##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-KSB

|  |  |                                                                                
|- |  | -------------------------------------------------------------------------------
|x |  | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal Year ended October 31, 2002

|  |  |                                                                                    
|- |  | -----------------------------------------------------------------------------------
|o |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGe ACT OF 1943.

For the Transition period from ____________________ to________________________

Commission file number 33-24566-A

BIO-LOK INTERNATIONAL INC.

---

(Name of small business issuer in its charter)


|                                                                       |  |                             
|---------------------------------------------------------------------- |  | ----------------------------
|DELAWARE                                                               |  | 65-0317138                  
|                                                                      
|(State or other jurisdiction of (I.R.S.
incorporation or organization) |  | Employer Identification No.)
|                                                                       |  |                             
|312 S. Military Trail, Deerfield Beach, Florida                        |  | 33442                       
|                                                                      
|(Address of principal executive offices)                               |  | (Zip Code)                  

Issuers telephone number, including area code: (954) 698-9998

Securities registered pursuant to Section 12 (b) of the Exchange Act: None
Securities registered pursuant to Section 12 (g) of the Exchange Act: None

Check whether the issuer (1) has 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. x YES o NO

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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

State Issuers revenues for its most recent fiscal year: $2,938,908

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specific date within the past 60 days: October 31, 2002, $1,058,575.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Check whether the issuer has filed all documents and reports required to be
filed by Section 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.  o YES o NO

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

As of October 31, 2002, the Registrant had 6,663,152 Common Stock shares
outstanding, at a par value $.01 per share.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format (Check one):  o Yes x No





---



FORWARD-LOOKING STATEMENTS

When used in this Annual Report on Form 10-KSB or in future filings by the
Company with the Securities and Exchange Commission, in the Companys press
releases or other public or shareholder communications, or in oral statements
made with the approval of an authorized executive officer, the words phrases
will likely result, are expected to, will continue, is anticipated,
estimate, project, or similar expressions are intended to identify
forward-looking statements. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak as of
the date made, and to advise readers that various factors, including regional
and national economic conditions, substantial changes in levels of market
interest rates, credit and other risks of manufacturing, distributing or
marketing activities, and competitive and regulatory factors could affect the
Companys financial performance and could cause the Companys actual results
for future periods to differ materially from those anticipated by any
forward-looking statements.

The Company does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.

TABLE OF CONTENTS



|           |                                                                                                                         |                                                           |  |  |  |  |  | 
|---------- | ----------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|PART I    
|           | ITEM 1. DESCRIPTION OF BUSINESS                                                                                        
|           | ITEM 2. DESCRIPTION OF PROPERTY                                                                                        
|           | ITEM 3. LEGAL PROCEEDINGS                                                                                              
|           | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                            
|PART II   
|           | ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                       
|           | ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                      
|           | ITEM 7. FINANCIAL STATEMENTS                                                                                           
|           | ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                           
|PART III  
|           | ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
|           | ITEM 10. EXECUTIVE COMPENSATION                                                                                        
|           | ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS               
|           | ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                
|           | ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                                                                              
|           | ITEM 14. CONTROLS AND PROCEDURES                                                                                       
|SIGNATURES
|           |                                                                                                                         | CONSOLIDATED BALANCE SHEET                               
|           |                                                                                                                         | CONSOLIDATED STATEMENTS OF OPERATIONS                    
|           |                                                                                                                         | CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
|           |                                                                                                                         | CONSOLIDATED STATEMENTS OF CASH FLOWS                    
|           |                                                                                                                         | CONSOLIDATED STATEMENTS OF CASH FLOWS                    
|           |                                                                                                                         | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS               



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##### Table of Contents



TABLE OF CONTENTS

|         |  |                                                                                                                 |  |                |    |  |    | 
|-------- |  | --------------------------------------------------------------------------------------------------------------- |  | -------------- | -- |  | -- | 
|         |  |                                                                                                                 |  | PART I         |    | 
|Item 1.  |  | Description of Business                                                                                         |  |                | 2  | 
|Item 2.  |  | Description of Property                                                                                         |  |                | 5  | 
|Item 3.  |  | Legal Proceedings                                                                                               |  |                | 5  | 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                             |  |                | 5  | 
|         |  |                                                                                                                 |  | PART II        |    | 
|Item 5.  |  | Market for Common Equity and Related Stockholder Matters                                                        |  |                | 5  | 
|Item 6.  |  | Managements Discussion and Analysis or Plan of Operation                                                       |  |                | 7  | 
|Item 7.  |  | Financial Statements                                                                                            |  |                | 9  | 
|Item 8.  |  | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures                           |  |                | 9  | 
|         |  |                                                                                                                 |  | PART III       |    | 
|Item 9.  |  | Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act |  |                | 9  | 
|Item 10. |  | Executive Compensation                                                                                          |  |                | 10 | 
|Item 11. |  | Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters                  |  |                | 11 | 
|Item 12. |  | Certain Relationships and Related Transactions                                                                  |  |                | 11 | 
|Item 13. |  | Exhibits and Reports on Form 8-K                                                                                |  |                | 12 | 
|Item 14. |  | Controls and Procedures                                                                                         |  |                | 12 | 
|         |  |                                                                                                                 |  | Signatures     |    |  | 13 | 
|         |  |                                                                                                                 |  | Certifications |    |  | 14 | 
|         |  |                                                                                                                 |  | Certifications |    |  | 15 | 

2



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PART I




ITEM 1. DESCRIPTION OF BUSINESS

Bio-Lok International Inc. (hereinafter BioLok or the Company) via
predecessor entities and management has been involved in the design,
development and manufacture of dental products for over 15 years. The Company
was originally established in 1988 as Colfax, Inc.

Bio-Lok is the manufacturer and distributor of the Bio-Lok Precision Dental
Implant System.The system represents an all-inclusive product line which is
augmented with a few products purchased for resale on a private label. The
implant system has been developed over the years, and represents a proprietary
line with over sixteen (16) patents. The products are marketed domestically
direct to the end-market, and internationally on a country-by-country basis via
select Distributors or a majority owned Company facility. The Company is
compliant with good manufacturing practices (GMP) and registers its products
with the Federal Drug Administration (FDA), and is ISO 9001 certified.

As of October 31, 2002, the company had set up three (3) majority owned
subsidiaries engaged in marketing of its product line in three countries. The
latest entity established was Bio-Lok International Pty. Inc. in May 2001 in
Australia.

Business of Issuer

Bio-Loks principal product consists of a line of dental implants, their
prosthetic components, tools, devices, irrigated spade drills, and membranes
and bone augmentation materials for use around implants. The dental implants
are the foundation upon which natural looking teeth are placed via a sound and
lasting prosthesis. Dental implants are small anchors (root form) shaped like
screws or cylinders which when placed become an artificial replacement of the
natural roots, are made out of bio-compatible titanium, and are placed into the
maxilla and mandible of a patient. Many of the implants have various coatings
or treatments (Hydroxylapatite, Titanium Plasma Sprayed, treated via a
resorbable blasted material  Osseo-Lok, passivated, and other like
processes), which are bonded to the implant to enhance the bonding and bone
growth process resulting in improved osseointegration.

Dental implant systems are placed by trained dentists, oral surgeons,
periodontists, implantologists, and other similar disciplined individuals.
Implants can have a high success rate if placed properly and expertly. With
proper oral care and regular dental visits, implants have lasted as long as 20
years and may last a lifetime.

Products, services and markets

The dental products Bio-Lok manufactures and markets consists of the following
key products:



| | (a) |  | Hex Top Implants
| | --- |  | ----------------



| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | - 3.45mm Platform    Silhouette Screw Implant with a tapered body from 4.0mm to 2.5mm;



| |                                                         
| | --------------------------------------------------------
| | - Micro-Lok Screw Implant 3.45mm body to head;          
|
| | - Micro-Lok Cylinder Implant 3.45mm body to 4.00mm head;



| |                                                                          
| | -------------------------------------------------------------------------
| | - 4.00 mm Platform   Micro-Lok Screw Implant 3.75mm body to 4.00mm head;



| |                                                                    
| | -------------------------------------------------------------------
| | - Micro-Lok Screw Implant 4.00mm body to 4.00mm head;              
|
| | - Micro-Lok Cylinder Implant 3.3mm body to 4.00mm head;            
|
| | - Micro-Lok Cylinder Implant 4.0mm body to 4.00mm head;            
|
| | - Silhouette Screw Implant with a tapered body from 4.5mm to 2.5mm;



| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | - 5.00 mm Platform   Micro-Lok Screw Implant 4.75mm body to 5.0mm head then cuff back to 4.0mm;



| |                                                                    
| | -------------------------------------------------------------------
| | - Micro-Lok Screw Implant 4.75mm body to 5.0mm head;               
|
| | - Micro-Lok Cylinder Implant 5.0mm body to 5.0mm head;             
|
| | - Silhouette Screw Implant with a tapered body from 5.5mm to 3.3mm;



| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | - 6.50 mm Platform    Silhouette Screw Implant with a tapered body from 7.0mm to 4.0mm;

3



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| | (b) |  | IC  Internal Connection Implants
| | --- |  | -----------------------------------



| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | - 3.45mm Platform    Silhouette Screw Implant with a tapered body from 4.0mm to 2.5mm; 
|
| | - 4.00 mm Platform    Silhouette Screw Implant with a tapered body from 4.5mm to 2.5mm;
|
| | - 5.00 mm Platform    Silhouette Screw Implant with a tapered body from 5.5mm to 3.3mm;
|
| | - 6.50 mm Platform    Silhouette Screw Implant with a tapered body from 7.0mm to 4.0mm;



| | (c) |  | Armamentarium, Tools and Devices
| | --- |  | --------------------------------



| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | - an extensive line of prosthetic abutments providing a practitioner ease
of identifying options available for completion
of       any prosthesis;
|
| | - all necessary tooling and devices for both placement of the implants
and for completion of a prosthesis;                                        
|
| | - a large selection of four(4) fluted (longitudinal cutting surfaces)
spade drills, pilot drills, fissure bur, countersinks and counter bores;    
|
| | - and, a select number of products utilized in implantology and purchased
for re-sale.                                                            

As of November 2001, the Company has selected a Collagen Resorbable Membrane
to market along with its dental implant system. The membrane is offered in
three sizes and is sold in boxes of five, three and one to the end-market
domestically and internationally. The product is private labeled and sold as
Mem-Lok Collagen Resorbable Membrane.

At the end of the first quarter of 2002, the Company added and is actively
marketing a bone augmentation material (Surgi-Plaster) as an add-on to its
product line. The product is readily utilized in the placement of implants,
hence providing a very synergistic product for the marketing of the implant
system.

Distribution

Domestically the Company markets the Bio-Lok Precision Dental Implant System
directly to the end market  clinicians, dental specialists and institutions.
As of 2002, the Company has been actively engaged in the hire of a national
sales force. The development of the domestic market is expected to grow the
Company considerably and result in the domestic business representing over 40%
of total sales. Internationally, Bio-Lok sells and markets its products via
distributors, majority owned subsidiaries and/or joint ventures.

As of October 31, 2002, the Company has contracts outstanding with over 12
Distributors, has set up three (3) majority owned subsidiaries and is
continually engaged in soliciting and establishing added international
relationships.

Competition

The Companys competition consists of a number of entities  approximately 10
primary competitors. The major competitors are Nobel Biocare, Centerpulse,
BioMed Inc.  Implant Innovations Inc. (3I), Dentsply  Friedent and its
Frialit implant, Lifecore Biomedical, Sterngold, Straumann  ITI implant, and
other smaller implant companies. To compete and overcome the competitor(s)
advantages in the marketplace, Bio-Lok offers to the market a product line
designed and manufactured in-house: a product line which represents State of
the Art based on todays technology by having incorporated into the system
unique and patented designs consisting of journals, thread design, seals and
other features which provide strength and fit to the product line. Due to these
factors, Bio-Lok anticipates being able to penetrate the existing dental
implant marketplace and gain market share as it completes the development and
implementation of its marketing objectives.

Raw Materials

The material used in manufacturing the dental products is titanium alloy
(ASTMB348 Grade 5 [Ti 6AL4V]), gold alloy and stainless steel. Titanium is
inert to body tissue and bone and is an alloy which has the unique ability to
form a permanent biological bond with living tissue after being placed.
Research in the use of ceramic and other materials is underway, particularly
for use as an abutment.

Financial Information about Industry Segments

The Company captures data for segmentation of its business activity via sales
by geographic areas. To accumulate information for assets and expenses is not
practical as the product line manufactured by the Company is not unique to any
market.

Trademarks and Patents

The Company has filed trademarks on the Company name and logo, and its dental
implant product line names and logos.

4



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The Company owns a number of patents. These patents were obtained by, or have
been transferred and assigned to, the Company. The Company has been granted a
total of sixteen (16) patents and has eight (8) patents pending.

Regulatory

The Company has maintained its ISO 9001 / EN46001 and Annex II (CE mark)
certification to continue to permit the Company to import and market its
products within the European Economic Community (EEC). The ISO certification
is required to permit the Company to import its products into the EEC or any
other country that has adopted the ISO rules, regulations and policies.

The Company has received 510(k) registrations from the Federal Drug
Administration (FDA) for required products and adheres to the GMP guidelines
established by them. FDA registration for the product line is required by the
US Government to enable the Company to present and detail the merits, quality
and performance of its products.

Research and Development

Product research is being done continually on the existing product line, new
ideas and concepts relating to dental implantology and the development of new
implant, prosthetic and tooling designs. New products will be and are being
brought to market as clinical evaluations, studies and testing are completed,
and FDA registration, if required or necessary, is obtained.

Product currently under final evaluation, trials and testing is the
laser-etched implant  Laser-Lok. The new implants are expected to be
brought to market by early 2003. The implant collars have been redesigned and
laser-etched to promote and improve bone and tissue adhesion. The improved
implant should reduce bone loss and lessen periodontal problems.

Environmental Laws

Environmental laws do not impact the Company, except for waste
products/materials created and/or generated by manufacturing processes. These
waste products are being recycled according to and in compliance with federal,
state, and local environmental protection laws.

Compliance by the Company with federal, state and local environmental
protection laws has not had and is not expected in the future to have, an
effect on capital expenditures, liquidity, earnings or its competitive
position.

Reports to Security Holders

The Company will deliver to the stockholders an Annual Report for the year
ended October 31, 2002.

The Company has filed all requisite reports with the SEC. Reports filed for
the years 2002 and 2001 are on Forms 10-QSB, 10-KSB, S-8 and 8-K.

SEC reports issued by the Company are completed electronically, hence they can
be obtained from the SEC maintained Internet site (http:\\www.sec.gov). The
reports can also be accessed and obtained through the Companys Internet site
(http:\\www.biolok.com). The public may read and copy any materials filed by
the Company with the Securities and Exchange Commission at the Commissions
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the Commission at 1-800-SEC-0330. The Commission maintains an internet
site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the Commission.
The address of that site is http://www.sec.gov.




ITEM 2. DESCRIPTION OF PROPERTY

The Companys principal executive office and manufacturing facility is located
in Deerfield Beach, Florida. The facility is considered to be in good
condition, fully utilized, and consists of 7,690 sq. ft. of leased plant and
offices. Added space or relocation is presently expected to be required in
2003 for the Deerfield Beach operation.

The Companys manufacturing facility consists of numerous automated CNC Swiss
and manual lathe machines. During 2001, Bio-Lok experienced a machine fire,
which resulted in all machines being replaced. The Company carried replacement
insurance on all equipment and business interruption insurance for any loss of
income resulting from the fire. As of October 31, 2002, all machinery had been
replaced.

5



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The Company also maintains a facility in Springfield, New Jersey, for Orthogen
Corporation, its wholly owned subsidiary. The facility consists of 900 sq. ft.
of leased office space.




ITEM 3. LEGAL PROCEEDINGS

No legal proceedings exist.




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

Only matters put to a vote of Security Holders for 2002 was the election of
Directors and the re-appointment of the independent Auditor at an annual
stockholders meeting held on May 1, 2002.




PART II




ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

The Companys common stock has been trading on the NASD OTC Electronic Bulletin
Board under the symbol BLLI since May 2000.

The following table sets forth the quarterly high and low bid prices of the
Companys common stock for the fiscal years ended October 31, 2001 and 2002, as
reported on the OTC Bulleting Board. Such quotes do not necessarily reflect
actual transactions or value since the stock is thinly traded.

|                               |  |            |      |     |  |   |      | 
|------------------------------ |  | ---------- | ---- | --- |  | - | ---- | 
|                               |  | BID PRICES
|                               |  |           
|                               |  | HIGH       |      | LOW
|                               |  |            |      |    
|Quarter Ended October 31, 2000 |  | $          | 1.03 |     |  | $ | 0.75 | 
|Quarter Ended January 31, 2001 |  | $          | 1.03 |     |  | $ | 0.88 | 
|Quarter Ended April 30, 2001   |  | $          | 1.00 |     |  | $ | 0.95 | 
|Quarter Ended July 31, 2001    |  | $          | 0.42 |     |  | $ | 0.42 | 
|Quarter Ended October 31, 2001 |  | $          | 0.30 |     |  | $ | 0.23 | 
|Quarter Ended January 31, 2002 |  | $          | 0.45 |     |  | $ | 0.45 | 
|Quarter Ended April 30, 2002   |  | $          | 0.48 |     |  | $ | 0.20 | 
|Quarter Ended July 31, 2002    |  | $          | 0.60 |     |  | $ | 0.60 | 
|Quarter Ended October 31, 2002 |  | $          | 0.23 |     |  | $ | 0.17 | 

These quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions. The Company
understands that eight member firms currently act as market makers for the
Companys common stock.

The Company has only one class of common stock which is publicly-traded. As of
October 31, 2002, there were approximately 582 shareholders of record of the
Companys common stock issued and outstanding. A number of these shares are
held in street name and may, therefore, be held by several beneficial owners.

The holders of the common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Holders of the
common stock have no preemptive rights to convert their common stock into any
other securities. There are no redemption or sinking fund provisions
applicable to the common stock.

Stockholders Equity

On February 28, 2002, the Company registered with the SEC under Form S-8
500,000 shares of common stock. The shares requested are common stock shares
it reserved for issuance under the Companys stock plan titled Stock
Compensation Plan

6



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##### Table of Contents



2002. Under the plan, shares are allocated for employee compensation, the
Bio-Lok 401(k) Plan, and shares to be awarded to institutions, consultants and
other entities that provide service, assistance and support.

During the nine months ended July 31, 2002, 577,794 shares of common stock were
issued for services valued at an aggregate amount of $164,522 and 17,327 shares
of treasury stock were acquired in lieu of an account receivable on the books
for $7,277 (no gain or loss was recognized since the A/R was settled at the
trading price of the stock on the date of acquisition).

On January 3, 2002, an option to purchase an aggregate of 30,000 shares of
common stock at $.05 per share was issued to a clinician for services and
support of the Company. On January 3, 2002, an option to purchase an aggregate
of 10,000 shares of common stock at $.25 per share was issued to an employee.
On February 15, 2002, one option to purchase an aggregate of 20,000 shares of
common stock at $.10 per share was issued to an entity for services rendered.

Effective May 2, 2002, the Board of Directors authorized the increase of the
common stock shares outstanding from 15,000,000 to 20,000,000. Stockholders
had previously approved the authorization of common stock shares to be
increased to 30,000,000, which increase was to be authorized by the Board of
Directors, as it deemed necessary.

As of October 31, 2002, there where 20,000,000 shares of common stock
authorized and 6,663,152 shares of common stock issued and outstanding; and
500,000 shares of Preferred Stock authorized and none outstanding.

Dividends

The Company paid no dividends during the fiscal year ended October 31, 2002.
The declaration and payment by the Company of dividends, if any, in the future
rests within the discretion of its Board of Directors and will depend, among
other things, upon the Companys earnings, its capital requirements and its
financial condition, as well as other relevant factors.

The Company does not anticipate the payment of any dividends in the near future
and is restricted from paying a dividend under its current Revolving Loan Bank
agreement and EximBank US credit insurance guarantee. The Board of Director
adheres to a policy of retaining earnings for growth and development.

Recent Sales of Unregistered Securities

There has been no sale of unregistered securities sold by the Company within
the last three years.

Equity Compensation Plan Information

Securities authorized for issuance under equity compensation plans are as
follows:

|                                                           |       |     |                                      |           |                      |     |                           |        |                       |  |                         |     | 
|---------------------------------------------------------- | ----- | --- | ------------------------------------ | --------- | -------------------- | --- | ------------------------- | ------ | --------------------- |  | ----------------------- | --- | 
|                                                           |       |     | Equity Compensation Plan Information
|                                                           |       |     |                                     
|                                                           |       |     |                                      |           |                      |     |                           |        |                       |  | Number of securities   
|                                                           |       |     |                                      |           |                      |     |                           |        |                       |  | remaining available for
|                                                           |       |     | Number of securities                 |           |                      |     |                           |        | future issuance under
|                                                           |       |     | to be issued upon                    |           | Weighted-average     |     | equity compensation plans
|                                                           |       |     | exercise of outstanding              |           | exercise price of    |     | (excluding securities    
|                                                           |       |     | options, warrants                    |           | outstanding options, |     | reflected                
|                                                           |       |     | and rights (1)(2)                    |           | warrants and rights  |     | in column (a))           
|Plan category                                              |       | (a) |                                      | (b)       |                      | (c)
|                                                           |       |     |                                      |           |                      |    
|Equity compensation plans
approved by security holders     |       |     |                                     |           |                      |     |                          |        |                       |  |                        |    
|Equity compensation plans
not approved by security holders |       |     | 1,755,000                            |           |                      | $   | 0.3360                    |        |                       |  | -0-                     |    
|                                                           |       |     |                                      |           |                      |     |                           |        |                       |  |                         |    
|                                                           | Total |     |                                      | 1,755,000 |                      |     | $                         | 0.3360 |                       |  |                         | -0- | 
|                                                           |       |     |                                      |           |                      |     |                           |        |                       |  |                         |    



|(1) |  | See Note 13 to the Consolidated Financial Statements for information with
respect to the identity of option holders and the terms of their options.                                                                 
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Does not include options for the purchase of 1,602,000 shares cancelled as
of September 16, 2002, by agreement of the Company and the holders of such
options. See Note 13 to the Consolidated Financial Statements.

7



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ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the
Financial Statements appearing elsewhere herein. The information that follows
includes results for the fiscal years ended October 31, 2002 and 2001.

Sales and Profits. [2002 vs. 2001]Net revenues for 2002 increased by $178,252,
or approximately 6%, over prior year results. The increase was due to gains in
the domestic market, which grew at 153% while international growth declined for
the year due to economic downturns in a number of countries. The domestic
market is expected to continue grow at over 100% while the international market
is expected to recover and grow due to the potential addition of new
distributors.

Gross margins on net sales increased from 73% in 2001 to 74% in 2002. The
increase was minor and reflected improved manufacturing capacity from machinery
and gains in the domestic market that generates higher gross margins which in
turn are offset by higher sales expenses incurred.

Selling expenses for the year increased by $656,032, or 117%, from prior year
results. The increased costs incurred are attributed to payroll increases
required to maintain market parity, the hire of added sales personnel and
general increases incurred due to market development efforts initiated to
increase the domestic market penetration. These costs are expected to continue
to increase as management continues to develop the domestic market and expand
its international presence. During 2003, individuals will be added to the
domestic staff, and internationally added distributors are anticipated to be
brought on-line in Europe and South and Central America.

General and administrative expenses increased by $369,965, or 30%, over prior
year results. The increased costs incurred are a direct result of the domestic
market growth and development support, increased insurance costs (increased by
300%), increased research and development (see Note 1(K) of the Consolidated
Financial Statements herein) and professional costs incurred. Expenses are
anticipated to continue to increase as the business grows.

Income from operations decreased by $972,960, or approximately 395%, from
$246,335 in 2001 to a loss of $726,625 in 2002. The decreased results are
the result of management electing to develop the domestic market. The
development of the domestic market will continue over the ensuing years.
Management is actively attempting to penetrate the dental implant market to
achieve 10% of total market.

Interest expenses were $104,519 in 2002 compared to $123,702 in 2001,
reflecting greater borrowings at lower borrowing costs. In 2002, the Company
incurred $126,284 in other expenses compared to none in 2001. The costs
incurred reflected expenses incurred and common stock issued to third parties
for services rendered to the Company. Other gains realized consist of added
funds obtained in 2002 for the machine fire in 2001, which resulted in a
non-taxable gain of over $1million in 2001.

The Companys net loss for the year totaled $939,077, compared to net income of
$1,130,758 in the prior year. Adjusting prior years results for the
non-recurring gain, net income would have totaled $123,801. The decrease of
net income from adjusted prior year results was in line with expected results
to be achieved. The lower results realized were a direct result of the planned
domestic market development. Due to the loss incurred for 2002, the Companys
net operating loss carry-forward increased to approximately $1,269,000.

In 2002, the Company had a net loss per common share of $.14 compared to a gain
of $.19 per share in 2001 based on 6,493,904 and 6,085,358 average number of
shares outstanding, respectively. In 2002, incremental shares relating to
stock options were anti-dilutive.

Liquidity and Capital Resources.On November 26, 2001, the Company replaced its
$500,000 asset-based credit facility with a working capital line of credit of
$1,500,000 from another lender at an interest rate 1% above the Prime Rate.
This new facility is secured by substantially all of the Companys assets. The
above credit agreement contains certain affirmative, negative and financial
covenants that, among others, specify maintenance of current ratios,
maintenance of debt to tangible net worth coverage ratios, EBITA, DSCR and debt
service coverage. As of October 31, 2002, the Company was not in accordance
with one of its lenders covenants and has received a waiver through January
31, 2003. On September 23, 2002, the lender temporarily capped the working
capital line of credit at $1,250,000. (See later discussions of our new lines
of credit.)

On November 26, 2001, the Company entered into an equipment loan of $300,000
from a lender at an interest rate of 7.5% for a term of five years. The loan
was collateralized with existing equipment and repayable over the initial 12
months at interest only and equal payments over the remaining 48 months.

8



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The Companys current ratio decreased to 1.18 on October 31, 2002, from 1.91 on
October 31, 2001. During 2002, the Companys revolving loan payable increased
by $726,122 and this increase was due to the domestic market development
initiated by management. As market penetration and related sales growth are
achieved, the current ratio is expected to increase in fiscal year 2003.

The Companys cash balances decreased by $31,826 from the October 31, 2001,
level of $55,326 to $23,500 on October 31, 2002. However, these cash balances
are not indicative of the Companys true liquidity because the Company employs
a cash management system utilizing a minimum balance disbursement account
funded by the Companys credit facility at the time outstanding checks are
presented and paid. The Company funds its operations chiefly through the
collection of its trade receivables, supplemented with periodic borrowings from
its working capital line of credit. The Companys revenue growth is
anticipated to continue, particularly from increased market penetration and
distributor additions. The Company intends to fund its working capital needs
primarily from operations and utilize as necessary its increased line of
credit. Additionally, the Company is actively engaged in seeking added equity,
particularly to fund an accelerated domestic market growth.

During the year ended October 31, 2002, the Company incurred a negative cash
flow from operating activities of $1,121,333 and a net loss of $939,077 and as
of October 31, 2002 had an accumulated deficit of $816,210, positive working
capital of $388,480, and positive stockholders equity of $1,623,475. As of
that date, the Company had $23,500 in cash, $807,905 in net accounts
receivable, and $1,918,933 in inventory. The Company had accounts payable,
accrued expenses and other payables in the aggregate of $453,385, revolving
loans payable of $1,250,000, and notes and loans payable  current of $346,007
(of which $128,330 relates to debtors that are unable to be located, under the
Chapter XI bankruptcy settlement dated February 12, 1997).

On February 26, 2003, the Company accepted a commitment letter from
CommerceBank, N.A. to provide two separate line of credit facilities. Under
the first facility, CommerceBank, N.A. commits to increase its current line of
credit under the revolving loan payable to $2,000,000 from $1,250,000. This
line of credit is an asset based line of credit to finance foreign accounts
receivable and inventory destined for export. The amount available under this
line of credit is subject to a monthly borrowing base, as defined in the
agreement. EximBank US is guaranteeing 90% of the loan. Under the second
facility, CommerceBank, N.A. commits to issue a revolving line of credit in the
amount of $250,000. This line of credit is an asset based line of credit to
finance domestic accounts receivable. The amount available under this line of
credit is subject to a monthly borrowing base, as defined in the agreement.
The interest rate for both of these facilities will be the Wall Street Journal
Prime Rate plus two percent and is due monthly. The principal under these
lines of credit will be due on demand with an annual financial review date of
December 31, 2003. The collateral for these facilities will consist of a
blanket, first priority UCC-1 lien on all of the Companys assets.

In an effort to increase sales related to the Companys business, the Company
has increased its sales force throughout 2002. The increase in the sales force
has improved sales by over 51% for the fourth quarter of fiscal year 2002
compared to the first quarter of 2002 and 72% for the first quarter of fiscal
year 2003 (unaudited) compared to the first quarter of fiscal year 2002. Sales
have also increased approximately 14% for the first quarter of 2003 (unaudited)
compared to the fourth quarter of 2002. Management plans to continue its
efforts to increase sales at a comparable rate for the rest of fiscal year 2003
while maintaining the same level of selling and administrative expenses
incurred during fiscal year 2002. The increase in sales from the first quarter
of 2002 is indicative of the Company recovering from the fire that occurred
during fiscal year 2001 that disrupted operations. During fiscal year 2002,
the Company has been able to replenish inventory destroyed in the fire to a
level that has provided the Company the ability to meet its sales demands.
Since substantially all of the Companys manufacturing equipment was replaced
with new equipment that is technologically more efficient and has increased
capacity, the Company has utilized the efficiency and increased capacity for
manufacturing by increasing its sales. The Company has enough machine capacity
to double fiscal year 2002 sales. While the sales force was hired during
fiscal year 2002, the major benefits from the sales force did not begin to
materialize until the third and fourth quarters.

The Company, being a small cap, closely held, public company, has experienced
extremely large added expenditures payable to its auditing company due to the
large amount of additional information and changes they have required, to be in
compliance to the Sarbanes-Oxley Act (the Act) passed by Congress and with
the anticipated rule changes within the SEC, based on the Act. These costs,
added to additional legal fees associated with the Act, having to increase the
number of outside Board of Director members and having to have an outside Audit
Committee Chairman, have increased administrative expenditures to an outlandish
level for this size company. Management will continue its efforts to expand
sales and increase performance.

Deteriorating global economic conditions may cause prolonged declines in
investor confidence in and accessibility to capital markets. Deteriorating
global economic conditions may make it more difficult for the Company to secure
funding because,
during times of deteriorating global economic conditions, prospective lenders
and investors generally have less funds to lend or invest.

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Future financing may not be available on a timely basis, in sufficient amounts
or on terms acceptable to the Company. Future financing in the form of equity
transactions may result in dilution of equity. Any additional debt financing
may contain additional covenants.

If adequate funds are not available either through operations or financing
arrangements, the Company may be required to delay or scale back the growth of
operations and product and service development efforts. In addition, there is
no guarantee that current financing arrangements will continue indefinitely.

The Company anticipates having adequate capital and liquidity for the next 12
months. The Company had no material capital expenditure commitments at October
31, 2002.

Critical Accounting Policies.The Company believes the following are its most
critical accounting policies in that they are the most important to the
portrayal of the Companys financial condition and results and require
managements most difficult, subjective or complex judgments.

Allowance for Doubtful AccountsThe Company regularly monitors and assesses its risk of not collecting amounts
owed to it by its customers. This evaluation is based upon an analysis of
amounts currently and past due along with relevant history and facts particular
to the customer. Based upon the results of this analysis, the Company records
an allowance for uncollectible accounts for this risk. This analysis requires
the Company to make significant estimates, and changes in facts and
circumstances could result in material changes in the allowance for doubtful
accounts.

Asset Impairment
The Company reviews its long-lived assets and identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. In performing the review
for recoverability, the Company estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the asset, an impairment loss is recognized.
Otherwise, an impairment loss is not recognized. Measurement of an impairment
loss for long-lived assets and identifiable intangibles would be based on the
fair value of the asset.

Outlook for fiscal year 2003.The development of the market was resumed in 2002
after management hired a number of domestic marketing individuals. Due to
increase in staff and market growth in 2002, net income objectives in 2003 are
expected to be at a break-even and profitable thereafter. Additionally, the
introduction of the state-of-the-art Laser-Lok Implant is expected to
dramatically increase the Companys recognition, market presence and growth
potential.

Bio-Lok will bring to market new products throughout the year. New products
are expected to provide enhanced market penetration.




ITEM 7. FINANCIAL STATEMENTS

Reference is made to the Consolidated Financial Statements, the notes thereto,
and the Independent Accountants Report thereon, commencing on page F-1 of this
Report, which Consolidated Financial Statements, Notes and Report are included
herewith by their reference. Summary financial results are as follows:

BIO-LOK INTERNATIONAL INC.

|               |                             |  |             |           | 
|-------------- | --------------------------- |  | ----------- | --------- | 
|               |                             |  | October 31,
|               |                             |  | 2002       
|               |                             |  |            
|Balance Sheet: |                             |  |             |          
|               | Current assets              |  | $           | 2,510,264 | 
|               | Property and Equipment, Net |  |             | 1,233,934 | 
|               | Other assets                |  |             | 345,911   | 
|               | Total Assets                |  |             | 4,090,109 | 
|               | Current liabilities         |  |             | 2,121,784 | 
|               | Non-current liabilities     |  |             | 344,850   | 
|               | Stockholders Equity        |  |             | 1,623,475 | 

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|                  |                               |  |            |           |          |  |   |           | 
|----------------- | ----------------------------- |  | ---------- | --------- | -------- |  | - | --------- | 
|                  |                               |  | YEAR ENDED
|                  |                               |  |           
|                  |                               |  | Oct. 31,   |           | Oct. 31,
|                  |                               |  | 2002       |           | 2001    
|                  |                               |  |            |           |         
|Income Statement: |                               |  |            |           |          |  |   |          
|                  | Net Sales                     |  | $          | 2,938,908 |          |  | $ | 2,760,656 | 
|                  | Gross Profit                  |  |            | 2,166,676 |          |  |   | 2,028,002 | 
|                  | Sales Expense                 |  |            | 1,247,120 |          |  |   | 561,873   | 
|                  | General & Admin. Exp          |  |            | 1,646,181 |          |  |   | 1,219,794 | 
|                  | (Loss) Income from Operations |  |            | (726,625  | )        |  |   | 246,335   | 
|                  | Other (Exp)/Inc.              |  |            | (212,452  | )        |  |   | 884,423   | 
|                  | Net (loss) income             |  |            | (939,077  | )        |  |   | 1,130,758 | 




ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

No changes in or disagreements with accountants on accounting and financial
disclosures exist for the years ended October 31, 2002 and 2001.




PART III




ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors of Bio-Lok hold offices for either one (1) or two (2) year terms.
Terms are set each year as Directors are nominated and subsequently elected at
the Companys Annual Meeting of Shareholders, last held on May 1, 2002.

Directors and Executive Officers
The following is a list of the names and ages of all Board of Directors and
Executive Officers of the Company, their positions and offices held by each
such person, and each such persons principal occupation(s) or employment(s)
during the past five years. Each such person has been elected to serve until
the next annual election of officers of the Company scheduled for April 30,
2003.

|                            |  |                                                                                                                                                                                              
|--------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                            |  | Positions and Offices Held and Principal                                                                                                                                                     
|                            |  | Occupations or Employment During                                                                                                                                                             
|Name and Age                |  | Past Five Year                                                                                                                                                                               
|                            |  |                                                                                                                                                                                              
|Bruce L. Hollander (64)     |  | Chairman of the Board, CEO and President; with the
Company since December 1995; Director since 1995;
present term as Director expires 2003;                                                  
|                            |  |                                                                                                                                                                                              
|Ingo K. Kozak (61)          |  | Director, CFO and VP-Finance & Administration;
with the Company since February 1994; Director since
February 1995; present term as Director expires 2003;                                    
|                            |  |                                                                                                                                                                                              
|Harold Alexander, PhD. (63) |  | Director; President of Orthogen Corporation (wholly
owned subsidiary) since May 2000; Editor of the
Journal of Biomedical Materials Research; Director since
2000; present term expires 2002;
|                            |  |                                                                                                                                                                                              
|Neil H. Smith (61)          |  | Director; retired and past Co-Chairman & CFO of
Express Shade, Inc.; Director since 1996; present term
as Director expires 2003;                                                             

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|                          |  |                                                                                                                             
|------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------
|Harold Weisman, Esq. (69) |  | Director; Attorney at Law, Delray Beach, FL; Director
since 1996; present term as Director expires 2003.                    
|                          |  |                                                                                                                             
|Patricio Nilo (39)        |  | Vice President Sales and Marketing; with the Company
since May 1995; previously Director of International
Sales & Marketing.

There is no understanding or arrangement between any Director or any person or
persons pursuant to which such individual was or is to be selected as a
Director or nominee of the Company.

No event listed in Subparagraphs (1) through (4) of Subparagraph (d) of Item
401 of Regulations S-B, has occurred with respect to any present executive
officer or Director of the Company during the past five years, which event is
material to an evaluation of the ability or integrity of such Director or
officer.




ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth the annual compensation attributable to the CEO for the fiscal years 2002, 2001 and 2000:

|                      |                      |      |                     |      |        |        |         |         |  |              |     |           |  |      |              |         |       |              |                        |     |            |  |            |     |  |  |     |     |  |  |     |     | 
|--------------------- | -------------------- | ---- | ------------------- | ---- | ------ | ------ | ------- | ------- |  | ------------ | --- | --------- |  | ---- | ------------ | ------- | ----- | ------------ | ---------------------- | --- | ---------- |  | ---------- | --- |  |  | --- | --- |  |  | --- | --- | 
|                      |                      |      |                     |      |        |        |         |         |  |              |     |           |  |      |              |         |       |              | Long-Term Compensation |     |            |  |           
|                      |                      |      |                     |      |        |        |         |         |  |              |     |           |  |      |              |         |       |              |                        |     |            |  |           
|                      |                      |      | Annual Compensation |      | Awards |        | Payouts |         |  |              |    
|                      |                      |      |                     |      |        |        |         |         |  |              |    
|                      |                      |      |                     |      |        |        |         |         |  |              |     |           |  |      |              |         |       |              |                        |     |            |  | Securities |     |  |  |     |     |  |  |    
|                      |                      |      |                     |      |        |        |         |         |  |              |     |           |  |      |              |         |       |              | Restricted             |     | underlying |  |            |     |  |  |     |     | 
|                      |                      |      |                     |      |        |        |         |         |  |              |     |           |  |      | Other Annual |         | Stock |              | options/               |     | LTIP       |  | All Other 
|Name and              |                      |      |                     |      |        | Salary |         | Bonus   |  | Compensation |     | Awards(s) |  | SARs |              | Payouts |       | Compensation
|principal position(s) |                      | Year |                     | ($)  |        | ($)    |         | ($)     |  | ($)          |     | (#)       |  | ($)  |              | ($) .  
|                      |                      |      |                     |      |        |        |         |         |  |              |     |           |  |      |              |        
|Hollander, Bruce L.   |                      |      | 2002                |      |        |        | 150,000 |         |  |              | -0- |           |  |      | -0-          |         |       |              | -0-                    |     |            |  | -0-        |     |  |  | -0- |     |  |  | -0- |    
|                      | President and CEO    |      |                     | 2001 |        |        |         | 150,000 |  |              |     | 15,000    |  |      |              | -0-     |       |              |                        | -0- |            |  |            | -0- |  |  |     | -0- |  |  |     | -0- | 
|                      |                      |      | 2000                |      |        |        | 89,734  | (a)     |  |              | -0- |           |  |      | -0-          |         |       |              | -0-                    |     |            |  | 400,000    |     |  |  | -0- |     |  |  | -0- |    
|Kozak, Ingo K.        |                      |      |                     |      |        |        |         |         |  |              |     |           |  |      |              |         |       |              |                        |     |            |  |            |     |  |  |     |     |  |  |     |    
|                      | VP-Finance & Admin., |      |                     | 2002 |        |        |         | 100,000 |  |              |     | -0-       |  |      |              | -0-     |       |              |                        | -0- |            |  |            | -0- |  |  |     | -0- |  |  |     | -0- | 
|                      | CFO and Secretary    |      |                     | 2001 |        |        |         | 100,000 |  |              |     | 15,000    |  |      |              | -0-     |       |              |                        | -0- |            |  |            | -0- |  |  |     | -0- |  |  |     | -0- | 
|                      |                      |      | 2000                |      |        |        | 80,833  | (b)     |  |              | -0- |           |  |      | -0-          |         |       |              | -0-                    |     |            |  | 200,000    |     |  |  | -0- |     |  |  | -0- |    



---

|(a) |  | $60,266 amount of salary and related bonus per employment agreement was
foregone at the election of the named executive;
|--- |  | ------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | $19,167 amount of salary and related bonus per employment agreement was
foregone at the election of the named executive.

Compensation of Directors
Compensation of Directors has been limited to issuing individuals common stock
shares of Bio-Lok for services and support of the company and to cover any
out-of-pocket expenses.

Employment Contracts and Termination of Employment and Change-in-Control Arrangements
Employment contracts are detailed in the Consolidated Financial Statements
hereto under Note 10. (B) Employment Agreements.




ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

Security Ownership of Certain Beneficial Owners
The following table sets forth the number of shares of the Companys common
stock beneficially owned by any person or group who is known to the Company to
be the beneficial owner of more than five percent of any class of the Companys
voting securities:

|                                   |  |              |         |              |  |  |     | 
|---------------------------------- |  | ------------ | ------- | ------------ |  |  | --- | 
|                                   |  | Beneficial   |         | Percent of  
|Name and address                   |  | Shares owned |         | Common Stock
|                                   |  |              |         |             
|Pletscher, Bruno (Nassau, Bahamas) |  |              | 375,000 |              |  |  | 5.6 | 

12



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##### Table of Contents



Security Ownership of Management
The following table sets forth the number of shares of the Companys common
stock beneficially owned by the CEO and by all Directors and Officers of the
Company as a group on October 31, 2002, unless otherwise indicated in
footnotes. Each person and member of the group has sole voting and investment
power with respect to the shares shown:

|                                                                                |  |              |            |         |  |  |      | 
|------------------------------------------------------------------------------- |  | ------------ | ---------- | ------- |  |  | ---- | 
|                                                                                |  |              |            |         |  |  |      | 
|                                                                                |  | Beneficial   |            |         |  | 
|Name and Office                                                                 |  | Shares owned |            | Percent
|                                                                                |  |             
|Hollander, Bruce L. (Director, CEO and President)                               |  |              | 2,348,582  | (a)     |  |  | 27.9 | 
|Kozak, Ingo K. (Director, CFO and VP-Finance & Admin.)                          |  |              | 843,334    | (b)     |  |  | 10.0 | 
|Alexander, Harold (Director and President of Orthogen)                          |  |              | 462,333    | (c)     |  |  | 5.5  | 
|Smith, Neil H. (Director)                                                       |  |              | 68,000     |         |  |  | 0.8  | 
|Weisman, Harold (Director)                                                      |  |              | 60,000     |         |  |  | 0.7  | 
|Nilo, Patricio A. (VP-Sales and Marketing)                                      |  |              | 216,721    | (d)     |  |  | 2.6  | 
|All Directors and Officers of the Company                                       |  |              | 3,998,970  | (e)     |  |  | 47.5 | 
|Total Common Stock Shares outstanding at October 31, 2002                       |  |              | 6,663,152  |         |  |  |      | 
|Total Common Stock Shares, Options and Warrants
outstanding at October 31, 2002 |  |              | 8,418,152  |         |  |  |      | 
|Total Common Stock Shares authorized                                            |  |              | 20,000,000 |         |  |  |      | 
|Total Preferred Stock Shares authorized                                         |  |              | 500,000    |         |  |  |      | 



---

|(a) |  | Includes 400,000 of Options granted in 2000                                                     
|--- |  | ------------------------------------------------------------------------------------------------
|   
|(b) |  | Includes 200,000 of Options granted in 2000                                                     
|   
|(c) |  | Includes 300,000 of Options granted in 2000 as a part of the acquisition
of Orthogen Corporation
|   
|(d) |  | Includes 100,000 of Options granted in 2000                                                     
|   
|(e) |  | Includes a total of 1,000,000 of Options                                                        




ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Bio-Lok has and continually is negotiating with a number of clinicians and
individuals to provide continued consulting, collaboration, clinical services,
marketing, promotional and sales support to the Company.

The Company continually enters into distribution agreements with select
international entities for the sale of its product line.

The Company has employment agreements outstanding since 1997 with its
President, Vice President and marketing executive.
These contracts are automatically renewed annually on October 31 for five, four
and two years, respectively.

The Company, at the time of the acquisition of Orthogen Corporation, entered
into an employment agreement with its elected President and a consulting
agreement with a doctor and associate professor. These contracts expire March
2005.

No other contracts had been entered into and were outstanding as of October 31,
2002.

Management from time-to-time utilize their personal credit cards for the
purchase of goods and services. (See Note 8, Related Parties, of the
Consolidated Financial Statements attached hereto for added detail.)




ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

|            |  |                               
|----------- |  | ------------------------------
|Exhibit No. |  | Description                   
|            |  |                               
|3.1         |  | Articles of Incorporation *   
|3.2         |  | By-Laws*
Amendment to By-Laws*

13



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|   |  |                                                                                                    
|-- |  | ---------------------------------------------------------------------------------------------------
|5  |  | Opinion re legality *                                                                              
|21 |  | Subsidiaries of the Registrant included in the Consolidated Financial Statements of the Issuer are:

|                              |  |                |  |                        |  |  |  | 
|----------------------------- |  | -------------- |  | ---------------------- |  |  |  | 
|                              |  | Incorporation  |  | Organization           |  |  |  | 
|Name of entity                |  | State or Cntry |  | type                   |  | 
|                              |  |                |  |                        |  | 
|Orthogen Corporation          |  | New Jersey     |  | research & development
|Micro-Lok Mexico S.A. DE C.V. |  | Mexico DF      |  | sales & marketing     
|Micro-Lok Chile S.A.          |  | Chile          |  | sales & marketing     
|Bio-Lok Intl. Pty. Inc.      |  | Australia      |  | sales & marketing     



---

|* |  | Filed previously
|- |  | ----------------

(b)  Reports on FORM 8-K None.




ITEM 14. CONTROLS AND PROCEDURES

Controls already implemented are the appointment of an Audit Committee of the
Board of Directors, with all members of the Audit Committee being outside
individuals. The Audit Committee is responsible for the appointment,
compensation, and oversight of the work of the Companys public account
individual auditors.

The Company, with the Audit Committee, is establishing procedures for (1) the
receipt, retention, and treatment of complaints received regarding accounting,
internal accounting controls, or auditing matters; and (2) the confidential,
anonymous submission by employees of concerns regarding questionable accounting
or auditing matters.

Management Assessment of Internal Controls
It is managements responsibility to establish and maintain an adequate control
structure and procedures for financial reporting. Management believes that its
internal control structures and procedures for financial reporting as of the
end of the most recent fiscal year of the Company are sufficient to meet all of
the obligations of the financial reporting process required of its by the
Security Exchange Act of 1934.

Disclosure Controls and Procedures
The Company maintains controls and procedures designed to ensure that it is
able to collect the information it is required to disclose in the reports it
files with the SEC, and to process, summarize and disclose this information
within the time periods specified in the rules of the SEC. The Companys Chief
Executive and Chief Financial Officers are responsible for establishing and
maintaining these procedures, and, as required by the rules of the SEC,
evaluate their effectiveness. Based on their evaluation of the Companys
disclosure controls and procedures, which took place as of the date within 90
days of the filing date of this Report, the Chief Executive and Chief Financial
Officers believe that these procedures are effective to ensure that the Company
is able to collect, process and disclose the information it is required to
disclose in the reports it files with the SEC within the required time periods.

Internal Controls
The Company maintains a system of internal controls designed to provide
reasonable assurance that transactions are executed in accordance with
managements general or specific authorization and that transactions are
recorded as necessary (1) to permit preparation of financial statements in
conformity with generally accepted accounting principles, and (2) to maintain
accountability for assets; access to assets is permitted only in accordance
with managements general or specific authorization; and the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any difference.

Since the date of the most recent evaluation of the Companys internal controls
by the Chief Executive and Chief Financial Officers, there have been no
significant changes in such controls or in other factors that could have
significantly affected those controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.

14



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##### Table of Contents



Code of Ethics for Senior Financial Officers
The code of ethics established by the Company for its Senior Financial
Officers is required to be signed by each, is maintained on file by the
Company, and incorporates the following:



| |  | The Financial Officer shall maintain a code of ethics which reasonably
promotes (1) honest and ethical
conduct, including the ethical handling of actual or apparent conflicts of
interest between personal and
professional relationships; (2) fully, fair, accurate, timely, and
understandable disclosure in the periodic
reports required to be filed by the issuer; and, (3) compliance with
applicable governmental rules and regulations.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |                                           |  |                              
|----------------------- |  | ----------------------------------------- |  | -----------------------------
|                        |  | BIO-LOK INTERNATIONAL INC.   (Registrant)
|                        |  |                                           |  |                              
|Date: February 26, 2003 |  | By                                        |  | /s/ Bruce L. Hollander       
|                        |  |                                           |  |                              
|                        |  |                                           |  | Bruce L. Hollander, President



| |  | Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the date indicated per
the final audit report issued by accountants.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        |  |                                         |  |                        
|--------------------------------------- |  | --------------------------------------- |  | -----------------------
|Signature                               |  | Title                                   |  |                        
|                                        |  |                                         |  |                        
|/s/ Bruce L. HollanderBruce L Hollander |  | President, CEO and Director             |  | Date: February 26, 2003
|                                       
|/s/ Ingo K. KozakIngo K. Kozak          |  | VP  Finance & Admin., CFO and Director |  | Date: February 26, 2003

15



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##### Table of Contents



CERTIFICATIONS

I, Bruce L. Hollander, the President and CEO, certify that:

1.     I have reviewed this annual report on Form 10-KSB of Bio-Lok
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, nor 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 quarterly, fairly present in
all material respects the financial condition, results of operations
and cash flow of the registrant as of, and for, the periods presented
in this annual report;

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

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

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

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

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

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

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

6.     The registrants other certifying officer and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regards to significant
deficiencies and material weaknesses.

|                        |  |                                                             
|----------------------- |  | ------------------------------------------------------------
|Date: February 26, 2003 |  | /s/ Bruce L. Hollander , President & CEO
Signature and Title

16



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##### Table of Contents



CERTIFICATIONS

I, Ingo K. Kozak, the Vice President Finance & Administration and CFO,
certify that:

1.     I have reviewed this annual report on Form 10-KSB of Bio-Lok
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, nor 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 quarterly, fairly present in
all material respects the financial condition, results of operations
and cash flow of the registrant as of, and for, the periods presented
in this annual report;

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

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

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

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

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

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

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

6.     The registrants other certifying officer and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regards to significant
deficiencies and material weaknesses.

|                        |  |                                                             
|----------------------- |  | ------------------------------------------------------------
|Date: February 26, 2003 |  | /s/ Ingo K. Kozak , VP  Finance and CFO
Signature and Title

17



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##### Table of Contents



BIO-LOK INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002 AND 2001

CONTENTS

|       |  |                                                                                                        
|------ |  | -------------------------------------------------------------------------------------------------------
|F-1    |  | INDEPENDENT AUDITORS REPORT                                                                           
|F-2    |  | CONSOLIDATED BALANCE SHEET AS OF OCTOBER 31, 2002                                                      
|F-3    |  | CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS
ENDED OCTOBER 31, 2002 AND 2001                    
|F-4    |  | CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS
EQUITY FOR THE YEARS ENDED OCTOBER 31, 2002 AND 2001
|F-56  |  | CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED OCTOBER 31, 2002 AND 2001                    
|F-726 |  | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OFOCTOBER 31, 2002                                       





---



##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Board of Directors of
Bio-Lok International, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Bio-Lok
International, Inc. and Subsidiaries (the Company) as of October 31, 2002 and
the related consolidated statements of operations, changes in stockholders
equity and cash flows for the years ended October 31, 2002 and 2001. These
consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the financial position of Bio-Lok
International, Inc. and Subsidiaries as of October 31, 2002, and the results of
their operations and their cash flows for the years ended October 31, 2002 and
2001, in conformity with accounting principles generally accepted in the United
States of America.

WEINBERG & COMPANY, P.A.

/S/ WEINBERG & COMPANY, P.A.
Boca Raton, Florida
February 26, 2003





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##### Table of Contents






BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF OCTOBER 31, 2002

|                                                                                        |                                                                                                     |                             |           |           |           | 
|--------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | --------------------------- | --------- | --------- | --------- | 
|                                                                                        |                                                                                                     |                             |           | 2002     
|                                                                                        |                                                                                                     |                             |           |          
|ASSETS                                                                                 
|CURRENT ASSETS                                                                          |                                                                                                     |                             |           |          
|                                                                                        | Cash                                                                                                |                             | $         | 23,500    |          
|                                                                                        | Accounts receivable, net                                                                            |                             |           | 767,450   |          
|                                                                                        | Inventory                                                                                           |                             |           | 1,677,839 |          
|                                                                                        | Prepaid expenses and other current assets                                                           |                             |           | 41,475    |          
|                                                                                        |                                                                                                     |                             |           |          
|                                                                                        |                                                                                                     | Total Current Assets        |           |           | 2,510,264 | 
|                                                                                        |                                                                                                     |                             |           |          
|PROPERTY AND EQUIPMENT  NET                                                            |                                                                                                     |                             | 1,233,934 |          
|                                                                                        |                                                                                                     |                             |           |          
|OTHER ASSETS                                                                            |                                                                                                     |                             |           |          
|                                                                                        | Patents                                                                                             |                             |           | 45,960    |          
|                                                                                        | Accounts receivable                                                                                 |                             |           | 40,455    |          
|                                                                                        | Inventory                                                                                           |                             |           | 241,094   |          
|                                                                                        | Deposits and other assets                                                                           |                             |           | 18,402    |          
|                                                                                        |                                                                                                     |                             |           |          
|                                                                                        |                                                                                                     | Total Other Assets          |           |           | 345,911   | 
|                                                                                        |                                                                                                     |                             |           |          
|TOTAL ASSETS                                                                            |                                                                                                     | $                           | 4,090,109 |          
|                                                                                        |                                                                                                     |                             |           |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                   
|CURRENT LIABILITIES                                                                     |                                                                                                     |                             |           |          
|                                                                                        | Revolving loans payable                                                                             |                             | $         | 1,250,000 |          
|                                                                                        | Notes and loans payable  current portion                                                           |                             |           | 346,007   |          
|                                                                                        | Capital lease obligations  current portion                                                         |                             |           | 62,199    |          
|                                                                                        | Accounts payable                                                                                    |                             |           | 214,966   |          
|                                                                                        | Accrued expenses and other payable                                                                  |                             |           | 238,419   |          
|                                                                                        | Due to stockholders                                                                                 |                             |           | 10,193    |          
|                                                                                        |                                                                                                     |                             |           |          
|                                                                                        |                                                                                                     | Total Current Liabilities   |           |           | 2,121,784 | 
|                                                                                        |                                                                                                     |                             |           |          
|LONG-TERM LIABILITIES                                                                   |                                                                                                     |                             |           |          
|                                                                                        | Notes and loans payable  non-current                                                               |                             |           | 231,250   |          
|                                                                                        | Capital lease obligations  non-current                                                             |                             |           | 113,600   |          
|                                                                                        |                                                                                                     |                             |           |          
|                                                                                        |                                                                                                     | Total Long-Term Liabilities |           |           | 344,850   | 
|                                                                                        |                                                                                                     |                             |           |          
|COMMITMENTS AND CONTINGENCIES (NOTES 6, 7 AND 10)                                       |                                                                                                     |                             |           |          
|                                                                                       
|STOCKHOLDERS EQUITY                                                                    |                                                                                                     |                             |           |          
|Preferred stock, $.75 par value, 500,000 shares authorized,
none issued and outstanding |                                                                                                     |                             |          |          
|                                                                                        | Common stock, $.01 par value, 20,000,000 shares authorized,
6,663,152 shares issued and outstanding |                             |           | 66,632    |          
|                                                                                        | Additional paid in capital                                                                          |                             |           | 2,380,330 |          
|                                                                                        | Accumulated deficit                                                                                 |                             |           | (816,210  | )        
|                                                                                        | Treasury stock (17,327 common shares), at cost                                                      |                             |           | (7,277    | )        
|                                                                                        |                                                                                                     |                             |           |          
|                                                                                        |                                                                                                     | Total Stockholders Equity  |           |           | 1,623,475 | 
|                                                                                        |                                                                                                     |                             |           |          
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                              |                                                                                                     | $                           | 4,090,109 |          
|                                                                                        |                                                                                                     |                             |           |          

See accompanying notes to
consolidated financial statements.

F - 2



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##### Table of Contents






BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 2002 AND 2001

|                                                                 |                                                  |                              |           |           |           |      |           |           |           | 
|---------------------------------------------------------------- | ------------------------------------------------ | ---------------------------- | --------- | --------- | --------- | ---- | --------- | --------- | --------- | 
|                                                                 |                                                  |                              |           | 2002      |           | 2001
|                                                                 |                                                  |                              |           |           |           |     
|SALES  NET                                                      |                                                  | $                            | 2,938,908 |           |           | $    | 2,760,656 |          
|COST OF SALES                                                    |                                                  |                              | 772,232   |           |           |      | 732,654   |          
|                                                                 |                                                  |                              |           |           |           |      |           |          
|GROSS PROFIT                                                     |                                                  |                              | 2,166,676 |           |           |      | 2,028,002 |          
|                                                                 |                                                  |                              |           |           |           |      |           |          
|OPERATING EXPENSES                                               |                                                  |                              |           |           |           |      |           |          
|                                                                 | Selling expenses                                 |                              |           | 1,247,120 |           |      |           | 561,873   |          
|                                                                 | General and administrative expenses              |                              |           | 1,646,181 |           |      |           | 1,219,794 |          
|                                                                 |                                                  |                              |           |           |           |      |           |          
|                                                                 |                                                  | Total Operating Expenses     |           |           | 2,893,301 |      |           |           | 1,781,667 | 
|                                                                 |                                                  |                              |           |           |           |      |           |          
|(LOSS) INCOME FROM OPERATIONS                                    |                                                  |                              | (726,625  | )         |           |      | 246,335   |          
|                                                                 |                                                  |                              |           |           |           |      |           |          
|OTHER (EXPENSE) INCOME                                           |                                                  |                              |           |           |           |      |           |          
|                                                                 | Other income                                     |                              |           |          |           |      |           | 1,168     |          
|                                                                 | Interest expense                                 |                              |           | (104,519  | )         |      |           | (123,702  | )        
|                                                                 | Other expense                                    |                              |           | (126,284  | )         |      |           |          |          
|                                                                 | Gain from involuntary conversion of fixed assets |                              |           | 18,351    |           |      |           | 1,006,957 |          
|                                                                 |                                                  |                              |           |           |           |      |           |          
|                                                                 |                                                  | Total Other (Expense) Income |           |           | (212,452  | )    |           |           | 884,423   | 
|                                                                 |                                                  |                              |           |           |           |      |           |          
|NET (LOSS) INCOME                                                |                                                  | $                            | (939,077  | )         |           | $    | 1,130,758 |          
|                                                                 |                                                  |                              |           |           |           |      |           |          
|Net (loss) income per common share:                              |                                                  |                              |           |           |           |      |           |          
|                                                                 | Basic                                            |                              | $         | (.14      | )         |      | $         | .19       |          
|                                                                 |                                                  |                              |           |           |           |      |           |          
|                                                                 | Diluted                                          |                              | $         | (.14      | )         |      | $         | .16       |          
|                                                                 |                                                  |                              |           |           |           |      |           |          
|Weighted average number of shares outstanding
during the period: |                                                  |                              |           |           |           |      |           |          
|                                                                 | Basic                                            |                              |           | 6,493,904 |           |      |           | 6,085,358 |          
|                                                                 |                                                  |                              |           |           |           |      |           |          
|                                                                 | Diluted                                          |                              |           | 6,493,904 |           |      |           | 6,906,358 |          
|                                                                 |                                                  |                              |           |           |           |      |           |          

See accompanying notes to
consolidated financial statements.

F - 3



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##### Table of Contents






BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE YEARS ENDED OCTOBER 31, 2002 AND 2001

|                                                 |                    |  |                 |   |              |   |         |   |              |  |           |        |          |   |        |     |       |   |            |        |          |   |            |   |  |   |        |   |  |   |           |        | 
|------------------------------------------------ | ------------------ |  | --------------- | - | ------------ | - | ------- | - | ------------ |  | --------- | ------ | -------- | - | ------ | --- | ----- | - | ---------- | ------ | -------- | - | ---------- | - |  | - | ------ | - |  | - | --------- | ------ | 
|                                                 |                    |  |                 |   |              |   |         |   |              |  |           |        |          |   |        |     |       |   |            |        |          |   | Retained   |   |  |   |        |   |  |   |          
|                                                 |                    |  |                 |   |              |   |         |   |              |  |           |        |          |   |        |     |       |   | Additional |        | Earnings |   |            |   |  |   |        |   | 
|                                                 |                    |  | Preferred Stock |   | Common Stock |   | Paid-In |   | (Accumulated |  | Treasury  |        |          |   |       
|                                                 |                    |  | Stock           |   | Amount       |   | Stock   |   | Amount       |  | Capital   |        | Deficit) |   | Stock  |     | Total
|                                                 |                    |  |                 |   |              |   |         |   |              |  |           |        |          |   |        |     |      
|Balance, October 31, 2000                        |                    |  |                |   |              | $ |        |   |              |  | 6,085,358 |        |          | $ | 60,854 |     |       | $ | 2,221,586  |        |          | $ | (1,007,891 | ) |  | $ |       |   |  | $ | 1,274,549 |       
|Net income, 2001                                 |                    |  |                |   |              |   |        |   |              |  |          |        |          |   |       |     |       |   |           |        |          |   | 1,130,758  |   |  |   |       |   |  |   | 1,130,758 |       
|                                                 |                    |  |                 |   |              |   |         |   |              |  |           |        |          |   |        |     |       |   |            |        |          |   |            |   |  |   |        |   |  |   |           |       
|Balance, October 31, 2001                        |                    |  |                |   |              |   |        |   |              |  | 6,085,358 |        |          |   | 60,854 |     |       |   | 2,221,586  |        |          |   | 122,867    |   |  |   |       |   |  |   | 2,405,307 |       
|Issuance of common stock for
services            |                    |  |                |   |              |   |        |   |              |  | 381,000   |        |          |   | 3,810  |     |       |   | 66,990     |        |          |   |           |   |  |   |       |   |  |   | 70,800    |       
|Issuance
of common stock
  401(k) Plan 2000     |                    |  |                |   |              |   |        |   |              |  | 12,541    |        |          |   | 126    |     |       |   | 9,280      |        |          |   |           |   |  |   |       |   |  |   | 9,406     |       
|                                                 |  401(k) Plan 2001 |  |                 |  |              |   |         |  |              |  |           | 36,420 |          |   |        | 364 |       |   |            | 33,871 |          |   |            |  |  |   |        |  |  |   |           | 34,235 | 
|Issuance of common stock for
sign-on bonuses     |                    |  |                |   |              |   |        |   |              |  | 117,500   |        |          |   | 1,175  |     |       |   | 22,009     |        |          |   |           |   |  |   |       |   |  |   | 23,184    |       
|Issuance of common stock to an
employee as bonus |                    |  |                |   |              |   |        |   |              |  | 30,333    |        |          |   | 303    |     |       |   | 9,697      |        |          |   |           |   |  |   |       |   |  |   | 10,000    |       
|Treasury stock acquired                          |                    |  |                |   |              |   |        |   |              |  |          |        |          |   |       |     |       |   |           |        |          |   |           |   |  |   | (7,277 | ) |  |   | (7,277    | )     
|Stock options issued for services                |                    |  |                |   |              |   |        |   |              |  |          |        |          |   |       |     |       |   | 16,897     |        |          |   |           |   |  |   |       |   |  |   | 16,897    |       
|Net loss, 2002                                   |                    |  |                |   |              |   |        |   |              |  |          |        |          |   |       |     |       |   |           |        |          |   | (939,077   | ) |  |   |       |   |  |   | (939,077  | )     
|                                                 |                    |  |                 |   |              |   |         |   |              |  |           |        |          |   |        |     |       |   |            |        |          |   |            |   |  |   |        |   |  |   |           |       
|BALANCE, OCTOBER 31, 2002                        |                    |  |                |   |              | $ |        |   |              |  | 6,663,152 |        |          | $ | 66,632 |     |       | $ | 2,380,330  |        |          | $ | (816,210   | ) |  | $ | (7,277 | ) |  | $ | 1,623,475 |       
|                                                 |                    |  |                 |   |              |   |         |   |              |  |           |        |          |   |        |     |       |   |            |        |          |   |            |   |  |   |        |   |  |   |           |       

See accompanying notes to
consolidated financial statements.

F - 4



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##### Table of Contents






BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 2002 AND 2001

|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |            |            |          |  
|------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | -------- | -------- | ---------- | ------- | ---------- | ---------- | -------- | -
|                                                  |                                                                  |                                                     |                                                     |          | 2002     |            | 2001   
|                                                  |                                                                  |                                                     |                                                     |          |          |            |        
|CASH FLOWS FROM OPERATING ACTIVITIES:             |                                                                  |                                                     |                                                     |          |          |            |         |           
|                                                  | Net (Loss) Income                                                |                                                     | $                                                   | (939,077 | )        |            | $       | 1,130,758  |           
|                                                  | Adjustments to reconcile net (loss) income to net cash
(used in) |                                                     |                                                     |          |          |            |         |            |           
|                                                  | provided by operating activities:                                |                                                     |                                                     |          |          |            |         |            |           
|                                                  |                                                                  | Depreciation and amortization                       |                                                     |          | 150,903  |            |         |            | 107,166    |         
|                                                  |                                                                  | Provision for doubtful accounts  net of recoveries |                                                     |          | 13,168   |            |         |            | (51,433    | )       
|                                                  |                                                                  | Issuance of common stock for services               |                                                     |          | 121,025  |            |         |            |           |         
|                                                  |                                                                  | Issuance of stock options for services              |                                                     |          | 16,897   |            |         |            |           |         
|                                                  |                                                                  | Gain from involuntary conversion                    |                                                     |          | (18,351  | )          |         |            | (1,006,957 | )       
|                                                  | Changes in operating assets and liabilities:                     |                                                     |                                                     |          |          |            |         |            |           
|                                                  |                                                                  | Accounts receivable, net                            |                                                     |          | 4,970    |            |         |            | (132,147   | )       
|                                                  |                                                                  | Inventory                                           |                                                     |          | (594,000 | )          |         |            | (23,668    | )       
|                                                  |                                                                  | Prepaid expenses and other current assets           |                                                     |          | 53,315   |            |         |            | (52,145    | )       
|                                                  |                                                                  | Deposits and other assets                           |                                                     |          | (1,913   | )          |         |            | (4,316     | )       
|                                                  |                                                                  | Accounts payable and accrued expenses               |                                                     |          | 101,846  |            |         |            | 308,175    |         
|                                                  |                                                                  | Due to stockholders                                 |                                                     |          | (30,116  | )          |         |            | 28,934     |         
|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |           
|                                                  |                                                                  |                                                     | Net Cash (Used In) Provided By Operating Activities |          |          | (1,121,333 | )       |            |            | 304,367  |  
|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |           
|CASH FLOWS FROM INVESTING ACTIVITIES:             |                                                                  |                                                     |                                                     |          |          |            |         |           
|                                                  | Purchases of property and equipment                              |                                                     |                                                     | (118,812 | )        |            |         | (1,202,061 | )         
|                                                  | Proceeds received from insurance settlement                      |                                                     |                                                     | 356,793  |          |            |         | 977,628    |           
|                                                  | Proceeds used to acquire patents                                 |                                                     |                                                     | (47,306  | )        |            |         |           |           
|                                                  | Increase in other assets                                         |                                                     |                                                     |         |          |            |         | 4,733      |           
|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |           
|                                                  |                                                                  |                                                     | Net Cash Provided by (Used in) Investing Activities |          |          | 190,675    |         |            |            | (219,700 | )
|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |           
|CASH FLOWS FROM FINANCING ACTIVITIES:             |                                                                  |                                                     |                                                     |          |          |            |         |           
|                                                  | Payment of capital lease obligations                             |                                                     |                                                     | (59,329  | )        |            |         | (52,541    | )         
|                                                  | Payment of notes and loans payable                               |                                                     |                                                     | (67,961  | )        |            |         | (160,465   | )         
|                                                  | Proceeds from notes and loans payable                            |                                                     |                                                     | 300,000  |          |            |         | 72,743     |           
|                                                  | Proceeds from revolving loans payable, net                       |                                                     |                                                     | 726,122  |          |            |         | 47,898     |           
|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |           
|                                                  |                                                                  |                                                     | Net Cash Provided by (Used in) Financing Activities |          |          | 898,832    |         |            |            | (92,365  | )
|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |           
|NET DECREASE IN CASH                              |                                                                  |                                                     | (31,826                                             | )        |          |            | (7,698  | )         
|CASH  BEGINNING OF YEAR                          |                                                                  |                                                     | 55,326                                              |          |          |            | 63,024  |           
|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |           
|CASH  END OF YEAR                                |                                                                  | $                                                   | 23,500                                              |          |          | $          | 55,326  |           
|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |                                                                  |                                                     |                                                     |          |          |            |         |           
|Cash paid during the year for interest            |                                                                  | $                                                   | 104,519                                             |          |          | $          | 123,701 |           
|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |           
|Cash paid during the year for income taxes        |                                                                  | $                                                   |                                                    |          |          | $          |        |           
|                                                  |                                                                  |                                                     |                                                     |          |          |            |         |           

See accompanying notes to
consolidated financial statements.

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##### Table of Contents






BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 2002 AND 2001

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

During 2002, funds of $356,793 were received from an insurance company for
assets destroyed in a fire. For 2001, $338,442 was included as a receivable
due in the calculation of the gain on involuntary conversion of assets
destroyed. Accordingly, an additional gain of $18,351 was recognized as other
income in fiscal 2002 for the fire that occurred in fiscal 2001.

During 2002, 17,327 treasury stock shares were obtained in exchange for $7,277
of accounts receivable owed from a customer that was also a stockholder.

At October 31, 2001, the Company had accrued $26,600 for a matching
contribution to its 401(k) plan. During 2002, the Company settled this accrual
by issuing approximately 29,800 shares of its common stock to the plan.

During 2001, the Company capitalized an aggregate of $99,200 of leased
equipment with a corresponding increase in capital lease payable.

See accompanying notes to
consolidated financial statements.

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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



NOTE 1


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A)  Organization and Description of Business Bio-Lok International, Inc. (Bio-Lok) (the Company) manufactures and
distributes the Bio-Lok Precision Dental Implant System. The Company
holds several patents and its products are sold internationally via
distributors and domestically direct to clinicians and institutions. The
Companys products are subject to various United States and international
regulatory laws that restrict their sale to licensed medical
practitioners in the United States and authorized importers of products
to the European Economic Community, respectively. The Company guarantees
and warrants its products, subject to certain restrictions and
requirements. As a result of minimal returns, the Company does not
maintain any reserve for product warranties. The Company manufactures
its products in a Federal Drug Administration registered facility, and is
ISO 9001 and Annex II Certified. (B)  Principles of Consolidation The consolidated financial statements include the accounts of the
Company, its majority owned subsidiaries, and Micro-Lok Chile, S.A.,
which is 51% owned. All significant intercompany balances and
transactions have been eliminated in consolidation. Foreign currency
translation gains or losses arising from the consolidation are not
recorded as they are deemed to be immaterial to the financial statements
as a whole since the subsidiaries have minimal activities. (C)  Use of Estimates In preparing financial statements in conformity with accounting
principles generally accepted in the United States of America, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements and revenues and
expenses during the reported period. Actual results could differ from
those estimates. (D)  Cash Cash includes cash on deposit at financial institutions. (E)  Reclassification Certain amounts from prior periods have been reclassified to conform to
the current year presentation.




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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002





(F)  Inventory Inventory is stated at the lower of cost or market using the first-in
first-out method. Inventory, which is not expected to be sold in one
year, is classified as long term. Finished goods inventory consists of a wide variety of products for sale
to satisfy a market that requires specific types and sizes of products
for specialized surgical applications and immediate order fulfillment. (G)  Property and Equipment Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets from five to twelve years.
Leasehold improvements are amortized on a straight-line basis over the
lesser of the remaining useful life of the asset or the remaining term of
the lease. Expenditures for maintenance and repairs are charged to
expense as incurred. In July 2001, a majority of the Companys
manufacturing equipment was destroyed in a fire for which the Company was
insured for replacement value (See Note 16). (H)  Patents The Company accounts for product and process patents by capitalizing the
costs associated with registration of the patent and other unrecovered
costs of a successful legal suit. Patents are amortized over the lesser
of 20 years or the estimated useful life of the patented product or
process. (I)  Advertising Expense Costs incurred for producing and communicating advertising of the Company
are charged to operations as incurred. Advertising expenses, including
promotional expenses, for the year ended October 31, 2002 and 2001 was
$101,868 and $81,814, respectively. (J)  Impairment of Long-Lived Assets In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of (SFAS 121), long-lived assets and certain
identifiable intangible assets held and used by the Company are reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Determination of
recoverability is based on an estimate of undiscounted future cash flows
resulting from the use of the asset and its eventual disposition.
Measurement of an impairment loss for long-lived assets is based on the
fair value of the asset. Long-lived assets to be disposed of are reported
at the lower of carrying amount or fair value less costs to sell. (See
Recent Accounting Pronouncements (S) SFAS 121 will be replaced by SFAS
144 effective for the fiscal year beginning after December 15, 2001.)




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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002





(K)  Research and Development Costs Expenditures relating to the development of new products and processes,
including significant improvements to existing products, are expensed as
incurred. Research and development expenses were $358,557 and $244,950
in fiscal years 2002 and 2001, respectively. (L)  Income Taxes The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, (SFAS 109). Under SFAS 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
SFAS 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date. (M)  Stock Options and Warrants In accordance with Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, (SFAS 123), the Company has
elected to account for stock options issued to employees under Accounting
Principles Board Opinion No. 25, (APB 25), and related interpretations.
The Company accounts for stock options issued to consultants and for
other services in accordance with SFAS 123. (N)  Treasury Stock Treasury stock is accounted for by the cost method. Issuance of treasury
shares is accounted for on a first-in, first-out basis. Differences
between the cost of treasury shares and the re-issuance proceeds are
charged to additional paid-in capital, if reissued. During the year
ended October 31, 2002, the Company acquired 17,327 shares of its common
stock in exchange for satisfaction of $7,277 in accounts receivable. No
gain or loss was recognized. No treasury shares have been reissued as of
October 31, 2002. (O)  Revenue Recognition The Company recognizes revenues when goods are shipped.




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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002





(P)  Per Share Data Basic net income (loss) per common share is computed based on the
weighted average common shares outstanding during the year as defined by
Statement of Financial Accounting Standards No. 128, Earnings Per
Share, (SFAS 128). Diluted net income per common share is computed
based on the assumed exercise of stock options and warrants, if dilutive. The following represents reconciliation from basic to diluted earnings
per share: 2002
    
    2001Numerator:Income (loss) to common shareholders
    
    $
    (939,077
    )
    
    $
    1,130,758Denominator:Weighted average common shares outstanding
    
    
    6,493,904
    
    
    
    6,085,358Assumed exercise of stock options (a)
    
    
    
    
    
    
    666,000Assumed exercise of stock warrants (b)
    
    
    
    
    
    
    155,000Diluted weighted average common shares
outstanding
    
    
    6,493,904
    
    
    
    6,906,358Basic earnings (loss) per common share
    
    $
    (.14
    )
    
    $
    .19Diluted earnings (loss) per common share
    
    $
    (.14
    )
    
    $
    .16  (a)
    
    Options to purchase 1,705,000 and 2,611,000 shares of common
stock at prices between $.05 and $3.00 per share were outstanding at
October 31, 2002 and 2001, respectively, but were not included in
the computation of diluted loss per share because they are
anti-dilutive.(b)
    
    Warrants to purchase 20,000 shares of common stock at a price
of $.10 per share were outstanding at October 31, 2002, but were not
included in the computation of diluted loss per share because they
are anti-dilutive. (Q)  Fair Value of Financial Instruments Statement of Financial Accounting Standards No. 107, Disclosures about
Fair Value of Financial Instruments, (SFAS 107), requires disclosures
of information about the fair value of certain financial instruments for
which it is practicable to estimate that value. For purposes of this
disclosure, the fair value of a financial instrument is the amount at
which the instrument could be exchanged in a current transaction between
willing parties other than in a forced sale or liquidation.




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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002





The carrying amounts of the Companys financial instruments, including
accounts receivable, accounts payable and accrued liabilities, and notes
and loans payable approximates fair value due to the relatively short
period to maturity for these instruments. (R)  Segment Accounting Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information, (SFAS 131),
requires that a public business enterprise report a measure of segment
profit or loss, certain specific revenue and expense items, and segment
assets. It requires reconciliations of total segment revenues, total
segment profit or loss, total segment assets, and other amounts disclosed
for segments to corresponding amounts in the enterprises general-purpose
financial statements. It requires that all public business enterprises
report information about the revenues derived from the enterprises
products or services (or groups of similar products and services), about
the countries in which the enterprise earns revenues and holds assets,
and about major customers regardless of whether that information is used
in making operating decisions. However, this Statement does not require
an enterprise to report information that is not prepared for internal use
if reporting it would be impracticable. (See Note 15 for the Companys
percentage of sales to various geographical areas.) The Company has only one product line consisting of its Bio-Lok
Precision Dental Implant System, which is sold both domestically and
internationally. It is practical to report by geographic area net sales
only, which has been included within this report. The Company does not
allocate assets and expenses between segments because assets and expenses
are used in more than one segment and any allocation would be
impractical. (S)  Recent Accounting Pronouncements In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS 142), which supercedes APB Opinion 17 and
related interpretations. SFAS No. 142 establishes new rules on
accounting for the acquisition of intangible assets acquired in a
business combination and the manner in which goodwill and all other
intangibles should be accounted for subsequent to their initial
recognition in a business combination accounted for under SFAS No. 141.
Under SFAS No. 142, intangible assets should be recorded at fair value.
Intangible assets with finite useful lives should be amortized over such
period and those with indefinite lives should not be amortized. All
intangible assets being amortized as well as those that are not, are both
subject to review for potential impairment under SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of. SFAS No. 142 also requires that goodwill
arising in a business combination should not be amortized, but is subject
to impairment testing at the reporting unit level to which the goodwill
was assigned at the date of the business combination. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001 and must be
applied as of the beginning of such year to all goodwill




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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002





and other intangible assets that have already been recorded in the
balance sheet as of the first day in which SFAS No. 142 is initially
applied, regardless of when such assets were acquired. Goodwill acquired
in a business combination whose acquisition date is on or after July 1,
2001, should not be amortized, but should be reviewed for impairment
pursuant to SFAS No. 121, even though SFAS No. 142 has not yet been
adopted. In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 establishes standards for the
initial measurement and subsequent accounting for obligations associated
with the sale, abandonment, or other type of disposal of long-lived
tangible assets arising from the acquisition, construction, or
development and/or normal operation of such assets. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002, with earlier
application encouraged. In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets and supercedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of. The provisions of the statement are effective for financial
statements issued for fiscal years beginning after December 15, 2001. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections. SFAS No. 145 rescinds the provisions of SFAS No.
4, which requires companies to classify certain gains and losses from
debt extinguishments as extraordinary items, eliminates the provisions of
SFAS No. 44 regarding transition to the Motor Carrier Act of 1980 and
amends the provisions of SFAS No. 13 to require that certain lease
modifications be treated as sale leaseback transactions. The provisions
of SFAS No. 145 related to classification of debt extinguishments are
effective for fiscal years beginning after May 15, 2002, with earlier
application encouraged. In July 2002, the FASB issued SFAS No. 146, Accounting for Restructuring
Costs. SFAS No. 146 applies to costs associated with an exit activity
(including restructuring) or with a disposal of long-lived assets. Those
activities can include eliminating or reducing product lines, terminating
employees and contracts and relocating plant facilities or personnel.
Under SFAS No. 146, the Company will record a liability for a cost
associated with an exit or disposal activity when that liability is
incurred and can be measured at fair value. SFAS No. 146 will require
the Company to disclose information about its exit and disposal
activities, the related costs, and changes in those costs in the notes to
the interim and annual financial statements that include the period in
which an exit activity is initiated and in any subsequent period until
the activity is completed. SFAS No. 146 is effective prospectively for
exit or disposal activities initiated after December 31, 2002, with
earlier adoption encouraged. Under SFAS No. 146, a company cannot
restate its previously issued financial statements and the new statement
grandfathers the accounting for liabilities that a company had previously
recorded under Emerging Issues Task Force Issue 94-3.




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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



| |  | In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure  an amendment of FASB
Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for
Stock Based Compensation and provides alternative methods for accounting
for a change by registrants to the fair value method of accounting for
stock-based compensation. Additionally, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require disclosure in the
significant accounting policy footnote of both annual and interim
financial statements of the method of accounting for stock
based-compensation and the related pro-forma disclosures when the
intrinsic value method continues to be used. The statement is effective
for fiscal years beginning after December 15, 2002, and disclosures are
effective for the first fiscal quarter beginning after December 15, 2002.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Management does not expect the impact from these statements
pronouncements to have a material impact on the Companys consolidated
financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

NOTE 2 ACCOUNTS RECEIVABLE



| |  | Accounts receivable as of October 31, 2002:
| |  | -------------------------------------------

|                                      |  |   |         | 
|------------------------------------- |  | - | ------- | 
|Accounts receivable, gross            |  | $ | 874,707 | 
|Less: Allowance for doubtful accounts |  |   | 66,802  | 
|                                      |  |   |         | 
|Accounts receivable, net              |  |   | 807,905 | 
|Less: Current portion                 |  |   | 767,450 | 
|                                      |  |   |         | 
|Accounts receivable, long-term        |  | $ | 40,455  | 
|                                      |  |   |         | 



| |  | Accounts receivable not expected to be collected within one year is
classified as long-term. The long-term account receivable is the result
of the devaluation of another countrys currency, which the Company
termed over an extended period and continued to market and sell into the
country on a current basis.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company maintains an allowance for doubtful accounts based on
managements analysis of historical customer collections and risk (See
Note 14).                                                                                                                                                                  

NOTE 3 INVENTORY



| |  | Inventory consisted of the following as of October 31, 2002:
| |  | ------------------------------------------------------------

|                                        |  |   |           | 
|--------------------------------------- |  | - | --------- | 
|Raw materials                           |  | $ | 19,119    | 
|Work in process                         |  |   | 459,277   | 
|Finished goods                          |  |   | 1,440,537 | 
|                                        |  |   |           | 
|                                        |  |   | 1,918,933 | 
|Less: Inventory classified as long-term |  |   | 241,094   | 
|                                        |  |   |           | 
|Total current inventory                 |  | $ | 1,677,839 | 
|                                        |  |   |           | 

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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002

NOTE 4 PROPERTY AND EQUIPMENT



| |  | Property and equipment consisted of the following as of October 31, 2002:
| |  | -------------------------------------------------------------------------

|                              |  |   |           | 
|----------------------------- |  | - | --------- | 
|Office equipment              |  | $ | 93,453    | 
|Machinery and equipment       |  |   | 679,868   | 
|Capital leases                |  |   | 584,201   | 
|Computer equipment            |  |   | 126,023   | 
|Leasehold improvements        |  |   | 65,101    | 
|                              |  |   |           | 
|                              |  |   | 1,548,646 | 
|Less accumulated depreciation |  |   | 314,712   | 
|                              |  |   |           | 
|                              |  | $ | 1,233,934 | 
|                              |  |   |           | 



| |  | Depreciation expense for the years ended October 31, 2002 and 2001 was
$149,557 and $107,166, respectively.
| |  | -----------------------------------------------------------------------------------------------------------

NOTE 5 PATENTS



| |  | Patent expenses for attorneys fees and related registration costs and
other unrecovered costs of a successful legal suit consisted of the
following as of October 31, 2002:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       |  |   |        | 
|-------------------------------------- |  | - | ------ | 
|Patents                                |  | $ | 47,306 | 
|Less: accumulated amortization expense |  |   | 1,346  | 
|                                       |  |   |        | 
|                                       |  | $ | 45,960 | 
|                                       |  |   |        | 



| |  | Amortization expense on patents for the year ended October 31, 2002
totaled $1,346.
| |  | -----------------------------------------------------------------------------------

NOTE 6 REVOLVING LOANS PAYABLE



| |  | The following schedule reflects revolving loans payable as of October 31,
2002:
| |  | -------------------------------------------------------------------------------

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |  |            | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | ---------- | 
|On November 26, 2001, the Company executed a revolving loan
agreement with CommerceBank, N.A., for a maximum loan amount of
$1,500,000, which was reduced by the bank to $1,250,000. The
Company pledged essentially all of its assets as collateral to
secure the loan arrangement. The interest rate is the prime
rate in effect plus 1.0%. At October 31, 2002, the effective
rate was 6.75%. To provide added security for the loan, the
Company also has obtained EximBank credit guarantees on the
Companys international receivables at a cost of $1.06 per $100
as invoices are issued and reported. Currently, the loan has
been extended to March 31, 2003. This revolving loan is in the
process of review and renewal (See Note 18) |  |  | $1,223,000 | 

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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002

|                                                                                                                                                                                                                                                                                                 |  |  |            | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | ---------- | 
|On July 15, 1999, the Company entered into a $35,000 line of
credit agreement with Sovereign Bank. The agreement calls for
an interest rate based on the banks prime rate plus 1.49%. At
October 31, 2002, the effective rate was 6.24%. The loan is a
demand loan and calls for annual reviews |  |  | 27,000     | 
|                                                                                                                                                                                                                                                                                                 |  |  |            | 
|                                                                                                                                                                                                                                                                                                 |  |  | $1,250,000 | 
|                                                                                                                                                                                                                                                                                                 |  |  |            | 



| |  | In relation to the $1,250,000 revolving loan agreement with CommerceBank,
N.A., the Company has certain financial covenants it is required to meet,
including debt to tangible net worth and cash flow coverage ratio. As of
October 31, 2002, the Company was in violation of the cash flow coverage
ratio and has received a waiver through January 31, 2003 from
CommerceBank, N.A. in relation to the violation.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 7 NOTES AND LOANS PAYABLE



| |  | The following schedule reflects notes and loans payable as of October 31,
2002:
| |  | -------------------------------------------------------------------------------

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |          | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | -------- | 
|Note payable in monthly installments of $2,245, including
interest at 9.5%, secured by manufacturing equipment; maturity
date is February 15, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  | $18,548  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |          | 
|Note payable in 24 monthly installments of $3,357, including
interest at 10.0%, secured by computer software; maturity date is
January 10, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  | 13,429   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |          | 
|On November 26, 2001, the Company entered into a promissory note
collateralized with existing equipment with CommerceBank N.A. at
an interest rate of 7.5%. The note requires payments of interest
only for the initial 12 months and interest plus principal forthe remaining 48 months from December 2002 through November 2006.                                                                                                                                                                                                                                                                                                                                                                                                 |  |  | 300,000  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |          | 
|Chapter XI bankruptcy settlement obligations under the Amended
Plan of Reorganization dated February 12, 1997, with aggregate
monthly payments due to the creditors as determined by the
payment schedules incorporated into the agreement, including
interest at 9%. The Company is in arrears on some payments due
to general unsecured creditors under the plan of reorganization
primarily because of the Companys inability to locate and
forward payments to those creditors. These payments are included
in the current portion of notes and loans payable. As of the
date of this report, no actions have been presented to the
Company relating to non-payment of the missing creditors under
the plan of reorganization |  |  | 245,280  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |          | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  | 577,257  | 
|Less: Current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |  | 346,007  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |          | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  | $231,250 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |          | 

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##### Table of Contents



BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



| |  | Required payments of principal on notes and loan payable, including
current maturities, are as follows as of October 31, 2002:
| |  | ------------------------------------------------------------------------------------------------------------------------------

|     |  |        |         | 
|---- |  | ------ | ------- | 
|Year |  | Amount
|     |  |       
|2003 |  | $      | 346,007 | 
|2004 |  |        | 75,000  | 
|2005 |  |        | 75,000  | 
|2006 |  |        | 75,000  | 
|2007 |  |        | 6,250   | 
|     |  |        |         | 
|     |  | $      | 577,257 | 
|     |  |        |         | 



| |  | Interest expense for the years ended October 31, 2002 and 2001 was
$104,519 and $123,701, respectively.
| |  | -------------------------------------------------------------------------------------------------------

NOTE 8 RELATED PARTIES



| |  | Related party transactions consist of advances to the Company from
stockholders in the form of using personal credit cards for the purchase
of goods and services. As of October 31, 2002, $10,193 was due to the
stockholders for the use of their personal credit cards.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 9 INCOME TAXES



| |  | For the years ended October 31, 2002 and 2001, taxable net income has
been adjusted to remove the gain from involuntary conversion of fixed
assets due to a fire loss that is not recognized for tax purposes.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Income tax expense (benefit) for the years ended October 31, 2002 and
2001 is summarized as follows:                                                                                                          

|                             |                               |   |      |          |      |   |   |         |  
|---------------------------- | ----------------------------- | - | ---- | -------- | ---- | - | - | ------- | -
|                             |                               |   | 2002 |          | 2001
|                             |                               |   |      |          |     
|Deferred:                    |                               |   |      |          |      |   |   |        
|                             | Federal                       |   | $    | (258,465 | )    |   | $ | (46,528 | )
|                             | State                         |   |      | (48,064  | )    |   |   | (7,965  | )
|                             | Change in valuation allowance |   |      | 306,529  |      |   |   | 54,493  |  
|                             |                               |   |      |          |      |   |   |        
|Income tax expense (benefit) |                               | $ |     |          |      | $ |  |        
|                             |                               |   |      |          |      |   |   |        



| |  | The Companys tax expense (benefit) differs from the expected tax
expense for the years ended October 31, 2002 and 2001 (computed by
applying the Federal Corporate tax rate of 34 percent to income before
taxes) as follows:
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002

|                                                        |  |      |          |      |  |   |         |  
|------------------------------------------------------- |  | ---- | -------- | ---- |  | - | ------- | -
|                                                        |  | 2002 |          | 2001
|                                                        |  |      |          |     
|Computed expected tax (benefit) expense               |  | $    | (296,558 | )    |  | $ | 48,314  |  
|State income tax (benefit)  net of federal tax
benefit |  |      | (55,181  | )    |  |   | 7,979   |  
|Effect of net operating loss carryforwards              |  |      |         |      |  |   | (56,293 | )
|                                                        |  |      |          |      |  |   |         |  
|                                                        |  | $    | (351,739 | )    |  | $ |        |  
|                                                        |  |      |          |      |  |   |         |  



| |  | The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities are as follows at October
31:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

|                                   |                                 |   |          |         |      |   |          |         | 
|---------------------------------- | ------------------------------- | - | -------- | ------- | ---- | - | -------- | ------- | 
|                                   |                                 |   | 2002     |         | 2001
|                                   |                                 |   |          |         |     
|Deferred tax assets:               |                                 |   |          |         |      |   |          |        
|                                   | Depreciation                    |   | $        | 29,260  |      |   | $        | 38,050  | 
|                                   | Net operating loss carryforward |   |          | 431,536 |      |   |          | 116,217 | 
|                                   |                                 |   |          |         |      |   |          |        
|Total gross deferred tax assets    |                                 |   | 460,796  |         |      |   | 154,267  |        
|Less valuation allowance           |                                 |   | (460,796 | )       |      |   | (154,267 | )      
|                                   |                                 |   |          |         |      |   |          |        
|Net deferred tax assets            |                                 |   |         |         |      |   |         |        
|                                   |                                 |   |          |         |      |   |          |        
|Net deferred tax asset (liability) |                                 | $ |         |         |      | $ |         |        
|                                   |                                 |   |          |         |      |   |          |        



| |  | As of October 31, 2002, the Company had net operating loss carryforwards
of $1,269,225 for income tax purposes, available to offset future taxable
income expiring on various dates through 2021.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The valuation allowance at October 31, 2001, was $154,267. The net
change in the valuation allowance during the year ended October 31, 2001,
was an increase of $306,529.                        

NOTE 10 COMMITMENTS AND CONTINGENCIES



| | (A) |  | Consulting Agreements
| | --- |  | ---------------------



| |  | On August 28, 2000, the Company entered into a consulting agreement with
a former stockholder of Orthogen Corporation, which was acquired in March
2000 and is primarily engaged in research and development of certain
technology, which the Company anticipates bringing to market. The
agreement is for a five-year period and is renewable. Compensation is
stated at $26,000 per year plus expenses, but is subject to review
annually by the Board of Directors. The agreement also grants the
consultant an option for 300,000 shares of common stock. The options are
to be issued upon the reaching of certain milestones by Orthogen. The
first milestone requires Orthogen to successfully provide a laser
machined dental implant that is ready for use in humans. The second and
third milestones are contingent on reaching certain sales levels of this
new product. The last milestone is based upon the next Orthogen
developed technology reaching financial break even. To date, no
milestones have been met (See Note 13(A)).
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



| | (B) |  | Employment Agreements
| | --- |  | ---------------------



| |  | On November 1, 1997 (the Effective Date), the Company entered into
three employment agreements (the Agreements) with executives (the
Employees) of the Company. The Employees were engaged as President and
Chief Executive Officer (CEO), as Vice President  Finance and Chief
Financial Officer (CFO) and as Director of International Sales &
Marketing (VP) of the Company (today VP Marketing & Sales). The
Agreements were established for terms of five years, four years, and two
years, respectively, from the Effective Date for the CEO, CFO and VP,
respectively. The Agreements automatically renew annually for a term of
five years, four years, and two years, respectively. The Agreements
contain a confidentiality and a non-compete clause. As consideration for
the Employees performances, the Company agreed to pay as of the original
contract date an annual base salary detailed in the Companys annual
meeting proxy statement. In addition, the Company agreed to award the
Employees an annual bonus of not less than 10% of their respective base
salaries. At the discretion of the Employees, the portion of the
Employees salaries and bonuses that are not taken during a given
employment year will be paid in shares of the Companys common stock at a
value equal to the Companys net worth divided by the number of shares
issued and outstanding.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In March 2000, the Company entered into an employment agreement with an
officer of Orthogen Corporation. The agreement specifies an annual base
salary as detailed in the Companys annual meeting proxy statement with a
10% bonus, both of which are reviewed annually by the Board of Directors.
The agreement also granted an option for 300,000 shares of common stock
as an added incentive to remain with the Company. The options are to be
issued upon the reaching of certain milestones by the Orthogen (See Note
13(A)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



| | (C) |  | International Distributor Agreements
| | --- |  | ------------------------------------



| |  | The Company enters into distributor agreements (the Agreements) with
all its foreign distributors (the Distributors). The Agreements are
established for a term of three to five years and renew automatically
after the initial term, unless canceled in writing by either party at
least 120 days prior to expiration. The Agreements may be terminated
earlier by the Distributors with or without cause upon ninety days
written notice and by the Company upon sixty days notice in case the
Distributors did not meet the specific requirements stipulated in the
Agreements. Under the terms of the Agreements, the Company grants to the
Distributors the exclusive right to sell to customers the Companys
product line in a specific territory.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



| | (D) |  | Capital Lease Agreements
| | --- |  | ------------------------



| |  | The Company leases computer and operating equipment under non-cancelable
capital lease agreements. Future minimum lease payments under the
capital leases are as follows as of October 31, 2002:
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        |      |        |         |        | 
|--------------------------------------- | ---- | ------ | ------- | ------ | 
|Year                                    |      | Amount
|                                        |      |       
|                                        | 2003 |        | $       | 62,199 | 
|                                        | 2004 |        |         | 66,070 | 
|                                        | 2005 |        |         | 43,130 | 
|                                        | 2006 |        |         | 4,400  | 
|                                        |      |        |         |       
|                                        |      |        | 175,799 |       
|Less: current portion                   |      |        | 62,199  |       
|                                        |      |        |         |       
|Capital lease obligations  non-current |      | $      | 113,600 |       
|                                        |      |        |         |       



| | (E) |  | Operating Lease Agreements
| | --- |  | --------------------------



| |  | The Company leases corporate office space and office equipment under
operating leases. The leases expire at various dates through November
2006. Future minimum lease payments for the operating leases are as
follows at October 31, 2002:
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|           |      |        |         |        | 
|---------- | ---- | ------ | ------- | ------ | 
|Year       |      | Amount
|           |      |       
|           | 2003 |        | $       | 69,827 | 
|           | 2004 |        |         | 17,250 | 
|           | 2005 |        |         | 17,400 | 
|           | 2006 |        |         | 17,400 | 
|Thereafter |      |        | 1,450   |       
|           |      |        |         |       
|           |      | $      | 123,327 |       
|           |      |        |         |       



| |  | Rent expense under the operating leases for the years ended October 31,
2002 and 2001 was $79,053 and $87,232, respectively.
| |  | ----------------------------------------------------------------------------------------------------------------------------



| | (F) |  | Royalty Agreement
| | --- |  | -----------------



| |  | Pursuant to a settlement agreement, the Company is obligated to make
royalty payments to a general creditor, in addition to payments on his
general unsecured claim, for the Companys continued sale of certain
dental implant products. These payments are to continue for a period of
ten years following confirmation of the Companys Amended Plan of
Reorganization dated February 12, 1997. Payments will be made based upon
a schedule as stipulated in the settlement agreement up to a maximum of
2% of the total net sales of certain products as defined in the
settlement agreement. The Company expensed $56,605 and $45,549 for
royalties under this agreement for the years ended October 31, 2002 and
2001, respectively.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



| |  | Pursuant to a License Agreement entered into with The New Jersey Center
and Medical Devices Consortium, the Company is obligated to make royalty
payments for the grant of a license for a certain laser technology
applied to dental products manufactured by the Company. Royalty payments
are to commence with 2002 and each year thereafter with a minimum payment
of $15,000 for 2002, $20,000 for 2003, and $25,000 each year thereafter;
additionally, once product is sold into the marketplace the Company is to
pay 2% of net sales on product sold with the technology and 5% on any
license issued net of any minimums paid.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (G) |  | Gain Contingency
| | --- |  | ----------------



| |  | In July 2001, a fire occurred at the Companys manufacturing facilities
that destroyed a significant amount of machines, equipment and inventory.
The Company had insurance for the replacement value of the destroyed
equipment as well as business interruption (BI) insurance. While the
equipment has been replaced as of the date of these financial statements,
the BI insurance is still being negotiated with the insurance company.
Depending on the final outcome, the Company could incur additional gains
related to the fire. Currently, the amount of this potential gain is
indeterminable (See Note 16).
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 11 401(K) PLAN SUMMARY



| |  | The Company set up and initiated a retirement 401(k) Plan effective
1/1/97 (the Plan). The Plan originally was managed by Prudential and
was transferred to Smith Barney Plan Services effective April 1998. The
Plan is open to all employees that have reached the age of 21, have
completed 90 days of service and are employed for 32 or more hours per
week. Participants can contribute from 1 to 15% of pay subject maximums
as prescribed by the IRS. Matching contributions are discretionary and
must be designated by the Board of Directors on a yearly basis. New
participants vest 33%, 66% and 100% in their first, second and third year
of employment for any matching contributions.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Board of Directors approved the issuance of a matching contribution
for the years 2002 and 2001. Contributions awarded totaled 50% of the
first 10% of contributions by a participant and the cost to the Company
was 65,104 and 36,420 shares of the Companys common stock having a fair
value of $16,276 and $34,235 for 2002 and 2001, respectively. The award
for 2002 has been accrued and is expected to be issued in early 2003.                                                                                                                                                                                                                                                            

NOTE 12 STOCKHOLDERS EQUITY



| | (A) |  | Authorized Common and Preferred Stock
| | --- |  | -------------------------------------



| |  | On May 2, 2002, the Company amended its certificate of incorporation to
20,000,000 authorized shares of $.01 par value common stock and 500,000
authorized shares of $.75 par value preferred stock. All share and per
share information in the financial statements herein give effect to these
capital stock transactions.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



| | (B) |  | Stock Issued for Services
| | --- |  | -------------------------



| |  | During fiscal year 2002, the Company issued 381,000 shares of common
stock or $70,800 to a number of employees, officers, and directors for
services rendered, 48,961 shares of common stock or $43,641 to the
Bio-Lok 401(k) Plan as a matching contribution for the years ended 2001
and 2000, 117,500 shares of common stock or $23,184 to new employees as
sign-on bonuses, and 30,333 shares of common stock or $10,000 to an
employee per a contractual obligation. The issued shares of common stock
were valued at the fair market value on the date of grant based on the
concurrent cash-offering price.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 13 STOCK OPTIONS AND WARRANTS



| | (A) |  | Stock Options Granted Under Employment and Consulting Agreements
| | --- |  | ----------------------------------------------------------------



| |  | During 2002 and prior, the Company granted stock options to certain
employees and consultants. A number of the options had been issued when
the Company had a negative net worth and prior to its stock trading.
Stock issued to employees has been recorded at intrinsic value in
accordance with APB 25 and options issued to third parties and clinicians
have been recorded at fair market value as calculated using the Black
Scholes model in accordance with SFAS 123. The proforma disclosure on
net income, had the Company used the fair value based method of
accounting for its stock options granted in 2002 and 2001 and charged
operations over the option vesting periods based on the fair value of
options at the date of grant, is minimal.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Included in the options granted above were 600,000 options issued as a
part of the acquisition of Orthogen Corporation. These options are
exercisable only if certain milestones are achieved (See (*) below and
Note 10(A) and (B)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Options to purchase an aggregate of 1,602,000 common shares granted
during 2000 through 2002 to existing directors and employees under a
qualifying plan were cancelled effective September 16, 2002. It was
found that a qualifying plan had never been established by the Company.
A qualified plan for employees is in the process of being finalized and
will be presented to stockholders for approval via a separate proxy
statement.                                                                                                                                                                                                                                                                                                                   
|
| |  | The fair market value of each stock option granted to non-employees was
estimated on the date of grant using the Black-Scholes Option-Pricing
Model in accordance with SFAS 123 assuming: (1) a risk-free interest rate
of 5.82% to 6.0%, (2) an expected life of five to nine years, (3) an
expected volatility of 101% to 141% and (4) no expected dividends.                                                                                                                                                                                                                                                                                                                                                                                               

F-21



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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



| |  | A summary of the stock options issued is presented below as of October
31, 2002:
| |  | --------------------------------------------------------------------------------

|                                     |                          |                                |           |                   |            |                |     |                  |     | 
|------------------------------------ | ------------------------ | ------------------------------ | --------- | ----------------- | ---------- | -------------- | --- | ---------------- | --- | 
|                                     |                          |                                |           |                   |            |                |     | Weighted Average
|                                     |                          |                                |           | Number of Options |            | Exercise Price
|                                     |                          |                                |           |                   |            |               
|Stock Options                        |                          |                                |           |                   |            |                |     |                 
|                                     |                          | Balance at beginning of period |           |                   | 3,277,000  |                |     | $                | .23 | 
|                                     |                          | Granted                        |           |                   | 60,000     |                |     |                  | .10 | 
|                                     |                          | Exercised                      |           |                   |           |                |     |                  |    | 
|                                     |                          | Cancelled and rescinded        |           |                   | (1,602,000 | )              |     |                  | .10 | 
|                                     |                          | Expired                        |           |                   |           |                |     |                  |    | 
|                                     |                          |                                |           |                   |            |                |     |                 
|                                     | Balance at end of period |                                |           | 1,735,000         |            |                | $   | .34              |    
|                                     |                          |                                |           |                   |            |                |     |                 
|Options exercisable at end of period |                          |                                | 1,705,000 |                   |            | $              | .34 |                 
|                                     |                          |                                |           |                   |            |                |     |                 



| |  | The following table summarizes information about stock options at October
31, 2002:
| |  | -----------------------------------------------------------------------------------

|                |           |                  |  |                  |        |                     |         |                  |      |                  |      |                     |     |                    |     |           |   |         |         |     |     |      |     | 
|--------------- | --------- | ---------------- |  | ---------------- | ------ | ------------------- | ------- | ---------------- | ---- | ---------------- | ---- | ------------------- | --- | ------------------ | --- | --------- | - | ------- | ------- | --- | --- | ---- | --- | 
|                |           |                  |  |                  |        | Options Outstanding |         |                  |      |                  |      | Options Exercisable
|                |           |                  |  |                  |        |                     |         |                  |      |                  |      |                    
|                |           |                  |  |                  |        | Number Outstanding  |         | Weighted Average |      |                  |      |                     |     | Number Exercisable |     |           |   |        
|                |           |                  |  |                  |        | at                  |         | Remaining        |      | Weighted Average |      | at                  |     | Weighted Average  
|Exercise Prices |           | October 31, 2002 |  | Contractual Life |        | Exercise Price      |         | October 31, 2002 |      | Exercise Price  
|                |           |                  |  |                  |        |                     |         |                  |      |                 
|                |           | $ .05            |  |                  | 30,000 |                     |         |                  | 8.19 |                  |      | $                   | .05 |                    |     |           |  |         |         | $   | .05 |     
|                |           | .10              |  |                  |        |                     | 100,000 |                  |      |                  | 5.42 |                     |     |                    | .10 |           |   |         | 100,000 |     |     |      | .10 | 
|                |           | .25              |  |                  |        |                     | 805,000 |                  |      |                  | 4.43 |                     |     |                    | .25 |           |   |         | 805,000 |     |     |      | .25 | 
|                |           | .75              |  |                  |        |                     | 100,000 |                  |      |                  | 2.29 |                     |     |                    | .75 |           |   |         | 100,000 |     |     |      | .75 | 
|                |           | 3.00             |  |                  |        | 100,000             |         |                  |      | 2.29             |      |                     |     | 3.00               |     |           |   | 100,000 |         |     |     | 3.00 |    
|                |           | (*)              |  |                  |        |                     | 600,000 |                  |      |                  | 4.50 |                     |     |                    |    |           |   |         | 600,000 |     |     |      |    | 
|                |           |                  |  |                  |        |                     |         |                  |      |                  |      |                     |     |                    |     |           |   |         |         |    
|                | $.05-3.00 |                  |  | 1,735,000        |        |                     |         | 4.12             |      |                  | $    | .34                 |     |                    |     | 1,705,000 |   |         | $       | .34 |    
|                |           |                  |  |                  |        |                     |         |                  |      |                  |      |                     |     |                    |     |           |   |         |         |    



| |     |  | (*) Performance based options consisting of 300,000 shares to each of
two individuals (aggregating 600,000 shares) that represented the sellers
of Orthogen Corporation to the Company; subsequent to the acquisition one
individual became an employee and the other a consultant. (See Note 10(A)
and (B)).                                                                                                                                                     
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (B) |  | Stock Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | (i) |  | In connection with the revolving loan obtained from Capital
Business Credit in April 1997 (See Note 6), the Company issued
warrants to Capital Business Credit to purchase 135,000 shares of
the Companys common stock. The warrants (now the property of
Guaranty Business Credit) were exercisable between April 29, 1999
and April 28, 2002 at an exercise price of $0.50 per share. None of
these warrants were exercised and they expired on April 29, 2002.

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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



| | (ii) |  | During 1998, the Company issued warrants to purchase an
aggregate of 20,000 shares of the Companys common stock to two
consultants. The warrants are exercisable between October 25, 1998
and September 30, 2003 at an exercise price of $0.10 per share. As
of October 31, 2002, none of these warrants have been exercised.
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 14 CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS



| |  | During fiscal 2002 and 2001, 49% and 63%, respectively, of the Companys
total revenues were derived from sales to three customers. The Companys
international sales represent approximately 75% and 85% of the total
sales for 2002 and 2001, respectively. As of October 31, 2002, 73% of
accounts receivable were due from four customers (See Note 2). Financial
instruments that potentially subject the Company to concentrations of
credit risk consist of accounts receivable.                                                                                      
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | To insure against extraordinary losses on the major account
concentrations, the Company maintains receivable credit insurance
guarantees on its major international accounts. The policy is issued by
EximBank and is paid as invoices are issued. As of October 31, 2002,
$406,706 of receivables were insured. Credit limits are individually
evaluated and assigned in part by the Company and EximBank.
Additionally, credit and country risk is continually evaluated to assess
risk and additional collateral and guaranties are requested and/or
obtained accordingly.

NOTE 15 SEGMENTS



| |  | During fiscal 2002 and 2001, the Company had net sales to Europe, North
America, South America and all other areas of approximately 45% and 49%,
25% and 15%, 22% and 32%, and 8% and 4%, respectively.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 16 GAIN ON INVOLUNTARY CONVERSION



| |  | In July 2001, a fire occurred at the Companys manufacturing facilities
that destroyed a significant amount of machines, equipment and inventory.
The Company had insurance for the replacement value of the destroyed
equipment and inventory, as well as business interruption (BI)
insurance. The table below shows the amount of insurance claims, the net
book value of the assets destroyed, the resulting gain from involuntary
conversion and the funds received from the insurance company as of
October 31, 2002 and 2001:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002

|                                                   |  |                 |           |     |  |  |  |                |  |      |         |  |  |   |           | 
|-------------------------------------------------- |  | --------------- | --------- | --- |  |  |  | -------------- |  | ---- | ------- |  |  | - | --------- | 
|Asset Destroyed                                    |  | Insurance Claim |           |     |  |  |  | Net Book Value |  | Gain
|                                                   |  |                 |           |     |  |  |  |                |  |     
|Manufacturing equipment                            |  | $               | 1,316,070 |     |  |  |  |                |  | $    | 343,088 |  |  | $ | 972,982   | 
|Inventory                                          |  |                 | 161,617   |     |  |  |  |                |  |      | 127,642 |  |  |   | 33,975    | 
|BI                                                 |  |                 | *         |     |  |  |  |                |  |      | *       |  |  |   | *         | 
|                                                   |  |                 |           |     |  |  |  |                |  |      |         |  |  |   |           | 
|                                                   |  |                 | 1,477,687 |     |  |  |  |                |  | $    | 470,730 |  |  | $ | 1,006,957 | 
|                                                   |  |                 |           |     |  |  |  |                |  |      |         |  |  |   |           | 
|Less: proceeds received through October
31, 2001   |  |                 | 1,139,245 | (A) |  |  |  |                |  |      |         |  |  |   |           | 
|                                                   |  |                 |           |     |  |  |  |                |  |      |         |  |  |   |           | 
|Insurance receivable at October 31, 2001           |  | $               | 338,442   |     |  |  |  |                |  |      |         |  |  |   |           | 
|                                                   |  |                 |           |     |  |  |  |                |  |      |         |  |  |   |           | 
|Insurance proceeds received during 2002            |  | $               | 356,793   |     |  |  |  |                |  |      |         |  |  |   |           | 
|Less: insurance receivable at October
31, 2001     |  |                 | 338,442   |     |  |  |  |                |  |      |         |  |  |   |           | 
|                                                   |  |                 |           |     |  |  |  |                |  |      |         |  |  |   |           | 
|Additional gain recognized in other
income in 2002 |  | $               | 18,351    |     |  |  |  |                |  |      |         |  |  |   |           | 
|                                                   |  |                 |           |     |  |  |  |                |  |      |         |  |  |   |           | 



| |  | The Company was also reimbursed (or the insurance company paid funds
directly on behalf of the Company) for costs expended for cleaning of the
facility, air conditioner repair, restoration services and other
incidental costs related to the fire.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (A) |  | Of this amount, $161,617 was received for destroyed inventory
and $977,628 for destroyed fixed assets
| | --- |  | -----------------------------------------------------------------------------------------------------



| |  | * See Note 10(G)
| |  | ----------------

NOTE 17 LIQUIDITY



| |  | During the year ended October 31, 2002, the Company incurred a negative
cash flow from operating activities of $1,121,333 and a net loss of
$939,077 and as of October 31, 2002 had an accumulated deficit of
$816,210, positive working capital of $388,480, and positive
stockholders equity of $1,623,475. As of that date, the Company had
$23,500 in cash, $807,905 in net accounts receivable, and $1,918,933 in
inventory. The Company had accounts payable, accrued expenses and other
payables in the aggregate of $453,385, revolving loans payable of
$1,250,000, and notes and loans payable  current of $346,007 (of which
$128,330 relates to debtors, that are unable to be located, under the
Chapter XI bankruptcy settlement dated February 12, 1997).
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On February 26, 2003, the Company accepted a commitment letter from
CommerceBank, N.A. to provide two separate line of credit facilities.
Under the first facility, CommerceBank, N.A. commits to increase its
current line of credit under the revolving loan payable to $2,000,000
from $1,250,000. This line of credit is an asset based line of credit to
finance foreign accounts receivable and inventory destined for export.
The amount available under this line of credit is subject to a monthly
borrowing base, as defined in the agreement. EximBank US is guaranteeing
90% of the loan. Under the second facility, CommerceBank, N.A. commits
to issue a revolving line of credit in the                                                                    

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##### Table of Contents



BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



| |  | amount of $250,000. This line of credit is an asset based line of credit
to finance domestic accounts receivable. The amount available under this
line of credit is subject to a monthly borrowing base, as defined in the
agreement. The interest rate for both of these facilities will be the
Wall Street Journal Prime Rate plus two percent and is due monthly. The
principal under these lines of credit will be due on demand with an
annual financial review date of December 31, 2003. The collateral for
these facilities will consist of a blanket, first priority UCC-1 lien on
all of the Companys assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In an effort to increase sales related to the Companys business, the
Company has increased its sales force throughout 2002. The increase in
the sales force has improved sales by over 51% for the fourth quarter of
fiscal year 2002 compared to the first quarter of 2002 and approximately
72% for the first quarter of fiscal year 2003 (unaudited) compared to the
first quarter of fiscal year 2002. Sales have also increased
approximately 14% for the first quarter of fiscal year 2003 (unaudited)
compared to the fourth quarter of fiscal year 2002. Management plans to
continue its efforts to increase sales at a comparable rate for the rest
of fiscal year 2003 while maintaining the same level of selling and
administrative expenses incurred during fiscal year 2002. The increase
in sales from the first quarter of 2002 is indicative of the Company
recovering from the fire that occurred during fiscal year 2001 that
disrupted operations. During fiscal year 2002, the Company has been able
to replenish inventory destroyed in the fire to a level that has provided
the Company the ability to meet its sales demands. Since substantially
all of the Companys manufacturing equipment was replaced with new
equipment that is technologically more efficient and has increased
capacity, the Company has utilized the efficiency and increased capacity
for manufacturing by increasing its sales. While the sales force was
hired during fiscal year 2002, the major benefits from the sales force
did not begin to materialize until the third and fourth quarters.
|
| |  | Deteriorating global economic conditions may cause prolonged declines in
investor confidence in and accessibility to capital markets.
Deteriorating global economic conditions may make it more difficult for
the Company to secure funding because, during times of deteriorating
global economic conditions, prospective lenders and investors generally
have less funds to lend or invest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Future financing may not be available on a timely basis, in sufficient
amounts or on terms acceptable to the Company. Future financing in the
form of equity transactions may result in dilution of equity. Any
additional debt financing may contain additional covenants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | If adequate funds are not available either through operations or
financing arrangements, the Company may be required to delay or scale
back the growth of operations and product and service development
efforts. In addition, there is no guarantee that current financing
arrangements will continue indefinitely.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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##### Table of Contents



BIO-LOK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF OCTOBER 31, 2002



| |  | As reflected in the accompanying financial statements and as of October
31, 2002, the Company had an accumulated deficit of $816,210, a net loss
from operations of $939,077 and net cash outflows from operating
activities of $1,121,333 that raise substantial doubt about its ability
to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on the Companys ability to raise
additional capital and implement its business plan. The financial
statements do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company anticipates an increase in sales volume and the raising of
additional capital during 2003. Management believes that actions
presently taken to improve its future operations, increase its sales
volume, and current efforts in increasing the line of credit under the
revolving loan payable to $2,000,000 provide the opportunity for the
Company to continue as a going concern (See Note 18).                                                                                                                                                                                                                 

NOTE 18 SUBSEQUENT EVENTS



| |  | On February 26, 2003, the Company accepted a commitment letter from
CommerceBank, N.A. to increase its line of credit under the revolving
loan payable to $2,000,000 and to provide an additional line of credit of
$250,000 to finance the Companys domestic accounts receivable. The
Company previously received from EximBank US insurance support guarantees
for inventory and receivables totaling $2,000,000 (See Note 17).
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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