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

                                   FORM 10-KSB

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

                     For the fiscal year ended June 30, 2003

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934


                        Commission file number 333-41672


                          Quick-Med Technologies, Inc.
                 ----------------------------------------------
                 (Name of Small Business issuer in its charter)


            Nevada                                              65-0797243
-------------------------------                           ----------------------
(State or Other Jurisdiction of                                (IRS Employer
Incorporation or Organization)                            Identification Number)

 3427 SW 42nd Way Gainesville, Florida                                  32608
----------------------------------------                              ----------
(Address of Principal Executive Offices)                              (Zip Code)

         Issuer's Telephone Number, Including Area Code: (352) 379-0611
                                 --------------

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

    Securities registered pursuant to Section 12(g) of the Act: Common Stock

     Check whether the issuer (1) filed all reports required to be filed by
  Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
 reports), and (2) has been subject to such filing requirements for the past 90
                              days. Yes [X] No [ ]

      Check if there is no disclosure of delinquent filers pursuant to Item
 405 of Regulation S-B is not contained in this form, and no disclosure will be
    contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
                    or any amendment to this Form 10-KSB. [X]
<PAGE>

State issuer's revenues for its most recent fiscal year: $0.

The aggregate market value of the issuer's common stock, $.0001 par value, held
by non-affiliates, based on the closing price on September 23, 2003 as reported
on the OTC Bulletin Board, was approximately $1,741,194.

On September 23, 2003, there were 15,382,339 shares of the issuer's common stock
outstanding.


DOCUMENTS INCORPORATED BY REFERENCE

None

                                        2
<PAGE>

                                TABLE OF CONTENTS

                            FORM 10-KSB ANNUAL REPORT

                          QUICK-MED TECHNOLOGIES, INC.

                                                                            PAGE

PART I
Item 1.      Description of Business........................................  4
Item 2.      Description of Property........................................ 10
Item 3.      Legal Proceedings.............................................. 12
Item 4.      Submission of Matters to a Vote of Security Holders............ 12

PART II
Item 5.      Market for the Registrant's Common Equity and Related
             Stockholder Matters............................................ 13
Item 6.      Management's Discussion and Analysis of Financial Condition
             and Plan of Operation.......................................... 15
Item 7.      Financial Statements    ....................................... 26
Item 8.      Changes in and Disagreements on Accounting and Financial
             Disclosure .................................................... 26

PART III
Item 9.      Directors, Executive Officers, Promoters and Control Persons,
             Compliance with Section 16(a) of the Exchange Act.............. 27
Item 10.     Executive Compensation......................................... 30
Item 11.     Security Ownership of Certain Beneficial Owners and
             Management..................................................... 31
Item 12.     Certain Relationships and Related Transactions................. 32

PART IV
Item 13.     Exhibits and Reports of Form 8-K............................... 33
Item 14.     Controls and Procedures........................................ 34
Item 15.     Principal Accountant Fees and Services......................... 34

SIGNATURES.................................................................. 35


                                        3
<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Overview

         Founded in April 1997, Quick-Med Technologies, Inc. ("Quick-Med
Technologies" or the "Company") is a life sciences Company focused on developing
proprietary, broad-based technologies in the consumer, healthcare, and
industrial markets. The Company's two core technologies under development are:
(1) the MultiStat(TM) family of advanced patent methods and compounds, shown to
be highly effective in key skin care therapy applications for cosmetic,
military, and medical markets; and (2) Novel Intrinsically Microbicidal Utility
Substrate (NIMBUS(TM)), a family of advanced polymers bio-engineered to have
antimicrobial, super-absorbent, and other properties that can be used in a wide
range of applications.

Quick-Med Technologies believes it is on schedule in executing its staged
commercialization strategy for each broad technology. MultiStat(TM) is being
developed in a cosmetic product line with an initial anti-aging product under
launch. MultiStat(TM) is also being employed in a drug product line, as a
post-injury treatment for mustard gas exposure, with the initial product
currently under development in a partnership with the U.S. Army. Quick-Med
Technologies' NIMBUS(TM) technology has initially been targeted at (a)
protecting building materials from rot or mold, (b) an advanced bandage product,
and (c) several enhanced consumer products, including personal and oral care
products. In each instance, the Company seeks or has employed joint ventures or
joint development agreements with leading firms in the respective industry to
co-develop and commercialize its products.

Quick-Med Technologies is a publicly traded Company listed under the symbol
"QMDT" on the OTC Bulletin Board.

Technology

         First Core Technology: MultiStat(TM)

Matrix metalloproteinases ("MMPs") are naturally occurring compounds in skin
tissue. External or internal stimuli can trigger an overproduction of certain
MMPs, which can produce chemical reactions within skin cells that induce adverse
outcomes such as blistering, inflammation or accelerated collagen degradation.
External triggers include prolonged sun exposure as well as chemical burns from
warfare agents such as mustard gas. Internal triggers include natural aging
where declining estrogen levels, which naturally inhibits MMPs, lead to
accelerated skin wrinkling.

There are natural or synthetic compounds that safely inhibit MMP ("MMPIs")
overproduction in the skin. These MMPIs can be topically applied to mitigate the
affects of triggering mechanisms. The bioscience of MMPI research includes the
identification of safe compounds that individually or in combination yield a
specific beneficial outcome.

MultiStat(TM) is Quick-Med Technologies' family of patented compounds and
techniques relating to MMP inhibition. MultiStat(TM)'s wide array of uses has
been documented in a series of clinical findings.

This core technology is being commercialized in the following areas:

     1.  Cosmetic.

MultiStat(TM) has had clinical success in improving the appearance of fine lines
and wrinkles associated with the signs of skin aging or deterioration resulting
from natural aging or sun damage, and also has significant benefits for use in
other conditions, such as skin roughness or redness.

                                        4
<PAGE>

Cosmetic development efforts involve optimizing the composition of the
formulation and working with expert consultants in specialized fields of cream
and hydrogel formulations, phytoestrogens, MMP-inhibitors, marketing research,
and product distribution.

         Quick-Med Technologies has entered into an exclusive five-year
         agreement with The Collaborative Group, Ltd., to develop, market, and
         distribute a range of skin care products derived from MultiStat(TM).
         The Collaborative Group is a leading New York-based specialty chemical
         company focused on developing and supplying performance ingredients and
         advanced formulations for the cosmetics industry.

         The agreement has defined a broad product development agenda that
         combines The Collaborative Group's advanced chemistries and formulation
         capabilities with Quick-Med Technologies' MultiStat(TM) family of
         MMPI-related technologies. The resulting formulations are intended to
         synergistically blend a series of ingredients that have scientifically
         proven benefits to produce significantly enhanced skin care products.

         The initial phase of the cosmetic product development program has been
         completed and its first product, a high performance ingredient for
         cosmetic formulations is in launch. The product, which targets the
         anti-aging segment, is the first in a series that the venture intends
         to offer. Other products will target other segments of the personal
         skin care market.

     2.  Pharmaceutical.

MMP activity has been shown to play a major role in the deterioration of human
tissue when exposed to chemical agents such as mustard gas. Ilomastat, a member
of the MultiStat(TM) family of patented compounds and techniques relating to MMP
inhibition, has been demonstrated to be highly effective with these types of
exposures.

     o   In November 2000, the Company entered a six-year Cooperative Research
         and Development Agreement, or CRADA, with the U.S. Army Medical
         Research Institute for Chemical Defense to develop Ilomastat as a
         post-injury agent therapy for mustard gas exposures in the skin and
         eye. Quick-Med Technologies anticipate the sale of the resulting drug
         product to the U.S. Army, NATO, and other friendly states, as well as
         for Homeland Defense and Civil Defense worldwide. If F.D.A. approval
         for mustard gas is obtained, the Company intends to seek approval for
         related chemical burns to the eye and skin, and then to focus on other
         indications for which Ilomastat is known to be an effective therapy,
         such as psoriasis and chronic wounds.

The data and analysis supporting the development of Ilomastat as a post-injury
agent for mustard gas includes:

     o   Ilomastat was successful in prior clinical studies of related injuries.

     o   The TNO Prins Maurits Laboratory ("TNO") in the Netherlands has
         conducted experiments showing that Ilomastat was effective in
         preventing the type of skin disintegration that leads to blistering
         when tested on human skin samples.

     o   The Israeli Institute for Biological Research ("IIBR") has conducted
         experiments showing that Ilomastat significantly reduced inflammation
         and blood vessel growth in rabbit eyes following exposure to mustard
         gas, which would cause blindness if untreated.

     o   Ilomastat has passed Phase I and II clinical safety tests for a related
         ocular indication. Since safety data for Ilomastat already exists, and
         human clinical trials are not necessary to determine efficacy (that is,
         F.D.A. animal rule can be invoked in the case of mustard gas),
         Quick-Med Technologies hopes to accelerate the research and development
         process.

                                        5
<PAGE>

Second Core Technology: NIMBUS(TM) (Novel Intrinsically Microbicidal Utility
Substrate)

The Company's collection of patents, techniques, and other intellectual property
- referred to as NIMBUS(TM) - uses advanced polymer chemistry to bond
biologically active molecules onto substrates. Choices of the substrate, the
bonded molecules, or the method of bonding creates products that can be modified
to produce varying product attributes. The most significant commercial
application of NIMBUS(TM) is in creating antimicrobial products. By altering
aspects of the formulation, the product can be made to be super-absorbent as
well as antimicrobial. Alternatively, the product can be made to have hemostatic
properties, or the ability to stop bleeding. A major distinguishing feature of
NIMBUS(TM) treated material is that the treated article is safe, the microbicide
is highly effective and the active ingredient does not leach off the substrate.

The antimicrobial effect is achieved by coating or impregnating the substrate
with a highly effective and safe microbicide in a way that prevents the active
ingredient from eluting. The active ingredient is not a heavy metal, which
allows it to have wider application than competing products. In numerous
clinical studies it has been shown that NIMBUS(TM)-treated materials are not
dangerous to humans. As a microbicide, NIMBUS(TM) treated material inhibits
bacteria, virus, fungus, and rot or mold due to the action of the microbicide.
In wood products, it repels termites because NIMBUS(TM) kills the bacteria that
termites require for their digestive systems.

Quick-Med Technologies is commercializing NIMBUS(TM) in a number of industries
where the Company believes that the technology provides a solution to a defined
need or an opportunity to create premium products. The Company's strategy is to
partner or license to major firms in end-markets for adapting and implementing
the technology in that industry.

The benefits and potential market applications for NIMBUS(TM) are:

<TABLE>
<CAPTION>
                            POTENTIAL MARKETS FOR NIMBUS(TM)


         HEALTHCARE                        CONSUMER                INDUSTRIAL
         ----------                        --------                ----------

<S>                                        <C>                     <C>
         o   Severe Acute Respiratory      o   Cosmetics           o   Building materials
             Syndrome, or SARS             o   Advanced bandages   o   Wallboard
         o   Human immunodeficiency        o   Feminine care       o   Cellulose
             virus, or HIV                                             insulation
         o   Hemostatic life threatening   o   Baby care           o   Fiber glass
             injuries                      o   Wipes                   insulation
         o   Chronic wound dressing        o   Linens              o   Paper - Pulp,
             Facemask                      o   Food storage            Fiber
         o   Wound dressings               o   Containers          o   Wood preservation
         o   Blood collection containers   o   Paper Towels            Pesticides
         o   Hospital garments             o   Napkins             o   Protective
         o   Surgical drapes and apparel   o   Bedding                 clothing
         o   Catheters                     o   Footwear            o   Wipes
         o   Urinary drainage systems      o   Adult               o   Filters
                                               incontinence        o   Packing materials
                                           o   Oral care           o   Hospitality
                                           o   Footwear                Industry
                                           o   Adult               o   Food service
                                               incontinence        o   Food contact
                                           o   Facemasks           o   Preservative
                                           o   Personal care       o   Protective
                                           o   Clothing                clothing
</TABLE>



The Company's initial focus is on commercializing NIMBUS(TM) in the following
three areas:

                                        6
<PAGE>

     1.  Industrial - Building material preservation, such as wood, wallboard
         --------------------------------------------------------------------
and insulation
--------------

The building material industry is now seeking safe, nontoxic ways of protecting
its products from rot or mold. NIMBUS(TM) technology is an alternative to wood
preservation without using Chromated Copper Arsenate, or CCA, and furthermore,
prevents termite damage, as termites are repelled by the active ingredient.
Similarly, NIMBUS(TM) can be bonded to wallboard or home insulation to provide a
novel solution to the emerging problem of mold growth in homes, office
buildings, and/or other locations.

     o   Quick-Med Technologies has entered into non-exclusive Joint-Development
         Agreements during 2003 with leading firms in the wood preservation,
         wallboard, and insulation industries to use NIMBUS(TM) technology to
         protect against mold, rot, and termites. In each instance, the
         technology is to undergo further research and development, potentially
         followed by a commercial agreement to be negotiated based on the
         success of the technology in specific product applications.

     o   Quick-Med Technologies has initiated testing materials treated with
         NIMBUS(TM) technology to determine its ability to assist in replacing
         treatments currently in commercial use, such as arsenic, that have
         potential toxic environmental effects.

     o   Prevention of Mold. Independent tests illustrate that
         NIMBUS(TM)-treated paper or wallboard prevents or retards the growth of
         mold.

     2.  Medical - Wound dressings
         -------------------------

The Company is developing advanced portfolio of advanced wound dressings
(bandages) that are antimicrobial, super-absorbent and hemostatic, suitable for
application on severe and life threatening wounds received in both military and
civilian activities. Clinical testing by the Company has confirmed the
effectiveness of the technology. The Company is seeking to commercialize or
license the product(s) with a major medical device manufacturer. The Company is
developing other medical applications of NIMBUS(TM) that include such products
as advanced face masks for use in medical or nursing facilities or even as
consumer products in the post 9-11, and post SARS world.

     3.  Consumer - Personal care products such as skin care, cosmetics and
         ------------------------------------------------------------------
oral care
---------

The Company is aggressively pursuing NIMBUS(TM) applications in the consumer and
personal care market. The initial focus will be to develop NIMBUS(TM) as a
preservative in personal care products such as cosmetics, odor control, soaps,
shampoos, and wipes. Other applications will include adult incontinence,
feminine care, and baby care as well as in paper and fabric applications such as
paper towels, napkins, napery, bedding, linens, footwear, apparel.

Quick-Med Technologies is negotiating with several firms in the personal care
industry for commercializing NIMBUS(TM) either as a license or joint venture in
a range of consumer applications. This would allow the company to gain deep
access to key customer relationships as well as facilities and technical
specialists in consumer applications.

Business Model

         Through its technologies and multiple strategic partnerships, Quick-Med
Technologies employs a business model intended to allow it to operate under
shorter timelines and consequently reduced costs. This should provide maximum
capital and efficiency. The Company also has the strategic position of product
breadth over a wide variety of markets, believing that the diverse applications
of its MultiStat(TM) and NIMBUS(TM) technologies could enable it to market its
products across multiple industries, provided that the necessary regulatory
approvals are obtained where necessary. Specifically, Quick-Med Technologies
develops core technologies with multiple applications in large consumer,
healthcare, and/or industrial markets. To accelerate R&D, the Company has
retained leading researchers in target markets with advanced technologies to
test and prototype attractive products.


The Company is currently developing its two core technologies, MultiStat(TM) and
NIMBUS(TM), while seeking leading industry partners to further progress and
commercialize in end-markets. This strategy is intended to enable the Company to

                                        7
<PAGE>

diversify and extend its reach, while not diluting internal development efforts.
This also serves to multiply the resources of the Company by leveraging product
development, sales, and marketing personnel in its partner companies. Consistent
with this philosophy, the Company does not intend to manufacture or distribute
the final products, but rather outsource these activities, while focusing its
attention solely on developing and commercializing its core technologies and/or
others in which Quick-Med Technologies Inc. can develop a competitive advantage
that is highly marketable and can be patent protected.

Headquarters, Executive Offices, and Employees

         Quick-Med Technologies possesses an executive and scientific team that
has experience in its target markets or in key disciplines of life science,
business management, law, and military affairs. The Company is able to work
expeditiously vis-a-vis its strategic partnerships with leading academic and/or
business organizations. It's headquarter is in Gainesville, Florida. The Company
also functions through scientific contract laboratories in the United States and
throughout Europe and the Middle East.

Government Regulation

The research and development, manufacture, and marketing of human pharmaceutical
and diagnostic products and devices are subject to regulation primarily by the
F.D.A. in the United States and by comparable authorities in other countries.
These national agencies and other federal, state, and local entities regulate,
among other things, research and development activities and the testing,
manufacturing, safety, handling, effectiveness, labeling, storage, record
keeping, approval, advertising, and promotion of the products that Quick-Med
Technologies is developing.

Noncompliance with applicable requirements can result in refusal to approve
product licensing or revocation of approvals previously granted. Noncompliance
can also result in fines, criminal prosecution, recall or seizure of products,
total or partial suspension of production, or refusal to enter into additional
contracts with Quick-Med Technologies.

The F.D.A. approval process for biomedical devices has historically been costly
and time consuming. Recently, the F.D.A. has shortened the approval process for
medical devices to approximately six months from the normal 18 months required
for drug products. Under current law, each medical product-manufacturing
establishment must be registered with, and be determined to be adequate by the
F.D.A. before the product is approved.

Quick-Med Technologies has not filed for regulatory approval of any potential
product as none of its products have reached the development stage requiring a
filing or are exempt from filing requirements. Any regulatory approvals that
Quick-Med Technologies receives for a product may be subject to limitations on
the indicated uses for which the product may be marketed. After Quick-Med
Technologies and/or its partner obtains marketing approval for any product, the
manufacturer and the manufacturing facilities for that product will be subject
to continual review and periodic inspections by the F.D.A. and other regulatory
authorities. If previously unknown problems with the product or with the
manufacturer or facility are discovered, restrictions on the product or
manufacturer may result, including an order to withdraw the product from the
market. If Quick-Med Technologies and/or its partner fail to comply with
applicable requirements, it may be fined, suspended or subject to withdrawal of
regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecution.

Quick-Med Technologies has a three part strategy to ensure it complies with
government regulations and minimizing the time required for regulatory approval
of its products:

Quick-Med Technologies has retained law firms specializing in regulatory affairs
activities affecting the pharmaceutical, cosmetic, and medical device
industries. These firms will assist Quick-Med Technologies with the following
regulatory activities when required:

     o   Regulatory Strategy and Liaison with F.D.A. and the Environmental
         Protection Agency, or E.P.A.;

     o   Non-clinical and clinical program assessment/development;

                                        8
<PAGE>

     o   Non-clinical and clinical protocol review/monitoring of studies;

     o   Regulatory affairs management/guidance;

     o   Product development and launch strategy;

     o   Validation of methods/processes;

     o   Product development strategies/assessment;

     o   Product compliance; and Label and labeling compliance.

For two of its planned products, Quick-Med Technologies is working in
cooperation with the U.S. Army Medical Research Institute for Chemical Defense
under the CRADA agreement.

Quick-Med Technologies intends to only develop working arrangements with
individuals and organizations that already have satisfactory records in
government regulatory compliance or approvals.

Company Milestones

09/24/03 - The Company announced that it has entered an agreement with DermaCo,
Inc. a specialty dermatology company, to license patents that will broaden the
applicability of the Company's MMPI technology in skin care markets.

07/01/03 - The Company announced that, working through its partner, the
Collaborative Group Ltd., it has completed the initial phase of its cosmetic
product development program and has launched its first product -- a high
performance ingredient for cosmetic formulations. Based on demonstrated
effectiveness over competing products, pre-marketing response from potential
customers in the cosmetics industry the response has been very positive.

06/24/03 - The Company announced it has entered into a Joint Development
Agreement with a leading firm in the wallboard industry for developing the
Company's NIMBUS(TM) technology. The agreement calls for a six-month period of
additional research and development, followed by a commercial agreement to be
negotiated based on the success of the technology in product applications.

06/24/03 - Quick-Med Technologies announced reported that independent tests have
shown its NIMBUS(TM) technology to be highly effective in preventing mold in
building materials. The test results reported today were performed by Biological
Labs Services, an independent testing service based in Minneapolis, MN, in
accordance with industry- standard test, ASTM D3273.

06/03/03 - Quick-Med Technologies announced that its compound MultiStat(TM) has
passed 2nd clinical test for treating exposure to mustard gas. The experiments,
which were conducted at The Israel Institute of Biologic Research ("IIBR"),
demonstrated the ability of Ilomastat to prevent severe deterioration in rabbit
eyes exposed to mustard gas vapor.

04/22/03 - Quick-Med Technologies announced that its compound MultiStat(TM) has
passed key tests demonstrating that Ilomastat was effective in preventing the
type of skin disintegration that leads to blistering from exposure to mustard
gas. These tests were conducted by the TNO Prins Maurits Laboratory, an
independent research facility in the Netherlands focused on medical
countermeasures.

04/15/03 -- Quick-Med Technologies announced its postponing of the debt
financing it announced in March 2003, turning to lower-cost alternatives,
including committed funding from senior officers of the Company through 2003.
This development follows growing business momentum at the Company as well as
other newly emerged low-cost funding sources.

                                        9
<PAGE>

03/18/03 - Quick-Med Technologies announced it had entered into a non-exclusive
Joint Development Agreement with a leading firm in the wood preservation
industry for developing the Company's NIMBUS(TM) technology. Previous
independent tests have shown NIMBUS(TM) to be effective in protecting wood from
rot and termite damage.

02/11/03 - Quick-Med Technologies entered into the next phase of its fast track
program for developing a post-injury agent for mustard gas injuries. The program
is being run jointly with the U.S. Army under a Cooperative Research and
Development Agreement, or CRADA. This next phase of the program is a
multi-pronged effort to deliver an effective therapy by 2004. This includes the
anticipated acquisition of existing Phase I and Phase II clinical safety data,
formulation analyses for the skin and eye, and Company sponsored efficacy
experiments being independently carried out by defense-affiliated research
laboratories in Israel and the Netherlands.

12/03/02 - Quick-Med Technologies entered into a licensing agreement with the
University of Florida at Gainesville that will give the Company exclusive
worldwide rights for the manufacturing, marketing, and distribution of its
NIMBUS(TM) and topical MultiStat(TM) technologies.

11/19/02 - Quick-Med Technologies' received US$650,000 of new equity through
conversion of debt as part of a restructuring of a finance agreement with Euro
Atlantic Capital Corp.

09/09/02 - Quick-Med Technologies announced distribution agreement with The
Collaborative Group, Ltd.

09/04/02 - Quick-Med Technologies announced commencement of trading on the OTC
Bulletin Board under the symbol "QMDT".


ITEM 2.  DESCRIPTION OF PROPERTY

Intellectual Property: Patents and Exclusive License Patents

         Quick-Med Technologies' strategy is to obtain original patents or
exclusive composition and use licenses to practice patents relating to core
technologies and their use in targeted applications. These patents or licenses
provide the legal basis for Quick-Med Technologies to develop and commercialize
its products.

If a promising invention has been discovered but proper testing results have not
been obtained, a provisional application may be filed. A provisional patent is a
filing that demonstrates intent to patent and to secure the idea, and the
inventor is given up to one year to apply for a permanent patent. If the patent
applied for is approved, the date that is assigned is the original filing date
of the provisional patent. Quick-Med Technologies has filed and owns the rights
to original patent applications for:

     o   Compositions for treating skin and eyes exposed to mustard gas and
         other vesicants.
     o   An advanced non-estrogenic topical cream skin care product, for the
         improvement of the appearance of lines and wrinkles.
     o   A super-absorbent polymer antimicrobial wound dressing for use in wound
         care products.
     o   Antimicrobial wallboard and lumber treatment methods.
     o   A method and composition for treating insect populations to control
         pathogens.
     o   A method and composition for inhibition of TNF-alpha converting enzyme.

Several of these patent applications are now under examination at the U.S.A.
Patent Trading Office, or PTO. The Company has a non-binding informal indication
that several claims pertaining to topical skin creams will be allowed and a
patent issued. A patent for NIMBUS(TM) as been awarded in EurAsia (i.e. the
former Eastern Block countries.) All other patents and claims not yet awarded
are still in prosecution.

                                       10
<PAGE>

Agreement With The University Of Florida

         Presently, Quick-Med Technologies owns an undivided one-half interest
in the aforementioned patent applications. University of Florida Research
Foundation owns the other one-half undivided interest, but that interest has
been exclusively licensed to Quick-Med Technologies.

Licensed Patents

         Quick-Med Technologies has an executed license agreements with the
University of Florida at Gainesville, DermaCo, Inc. and Dr. Richard Galardy, to
practice certain rights under patents relating to a family of MMPIs. Quick-Med
Technologies is using these rights to develop both the cosmetic anti-aging
products and vesicant skin treatment products. The United States and foreign
patent rights, including but not limited to Germany, Spain, France, United
Kingdom, and Italy have been licensed to Quick-Med Technologies for these
applications.

                     QUICK-MED TECHNOLOGIES - U.S.A. PATENTS

NO.              EXPIRATION DATE          DESCRIPTION
---              ---------------          -----------

5,183,900        November 21, 2010        MMPIs
5,189,178        November 21, 2010        MMPIs
5,239,078        November 21, 2010        MMPIs
5,268,384        December 7, 2010         Inhibition of angiogenesis by
                                          synthetic MMPIs
5,270,326        November 21, 2007        Treatment for tissue ulceration
5,696,147        December 9, 2014         Inhibition of angiogenesis by
                                          synthetic matrix
5,773,438        June 30, 2015            Synthetic MMPIs and use there of MMPIs
5,89,112         April 6, 2016            Process for preparing synthetic MMPIs


                          RELATED INTERNATIONAL PATENTS

                 NO.                      EXPIRATION DATE

                 273685 (Japan)           November 21, 2011
                 4501333 (Japan)          November 21, 2011
                 652016 (Australia)       November 21, 2011
                 1971367 (Japan)          November 21, 2011
                 EPO558681 (Europe)       November 21, 2011


Protective Agreements with Employees, Consultants and Other Firms

         All of Quick-Med Technologies' employees and consultants have signed
agreements that assign to Quick-Med Technologies all intellectual property
rights to any inventions or other proprietary information in any area in which
that person is working with Quick-Med Technologies. None of these agreements
provide for the payment of any royalties. Dr. Gregory Schultz and Dr.
Christopher Batich, who are on the faculty of the University of Florida at
Gainesville, are the only consultants who currently have any rights in any
intellectual property that may be shared with Quick-Med Technologies. Dr.
Schultz and Dr. Batich may be paid a royalty out of the royalties that may be
paid by Quick-Med Technologies to the University of Florida.

In any dealing with another firm or other entity in which confidential
Intellectual Property ("IP") is disclosed, the Company assures the maximum of IP
protection through confidentiality agreements.

In cases where partial funding or research support an the invention was provided
by the U.S. Government, then the Company may not be able to charge a royalty on
resulting products sold to the Government, but is compensated solely through
product sales.

In the case of the University of Florida, which is a state run University, by
statue, all employees of the University must assigned back all IP right's

                                       11
<PAGE>

developed within their field of expertise. In November 2002, Quick-Med
Technologies entered into a licensing agreement with the University of Florida
at Gainesville that will give the Company exclusive worldwide rights for the
manufacturing, marketing, and distribution of its NIMBUS(TM) and topical
MultiStat(TM) technologies.

Physical Property: Plant and Equipment

         The Company owns no properties and at this time and have no agreements
to acquire any properties.

Quick-Med Technologies occupies 500 square feet at 401 N.E. 25th Terrace, Boca
Raton, Florida. Space is provided to us at $575 per month by David S. Lerner,
Quick-Med Technologies' president.

Quick-Med Technologies has leased 2,430 square feet of an equipped laboratory
space in Gainesville, Florida pursuant to a two-year lease with payments of
$1,124 per month. In April 2003, Quick-Med Technologies leased additional
laboratory space on the same facility for a monthly payment of $515 per month.
Quick-Med Technologies spent approximately $12,000 for leasehold improvements
and equipment for the lab.


ITEM 3.  LEGAL PROCEEDINGS

         The Company is not a party to any litigation. The Company received
notice from an attorney for Dr. Harry Phillips, a shareholder of the Company,
seeking repayment of certain funds that he claimed were loaned to the Company.
The Company has never entered into any transaction with Dr. Phillips. Dr.
Phillip's son, Andrew Phillips was a partner of Euro Atlantic Capital
Corporation ("Euro Atlantic"), a Florida-based merchant bank, which was a
promoter for the Company's merger with Above Average Investments, Inc. in 2002.
Euro Atlantic loaned the Company approximately $650,000, which was converted
into common stock in November 2002 pursuant to a written agreement between the
Company and Euro Atlantic. Euro Atlantic had agreed to raise $2,000,000 of
equity capital for the Company by September 2002 but to date as only raised
approximately $900,000. Euro Atlantic had also agreed to place 1,000,000 shares
of common stock in escrow pending the raising of such capital. The Company
believes that Dr. Phillips does not have any meritorious claims against the
Company and if a claim is brought, the Company intends to file claims against
Euro Atlantic since it acted as a principal in all transactions with the Company
and represented that all funds invested were its funds.


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

         Not applicable.

                                       12
<PAGE>

                                     PART II

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

Quick-Med Technologies is a publicly traded company listed under the symbol
"QMDT" on the OTC Bulletin Board. The following table sets forth the range of
high and low closing sale price as reported by the OTC Bulletin Board for our
common stock for the fiscal quarters indicated. The OTC Bulletin Board
quotations represent quotations between dealers without adjustment for retail
mark-up, markdowns or commissions and may not represent actual transactions.

                                                   HIGH         LOW

                  September 4 to September 30     $5.00        $4.50
                  October 1 to December 31        $5.00        $0.60
                  January 1 to March 31           $1.40        $0.55
                  April 1 to June 30              $1.12        $0.50


Dividends

         Quick-Med Technologies has not paid any cash dividends on its common
stock since its inception. Quick-Med Technologies presently intends to retain
future earnings, if any, to finance the expansion of its business and does not
anticipate that any cash dividends will be paid in the foreseeable future.
Future dividend policy will depend on Quick-Med Technologies' earnings, capital
requirements, expansion plans, financial condition and other relevant factors.

Sales of Unregistered Securities

         In February 2002, the Company issued 10,260,000 shares of common stock
to 17 individuals pursuant to the acquisition of Quick-Med Technologies.

In April 2002, the Company issued an aggregate of 7,500 shares of common stock
to two persons for services provided prior to that date.

In January 2002, Michael R. Granito ("Mr. Granito"), chairman of Quick-Med
Technologies, executed a convertible line of credit agreement where he agreed to
fund up to $750,000. All amounts due are convertible at $1.00 per share. At June
30, 2003, $750,000 has been borrowed and the note has not been converted.

In November 2002, the Company issued 100,000 shares of common stock to Euro
Atlantic for $100,000.

In November 2002, Euro Atlantic converted $650,000 of the bridge financing plus
$25,000 accrued interest into 675,000 shares of common stock.

In January and February 2003, the Company sold 67,500 shares of common stock to
two accredited investors for cash.

In January 2003, a convertible note of $30,855 including interest from an
affiliated company owned by David Lerner, the Company's President was converted
into 30,855 shares of common stock.

In May 2003, the Company issued an aggregate of 23,750 shares of common stock to
two persons for services provided prior to that date.

In May 2003, the Company issued 500,000 shares of common stock for $250,000 of
cash to an entity directly owned by Mr. Granito.

In July and August 2003, we issued 115,000 shares of common stock for $45,487 of
cash to David S. Lerner ("Mr. Lerner"), the Company's president.

                                       13
<PAGE>

In September 2003, the Company issued 1,000,000 shares of common stock for
$250,000 of cash to Mr. Granito.


SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY INCENTIVE PLANS

         Set forth in the table below is information regarding awards made
through compensation plans or arrangements through June 30, 2003, the most
recently completed fiscal year.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                         Number of securities    Weighted average        Number of securities
                         to be issued upon       exercise price of       remaining available
                         exercise of             outstanding options,    for future issuance
                         outstanding options,    warrants and rights     under equity
                         warrants and rights     (b)                     compensation plans
                         (a)                                             (excluding securities
                                                                         reflected in column
                                                                         (a)
----------------------------------------------------------------------------------------------
<S>                      <C>                     <C>                     <C>
Equity compensation      1,980,000               $3.23                   1,860,000
plans approved by
security holders
----------------------------------------------------------------------------------------------
Equity compensation      N/A                     N/A                     N/A
plans not approved by
security holders
----------------------------------------------------------------------------------------------
Total                    1,980,000               $3.23                   1,860,000
----------------------------------------------------------------------------------------------
</TABLE>

The 2001 Stock Option Plan authorizes the issuance of options, right to purchase
Common Stock and stock bonuses to officers, employees, directors and
consultants. We reserved 10,000,000 shares of our Common Stock for awards to be
made under the 2001 Plan. The 2001 Plan is administered by a committee of two or
more members of the Board of Directors or, if no committee is appointed, then by
the Board of Directors. The 2001 Plan allows for the issuance of incentive stock
options (which can only be granted to employees), non-qualified stock options,
stock awards, or stock bonuses. The committee, or the Board of Directors if
there is no committee, determines the type of award granted, the exercise price,
the option term, which may be no more than ten years, terms and conditions of
2001 and methods of exercise. Options must vest within ten years. Under the 2003
Plan, the exercise price may not be less than fair market value on the date of
grant for incentive stock options, and not less than 85% of the fair market
value on the date of grant for non-qualified stock options. The number of
options under the 2001 Plan available for grant at June 30, 2003 was 1,860,000.

                                       14
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION

         The following discussion should be read in conjunction with Quick-Med
Technologies' audited financial statements and notes thereto included herein. In
connection with, and because it desires to take advantage of, the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, Quick-Med
Technologies cautions readers regarding certain forward looking statements in
the following discussion and elsewhere in this report and in any other statement
made by, or on the behalf of Quick-Med Technologies, whether or not in future
filings with the Securities and Exchange Commission. Forward-looking statements
are statements not based on historical information and which relate to future
operations, strategies, financial results or other developments. Forward-looking
statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond Quick-Med
Technologies' control and many of which, with respect to future business
decisions, are subject to change. These uncertainties and contingencies can
affect actual results and could cause actual results to differ materially from
those expressed in any forward-looking statements made by, or on behalf of,
Quick-Med Technologies. Quick-Med Technologies disclaims any obligation to
update forward-looking statements.

Overview

         Quick-Med Technologies intends to fund the research efforts necessary
to develop the planned products, administer the patent process, subcontract the
manufacture of its products and, in many cases, enter joint ventures or licenses
with other companies to move products to the marketplace. Quick-Med Technologies
itself does not intend to manufacture and distribute final products. Quick-Med
Technologies intends to focus its attention on the value-added activities of
developing and commercializing new core technologies. Scientific experts in
relevant fields will be identified and retained through consulting contracts.
Senior management will be identified to ensure broad experience in all aspects
of the business. Cash expenditures have been kept relatively low because
Quick-Med Technologies has been compensating non-executive management and the
scientific team mostly in equity, and not in cash salaries and benefits.

Quick-Med Technologies' vision is to maximize human health initiatives through
the rapid identification and development of its core technologies, followed by
the commercialization of those technologies through strategic partnership,
licenses, joint ventures, or co-development agreements.


Summary of Business Developments

         The Company believes that it is on plan in commercializing its two core
technologies -- NIMBUS(TM)and MultiStat(TM)

Technology: MultiStat(TM)

         MultiStat(TM) is the Company's family of patented compounds and
techniques for MMPI-related skin care applications, which is being
commercialized in both the cosmetics/personal skin care and pharmaceutical
markets.

In the cosmetics/personal skin care category, the Company has a distribution
agreement with the Collaborative Group, a specialty chemical company providing
ingredients and advanced formulations to the skin care industry. The agreement
called for a period of product development followed by an aggressive marketing
and sales effort for various skin care products. The first phase of product
development was substantially complete in June 2003 and the venture launched its
first product in Q3 2003, EquiStat(TM) - a high performance ingredient for
anti-aging skin care products, which meets or exceeds efficacy expectations.
Through August 2003, the market reception to EquiStat(TM) has been positive with
at least 3 nationally recognized brands indicating, although not yet committing,
to utilize EquiStat in product launches during 2004. Numerous other companies
are currently evaluating EquiStat(TM) for inclusion in 2004 and beyond.
EquiStat(TM) has already been formulated in a small volumes of skin care
products sold over television shopping network and has produced a small level of
sales during the first 3 months of sales and marketing. The Collaborative Group
believes that it will be able to fulfill its sales objectives as outlined in the
distribution agreement with Quick-Med Technologies.

                                       15
<PAGE>

In the pharmaceutical area, the Company has a Cooperative Research And
Development Agreement, or CRADA, with the U.S. Army Medical Research Institute
for Chemical Defense at Edgewood, MD, to develop a post-injury agent for mustard
gas exposures to the eye and skin. The drug development plans entails combining
pre-existing safety data (Completed Phase I and II/III studies of the same
formulation but used for a related ocular condition) with efficacy data derived
from animal models. (Animal data is expected to be allowed by the FDA because
mustard gas cannot be tested in human subjects.) During the 9-month ended June
30,2003 the proposed drug was found to be successful in initial efficacy studies
conducted in Israel and the Netherlands. Additional efficacy tests should be
completed by Q1, 2004. Based on the successful efficacy findings to date and the
known safety profile of the proposed drug product, the U.S. Army's drug
procurement office has expressed significant interest in the drug product. The
Company is currently negotiating with the owner of the pre-existing safety data
to acquire full rights to the data for use in the drug development program. The
Company is expecting various submissions to the F.D.A. and to seek approval for
the drug during 2004, for possible sale to the U.S. Government as early as
fiscal 2005, which commences in October 2004.

Technology: NIMBUS(TM) - Novel Intrinsically Microbiocidal Utility Substrate

         NIMBUS(TM) refers to a family of advanced polymers that can be bonded
onto a variety of substrates to cause the treated article to be antimicrobial,
super-absorbent or hemostatic. The Company believes that NIMBUS(TM) has
applications in numerous end industries but is currently focused on three key
end industries.

     1.           Bandages, Wound Dressings and Related Products: Bandage
         products that use NIMBUS(TM)technology have undergone proof of concept
         testing to demonstrate unique or superior characteristics and as a
         result, the Company is working with several domestic and one European
         firm that specialize in healthcare and medical device products as well
         as hospital supplies. It is believed that the regulatory approval
         process in this arena will be simplified by the existence of predicate
         devices that may fast track F.D.A. approval. The Company is seeking to
         finalize and/or enter joint development agreements or license
         negotiations with key firms that will serve as partners in
         commercializing NIMBUS(TM)in the end market.

     2.           Building Materials: The growing concern over mold or toxic
         compounds is causing many companies in this industry to examine ways to
         protect their products. The Company has Joint Development Agreements in
         place with several major firms in the building materials industry,
         including preserved wood and wallboard, and is in negotiation with
         several others, including insulation companies and diverse wood
         products manufacturers. The development efforts are at various stages
         of maturity, wallboard being the most advanced with efficacy testing
         successfully completed and significant effort underway to implement the
         technology in the partner company production processes.
         NIMBUS(TM)continues to be tested in the wood preservation arena where
         it is common for testing protocols to take several years to reach
         conclusion. NIMBUS(TM)is now being tested for effectiveness in the
         insulation and wood products categories, where discussions are actively
         underway with potential business partners who are showing interest in
         this technology.

     3.           Personal Care Products: NIMBUS(TM)is being commercialized in
         several ways in the personal care industry. The Company believes that
         the greatest opportunity may be as a preservative in cosmetic or other
         topical products. A common preservative in that market -- parabens --
         are likely to be withdrawn from the market due to health concerns, and
         as a result, the industry is seeking alternatives. NIMBUS(TM)is
         attractive for this market as it takes a novel approach by bonding the
         active microbicide to other ingredients in the preparation, thus
         preventing growth of microbes, but it is safe to humans and cannot be
         absorbed into the skin the way competing preservatives can.
         NIMBUS(TM)is being actively studied by a several major personal care or
         cosmetics manufacturers as a preservative. The Company is also working
         on other opportunities in personal care including use in soaps and
         shampoos (where it has developed new emulsion technologies to
         effectively deliver the NIMBUS(TM)), oral care and wipes.

                                       16
<PAGE>

The Company has been recently approached by two competing firms in the business
of providing antimicrobial technologies for possible collaboration or licensing.
These opportunities are being evaluated. In addition, the Company has begun to
be approached by end-market companies for possible application of the
technology.

Quick-Med Technologies believes that NIMBUS(TM) technology is timely as numerous
end markets have begun to have concern about bacteria, mold or the toxicity of
existing approaches. The Company plans to first pursue opportunities where speed
to market is greatest and regulatory barriers are lowest. Regulatory difficulty
is lowest in the preservatives arena, followed by bandages and wound dressings,
followed by building materials or other areas. (If an antimicrobial public
health claim is made by the product, the E.P.A. pesticide regulations will
apply.

Critical Accounting Policies and Estimates

         The preparation of the Company's financial statements requires for
Quick-Med Technologies to make estimates and assumptions that affect the
reported amounts. The estimates and assumptions are evaluated on an on-going
basis and are based on historical experience and on various other factors that
are believed to be reasonable. Estimates and assumptions include, but are not
limited to, fixed asset lives, intangible assets, income taxes, and
contingencies. Quick-Med Technologies bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Quick-Med Technologies
believes the following critical accounting policies affect its more significant
judgments and estimates used in the preparation of the financial statements. The
Company's accounting for stock compensation requires for Quick-Med Technologies
to estimate the value of the shares issued and the value of intangible assets
require the Company to continually assess whether such assets are impaired.

Results Of Operations

         YEAR-ENDED JUNE 30, 2003

Quick-Med Technologies had no sales for the year ended June 30, 2003 as its
products are still in the development stage.

Quick-Med Technologies reported an operating loss of ($4,260,177) for the year
ended June 30, 2003. The operating loss was due to a combination of a
significant stock-based compensation, an accelerated spending in research and
development, a substantial interest expense and an increased general and
administrative expenses as operating level increased. The significant
stock-based compensation was resulted from a non-cash expense 1,758, 539 for
issuance of stock options in lieu of cash compensation to the board of
directors, management and the consultants. The research and development expense
of $618,076 for the year ended June 30, 2003 was accelerated as the Company
added more personnel during the year and stepped up its research and development
through various product developments. As part of the research and development
expense, Quick-Med Technologies incurred $250,000 of its proportionate share as
part of the product development and distribution agreement with the
Collaborative Group to further develop a cosmetic product. Further, the Company
expensed approximately $62,000 for post-injury mustard gas exposure treatment
research testing conducted by third parties. General and administrative expenses
of $807,769 included a $125,000 salary of a full-time president, an
approximately $87,000 in directors and officers liability insurance, a $86,000
in consulting fees, a $81,000 in patent maintenance fees and related legal
expenses, an approximately $96,000 in public relations and expenses related to
being a public company. Additionally, approximately $81,000 was incurred in
accounting and audit fees. Further, Quick-Med Technologies incurred $50,000 in
fees to the licensors in order to maintain its rights under the license
agreement as the Company anticipated that it will not meet all the developmental
milestones at June 30, 2003. Quick-Med Technologies expects that costs will
continue to increase as its product development efforts continue to increase and
additional employees are hired to staff the research lab.

                                       17
<PAGE>

Interest expense for the year ended June 30, 2003 was $1,036,025 due to the
conversions of the notes payable to shareholders of $673,710 in principal
balance and $29,974 in related accrued interest into common stock. As a result
of these conversions, the Company took a charge of $965,559 of non-cash interest
expense. Additionally, Quick-Med Technologies had a larger outstanding balance
as June 30, 2003 as compared to June 30, 2002.

Net loss for the year ended June 30, 2003 was ($4,260,177) or $.32 per share.


SIX MONTHS ENDED JUNE 30, 2003

         Quick-Med Technologies had no sales for the six months ended June 30,
2002 as its products are still in the development stage.

Quick-Med Technologies reported an operating loss of ($903,833) for the six
months ended June 30, 2002. The operating loss was due to a non-cash expense of
$445,276 in stock-based compensation in lieu of cash to directors, management
and consultants, an accelerated research and development expense of $120,658 and
an approximately $289,000 in general and administrative expenses. Quick-Med
Technologies expects that costs will continue to increase as it product
development efforts continue to increase.

Interest expense for the six months ended June 30. 2002 was approximately
$28,000.

Net loss for the six months ended June 30, 2002 was ($903,833) or ($.07) per
share.

Liquidity and Capital Resources

         At June 30, 2003, Quick-Med Technologies had a working capital deficit
of ($2,128,388), primarily due to loans of $1,300,200, a license fee payable of
$160,000 and accounts payable of $607,241. At June 30, 2003, Quick-Med
Technologies had a stockholders' deficit of ($1,754,811). A substantial portion
of the deficit was due to non-cash stock compensation expense and non-cash
interest expense due to the notes payable conversions described below and above.

Cash used by operating activities was $1,192,693 for the year ended June 30,
2003. Net cash used by investing activities was $2,746 for a purchase of fixed
assets, and $51,894 for additional licensing rights, the filing fees and related
legal fees of new patent applications. Net cash provided by financing activities
was $1,283,200 of which $885,200 was from notes payable and $398,000 from the
issuance of common stock for cash.

During the next six months, the Company will be seeking additional outside
funding either from financial or strategic investors. The firm is in dialog with
several entities that may seek a strategic stake in the NIMBUS(TM) technology.

In order to obtain funding for particular applications of either its NIMBUS(TM)
or Multistat(TM) technologies, the Company pursues applicable federal grants
under either the SBIR or STTR programs.

To date, Quick-Med Technologies has funded its activities principally from loans
totaling approximately $1,309,500 from shareholders and an affiliated company
and a $650,000 loan from a merchant banking firm. The funds have been loaned
with 6% interest. The loan from the investment banking firm was converted in
November 2002 into common stock at $1.00 per share.

At June 30, 2003, Quick-Med Technologies had an outstanding loan balance of
$1,300,200 with Mr. Granito, of which $750,000 was from a line of credit fully
utilized by the Company. The line of credit agreement provides that the
outstanding balance is convertible into common stock at $1.00 per share at Mr.
Granito's option. At June 30, 2003, no conversion of common stock had taken
place. In October and November 2002, the Company entered into an additional
short term borrowing arrangement with the Chairman for up to $500,000 at 6%
interest, due July 1, 2003. It was secured by the assets and revenues of the
Company. The additional short term borrowing without a conversion privilege was
considered as an extension of a line of credit of $750,000 as part of a single
financial instrument. As of June 30, 2003, the line had been extended to
$550,200 and was fully utilized by the Company. So far, the Company has not
repaid any amounts to the Mr. Granito; the entire combined borrowing of
$1,300,200 (excluding interest) is due to Mr. Granito.

                                       18
<PAGE>

In September 2003 the Company negotiated a successor agreement with Mr. Granito
regarding the line of credit, which expired July 1, 2003 totaling $1,300,200,
excluding interest. The line of credit of $750,000 and the short term borrowing
of $625,000 are consolidated into a single convertible note for up to $1,500,000
excluding accrued interest, at an interest rate of 6% and due July 1, 2004. The
maturity date of the loan will be extended if the Company is unable to repay the
loan at that time. The convertible note is secured by the assets and revenues of
the Company and will be remained as the senior-most debt obligation. The note
plus accrued interest will be convertible, in full or in part, at the option of
the lender for a term of up to 5 years beginning at September 1, 2003 at a
conversion rate of $0.38 per share. The conversion rate was determined as 15%
above the average share price over the prior 20 trading days ($0.33 per share)
and 50% over the share price at which the Company would normally price its
restricted common stock based on a discount to the prior 20 day average trading
price. The note has an anti-dilution provision in the event that the Company
sells stock to other investors at less than $0.20 per share. This convertible
note agreement is made contingent upon the agreement of the lender to provide
additional funding to the Company by purchasing restricted common stock at
prices to be agreed to by the Company or by other means.

During the fiscal year ended June 30, 2003, Quick-Med Technologies raised
approximately $398,000 through the issuance of common stock, of which $250,000
was from an entity owned by the Chairman.

In January 2003, Mr. Lerner, converted its outstanding loan balance of $26,191
plus accrued interest into approximately 30,855 shares of common stock at the
conversion rate of $1.00 per share.

In September 2003, the shareholder loan payable of $9,300 plus accrued interest
has been converted into restricted common stock at the conversion rate of $0.25
per share.

In September 2003, approximately $27,000 of accounts payable was paid by the
issuance of 50,000 shares of restricted common stock.

To date, Quick-Med Technologies has been able to meet its obligations on a
timely or delayed basis, as funding has been made available on an as needed
basis. However, Quick-Med Technologies cannot assure the investor, that Mr.
Granito will continue to provide funding beyond the amount of the revolving note
agreement.

Quick-Med Technologies received $650,000 of bridge financing from Euro Atlantic.
On November 16, 2002, Quick-Med Technologies and Euro Atlantic entered into an
interim agreement to restructure its relationship. Under the revised terms, Euro
Atlantic converted the notes in the principal amount of $650,000 plus $25,000
accrued interest into 675,000 shares of common stock and such amounts will be
applied to the $2 million of equity financing that Euro Atlantic committed to
provide. The deadline for providing the remaining amounts up to $2 million was
extended to May 4, 2003. As of June 30, 2003, Euro Atlantic has raised a total
of $850,000 including the $650,000 from the conversion of its $2 million
commitment and the Company believes it is unable or unwilling to fulfill its
obligations. As of September 2003, Quick-Med Technologies and Euro Atlantic have
continued to discuss ways by which Euro Atlantic may fulfill its obligations to
Quick-Med Technologies.

                                       19
<PAGE>

Contractual Obligations and Commercial Commitments

         The following tables summarize our contractual obligations and
commercial commitments as of June 30, 2003:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Significant Capital Obligations     Total     Within 1 Year    2-3 Years    4-5 Years    After 5 Years
------------------------------------------------------------------------------------------------------
<S>                                <C>           <C>            <C>          <C>            <C>
Capital Leases                     $    --
------------------------------------------------------------------------------------------------------

Operating Leases                   $ 3,351       $    --        $    --      $    --        $    --
------------------------------------------------------------------------------------------------------
</TABLE>


         The Company is committed under leases for its Gainesville, Florida
office and lab. The lease expires in March 2004. The Company does not have any
capital leases.

Recent Pronouncements

         In December 2002, the Financial Accounting Standards Board ("FASB")
issued Statement No. 148 ("SFAS No. 148"), "Accounting for Stock-Based
Compensation, Transition and Disclosure." SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. SFAS No. 148 also requires
that disclosures of the pro forma effect of using the fair value method of
accounting for stock-based employee compensation be displayed more prominently
and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the
pro forma effect in interim financial statements. The transition and annual
disclosure requirements of SFAS No. 148 are effective for fiscal years ended
after December 15, 2002. The interim disclosure requirements are effective for
interim periods ending after December 15, 2002. The disclosure provision of SFAS
No. 148 has been adopted by the Company with appropriate disclosure included in
the financial statements.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 149 is effective for contracts entered into or modified after June 30, 2003,
except as specified and for hedging relationships designated after June 30,
2003.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS 150
requires that certain financial instruments, which under previous guidance were
accounted for as equity, must now be accounted for as liabilities. The financial
instruments affected include mandatory redeemable stock, certain financial
instruments that require or may require the issuer to buy back some of its
shares in exchange for cash or other assets and certain obligations that can be
settled with shares of stock. SFAS No. 150 is effective for all financial
instruments entered into or modified after May 31, 2003. Otherwise it will
become effective at the beginning of the first interim period beginning after
June 15, 2003.

The Company believes that the ongoing application of these Statements will not
have a material adverse effect on the Company's financial position, results of
operations, or cash flows.

Plan of Operation

RESEARCH AND DEVELOPMENT

Over the next 12 months Quick-Med Technologies intends to continue the
development of its two core technologies. Assuming it raises sufficient funds,
product development activities are expected to accelerate. Quick-Med
Technologies has been modestly expanding its research facility in Gainesville,
Florida near its University of Florida researchers, but will continue its
research and development with existing and new partners in order to conserve

                                       20
<PAGE>

resources. For each potential product, Quick-Med Technologies will continue to
monitor the appropriate time to enter into negotiations towards a license
agreement with a joint venture partner such as with the Collaborative Group. To
the extent that Quick-Med Technologies enters into a joint venture agreement, it
is anticipated that the partner will assume some or all of the development costs
in exchange for a percentage of the profits for that product. These ventures
will have the effect of decreasing cash flow over the near term and long term,
but will help sustain Quick-Med Technologies' operations since it should be able
to devote its limited resources to more projects than it could otherwise do
without partners.

Quick-Med Technologies anticipates hiring additional employees, and expects to
retain scientific and product marketing consultants on a project basis over the
next year. These consultants will be paid on an hourly, milestone or project
basis in cash or equity. Quick-Med Technologies currently employs five
scientific consultants on a part-time basis. Their consulting fees range from
$36,000 per year to $72,000 per year in cash and shares of stock. The agreements
also provide for bonuses of up to $10,000 per year. In order to conserve its
cash, Quick-Med Technologies intends to seek employees who are willing to
receive a combination of cash and equity for compensation. Bonuses may be
awarded for achievement of milestones such as entering into a license agreement
or receipt of regulatory approval for a particular product.

         TECHNOLOGY: MULTISTAT(TM)
COSMETIC

In August 2002, Quick-Med Technologies entered into an exclusive five-year
product, manufacturing and distribution agreement with The Collaborative Group,
Ltd. (the "Collaborative Group"), a leading specialty chemical company focused
on supplying ingredients and advanced formulations to a variety of products
within the cosmetic industry. Under the agreement, a product line is being
developed using a combination of the Collaborative Group's advanced chemistries
and formulation capabilities with Quick-Med Technologies' MultiStat(TM) family
of MMPI-related technologies. Quick-Med Technologies is required to pay to
Collaborative an additional $100,000 over the next 10 months for research and
development pursuant to the Distribution contract signed in August 2002.

         The Collaborative Group will conduct its work pursuant to a work plan
agreed to by the parties that outlines a series of personal skin care products
for development and launch. The initial phase of the cosmetic product
development program has been completed with the first formulation in launch - a
high performance ingredient for cosmetic formulations. This product is not
currently expected to require FDA approval. The plan for the next 12 months is
predominantly to aggressively sell this first product. The Company expects that
other products will be developed and readied for launch during 2004 and beyond.

PHARMACEUTICAL

For the sulfur mustard post-injury agent treatment, Quick-Med Technologies will
continue its development pursuant to the Cooperative Research and Development
Agreement, or CRADA, with U.S. Army Medical Research Institute of Chemical
Defense. The CRADA provides that research is done by Quick-Med Technologies in
consultation with the U.S. Army.

Over the next 12 months the plan will be to continue developing the efficacy
data in clinical experiments using animal models. At the same time, the Company
is negotiating to acquire pre-existing safety data. The Collaborative Group is
assisting Quick-Med on manufacturing and packaging. The Company expects to have
the requisite data package and development program available for submission to
the F.D.A. in H1 2004 and to seek approval for an ocular drug treatment during
Q4 2004. The Company will seek funding from the U.S. Government for purchase of
drug product during fiscal 2005, which begins in October 2004. After it has made
sufficient progress on the ocular indication, the Company will initiate research
and development on a drug for skin exposures.

                                       21
<PAGE>

TECHNOLOGY: NIMBUS(TM)

         For the NIMBUS(TM) technology, Quick-Med Technologies will continue its
product development at its own and outside laboratories with the intent of
seeking to commercialize this potential product in collaboration with end-market
manufacturers. Preliminary discussions have commenced with potential partners.
If research and product development are successful, and any required regulatory
approvals obtained, first products may be ready for commercialization by 2004.

The research and development on NIMBUS(TM) is focused at present in three areas:
bandages, building materials and personal care products. In bandages, the area
of focus will be new high technology products that are antimicrobial while being
either super-absorbent or hemostatic. In building materials, the areas of
immediate focus will be wallboard, where the company has made the greatest
progress, followed by insulation and wood. In personal care, the plan will be to
focus on use of NIMBUS(TM) as a preservative and in other personal care products
such as shampoos, deodorants and soaps. During the next 12 months, the Company
seeks to have developed proof-of-concept product applications and license (or
similar) agreements with at least one firm in each of these categories.

Quick-Med Technologies will seek additional business partnerships in the bandage
and personal care/preservatives categories to accelerate the work and
commercialize.

Capital Expenditures and Requirements

         Quick-Med Technologies has spent approximately $295,000 over the last
two years on the acquisition of patents and exclusive license agreements, and
owes an additional $160,000, which is due when certain milestones are met.

Over the next 12 months Quick-Med Technologies anticipates earning revenues from
some of its products. However, over the next 12 months, Quick-Med Technologies
is unlikely to be required to pay any royalties for its license to its primary
MMP-inhibitor. Should Quick-Med Technologies receive revenues pursuant to its
license of its primary MMP-inhibitor from other than cosmetic or military sales
then it will be required to pay a royalty to the licensor of 2.0% of the first
$1.5 million of revenue, and 1.5% from then on, for such sales. Over the next 12
months the Company is likely to pay royalties to DermaCo, Inc. on sales of
cosmetics products, of which $25,000 has been pre-paid via an upfront payment to
DermaCo, Inc.

Quick-Med Technologies anticipates over the next 12 months that it will spend
approximately $1,500,000 on operations, most of which is expected to come from
third party funding, private placements, strategic partnerships or license
agreements. It is anticipated that the majority of any funds raised will be used
for research and development, patent prosecutions and licenses for proposed
products. It is also possible that a licensing arrangement will be made with one
or more strategic partners that will pay a license fee to Quick-Med Technologies
or assume a portion of the research expenses.

         Quick-Med Technologies does not expect any significant additions to
physical property, plant and equipment in the 12 months, but may acquire or pay
to produce additional intellectual property.

Factors That May Affect Future Results

Investors should carefully consider the following risks in evaluating Quick-Med
Technologies. The risks described below are not the only ones that the Company
faces. Additional risks that the Company does not yet know of or that Quick-Med
Technologies currently considers being immaterial may also impair its business
operations. The Company's business, operating results or financial condition
could be materially adversely affected by any of the following risks. The
trading price of Quick-Med Technologies' common stock could decline due to any
of these risks, and the investor may lose all or part of its investment. The
investor should also refer to the other information set forth in this report,
including the Company's financial statements and the related notes.

Quick-Med Technologies cautions the investor, that certain important factors may
affect the Company's actual results and could cause those results to differ
significantly from any forward-looking statements made in this report or
otherwise made by or on behalf of Quick-Med Technologies.

                                       22
<PAGE>

The Company has a negative net worth and will be unable to continue operations
without raising additional capital or generating revenues from product sales or
licensing. The Company is insolvent since Quick-Med Technologies has not yet
raised sufficient funds to operate its planned business. The Company incurred
net loss of ($4,260,177) for the year ended June 30, 2003. Quick-Med
Technologies expects to incur operating losses for the next several years as it
invests in product research and development, preclinical and clinical testing
and regulatory compliance. Quick-Med Technologies will require substantial
additional funding to complete the research and development of its product
candidates, and to market its products.

Quick-Med Technologies' accountants have issued a going concern opinion due to
the lack of capital. Because of the uncertainties in its ability to satisfy its
future capital needs, Quick-Med Technologies' auditors' report on its financial
statements for the six months ended June 30, 2002 contains an explanatory
paragraph about its ability to continue as a going concern.

Because Quick-Med Technologies is a new business venture with no products in the
market, the investor does not have any history on which to rely upon in
determining whether to invest in Quick-Med Technologies. Quick-Med Technologies
has limited experience and a short history of operations, and has no experience
in marketing and selling any products. It has not generated any revenues from
operations. None of its products have sought or received regulatory approval.
Quick-Med Technologies cannot assure the investor that it will be able to
complete designing and testing its products, that the products will be (1)
approved by the F.D.A., (2) accepted in the marketplace, or (3) that it will be
able to sell them at a profit. Furthermore, as a young company, Quick-Med
Technologies is especially vulnerable to the problems, delays, expenses, and
difficulties encountered by any company in the development stages, because it
does not have an operating history and experience to rely upon or an established
infrastructure.

Quick-Med Technologies has not completed the process of proving any of its
products' effectiveness and may not be able to do so in the future. Quick-Med
Technologies has just started developing its primary products and will require
substantial laboratory and clinical testing before it can market a product to
consumers. This testing could take several years to complete.

Quick-Med Technologies' proposed products might not be accepted in the market,
adding to the time before it receives any revenue from product sales. Quick-Med
Technologies plans to develop and market products to the U.S.A. and foreign
militaries, pharmaceutical and cosmetic companies for sale to civilian retail
customers. Military sales will require detailed and rigorous research and
development process that may be lengthy and uncertain in outcome. Although
Quick-Med Technologies will not sell directly to civilian retail customers,
these consumers must still accept its wound dressing or cosmetic products as
beneficial and worthwhile. Patients, doctors and third-party payers must also
accept Quick-Med Technologies developed products as medically useful and
cost-effective. Market acceptance will require substantial education about the
benefits of its wound care products and other products. Quick-Med Technologies
cannot assure the investor that the market will accept its products, even if
approved for marketing, on a timely basis. If retail consumers, patients, the
medical community, and third-party payers do not accept its products or
acceptance takes a long time, then revenues and profits would be reduced.

Quick-Med Technologies will require additional capital to be successful, which
will potentially dilute the value of shares of then current shareholders.
Quick-Med Technologies expects to continue to incur substantial losses for at
least another year. During this period, it does not expect to obtain significant
revenues from operations but will need substantial funds, primarily for the
following purposes:

         To continue product development of its proposed products;
         To continue clinical trials and otherwise pursue regulatory approvals;
         and
         To begin to develop new products based on its wound care technology;
         and
         To conduct the clinical tests necessary to develop and refine new
         products.

                                       23
<PAGE>

To finance Quick-Med Technologies' operations to date, it has relied almost
entirely on private offerings of common stock and loans from officers. The terms
on which it obtains additional financing may dilute the existing shareholders
investments, or otherwise adversely affect its position. It is also possible
that Quick-Med Technologies will be unable to obtain the additional funding it
needs as and when it needs it. If it were unable to obtain additional funding as
and when needed, Quick-Med Technologies could be forced to delay the progress of
its development efforts. These delays would hurt its ability to bring a product
to market and obtain revenues, and could result in competitors developing
products ahead of Quick-Med and/or in its being forced to relinquish rights to
technologies, products or potential products.

Quick-Med Technologies will depend upon others for marketing and distributing
its products. Quick-Med Technologies has both military and civilian target
markets. While some members of its management have experience in selling to
military organizations, Quick-Med Technologies currently lacks marketing and
sales experience and personnel, distribution channels and other infrastructure
needed to successfully market and distribute a product in civilian markets. It
intends to rely on collaborative arrangements with one or more other companies
which possess strong marketing and distribution resources to perform these
functions. Quick-Med Technologies only has an agreement with other companies for
marketing or distributing one of its proposed products. It may be forced to
enter into contracts to market and distribute its products that substantially
limit the potential benefits to it from commercializing these products.
Quick-Med Technologies will not have the same control over marketing and
distribution that it would have if it conducted these functions itself.

Quick-Med Technologies depends on licenses it has obtained on patented
technology, the loss of which would mean it could not develop or market many of
its products. Quick-Med Technologies' rights to develop several of its proposed
products comes primarily from one license agreement. In the event that this
primary license agreement terminates for any reason, including failure to make
royalty payments, challenges to the underlying patent or a breach, Quick-Med
would lose its rights to manufacture and market its proposed wrinkle treatment
skin care and mustard gas products. Quick-Med Technologies may also be required
to license additional rights in order to market its products and may not be able
to obtain these rights on favorable terms or at all.

Quick-Med Technologies has multiple U.S.A. and international patent applications
that may not be granted. Quick-Med Technologies cannot assure the investor that
its applications will be granted or that its patent rights will provide it with
significant protection against competitive products or otherwise be commercially
viable. As a result Quick-Med Technologies may not be able to protect its
proprietary information.

Quick-Med Technologies may experience a significant delay in obtaining patent
protection for its products due to a substantial backlog of pharmaceutical and
biotechnology patent applications at the U.S.A. Patent and Trademark Office,
commonly known as the "PTO". Because patent applications in the U.S. have been
maintained until recently in secrecy until patents issue, other competitors may
have filed or maintained patent applications for technology used by Quick-Med
Technologies or covered by pending applications without its being aware of these
applications.

The regulatory approval process is costly and lengthy and Quick-Med Technologies
may not be able to successfully obtain all required regulatory approvals, which
would prohibit it from selling some or all of its planned products. The
preclinical development, clinical trials, manufacturing, marketing and labeling
of pharmaceuticals are all subject to extensive regulation by numerous
governmental authorities and agencies in the U.S.A. and other countries.
Quick-Med Technologies must obtain regulatory approval for some of its product
candidates before marketing or selling them. It is not possible to predict how
long the F.D.A.'s or any other applicable federal, state or foreign regulatory
authority or agency's approval process for any of its products will take or
whether any approvals will be granted. Positive results in preclinical testing
and/or early phases of clinical studies offer no assurance of success in later
phases of the approval process. Generally, preclinical and clinical product
testing can take many years, and can require the expenditure of substantial

                                       24
<PAGE>

resources. Any delay or failure to obtain approvals will adversely affect
Quick-Med Technologies' ability to market its products and its ability to
generate product revenue. Factors that can impact the approval process include:

     o   Delays or rejections in the regulatory approval process based on the
         failure of clinical or other data to meet expectations, or the failure
         of the product to meet a regulatory agency's requirements for safety,
         efficacy and quality; and

     o   Regulatory approval, if obtained, may significantly limit the indicated
         uses for which a product may be marketed.

Quick-Med Technologies' clinical trials could take longer to complete and cost
more than it expects, which would require raising additional funds and lengthen
the time before Quick-Med Technologies could realize any revenue. Quick-Med
Technologies will need to conduct a complete study of each of its product
candidates. These studies are costly, time consuming and unpredictable. Any
unanticipated costs or delays in its clinical studies could cause Quick-Med
Technologies to expend substantial funds unexpectedly or delay or modify its
plans significantly, either of which would harm its business, financial
condition and results of operations. The factors that could contribute to these
costs, delays or modifications include:

     o   The cost of conducting human clinical trials for any potential product;

     o   These costs can vary dramatically based on a number of factors,
         including the order and timing of clinical indications pursued and the
         development and financial support from Company partners; and

     o   Intense competition in the pharmaceutical market, which may make it
         difficult for it to obtain sufficient patient populations or clinician
         support to conduct its clinical trials as planned.

Quick-Med Technologies does not have product liability insurance and may not be
able to get any on reasonable terms. Its business exposes it to product
liability claims inherent in the testing and marketing of medical products. It
currently carries no product liability insurance, but intends to acquire
insurance prior to selling any of its products for commercial use. Quick-Med
Technologies cannot assure the investor that it will be able to get or keep
adequate liability insurance at a reasonable cost. Its inability to get or keep
insurance at an acceptable cost could prevent or inhibit the commercial
development of its products. A liability claim, even one without merit, could
result in major legal expenses.

The hazardous material Quick-Med Technologies will use in part of its research
and development could result in significant liabilities. Quick-Med Technologies
will use hazardous materials in some of its research and development activities.
In most instances these materials are only handled by the U.S. military in
conducting tests jointly on behalf of Quick-Med Technologies and the military.
In some other instances, these materials may be handled within the private
sector. While it believes that it will be in substantial compliance with
federal, state and local laws and regulations governing the use of these
materials, accidental injury or contamination may occur. An accident or
contamination could result in substantial liabilities, which could exceed its
financial resources. The cost of compliance with environmental and safety laws
and regulations may also increase in the future, which could adversely effect
revenues.

There is a limited public market for Quick-Med Technologies common stock, which
means the investor may experience difficulty in selling its shares. At the
present time, there is a limited public market for Quick-Med Technologies common
stock, which commenced trading on the OTC Bulletin Board in September 2002. In
any event, due to the low price of the securities, many brokerage firms may
choose not to engage in market making activities or effect transactions in such
securities. Purchasers of the securities may have difficulties in reselling them
and many banks may not grant loans utilizing Quick-Med Technologies securities
as collateral. Quick-Med Technologies securities are not eligible for listing on
the Nasdaq Stock Market, and may not be in the future.

                                       25
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

         The Financial Statements are located after the signature page.

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

         None.


                                       26
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         The following table sets forth the names, ages and positions held for
Quick-Med Technologies' directors, executive officers and significant employees.

Quick-Med Technologies' directors and officers are as follows:

           Name                   Age        Position
           ----                   ---        --------

Michael R. Granito                 51        Founder and Chairman of the Board

David S. Lerner                    50        Founder, President, and Director

MG. George E. Friel (Ret.)         61        Vice President, Chemical and
                                             Biological Affairs, and Director

LTD. Paul G. Cerjan (Ret.)         65        Vice President, Worldwide Military
                                             Affairs, and Director

Gerald M. Olderman, Ph.D.          70        Vice President, Research &
                                             Development and Commercialization,
                                             and Director

Gregory S. Schultz, Ph.D.          53        Vice President, Laboratory and
                                             Clinical Research, and Director

Michael D. Karsch, ESQ.            43        General Counsel, Secretary, and
                                             Director

Peter Barton Hutt, ESQ.            68        Director



BIOGRAPHY

Michael R. Granito -Chairman of the Board

Michael R. Granito was appointed to Chairman of the Board of Quick-Med
Technologies, Inc. in July 2000. A noted author and proven expert in his field,
Mr. Granito recently joined Federated Investors, Inc. as senior vice president
and head of capital market research. In December 2002, he retired from J.P.
Morgan Fleming Investment Management where he was managing director and head of
capital market research, overseeing quantitative research and development for
investment services. He served as an adjunct Professor of Finance at Yale
University and New York University and authored a book and 14 papers on finance
and foreign exchange topics.

David S. Lerner - Founder, President and Director

David S. Lerner has served as President and Director since Quick-Med
Technologies' incorporation in December 1997 and has been engaged in the
formation and development of Quick-Med Technologies since 1995. Mr. Lerner has
20 years experience in international and domestic manufacturing, marketing,
sales, and business development in Asia, Europe, South America, and Mexico. He
has successfully managed export financing activities, including letter of credit
and manufacturing arrangements. Mr. Lerner also has experience with major
retailers, namely Sears, Roebuck and Co., Kmart Corporation, and Wal-Mart Stores
Inc. and has developed markets for private label and nationally branded products
through mass retailers and department stores. He received his B.A. from Queens
College, The City University of New York, New York.

MG. George E. Friel (Ret.) - Vice President, Chemical and Biological Affairs,
and Director

Major General George E. Friel (Ret.) has served as Vice President, Chemical and
Biological Affairs and Director for Quick-Med Technologies since July 2000, and
has been self-employed as a consultant to various organizations in the defense
industry since September 1998. Mr. Friel served in the U.S. Army from 1967 to

                                       27
<PAGE>

1998, rising to the rank of Major General. Mr. Friel was the commanding general
of the U.S. Army Chemical and Biological Defense Command, at the Aberdeen
Proving Ground in Maryland, deputy chief of staff for Chemical and Biological
Matters of the Army Material Command in Virginia, and was responsible for a $1
billion contract for protective military clothing. Mr. Friel was also
responsible for a $600 million budget for the Nuclear, Biological, and Chemical
Defense Command for six years and directed over 1,100 scientists and engineers.
Mr. Friel has also served as chairman of the boards of the Nuclear, Biological,
and Chemical Defense Enterprise at the Edgewood arsenal in Maryland, and the
U.S. Army Material Command, Acquisition and Procurement Enterprise. Mr. Friel
earned an M.B.A. from Northwest Missouri State University and a B.S. from the
University of Nebraska-Lincoln. He is a graduate with basic and advanced courses
from the U.S. Army Chemical School in Alabama, and is also a director of
Engineer Support Systems, Inc.

LTG. Paul G. Cerjan (Ret.) - Vice President, Worldwide Military Affairs, and
Director

Lieutenant General Paul G. Cerjan (Ret.) has served as Vice President, Worldwide
Military Affairs and Director for Quick-Med Technologies since July 2000. From
December 1997 to September 2000, Mr. Cerjan was President of Regent University
in Virginia. Prior to his Presidency at Regent University, Mr. Cerjan served as
Director of Tactical Systems for Lockheed Martin Corporation from August 1994 to
October 1997. He was in the U.S. Army from 1960 to 1994, rising to the rank of
Lieutenant General. While in the U.S. Army, Mr. Cerjan served as project manager
for the design and construction of 10,000 military and a daily population and
16,000 civilian including families in Fort Drum, New York valued at $1.3
billion, managed 22 separate organizations in Europe with 70,000 people,
supervised all aspects of community life in Europe for 300,000 army personnel,
and served as CEO for a university organization educating the most senior
leadership of the Department of Defense. Mr. Cerjan has an M.S. degree in
Construction Management from Oklahoma State University and a B.S in Engineering
from the United States Military Academy at West Point, New York. He is a
registered professional engineer in the state of Virginia. Mr. Cerjan is a
member of the advisory board for the Association of the United States Army, a
member of the board of directors of the Army Engineer Association, the National
Defense University Foundation, and President and CEO of the National Defense
University Foundation.

Gerald M. Olderman, Ph.D. - Vice President, Research & Development and
Commercialization, and Director

Gerald M. Olderman, Ph.D., has served as Vice President, Research & Development,
and Director for Quick-Med Technologies since July 2000, bringing 35 years of
healthcare experience, 31 years of technical management experience, and 25 years
serving as the head of research and development activities for fortune 500
companies. Since November 1996, Dr. Olderman has been a Vice President and
Associate of R.F. Caffrey & Associates Inc., a management consultant to medical
device companies and suppliers. Prior to joining R.F. Caffrey & Associates, Dr.
Olderman served as Director and head of research and development for C.R. Bard,
Inc.'s Cardiopulmonary Division, where he organized a new product development
process in which 19 new medical devices were developed. Dr. Olderman also served
as Vice President for domestic and international research and development for
Baxter Healthcare Corp. and Vice President for research and development for the
Converters, a division of American Hospital Supply Corporation prior to its
acquisition by Baxter Healthcare Corporation, where he led product development
and made material changes that helped increase market share from 30% to 45%
within a $750 million market. Dr. Olderman has also served as Vice President for
research and development and as a director for Surgikos, Inc. a subsidiary of
Johnson & Johnson. Dr. Olderman received a B.S in Chemistry from Rensselaer
Polytechnic Institute in New York. He also holds an M.S. in Physical Chemistry
and a Ph.D. in Physical Chemistry from Seton Hall University in New Jersey.

Gregory S. Schultz, Ph.D. - Vice President, Laboratory and Clinical Research,
and Director

Gregory S. Schultz, Ph.D., has served as Vice President, Laboratory and Clinical
Research, and Director for Quick-Med Technologies since July 2000, also serving
as the Company's principal investigator. Former President of the Wound Healing
Society from 1999 t 2001, Dr. Schultz has worked as a consultant for 12 major

                                       28
<PAGE>

biotechnology companies and has served as a professor of obstetrics/gynecology
and research in the College of Medicine at the University of Florida at
Gainesville, Florida since 1989. From 1986 to 1988, Dr. Schultz served as
principal investigator for the U.S. Army grant on treatment of burns with growth
factors. He has also held a position as associate professor of biochemistry at
the University of Louisville School of Medicine in Kentucky. Dr. Schultz earned
a doctorate in biochemistry from Oklahoma State University and postdoctoral
fellowship in cell biology at Yale University in Connecticut.

Michael D. Karsch, ESQ. - General Counsel, Secretary, and Director

Michael D. Karsch, ESQ., has served as General Counsel, Secretary, and Director
since July 2000. Since November 2001, Mr. Karsch has been a partner with Sachs
Sax Klein, a Florida-based law firm. Mr. Karsch served as a managing director of
MCG Partners, Inc., a merchant bank firm from May to November 2001 following his
tenure as vice president and general counsel of MerchantOnline.com, Inc., a
provider of secure online transactions before its bankruptcy in October 2001.
Mr. Karsch has also held positions as partner for both Broad & Cassel and
Bernstein & Wasserman, and as general counsel for U.S. Diagnostic, Inc., a
healthcare management company located in Florida. Mr. Karsch was a partner with
the law firm of Bachner, Talley, Polevoy, and an associate with the law firm of
Skadden, Arps Slate, Meagher & Flom in New York. He earned a J.D. from the
University of Pennsylvania Law School in 1985 and a B.S., cum laude from the
University of Pennsylvania in 1982.

Peter Barton Hutt was elected a Director in April 2002. Since 1975 he has been a
partner of Covington & Burling, a Washington, DC based law firm, where he
specializes in food and drug law and trade association law. He is a member of
the Institute of Medicine of the National Academy of Sciences, and has served on
the IOM Executive Committee. Mr. Hutt serves on a wide variety of academic and
scientific advisory boards and on the boards of directors of CV Theraputics,
Inc. and several private companies. Mr. Hutt has served on the IOM Roundtable
for the Development of Drugs and Vaccines Against AIDS, the Advisory Committee
to the Director of the National Institutes of Health, the National Academy of
Sciences Committee on Research Training in the Biomedical and Behavioral
Sciences, the NIH Advisory Committee to Review the Guidelines for Recombinant
DNA Research, the National Committee to Review Current Procedures for Approval
of New Drugs for Cancer and AIDS established by the President's Cancer Panel of
the National Cancer Institute at the request of former President Bush, and five
(5) Office of Technology Assessment advisory panels. Mr. Hutt has twice been a
councilor of the Society for Risk Analysis and is presently Legal Counsel to the
Society as well as the American College of Toxicology. From 1971 to 1975, he was
Chief Counsel for the Food and Drug Administration. He earned a B.A., magna cum
laude from Yale University in 1956, a LL.B. from Harvard University in 1959, and
an L.L.M. from New York University in 1960.

The above listed officers and directors will serve until the next annual meeting
of the shareholders or until their death, resignation, retirement, removal, or
disqualification, or until proposed successors have been duly elected and
qualified. Vacancies in the existing board are filled by majority vote of the
remaining directors. The Company's officers serve at the will of the board.
There are no family relationships between any executive officer and director.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         To Quick-Med Technologies' knowledge, based solely on a review of the
copies of such reports furnished to Quick-Med Technologies and on
representations that no other reports were required, all reports were timely
filed during fiscal 2003 as required under Section 16(a) of the Securities
Exchange Act of 1934.

                                       29
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

David S. Lerner is currently paid at an annual rate of $125,000 per year,
Michael D. Karsch is currently paid at an annual rate of $24,000 per year, and
Gerald M. Olderman is paid at an annual rate $72,000 per year beginning in
November 2002,and Gregory S. Schultz is paid $24,000 per year. Quick-Med
Technologies' other officers have agreed to act without cash compensation until
authorized by the board, which is not expected to occur until Quick-Med
Technologies has generated revenues from operations or has obtained sufficient
capital. The officers or directors are not otherwise accruing any compensation
under any agreement with Quick-Med Technologies. The officers and directors have
been granted stock options for past services, as set forth below.

<TABLE>
<CAPTION>
                               SUMMARY COMPENSATION TABLE

                             -----------------------------------------------------------
                                 ANNUAL COMPENSATION           LONG TERM COMPENSATION

----------------------------------------------------------------------------------------
                                                             RESTRICTED      SECURITIES
                                                               STOCK         UNDERLYING
                                                               AWARDS       OPTIONS/SARs
     NAME           YEAR       TITLE          SALARY            ($)              (#)
----------------------------------------------------------------------------------------

<S>                 <C>      <C>           <C>                   <C>              <C>
David S. Lerner     2003     President     $ 140,314 (1)         --               --
----------------------------------------------------------------------------------------

                    2002                   $  69,767 (1)         --               --
----------------------------------------------------------------------------------------
</TABLE>

     (1)      Includes $4,043 and $1,445 for health insurance and $11,251; and
         $5,822 for reimbursement of automobile expenses in 2003 and 2002.

No retirement, pension or insurance programs or other similar programs have been
adopted for Quick-Med Technologies' employees. A stock option plan has been
approved by Quick-Med Technologies' Board of Directors, and 1,140,000 options to
purchase common stock have been granted to officers, directors, employees, and
consultants under the plan in 2002. All 2002 options have an exercise price
equal to 75% of the closing bid price for the first 30 days of trading in the
common stock, which commenced September 6, 2002, with the exception of Peter
Barton Hutt, a director of Quick-Med Technologies, whose options are at 25% of
such price. A total of 840,000 options were issued in 1999, 2000 and 2001 to
officers, directors, employees, and consultants. In July 2003, the Board of
Directors have authorized the issuance up to approximately 1,300,000 stock
options and 250,000 shares of restricted common stocks to be granted to
officers, directors, employees, and consultant.

COMPENSATION OF DIRECTORS

         The Company does not currently pay any cash compensation to its
directors. The only compensation has been options. During the period ended June
30, 2003, no options were granted to directors:


Aggregated Options/SAR Exercises In Last Fiscal Year And FY-End Option/SAR
Values

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                                                            Numbers of               Value
                                                            Securities          Unexercised In-
                                                            Underlying             The-Money
                                                            Unexercised         Options/SARs at
                                                        Options/SARs at FY-       FY-End ($)
                   Shares Acquired    Value Realized    End (#) Exercisable/      Exercisable/
     Name          On Exercise (#)          ($)            Unexercisable         Unexercisable

-----------------------------------------------------------------------------------------------
<S>                         <C>              <C>           <C>                       <C>
David S. Lerner             0                0             333,333/41,667            $0/$0
-----------------------------------------------------------------------------------------------
</TABLE>

                                       30
<PAGE>

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

In May 2002, the Company entered into an employment letter with Gerard Bencen to
serve as Executive Vice President in charge of Intellectual Property and
Gainesville Operations. His annual compensation was $125,000 and 100,000 options
with an exercise price equal to 75% of the average closing bid for the first 30
days of trading. Mr. Bencen resigned in March 2003 and his employment contract
was terminated.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables disclose information concerning ownership of common stock
by officers, directors and holders of 5% or more of our common stock. Our
currently outstanding shares of common stock, for purposes of these
calculations, are calculated based on information available as of September 23,
2003 and include both currently outstanding securities and securities which a
named person has a right to acquire within 60 days following the date of this
report.

--------------------------------------------------------------------------------
Directors, Officers and 5% Stockholders               Shares Beneficially Owned

--------------------------------------------------------------------------------
                                                        Number          Percent

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

Michael R. Granito                                   5,028,333 (1)       30.7%
30 East 37 st, New York, NY 10016
David S. Lerner                                      4,402,188 (2)       26.9%
401 N.E. 25th Terrace, Boca Raton, Florida 33431
Paul G. Cerjan                                         716,667 (3)        4.4%
3524 Old Course Lane, Valrico, Florida 33594
George E. Friel                                        486,667 (4)        3.0%
RR2, Box 69 Buckeye, West Virginia 24924
Mike D. Karsch                                         178,000 (5)        1.1%
5747 Paddington Way, Boca Raton, Florida 33496
Gerald Olderman                                        553,333 (6)        3.4%
17 Pickman Drive, Bedford, MA 01730
Gregory S. Schultz                                     756,667 (7)        4.6%
832 NW 45th Terrace, Gainesville, Florida 32560
Peter Barton Hutt                                      100,000 (8)        0.6%
c/o Covington and Burling
1201 Pennsylvania Ave, N.W. Washington D.C. 20004

The Company's directors and officers as a group
(8 persons)                                         12,221,855           74.6%


         (1) Includes 148,333 shares issuable upon the exercise of options
             exercisable within 60 days. Does not include convertible notes.

         (2) Includes 333,333 shares issuable upon the exercise of options
             exercisable within 60 days.

         (3) Includes 41,667 shares issuable upon the exercise of options
             exercisable within 60 days.

         (4) Includes 81,667 shares issuable upon the exercise of options
             exercisable within 60 days.

         (5) Includes 65,000 shares issuable upon the exercise of options
             exercisable within 60 days.

         (6) Includes 148,333 shares issuable upon the exercise of options
             exercisable within 60 days.

         (7) Includes 81,667 shares issuable upon the exercise of options
             exercisable within 60 days.

         (8) Includes 100,000 shares issuable upon the exercise of options
             exercisable within 60 days

                                       31
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

At June 30, 2002, Quick-Med Technologies had a note payable of $23,710 for funds
advanced from Think Tank Associates, Inc., a company owned by the Company's
President, David S. Lerner. The note bears interest at 6.0% and the maturity
date has been extended to December 31, 2003. On January 23, 2003, the note
payable plus accrued interest was converted into 30,855 shares of common stock.

At June 30, 2003 and 2002, the Company had a note payable to a relative of Mr.
Lerner in the amount of $9,300. The note bears interest at 6.0% and has a
maturity date of December 31, 2003.

At June 30, 2003 and 2002, the Company paid $6,900 and $3,450 respectively in
rent to the President for the sub-lease of office space. The sub-lease is for a
period of one year and expires in July 2004.

In July and August 2003, the Company issued 115,000 shares of common stock for
$45,487 of cash to Mr. Lerner.

To provide additional funding to the Company, Mr. Granito purchased 500,000
restricted common shares in May 2003, at a price of $0.50/share and on September
11, 2003,an additional 1,000,000 restricted shares at a price of $0.25/share. As
with all stock issuance, these transactions were reviewed and approved by the
Company's Board of Directors and assured to be consistent with the Company's
policies regarding pricing of restricted stock in relation to prevailing market
prices for common equity of the Company.

At June 30, 2003, Quick-Med Technologies had an outstanding loan balance of
$1,300,200 with Mr. Granito, of which $750,000 was from a line of credit fully
utilized by the Company. The line of credit agreement provides that the
outstanding balance is convertible into common stock at $1.00 per share at Mr.
Granito's option. At June 30, 2003, no conversion of common stock had taken
place.

In October and November 2002, the Company entered into an additional short term
borrowing arrangement with the Chairman for up to $500,000 at 6% interest, due
July 1, 2003. It was secured by the assets and revenues of the Company. The
additional short term borrowing without a conversion privilege was considered as
an extension of a line of credit of $750,000 as part of a single financial
instrument. As of June 30, 2003, the line had been extended to $550,200 and was
fully utilized by the Company. So far, the Company has not repaid any amounts to
Mr. Granito, the entire combined borrowing of $1,300,200 (excluding interest) is
due to Mr. Granito.

In September 2003 the Company negotiated a successor agreement with the Chairman
regarding the line of credit, which expired July 1, 2003 totaling $1,300,200,
excluding interest. The line of credit of $750,000 and the short term borrowing
of $625,000 (as of September 2003) are consolidated into a single convertible
note for up to $1,500,000 excluding accrued interest, at an interest rate of 6%
and due July 1, 2004. The maturity date of the note will be extended if the
Company is unable to repay at that time. The convertible note is secured by the
assets and revenues of the Company and will be remained as the senior-most debt
obligation. The note plus accrued interest will be convertible, in full or in
part, at the option of the lender for a term of up to 5 years beginning at
September 1, 2003 at a conversion rate of $0.38 per share. The conversion rate
was determined as 15% above the average share price over the prior 20 trading
days ($0.33 per share) and 50% over the share price at which the Company would
normally price its restricted common stock based on a discount to the prior 20
day average trading price. The note has an anti-dilution provision in the event
that the Company sells stock to other investors at less than $0.20 per share.
This convertible note agreement is made contingent upon the agreement of the
lender to provide additional funding to the Company by purchasing restricted
common stock at prices to be agreed to by the Company or by other means.

                                       32
<PAGE>

Messrs. Lerner and Granito are deemed to be the promoters of Quick-Med
Technologies. Mr. Lerner received 4,273,000 shares and Mr. Granito 2,930,000
shares for founding Quick-Med Technologies. There have not been any other
transactions with promoters.

Other than the relationships with the University of Florida, no officer or
director has any relationship with any company or entity that will be working on
developing Quick-Med Technologies' family of technologies or patents.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits

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

2.1               Merger Agreement dated March 19, 2001 between Above Average
                  Investments Ltd. and Quick-Med Technologies, Inc. (1)
2.2               Amendment to Merger Agreement (1)
3.1               Articles of Incorporation (1)
3.2               Bylaws (1)
10.1              Quick-Med Technologies' MMP License Agreement (1)
10.2              Quick-Med Technologies Stock Option Plan (1)
10.3              Cooperative Research and Development Agreement - The U.S. Army
                  Medical Research Institute of Chemical Defense (1)
10.4              Financing Agreement - Euro Atlantic Capital Corporation (1)
10.5              Consulting Agreement - Gregory Schultz (1)
10.5.1            Consulting Agreement - Christopher T. Batich (1)
10.5.2            Consulting Agreement - Bruce Mast (1)
10.5.3            Consulting Agreement - William Toreki (1)
10.6              Note issued to Michael R. Granito by Quick-Med Technologies
                  (1)
10.7              Employment Agreement - Gerard Bencen (1)
10.8              Research and Development Agreement - The Collaborative Group
                  (2)
31.1              Certification of Chief Executive Officer Pursuant to Rule
                  13a-14(a) and 15d-14(a), filed herewith.
31.2              Certification of Chief Financial Officer Pursuant to Rule
                  13a-14(a) and 15d-14(a), filed herewith.
32.               Certification Pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                  filed herewith.
99.3              Assignment of Patent for Wound Care (1)
99.4              Assignment of Patent for Mustard Gas (1)
99.5              Assignment of Patent for Anti-wrinkle cream (1)


         (1) Incorporated by reference to the Company's registration statement
             on Form SB-2 (file no. 333-41672)
         (2) Incorporated by reference to the Company's Annual Report on Form
             10-KSB for the year ended September 30, 2002

(b)  Reports on Form 8-K

None

                                       33
<PAGE>

ITEM 14. CONTROLS AND PROCEDURES.

         (a) Evaluation of disclosure controls and procedures. Based on their
evaluation of the Company's disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")),
the Company's principal executive officer and principal financial officer have
concluded that as of the end of the period covered by this Annual Report on Form
10-KSB such disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.

         (b) Changes in internal control over financial reporting. During the
last quarter of the year under report, there was no change in the Company's
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.


ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The following table sets forth fees billed to us by our auditors during
the fiscal years ended June 30, 2002 and June 30, 2003 for: (i) services
rendered for the audit of our annual financial statements and the review of our
quarterly financial statements, (ii) services by our auditor that are reasonably
related to the performance of the audit or review of our financial statements
and that are not reported as Audit Fees, (iii) services rendered in connection
with tax compliance, tax advice and tax planning, and (iv) all other fees for
services rendered. "Audit Related Fees" consisted of consulting regarding
accounting issues.


                                    June 30, 2003    June 30, 2002
     -------------------------------------------------------------

     (i)      Audit Fees              $ 37,290         $ 54,486

     (ii)     Audit Related Fees      $      0         $      0

     (iii)    Tax Fees                $  8,985         $  5,384

     (iv)     All Other Fees          $      0         $      0


                                       34
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has caused its Annual Report on Form 10-KSB to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                       QUICK MED TECHNOLOGIES, INC.


Date:                                  By: /s/ DAVID S. LERNER
                                           -------------------------------------
                                           David S. Lerner, President


In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------

       Signature                               Title                                Date

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

<S>                         <C>                                              <C>
/s/ MICHAEL R. GRANITO      Chairman of the Board - Michael R. Granito       September 25, 2003

/s/ DAVID S. LERNER         President and Director - David S. Lerner         September 25, 2003

/s/ GEORGE E. FRIEL         Vice President, Chemical & Biological            September 25, 2003
                            Affairs, and Director - George E. Friel

/s/ PAUL G. CERJAN          Vice President, Worldwide Military Affairs,      September 25, 2003
                            and Director - Paul G. Cerjan

/s/ GERALD M. OLDERMAN      Vice President, Research & Development and       September 25, 2003
                            Commercialization, and Director - Gerald M.
                            Olderman

/s/ GREGORY S. SCHULTZ      Vice President, Laboratory & Clinical            September 25, 2003
                            Research, and Director - Gregory S. Schultz

/s/ MICHAEL D. KARSCH       General Counsel and Secretary, and Director      September 25, 2003
                            - Michael D. Karsch

/s/ PETER BARTON HUTT       Director -Peter Barton Hutt                      September 25, 2003
</TABLE>


                                       35
<PAGE>
                          QUICK-MED TECHNOLOGIES, INC.

                              FINANCIAL STATEMENTS

                        FOR THE YEAR ENDED JUNE 30, 2003

                   AND FOR THE SIX MONTHS ENDED JUNE 30, 2002


<PAGE>

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

Independent Auditor's Report...............................................    1


Financial Statements:

   Balance Sheets as of June 30, 2003 and 2002.............................    2

   Statements of Operations for the year ended June 30, 2003
      and for the six months ended June 30, 2002 ..........................    3

   Statements of Changes in Stockholders' Deficit for the year ended
      June 30, 2003 and for the six months ended June 30, 2002.............    4

   Statements of Cash Flows for the year ended June 30, 2003
      and for the six months ended June 30, 2002...........................  5-6


Notes to Financial Statements.............................................. 7-16
<PAGE>
                       [LETTERHEAD OF DASKAL BOLTON LLP]

                         INDEPENDENT AUDITOR'S REPORT
                         ----------------------------


To the Board of Directors and Stockholders
Quick-Med Technologies, Inc.


We have audited the accompanying balance sheets of Quick-Med Technologies, Inc.
as of June 30, 2003 and the six months ended June 30, 2002, and the related
statements of operations, changes in stockholders' deficit and cash flows for
the year ended June 30, 2002 and for the six months ended June 30, 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quick-Med Technologies, Inc.,
as of June 30, 2003 and the six months ended June 30, 2002, and the results of
its operations and its cash flows for the year ended June 30, 2003 and for the
six months ended June 30, 2002, in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has experienced recurring losses
and negative cash flows from operations for the year ended June 30, 2003 and for
the six months June 30, 2002, and has a net capital deficiency. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are described in the
footnotes accompanying the financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

                                                        /s/ DASZKAL BOLTON LLP


Boca Raton, Florida
September 23, 2003


                                     - 1 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
BALANCE SHEETS
AT JUNE 30, 2003 AND DECEMBER 31, 2002
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                     ASSETS
                                     ------
                                                             2003           2002
                                                         -----------    -----------
<S>                                                      <C>            <C>
Current assets:
   Cash                                                  $    47,423    $    11,556
                                                         -----------    -----------

Property and equipment, net                                    3,880          2,738
                                                         -----------    -----------
Other assets:
   Prepaid expenses                                            6,069          1,117
   Intangible asset, net                                     363,491        349,761
                                                         -----------    -----------
          Total other assets                                 369,560        350,878
                                                         -----------    -----------
          Total assets                                   $   420,863    $   365,172
                                                         ===========    ===========

                     LIABILITIES AND STOCKHOLDERS' DEFICIT
                     -------------------------------------

Current liabilities:
   Accounts payable                                      $   607,241    $   387,453
   Accrued expenses                                            8,518         21,122
   Accrued interest on note payable - officer/director        90,552         37,155
   License payable                                           160,000        160,000
   Loan payable - Euro Atlantic Capital                           --        400,000
   Note payable - officer/director                         1,300,200        665,000
   Shareholder loan payable                                    9,300          9,300
   Due to affiliate/shareholder                                   --         26,191
                                                         -----------    -----------
          Total current liabilities                        2,175,811      1,706,221
                                                         -----------    -----------
Commitments and Contingencies
Stockholders' deficit:
   Common stock, $0.0001 par value; 100,000,000
     authorized shares; 14,239,604 and 12,767,500
     shares issued and outstanding at June 30, 2003
     and 2002, respectively                                    1,424          1,277
   Additional paid-in capital                              6,332,744      2,524,781
   Outstanding stock options                                 103,968         65,800
   Accumulated deficit                                    (8,193,084)    (3,932,907)
                                                         -----------    -----------
          Total stockholders' deficit                     (1,754,948)    (1,341,049)
                                                         -----------    -----------
          Total liabilities and stockholders' deficit    $   420,863    $   365,172
                                                         ===========    ===========
</TABLE>
                 See accompanying notes to financial statements.

                                      - 2 -
<PAGE>


QUICK-MED TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2003
AND FOR THE SIX MONTHS ENDED JUNE 30, 2002
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                              2003            2002
                                          ------------    ------------
<S>                                       <C>             <C>
Sales                                     $         --    $         --

Cost of sales                                       --              --
                                          ------------    ------------

Gross profit                                        --              --

Expenses:
    General and administrative expenses        807,769         289,333
    Research and development                   618,076         120,658
    Depreciation and amortization               39,768          20,526
    Stock-based compensation                 1,758,539         445,276
                                          ------------    ------------
Total expenses                               3,224,152         875,793
                                          ------------    ------------

Loss from operations                        (3,224,152)       (875,793)
                                          ------------    ------------
Other income (expense):
    Interest expense                        (1,036,025)        (28,040)
                                          ------------    ------------

Loss before income taxes                    (4,260,177)       (903,833)
                                          ------------    ------------

Provision (benefit) for income taxes                --              --
                                          ------------    ------------

Net loss                                  $ (4,260,177)   $   (903,833)
                                          ============    ============

Net loss per share (basic and diluted)    $      (0.32)   $      (0.07)
                                          ============    ============

Weighted average common
  shares outstanding                        13,289,672      12,118,223
                                          ============    ============
</TABLE>
                 See accompanying notes to financial statements.

                                      - 3 -
<PAGE>
QUICK-MED TECHNOLOGIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED JUNE 30, 2003
AND FOR THE SIX MONTHS ENDED JUNE 30, 2002
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                 Common Stock            Additional
                                          --------------------------      Paid-In      Accumulated    Outstanding
                                            Shares          Amount        Capital        Deficit     Stock Options     Total
                                          -----------    -----------    -----------    -----------    -----------   -----------
<S>                                       <C>           <C>            <C>            <C>            <C>           <C>
Balance, December 31, 2001                 10,260,000    $     1,026    $ 2,266,548    $(3,029,074)   $     8,550   $  (752,950)
Stock issued for services                       7,500              1         29,999             --             --        30,000
Stock-based compensation                           --             --        358,026             --             --       358,026
Stock acquired on merger                    3,000,000            300       (111,562)            --             --      (111,262)
Stock repurchased and retired on merger      (500,000)           (50)       (24,950)            --             --       (25,000)
Liabilities paid by a shareholder                  --             --          6,720             --             --         6,720
Stock options granted for services                 --             --             --             --         57,250        57,250
Net loss, June 30, 2002                            --             --             --       (903,833)            --      (903,833)
                                          -----------    -----------    -----------    -----------    -----------   -----------

Balance, June 30, 2002                     12,767,500          1,277      2,524,781     (3,932,907)        65,800    (1,341,049)
Stock issuance for cash                       667,500             67        397,933             --             --       398,000
Stock issued in debt conversion               705,855             71      1,671,344             --             --     1,671,415
Stock options granted for consulting               --             --             --             --         38,168        38,168
Stock issued for services                      98,750              9         67,440             --             --        67,449
Liabilities paid by a shareholder                  --             --         14,625             --             --        14,625
Stock-based compensation                           --             --      1,656,621             --             --     1,656,621
Net loss, June 30, 2003                            --             --             --     (4,260,177)            --    (4,260,177)
                                          -----------    -----------    -----------    -----------    -----------   -----------

Balance, June 30, 2003                     14,239,605    $     1,424    $ 6,332,744    $(8,193,084)   $   103,968   $(1,754,948)
                                          ===========    ===========    ===========    ===========    ===========   ===========
</TABLE>
                 See accompanying notes to financial statements.

                                      - 4 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2003
AND FOR THE SIX MONTHS ENDED JUNE 30, 2002
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                               2003           2002
                                                           -----------    -----------
<S>                                                        <C>            <C>
Cash flows from operating activities:
   Net loss                                                $(4,260,177)   $  (903,833)
   Adjustments to reconcile net loss to net
     cash used by operating activities:
      Depreciation and amortization                             39,768         20,526
      Common stock issued for services                          63,750         30,000
      Stock options granted for services                        38,168         57,250
      Stock-based compensation                               1,656,621        358,026
      Liabilities paid by a shareholder                         14,625          6,720
      Interest expense in debt conversion to equity            965,559             --
      Changes in assets and liabilities net of
        effects from merger:
         (Increase) decrease in deposits                            --           (270)
         (Increase) decrease in prepaid expenses                (4,952)            --
         Increase (decrease) in:
            Accounts payable                                   219,788        (27,794)
            Accrued expenses                                        --          8,286
            Accrued interest                                    70,458         19,342
                                                           -----------    -----------
Net cash used by operating activities                       (1,196,392)      (431,747)
                                                           -----------    -----------

Cash flows from investing activities:
   Purchase of fixed assets                                     (2,747)        (2,374)
   Cash acquired in merger                                          --        125,000
   Patents                                                     (51,894)        (4,323)
                                                           -----------    -----------
Net cash used by investing activities                          (54,641)       118,303
                                                           -----------    -----------

Cash flows from financing activities:
   Issuance of common stock, net                               398,000             --
   Repurchase common stock on merger                                --        (25,000)
   Issuance of common stock for payment of a liability           3,700             --
   Increase in notes payable                                   250,000        250,000
   Increase in notes payable - officer/director                635,200        100,000
                                                           -----------    -----------
Net cash provided by financing activities                    1,286,900        325,000
                                                           -----------    -----------

Net increase (decrease) in cash                                 35,867         11,556
Cash at beginning of period                                     11,556             --
                                                           -----------    -----------
Cash at end of period                                      $    47,423    $    11,556
                                                           ===========    ===========
</TABLE>
                 See accompanying notes to financial statements.

                                      - 5 -

<PAGE>

QUICK-MED TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 2003
AND FOR THE SIX MONTHS ENDED JUNE 30, 2002
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                               2003           2002
                                                           -----------    -----------
<S>                                                        <C>            <C>
Supplementary Information:
--------------------------

  Cash paid for:
     Interest                                              $        --    $        --
                                                           ===========    ===========
     Income taxes                                          $        --    $        --
                                                           ===========    ===========
  Non-cash disclosures of investing and
    financing activities:
     Stock options granted to consultant                   $    38,168    $        --
                                                           ===========    ===========
     Conversion of debt to equity                          $   705,856    $        --
                                                           ===========    ===========
     Issuance of common stock for payment of a liability   $     3,700    $        --
                                                           ===========    ===========
</TABLE>
                 See accompanying notes to financial statements.

                                      - 6 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1 - DESCRIPTION OF BUSINESS
--------------------------------

Founded in April 1997, Quick-Med Technologies Inc. is a life sciences company
focused on developing proprietary, broad-based technologies in consumer,
healthcare, and industrial markets. The Company's two core technologies under
development are: (1) MultiStat(TM), a family of advanced patented methods and
compounds shown to be highly effective in skin therapy applications; and (2)
Novel Intrinsically Microbicidal Utility Substrate (NIMBUS(TM)), a family of
advanced polymers bio-engineered to have antimicrobial, super-absorbent, and
other properties that can be used in a wide range of applications. Currently,
MultiStat(TM) is being developed in a cosmetic product line with an initial
anti-aging product under launch. MultiStat(TM) is also being employed in a drug
product line as a post-injury treatment for mustard gas exposure, with the
initial product currently at a mature state of development in partnership with
the U.S. Army. Quick-Med Technologies Inc.'s NIMBUS(TM) technology has initially
been targeted at (a) protecting building materials from rot or mold, (b) an
advanced bandage product, and (c) several enhanced consumer products, including
antibacterial wipes. In each instance, the Company has employed joint ventures
or joint development partnerships with leading firms in the respective industry
to co-develop and commercialize its products.

The Company specializes in the research and development of biomedical products
and devices for antibacterial applications. The Company conducts research
efforts or collaborates with third parties as necessary to develop products and
administer the patent process. The Company does not expect to produce nor
directly market its products. Instead, it intends to rely on outside
organizations for those activities.

The Company has no revenues to date. Since its inception, the Company has been
dependent upon the receipt of capital investment or other financing to fund its
continuing activities. In addition to the normal risks associated with a new
business venture, there can be no assurance that the Company's product
development will be successfully completed or that it will be a commercial
success. Further, the Company is dependent upon certain related parties to
provide continued funding and capital resources.

In March 2002, the Board of Directors approved the Company's change of year-end
from December 31 to June 30.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

Cash Equivalents
----------------

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. The Company had no
cash equivalents at June 30, 2003 and 2002.

Use of Estimates
----------------

The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect certain
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and expenses during the
period reported. These estimates include assessing the realization of deferred
tax assets, useful lives and recoverability of tangible and intangible assets
and accruals for commitments and contingencies, among others. Estimates and
assumptions are reviewed periodically and the effects of revisions are reflected
in the financial statements in the period they are determined to be necessary.
Accordingly, actual results could differ from those estimates.

                                      - 7 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------

Stock Compensation
------------------

The Company has adopted Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation." SFAS 123 encourages the
use of a fair-value-based method of accounting for stock-based awards, under
which the fair value of stock options is determined on the date of grant and
expensed over the vesting period. Under SFAS 123, companies may, however,
measure compensation costs for those plans using the method prescribed by
Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock
Issued to Employees." Companies that apply APB No. 25 are required to include
pro forma disclosures of net earnings and earnings per share as if the
fair-value-based method of accounting had been applied. The Company elected to
account for such plans under the provisions of APB No. 25. The Company accounts
for stock options granted to consultants under SFAS 123.

Intangible Assets
-----------------

The cost of obtaining license agreements along with the costs to defend the
patents underlying the license agreements are capitalized and are amortized
using the straight-line method over the estimated useful lives of the underlying
patents. The costs of obtaining and maintaining new patents are capitalized and
amortized using the straight-line method over the estimated useful lives of the
patents. The cost of patents in process is not amortized until the patent is
issued.

Property and Equipment
----------------------

Property and equipment are stated at cost. Depreciation on property and
equipment is computed using the straight-line method over the expected useful
lives of the assets.

Earnings Per Share
------------------

Basic net earnings (loss) per common share is computed by dividing net earnings
(loss) applicable to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted net earnings (loss) per
common share is determined using the weighted-average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock
equivalents, consisting of shares that might be issued upon exercise of common
stock options. In periods when losses are reported, the weighted-average number
of common shares outstanding excludes common stock equivalents, because their
inclusion would be anti-dilutive.

Research and Development Costs
------------------------------

Research and development costs are expensed as incurred.

New Accounting Pronouncements
-----------------------------

In December 2002, the Financial Accounting Standards Board ("FASB") issued
Statement No. 148 ("SFAS No. 148"), "Accounting for Stock-Based Compensation,
Transition and Disclosure." SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. SFAS No. 148 also requires that
disclosures of the pro forma effect of using the fair value method of accounting
for stock-based employee compensation be displayed more prominently and in a
tabular format. Additionally, SFAS No. 148 requires disclosure of the pro forma
effect in interim financial statements. The transition and annual disclosure
requirements of SFAS No. 148 are effective for fiscal years ended after December
15, 2002. The interim disclosure requirements are effective for interim periods
ending after December 15, 2002. The Company has adopted the disclosure
requirements of SFAS No. 148 as presented in the financial statements.

                                      - 8 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
--------------------------------------------------------------

New Accounting Pronouncements, continued
----------------------------------------

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 149 is effective for contracts entered into or modified after June 30, 2003,
except as specified and for hedging relationships designated after June 30,
2003. The Company does not anticipate that the adoption of this statement will
have any material impact on the balance sheet or statement of operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS 150
requires that certain financial instruments, which under previous guidance were
accounted for as equity, must now be accounted for as liabilities. The financial
instruments affected include mandatorily redeemable stock, certain financial
instruments that require or may require the issuer to buy back some of its
shares in exchange for cash or other assets and certain obligations that can be
settled with shares of stock. SFAS 150 is effective for all financial
instruments entered into or modified after May 31, 2003. Otherwise it will
become effective at the beginning of the first interim period beginning after
June 15, 2003. The Company does not anticipate that the adoption of this
statement will have any material impact on the balance sheet or statement of
operations.

NOTE 3 - FAIR VALUE OF FINANCIAL INSTRUMENTS
--------------------------------------------

The Company's financial instruments are accounts payable and notes payable. The
carrying value of accounts payable and accrual expenses approximates the fair
value based on its short-term nature. The recorded value of the notes payable
approximates its fair value based on its short-term nature and the interest
approximates the market rate.

NOTE 4 - PROPERTY AND EQUIPMENT
-------------------------------

Property and equipment consist of the following at June 30, 2003 and 2002:

                                               2003            2002
                                            ----------     ----------

         Computer equipment                 $    9,164     $    6,418
         Less: accumulated depreciation         (5,284)        (3,680)
                                            ----------     ----------
             Net property and equipment     $    3,880     $    2,738
                                            ==========     ==========

Depreciation expense for the year ended June 30, 2003 and the six months ended
June 30, 2002 was $1,604 and $1,443 respectively.

NOTE 5 - INTANGIBLE ASSETS
--------------------------

License Agreement
-----------------

The license agreement with two inventors for the worldwide rights to the MMP
inhibitors and uses thereof, commenced on September 13, 2000. The license
agreement transfers to the Company the technology

                                     - 9 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 5 - INTANGIBLE ASSETS, continued
-------------------------------------

License Agreement, continued
----------------------------

that is the subject of issued patents as well as pending patent applications,
which were filed by the original inventors. The licenses are amortized on a
straight-line basis over the estimated useful lives of the underlying patents or
the license agreement. The U.S. patents expire beginning November 2007 through
November 2016 and the international patents expire on November 21, 2011.
Accumulated amortization for the year ended June 30, 2003 and the six months
ended June 30, 2002 was $111,048 and $72,883 respectively.

The Company assesses whether its intangible assets are impaired as required by
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets "
based on an evaluation of undiscounted projected cash flows through the
remaining useful live. If impairment exists, the amount of such impairment is
calculated as the estimated fair value of the assets.

Under the terms of the license agreement, the Company paid $200,000 and granted
160,000 shares of common stock valued at $0.05 per share and granted 160,000
stock options. The stock options were valued at the estimated minimum value in
accordance with SFAS 123 of $8,000. In order to maintain the exclusive rights to
the licenses, the agreements require total payments of $260,000 if certain
milestones regarding the proof-of-concept and development of a prototype are
completed. If a milestone is not met by the third anniversary of the agreement,
the Company is obligated to pay each inventor $25,000 per year until all such
milestones are completed. At June 30, 2003, the Company anticipated that it
would not meet all the milestones by September 30, 2003 and has accrued an
additional $50,000 to maintain its rights under the license agreement. At June
30, 2003 and 2002, the balance due under the license agreement was $160,000.

As additional compensation to the licensors, the Company will pay a royalty on
the Company's net sales of licensed products. The royalty rate is 2% on the
first $1,500,000 of applicable quarterly revenue and 1.5% of sales above
$1,500,000 on applications of products other than applications for military and
cosmetic products. For each sublicense the Company grants, the licensors will be
paid 3% of the up-front licensing fee, limited to $100,000.

In November 2002, the Company and the University of Florida Research Foundation
("University") entered into an agreement whereby the University has given their
rights to the Company for its exclusive use of its license.

New Patents
-----------

During fiscal 2003, the Company filed five new patent applications relating to
the new projects: treatment of mustard gas, NIMBUS treatment of lumber, and
antimicrobial and antiproteolytic wound dressing and method. The capitalized
costs to date of these five new patent applications are $8,331. The termination
dates for patents resulting from these applications are July 31, 2023, December
4, 2003, February 25, 2004, June 20, 2004 and June 30, 2004 respectively.

During 2002, the Company filed three new patent applications relating to three
new projects: combination cosmetic cream, NIMBUS treatment of lumber, and
antimicrobial and antiproteolytic wound dressing and method. The capitalized
costs to date of these three new patent applications are $1,996. The termination
dates for patents resulting from these applications are March 27, 2022, April
22, 2022, and July 31, 2022 respectively.

                                     - 10 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 5 - INTANGIBLE ASSETS, continued
-------------------------------------
<TABLE>
<CAPTION>

                                           June 30, 2003                    June 30, 2002
                                   -----------------------------     -----------------------------
                                      Gross         Accumulated         Gross         Accumulated
                                      Amount        Amortization        Amount        Amortization
                                   ------------     ------------     ------------     ------------
<S>                                <C>              <C>              <C>              <C>
Amortized Intangible Assets
---------------------------
License agreement                  $    425,215     $   (111,048)    $    381,651     $    (72,883)
Patents in process                       49,324               --           40,993               --
                                   ------------     ------------     ------------     ------------
Total                              $    474,539     $   (111,048)    $    422,644     $    (72,883)
                                   ============     ============     ============     ============
</TABLE>

Patents in process will be amortized when the patents are issued. As of June 30,
2003, management cannot estimate when that date will be.
<TABLE>
<CAPTION>

                                           June 30, 2003                    June 30, 2002
                                   -----------------------------     -----------------------------
                                      Gross         Accumulated         Gross         Accumulated
                                      Amount        Amortization        Amount        Amortization
                                   ------------     ------------     ------------     ------------
<S>                                <C>              <C>              <C>              <C>
Aggregate Amortization Expense
------------------------------

For the years ended                $     38,165     $    111,048     $     19,083     $     72,883
                                   ============     ============     ============     ============
</TABLE>

Estimated Amortization Expense        Amount
------------------------------     ------------
For the year ended June 30, 2004   $     42,521
For the year ended June 30, 2005   $     42,521
For the year ended June 30, 2006   $     42,521
For the year ended June 30, 2007   $     42,521
For the year ended June 30, 2008   $      4,356


NOTE 6 - RELATED PARTY TRANSACTIONS
-----------------------------------

On November 25, 2001 the Company granted the option to convert all of the notes
payable - officer/director and affiliate loans payable plus accrued interest
into common stock at $1.00 per share, subject to adjustments in case of stock
splits and other recapitalization. At June 30, 2002 the amount of the notes
payable to the chairman and the affiliate was $665,000 and $26,191,
respectively. The note payable to the affiliate plus accrued interest was
converted into 30,855 shares of common stock on January 23, 2003.

In January 2002 the Company's short -term note payable to the chairman was
converted into a line of credit of up to $750,000 at an interest rate of 6% due
July 1, 2003. The Company had drawn down on the entire line by November 2002.
The company recognized an additional $358,026 in compensation

                                     - 11 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 6 - RELATED PARTY TRANSACTIONS (Continued)
-----------------------------------------------

expense in the six months ended June 30, 2002 as a result of the conversion
privilege. As of June 30, 2003 and June 30, 2002 no conversions into common
stock had taken place.

When Euro Atlantic failed to provide financing to the Company in October and
November of 2002 (See Note 11), the Company entered into an additional short
term borrowing arrangement with the Chairman for up to $500,000 at 6% interest,
due July 1, 2003. It was secured by the assets and revenues of the Company. The
additional short term borrowing without a conversion privilege was considered as
an extension of a line of credit of $750,000 as part of a single financial
instrument. As of June 30, 2003, the line had been extended to $550,200 and was
fully utilized by the Company. Insofar as the Company has not repaid any amounts
to the lender, the entire combined borrowing of $1,300,200 (excluding interest)
is due to the lender. In September 2003, the Lender agreeed with the Company to
put in place a successor agreement to the expired line of credit facility. (See
Note 15 -- Subsequent Events)

At June 30, 2003 and 2002, the Company had a note payable to a relative of the
President in the amount of $9,300. The note bears interest at 6.0% and has a
maturity date of December 31, 2003.

At June 30, 2003 and 2002, the Company paid $6,900 and $3,450 respectively in
rent to the President for the sub-lease of office space. The sub-lease is for a
period of one year and expires in July 2004.

NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT)
---------------------------------------

As a result of the merger with Above Average Investments, Ltd on February 25,
2002, the Company's authorized common stock increased to 100,000,000 from an
original 15,000,000 shares.

2003
----

In the fiscal year 2003, the Company sold 667,500 shares of common stock for
$398,000 in cash.

In November 2002, the Company converted a $650,000 note payable to a shareholder
plus accrued interest into 675,000 shares of common stock. As a result, the
Company took a charge of $965,559 in interest expense in fiscal year 2003.

In January 2003, the Company converted a $26,191 note payable to an officer and
shareholder plus accrued interest into 30,855 shares of common stock.

In May 2003, the Company issued 98,750 shares of common stock for professional
services. The Company recorded $63,750 in expense.

2002
----

In April 2002, the Company issued 7,500 shares of common stock for consulting
services. The Company recorded $30,000 ($4.00 per share) in compensation
expense.

NOTE 8 - COMMITTMENTS
---------------------

The Company leases an equipped laboratory in Gainesville, Florida. The lease
expires on March 14, 2004. Rent expense for the year ended June 30, 2003 and the
six months ended June 30, 2002, was $15,100 and $6,051, respectively.

                                     - 12 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 8 - COMMITMENTS (Continued)
--------------------------------

The following is a schedule of minimum future payments on the operating leases
as of June 30, 2003:

           For The Years Ending June 30,
           -----------------------------

                        2004                   $    3,351
                        2005                           --
                        2006                           --
                     Thereafter                        --
                                               ----------
                       Total                   $    3,351
                                               ==========

NOTE 9 - STOCK OPTIONS
----------------------

The Company adopted a qualified equity incentive plan on March 4, 2001. Under
the Plan the Company is authorized to grant up to 3,000,000 shares of common
stock. During 2002 1,140,000 unqualified options were granted under the Plan.
The exercise price for 990,000 and 150,000 of the options are $2.84 and $0.95,
respectively, of the average trading price of the Company's stock during the
first 30 days after commencement of the stock trading on the Over the Counter
("OTC") Market. The vesting provisions for 100,000 of the options are immediate
and the remainder of the 1,040,000 options are vested one third on January 15,
2002, one third on January 15, 2003, and one third on January 15, 2004. All the
options expire five years after the grant date.

The Company has elected to account for the stock options granted to employees
under the Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Under APB No.25, the
difference between the option price and the fair value of the shares creates an
additional stock option compensation expense, which will be recorded in the
income statement the next two fiscal years. The Company accounts for stock
options granted to consultants under Financial Accounting Standards Board
Statement No. 123, "Accounting for Stock-Based Compensation." During 2002,
50,000 options were granted to a consultant vesting over a three-year period.
Using the Black Scholes model $57,250 of compensation expense was recorded on
the financial statements. The total stock-based compensation expense for the
year ended June 30, 2003 and the six months ended June 30, 2002 was $1,694,789
and $415,276 respectively.

Had the compensation expense for the stock option plan been determined based on
the fair value of the options at the grant date consistent with the methodology
prescribed under Statements of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation," the Company's net loss for the year
ended June 30, 2003, and the six months ended June 30, 2002, would have been
increased by $164,150 and $1,436,050, respectively.

The fair value of each option is estimated present value on the date of grant
using the Black Scholes option-pricing model with the assumption:

                   Risk-free interest rate            4.75%
                   Expected life (years)              5
                   Expected volatility                50%
                   Expected dividends                 None


                                     - 13 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 9 - STOCK OPTIONS (Continued)
----------------------------------

A summary of options for the year ended June 30, 2003, and the six months ended
June 30, 2002 is shown below:
<TABLE>
<CAPTION>

                                                  June 30, 2003                     June 30, 2002
                                          -------------------------------   -------------------------------
                                              Number      Weighted-Average      Number      Weighted-Average
                                             of Shares     Exercise Price      of Shares     Exercise Price
                                          --------------   --------------   --------------   --------------
<S>                                           <C>         <C>                   <C>       <C>
Outstanding at beginning of period             1,980,000   $         2.68          840,000   $         2.24
Granted                                               --               --        1,140,000             3.00
Exercised                                             --               --               --               --
Forfeited                                             --               --               --               --
                                          --------------   --------------   --------------   --------------
Outstanding at end of period                   1,980,000   $         3.23        1,980,000   $         2.68
                                          --------------   ==============   --------------   ==============
Exercisable at end of period                   1,633,333                         1,286,667
                                          --------------                    --------------
Available for issuance at end of period        1,860,000                         1,860,000
                                          ==============                    ==============
</TABLE>

For the year ended June 30, 2003, and the six months ended June 30, 2002, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:

                                               2003             2002
                                          --------------   --------------
Net loss
  As reported                             $   (4,260,177)  $     (903,833)
                                          ==============   ==============
  Pro forma                               $   (4,424,327)  $   (2,339,883)
                                          ==============   ==============
Loss per share
  As reported                             $        (0.32)  $        (0.07)
                                          ==============   ==============
  Pro forma                               $        (0.33)  $        (0.19)
                                          ==============   ==============

In July 2003, the Board of Directors has authorized the issuance up to 1,300,000
options and 250,000 shares of restricted common stock to be granted to
directors, employees and service providers.

NOTE 10 - INCOME TAXES
----------------------

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
standard requires, among other things, recognition of future tax consequences,
measured by enacted tax rates attributable to taxable and deductible temporary
differences between financial statement and income tax bases of assets and
liabilities. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable for the period and the change during the period in the deferred
tax asset and liability.

For income tax purposes, the Company has elected to capitalize start-up costs
incurred during 1999 and 2000 totaling $357,989. The start-up costs will be
amortized over sixty (60) months beginning in 2001. An analysis of the
components of the (loss) before income taxes and the related income tax
(benefit) is presented in the following tables. The tax amounts have been
calculated using the 34% federal and 5.5% state income tax rates.

                                     - 14 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 10 - INCOME TAXES, continued
---------------------------------

The (provision) benefit for income taxes consists of the following:

                                                         2003           2002
                                                      -----------   -----------
    Current                                           $        --   $        --
    Deferred                                                   --            --
                                                      -----------   -----------
                                                      $        --   $        --
                                                      ===========   ===========

Deferred tax assets for June 30, 2003 and 2002 consist of the following:

                                                         2003           2002
                                                      -----------   -----------
    Deferred tax asset:
      Depreciation and amortization                   $     1,303   $     1,303
      Tax benefit of capitalized start-up costs            67,355        94,298
      Stock based compensation                          1,480,765       843,768
      Net operating loss carry forward                  1,488,744       497,803
      Research tax credit                                   7,203         7,203
      Less:  valuation allowance                       (3,045,370)   (1,444,375)
                                                      -----------   -----------
    Deferred tax asset                                $        --   $        --
                                                      ===========   ===========


A reconciliation of income tax at the statutory rate to the Company's effective
tax rates for the periods ended June 30, 2003 and 2002, is as follows:

                                                         2003           2002
                                                      -----------   -----------

    Federal income tax at statutory rate of 34%       $(1,447,234)  $  (306,608)
    State tax, net of federal benefit                    (154,514)      (32,735)
    Other                                                     753       (16,953)
    Valuation allowance                                 1,600,995       356,296
                                                      -----------   -----------
    Deferred tax asset                                $        --   $        --
                                                      ===========   ===========


The Company has a net operating loss carry forward of approximately $3,956,000
which will begin to expire in 2018.

NOTE 11 - NOTE PAYABLE - EURO ATLANTIC CAPITAL
----------------------------------------------

An original note payable to Euro Atlantic Capital Corp. ("Euro"), a merchant
banker, of $150,000 (in 2001 and 2000) increased by $250,000 in 2002 to
$400,000, due to the interim financing agreement entered into in November 2001.
Euro agreed to provide up to $500,000 of bridge financing at $50,000 per month
for up to ten months, commencing in February 2002 and $2 million by October
2002. The Company received a $650,000 of bridge financing from Euro. Euro failed
to deliver the $2 million of equity financing that was due on October 4, 2002.
On November 16, 2002, the Company and Euro entered into an interim agreement to
restructure its relationship. Under the revised terms, Euro converted the then
outstanding notes in the principal amount of $650,000 plus $25,000 accrued
interest into 675,000 shares and committed to provide its originally committed
funding. The Company and Euro negotiated the restructure the agreement. The
deadline for providing the remaining amount up to $2,000,000 was extended to May
4, 2003.

                                     - 15 -
<PAGE>

QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 11 - NOTE PAYABLE - EURO ATLANTIC CAPITAL (Continued)
----------------------------------------------------------

At June 30, 2003, Euro has not been able to meet its obligations. As of
September 2003, the Company and Euro Atlantic have continued to discuss ways by
which Euro Atlantic may fulfill its obligations to the Company.

NOTE 12 - GOING CONCERN
-----------------------

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has negative cash flows
from operations and an accumulated deficit that raises substantial doubt about
its ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

For the remainder of the fiscal year 2004, the Company will rely on funds
provided by a line of credit described in Note 6 above. The Company's common
stock began trading on September 4, 2002 on the OTC Bulletin Board and the
Company intends to raise additional equity. The Company may also secure
strategic partnerships or other joint ventures to either conduct its research or
fund a portion of the expenses. No assurances can be made that we will be
successful in these activities. Should the events not occur, the financial
statements will be materially affected.

NOTE 13 - MERGER AGREEMENT
--------------------------

On March 19, 2001 the Company (QMT) entered into an agreement with Above Average
Investments, Ltd. (AAI), a public blank check company, to acquire all of the
issued and outstanding shares of capital stock of the Company in exchange for
10,260,000 shares of AAI's capital stock. For accounting purposes, the public
shell merger was treated as a recapitalization of the Company. The value of the
net assets of the Company after the public shell merger is the same as their
historical book value.

On February 25, 2002, AAI and QMT shareholders reconfirmed their investment and
closed on the original merger agreement. Therefore AAI issued 10,260,000 shares
of its common stock in exchange for all the issued and outstanding stock of QMT.
Prior to the closing, under the merger agreement, AAI had a total of 3,000,000
shares issued and outstanding, of which 500,000 shares were repurchased and
cancelled on April 8, 2002 for an originally agreed amount of $25,000.

As of June 30, 2002 the merged Company had 12,767,500 issued and outstanding
shares of common stock of which 10,267,500 shares, or approximately 80% are
owned by persons who were previously shareholders of QMT. Persons who were
previously shareholders of AAI owned a total of 2,500,000 shares or
approximately 20% of the issued and outstanding common stock. Prior to the
closing of the merger agreement, the shareholders of AAI adopted Restated and
Amended Articles of Incorporation changing the name of AAI to Quick-Med
Technologies, Inc. As part of the Merger Agreement, QMT was to assume no
liabilities of AAI. There was approximately $230,000 outstanding liability in
legal and accounting fees at the time of merger. QMT is contesting this
liability pursuant to the terms of the agreement.

NOTE 14 - LEGAL PROCEEDINGS
---------------------------

The Company received notice from an attorney for Dr. Harry Phillips, a
shareholder of the Company, seeking repayment of certain funds that he claimed
were loaned to the Company. The Company has never entered into any transaction
with Dr. Phillips. Dr. Phillip's son, Andrew Phillips was a partner of Euro
Atlantic Capital Corporation ("Euro Atlantic"), a Florida-based merchant bank,
which was a promoter for the Company's merger with Above Average Investments,
Inc. in 2002. Euro Atlantic loaned the Company approximately $650,000, which was
converted into common stock in November 2002 pursuant to a written agreement
between the Company and Euro Atlantic. Euro Atlantic had agreed to raise
$2,000,000 of equity capital for the Company by September 2002 but to date as
only raised approximately $900,000. Euro Atlantic had also agreed to place
1,000,000 shares of common stock in escrow pending the raising of such capital.
The Company believes that Dr. Phillips does not have any meritorious claims
against the Company and if a claim is brought, the Company intends to file
claims against Euro Atlantic since it acted as a principal in all transactions
with the Company and represented that all funds invested were its funds.

NOTE 15 - SUBSEQUENT EVENTS
---------------------------

In July 2003, the Company signed a non-exclusive licensing agreement with
DermaCo, Inc. to allow it to make or use and sell the Licensee's Compound in the
United States. The Company paid a fee of $50,000, which is creditable at 100%
against royalties pursuant to the terms of the agreement.

In September 2003, the Company sold 1,000,000 shares of its restricted common
stock to the Chairman for $250,000 in cash.

In September 2003 the Company negotiated a successor agreement with the Chairman
regarding the line of credit, which expired July 1, 2003 totaling $1,300,200,
excluding interest. The line of credit of

                                     - 16 -
<PAGE>
QUICK-MED TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 15 - SUBSEQUENT EVENTS (Continued)
---------------------------------------

$750,000 and the short term borrowing of $550,200 have been consolidated into a
single convertible note for up to $1,500,000 excluding accrued interest, at an
interest rate of 6% and due July 1, 2004. The maturity date of the note will be
extended if the Company is unable to repay the debt at that date. The
convertible note is secured by the assets and revenues of the Company and is
senior to all other debt obligations. The note plus accrued interest will be
convertible, in full or in part, at the option of the lender for a term of up to
5 years beginning at September 1, 2003 at a conversion rate of $0.38 per share.
The conversion rate was determined as 15% above the average share price over the
prior 20 trading days ($0.33 per share). The note has an anti-dilution provision
in the event that the Company sells stock to other investors at less than $0.20
per share. This convertible note agreement is made contingent upon the agreement
of the lender to provide additional funding to the Company by purchasing
restricted common stock at prices to be agreed to by the Company or other means.

In September 2003, a shareholder loan payable of $9,300 plus accrued interest
was converted into restricted common stock at a conversion rate of $0.25 per
share.

In September 2003, approximately $27,000 of accounts payable was paid by the
issuance of 50,000 shares of restricted common stock.


                                     - 17 -