U.S. SECURITIES AND
EXCHANGE COMMISSION Washington, D.C. 20549

AMENDMENT NO. 2

TO

FORM 10-KSB

(Mark One)

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

For the fiscal year ended December 31, 2001

OR

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

For the transition
period from ____________ to _____________

Commission file number:
000-31479

# BIOGAN INTERNATIONAL,
INC. (Name of small business
issuer in its charter)



|Delaware 
(State or other jurisdiction of incorporation or organization)120 Adelaide Street WestSuite 512Toronto,Ontario, Canada
(Address of principal executive offices) |  | 58-1832055
(I.R.S. Employer Identification No.)M5H 1T1
(Zip Code)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------

Issuers
telephone number, including area code: (416) 214-3270

Securities registered under Section
12(b) of the Exchange Act: None

Securities
registered under 12(g) of the Exchange Act: Common Stock, $0.001
par value(Title of
class)

Check whether the issuer (1) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 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
|  | No |X|.

Check if there is disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.|X|

For the twelve months ended December 31, 2001, Biogan International, Inc. reported no
revenues.

As of February 19, 2003, the aggregate market value (based upon the market price in
limited trading in the over-the-counter market) of the voting stock held by nonaffiliates
was approximately $1,080,622. The number of shares outstanding of the registrants
only class of common stock was 108,066,199 on February 19, 2003. The information provided
shall in no way be construed as an admission that any person whose holdings are excluded
from the figure is an affiliate or that any person whose holdings are included is not an
affiliate, and any such admission is hereby disclaimed. The information provided is solely
for record keeping purposes of the Securities and Exchange Commission.

DOCUMENTS INCORPORATED BY
REFERENCE: None.

# Part I

# Item
1.     Description of Business

# Company Overview

We are a Delaware corporation that was incorporated on February 5, 1988 under the name
H.W. Ronney and Company. In March 1989, H.W. Ronney was merged with Biogan Medical
International, Inc., with the resulting company maintaining the Biogan Medical
International, Inc. name. Biogan had been engaged in various medical and related
enterprises prior to the merger and the merged company continued with those enterprises
following the merger. Prior to 1995, either directly or indirectly, through subsidiaries
or other affiliates, we also engaged in business operations in a variety of other
industries, undergoing several corporate restructurings during that time.

In 1995, we began development of a new concept for electrical motors known as the
IntorCorp Motor. In order to promote the development of the IntorCorp Motor, we entered
into a consulting agreement with Technical Development Consultants, Inc., or TDC, an
independent electrical engineering consulting firm. As part of the research and
development process, TDC formed a company named Collective Technologies, LLC, which
acquired all intellectual property rights, which consisted of the technology based
knowledge of a new type of electrical motor, held by TDC with respect to the IntorCorp
Motor concept. We then changed our name to Biogan International, Inc. in September 1997 to
avoid any confusion that could have resulted from the use of the word medical
in our name, in light of our corporate focus having shifted to the development of the
IntorCorp Motor. Effective February 1998, we entered into a joint venture agreement with
Collective Technologies, LLC to continue the development of the IntorCorp Motor, and
established IntorCorp, Inc. for that purpose. IntorCorp Inc. was established as an Idaho
corporation in which we held a 50% ownership interest. In August 1999, we transferred all
of our rights and interest in IntorCorp, Inc., including all of our interest in the
IntorCorp Motor and related patent applications, to R-Tec Engineering Corporation. Under
the terms of the agreement, the parties created an Idaho corporation, R-Tec Holding, Inc.,
into which we transferred our 50% ownership interest in IntorCorp, Inc. in exchange for
4,266,797 shares of common stock of R-Tec Holding, Inc. In September 1999, we distributed
these shares to our stockholders. Following our transaction with R-Tec Holding, and having
divested ourselves of certain assets related to the electrical motor industry and disposed
of all of our subsidiaries and other interests in other affiliates and other entities, we
began to focus our attention, experience and resources on developing a base metal mining
and smelting operation in the Peoples Republic of China, or PRC, because management
believed that given the economic climate in China and the growth potential of both
existing and undeveloped mines in the Hechi region, significant opportunities existed in
the base metal industry in China.

During 1999, we did not engage in any significant business activities other than divesting
ourselves of assets and interests related to the IntorCorp Motor and negotiating an
acquisition agreement relating to certain assets of Hechi Industrial Co., Ltd., or Hechi.
The transaction with Hechi related to the formation of Guangxi Guanghe Metals Company
Limited, or GGM, structured as a Cooperative Joint Venture Company under the laws of the
PRC. Pursuant to the agreement, GGM was formed on January 27, 2000 for the purpose of
operating a copper smelter to produce blister copper and engaging in the mining and
processing of non-ferrous metals in the Guangxi Province of China, and was to be owned by
the company and Hechi. In anticipation of the completion of the acquisition, in November
1999 Rulon Tolman and L. William Glazier resigned as Vice President and as President and
Chief Executive Officer of the company, respectively, and Gilles Laverdiere, an
experienced geologist in the mining industry, was appointed as our Chief Executive Officer
and President. Mr. Laverdiere became a director of the company in November 1999 and also
served as our Acting Chief Financial Officer from November 1999 until the appointment of
Kerry D. Smith as our Chief Financial Officer in January 2001. Mr. Laverdiere served as
Chairman of our Board of Directors from November 1999 until March 2000 when he became a
director and the Vice-Chairman of the Board of the company. Kuang Yihuai, the Chief
Executive Officer of Hechi, became Chairman of the Board of the Company in March 2000.
Kerry D. Smith acted as Chief Financial Officer until November 2001, when he became
President and Chief Operating Officer of the company, at which point Rob Doyle joined the
company as Executive Vice-President and Chief Financial Officer.

Hechis business was established in 1977 by the Hechi Prefecture Government through
Hechi Prefecture Mining Company, or HPMC. Hechi came under private ownership in June, 1998
when the employees of HPMC purchased all of the assets of HPMC, and assumed certain
liabilities. The employees of HPMC subsequently contributed HPMCs business to Hechi
and became Hechis shareholders. Hechi has become one of the largest enterprises in
the regional mining community in the Guangxi Province, which is located in southeastern
China approximately 500 kilometers northwest of Hong Kong, and was one of the first
privately-owned mining enterprises in the Guangxi region.

Effective July 1, 2000, we entered into an asset purchase agreement with Hechi. The Asset
Purchase Agreement provided for our acquisition of certain of Hechis assets,
including Hechis 9% interest in Gaofeng Mining Company Limited (which owns and
operates the Gaofeng mine and processing facilities), 100% interest in the Wuxu Mine and
ore processing facilities and 100% interest in the Hechi copper smelter, in exchange for
16,800,000 shares of our common stock and 31,300 shares of our Series A preferred stock.
Under this agreement we were to hold a 92% equity interest and a 95% profits interest in
GGM.

On July 27, 2001, we were advised that the transactions contemplated under the original
agreements were not in compliance with certain laws of the PRC and, therefore, void.
Between the effective date of the acquisition agreement and prior to the determination
that the transaction was void under the laws of the PRC, we believed that we had properly
consummated the transactions with Hechi and, therefore, had focused corporate resources
entirely upon managing the mining operations of Hechi and did not engage in any other
business operations.

Following discussion with Hechi and our U.S., Chinese and Canadian legal counsel, on July
19, 2002, we implemented our transaction, effective July 1, 2002, with Hechi on a
restructured basis, in compliance with Chinese legal requirements. Hechi and the Company
implemented the revised structure for the acquisition by completing the following steps:
(1) the Hechi shareholders established a wholly-owned British Virgin Islands corporation,
Fushan Industrial Co. Ltd.; or Fushan, (2) Fushan established a British Virgin Islands
corporation, Biogan International (BVI) Inc., or Biogan (BVI); (3) the company and Hechi
terminated the Asset Purchase Agreement; (4) the company contributed its interest in GGM
to Biogan (BVI) in exchange for a non-interest bearing demand promissory note in the
principal amount of $1.7 million; (5) Hechi and the company amended and restated the
agreement establishing GGM to provide for the replacement of the company by Biogan (BVI);
and (6) Fushan and the company entered into a share exchange agreement dated July 19, 2002
pursuant to which the company acquired 100% of Biogan (BVI) in exchange for 16,800,000
shares of the companys common stock and 3,624,000 shares of the companys
Series B Convertible Preferred Stock. There was no affiliation between the Company and
Hechi and the purchase price for the acquisition was determined through arms length
negotiations. There was no allocation made to the various assets and interest bought as
the purchase price for the assets was negotiated as a whole. GGM has received its
Certificate of Approval in August 2003.

The Series B Convertible Preferred Stock is convertible into 362,400,000 shares of our
common stock following stockholder authorization of additional issuable common stock at
our next meeting of stockholders. Accordingly, as a result of these transactions, we
acquired, as intended under the original agreement with Hechi, a 92% equity interest and a
95% profits interest in GGM in exchange for 78.4% of our voting capital stock (assuming
the conversion of all of the outstanding shares of Series A Convertible Preferred Stock
and all of the outstanding shares of Series B Convertible Preferred Stock). For accounting
purposes the transaction will be accounted for as a reverse takeover with GGM treated as
having acquired Biogan.

# Assets of GGM

The Gaofeng mine, which is owned and operated by the Gaofeng Mining Company Limited in
which GGM holds a 9% interest, is an operating polymetallic mine and ore processing
facility in Guangxi Zhuang Autonomous Region of China, 85 kilometers northwest of the city
of Hechi. There are three other parties which hold interests in the Gaofeng Mining
Company, each of which is a government entity. The Huaxi Group, a provincial government
entity holds a 51% interest in the company, while Guangxi Nandan Nanxing Antimony Industry
Co. Ltd., a county government entity, and Guangxi Development and Investment Co. Ltd., a
provincial government entity, own 20% each.

The Gaofeng mine is a medium sized
underground mine that produces an average of approximately 1000 tonnes/day of polymetallic
ore. Ore production in the years 2000 and 2001 totaled 397,000 tonnes and 356,000 tonnes
respectively. The mineral resources in the mine include tin, zinc, lead, antimony and
silver. The Gaofeng Mining Company also owns and operates the Bali mineral processing mill
which has a processing capacity of 350,000 tonnes/ year.

The Wuxu mine, in which GGM holds a 100% interest, is a small scale underground mining
operation located in the Latang-Shuilou area of China, 23 kilometers southwest of the city
of Hechi. The Wuxu mine produces 100 tonnes/day of zinc-lead-antimony ore. Ore production
in the years 2000 and 2001 totaled 15,974 tonnes and 17,000 tonnes respectively. The Wuxu
mine, which is currently leased to a third party, also owns and operates the Wuxu mineral
processing mill which has a processing capacity of 35,000 tonnes/ year.

GGM also holds a 100% interest in the Hechi copper smelter. The Hechi copper smelter
produces blister copper and comprises a blast furnace and a continuous horizontal
converter. The annual production capacity of the smelter is 4,900 tonnes. The smelter also
produces sulphuric acid which is sold in local markets.

GGM is additionally engaged from time to time in the purchase and sale of concentrates as
a part of its business activity. This activity consists of the purchase of base metal
concentrates from small-scale mining operations and the resale of these to smelting and
refining enterprises.

# Employees

The company currently has 3 full time employees. As a result of our transaction with
Hechi, substantially all of our personnel are in China. As of June 2002, GGM employed 1068
people, of which 60 were employed at the Wuxu mineral processing mill, 683 at the Gaofeng
mine and 325 at the Hechi copper smelter. Of these 28 were employed in an administrative
capacity.

# Item
2.    Description of Property

We operate from approximately 250 square feet of office space at 120 Adelaide Street West,
Suite 512, Toronto, Ontario, Canada and approximately 250 square feet of office space at
813 Beriault, Suite 203, Longueuil, Quebec, Canada. Both office spaces in Canada are under
month-to-month tenancies.

# Item
3.    Legal Proceedings

We are not a party to any pending legal proceedings.

# Item
4.    Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our security holders during the fiscal year ended
December 31, 2001.

# Part II

# Item
5.    Market for Common Equity and Related Stockholders Matters

Market Price

Until January 9, 2001, our common stock was traded on the National Association of
Securities Dealers OTC Electronic Bulletin Board under the symbol BIGM.
Effective at the opening of business on January 9, 2001, the NASD deleted all quotations
of our common stock from the OTC Electronic Bulletin Board. Since January 9, 2001, our
common stock has been quoted only sporadically from time to time in the over-the-counter
pink sheets, an ad hoc forum for quotations of securities prices intended to
match potential buyers and sellers, which forum is not monitored or supervised by any
regulatory authority or agency.

The following table sets forth the high and low closing bid prices of our common stock
during each quarter of the fiscal years ended December 31, 2000, and December 31, 2001, as
well as for the quarters ended March 31, 2002 and June 30, 2002, as reported on the OTC
Electronic Bulletin Board until January 9 2001. High and low closing bids after January 9,
2001 which were used in calculating this table were taken from over-the-counter pink
sheets bids for our shares. OTC Market Quotations reflect interdealer prices,
without mark-up, mark-down or commission and may not represent actual transactions:

|                              |  | High  | Low  
|----------------------------- |  | ----- | -----
|Year Ended December 31, 2000: |  |       |      
|First Quarter                 |  | 0.780 | 0.438
|Second Quarter                |  | 0.550 | 0.150
|Third Quarter                 |  | 0.351 | 0.125
|Fourth Quarter                |  | 0.141 | 0.019
|Year Ended December 31, 2001: |  |       |      
|First Quarter                 |  | 0.100 | 0.020
|Second Quarter                |  | 0.040 | 0.001
|Third Quarter                 |  | 0.030 | 0.001
|Fourth Quarter                |  | 0.032 | 0.001
|                              |  |       |      
|                              |  | High  | Low  
|First Quarter 2002            |  | 0.025 | 0.001
|Second Quarter 2002           |  | 0.040 | 0.017
|Third Quarter 2002            |  | 0.03  | 0.001
|Fourth Quarter 2002           |  | 0.02  | 0.001

As
of February 19, 2003, we had approximately 646 holders of record of our common stock.
Within the holders of record of our common stock are depositories such as Cede & Co.
that hold shares of stock for brokerage firms that, in turn, hold shares of stock for
beneficial owners.

Dividend Policy

We have never paid any dividends on our common stock. The declaration and payments by us
of dividends will be subject to the discretion of our board of directors. The amount of
any such dividend and the boards policy with respect to the payment of dividends
will depend on our results of operations, financial condition, capital requirements,
contractual restrictions and other factors deemed relevant by our board of directors.

Recent Sales of Unregistered Securities

On June 10, 1999, we issued 235,080 shares of common stock to Wadsworth and Smith CPAs for
non-audit related accounting services. On August 21, 1999, we issued 78,746 shares of
common stock to Robert Montgomery, our Secretary, for legal services. On August 21, 1999
we issued 100,000 shares of common stock to Wadsworth and Smith, CPAs for non-audit
related accounting services. The total fair market value of the above services was
approximately $16,502, and we made each of the above issuances of shares pursuant to
Section 4(2) of the Securities Act.

In March 2000, we completed an offering of 8% secured convertible debentures in the
aggregate amount of $2,035,000 to two investors pursuant to Section 4(2) of the Securities
Act. We issued a $2,000,000 debenture to CALP II, LLC, a Bermuda limited liability
company, and a $35,000 debenture to Carbon Mesa Partners, LLC, a Nevada limited liability
company. The $2,000,000 debenture was subsequently transferred to Thomson Kernaghan &
Co., Limited, or TK. In connection with the issuance of the debentures, we issued
immediately exercisable warrants for the purchase of up to an aggregate of 489,000 shares
of our common stock. The warrants have an initial exercise price of $0.60 per share of
common stock and have cashless exercise provisions. The warrants expire on February 28,
2003. The shares of common stock underlying the debentures and the warrants are subject to
piggyback and demand registration rights under the terms of a registration rights
agreement.

On August 1, 2000, we issued 1,100 shares of our Series A Convertible Preferred Stock to
TK, pursuant to Section 4(2) of the Securities Act, in consideration for investment
banking services with a fair market value of $1,848,000.

On May 3, 2002, through a private placement we issued 150,000 shares of our common stock
to one U.S. investor and 15,816,664 special warrants to investors outside of the United
States, at a purchase price of $0.03 per share or special warrant, for aggregate gross
proceeds of $479,000. Each special warrant automatically converts into one share of common
stock upon the qualification of a prospectus in Canada. The companys issuance of
150,000 shares to a U.S. investor was exempt from registration under the Securities Act of
1933 by virtue of Section 4(2) of that act and/or Regulation D thereunder.

On July19, 2002, we acquired a controlling interest in GGM the consideration for
which consisted of 16,800,000 shares of our common stock and 3,624,000 shares of our
Series B Convertible Preferred Stock. The shares of Series B Convertible Preferred Stock
automatically convert into 362,400,000 shares of our common stock following authorization
of additional common stock at our next meeting of shareholders. As a result of the
transaction, a change in control has occurred and Hechi shareholders now control 78.4% of
our outstanding voting stock.

We did not engage underwriters in connection with any of the above issuances. Each of the
purchasers was in a position to insist upon the issuer providing it with information as or
more extensive than that contained in a registration statement. Each of the purchasers had
access to all material information regarding the company prior to the offer or sale. These
offers and sales of common stock are believed to have been exempt from the registration
requirements of Section 5 of the Securities Act of 1933 pursuant to either Section 4(2) or
Regulation S or Regulation D, as the case may be, by available provisions of similar
applicable state securities laws and by provisions of applicable Canadian securities laws
as the case may be, exempting from registration or qualification the offer and sale of our
securities. Services described above as being rendered in exchange for the issuances of
shares were valued based upon the billing rates of the service providers.

Description of Securities

Our authorized capital stock consists of 300,000,000 shares of common stock, $0.001 par
value per share, and 10,000,000 shares of preferred stock, $0.001 par value per share. Of
the 10,000,000 shares of preferred stock, 31,300 shares have been designated as Series A
Convertible Preferred Stock and 3,624,000 shares have been designated as Series B
Convertible Preferred Stock, $0.001 par value per share and the remaining 6,344,700 shares
are undesignated. As of February 19, 2003, there were 108,066,199 shares of common stock
outstanding held by approximately 646 holders of record, 1,100 shares of Series A
Convertible Preferred Stock outstanding held by one holder of record and 3,624,000 shares
of Series B Convertible Preferred Stock outstanding held by one holder of record. We also
have outstanding two debentures which are convertible into shares of common stock. The
following is a summary description of our capital stock and the debentures.

Common Stock

The holders of outstanding shares of our common stock are entitled to receive dividends
out of assets legally available at times and in amounts as the board of directors may from
time to time determine. Holders of common stock are entitled to one vote per share on all
matters to be voted upon generally by the stockholders.

The common stock is not entitled to preemptive or preferential rights. There are no
redemption or sinking fund provisions applicable to our common stock. Upon liquidation,
dissolution or winding up of the company, the assets legally available for distribution to
our stockholders are divided among the holders of the common stock in proportion to the
number of shares of common stock held by each of them, following payment of all of our
debts and liabilities and fulfillment of the rights of any outstanding class or series of
preferred stock that has priority to distributed assets. The rights of holders of common
stock are subordinate to those of holders of any series of preferred stock.

Preferred Stock

Our board of directors is authorized to issue from time to time, without stockholder
authorization, in one or more designated series, any or all of our authorized but unissued
shares of preferred stock with any dividend, redemption, conversion and exchange provision
as may be provided in that particular series.

The rights of the holders of our common stock will be subject to, and may be adversely
affected by, the rights of the holders of any preferred stock. Issuance of a new series of
preferred stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of entrenching our board
of directors and making it more difficult for a third-party to acquire, or discouraging a
third-party from acquiring, a majority of our outstanding voting stock.

Below is a summary of the terms of our Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock. Copies of the full text of the various documents comprising
our certificate of incorporation are filed as exhibits to this document.

Series A Convertible Preferred Stock

We filed an Amended Certificate of Designations of Series A Convertible Preferred Stock
with the Delaware Secretary of State on August 1, 2000, which certificate fixed, altered
and amended the rights, preferences, privileges and restrictions relating to our Series A
Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock is
convertible, at the option of the holder, into 12,000 shares of our common stock. TK is
the only holder of Series A Convertible Preferred Stock, holding 1,100 shares, which
entitle TK to acquire 13,200,000 shares of common stock. However, we have agreed with TK
that it may not convert shares of Series A Convertible Preferred Stock to the extent that
such conversion would result in the holder, together with its affiliates, beneficially
owning in excess of 9.99% of our outstanding shares of common stock.

Holders of Series A Convertible Preferred Stock are entitled to vote on all matters
submitted to a vote of the holders of our common stock, and each share of Series A
Convertible Preferred Stock is entitled to one vote for each full share of common stock
into which each share of Series A Convertible Preferred Stock is convertible on the record
date for the vote. Shares of Series A Convertible Preferred Stock are not entitled to any
dividends.

In the event of any liquidation, dissolution or winding up of our affairs, either
voluntary or involuntary, the holders of shares of Series A Convertible Preferred Stock
are entitled to receive for each share of Series A Convertible Preferred Stock then held,
out of our assets available for distribution to stockholders and prior and in preference
to any distribution of any of our assets to the holders of our common stock, an amount
equal to $1.00 plus an amount equal to the amount that the holders would have received had
the holders converted their shares of Series A Convertible Preferred Stock to shares of
common stock immediately prior to the liquidation, dissolution or winding up. The holders
of Series A Convertible Preferred Stock are not entitled to any redemption, nor are there
any sinking fund provisions with respect to the shares. In addition, there are no
preemptive rights applicable to our Series A Convertible Preferred Stock.

Series B Convertible Preferred Stock

We filed a Certificate of Designation of Series B Convertible Preferred Stock with the
Delaware Secretary of State on July 18, 2002, which certificate fixed the rights,
preferences, privileges and restrictions relating to our Series B Convertible Preferred
Stock. Each share of Series B Convertible Preferred Stock shall be automatically converted
into fully paid and non-assessable shares of our common stock at the effective time of an
amendment to our Certificate of Incorporation to authorize additional shares of common
stock. Each share of Series B Convertible Preferred Stock is convertible into 100 shares
of our common stock, subject to adjustment in the event of a subdivision or combination of
the companys shares of common stock or similar event.

Holders of Series B Convertible Preferred Stock are entitled to vote on all matters
submitted to a vote of the holders of our common stock, and each share of Series B
Convertible Preferred Stock is entitled to one vote for each full share of common stock
into which each share of Series B Convertible Preferred Stock is convertible on the record
date for the vote. In the event of any distributions (including distribution in
liquidation and distribution of rights) either voluntary or involuntary, we shall pay to
the holders of Series B Convertible Preferred Stock such distributions that would have
been paid in respect of shares of common stock into which such shares of Series B
Convertible Preferred Stock are convertible on the record date for such distribution.

Convertible Debentures

We issued the TK and Carbon Mesa debentures on March 29, 2000 for aggregate proceeds of
$2,035,000 to assist us in financing our required contributions to GGM under the original
terms of our transaction with Hechi. Out of the net proceeds of $1,800,000 from the sale
of the debentures, we contributed $1,500,000 to GGM, which was used primarily to purchase
metal concentrates, with $300,000 being retained for working capital purposes.

Subject to beneficial ownership limitations described below, a debenture holder is
entitled, at its option, to convert $10,000 or more of the balance of its debenture into
shares of our common stock at any time until the maturity date. A debenture holder may not
during any consecutive 30 day period convert more than one-third of the original principal
amount of its debenture or sell more than a number of shares of our common stock equal to
$208,000, in the case of the TK debenture, or $35,000, in the case of the Carbon Mesa
debenture, divided by the applicable conversion rate. In addition, except with respect to
an automatic conversion or while there is outstanding a tender offer for any or all of the
shares of our common stock, a holder may not convert a debenture to the extent that, after
the conversion, the holder and its affiliates would beneficially own more than 9.99% of
our outstanding common stock. Debentures not converted as of the maturity date will be
automatically converted at the then-applicable conversion rate.

Subject to adjustment for stock splits, stock dividends, capital reorganizations or
similar occurrences, the conversion rate for the debentures is equal to the lower of the
per share price of $0.4166 or 80% of the average of the closing bid prices of our common
stock as reported on the over-the-counter market for the five trading days immediately
prior to the conversion date, except that the conversion rate for the $650,000 of the
additional principal amount of the TK debenture related to the September 2001 amendment to
the TK debenture, as discussed below, shall not be less than $0.025 per share. However, if
once we ensure compliance with our reporting obligations, we again fail to file all
reports required pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended and/or fail to continue our status as an issuer required to file reports under
the Exchange Act of 1934, then the conversion rate under the Carbon Mesa debenture will be
amended to equal 90% of the conversion rate otherwise applicable, and Carbon Mesa may
require us to immediately redeem for cash the outstanding portion of the Carbon Mesa
debenture. The redemption amount is calculated by dividing the sum of the outstanding
principal balance plus accrued interest by the conversion rate in effect on the date of
redemption, and then multiplying that quotient by the highest closing ask price during the
period beginning on the date of redemption and ending on the date of payment of the
redemption amount.

A debenture holder may declare the entire unpaid principal balance and all accrued but
unpaid interest immediately due and payable upon an event of default under its debenture.
Events of default include:

·     an
uncured failure to make payments due under the debentures or to perform or observe any
obligation under either of the debentures or related agreements;

·     our
written admission that we are insolvent, our making an assignment for the benefit of
creditors or commencing proceedings for dissolution, or our application for the
appointment of a trustee, liquidator or receiver;

·     the
institution of voluntary or involuntary bankruptcy, reorganization, insolvency or
liquidation proceedings against us that are not dismissed within 60 days;

·     the entry
of a judgment or writ of attachment in excess of $200,000 that remains unpaid, unvacated,
unbonded or unstayed for 60 days or during the five days prior to the date of any proposed
sale under the judgment or writ; or

·     the
suspension of trading or delisting from an exchange or the NASDs OTC Electronic
Bulletin Board of our common stock for more than five trading days after our common stock
is relisted on an exchange or on the NASDs OTC Electronic Bulletin Board.

As of February 19, 2003, we had a total of 108,066,199 shares of common stock outstanding,
and debentures convertible, if contractual limitations on conversion were disregarded,
into approximately 174,000,000 shares of our common stock at an assumed conversion price
of $0.025. The number of shares that the debentures ultimately may be converted into or
exercised for could prove to be greater than this estimate if the market price of our
common stock declines. Further, to the extent the holders convert those debentures and
then sell the underlying shares of common stock into the market, the price of our common
stock may decline due to the additional shares available in the market. This decline could
allow the holders to convert their remaining debentures into a greater number of shares of
common stock, the sale of which would further depress the stock price. Our stockholders
could, therefore, experience substantial dilution and a decline in the value of their
investment as a result of the conversion of the debentures and the sale of the shares of
common stock issuable upon conversion of the debentures.

If we are limited in our ability to issue shares upon the conversion of the debentures,
due either to a limitation on our number of authorized shares or the applicable rules of
the principal securities market on which our shares of common stock are listed or traded,
and if we are unable to remedy this situation, then the debenture holders will have the
option to elect one or both of the following remedies with respect to the unconverted
portions of the debentures:

·     require
us to issue shares of our common stock in accordance with the holders notice of
conversion at a conversion price equal to the average of the closing bid prices per share
of our common stock for any five consecutive trading days during the sixty trading days
immediately preceding the date of the holders notice of conversion; or

·     require
us to redeem each unconverted debenture for an amount, payable in cash, equal to the
outstanding principal balance plus accrued interest, divided by the conversion rate in
effect on the date of redemption, multiplied by the highest closing ask price during the
period beginning on the date of redemption and ending on the date of payment of the
redemption amount.

Upon a merger, consolidation or sale or transfer of all or substantially all of our assets
pursuant to which our stockholders are entitled to receive securities or property in
exchange for shares of our common stock, each debenture holder may convert their debenture
and be entitled to such securities or property as if the conversion had taken place prior
to the merger, consolidation, sale or transfer. In the event of any proposed merger,
consolidation, sale or transfer, the debenture holders have the right to convert their
debentures by delivering a notice of conversion to us within 15 days of receipt of notice
of such sale. If a holder elects not to convert, then we may prepay the outstanding
principal balance and accrued interest on the debenture by paying a redemption price equal
to the conversion rate applicable on that date, less all amounts required by law to be
deducted. If we spin off or otherwise divest a part or all of our business or operations
in a transaction in which securities of another entity are issued to our stockholders,
then any unconverted debentures will be deemed converted for the purpose of determining
security holders entitled to such securities, with such securities to be paid upon
conversion of the debentures.

We may, at our option, prepay all or part of the outstanding principal and interest
balance of the debentures. Any redemption is to be in an aggregate principal amount of at
least $100,000 and made pro rata among all of the holders of the debentures based on the
then-outstanding balances due under the debentures. Redemptions under the TK debenture and
Carbon Mesa debenture are to be made at a redemption price equal to 100% or 125%,
respectively, of the amount to be redeemed. If we serve a redemption notice, TK and Carbon
Mesa will retain conversion rights, up to a maximum of 50% of the amount subject to the
redemption, for two business days following receipt of the redemption notice. We may not
serve any redemption notice without having the necessary cash or credit facilities
immediately available to cover the redemption price.

In connection with the issuance of the debentures, we also issued warrants. The warrants
have an initial exercise price of $0.60 per share and also have cashless exercise
provisions. The warrants expire on February 28, 2003. In addition, the warrants contain
piggyback and demand registration rights, which rights are discussed further below.

The debentures were initially secured by a standby letter of credit in the amount of
$1,200,000 issued by the Bank of India. However, this letter of credit has since expired.
Under the September 2001 amendment to the TK debenture, the debenture was to be secured by
our assets. The TK and Carbon Mesa debentures also continue to be secured by 28,800,000
shares of common stock pledged by the company. The pledged shares are held in escrow under
the terms of a pledge agreement dated March 8, 2000. The pledge agreement provides that,
unless and until an event of default occurs, the pledged shares shall be deemed unissued
shares for the purpose of voting and other powers of ownership. Any dividends, whether in
cash or stock, paid with respect to the pledged shares will be added to the pledged shares
as additional collateral.

Under the pledge agreement, an event of default includes a false or misleading
representation or warranty made in the pledge agreement, our failure to observe or perform
any covenant in the pledge agreement or to cure such failure within five days after
discovery or notice of such failure, and the occurrence of any event of default under the
debentures. Upon the occurrence of an event of default under the pledge agreement, a
pledgee will have the sole and exclusive right to exercise all voting powers and other
powers of ownership related to the pledged shares and any other collateral.
Notwithstanding anything in the pledge agreement, no pledgee may beneficially own in
excess of 9.99% of the outstanding shares of our common stock, as provided in the
debentures. In addition, upon an event of default, but subject to repayments of the TK
debenture, a pledgee may sell the pledged shares and any other collateral. The pledge
agreement terminates upon satisfaction of all of our obligations under the debentures, the
registration rights agreement and the warrants.

The registration rights agreement obligated us to file a registration statement under the
Securities Act within 30 days following the sale of the debentures for the purpose of
registering for resale shares of our common stock issuable upon conversion of the
debentures and upon exercise of the warrants. In order to ensure that the registration
statement covers all of the shares issuable upon conversion of the debentures and exercise
of the warrants, we were required to register no less than 200% of the aggregate number of
shares into which the debentures are convertible and the warrants are exercisable at the
time of filing the registration statement. Penalties for failure to timely file and obtain
effectiveness of the registration statement included our monthly payment to the debenture
holders of 2%of the value of the debenture on the 31st day following
the sale of the debentures and 3% of the value of the debenture on the first day of each
subsequent month until such time as the registration statement is filed, as well as the
right of the debenture holders to cause us to fully redeem the debentures in cash within
three days.

On August 18, 2000 and December 5, 2000, TK converted an aggregate of $530,000 of the
principal balance of its debenture plus related interest into 3,379,489 shares of our
common stock. In 2000 we repaid $5,000 of the $35,000 principal amount of the Carbon Mesa
Debenture. An additional $10,000 was paid on the Carbon Mesa Debenture in 2002. Prior to
September 24, 2001, we defaulted under the provisions of the debentures and the
registration rights agreement due to our failure to maintain our listing on the
NASDs OTC Electronic Bulletin Board and our failure to timely register with the SEC
for resale the shares of common stock issued or issuable upon conversion of the debentures
and exercise of the warrants. As a result of this failure, penalties totaling $956,000
became due. We renegotiated the terms of the TK debenture and, on September 24, 2001,
amended the debenture and the Registration Rights Agreement. Under the amendment, TK
waived defaults under the TK debenture and agreed to extend the maturity date of the TK
debenture from February 28, 2002 to February 28, 2003, and provide that unpaid interest
shall continue to accrue on the TK debenture payable quarterly in arrears beginning March
31, 2002. We also agreed to increase the principal balance of the TK debenture by $650,000
to $2,120,000 and issue 2,500,000 shares of common stock to TK in settlement of penalties
outstanding under the registration rights agreement. Accrued interest under both the TK
and Carbon Mesa debentures continues to be payable upon conversion in the form of either
cash or additional shares of our common stock, at our option, at the then-applicable
conversion rate. We remain in default of the Carbon Mesa Debenture.

In addition, we agreed that on or before November 30, 2001, we would file with the SEC all
securities filings that are required to be filed prior to that date and secure and
maintain the listing of our common stock on an exchange or on the NASDs OTC
Electronic Bulletin Board. In addition, we agreed to file by January 31, 2002 a
registration statement covering, among other things, the shares of common stock issued or
issuable upon conversion of the debentures and exercise of the warrants. Penalty for
failure to comply with the filing or relisting requirements, was that the principal amount
of the TK debenture would increase by $50,000 for each 30-day period of non-compliance,
with a maximum aggregate increase of $350,000. As a result of our failure to comply with
the above filing and listing requirements, the principal amount of the TK debenture has
increased by $350,000, to $2,470,000.

# Item
6.    Managements Discussion and Analysis and Plan of Operation

The following discussion and analysis should be read in conjunction with our financial
statements and notes to financial statements included elsewhere in this Annual Report on
Form 10-KSB. This report and our financial statements and notes to financial statements
contain forward-looking statements, which generally include the plans and objectives of
management for future operations, including plans and objectives relating to our future
economic performance and our current beliefs regarding capital we might need and revenues
we might earn pursuant to the revised joint venture and implementation of our business
strategies. The forward-looking statements and associated risks may include, relate to or
be qualified by other important factors including, without limitation, anticipated trends
in our financial condition and results of operations.

Any of the factors described above or in the Risk Factors section below could
cause our financial results, including our net income (loss) or growth in net income
(loss) to differ materially from prior results, which in turn could, among other things,
cause the price of our common stock to fluctuate substantially.

# Overview

We were incorporated on February 5, 1988 under the laws of the State of Delaware.
Historically, we had been engaged in medical and medical related enterprises and
subsequently the development of electrical motors. In 1999, we entered into certain
transactions with R-Tec Corporation through which we divested ourselves of assets related
to the electrical motor industry.

In the year 2000, we entered into a Cooperative Joint Venture agreement with Hechi, in
anticipation of changing the focus of our business to the smelting and mining of
non-ferrous metals in the Guangxi Province of China. However, in July 2001, we were
advised that the transactions were not in compliance with the laws of the PRC. On July 19,
2002 we revised our agreements with Hechi so as to be in compliance with the laws of the
PRC.

# Results of Operations

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

We had no significant revenues in the two-year period ended December 31, 2001. For the
year ended December 31, 2001, we had a net loss of $1,783,485, compared to a net loss of
$3,221,058 for the year ended December 31, 2000. Our loss in 2000 reflects a charge of
$1,848,000 related to the issuance of Series A Preferred Stock as part of the consummation
of our transaction with Hechi under its original terms, as well as a charge of $500,000
related to the beneficial conversion features of the convertible debentures. The absence
of these charges in 2001, when combined with lower legal, accounting and other related
costs, offset by penalties incurred in connection with the convertible debentures, account
for the reduced loss in 2001 relative to 2000.

Effective July 1, 2000, we entered into an asset purchase agreement with Hechi. The Asset
Purchase Agreement provided for our acquisition of certain of Hechis assets,
including a 9% interest in Gaofeng Mining Company Limited (which owns and operates the
Gaofeng mine and processing facilities) a 100% interest in the Wuxu Mine and ore
processing facilities and a 100% interest in the Hechi copper smelter. On July 27, 2001,
we were advised that the transactions contemplated under the original agreements were not
in compliance with certain laws of the PRC and, therefore, void. Between the effective
date of the acquisition agreement and prior to the determination that the transaction was
void under the laws of the PRC, we believed that we had properly consummated the
transactions with Hechi and, therefore, had focused corporate resources entirely upon
managing the mining operations of Hechi and did not engage in any other business
operations. Since July 27, 2001 we have focused our resources on restructuring the
transaction with Hechi. In effecting the transaction in its original form and subsequently
restructuring it, we incurred substantial expenses in both fiscal years 2000 and 2001
which contributed significantly to our losses for those years. In addition, because the
original transaction was deemed void we did not benefit from revenue generated by Hechi
during 2000 and 2001.

# Employees

The company currently has 2 full time employees in our offices in Toronro. As a result
of our transaction with Hechi, substantially all of our personnel will be located in
China. As of June 2002, GGM employed 1068 people, of which 60 were employed at the Wuxu
mineral processing mill, 683 at the Gaofeng mine and 325 at the Hechi copper smelter. Of
these 28 were employed in an administrative capacity.

# Liquidity and Capital
Resources

During and since 1999, we have funded our activities primarily from loans from private
parties in exchange for promissory notes, and capital contributions from Gilles
Laverdiere, our current Vice Chairman and Chief Executive Officer. In March 2000, we
completed an offering of two debentures in the initial principal amounts of $2,000,000 and
$35,000, respectively. From the net proceeds of $1,800,000 from the sale of the
debentures, we contributed $1,500,000 to GGM, which was used primarily to purchase metal
concentrates, and we retained $300,000 for working capital purposes.

On August 18, 2000 and December 5, 2000, TK converted an aggregate of $530,000 of the
principal balance of its debenture plus related interest into 3,379,489 shares of our
common stock. In 2000 we repaid $5,000 of the $35,000 principal amount of the Carbon Mesa
Debenture. An additional $10,000 was paid on the Carbon Mesa Debenture in 2002. Under
amendments to the TK debenture and registration rights agreement, TK waived defaults under
the debenture and agreed to extend its maturity date from February 28, 2002 to February
28, 2003, and provided that unpaid interest would continue to accrue on the TK debenture
payable quarterly in arrears beginning March 31, 2002. We also agreed to increase the
principal balance of the TK debenture by $650,000 to $2,120,000 and issue 2,500,000 shares
of common stock to TK in settlement of penalties outstanding under the registration rights
agreement. Accrued interest under both the TK and Carbon Mesa debentures continues to be
payable upon conversion in the form of either cash or additional shares of our common
stock, at our option, at the then-applicable conversion rate. We remain in default of the
Carbon Mesa Debenture.

In addition, we agreed that on or before November 30, 2001, we would file with the SEC all
securities filings that are required to be filed prior to that date and secure and
maintain the listing of our common stock on an exchange or on the NASDs OTC
Electronic Bulletin Board. In addition, we agreed to file by January 31, 2002 a
registration statement covering, among other things, the shares of common stock issued or
issuable upon conversion of the debentures and exercise of the warrants. Penalty for
failure to comply with the filing or relisting requirements, was that the principal amount
of the TK debenture would increase by $50,000 for each 30-day period of non-compliance,
with a maximum aggregate increase of $350,000. As a result of our failure to comply with
the above filing and listing requirements, the principal amount of the TK debenture has
increased by $350,000, to $2,470,000.

On May 3, 2002 we raised $479,000 pursuant to a private placement. These funds will be
used by the company to pay expenses related to the implementation of the revised structure
and for general expenses including overhead, travel expenses and professional fees.

The execution and success of our strategy is largely dependent on our ability to raise
necessary funds. The company intends to contribute $7,300,000 to GGM. Currently the assets
of GGM are self sustaining and can continue to be so for the foreseeable future. However,
because of capital limitations these assets are operating below capacity and are therefore
earning less revenue and are less profitable than they could be given additional capital.
It is our expectation that both revenue and profitability will rise with the introduction
of additional capital in an amount that will provide reasonable returns on the capital
investment. Additionally, management expects to diversify its product offering in an
attempt to smooth out the effects of market cyclicality. To the extent we are not
successful in raising capital to further contribute to the GGM we will continue to operate
our assets at their current capacity until such time as additional capital becomes
available. In the event, we do not contribute the agreed to $7,300,000 to GGM by September
1, 2003 our equity interest in GGM will be proportionately reduced but will in no event be
less than 70%. Our profits interest in GGM will remain fixed at 95% regardless of the
amount and timing of our capital contributions. In addition, under Chinese law, in the
event a joint venture party fails to make an agreed to capital contribution the government
may in some cases revoke the joint venture license forcing the joint venture to begin
winding up proceedings. The joint venture parties may, in such a case, renegotiate the
terms of the capital contribution subject to approval from the relevant authorities. There
can be no assurance that we will be able to obtain public or private third-party sources
of financing or that favorable terms for such financing will be available. If we raise
additional funds by issuing equity or convertible debt securities, options or warrants,
further dilution to our existing stockholders may result. In addition, any debt financing
or other financing of securities senior to common stock may include financial and other
covenants that will restrict our flexibility. Any failure to comply with these covenants
would have a material adverse effect on our business, prospects, financial condition and
results of operations.

Capital requirements for the next year are $9,000,000 of which $7,300,000 will be
contributed to GGM and $1,700,000 will be used for working capital. If adequate funds are
not available, we may be required to delay, scale back or eliminate portions of our
planned operations or to obtain funds through arrangements with partners or others that
may require us to relinquish rights to some of our assets. Accordingly, the inability to
obtain financing could result in a significant loss of ownership and/or control of our
assets and could also adversely affect our ability to fund our planned operations.

# Risk Factors

An investment in our securities involves a high degree of risk. You should consider, among
other things, the following factors carefully before deciding to purchase or hold any of
our securities.

We have a history of losses that
may continue in the future and that may adversely impact our business and our
stockholders.

We have incurred substantial additional losses since our inception. We incurred
significant net operating losses in each of the years ended December 31, 2001 and 2000 and
had a stockholders deficit of $1,961,429 at December 31, 2001. We have incurred
substantial additional losses since December 31, 2001. Our recurring losses raise
substantial doubt about our ability to continue as a going concern and led our independent
certified public accountant to include in his unqualified opinion covering our 2001
financial statements an explanatory paragraph related to our ability to continue as a
going concern. Our 2001 financial statements do not include any adjustments that might
result from the outcome of this uncertainty. If we are unable to attain or maintain
profitable operations in the future, there may be a material adverse effect on our cash
flows, which could cause us to violate other covenants under the debentures and could
impede our ability to raise capital through debt or equity financing to the extent we may
need it for our continued operations or for planned expansion. Consequently, future losses
may have a material adverse effect on our business, prospects, financial condition,
results of operations and cash flows.

We will need additional capital in
the future and adequate financing may not be available to us on acceptable terms or at
all. If we obtain financing through the issuance of equity securities, further dilution to
existing stockholders may result. We may be required to obtain financing through
arrangements that may require us to relinquish rights to or control of our assets.

Since 1999, we have funded our activities primarily from loans from private parties in
exchange for promissory notes, capital contributions from Gilles Laverdiere, our current
Vice Chairman and Chief Executive Officer and private placement financing. We have not
been successful in generating cash from our development stage activities in the past and
cannot assure you that we will be able to do so in the future. Funds raised by the company
will be used to increase the capacity and profitability of the mining and smelting assets
and interests it has acquired through its transaction with Hechi. Our capital requirements
are approximately $7,300,000 to be contributed to GGM and used in connection with the
business. Currently the assets of GGM are self sustaining and can continue to be so for
the foreseeable future. However, because these assets are operating below capacity, an
infusion of capital will increase both the capacity and profitability of these operations.
There can be no assurance that we will be able to obtain public or private third-party
sources of financing or that favorable terms for such financing will be available. If we
raise additional funds by issuing equity or convertible debt securities, options or
warrants, further dilution to our existing stockholders may result. In addition, any debt
financing or other financing of securities senior to common stock will likely include
financial and other covenants that will restrict our flexibility. Any failure to comply
with these covenants would have a material adverse effect on our business, prospects,
financial condition and results of operations.

If adequate funds are not available, we may be required to delay, scale back or eliminate
portions of our planned operations or to obtain funds through arrangements with partners
or others that may require us to relinquish rights to some of our assets. Accordingly, the
inability to obtain financing could result in a significant loss of ownership and/or
control of our assets and could also adversely affect our ability to fund our planned
operations.

# Extraction and
processing risks and potential inadequacy of insurance coverage

The business of extraction and processing of minerals is subject to many risks and
hazards, including environmental hazards, industrial accidents, periodic interruptions due
to inclement weather conditions, labor disputes, critical equipment failures, fires,
unusual or unexpected geological or mining conditions and flooding. Such risks could
result in damage to, or destruction of, extraction or processing facilities, personal
injury, environmental damage, delays in extraction or production, monetary loss and
possible legal liability. Although we will maintain insurance within ranges of coverage
consistent with industry practice, it cannot be certain that such insurance will be
adequate to cover losses or continue to be available at economically acceptable rates in
the future. We may become subject to liability for pollution, accidents or other hazards
against which we are uninsured.

# Peoples Republic
of China political and economic considerations

Biogans, business operations are located in, and revenues derived from, the PRC.
Accordingly, the Companys business, financial condition and results of operations
could be significantly and adversely affected by economic, political and social changes in
the PRC.

The economy of the PRC has traditionally been a planned economy, subject to five-year and
annual plans adopted by the State, which set down national economic development goals.
Since 1978, the State has been moving the economy from a planned economy to a more open,
market-oriented system. The PRCs economic development is following a model of market
economy under socialism. Under this direction, it is expected that the PRC will continue
to strengthen its economic and trading relationships with foreign countries and business
development in the PRC will follow market forces. However, there is no guarantee that a
major turnover of senior political decision-makers will not occur, or that the existing
economic policy of the PRC will not be changed. A change in policies by the State could
adversely affect our investment in GGM by changes in laws, regulations, or the
interpretation thereof, confiscatory taxation, restrictions on currency conversion,
imports and sources of supplies, or the expropriation of private enterprises.

Conversion of our outstanding
convertible debentures could substantially dilute your investment and cause the price of
our common stock to decline because the conversion price of the debentures is determined
by the market price of our common stock, with no ceiling on the number of shares of our
common stock that are issuable upon conversion of those debentures.

The TK and Carbon Mesa debentures are
convertible into shares of our common stock at a price equal to the lesser of a fixed
price and a variable price that is based upon a discount on the market price of our common
stock. To the extent the holders convert the debentures and then sell the underlying
shares of common stock into the market, the price of our common stock may decline due to
the additional shares available in the market. This decline could allow the holders to
convert their remaining debentures into a greater number of shares of common stock, the
sale of which would further depress the stock price. You could, therefore, experience
substantial dilution and a decline in the value of your investment as a result of the
conversion of the debentures.

If the holders of our outstanding
securities or others engage in short sales of our common stock, including sales of shares
to be issued upon conversion of convertible securities, the price of our common stock may
decline.

Selling short is a technique used by a stockholder to take advantage of an anticipated
decline in the price of a security. A significant number of short sales can create a
downward pressure on the price of the security. If the holders of our debentures or Series
A Convertible Preferred Stock or others sell large volumes of our common stock within a
relatively short period of time, the market price of our common stock may decrease. The
decrease in market price would allow holders of the debentures that have a conversion
price based upon a discount on the market price of our common stock to convert their
debentures into an increased number of shares of our common stock. Further sales of common
stock issued upon conversion of debentures could cause even greater declines in the price
of our common stock. The downward pressure on the market price caused by conversion of
debentures, and the sale of the underlying shares of common stock, could encourage short
sales by the debenture holders and others and could further undermine the value of our
common stock.

The unpredictability of our
quarterly operating results may cause the price of our common stock to fluctuate or
decline.

Our quarterly operating results have
varied significantly in the past and will likely continue to do so in the future due to a
variety of factors, many of which are beyond our control and which include the following:

·     the level
of demand for base metal products within China and internationally; ·
    the prices that the company will be able to charge for mineral
products; ·     costs related to possible acquisitions of new mines
or technologies to modernize mining operations; ·     regulatory
changes affecting the Chinese mining community generally or our operation of mines; and
·     the amount and timing of capital expenditures and other costs
relating to the expansion of smelting operations.

Due to these factors and other factors, including changes in general economic conditions,
we believe that period-to-period comparisons of our operating results will not necessarily
be meaningful in predicting future performance. We plan to increase our expenditures for
our marketing operations and to expand and develop GGMs mining and smelting
operations to increase production and sales of products. We cannot assure you that our
revenues will increase in proportion to our expenses. We may be unable to adjust spending
quickly enough to offset any unexpected revenues shortfall. This could lead to a shortfall
in revenues in relation to our expenses. If our operating results do not consistently meet
the expectations of securities analysts or investors, our stock price may fluctuate or
decline.

Our stock price has been volatile,
which could result in substantial losses for investors purchasing shares of our common
stock.

The market price of our common stock has fluctuated significantly in the past. The market
price of our common stock may continue to exhibit significant fluctuations in response to
the following or other factors, many of which are beyond our control.

- variations in our quarterly operating results;
- material announcements by us or our competitors of mining developments, strategic partnerships, joint ventures
or capital commitments;
- general economic and political conditions in China and in the mining industry; and
- regulatory developments.

The price at which you purchase shares of our common stock may not be indicative of the
price of our common stock that will prevail in the trading market. You may be unable to
sell your shares of common stock at or above your purchase price, which may result in
substantial losses to you. Moreover, in the past, securities class action litigation has
often been brought against a company following periods of volatility in the market price
of its securities. We may in the future be the target of similar litigation. Such
litigation could result in substantial costs and a diversion of managements
attention and resources.

Our success depends on our ability
to retain our current management team and recruit additional key management personnel.

Our success is highly dependent upon the continued services of key managerial employees
both in North America and in China, including Kuang Yihuai, our Chairman of the Board,
Gilles Laverdiere, our Vice-Chairman and Chief Executive Officer, and Kerry D. Smith, our
President and Chief Operating Officer. We do not currently maintain key-man life insurance
policies on any member of management. Consequently, the loss of these key executives or
one or more other key members of management could have a material adverse effect on us.

Our success also depends upon our ability to recruit, assimilate and retain other
qualified employees. Chinas current economic restructuring and the corresponding
creation of a liquid market for skilled employees may lead to problems retaining local
Chinese management. The loss of key employees and/or the inability to attract and retain
management personnel could result in a management shortage and inefficient production,
which would have a material adverse effect on us.

Because we are subject to the
penny stock rules, the level of trading activity in our stock may be reduced.

Broker-dealer practices in connection with transactions in penny stocks are
regulated by penny stock rules adopted by the SEC. Penny stocks, which shares of our
common stock qualify as, are generally equity securities with a price of less than $5.00
(other than securities registered on some national securities exchanges or quoted on
NASDAQ). The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and the nature and level of risks in
the penny stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and, if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealers presumed control over
the market, and monthly account statements showing the market value of each penny stock
held in the customers account. In addition, broker-dealers who sell these securities
to persons other than established customers and accredited investors must make
a special written determination that the penny stock is a suitable investment for the
purchaser and receive the purchasers written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level of trading
activity, if any, in the secondary market for a security subject to the penny stock rules,
and investors in our common stock may find it difficult to sell their shares.

Because our common stock is not
listed on a national securities exchange, you may find it difficult to dispose of or
obtain quotations for our common stock.

There is currently an extremely limited trading market for our common stock. Until January
9, 2001, our common stock was traded on the NASDs OTC Electronic Bulletin Board
under the symbol BIGM. Effective January 9, 2001, the NASD deleted all
quotations of our common stock from the OTC Electronic Bulletin Board. Since that time,
our common stock has been quoted only sporadically from time to time in the
over-the-counter pink sheets, an ad hoc forum for quotations of securities
prices intended to match potential buyers and sellers, which forum is not monitored or
supervised by any regulatory authority or agency. There can be no assurance that any
regular trading market for our common stock will develop or, if developed, will be
sustained. Consequently, you may find it difficult to either dispose of, or to obtain
quotations as to the price of, our common stock.

Our preferred stock may cause or
prevent a takeover of the company, possibly preventing you from obtaining higher stock
prices for your shares.

Our board of directors has the authority to issue up to 10,000,000 shares of preferred
stock and to fix the rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by our stockholders. As of July
19, 2002, a total of 1,100 shares of our Series A Convertible Preferred Stock, each
convertible into 12,000 shares of our common stock, were outstanding. On July 19, we
issued a total of 3,624,000 shares of our Series B Convertible Preferred Stock, each
convertible in 100 shares of our common stock. The rights of the holders of our common
stock are subject to the rights of the holders of our currently outstanding preferred
stock and will be subject to, and could be adversely affected by, the rights of the
holders of any preferred stock that we may issue in the future. The issuance of preferred
stock provides desired flexibility in connection with possible acquisitions and other
corporate purposes. However, the issuance of preferred stock to Fushan has resulted in
change in control of the company. The issuance of preferred stock could also have the
effect of making it more difficult for a third party to acquire a majority of our
outstanding voting stock, which would delay, defer or prevent a change in control of the
company even if a change in control would be beneficial to our stockholders. Furthermore,
preferred stock may have other rights, including economic rights senior to the common
stock and, as a result, the issuance of preferred stock could adversely affect the market
value of our common stock.

The anti-takeover effects of
Delaware law could adversely affect the performance of our stock.

Section 203 of the General Corporation Law of Delaware prohibits us from engaging in
business combinations with interested stockholders, as defined by statute. These
provisions may have the effect of delaying or preventing a change in control of the
company without action by our stockholders, even if a change in control would be
beneficial to our stockholders. Consequently, these provisions could adversely affect the
price of our common stock.

# Item
7.    Financial Statements

Our audited financial statements for the years ended December 31, 2001 are submitted as a
separate section of this Annual Report on Form 10-KSB beginning at page F-1.

# Item
8.    Changes in and Disagreements With Accountants On Accounting and
Financial Disclosure

On August 10, 2000, we filed a Current Report on Form 8-K to report the resignation of
George Brenner, C.P.A. and the engagement of Bersch Accounting as our independent
accountants, effective as of August 7, 2000. In our two most recent fiscal years and
subsequent interim period preceding Mr. Brenners resignation, there were no
disagreements between the company and Mr. Brenner on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Mr. Brenner, would have caused Mr.
Brenner to make reference to the subject matter of the disagreement in connection with his
reports. Mr. Brenners reports on our financial statements for the prior two fiscal
years contained no adverse opinion and no disclaimer of opinion, nor were such reports
qualified or modified as to uncertainty, audit scope or accounting principles, except that
the report of Mr. Brenner dated May 13, 1999 appearing in our Annual Report on Form 10-KSB
for the year ended December 1998 and the report of Mr. Brenner contained in this Annual
Report on Form 10-KSB include an explanatory paragraph regarding substantial doubt about
our ability to continue as a going concern. Our decision to accept the resignation of Mr.
Brenner and to engage Bersch Accounting was approved by our board of directors.

On February 26, 2001 and March 8, 2001, we filed Current Reports on Form 8-K to report a
change in our independent certifying accountants. The February 26, 2001 Form 8-K was
amended on March 8, 2001, March 15, 2001 and March 27, 2001, to report the dismissal of
Bersch Accounting and the engagement of KPMG LLP as our new independent certified public
accountants. Following the termination of our relationship with Bersch Accounting, we
received letters from Bersch Accounting stating that there were disagreements between
Bersch Accounting and us. These letters are incorporated by reference as exhibits to this
report. Our decision to dismiss Bersch Accounting and engage KPMG LLP was approved by our
board of directors. On January 28, 2002, we filed a Current Report on Form 8-K to report
the resignation of KPMG LLP and the engagement of George Brenner, C.P.A. as our
independent accountant, effective January 28, 2002. The resignation of KPMG LLP was
necessitated by KPMGs intake procedures when it was discovered that the original
transaction with Hechi was not completed. During our two most recent fiscal years and
subsequent interim periods preceding the resignation of KPMG, there were no disagreements
with KPMG on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of KPMG, would have caused KPMG to make reference to the subject matter of
the disagreement in connection with its reports, if any had been rendered. Our decision to
re-engage George Brenner, C.P.A. was approved by our board of directors.

Following the termination of our relationship with KPMG LLP, we received a letter from
KPMG LLP agreeing to the statements concerning them in the Form 8-K filed on January 28,
2002. Such letter is incorporated by reference as an exhibit to this report.

# Item
9.    Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the  ExchangeAct

Set forth below is information with respect to our directors and executive officers as of
July 19, 2002:

|Name                                                                                                                                      | Age                     | Titles                                                                                                                                                                                
|----------------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Kuang Yihuai     
Gilles Laverdiere
                 
Kerry D. Smith   
Liang Changjiang 
John Cullen      
Pierre O'Dowd    
Kuang Zhong | 50
48
  
48
51
46
45
27 | Chairman of the Board
Vice Chairman, Chief Executive Officer, Chief Financial Officer and Director
President, Chief Operating Officer and Director
Director
Director
Director
Director

# Business Experience

Kuang Yihuai has served as a director and Chairman of the Board of Directors since
March 2000. Mr. Yihuai has served as the Chief Executive Officer of Hechi since March 2000
and as Chairman of the Board of Directors of Hechi from March 2000 until May 2001. Mr.
Yihuai also served as President of HPMC from 1988 until its privatization in June 1998,
and as President of Hechi since June 1998. Mr. Kuang Yihuai is the uncle of Mr. Kuang
Zhong.

Gilles Laverdiere has served as our Vice Chairman and Chief Executive Officer since
November 23, 2001. Mr. Laverdiere served as Chief Executive Officer and President of the
company from November 1999 until November 2001. Mr. Laverdiere has been a director of the
company since November 1999, and served as Chairman of the Board of Directors from
November 1999 until March 2000. In addition, he served as our Acting Chief Financial
Officer from November 1999 until January 2001. Prior to joining the company, Mr.
Laverdiere served as Chief Executive Officer and Chairman of the Board of Directors of
Tiaro Bay Resources Inc. since 1996. Mr. Laverdiere continues to serve as a director of
Tiaro Bay Resources. Since January 2002 Mr. Laverdiere has served as a director of Roland
Virtual Business Systems, Inc. Since 1985, he has served as President and Chief Executive
Officer of Giminex, Inc., a mining and exploration consulting firm, and since 1998, he has
served as President and a director of Exploration Mirandor Inc., an exploration junior
mining company that was publicly traded on the Montreal Exchange under the symbol
MIQ until May 17, 2001. As a consultant to mining and exploration ventures,
Mr. Laverdiere evaluated mining prospects and negotiated and structured financing for
various mining companies. Mr. Laverdiere received a B.S. in geology in 1978 from the
University of Montreal and a license in ecology in 1996 from the University du Quebec in
Abitibi-Temiscamingue. Mr. Laverdiere devotes substantially all of his professional time
to the business of the company.

Kerry D. Smith has served as President and Chief Operating Officer, and as a director,
since November 23, 2001. Mr. Smith was the Chief Financial Officer and a Vice President of
the company from January 2001 to November 23, 2001. From 1996 until 2000, Mr. Smith served
as a Senior Mining Analyst of Merrill Lynch Canada Inc., formerly known as Midland Walwyn
Capital Inc. From 1995 until 1996, he served as a Senior Mining Analyst of RBC Dominion
Securities Inc. Mr. Smith received a B.A.Sc. in mining engineering in 1976, and an M.B.A.
in finance and production from Queens University in 1980. In addition, Mr. Smith has
16 years experience in mining with several companies including Eldorado Nuclear, Hudson
Bay Mining & Smelting and Denison Mines, Ltd. Mr. Smith is a member of the Association
of Professional Engineers of Ontario.

Liang Changjianghas served as a director of the company since November 2001. Mr.
Changjiang has served as a director of Hechi Industrial Co., Ltd. since June 1998, and
Chairman of the Board since May 2001. Mr. Changjiang has also served as Vice-Director of
the supply department of China Non-Ferrous Metals Materials Co., Ltd. From July 1971 to
April 1981 he worked for Beijing Structural Members Plants as an employee.

John Cullenhas been a self-employed businessman since April 1998. From April 23, 1997
to the present Mr. Cullen has served as a director of CGX Energy, Inc. From December 1987
to April 1998 Mr. Cullen was employed as an investment adviser with Nesbitt Burns. From
1996 to February 1997 Mr. Cullen served as a director of Link Mineral Resources and as a
member of its compensation committee.

Pierre ODowd has served as a director of the company since March 2000. In
addition, from 1995 to October 1999, Mr. ODowd served as a consulting geologist and
Vice President of Exploration for Noveder, Inc., a junior mining exploration company in
Canada. Since October 1999, Mr. ODowd has served as a director and President of
Noveder, Inc., now called Atlantis Exploration Inc. From 1979 to 1992, Mr. ODowd
worked as an exploration and mine geologist in Canada and South America. He received a
B.S. in geology in 1978 from Universitè du Montreal.

Kuang Zhonghas served as a member of our Board of Directors since March 2000. In
addition, Mr. Zhong has served as a director of Hechi since March 2000. From June 1995 to
June 1998, he served as a director of Fengshan Gold Mine in Guangxi, China. Mr. Kuang
Zhong is the nephew of Mr. Kuang Yihuai. He received a degree in base metal metallurgy
from Zhong Nan Industrial University in China in 1995.

All directors serve for one year and hold office until the next annual stockholders
meeting or until their respective successors are elected or until their earlier death,
resignation or removal. Each officer serves at the discretion of the board of directors.
Currently other than the Audit Committee and the Executive Committee there are no
committees of the board of directors. Steven Yishyun Chi resigned as a director in
February 2001, Gerald Sneddon resigned as a director in March 2001, and Ron Tolman
resigned as a director in May 2002.

# Item 10. Executive
Compensation

Summary Compensation Table

The following table sets forth information concerning compensation accrued but not paid to
our Chief Executive Officer for services rendered to us during the fiscal years ended
December 31, 2001, 2000 and 1999. No other executive officer received an annual salary and
bonus of more than $100,000 for services rendered to us during this period of time nor did
any other executive officer provide services valued at more than $100,000.

|                            |      | Annual compensation | Long-term compensation
|--------------------------- | ---- | ------------------- | ----------------------
|                            |      |                     |                       
|                            |      | Salary              | Bonus                 
|Name and Position           | Year | ($)                 | ($)                   
|Gilles Laverdiere           | 2001 | $60,000             | NIL                   
|Vice-Chairman               | 2000 | $60,000             | NIL                   
|and Chief Executive Officer | 1999 | NIL                 | NIL                   

We have not granted any stock
appreciation rights to any of our executive officers. Under an employment agreement 
Kerry D. Smith is entitled to 500,000 options to purchase shares of common stock, priced
at the same price as the companys proposed public offering, as well as, an
additional 100,000 options to purchase shares of common stock, priced at the same price as
the companys proposed public offering, upon successful completion of a public
offering of $5,000,000 or more. Under an employment agreement Gilles Laverdiere is
entitled to 500,000 options to purchase shares of common stock, priced at the same price
as the companys proposed public offering. Under a letter agreement John Cullen is
paid $3,000 per month by the company for consulting services rendered. Mr. Cullen consults
with the company on financial and capital markets matters. The companys agreement
with Mr. Cullen is terminable at will by either party. Except for these employment
agreements, the company has not entered into any other employment agreements. Directors
are not compensated for any services they may provide as directors on our board of
directors.

# Item
11.    Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the beneficial ownership of
each of our classes of stock as of February 19, 2003, by:

- each person known by us to own beneficially 5% or more of the outstanding shares of any class of voting stock
issued by the company;
- each of our directors;
- each of our executive officers named in the summary compensation table above; and
- all of our directors and executive officers as a group

The following calculations of the
percent of outstanding common shares are based on 108,066,199 shares of our common stock,
1,100 shares of our Series A Convertible Preferred Stock and 3,624,000 shares of our
Series B Convertible Preferred Stock issued and outstanding as of the date of the table.
Beneficial ownership and, accordingly, percent of class ownership, is calculated in
accordance with Rule 13d-3 of the Securities Act.

Each of the natural persons listed in the table beneficially owns only outstanding shares
of common stock, Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock. TK holds, as agent for two other entities, outstanding shares of common stock and
shares of Series A Convertible Preferred Stock, the TK debenture and the warrants. Each
share of Series A Convertible Preferred Stock is convertible into 12,000 shares of common
stock. Each share of Series B Convertible Preferred Stock is convertible into 100 shares
of common stock. The terms of the TK debenture and warrants held by TK, as amended,
prohibit in any 30 consecutive day period conversion of more than one-third of the
original principal amount of the TK debenture or sales of more than a number of shares of
our common stock equal to $208,000 divided by the applicable conversion rate, and prohibit
conversion of shares of Series A Convertible Preferred Stock, conversion of the TK
debenture or exercise of the warrants to the extent that such conversion or exercise would
result in the debenture holder, together with its affiliates, beneficially owning in
excess of 9.99% of our outstanding shares of common stock.

These limitations do not, however, preclude the holder from converting or exercising and
selling shares of common stock underlying its shares of Series A Convertible Preferred
Stock, debenture and warrants in stages over time where each stage does not cause the
debenture holder to beneficially own in excess of the limitation amounts. As a result of
the conversion limitations described above and the number of shares of common stock that
were held by TK or that could have been acquired by TK upon conversion of shares of Series
A Convertible Preferred Stock or upon conversion of the TK debenture or exercise of its
warrant as of the date of the table, the number of shares of common stock shown in the
table as beneficially owned by TK has been limited to 9.99% of the shares of common stock
outstanding as of the date of the table

|Name and Address of Beneficial Owner(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | Title of Class                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Amount and Nature of BeneficialOwnership                                                                                                                   | Percent of Class                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------
|Kuang Yihuai                                      
Gilles Laverdiere                                 
Kerry D. Smith                                    
Liang Changjiang                                  
John Cullen                                       
Pierre O'Dowd                                     
Kuang Zhong                                       
Fushan Industrial Co. Ltd.                        
Thomson Kernaghan & Co., Limited  
Rulon L. Tolman                                   
All directors and executive officers as a group (8persons)                                          
Thomson Kernaghan & Co., Limited                  
All directors and executive officers as a group (8persons)   
Kuang Yihuai                                      
Gilles Laverdiere                                 
Kerry D. Smith                                    
Liang Changjiang                                  
John Cullen                                       
Pierre O'Dowd                                     
Kuang Zhong                                       
All directors and executive officers as a group(8 persons) | Common                        
Common                        
Common                        
Common                        
Common                        
Common                        
Common                        
Common                        
Common                        
Common                        
Common
Series A Convertible Preferred
Series A Convertible Preferred
Series B Convertible Preferred
Series B Convertible Preferred
Series B Convertible Preferred
Series B Convertible Preferred
Series B Convertible Preferred
Series B Convertible Preferred
Series B Convertible Preferred
Series B Convertible Preferred | -(4) 
3,339,488 
- 
-(4) 
- 
25,000 
-(4) 
16,800,000 
10,795,813(2)(3) 
6,879,284 
3,364,488 
1,100(2) 
-  
290,563 
- 
- 
55,400 
- 
- 
228,457 
574,420 | -
3.09%
-
-
-
*
-
15.55%
9.99%
6.37%

3.11%
100.00%
-
8.02%
-
-
1.53%
-
-
6.30%
15.85%
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                            |                                                                                       

* Represents less than 1%.

(1)        Unless otherwise indicated, the
address of each person in this table is c/o                     Biogan International,
Inc. 120 Adelaide Street, Suite 512, Toronto, OntarioM5H 1T1. Kuang Yihuai, Gilles
Laverdiere, Kerry D. Smith, Liang Changjiang,                     John Cullen, Pierre ODowd,
and Kuang Zhong, are directors of the Company.                     Gilles Laverdiere,
Kerry D. Smith, and Robert Doyle are executive officers of                     the
company.

(2)       TK holds
the securities shown in the table as agent for Canadian Advantage
                    Limited Partnership (CALP II) and Advantage (Bermuda)
Fund Ltd.                     (ABFL). VMH Management Ltd. is the general
partner of CALP II, and                     VMH International is the investment manager
of ABFL. Mr. Mark Valentine is the                     sole director and president of VMH
Management Ltd. and is the president of VMH                     International. In those
capacities, Mr. Valentine holds the power to vote or                     dispose of the
shares of common stock that are listed as owned by TK. The                     address
for Mr. Valentine is c/o Thomson Kernaghan & Co., Limited, 120
                    Adelaide Street West, Suite 1600, Toronto, Ontario, Canada M5H 1T1.

(3)       Represents 5,879,489
shares of common stock issued and outstanding and an                     aggregate of
4,916,324 shares of common stock currently issuable upon conversion
                    of a debenture, preferred stock and/or upon exercise of a warrant.

(4)       Kuang Yihuai,
Liang Changjiang and Kuang Zhong hold the right to receive common
                    shares of the company upon conversion of Series B Preferred Stock
held                     beneficially by them. They respectively hold 290,563, 55,400,
and 228,457 shares                     of Series B Convertible Preferred Stock. Each
share of Series B Convertible                     Preferred Stock is convertible into 100
shares of common stock of the company.                     The Series B Convertible
Preferred Stock will automatically convert into common                     shares of the
company upon an increase in the companys share capital in an
                    amount sufficient to allow the issuance of the Series B Preferred
Stock or upon                     a change in control transaction. It is expected that
the shareholders of the                     company will approve a reincorporation merger
of the company at the next special                     meeting of the shareholders, which
will have the effect of, among other things,                     triggering the
conversion of the Series B Convertible Preferred Stock into                     common
stock of the company.

# Item
12.    Certain Relationships and Related Transactions

On August 18, 2000 and December 5, 2000, TK converted an aggregate of $530,000 of the
principal balance of its debenture plus related interest into 3,379,489 shares of our
common stock. In 2000 we repaid $5,000 of the $35,000 principal amount of the Carbon Mesa
Debenture. An additional $10,000 was paid on the Carbon Mesa Debenture in 2002. Prior to
September 24, 2001, we defaulted under the provisions of the debentures and the
registration rights agreement due to our failure to maintain our listing on the
NASDs OTC Electronic Bulletin Board and our failure to timely register with the SEC
for resale the shares of common stock issued or issuable upon conversion of the debentures
and exercise of the warrants. As a result of this failure, penalties totaling $956,000
became due. We renegotiated the terms of the TK debenture and, on September 24, 2001,
amended the debenture and the Registration Rights Agreement. Under the amendment, TK
waived defaults under the TK debenture and agreed to extend the maturity date of the TK
debenture from February 28, 2002 to February 28, 2003, and provide that unpaid interest
shall continue to accrue on the TK debenture payable quarterly in arrears beginning March
31, 2002. We also agreed to increase the principal balance of the TK debenture by $650,000
to $2,120,000 and issue 2,500,000 shares of common stock to TK in settlement of penalties
outstanding under the registration rights agreement. Accrued interest under both the TK
and Carbon Mesa debentures continues to be payable upon conversion in the form of either
cash or additional shares of our common stock, at our option, at the then-applicable
conversion rate. We remain in default of the Carbon Mesa Debenture. Further detail can be
found in Item 5 of this report.

To satisfy the terms of the companys original transaction with Hechi, Biogan was
likely to undertake an equity financing for the purpose of contributing capital to GGM.
With the goal of minimizing the dilution that would occur to existing company stockholders
upon consummation of any such financing, a group of the companys stockholders,
including former company officers Ron Tolman, Rulon Tolman and William Glazier, orally
agreed to reduce the numbers of their own shares of our common stock by placing up to
8,739,488 of their own shares in the hands of Gilles Laverdiere and an entity controlled
by Mr. Laverdiere. Mr. Laverdiere, who later became an officer of the company, sold a
portion of the shares, of which 3,339,488 remain held by him, and contributed the proceeds
from that sale to the company for use in satisfying certain outstanding liabilities of the
company and coordinating the consummation of the transaction with Hechi. The capital
contributions made by Mr. Laverdiere during 1999, 2000 and 2001 totaled $822,610 which
included both proceeds from the sale of the shares transferred to him and contributions he
made personally to the company. In exchange for contributions made by him, Mr. Laverdiere
received, on March 31, 2001, a 10% demand note in the principal amount of $60,000. Other
than this note, no stock or other obligation was issued by the company to Mr. Laverdiere
in exchange for capital contributions made by him. Separately, Mr. Laverdiere has agreed
orally with Fushan that Fushan will deliver 14,400,000 shares of common stock to Mr.
Laverdiere of following the conversion of the Series B Preferred Stock which has been
issued to Fushan pursuant to the terms of the companys July 19, 2002 transaction
with Hechi. These shares are to be transferred to Mr. Laverdiere as compensation for
structuring the transaction between the company and Hechi. The terms of Mr.
Laverdieres arrangement with Hechi were negotiated and agreed upon prior to Mr.
Laverdieres involvement with Biogan.

# Where you can find
more information

You are advised to read this Form
10-K in conjunction with other reports and documents that we file from time to time with
the SEC. In particular, please read our Quarterly Reports on Form 10-Q and any Current
Reports on Form 8-K that we may file from time to time. You may obtain copies of these
reports directly from us or from the SEC and the SECs Public Reference Room at 450
Fifth Street, N.W. Washington, D.C. 20549. In addition, the SEC maintains information for
electronic filers (including Biogan) at its website at www.sec.gov.

# Item
13.    Exhibits and Reports On Form 8-K

(a)    Exhibits

Exhibits are numbered in accordance with Item 601 of Regulation S-B.

|Exhibit No                                                                                                                                                                 | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   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|3.1 
3.2 
3.3 
3.4 
3.5 
3.6 
3.7 
3.8 
3.9 
4.2 
4.3 
4.4 
4.5 
4.6 
4.7 
4.8 
4.9 
4.10
4.11
4.12
4.13
4.14
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
23.1
99.1
99.2 
99.3 | Certificate of Incorporation of the Registrant filed with the Delaware Secretary of State on February 5, 1988
(incorporated herein by reference to the registrant's Form 8-A filed with the Securities and Exchange Commission on September 6, 2000).

Certificate of Amendment of Certificate of Incorporation of the Registrant filed with the Delaware Secretary
of State on March 31, 1989 (incorporated herein by reference to the registrant's Form 8-A filed with the Securities and Exchange Commission on September 6, 2000).
Certificate of Amendment of Certificate of Incorporation of the Registrant filed with the Delaware Secretary
of State on June 29, 1989 (incorporated herein by reference to the registrant's Form 8-A filed with the Securities and Exchange Commission on September 6, 2000).
Certificate for Renewal and Revival of Charter of the Registrant filed with the Delaware Secretary of State on
May 2, 1990 (incorporated herein by reference to the registrant's Form 8-A filed with the Securities and Exchange Commission on September 6, 2000).
Certificate for Renewal and Revival of Charter of the Registrant filed with the Delaware Secretary of State on
August 29, 1994 (incorporated herein by reference to the registrant's Form 8-A filed with the Securities and Exchange Commission on September 6, 2000).
Certificate of Amendment of Certificate of Incorporation of the Registrant filed with the Delaware Secretary
of State on September 5, 1997 (incorporated herein by reference to the registrant's Form 8-A filed with the Securities and Exchange Commission on September 6, 2000).
Certificate for Renewal and Revival of Charter of the Registrant filed with the Delaware Secretary of State on May 23, 2002.
Amended and restated bylaws of Registrant (incorporated herein by reference to the registrant's Form 8-A filed
with the Securities and Exchange Commission on September 6, 2000).
Articles Of Association Of Guangxi Guanghe Metals Co. Ltd. filed with the government of the People's Republic
of China on July 19, 2002. (incorporated herein by reference to the Registrant's Form 10-KSB filed with the Securities and Exchange Commission on August 2, 2002).
8% Secured Convertible Debenture due February 28, 2002 issued by the Registrant to CALP II, LLC (incorporated
herein by reference to the registrant's Form 8-A filed with the Securities and Exchange Commission on September 6, 2000).
8% Secured Convertible Debenture due February 28, 2002 issued by the Registrant to Carbon Mesa Partners, LLC
(incorporated herein by reference to the registrant's Form 8-A filed with the Securities and Exchange Commission on September 6, 2000).
Common Stock Purchase Warrant dated March 29, 2000 issued by the Registrant to CALP II, LLC (incorporated
herein by reference to the registrant's Form 8-A filed with the Securities and Exchange Commission on
September 6, 2000).
Common Stock Purchase Warrant dated March 29, 2000 issued by the Registrant to Carbon Mesa Partners, LLC
(incorporated herein by reference to the registrant's Form 8-A filed with the Securities and Exchange
Commission on September 6, 2000).
Registration Rights Agreement dated as of March 8, 2000 between the Registrant, CALP II, LLC and Carbon Mesa
Partners,LLC (incorporated herein by reference to the registrant's Form 8-A filed with the Securities and
Exchange Commission on September 6, 2000).
Securities Purchase Agreement dated as of March 8, 2000 by and between the Registrant and CALP II, LLC and
Carbon Mesa Partners, LLC (incorporated herein by reference to the registrant's Form 8-A filed with the
Securities and Exchange Commission on September 6, 2000).
Pledge Agreement, dated March 8, 2000, by and among the Registrant, CALP II, LLC, Carbon Mesa Partners, LLC
and Law Offices of Michael S. Rosenblum (incorporated herein by reference to the registrant's Form 8-A filed
with the Securities and Exchange Commission on September 6, 2000).
Joint Escrow Instructions dated March 8, 2000 by and between the Registrant and CALP II, LLC and Carbon Mesa
Partners, LLC (incorporated herein by reference to the registrant's Form 10-KSB-filed with the Securities and
Exchange Commission on October 5, 2001).
First Amendment to 8% Secured Convertible Debenture due February 28, 2002 dated as of September 24, 2001 by
and between the Registrant and Thomson Kernaghan & Co., Limited (incorporated herein by reference to the
registrant's Form 10-KSB-filed with the Securities and Exchange Commission on October 5, 2001).
First Amendment to Registration Rights Agreement dated as of September 24, 2001 by and between the Registrant
and Thomson Kernaghan & Co., Limited (incorporated herein by reference to the registrant's Form 10-KSB-filed
with the Securities and Exchange Commission on October 5, 2001).
Addendum to First Amendment to 8% Secured Convertible Debenture due February 28, 2002 dated as of September
24, 2001 by and between the Registrant and Thomson Kernaghan & Co., Limited (incorporated herein by reference
to the registrant's Form 10-KSB-filed with the Securities and Exchange Commission on October 5, 2001).
Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of the company
(incorporated herein by reference to the registrant's Form 8-A filed with the Securities and Exchange
Commission on September 6, 2000).
Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock of the company.
(incorporated herein by reference to the Registrant's Form 10-KSB filed with the Securities and Exchange
Commission on August 2, 2002).
Share Exchange Agreement by and between the Registrant and Fushan Industrial Co. Ltd, dated as of July 19,
2002. (incorporated herein by reference to the Registrant's Form 10-KSB filed with the Securities and Exchange
Commission on August 2, 2002).
Joint Venture Agreement by and among Guangxi Guanghe Metals Co. Ltd., Hechi Industrial Co. Ltd. and Biogan
(BVI) International Inc. dated as of July 19, 2002. (incorporated herein by reference to the Registrant's Form
10-KSB filed with the Securities and Exchange Commission on August 2, 2002).
Consulting Agreement dated November 23, 2001 between the Biogan International, Inc. and John Cullen.
(incorporated herein by reference to the Registrant's Form 10-KSB filed with the Securities and Exchange
Commission on August 2, 2002).
Employment agreement by and between the Registrant and Gilles Laverdiere effective as of January 1, 2000.
(incorporated herein by reference to the Registrant's Form 10-KSB filed with the Securities and Exchange
Commission on August 2, 2002).
Employment agreement by and between the Registrant and Kerry D. Smith effective as of August 1, 2000.
(incorporated herein by reference to the Registrant's Form 10-KSB filed with the Securities and Exchange
Commission on August 2, 2002).
Employment agreement by and between the Registrant and Robert Doyle effective as of November 23, 2001.
(incorporated herein by reference to the Registrant's Form 10-KSB filed with the Securities and Exchange
Commission on August 2, 2002).
Agreement, dated July 19, 2002 by and between Biogan International, Inc. and Hechi Industrial Co. Ltd.
terminating the asset purchase agreement by and between the parties dated July 1, 2000. (incorporated herein
by reference to the Registrant's Form 10-KSB filed with the Securities and Exchange Commission on August 2,
2002).
Agreement, dated July 19, 2002 by and between Biogan International, Inc. and Biogan International (BVI) Inc.
assigning Biogan International, Inc.'s rights in GGM to Biogan International (BVI) Inc. (incorporated herein
by reference to the Registrant's Form 10-KSB filed with the Securities and Exchange Commission on August 2,
2002).
Consent of Independent Auditor George Brenner, C.P.A.
Certification Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
Articles of Association of Guangxi Guanghe Metals Co. Ltd. (Incorporated herein by reference to the
Registrants Form 8-K filed with the Securities and Exchange Commission on August 15, 2002).

Certificate of Approval.

# (b) Reports on Form 8-K

On
January 9, 2001, we filed a Current Report on Form 8-K concerning NASDs decision to
delete all quotations of the companys securities from NASDs OTC Bulletin Board
at the opening of business on January 7, 2001.

On January 9, 2001, we filed on Form 8-K/A, Amendment No. 3 to the Current Report on Form
8-K filed October 24, 2000 concerning the companys determination that the financial
statements filed with the SEC on October 24, 2000 in connection with the acquisition by
the company of certain of the assets of Hechi, were not prepared in accordance with the
requirements of Item 310 of Regulation S.B. of the Securities Act and that the acquisition
of assets which constitute a reverse acquisition were not accounted as such in the
financial statements.

On February 26, 2001, the company filed a Current Report on Form 8-K concerning the
engagement of KPMG LLP as its independent certifying accounts.

On March 8, 2001, we filed on Form 8-K/A, Amendment No. 1 to the Current Report on Form
8-K filed February 26, 2001 concerning the engagement of KPMG LLP as the companys
auditors along with a letter from Bersch Accounting to the SEC regarding change in the
companys certifying accountants.

On March 8, 2001, we filed a Current Report on Form 8-K concerning the resignation of
Bersch Accounting as the companys auditors.

On March 15, 2001, we filed on Form 8-K/A, Amendment No. 2 to Current Report on Form 8-K
filed February 26, 2001 outlining concerns of the former auditors, Bersch Accounting and
the companys response to such concerns.

On March 15, 2001, we filed on Form 8-K/A, Amendment no. 1 to Current Report on Form 8-K
filed March 8, 2001 for purposes of reporting that KPMG LLP and not the companys
former auditors would review the companys September 10-QSB and for filing the former
auditors resignation letter as also a disclosure letter from the companys former
accountants outlining their concerns.

On March 27, 2001, we filed on Form 8-K/A, Amendment No. 2 to Current Report on Form 8-K
filed March 15, 2001 for purposes of filing a letter by the companys former
accountants, Bersch Accounting which is required to be filled in connection with the
companys disclosure concerning changes in the companys accountants.

On March 27, 2001, we filed on Form 8-K/A, Amendment no. 3 to the Current Report on Form
8-K filed February 26, 2001 for purposes of filing the letter from the companys
former accountants, Bersch Accounting as also the response letter from the former
auditors.

On April 3, 2001, we filed on Form 8-K/A, Amendment no. 2 to the Current Report on Form
8-K filed March 15, 2001 for purposes of filing a response letter addressed to the SEC
from the former auditors, Bersch Accounting stating that they had read the disclosures in
item 4 of the Form 8-K/A dated March 27, 2001, and that they agreed with the disclosures.

On April 3, 2001, we filed on Form 8-K/A, Amendment no. 4 to the Current Report on Form
8-K for purposes of filing a letter from the companys former accountants, Bersch
Accounting, which is required to be filed in connection with the companys disclosure
concerning changes in the companys accountants.

On July 30, 2001, we filed a Current Report on Form 8-K for purposes of reporting that the
transactions contemplated in the Asset Purchase Agreement, effective as of July 1, 2001
between the company and Hechi, and the Joint Venture Contract, dated January 27, 2000
between the company and Hechi may not be in compliance with certain regulatory laws of the
PRC and therefore may not be valid.

On March 5, 2002 we filed a Current Report on Form 8-K concerning the resignation of KPMG
LLP as the companys auditors and the engagement of George Brenner, C.P.A. as the
companys independent certifying accountant.

On May 3, 2002, we filed a Current Report on Form 8-K for purposes of reporting the
completion of a private placement financing, consisting of a non-brokered private
placement of 15,816,664 special warrants and 150,000 restricted shares of common stock at
a price of $0.03 per special warrant or share of common stock, for proceeds of $479,000.

On August 2, 2002, we filed a Current Report on Form 8-K for purposes of reporting the
acquisition of the controlling interest in GGM, the consideration for which consisted of
16,800,000 shares of our common stock and 3,624,000 shares of our Series B Convertible
Preferred Stock. As a result of the acquisition a change in control has occurred and
Hechis shareholders now control 78.4%, through Fushan, of our outstanding voting
shares.

On October 1, 2002, we filed on Form 8-K/A, Amendment No. 1 to Current Report on Form
8-K filed August 2, 2002, for purposes of filing Audited combined annual financial
statements of Guangxi Metals Co., Ltd., Hechi Copper refinery plant.  Wuxu mining
plant and 9% equity interest in Gaofeng Mining Co., Ltd. for the years ended December 31,
2001 and 2002, as well as, Pro Forma Condensed Consolidated Financial information for the
year ended December 31, 2001 of the Registrant.

On November 19, 2002, we filed on Form 8-K/A, Amendment No. 1 to Current Report on Form
8-K filed August 2, 2002, for purposes of filing Unaudited combined interim financial
statements of Guangxi Guanghe Metals Co., Ltd., Hechi copper refinery plant, Wuxu mining
plant and 9% equity interest in Gaofeng Mining Co., Ltd. for the three month period ended
March 31, 2002 and the six month period ended June 30, 2002, as well as, Pro forma
Condensed Consolidated Financial Information for the three month period ended March 31,
2002 and six month period ended June 30, 2002 of the Registrant.

# Signatures

In Accordance with Section 13 or 15(d) of the Exchange Act, The Registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

BIOGAN INTERNATIONAL,
INC. (REGISTRANT)

| | /S/ Gilles Laverdiere
By:Gilles Laverdiere Vice Chairman, Chief
Executive Officer, Chief Financial Officer
and Director | August 21, 2003
| | ---------------------------------------------------------------------------------------------------------------------------------------- | ---------------

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

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

| | /S/ Gilles Laverdiere
Gilles Laverdiere | Vice Chairman, Chief
Executive Officer, Chief Financial Officer
and Director | August 21, 2003
| | ------------------------------------------------- | ---------------------------------------------------------------------------- | ---------------

| | /S/ Kerry D. Smith
Kerry D. Smith | President, Chief
Operating Officer, and Director | August 21, 2003
| | ------------------------------------------- | ------------------------------------------------ | ---------------

| | /S/ Pierre O'Dowd
Pierre O'Dowd | Director | August 21, 2003
| | ----------------------------------------- | -------- | ---------------

CERTIFICATION PURSUANT TO SECTION 302 of the SARBANES-OXLEY ACT OF 2002_________________

| |  | I, Gilles
Laverdiere, Vice Chairman, Chief Executive Officer, Chief Financial Officer and Director
of Biogan International, Inc., hereby certify that:
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | 1. | I
have reviewed this annual report on Form 10-KSB of Biogan International, Inc.
| | -- | -------------------------------------------------------------------------------

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

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

| | 4. | I
am responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and I have:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

| | 5. | I
have disclosed, based on my most recent evaluation, to the registrant's auditors and to
the audit committee of registrants board of directors (or persons performing the
equivalent function):
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

| | Date: August 21, 2003/S/ Gilles Laverdiere
By: Gilles Laverdiere Vice Chairman, Chief
Executive Officer, Chief Financial Officer
and Director | 
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | 

|BIOGAN INTERNATIONAL,
INC. FINANCIAL STATEMENTS DECEMBER 31, 2001


TABLE OF CONTENTS
|-------------------------------------------------------------------------------------

|Independent Auditors Report
Balance Sheet as of December 31, 2001

Statement of Operations for the Years Ended December 31, 2001 and 2000, and from Inceptionthrough December 31, 2001


Statement of Changes in Stockholders Equity (Deficiency) for the Period fromInception through December 31, 2001


Statement of Cash Flows for the Years Ended December 31, 2001 and 2000, and fromInception through December 31, 2001

 Notes to Financial Statements | 123456-15
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------

|George Brenner, CPA A Professional
Corporation 10680 W. PICO BOULEVARD, SUITE 260LOS ANGELES, CALIFORNIA 90064 310/202-6445  Fax 310/202-6494


REPORT OF INDEPENDENT
AUDITOR


Board of Directors


Biogan International,
Inc. (A Development-Stage Company)Toronto, Canada


I have audited the accompanying
balance sheet of Biogan International, Inc., (A Development-Stage Company) as of December
31, 2001 and the related statements of operations, stockholders deficit and cash
flows for the years ended December 31, 2001 and 2000 and from inception (February 5, 1998)
through December 31, 2001. These financial statements are the responsibility of the
Companys management. My responsibility is to express an opinion on these financial
statements based on my audits.


I conducted my audits in accordance
with auditing standards generally accepted in the United States of America. Those
standards require that I plan and perform the audits 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. I believe that my audits provide a reasonable basis for my
opinion.


In my opinion, the financial
statements referred to above present fairly, in all material respects, the financial
condition of Biogan International, Inc. as of December 31, 2001 and the results of its
operations, stockholders deficit and cash flows for the years ended December 31,
2001 and 2000 and from inception (February 5, 1998) through December 31, 2001 in
conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements
have been prepared assuming the Company will continue as a going concern. As more fully
described in Note 2C to the financial statements, the Companys recurring losses from
development stage activities raise substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments to reflect the
possible effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible inability of the Company
to continue as a going concern. Managements plans in this regard are discussed in
Notes 1 and 12 Cooperative Joint Venture and Subsequent Events,
respectively. Should the Company not be successful in its Joint Venture the $1,700,000
(Note 2B) will be written off increasing the stockholders deficit from approximately
$1,961,000 to $3,661,000.


George Brenner, C.P.A.Los
Angeles, California July 22, 2002
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|BIOGAN INTERNATIONAL,INC. (A DEVELOPMENT STAGE
COMPANY) BALANCE SHEETDECEMBER 31, 2001
|--------------------------------------------------------------------------------------

|ASSETS                                                   |  |  |   |             |  
|-------------------------------------------------------- |  |  | - | ----------- | -
|FIXED ASSETS, NET OF ACCUMULATED DEPRECIATION OF $30,140 |  |  | $ | 6,495       |  
|COOPERATIVE JOINT VENTURE INVESTMENT                     |  |  |   | 1,700,000   |  
|                                                         |  | 
|                                                         | 
|TOTAL ASSETS                                             |  |  | $ | 1,706,495   |  
|                                                         |  | 
|                                                         | 
|                                                         | 
|                                                         | 
|LIABILITIES & STOCKHOLDERS' DEFICIT                      |  | 
|ACCOUNTS PAYABLE                                         |  |  | $ | 499,526     |  
|BANK OVERDRAFTS                                          |  |  |   | 10,076      |  
|NOTES PAYABLE                                            |  |  |   | 269,967     |  
|ACCRUED EXPENSES                                         |  |  |   | 759,006     |  
|                                                         |  | 
|                                                         | 
|TOTAL CURRENT LIABILITIES                                |  |  |   | 1,538,575   |  
|NON-CURRENT LIABILITIES                                  |  | 
|CONVERTIBLE DEBENTURES                                   |  | 
|- NET OF UNAMORTIZED ISSUANCE COSTS OF $70,661           |  |  |   | 2,129,339   |  
|                                                         |  | 
|                                                         | 
|                                                         | 
|TOTAL LIABILITIES                                        |  |  |   | 3,667,914   |  
|COMMITMENTS                                              |  |  |   | -           |  
|STOCKHOLDERS' DEFICIT                                    |  | 
|SERIES A CONVERTIBLE PREFERRED STOCK $.001 PAR VALUE,    |  | 
|10,000,000 SHARES AUTHORIZED 1,100 SHARES ISSUED         |  |  |   | 1           |  
|COMMON STOCK $.001 PAR VALUE 300,000,000                 |  | 
|SHARES AUTHORIZED, 91,266,199 ISSUED AND OUTSTANDING     |  |  |   | 91,266      |  
|ADDITIONAL PAID IN CAPITAL                               |  |  |   | 8,354,377   |  
|ACCUMULATED DEFICIT                                      |  |  |   | (10,407,073 | )
|TOTAL STOCKHOLDERS' DEFICIT                              |  |  |   | (1,961,429  | )
|                                                         |  | 
|                                                         | 
|                                                         | 
|TOTAL LIABILITIES &STOCKHOLDERS' DEFICIT                 |  |  | $ | 1,706,485   |  
|                                                         |  | 
|                                                         | 

|BIOGAN INTERNATIONAL,INC. (A DEVELOPMENT STAGE
COMPANY) STATEMENT OF OPERATIONS
|-------------------------------------------------------------------------------

|                                    | FOR THE YEAR ENDINGDECEMBER 31, 2001 | FOR THE YEAR ENDINGDECEMBER 31, 2000 | FROM INCEPTIONFEBRUARY 5, 1988 THROUGHDECEMBER 31, 2001
|----------------------------------- | ------------------------------------ | ------------------------------------ | -------------------------------------------------------
|SALES                               |                                      |                                      |                                                        
|REVENUE                             |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|TOTAL SALES                         |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|EXPENSES                            |                                      |                                     
|WAGES                               |                                      |                                      |                                                        
|STOCK SUBSCRIPTION LOSS             |                                      |                                      |                                                        
|DEPRECIATION EXPENSE                |                                      |                                      |                                                        
|AMORTIZATION                        |                                      |                                      |                                                        
|STOCK BASED EXPENSES                |                                      |                                      |                                                        
|INTEREST EXPENSE                    |                                      |                                      |                                                        
|INTEREST EXPENSE -BENEFICIAL        |                                      |                                      |                                                        
|INCENTIVE BONUS                     |                                      |                                      |                                                        
|LEGAL & ACCOUNTING FEES             |                                      |                                      |                                                        
|RENT                                |                                      |                                      |                                                        
|START UP COSTS                      |                                      |                                      |                                                        
|RESEARCH AND DEVELOPMENT            |                                      |                                      |                                                        
|SUBSIDIARIES LOSSES                 |                                      |                                      |                                                        
|OTHER OPERATING EXPENSES            |                                      |                                      |                                                        
|TOTAL EXPENSES                      |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|NET OPERATING INCOME (LOSS)         |                                      |                                      |                                                        
|STOCK RESTITUTION LOSS              |                                      |                                      |                                                        
|INTEREST INCOME                     |                                      |                                      |                                                        
|OTHER INCOME                        |                                      |                                      |                                                        
|DEBENTURE SETTLEMENT COSTS          |                                      |                                      |                                                        
|MISCELLANEOUS EXPENSE               |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|TOTAL OTHER                         |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|NET INCOME (LOSS)                   |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|PRIMARY INCOME (LOSS) PER SHARE     |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|                                    |                                      |                                      |                                                        
|WEIGHTED AVERAGE SHARES OUTSTANDING |                                      |                                      |                                                        

|BIOGAN INTERNATIONAL, INC. (A DEVELOPMENT STAGE
COMPANY) STATEMENT OF STOCKHOLDERS' DEFICITFOR THE PERIOD FROM FEBRUARY 5, 1988 (INCEPTION)
|-------------------------------------------------------------------------------------------------------------------------------------------

|COMMON STOCKISSUED:                                         | SHARES      | COMMON STOCKAMOUNT | PREFERRED STOCKSHARES   AMOUNT | AMOUNT PER SHARE | ADDITIONAL PAID-IN CAPITAL | ACCUMULATED DEFICIT | STOCKHOLDERS' DEFICIT
|----------------------------------------------------------- | ----------- | ------------------ | ------------------------------ | ---------------- | -------------------------- | ------------------- | ---------------------
|1988                                                        | 2,250,000   | 2,250              |                                |                  |                            | 22,750              | (15,052)             
|1989                                                        | 21,387,347  | 21,387             |                                |                  |                            | 197,352             | (149,448)            
|1995                                                        | 56,858,115  | 56,858             |                                |                  |                            | 3,246,860           | (3,261,573)          
|1996                                                        | 4,573,939   | 4,574              |                                |                  |                            | 1,123,417)          | (1,263,513           
|1997                                                        | 2,785,054   | 2,785              |                                |                  |                            | 560,139             | (678,716)            
|1998                                                        | (2,731,571) | (2,732)            |                                |                  |                            | (782,711)           | 582,555              
|1999                                                        | 263,826     | 264                |                                |                  |                            | 442,868             | (238,263)            
|MARCH 8, 2000   BENEFICIAL    CONVERSION    FEATURE         | -           | -                  |                                |                  | -                          | 508,750             |                      
|MARCH 31, 2000    CONTRIBUTED    CAPITAL                    | -           | -                  |                                |                  | -                          | 170,500             |                      
|FORGIVEN OFFICERS WAGES                                     | -           | -                  |                                |                  | -                          | 171,200             |                      
|JUNE 30, 2000    CONTRIBUTED CAPITAL                        | -           | -                  |                                |                  | -                          | 205,500             |                      
|AUGUST 18, 2000    CONTRIBUTED CAPITAL                      | -           | -                  |                                |                  | -                          | 10,000              |                      
|$500,000 DEBENTURE    CONVERSION   PLUS INTEREST OF $15,122 | 2,712,387   | 2,712              |                                |                  | 0.1899                     | 512,410             |                      
|OCTOBER 8, 2000   PREFERRED STOCK ISSUED                    | -           | -                  | 1,100                          | 1                | 0.0010                     | (1)                 |                      
|STOCK BASED COMPENSATION                                    | -           | -                  |                                |                  |                            | 1,848,000           |                      
|DECEMBER 5, 2000    CONTRIBUTED CAPITAL                     | -           | -                  |                                |                  | -                          | 35,100              |                      
|$30,000 DEBENTURE CONVERSION   PLUS INTEREST OF $400        | 667,102     | 667                |                                |                  | 0.0456                     | 29,733              |                      
|NET LOSS                                                    | -           | -                  | -                              | -                | -                          | -                   | (3,598,578)          
|                                                            | _________   | _________          | _________                      | _________        |                            | _________           | _________            
|DECEMBER 31, 2000                                           | 88,766,199  | 88,766             | 1,100                          | 1                |                            | 8,301,867           | (8,622,588)          
|MARCH 31, 2001    CONTRIBUTED CAPITAL                       | -           | -                  |                                |                  | -                          | 25,010              |                      
|SEPTEMBER 30, 2001    STOCK ISSUED -DEBENTURE   SETTLEMENT  | 2,500,000   | 2,500              |                                |                  | 0.0010                     | (2,500)             |                      
|STOCK BASED COMPENSATION                                    | -           | -                  |                                |                  |                            | 30,000              |                      
|NET LOSS                                                    | -           | -                  | -                              | -                |                            |                     | (1,784,485)          
|                                                            | _________   | _________          | _________                      | _________        |                            | _________           | _________            
|DECEMBER 31, 2001                                           | 91,266,199  | 91,266             | 1,100                          | 1                |                            | 8,354,377           | (10,407,073)         
|                                                            | =========   | =========          | =========                      | =========        |                            | =========           | =========            

|BIOGAN INTERNATIONAL, INC. (A DEVELOPMENT STAGE
COMPANY) STATEMENTS OF CASH FLOWS
|---------------------------------------------------------------------------------

|                                                | FOR THE YEARENDINGDECEMBER 31,2001 | FOR THE YEAR ENDINGDECEMBER 31,2000 | FEBRUARY 5, 1988(INCEPTION)THROUGHDECEMBER 31,2001
|----------------------------------------------- | ---------------------------------- | ----------------------------------- | --------------------------------------------------
|CASH FLOWS FROM OPERATIONS                      |                                    |                                     |                                                   
|NET INCOME (LOSS)                               |                                    |                                     |                                                   
|ADJUSTMENTS TO RECONCILE NET LOSS TO            |                                    |                                     |                                                   
|NET CASH USED BY OPERATING ACTIVITIES:          |                                    |                                     |                                                   
|ADD BACK STOCK ISSUED FOR:                      |                                    |                                     |                                                   
|MANAGEMENT                                      |                                    |                                     |                                                   
|CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL |                                    |                                     |                                                   
|SERVICES, AND RESEARCH AND DEVELOPMENT          |                                    |                                     |                                                   
|IMPUTED EXECUTIVE COMPENSATION                  |                                    |                                     |                                                   
|RESTITUTION                                     |                                    |                                     |                                                   
|STOCK BASED COMPENSATION                        |                                    |                                     |                                                   
|INTEREST EXPENSE                                |                                    |                                     |                                                   
|INTEREST EXPENSE -BENEFICIAL CONVERSION         |                                    |                                     |                                                   
|DISPUTE SETTLEMENTS                             |                                    |                                     |                                                   
|STOCK CANCELLATION                              |                                    |                                     |                                                   
|OTHER ADJUSTMENTS:                              |                                    |                                     |                                                   
|SUBSIDIARIES LOSSES                             |                                    |                                     |                                                   
|STOCK SUBSCRIPTION LOSS                         |                                    |                                     |                                                   
|FIRST DEVELOPMENT STAGE LOSS                    |                                    |                                     |                                                   
|AMORTIZATION                                    |                                    |                                     |                                                   
|DEPRECIATION                                    |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|TOTAL ADJUSTMENTS                               |                                    |                                     |                                                   
|ADVANCES                                        |                                    |                                     |                                                   
|ACCOUNTS RECEIVABLE                             |                                    |                                     |                                                   
|ACCOUNTS PAYABLE                                |                                    |                                     |                                                   
|ACCRUED LIABILITIES                             |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|NET CASH (USED)                                 |                                    |                                     |                                                   
|BY OPERATING ACTIVITIES                         |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|CASH FLOWS FROM INVESTING ACTIVITIES            |                                    |                                     |                                                   
|PURCHASE FURNITURE/EQUIPMENT                    |                                    |                                     |                                                   
|DISPOSAL FURNITURE/EQUIPMENT                    |                                    |                                     |                                                   
|ADVANCE ON BUSINESS COMBINATION                 |                                    |                                     |                                                   
|INVESTMENT IN SUBSIDIARIES                      |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|NET CASH (USED)                                 |                                    |                                     |                                                   
|BY INVESTING ACTIVITIES                         |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|CASH FLOWS FROM FINANCING ACTIVITIES            |                                    |                                     |                                                   
|NOTE PAYABLE-STOCKHOLDER RECEIVED               |                                    |                                     |                                                   
|NOTES PAYABLE -OTHER RECEIVED                   |                                    |                                     |                                                   
|PAYMENT OF NOTES PAYABLE -OTHER                 |                                    |                                     |                                                   
|CONVERTIBLE DEBENTURES                          |                                    |                                     |                                                   
|PAYMENTS OF DEBENTURES                          |                                    |                                     |                                                   
|ISSUANCE OF COMMON STOCK                        |                                    |                                     |                                                   
|BOND ISSUANCE COST CAPITALIZED                  |                                    |                                     |                                                   
|CONTRIBUTED CAPITAL                             |                                    |                                     |                                                   
|OTHER                                           |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|NET CASH PROVIDED                               |                                    |                                     |                                                   
|BY FINANCING ACTIVITIES                         |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|NET INCREASE (DECREASE) IN CASH                 |                                    |                                     |                                                   
|BEGINNING CASH BALANCE                          |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|CASH ENDING BALANCE                             |                                    |                                     |                                                   
|                                                |                                    |                                     |                                                   
|                                                |                                    |                                    
|SUPPLEMENTAL INFORMATION                        |                                    |                                     |                                                   
|CASH PAYMENTS FOR INTEREST EXPENSE              |                                    |                                     |                                                   
|CASH PAYMENTS FOR INCOME TAXES                  |                                    |                                     |                                                   
|NONMONETARY TRANSACTIONS                        |                                    |                                     |                                                   
|STOCK ISSUED FOR:                               |                                    |                                     |                                                   
|DEBT REDUCTION                                  |                                    |                                     |                                                   
|MANAGEMENT                                      |                                    |                                     |                                                   
|CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL |                                    |                                     |                                                   
|SERVICES, AND RESEARCH AND DEVELOPMENT          |                                    |                                     |                                                   
|IMPUTED EXECUTIVE COMPENSATION                  |                                    |                                     |                                                   
|RESTITUTION                                     |                                    |                                     |                                                   
|INTEREST EXPENSE -BOND CONVERSION               |                                    |                                     |                                                   
|INTEREST EXPENSE -BENEFICIAL CONVERSION         |                                    |                                     |                                                   
|DISPUTE SETTLEMENT                              |                                    |                                     |                                                   
|STOCK CANCELLATION                              |                                    |                                     |                                                   
|BOND ISSUANCE COSTS CAPITALIZED                 |                                    |                                     |                                                   
|BOND CONVERSION INTO COMMON STOCK               |                                    |                                     |                                                   
|STOCK BASED COMPENSATION                        |                                    |                                     |                                                   

|BIOGAN INTERNATIONAL, INC. (A DEVELOPMENT STAGE
COMPANY) NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2001
|-------------------------------------------------------------------------------------------------------

|HISTORY


Background
|--------------------

| | Biogan International, Inc. (Biogan or the company) was incorporated under
the laws of the State of Delaware on February 5, 1988 under the name H.W. Ronney and
Company and has been a development stage company since its inception. The company changed
its name to Biogan Medical International, Inc. in March 1989 after merging with a company
of that name, and then engaged in various medical-related enterprises under the
companys new name. Prior to 1995, either directly or indirectly, through
subsidiaries or other affiliates, the company also engaged in business operations in a
variety of other industries, undergoing several corporate restructurings during that time.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In 1995, the company began development of a new concept in electrical motors called the
IntorCorp Motor. To assist in the development of the companys electrical motor
concept, the company entered into a consulting agreement with Technical Development
Consultants, Inc. (TDC), an independent electrical engineering consulting
firm. As part of the research and development process, the companys consultants
formed a company called Collective Technologies, LLC, which company acquired any
intellectual property rights held by TDC with respect to the IntorCorp Motor concept. The
company changed its name to Biogan International, Inc. in September 1997 to avoid any
confusion that could result from the use of the word medical in the
companys name when the companys emphasis at that time was to promote the
development of the IntorCorp Motor.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
February 1998, the company entered into a joint venture agreement with Collective
Technologies, LLC to continue the development of the IntorCorp Motor through an Idaho
corporation, IntorCorp, Inc., in which the company held a 50% ownership interest. In
August 1999, the company transferred all of its rights and interest in IntorCorp,
Inc., including the companys interest in the IntorCorp Motor and the patent
application to the electromagnetic motor, in connection with an agreement with R-Tec
Engineering Corporation. Under the terms of the agreement, the parties created an Idaho
corporation, R-Tec Holding, Inc., into which the company transferred its 50% ownership
interest in IntorCorp, Inc. in exchange for 4,266,797 shares of common stock of R-Tec
Holding, Inc. In September 1999, the company distributed these shares to its stockholders.
Following this transaction, and having divested itself of certain assets related to the
electrical motor industry and disposed of all of its subsidiaries and other interests in
other affiliates and other entities, the company began to focus its attention, experience
and resources on developing a base metal mining and smelting operation in the
Peoples Republic of China.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Cooperative Joint Venture
|-------------------------

| | Effective
July 1, 2000 the company entered into an asset purchase agreement with Hechi Industrial
Co., Ltd. (Hechi) under the laws of the Peoples Republic of China. A Cooperative
Joint Venture, Guangxi Guanghe Metals Co., Ltd. (GGM), was formed for the purpose of
engaging in the mining and milling of non-ferrous metals and for the purpose of operating
a copper smelter to produce blister copper in the Guangxi Province of China.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Pursuant to the transaction, the company paid $1,700,000 and issued 16,800,000 shares of the
companys common stock and 30,200 shares of Series A preferred stock to Hechi in
exchange for a 92% equity interest and a 95% profits interest in GGM.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On July 27, 2001, the company was advised that the transactions contemplated under the
original agreements were not in compliance with certain laws of the Peoples Republic
of China.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Following discussions with Hechi and its U.S., Chinese and Canadian legal counsel, the company
implemented the acquisition on a restructured basis on July 19, 2002, in compliance with
Chinese legal requirements, more fully described in Note 12 Subsequent Events.
As a result, Biogan acquired, as intended under the original agreement with Hechi, a 92%
equity interest and a 95% profits interest in GGM in exchange for 78.4% of Biogans
voting capital stock. For accounting purposes, the transaction will be treated as a
reverse takeover, with GGM treated as having acquired Biogan.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 2.   
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

| | The accompanying financial statements have been prepared in accordance with the Statement of
Financial Accounting Standards No. 7 Accounting and Reporting by Development-Stage
Enterprises. A development stage enterprise is one in which planned principal
operations have not commenced or if its operations have commenced there has been no
significant revenue there from. Development-stage companies report cumulative costs from
the enterprises inception.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The $1,700,000 referred to in Note 1 above will not be refunded should the Chinese transaction
not be consummated. The common and preferred shares previously issued were cancelled. The
common shares will be reissued along with a new Series B Preferred Stock in connection
with the re-structuring as outlined in Note 12.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Should the transaction not be consummated, the $1,700,000 will be written off in which case the
stockholders deficit of $1,961,000 at December 31, 2001 will become $3,661,000. See
next caption Continued Existence.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
company has had recurring losses from development stage activities, negative working
capital of $1,539,000 and a stockholders deficit of $1,961,000. In addition, there
is also an uncertainty in connection with the company meeting its $7,300,000 funding
requirement (Note 12).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
above financial factors raise a substantial doubt about the companys ability to
continue as a going concern. The financial statements do not include any adjustments to
reflect the possible effects on the recoverability and classification of assets or amounts
and classifications of liabilities that may result from the possible inability of the
company to continue as a going concern. Management plans to continue in existence are set
forth in Note 1 Cooperative Joint Venture and Note 12 Subsequent
Events. There can be no assurance that the Cooperative Joint Venture will be
successful.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
company issued secured convertible debentures totaling $2,035,000 on March 30, 2000, as
discussed in Note 10. The costs ($300,000) associated with the issuance of such debentures
and their discount ($235,000) are amortized over the life of the debentures. The
convertible debenture contains a beneficial conversion feature. The company accounted for
the beneficial conversion feature in accordance with Emerging Issues Task Force Issue No.
98-5, Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios. EITF 98-5 requires the Beneficial Conversion
Feature be calculated and amortized from the date of closing of the agreement until the
earliest date on which investors have the right to convert the debt to common shares. The
Beneficial Conversion Feature was computed at $508,750, all of which was expensed in 2000.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Furniture
and equipment are carried at cost. Depreciation of furniture and equipment is provided
using the straight-line method of depreciation and the accelerated cost recovery method
for federal income tax purposes. Depreciation is calculated over useful life ranging from
5 to 10 years.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
purposes of the statement of cash flows, the company considers all short-term investments
in interest bearing accounts, securities and other instruments with an original maturity
of three months or less, to be equivalent to cash.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Deferred taxes are provided on the asset and liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax credit
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported amounts of
asset and liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At December 31, 2001 and 2000 there were temporary differences between book and tax income,
principally stock based expenses. The operating loss carryforwards were fully reserved.
(Note 8. "Income Taxes")
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Basic
income (loss) per share is based on the weighted-average number of outstanding common
shares during the applicable period. Of the 91,266,199 shares outstanding 22,716,648 are
restricted and 68,549,551 shares are unrestricted. The 28,800,000 shares that are being
held in escrow and are pledged as collateral for the convertible debentures (Note 10) are
not included in the weighted-average computation. No potential conversion of the
debentures and Series A preferred stock to common stock was included in computing loss per
share because the effect would be anti-dilutive.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with the acquisition of the Hechi assets, the company issued 1,100 shares of
Series A Preferred Stock convertible into 13,200,000 shares of common stock in August
2000, resulting in a charge to operations of $1,848,000 for the year ended December 31,
2000.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In connection with the negotiations resolving the event of default of the convertible
debentures, the company issued 2,500,000 shares of common stock in September 2001,
resulting in a charge to operations of $30,000 for the year ended December 31, 2001.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 3.   
NOTES PAYABLE

| | Unsecured
notes payable, with interest at 10% per annum, are payable on demand, with payments
applied first to any unpaid interest. As of December 31, 2001 the balance consists of the
following:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                  | 
| | ---------------------------------------------------------------- | 
| | Ronald J. Tolman, Stockholder, November 13, 1996                 | 
| | Rulon L. Tolman, Stockholder, November 13, 1996                  | 
| | Rulon L. Tolman, Stockholder, April 29, 1999                     | 
| | Ronald J. Tolman, Stockholder, September 7, 1999                 | 
| | Hechi Industrial Company Limited, January 3, 2001                | 
| | Hechi Industrial Company Limited, February 6, 2001               | 
| | Gilles Laverdiere, Vice Chairman & CEO of Biogan, March 31, 2001 | 
| | Hechi Industrial Company Limited, May 29, 2001                   | 
| | Hechi Industrial Company Limited, August 20, 2001                | 
| | Total Notes Payable                                              | 
| |                                                                  | 

# 4.      
STOCKHOLDERS DEFICIT

| | COMMON STOCK  There are 120,066,191 shares of common stock issued and outstanding, of which
28,800,000 are held in escrow as collateral for the convertible debentures, resulting in
net shares outstanding of 91,266,199.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | PREFERRED STOCK  There are 1,100 shares of Series A convertible preferred stock issued and
outstanding, which are convertible into 13,200,000 common shares. See Note 2. I,
Stock Based Expenses in connection with the Series A preferred shares.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ADDITIONAL PAID IN CAPITAL  Included in additional paid in capital for which no stock was
issued are cash received from Mr. Gilles Laverdiere, Vice Chairman, $822,610 and $171,200
of accrued salaries forgiven by former corporate officers.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 5.      
ACCRUED EXPENSES

|                                           | 
|------------------------------------------ | 
|Accrued expenses consist of the following: | 
|Accrued interest on convertible debentures | 
|Accrued interest on notes payable          | 
|Accrued salaries - officer/stockholders    | 
|Expenses advanced by Hechi                 | 
|                                           | 
|                                           | 

# 6.       USE
OF ESTIMATES

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

# 7.      
STOCK OPTIONS

| | On December 8, 1988, the board of directors of Biogan allocated 2,000,000 shares of the
companys authorized common stock shares for a stock incentive plan to be issued as
determined by the board at an option price of not less than placement offering of any
private placement offering of the companys common stock. No options have been
granted under this stock incentive plan.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 8.      
INCOME TAXES

| | At December 31, 2001, Biogan had net operating losses (NOL) carryforwards and research &
development tax credit as follows:
| | ---------------------------------------------------------------------------------------------------------------------------

|YEAR | NOL        | YEAREXPIRES | TAXCREDIT | YEAREXPIRES
|---- | ---------- | ----------- | --------- | -----------
|1995 | 2,887,130  | 2010        |           |            
|1996 | 1,122,539  | 2011        | 12,197    | 2011       
|1997 | 736,051    | 2017        | 9,665     | 2012       
|1999 | 141,273    | 2019        |           |            
|2000 | 1,798,073  | 2020        |           |            
|2001 | 1,711,698  | 2021        | ______    |            
|     | $8,396,764 |             | $21,862   |            
|     |            |             |           |            

| | No deferred asset will be recognized on the tax benefit resulting from the NOL until the
company becomes profitable. While management believes the loss recorded due to the stock
restitution loss in prior years ($2,676,409) is a tax-deductible expense; it could be
subject to an IRS disallowance. If the transaction described in Note 1 takes place, there
will be a significant change in ownership, and the net operating losses carried forward
may be significantly reduced. Stock based expenses (Note 2.I.) are not included in the
above NOL calculations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 9. RECENTLY ISSUED
ACCOUNTING STATEMENTS

| | In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141, Business Combinations and No. 142,
Goodwill and Other Intangible Assets. SFAS 141 requires business combinations
to be accounted for by the purchase method starting July 1, 2001. SFAS 142 requires
intangible assets to be amortized over their useful life if determinable. Intangible
assets with determinable lives (such as goodwill) are no longer subject to amortization;
rather they are subject to impairment by applying a fair-value-based test. SFAS 142 is
generally effective for fiscal years beginning after December 15, 2001. However, the
non-amortization provisions regarding goodwill are effective immediately.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS 143 requires the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred. SFAS 143 will be effective
for years beginning after June 15, 2002, although earlier adoption is permitted.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets. SFAS 144 slightly changes and clarifies the accounting for
long-lived assets. SFAS 144 will be effective for years beginning after December 15, 2001,
although earlier adoption is permitted.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The company believes that the adoption of these accounting standards will not have any
material effect on the financial statements of the company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------

# 10.   
CONVERTIBLE DEBENTURES

| | The company issued convertible debentures on March 29, 2000 to Thomson Kernaghan & Co.
Ltd. (TK) and Carbon Mesa Partners, LLC (Carbon Mesa) for aggregate proceeds of $2,035,000
to assist in financing required contributions to the joint venture with Hechi under its
original terms. Out of the net proceeds of $1,800,000 from the sale of the debentures,
$1,500,000 was contributed to GGM and $300,000 was retained for working capital purposes.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Subject to adjustment for stock splits, stock dividends, capital reorganizations or similar
occurrences, the conversion rate for the debentures is equal to the lower of the per share
price of $0.4166 or 80% of the average of the closing bid prices of Biogans common
stock as reported on the over-the-counter market for the five trading days immediately
prior to the conversion date, except that the conversion rate for the $650,000 of the
additional principal amount of the TK debenture related to the September 2001 amendment
discussed below, shall not be less than $0.025 per share.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As of July 16, 2002, Biogan had a total of 91,266,199 shares of common stock outstanding, and
debentures convertible, if contractual limitations on conversion were disregarded, into
approximately 174,000,000 shares of common stock.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The company may, at its option, prepay all or part of the outstanding principal and interest
balance of the debentures. Any redemption is to be in an aggregate principal amount of at
least $100,000 and made pro rata among all of the holders of the debentures based on the
then-outstanding balances due under the debentures. Redemptions under the TK debenture and
Carbon Mesa debenture are to be made at a redemption price equal to 100% and 125%,
respectively, of the amount to be redeemed. If the company serves a redemption notice, TK
and Carbon Mesa will retain conversion rights, up to a maximum of 50% of the amount
subject to the redemption, for two business days following receipt of the redemption
notice. The company may not serve any redemption notice without having the necessary cash
or credit facilities immediately available to cover the redemption price.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In connection with the issuance of the debentures, Biogan also issued warrants. The warrants
have an initial exercise price of $0.60 per share and also have cashless exercise
provisions. The warrants expire on February 28, 2003. In addition, the warrants contain
piggyback and demand registration rights, which rights are discussed further below.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under the September 2001 amendment to the TK debenture discussed below, the debenture was to be
secured by the companys assets. The TK and Carbon Mesa debentures also continue to
be secured by 28,800,000 shares of common stock pledged by the company. The pledged shares
are held in escrow under the terms of a pledge agreement dated March 8, 2000. The pledge
agreement provides that, unless and until an event of default occurs, the pledged shares
shall be deemed unissued shares for the purpose of voting and other powers of ownership.
Any dividends, whether in cash or stock, paid with respect to the pledged shares will be
added to the pledged shares as additional collateral.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On August 18, 2000 and December 5, 2000, TK converted an aggregate of $530,000 of the
principal balance of its debenture plus related interest into 3,379,489 shares of common
stock. In 2000 the company repaid $5,000 of the $35,000 principal amount of the Carbon
Mesa Debenture. An additional $10,000 was paid on the Carbon Mesa Debenture in 2002. Prior
to September 24, 2001, Biogan defaulted under the provisions of the debentures and the
registration rights agreement due to its failure to maintain its listing on the
NASDs OTC Electronic Bulletin Board and its failure to timely register with the SEC
for resale the shares of common stock issued or issuable upon conversion of the debentures
and exercise of the warrants. As a result of this failure, penalties totaling $956,000
became due. The company renegotiated the terms of the TK debenture and, on September 24,
2001, amended the debenture and the Registration Rights Agreement. Under the amendment, TK
waived defaults under the TK debenture and agreed to extend the maturity date of the TK
debenture from February 28, 2002 to February 28, 2003, and provide that unpaid interest
shall continue to accrue on the TK debenture payable quarterly in arrears beginning March
31, 2002. The company also agreed to increase the principal balance of the TK debenture by
$650,000 to $2,120,000 and issue 2,500,000 shares of common stock to TK in settlement of
penalties outstanding under the registration rights agreement. Accrued interest under both
the TK and Carbon Mesa debentures continues to be payable upon conversion in the form of
either cash or additional shares of common stock, at the companys option, at the
then-applicable conversion rate. Biogan remains in default of the Carbon Mesa Debenture.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The company also agreed that on or before November 30, 2001, it would file with the SEC all
securities filings that are required to be filed prior to that date and secure and
maintain the listing of Biogan common stock on an exchange or on the NASDs OTC
Electronic Bulletin Board. In addition, the company agreed to file by January 31, 2002 a
registration statement covering, among other things, the shares of common stock issued or
issuable upon conversion of the debentures and exercise of the warrants. Penalty for
failure to comply with the filing or relisting requirements, was that the principal amount
of the TK debenture would increase by $50,000 for each 30-day period of non-compliance,
with a maximum aggregate increase of $350,000. As a result of the companys failure
to comply with the above filing and listing requirements, the principal amount of the
debentures has increased by a further $50,000, resulting in a balance at December 31, 2001
of $2,200,000 less unamortized issuance cost ($70,661) or a net balance of $2,129,339. At
December 31, 2001 accrued interest amounted to $226,339.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 11.     RELATED
PARTY TRANSACTIONS

| | Thomson Kernaghan & Co. Limited (TK) owned 9.9% of the companys common stock at December
31, 2001 (Note 10.) Disregarding beneficial ownership limitations, the remaining
debentures convert into approximately 174,000,000 shares of common stock and the Series A
preferred stock (Note 4) converts into 13,200,000 shares of common stock.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The companys Vice Chairman and three former officers/stockholders contributed capital of
$993,810 for which no shares of stock were issued (Note 4. Stockholders
Deficit). Also a $60,000 10% unsecured demand note (Note 3) and $120,000 in accrued
salary (Note 5) were due the companys Vice Chairman.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | There are four 10% unsecured demand notes aggregating $114,967 due Hechi Industrial Company
Limited (Note 3), a co-owner in GGM. In addition Hechi advanced $81,747 on behalf of
Biogan (Note 5).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 12.     
SUBSEQUENT EVENTS

| | The principal amount of the convertible debentures has increased by a further $300,000
subsequent to December 31, 2001.
| | -----------------------------------------------------------------------------------------------------------------------

| | The company announced on May 3, 2002, that it had completed a non-brokered private placement
of 15,816,664 special warrants and 150,000 restricted common shares at a price of U.S.
$0.03 per special warrant or common share, for proceeds of U.S. $479,000. The proceeds of
the offering will be used for working capital purposes. The special warrants, which were
offered outside of the U.S., entitle holders to acquire, at no additional cost, one common
share for each special warrant held, at any time before the earlier of five days after the
issuance of a receipt for a final prospectus from the Ontario Securities Commission and
two years from closing. The common shares issued in the U.S. are subject to restrictions
on resale imposed by the U.S. Securities Act of 1933.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On
July 19, 2002 Hechi and the company implemented the revised structure by completing the
following steps:

| | a) | The
Hechi shareholders established a wholly-owned British Virgin Islands
               corporation, Fushan Industrial Co., Ltd. (Fushan);
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------

| | b) | Fushan
established a British Virgin Islands corporation, Biogan International           (BVI)
Inc.;
| | -- | ---------------------------------------------------------------------------------------------------

| | c) | The
company and Hechi terminated the original Asset Purchase Agreement;
| | -- | -----------------------------------------------------------------------

| | d) | The
company contributed its interest in Guangxi Guanghe Metals Co., Ltd. to           Biogan
International (BVI) Inc. in exchange for a non-interest bearing promissory note in the
principal amount of $1.7 million;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | e) | Hechi
and the company amended and restated the agreement establishing the           Cooperative
Joint Venture to provide for the replacement of the company by Biogan (BVI)Inc. and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | f) | Fushan
and the company entered into a share exchange agreement pursuant to           which the
company acquired 100% of Biogan International (BVI) Inc. in exchange           for
16,800,000 shares of the companys common stock and 3,624,000 shares of
          Series B Preferred stock.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Series B Preferred Stock is convertible into 362,400,000 shares of common stock following
shareholder authorization of additional issuable stock at Biogans next meeting of
shareholders.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
order for the company to earn its 92% equity interest in GGM, it must contribute
additional capital of $7,300,000 to GGM by September 2003. Should the company not
contribute the $7,300,000 or contribute only a partial amount, its ownership equity will
be reduced proportionately. Regardless of any additional capital contributed, the profit
and loss sharing remains at 95%.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
a result of this transaction, the companys business will be completely concentrated
in the Peoples Republic of China. Consequently its continued existence depends on
the success of the Cooperative Joint Venture. Because the company conducts its principal
operations in China, it is subject to significant risks not typically associated with
investments in equity securities of the United States and Western European companies.
These include risks associated with, among others, the political, economic and legal
environment, influence of the State Council over substantially all aspects of its
operations and competition in the mining and refining industry.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | It
is the companys management belief that the events outlined above, along with its
plans to raise at least $7,300,000 for modernizing the properties of GGM will allow the
company to continue in existence. As set forth in Note 2.C. Continued Existence there
can be no assurance that these plans will be successfully effected and the company will
operate as a going concern.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|BIOGAN INTERNATIONAL, INC. (A DEVELOPMENT STAGE
COMPANY) BALANCE SHEETSUNAUDITEDAs of
|-------------------------------------------------------------------------------------

|                                                           | MARCH 31,
   2001 | JUNE 30,
  2001 | SEPTEMBER 30, 2001
|---------------------------------------------------------- | ----------------- | --------------- | ------------------
|ASSETS                                                     |                   |                 |                   
|CASH                                                       |                   |                 | $                 
|PREPAID EXPENSES                                           |                   |                 |                   
|                                                           |                   |                 |                   
|TOTAL CURRENT ASSETS                                       |                   |                 |                   
|                                                           |                   |                 |                   
|                                                           |                   |                 |                   
|FURNITURE/EQUIPMENT                                        |                   |                 |                   
|ACCUMULATED DEPRECIATION                                   |                   |                 |                   
|                                                           |                   |                 |                   
|TOTAL FIXED ASSETS                                         |                   |                 |                   
|                                                           |                   |                 |                   
|COOPERATIVE JOINT VENTURE                                  |                   |                 |                   
|                                                           |                   |                 |                   
|                                                           |                   |                 |                   
|TOTAL ASSETS                                               |                   |                 | $                 
|                                                           |                   |                 |                   
|LIABILITIES & STOCKHOLDERS' DEFICIT                        |                   |                 |                   
|ACCOUNTS PAYABLE                                           |                   |                 | $                 
|NOTES PAYABLE                                              |                   |                 |                   
|ACCRUED EXPENSES                                           |                   |                 |                   
|                                                           |                   |                 |                   
|TOTAL CURRENT LIABILITIES                                  |                   |                 |                   
|                                                           |                   |                 |                   
|NON-CURRENT LIABILITIES                                    |                   |                 |                   
|CONVERTIBLE DEBENTURES                                     |                   |                 |                   
|- NET OF UNAMORTIZED DISC0UNT AND ISSUANCE COSTS           |                   |                 |                   
|                                                           |                   |                 |                   
|TOTAL LIABILITIES                                          |                   |                 |                   
|                                                           |                   |                 |                   
|STOCKHOLDERS' DEFICIT                                      |                   |                 |                   
|SERIES A CONVERTIBLE PREFERRED STOCK $.001 PAR VALUE,      |                   |                 |                   
|10,000,000 SHARES AUTHORIZED 1,100 SHARES ISSUED           |                   |                 |                   
|COMMON STOCK $.001 PAR VALUE 300,000,000 SHARES AUTHORIZED |                   |                 |                   
|ADDITIONAL PAID IN CAPITAL                                 |                   |                 |                   
|ACCUMULATED DEFICIT                                        |                   |                 |                   
|                                                           |                   |                 |                   
|TOTAL STOCKHOLDERS' DEFICIT                                |                   |                 |                   
|                                                           |                   |                 |                   
|TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT                  |                   |                 | $                 
|                                                           |                   |                 |                   

|BIOGAN INTERNATIONAL,INC. (A DEVELOPMENT STAGE
COMPANY) STATEMENT OF OPERATIONSUNAUDITED
|----------------------------------------------------------------------------------------

|                                         | FOR THETHREE MONTH PERIOD ENDED MARCH 31,2001 | FOR THETHREE MONTH PERIOD ENDED MARCH 31,;2000 | FOR THETHREE MONTH PERIOD ENDED JUNE 30, 2001 | FOR THE THREE MONTH PERIOD ENDED JUNE 30,2000 | FOR THESIX MONTHPERIOD ENDED JUNE 30, 2001 | FOR THESIX MONTH PERIOD ENDED JUNE30 ,2000 | FOR THETHREE MONTHPERIOD ENDEDSEPTEMBER30,2001 | FOR THE THREE MONTHPERIODENDEDSEPTEMBER30, 2000 | FOR THE NINEMONTHPERIODENDEDSEPTEMBER30, 2001 | FOR THE NINEMONTHPERIODENDEDSEPTEMBER30, 2000 | FROMINCEPTIONFEBRUARY 5,1988THROUGHSEPTEMBER30, 2001
|---------------------------------------- | --------------------------------------------- | ---------------------------------------------- | --------------------------------------------- | --------------------------------------------- | ------------------------------------------ | ------------------------------------------ | ---------------------------------------------- | ----------------------------------------------- | --------------------------------------------- | --------------------------------------------- | ----------------------------------------------------
|                                         |                                               |                                                |                                               |                                               |                                            |                                            |                                                |                                                 |                                               |                                               |                                                     
|SALES REVENUE                            |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|                                         |                                               |                                                |                                               |                                               |                                            |                                            |                                                |                                                 |                                               |                                               |                                                     
|TOTAL SALES                              |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|                                         |                                               |                                                |                                               |                                               |                                            |                                            |                                                |                                                 |                                               |                                               |                                                     
|EXPENSES                                 |                                               |                                                |                                               |                                               |                                            |                                            |                                                |                                                 |                                               |                                               |                                                     
|WAGES                                    |                                               |                                                |                                               | 63,200                                        |                                            |                                            | 43,200                                         |                                                 |                                               | 53,200                                        |                                                     
|STOCK SUBSCRIPTION LOSS                  |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|DEPRECIATION EXPENSE                     |                                               |                                                |                                               | 2,296                                         |                                            |                                            | 1,831                                          |                                                 |                                               | 1,278                                         |                                                     
|AMORTIZATION                             |                                               |                                                |                                               | 65,456                                        |                                            |                                            | --                                             |                                                 |                                               | 66,854                                        |                                                     
|STOCK BASED EXPENSE                      |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|INTEREST EXPENSE                         |                                               |                                                |                                               | 32,982                                        |                                            |                                            | 7,229                                          |                                                 |                                               | 35,736                                        |                                                     
|INTEREST EXPENSE - BENEFICIAL CONVERSION |                                               |                                                |                                               | --                                            |                                            |                                            | 508,750                                        |                                                 |                                               | --                                            |                                                     
|LEGAL & ACCOUNTING FEES                  |                                               |                                                |                                               | 170,355                                       |                                            |                                            | 98,350                                         |                                                 |                                               | 14,870                                        |                                                     
|RENT                                     |                                               |                                                |                                               | 5,895                                         |                                            |                                            | --                                             |                                                 |                                               | 3,738                                         |                                                     
|START UP COSTS                           |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|RESEARCH AND DEVELOPMENT                 |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|SUBSIDIARIES LOSSES                      |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|OTHER OPERATING EXPENSES                 |                                               |                                                |                                               | 17,514                                        |                                            |                                            | 7,190                                          |                                                 |                                               | 6,823                                         |                                                     
|                                         |                                               |                                                |                                               |                                               |                                            |                                            |                                                |                                                 |                                               |                                               |                                                     
|TOTAL EXPENSES                           |                                               |                                                |                                               | 357,698                                       |                                            |                                            | 666,550                                        |                                                 |                                               | 182,499                                       |                                                     
|                                         |                                               |                                                |                                               |                                               |                                            |                                            |                                                |                                                 |                                               |                                               |                                                     
|NET OPERATING INCOME (LOSS)              |                                               |                                                |                                               | (357,698                                      | )                                          |                                            | (666,550                                       | )                                               |                                               | (182,499                                      | )                                                   
|STOCK RECOVERY INCOME                    |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|INTEREST INCOME                          |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|OTHER INCOME                             |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|DEBENTURE SETTLEMENT COSTS               |                                               |                                                |                                               | --                                            |                                            |                                            | --                                             |                                                 |                                               | --                                            |                                                     
|MISCELLANEOUS EXPENSE                    |                                               |                                                |                                               | --                                            |                                            |                                            | (88                                            | )                                               |                                               | --                                            |                                                     
|                                         |                                               |                                                |                                               |                                               |                                            |                                            |                                                |                                                 |                                               |                                               |                                                     
|TOTAL OTHER                              |                                               |                                                |                                               | --                                            |                                            |                                            | (88                                            | )                                               |                                               | --                                            |                                                     
|NET INCOME (LOSS)                        |                                               |                                                |                                               | (357,698                                      | )                                          |                                            | (666,638                                       | )                                               |                                               | (182,499                                      | )                                                   
|                                         |                                               |                                                |                                               |                                               |                                            |                                            |                                                |                                                 |                                               |                                               |                                                     
|PRIMARY INCOME (LOSS) PER SHARE          |                                               |                                                |                                               | (0.00                                         | )                                          |                                            | (0.01                                          | )                                               |                                               | (0.00                                         | )                                                   
|                                         |                                               |                                                |                                               |                                               |                                            |                                            |                                                |                                                 |                                               |                                               |                                                     
|WEIGHTED AVERAGE SHARES OUTSTANDING      |                                               |                                                |                                               | 88,766,199                                    |                                            |                                            | 85,386,710                                     |                                                 |                                               | 88,766,199                                    |                                                     

|BIOGAN INTERNATIONAL,INC. (A DEVELOPMENT STAGE
COMPANY) STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIENCY)FOR THE PERIOD FROM INCEPTION (FEBRUARY 5, 1988)THROUGH SEPTEMBER 30, 2001UNAUDITED
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|COMMON STOCK ISSUED:                                            | SHARES       | COMMONSTOCKAMOUNT | PREFERREDSTOCKSHARES AMOUNT | AMOUNTPERSHARE | ADDITIONALPAID-INCAPITAL | ACCUMULATEDDEFICIT DURING THEDEVELOPMENTSTAGE | STOCKHOLDERS' EQUITY(DEFICIT)
|--------------------------------------------------------------- | ------------ | ----------------- | --------------------------- | -------------- | ------------------------ | --------------------------------------------- | -----------------------------
|____________________                                            | ____________ | ____________      | ____________                | ____________   | _________________        | _________________                             | ___________________          
|1988                                                            | 2,250,000    | 2,250             |                             |                |                          | 22,750                                        | (15,052)                     
|1989                                                            | 21,387,347   | 21,387            |                             |                |                          | 197,352                                       | (149,448)                    
|1995                                                            | 56,858,115   | 56,858            |                             |                |                          | 3,246,860                                     | (3,261,573)                  
|1996                                                            | 4,573,939    | 4,574             |                             |                |                          | 1,123,417                                     | (1,263,513                   
|1997                                                            | 2,785,054    | 2,785             |                             |                |                          | 560,139                                       | (678,716)                    
|1998                                                            | (2,731,571)  | (2,732)           |                             |                |                          | (782,711)                                     | 582,555                      
|1999                                                            | 263,826      | 264               |                             |                |                          | 442,868                                       | (238,263)                    
|TOTAL AT DECEMBER 31, 1999                                      | 85,386,710   | 85,387            |                             |                |                          | 4,810,675                                     | (5,024,010)                  
|MARCH 8, 2000    BENEFICIAL CONVERSION FEATURE                  | --           | --                |                             |                |                          | 508,750                                       |                              
|MARCH 31, 2000   CONTRIBUTED CAPITAL                            | --           | --                |                             |                |                          | 170,500                                       |                              
|FORGIVEN OFFICERS WAGES                                         | --           | --                |                             |                |                          | 171,200                                       |                              
|JUNE 30, 2000   CONTRIBUTED CAPITAL                             | --           | --                |                             |                |                          | 205,500                                       |                              
|AUGUST 18, 2000   CONTRIBUTED CAPITAL                           | --           | --                |                             |                |                          | 10,000                                        |                              
|$500,000 DEBENTURE CONVERSION    PLUS INTEREST OF $15,122       | 2,712,387    | 2,712             |                             |                | 0.1899                   | 512,410                                       |                              
|OCTOBER 8, 2000  PREFERRED STOCK ISSUED                         | --           | --                | 1,100                       | 1.00           | 0.00140                  | (1)                                           |                              
|STOCK BASED COMPENSATION                                        | --           | --                |                             |                |                          | 1,848,000                                     |                              
|DECEMBER 5, 2000     CONTRIBUTED CAPITAL                        | --           | --                |                             |                |                          | 35,100                                        |                              
|$30,000 DEBENTURE CONVERSION PLUS INTEREST OF $400              | 667,102      | 667               |                             |                | 0.0456                   | 29,733                                        |                              
|NET LOSS FOR 2000                                               | --           | --                | --                          | --             |                          | --                                            | (3,598,578)                  
|                                                                | _________    | _________         | _________                   | _________      |                          | _________                                     | _________                    
|                                                                | 88,766,199   | 88,766            | 1,100                       | 1              |                          | 8,301,867                                     | (8,622,588)                  
|MARCH 31, 2001    CONTRIBUTED CAPITAL                           | --           | --                |                             |                |                          | 25,010                                        |                              
|NET LOSS FOR QUARTER ENDING                                     | --           | --                | --                          | --             |                          | --                                            | (357,698)                    
|                                                                | _________    | _________         | _________                   | _________      |                          | _________                                     | _________                    
|TOTAL AT MARCH 31, 2001                                         | 88,766,199   | 88,766            | 1,100                       | 1              |                          | 8,326,877                                     | (8,980,286)                  
|JUNE 30, 2001    NET LOSS FOR QUARTER ENDING                    | --           | --                | --                          | --             |                          | --                                            | (182,499)                    
|                                                                | _________    | _________         | _________                   | _________      |                          | _________                                     | _________                    
|TOTAL AT JUNE 30, 2001                                          | 88,766,199   | 88,766            | 1,100                       | 1              |                          | 8,326,877                                     | (9,162,785)                  
|SEPTEMBER 30, 2001    STOCK ISSUED - DEBENTURE       SETTLEMENT | 2,500,000    | 2,500             |                             |                | 0.0010                   | (2,500)                                       |                              
|STOCK BASED COMPENSATION                                        | --           | --                |                             |                |                          | 30,000                                        |                              
|NET LOSS FOR QUARTER ENDING                                     | --           | --                | --                          | --             |                          | --                                            | (908,484)                    
|                                                                | _________    | _________         | _________                   | _________      |                          | _________                                     | _________                    
|TOTAL AT JUNE 30, 2001                                          | 91,266,199   | 91,266            | 1,100                       | 1              |                          | 8,354,377                                     | (10,071,269)                 
|                                                                | ========     | ========          | ========                    | ========       |                          | ========                                      | ========                     

|BIOGAN INTERNATIONAL,INC. (A DEVELOPMENT STAGE
COMPANY) STATEMENT OF CASH FLOWSUNAUDITED
|----------------------------------------------------------------------------------------

|                                                | FOR THE THREE MONTH PERIOD ENDING MARCH 31, 2001 | FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2000 | FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2001 | FOR THE SIX MONTH PERIOD ENDED JUNE 30,2000 | FOR THE NINE MONTHE PERIODENDED SEPTEMBER 30, 2001 | FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 | FROM FEBRUARY 5, 1988(INCEPTION)THROUGHSEPTEMBER 30, 2001
|----------------------------------------------- | ------------------------------------------------ | ----------------------------------------------- | -------------------------------------------- | ------------------------------------------- | -------------------------------------------------- | -------------------------------------------------- | ---------------------------------------------------------
|CASH FLOWS FROM OPERATIONS                      |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|NET INCOME (LOSS)                               |                                                  |                                                 | $(357,698)                                   |                                             |                                                    | $(666,638)                                         |                                                          
|ADJUSTMENTS TO RECONCILE NET LOSS TO            |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|NET CASH USED BY OPERATING ACTIVITIES:          |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|ADD BACK STOCK ISSUED FOR:                      |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|MANAGEMENT                                      |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|SERVICES, AND RESEARCH AND DEVELOPMENT          |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|IMPUTED EXECUTIVE COMPENSATION                  |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|RESTITUTION                                     |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|STOCK BASED COMPENSATION                        |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|INTEREST EXPENSE                                |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|INTEREST EXPENSE - BENEFICIAL CONVERSION        |                                                  |                                                 | --                                           |                                             |                                                    | 508,750                                            |                                                          
|DISPUTE SETTLEMENTS                             |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|STOCK CANCELLATION                              |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|OTHER ADJUSTMENTS:                              |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|SUBSIDIARIES LOSSES                             |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|STOCK SUBSCRIPTION LOSS                         |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|FIRST DEVELOPMENT STAGE LOSS                    |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|AMORTIZATION                                    |                                                  |                                                 | 65,456                                       |                                             |                                                    | --                                                 |                                                          
|DEPRECIATION AND AMORTIZATION                   |                                                  |                                                 | 2,296                                        |                                             |                                                    | 3,219                                              |                                                          
|                                                |                                                  |                                                 | _________                                    |                                             |                                                    | _________                                          |                                                          
|                                                |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|TOTAL ADJUSTMENTS                               |                                                  |                                                 | 67,752                                       |                                             |                                                    | 511,969                                            |                                                          
|                                                |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|PREPAID EXPENSES                                |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|ACCOUNTS RECEIVABLE                             |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|ACCOUNTS PAYABLE                                |                                                  |                                                 | 60,665                                       |                                             |                                                    | 9,193                                              |                                                          
|ACCRUED LIABILITIES                             |                                                  |                                                 | 96,182                                       |                                             |                                                    | 47,601                                             |                                                          
|                                                |                                                  |                                                 | _________                                    |                                             |                                                    | _________                                          |                                                          
|                                                |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|NET CASH PROVIDED (USED)                        |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|BY OPERATING ACTIVITIES                         |                                                  |                                                 | (133,099)                                    |                                             |                                                    | (97,875)                                           |                                                          
|CASH FLOWS FROM INVESTING ACTIVITIES            |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|PURCHASE FURNITURE/EQUIPMENT                    |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|DISPOSAL FURNITURE/EQUIPMENT                    |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|ADVANCE ON BUSINESS COMBINATION                 |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|INVESTMENT IN SUBSIDIARIES                      |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|                                                |                                                  |                                                 | _________                                    |                                             |                                                    | _________                                          |                                                          
|                                                |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|NET CASH PROVIDED (USED)                        |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|BY INVESTING ACTIVITIES                         |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|CASH FLOWS FROM FINANCING ACTIVITIES            |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|NOTES PAYABLE - OTHER RECEIVED                  |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|NOTE PAYABLE-STOCKHOLDER RECEIVED               |                                                  |                                                 | 79,985                                       |                                             |                                                    | --                                                 |                                                          
|PAYMENT OF NOTES PAYABLE - OTHER                |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|ISSUANCE OF COMMON STOCK                        |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|CONTRIBUTED CAPITAL                             |                                                  |                                                 | 25,010                                       |                                             |                                                    | 370,500                                            |                                                          
|BOND ISSUANCE COST CAPITALIZED                  |                                                  |                                                 | --                                           |                                             |                                                    | (300,000)                                          |                                                          
|PAYMENT OF DEBENTURES                           |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|CONVERTIBLE DEBENTURES                          |                                                  |                                                 | --                                           |                                             |                                                    | 1,800,000                                          |                                                          
|OTHER                                           |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|                                                |                                                  |                                                 | _________                                    |                                             |                                                    | _________                                          |                                                          
|NET CASH PROVIDED (USED)                        |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|BY FINANCING ACTIVITIES                         |                                                  |                                                 | 104,995                                      |                                             |                                                    | 1,870,500                                          |                                                          
|                                                |                                                  |                                                 | _________                                    |                                             |                                                    | _________                                          |                                                          
|                                                |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|NET INCREASE(DECREASE) IN CASH                  |                                                  |                                                 | (28,104)                                     |                                             |                                                    | 1,772,625                                          |                                                          
|BEGINNING CASH BALANCE                          |                                                  |                                                 | 38,025                                       |                                             |                                                    | 67,193                                             |                                                          
|                                                |                                                  |                                                 | _________                                    |                                             |                                                    | _________                                          |                                                          
|CASH ENDING BALANCE                             |                                                  |                                                 | $   9,921                                    |                                             |                                                    | $ 1,839,818                                        |                                                          
|                                                |                                                  |                                                 | =======                                      |                                             |                                                    | ===========                                        |                                                          
|                                                |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|SUPPLEMENTAL INFORMATION                        |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|                                                |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|CASH PAYMENTS FOR INTEREST EXPENSE              |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|CASH PAYMENTS FOR INCOME TAXES                  |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|NONMONETARY TRANSACTIONS                        |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|STOCK ISSUED FOR:                               |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|DEBT REDUCTION                                  |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|MANAGEMENT                                      |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL |                                                  |                                                 |                                              |                                             |                                                    |                                                    |                                                          
|SERVICES, AND RESEARCH AND DEVELOPMENT          |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|IMPUTED EXECUTIVE COMPENSATION                  |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|RESTITUTION                                     |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|INTEREST EXPENSE - BOND CONVERSION              |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|INTEREST EXPENSE - BENEFICIAL CONVERSION        |                                                  |                                                 | --                                           |                                             |                                                    | 508,750                                            |                                                          
|DISPUTE SETTLEMENT                              |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|STOCK CANCELLATION                              |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|BOND ISSUANCE COSTS CAPITALIZED                 |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|BOND CONVERSION INTO COMMON STOCK               |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |                                                          
|STOCK BASED COMPENSATION                        |                                                  |                                                 | --                                           |                                             |                                                    | --                                                 |