F-9
<PAGE>

                       CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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.

                                      F-10
<PAGE>
                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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 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 adoption of 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.


                                      F-11
<PAGE>
                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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.

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:

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

Credit card deposits in transit      $      303,746    $     239,618

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

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

                                      F-12
<PAGE>
                       CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 -- INVENTORIES
<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
                                                                                   =============    ============

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.

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
                                                                               ===============    ==============
</TABLE>

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

                                      F-13
<PAGE>


                       CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. Certain other
equipment is being held for sale.

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
                                                                              ==============       =============

Amortization expense aggregated $51,097, $221,250 and $888,480 for 2002, 2001
and 2000, respectively.
</TABLE>


                                      F-14
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

NOTE 7 -- LONG-TERM DEBT

Long-term debt consists of the following:

                                                                                        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.


                                      F-15
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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,
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-16
<PAGE>


                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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           Term
                          Warrants           Price
                          ------------    ------------     ------------

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-17
<PAGE>

                       CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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-18
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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.

                                      F-19
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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.



                                      F-20
<PAGE>
                       CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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. Carpenter (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).

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.

                                      F-21
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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:

o    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.

o    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.


                                      F-22

<PAGE>


                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


o 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 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.

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.



                                      F-23
<PAGE>

                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 -- OTHER INCOME

Other income insists of the following:
<TABLE>
<CAPTION>

                                                                               Years ended December 31,
                                                                     ------------------------------------------------
                                                                        2002             2001              2000
                                                                     -------------     ------------     -------------
<S>                                                                    <C>               <C>                 <C>


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.

NOTE 15 -- QUARTERLY RESULTS (UNAUDITED)

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

                                                    FIRST            SECOND           THIRD(A)          FOURTH(B)
  ------------------------------------------------------------------------------------------------------------------

  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)    $         (.05)

  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.


                                      F-24
<PAGE>


                      CELL TECH INTERNATIONAL INCORPORATED
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(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-25
<PAGE>