<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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 May 31, 2002, or

[ ]      Transition report pursuant to section 13 or 15(d) of the Securities
         Exchange act of 1934 for the transition period from to

                          Commission File No. 000-31727

                       TRANSFORM PACK INTERNATIONAL, INC.
           (Name of Small Business Issuer as specified in its charter)

           Minnesota                                             41-1886254
(State or Other Jurisdiction of                                (IRS Employer
Incorporation or Organization)                               Identification No.)

            PO Box 1354, 310 Baig Blvd., Moncton, NB, Canada E1C 8T6
              (Address of Principal Executive Offices and Zip Code)

Issuer's Telephone Number:  (506) 854-9211

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

Securities registered under Section 12(g) of the Act:

                         Common Stock, Par Value $0.004

Check whether the issuer (1) filed all reports required to be filed by sections
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the issuer 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 in response to Item 405 of
Regulation S-B 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]

The issuer's revenues for its most recent fiscal year: CDN$1,257,021.

The aggregate market value of voting stock held by non-affiliates computed on
the basis of the last sale price on August 28, 2002, was $3,029,739.

As of May 31, 2002, the Registrant had outstanding 12,118,957 shares of Common
Stock, par value $0.004.

Documents incorporated by reference:  None.



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                                TABLE OF CONTENTS

ITEM NUMBER AND CAPTION                                             Page

Part I

1.   Description of Business                                          3

2.   Description of Properties                                       11

3.   Legal Proceedings                                               11

4.   Submission of Matters to a Vote of Security Holders             11

Part II

5.   Market for Common Equity and Related Stockholder                11
     Matters

6.   Management's Discussion and Analysis of Financial               12
     Condition and Results of Operations

7.   Financial Statements                                            14

8.   Changes in and Disagreements with Accountants                   14
     on Accounting and Financial Disclosure

Part III

9.   Directors, Executive Officers, Promoters and Control            15
     Persons; Compliance with Section 16(a) of the Exchange Act

10.  Executive Compensation                                          16

11.  Security Ownership of Certain Beneficial Owners and             16
     Management

12.  Certain Relationships and Related Transactions                  18

13.  Exhibits and Reports on Form 8-K                                19

Signatures                                                           21

                                        2


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                                     PART I

                         ITEM 1. DESCRIPTION OF BUSINESS

Our Company

         Transform Pack International, Inc., is a company that has developed a
cold dissolvable calibrating matrix that makes it possible to apply seasoning
and curing formulas onto roll-stock plastic food packaging materials that are
cut into sheets for the final application to the food product.

         Transform Pack seasoning sheets are used primarily for meat, fish and
poultry products. The matrix applied to the seasoning sheets uses the natural
juices of the food product to dissolve the matrix and transfer the seasoning or
curing agent to the product. Transform Pack produces seasoning sheets for boil
in the bag and roast in the bag applications, and to flavor food products, glaze
meat, cure fish, marinade food products, and age beef. We also have a
smoke-curing sheet that creates a smoke flavored food product.

         A review by the United States Food & Drug Administration shows the pH
(which is a measure of acidity) level of products treated with our seasoning
sheets and water soluble salts found in our matrix closely conform to the
specifications accepted by the National Advisory Committee for Microbiological
Criteria for Foods recommendations for aerobically packed fish products to
protect against germination of botulism bacteria. A test conducted by an
independent testing firm, Research Productivity Council, Fredericton New
Brunswick, showed that the rate of growth of bacteria on beef, chicken and fish
treated with our seasoning sheets was less than on untreated meats, which
extends the shelf-life of the product. Our smoke-curing sheet uses liquid smoke
to flavor the food product, so it eliminates harmful carcinogens that result
when natural smoke is used to flavor the product. The matrix does not contain
any known carcinogens or allergens. Another test conducted by The Food Chain
Ltd. shows a reduction in water loss from chicken treated with our seasoning
sheets. We believe reducing water loss improves the flavor quality of meat
products. As a result of these characteristics, we believe our seasoning sheets
improve product safety, quality, and shelf life.

         Our production machinery is able to apply from 50 to 450 milligrams of
seasoning or curing agent per square inch of seasoning sheet. When the sheets
are applied to a food product, the matrix dissolves in a cold or refrigerated
climate transferring the seasoning or curing agent to the product up to one
millimeter deep assuring that the agent will stay with the product during
freezing, thawing, and cooking processes. These elements of our product
manufacturing and application result in a high level of consistency and
efficiency in the production and use of our seasoning sheets.

         We spent several years developing our product and began marketing
efforts in 1995. In the past year we have moved from relying on others to market
our product to developing our own marketing capability. We believe this change
is beginning to show results, as revenue increased from CDN $442,917 for the
year ended May 31, 2001, to CDN $1,257,021 for the year ended May 31, 2002.
Although our revenue has increased, we continue to recognize losses from
operations and we expect that will continue until we achieve market acceptance
of our product and a much higher sales volume.

         For the years ended May 31, 2002 and 2001 we recognized net losses of
CDN $767,341 and CDN $864,432, respectively. At May 31, 2002, Transform Pack had
a working capital deficit of CDN $876,343. We are attempting to reduce our
operating losses by implementing marketing strategies designed to introduce our
seasoning sheet product to potential customers in North America and Europe,
which we believe will ultimately be successful. However, these marketing
strategies have not yet generated sales in amounts to cover our operating
expenses. Operating expenses as a percentage of revenue for the year ended May
31, 2002 was 103%, and was 204% for the year ended May 31, 2001. We generated
negative cash flow from operations of CDN $1,241 for the year ended May 31,
2002, and CDN $484,677 for the year ended May 31, 2001. Transform Pack is
seeking additional debt or equity financing to fund its operations, but has not
identified any sources for such financing and has no arrangements for additional
financing at this time. The foregoing factors led our independent auditors to
express substantial doubt about the ability of Transform Pack to continue as a
going concern.

                                       3
<PAGE>

The Meat Seasoning Industry

         In the past several years, consumer demand for spicy or more flavorful
foods had grown substantially. The American Spice Trade Association, 1998
Report, shows that US spice consumption increased from 750 million pounds in
1990 to 970 million pounds in 1998, an increase of 29%. We believe this increase
in spice consumption is a direct result of consumer demand for greater variety
in their food. The American palate has expanded so that now barbeque, Cajun,
fajita, lemon pepper, and smoke are commonplace flavorings for food products.

         The US Department of Agriculture Report, 1995, states that the
industrial food processing sector is a major user of spices in meat preparation,
soups, bakery products and other food items, and the trend is toward greater use
of spices prepared to meet the specifications of food processing companies. The
report further states that 60% of total spice consumption is attributable to the
foodservice sector as compared to 40% a decade ago, and the largest users of
spices in food processing are packers of meat products. Meat processors
certainly include meatpacking companies, but also include grocery stores,
restaurant chains, and specialty retail outlets that produce prepared meat
entrees for their customers.

Our Product

         Transform Pack manufactures seasoning sheets - a food contact approved
plastic film coated with a food grade adhesive. Spices and other additives are
applied to the adhesive. This film is placed in contact with meat, poultry or
fish products. The adhesive dissolves in the presence of moisture at low
temperature and the flavor from or properties of the spices or additives are
transferred to the meat products. The raw materials required for our product are
available from a number of sources at similar prices. We believe our product
complies with applicable food safety and manufacturing requirements of Canada
and the United States, and that ongoing government approvals are not required
other than routine periodic safety inspection of our manufacturing facilities.

         Our unique cold-dissolvable adhesive matrix lets us calibrate seasoning
and additive formulas anywhere from 50 mg to 450 mg per square inch, depending
on the density of the spice mixture. This allows the meat processor to season
meat, apply a decorative and flavorful spice crust to the meat product, or
produce a sauce-in-the-bag product.

         The meat processor specifies the spice mixture. Proprietary mixes with
exotic and exciting flavors seem to be the trend in today's market. Our system
lets the meat processor develop its own flavor, or select from one of the many
flavors currently available on the market.

                                        4


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         The consistent and precise application quality of our seasoning sheets
enables us to equip our sheets with additional functions. Adding tenderizing
agents such as papain enables the meat processor to tenderize some of the
tougher cuts, such as inside round and eye of round. Adding tenderizing agents
also makes it possible for the meat processor to avoid dry aging to tenderize
meat - a process that removes moisture from the meat product and reduces the
sale price of products sold by weight. Shelf life-extending additives and other
preservative products that must be added in minimum quantities can now be
applied with precision and consistency. Smoke flavors and other hard-to-apply
liquid concentrates can also be added as special flavor effects.

         After the meat processor decides on the spice mixture or additives,
Transform Pack applies the additives uniformly to seasoning sheets with our
adhesive technology. Seasoning sheets are produced in a variety of sizes
depending on the meat application. The meat processor simply applies the sheet
to the top and bottom or on one side of the mat product, depending on the
thickness of the meat and the concentration of the spice or additive mixture. If
the meat product is vacuum packed, the transfer of spice or seasoning to the
meat will occur within an hour. For the marinating process to take place, a
period of approximately eight hours is needed for beef and less than one hour
for fish, poultry and pork.

         We believe our seasoning sheets offer significant benefits to the meat
processor.

         Lower costs

         *    Cost of spices and seasonings is substantially less than
              conventional methods, because you use only what you need for each
              piece of meat.
         *    Reduced labor, because there is no mixing or clean up.
         *    The addition of natural tenderizers (Papain) allows increased use
              of cheaper cuts.

         Quick, easy and uniform preparation

         *    Flavor distribution is even, so there is no seasoning variation by
              location or user.
         *    Our seasoning sheets are easy to use
         *    Transfer of flavors and additives can occur quickly, in one hour,
              if the meat product is vacuum packed.
         *    The adhesive dissolves completely leaving only a food grade film
              that is removed before shipping or cooking.
         *    The food products can be shipped, frozen or stored with the
              seasoning sheet in place.

         Improved product safety

         *    No cross contamination since sheets are discarded and not reused.
         *    Seasoning sheets are gas flushed to eliminate the growth of
              airborne mould spores and coliforms.
         *    Our seasoning sheets can eliminates extensive marinating, aging
              and curing processes where bacteria and other agents can grow in
              the product.

         Increased shelf life

         *    Flavor sheets inhibit bacterial growth. In some cases, bacteria
              counts are actually reduced.
         *    Reduced odors in vacuum pack and modified atmosphere packaging.



                                        5


<PAGE>

         Better tasting product

         *    Reduced moisture loss.
         *    Leaves the internal structure of the meat intact.
         *    Flavor profiles do not change over time.

Our Technology

         Transform Pack's method of transferring additives through seasoning
sheets is the subject of patents issued in Canada, Canadian patent number
2,135,416 issued February 10, 1998, New Zealand, New Zealand patent number
294802 issued April 20, 2000, Australia, Australian patent number 712248 issued
February 17, 2000, China, Chinese patent number 95197105.0 issued June 16, 2001
and Europe, European patent number 0788319 issued April 3, 2002. We filed
applications in the United States, Iceland, Brazil, Japan, and Mexico, all of
which are pending and we cannot predict when any final action will be taken on
these applications. We have not received notice from any of the agencies where
we filed applications of any preliminary action that would indicate whether the
patents will or will not be issued. We are not aware of any infringing use of
our patented technology and we do not believe our patent infringes on the
proprietary rights of any other person.

         Transform Pack developed the equipment we use for applying spice
mixtures to seasoning sheets internally and we are unaware of any similar
equipment being constructed or sold by any other person. During the two fiscal
years ended May 31, 2002 and 2001, we spent CDN $7,070 and CDN $85,466,
respectively, on developing and perfecting our proprietary equipment. Based on
our experience in developing the equipment, we estimate that it would require at
least one year and CDN $163,000 for another company to design similar equipment.
In addition, there would be the time and expense, which we cannot estimate, to
develop a technology that does not conflict with our patent. We believe our
proprietary equipment is unique and the time and expense required of someone
else to develop equipment that performs the same function gives us a competitive
advantage over anyone who would seek to develop a product that competes with us
directly.

         We are protected by a process patent in addition to our proprietary
rights to the seasoning sheet. In the event we discover an infringing use of our
patents, we may be required to incur substantial cost to protect our
intellectual property rights. Even if we prosecute our intellectual property
claims, there is no assurance that a court will ultimately determine that our
intellectual property is patentable and protected under applicable statutes.

         Patents in certain jurisdictions provide limited protections. Similar
processes could be developed that do not infringe on our patents rights, but
that are similar enough to compete against our product. Moreover, it is possible
that an unpatented but prior existing process may exist that has never been made
public and therefore is not known to the industry or us in general. Such a
process could be introduced into the market without infringing on our current
patents. If any such competing non-infringing processes were developed, our
profit potential would be adversely impacted, which would seriously impair our
viability.

         Also, our present and future products may be found to infringe upon the
patents of others. If our products are found to infringe on the patents, or
otherwise impermissibly utilize the intellectual property of others, our
development, manufacture and sale of such products could be severely restricted
or prohibited. We may be required to obtain licenses to utilize such patents or
proprietary rights of others and acceptable terms may be unavailable. If we do
not obtain such licenses, the development, manufacture or sale of products
requiring such licenses could be materially adversely affected.


                                       6
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Marketing Our Product

         We believe there is a well-established and growing market among
consumers for flavored meats that can be purchased ready to cook. The July 1997
issue of Food Product Design magazine identifies the trend toward increased
spice consumption and attributes this to consumer demand for greater variety in
their foods. Meat processors are pursuing this market, and are seeking effective
solutions for producing flavored meat products.

         Building recognition and acceptance of our product is critical to the
future success of Transform Pack. Our failure to promote our product
successfully may result in stunted growth and loss of customers. Accordingly, we
have established a very crucial marketing plan and policy that will enable us to
fully capture the total potential of our System. The Transform Pack Flavour
Transfer System is a value-added spice delivery system and therefore must be
available to all the seasoning companies in the world. At the moment, we must
market our product aggressively to all potential users of the product. However,
the final goal is to hand offer our clients to our seasoning partners. Transform
Pack cannot become a competitor to the seasoning industry rather it must remain
a confidential and potential partner of this industry.

         Transform Pack is focusing its direct marketing effort on meat
processors, including meat packers, grocery stores, restaurant chains and
specialty retail outlets. Our product was originally developed as a simple and
economic method for meat processors to apply seasoning without additional
processing or packaging machinery based on management's belief that there is a
meaningful market for such a product. Accordingly, we position our product as an
alternative to manual seasoning systems and as an improvement over manual
systems due to the added benefits of ease of use, cost-effectiveness, and
product quality and safety control.

         Transform Pack is also working directly with the spice manufacturers to
inform them on the use and benefits of our seasoning sheets. We believe that as
the seasoning sheet system grows in acceptance and use, spice manufacturers will
want to offer our seasoning sheets directly to meat processors. Ultimately our
goal is to effect most of our product sales to spice companies that provide to
us seasoning formulations we apply to spice sheets that are resold by the spice
companies under private label to meat processors and consumers. We employ a
sales person to pursue these marketing initiatives. We also plan to advertise in
trade journals and other industry periodicals. We have participated in market
evaluations and product testing with the spice manufacturers, which has required
the production of free sample product for the spice manufacturers to work with.

         As of May 2002, Rector Foods Limited has launched a Retail Product with
our System. The "Insta Chef Spice Wrap" has been Trademarked by Rector Foods for
sales in Canada and the United States. Early indications and results from
promotions are very Positive as the product is being listed in retail stores in
Toronto-Ontario, Vancouver-British Columbia, and New Brunswick. A more
aggressive marketing strategy is being developed and to be implemented in the
coming years.

                                        7


<PAGE>

         In April 2001 we entered into an exclusive supply contract with Tilia
International, Inc. Tilia International manufactures and distributes the Food
Saver vacuum storage system through infomercials and retailers. It was listed in
the October 2000 issue of Inc. magazine as number 357 on its annual list of the
500 fastest growing private companies in the United States with annual sales in
excess of $80,000,000. Our seasoning sheets are being packaged and sold as an
add-on with the Food Saver. The supply contract is for a term of three years and
grants to Tilia International the exclusive right to sell worldwide our
seasoning sheets in a retail package. Tilia International is required to make
minimum annual purchases of our products in the amount of USD $1,750,000 in year
one of the supply agreement, USD $3,500,000 in year two, and USD $5,500,000 in
year three. If Tilia International fails to meet its annual minimum in any given
year, it loses its exclusive rights unless it makes a cash payment of 25 percent
of the difference between the amount purchased during the year and the annual
minimum purchase amount for that year. Tilia International accounted for 64
percent of our sales revenue in fiscal year 2001. As of May 31, 2002, Tilia,
Inc. has not met its annual minimum for year 1, and has not made a cash payment
of 25 percent of the difference between the amount purchased during the year and
the annual minimum purchase amount for the year. Therefore, Tilia, Inc. has
relinquished their exclusive rights.

         We have agreed to pay to Plus Marketing Corporation for the consulting
services and other marketing support of Greg Phillips, a director of Transform
Pack, USD $25,000 per month over a term of four months commencing after we are
able to obtain additional financing for our operations. Mr. Phillips will
provide through Plus Marketing his consulting services in developing and
implementing marketing programs for our product and office and clerical support
for our marketing efforts originating from his office in New Jersey.

         In October 1999, Transform Pack granted to Compass Rose Ltd., an
exclusive license to distribute seasoning sheets to food processors in Western
Canada. Under the license Compass Rose purchases seasoning sheets from Transform
Pack at the contract price for resale. The contract price represents a discount
from the suggested selling price to food processors. The license is for a term
of five years, with an option to renew for two additional five-year terms. In
the year ended May 31, 2000, Compass Rose Ltd., accounted for 56 percent of our
sales revenue, and there were no sales to Compass Rose in 2001. In view of
recent development at Compass Rose, the agreement granted to that company was
void & null as of March 27, 2002.

         In December 1997, Transform Pack granted to Elias Brothers Restaurant
Inc., an exclusive license to manufacture and sell seasoning sheets with
equipment supplied by Transform Pack in the continental United States. In
exchange for this license, Elias Brothers:

         *    agreed to purchase all adhesive matrix from Transform Pack, and

         *    agreed to pay a royalty to Transform Pack equal to CD$0.000875 per
              square inch of product sold.

         Elias Brothers accounted for approximately 59 percent of our sales
during the year ended May 31, 1999, but subsequently curtailed its operations.
Due to this substantial reduction in business and, as a result, sales of our
products, Transform Pack notified Elias Brothers in September 2000 that we are
terminating the license agreement for failure to promote and market our products
as provided in the license agreement. On October 20, 2000, a chapter 11
bankruptcy case concerning Elias Brothers was filed and Elias Brothers is now in
the process of liquidating its assets. Elias Brothers cannot assign the license
to unrelated parties, and bankruptcy is an event of termination of the license
agreement.



                                        8


<PAGE>

         When Transform Pack first developed its product, it entered into a
Master License Agreement with Transform Pack GmbH Europe in July 1995. Under the
agreement, Transform Pack granted to Transform Pack Europe the right to
manufacture its proprietary equipment to produce seasoning sheets and to market
seasoning sheets, either directly or through sublicensees, in Europe, Southeast
Asia,

         South America, and Japan. Transform Pack further agreed to purchase at
cost from Transform Pack Europe all production equipment sold by Transform Pack
to other persons outside of Transform Pack Europe's territory, and pay to
Transform Pack Europe 45% of the net profit from sale of such equipment. In
exchange for this license, Transform Pack Europe:

         *    granted to Transform Pack a 2% ownership interest in Transform
              Pack Europe,
         *    agreed to purchase for itself and sublicensees all adhesive matrix
              from Transform Pack, and
         *    agreed to pay a royalty to Transform Pack equal to 10% of gross
              revenue from seasoning sheet sales.

         The Master License Agreement with Transform Pack Europe was for an
initial term of five years, which expired in July 2000. Upon expiration of the
Master License Agreement, Transform Pack acquired certain production equipment
from Transform Pack Europe for CDN $100,000 and all marketing rights of
Transform Pack Europe terminated.

         We have registered the trademark "Transform Pack" in Canada
(registration number 513,791) and the United States (registration number
2,264,190). We have also registered the trademark "Insta Chef" in Canada under
registration number 513,099, we are currently promoting this mark in our
marketing program with Rector Foods Limited. We are not aware of any infringing
use of our trademarks and we do not believe our patent infringes on the
proprietary rights of anyother person.

Competition

         The largest competitor is that of substitution since no other spice
application systems are available in the market place other than manual internal
processes that meat processors may have in place. These processes are
problematic since they depend on the operator for accuracy and repeatability of
the spice application. Accordingly, we believe we can compete with traditional
methods of manual application on the basis of the ease of use and uniformity
offered by our seasoning sheets.

         Transform Pack also believes we can compete effectively with manual
application systems for meat products on the basis of price and economic
benefits of using our system. By using our seasoning sheets, the cost of spices
and other additives actually used to process a meat product are reduced, since
there are no wasted spices or additives in the process. The ease with which
spices and additives are applied to meat products with our seasoning sheets
reduces labor costs for the meat processor. Furthermore, the use of our product,
particularly to tenderize meat products without aging or curing, reduces
substantially the loss of moisture in the meat product, which improves flavor
and increases weight of the meat products and the price a which meats products
are ultimately sold to consumers.

         Transform Pack's principal competitors are manual spice applications,
sprinkling machinery or the tumbling industry. None of which produce an even
slight resemblance to the quality that the Transform Pack Flavour Transfer
System is capable of delivering and achieving in topical seasoning application.
We do not compete with spice producers; they, if they see it fit or beneficiary,
can deliver their products with our System. In fact, seasoning and spice
companies are now performing most of Transform Pack's marketing.


                                        9


<PAGE>

Government Regulation

         Transform Pack is subject to a host of national, state, and local
regulations affecting health, sanitation and safety standards for production of
food products. If we fail to comply with these standards, we could be required
to recall our products, suspend operations until we are in compliance, or be
penalized through fines or criminal charges. We believe our manufacturing
processes comply with applicable regulations. However, differing interpretations
of existing regulations or new regulations could result in Transform Pack being
non-compliant and place additional operational burdens and costs on us.

Employees

         At May 31, 2002, we employed 4 persons, of which 2 occupy executive or
managerial positions and 2 hold manufacturing positions. None of our employees
are represented by a labor union. We consider our relations with our employees
to be good and have not experienced any interruption of operations due to labor
disputes.

About Transform Pack

         We acquired Transform Pack, Inc., our operating subsidiary, in January
2000, through a reverse acquisition. Transform Pack, Inc., was formed in October
1994 under the laws of New Brunswick, Canada to develop, manufacture and
distribute our current seasoning sheet product. Transform Pack, Inc., began
developing the product for sale to local meat packinghouses in October 1994. It
took one year to develop the calibration matrix and obtain all necessary
regulatory approvals for commercial use of the product in Canada and the United
States. In late 1995, two restaurant chains in the United States began to use
and order substantial amounts of the seasoning sheets. The production machinery
used by Transform Pack, Inc., at that time was inadequate for meeting the new
demand for product. As a result, Transform Pack, Inc., suspended its marketing
activities in 1996 and redesigned its production machinery. The new production
machinery was operational and in place by the end of 1999, and Transform Pack,
Inc., developed new marketing plans that it implemented from the first quarter
of 2000 through the present.

         Transform Pack International, Inc., the parent of Transform Pack, Inc.,
was formed as a Minnesota corporation in February 1975, under the name of
Automated Multiple Systems, Inc. It subsequently changed its name to Stylus,
Inc., and was engaged in the business of developing a minicomputer word
processor. This business was unsuccessful and the corporation was inactive until
December 1997, when it changed its name to Cybernetics, Inc., and acquired
Cybernetics Medical Systems Corporation, a privately held Minnesota corporation,
in exchange for 2,000,000 shares of common stock and warrants to purchase
300,000 additional shares. Cybernetics Medical was engaged in the business of
developing medical products. Delays in product development and increased
competition impaired its ability to raise capital to fund product development.
In March 1999, Cybernetics Medical was sold to certain stockholders for
assumption of all liabilities and cancellation of the 300,000 warrants issued in
the original acquisition. We were inactive until January 2000, when we acquired
Transform Pack, Inc., for seven million shares of common stock and changed our
name to Transform Pack International, Inc. Any references you see to "Transform
Pack" in this report are references to both the parent and subsidiary companies.

         In February 2000 we sold 1,000,957 shares of common stock for CDN
$712,715. This financing was completed following the reverse acquisition of
Transform Pack, Inc. in January 2000. Transform Pack, Inc. found the investors
in the last quarter of 1999, but the new investors were unwilling to proceed
with the investment unless they could acquire shares that would have the
potential for liquidity in the public market in the future. In order to obtain
the financing and facilitate future financings, Transform Pack, Inc., negotiated
for and effected the reverse acquisition to become a publicly held company. We
do not have any additional financing arrangements pending at this time.


                                       10
<PAGE>

                        ITEM 2. DESCRIPTION OF PROPERTIES

         Transform Pack leases approximately 6,000 square feet of space in
Moncton, New Brunswick, Canada, which serves as our business office and
manufacturing facility. The monthly lease rate is CDN $3,672 under a lease that
expires in March 2004. Our facility is adequate to accommodate one production
line for seasoning sheets, which is capable of producing 10,000,000 seasoning
sheets per month. We are currently selling on average 4,200,000 seasoning sheets
per month, so our current facility is adequate for a 58 percent increase in our
current sales volume. We believe this facility will be adequate for our needs
for the next year. Our principal executive office and manufacturing facility are
located at 310 Baig Blvd., Moncton, NB, Canada E1C 8T6. Our telephone number is
(506) 854-9211.

ITEM 3. LEGAL PROCEEDINGS

         Transform Pack is not a party to any material pending legal
proceedings, and to the best of its knowledge, no such proceedings by or against
Transform Pack have been threatened.

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

         No matter was submitted to a vote of security holders in the fiscal
quarter ended of May 31, 2001.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         There is no established trading market for the Transform Pack's common
stock. In August 2001, quotations for our common stock were first listed on the
OTC Bulletin Board under the symbol TPII.

         Since its inception, no dividends have been paid on our common stock.
Transform Pack intends to retain any earnings for use in its business
activities, so it is not expected that any dividends on the common stock will be
declared and paid in the foreseeable future.

         At May 31, 2002, there were approximately 210 holders of record of the
Company's Common Stock.

         In September 2000, Transform Pack obtained a loan from Bruce Weitz, a
director, in the amount of $154,230. In February 2001, Mr. Weitz contributed an
additional $153,736 to acquire common stock and warrants of the Company. As a
result, Mr. Weitz contributed a total of CDN $307,965 to Transform Pack to
acquire 408,000 shares of the Company's common stock and a warrant to purchase
an additional 408,000 shares of common stock at an exercise price of USD $0.50
per share that expires February 15, 2004. No broker was involved in the
transaction and no commission was paid to any person. The transaction was
effected in reliance on the exemption from registration set forth in Section
4(2) of the Securities Act of 1933.


                                       11
<PAGE>

         In April 2001, Transform Pack issued to Greg Phillips, a director,
100,000 shares of common stock and 100,000 warrants to purchase common stock,
all valued at $75,500, as compensation for services to Transform Pack. The
warrant is exercisable at a price of USD $0.50 per share and expires February
15, 2004. No broker was involved in the transaction and no commission was paid
to any person. The transaction was effected in reliance on the exemption from
registration set forth in Section 4(2) of the Securities Act of 1933.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS

         Transform Pack International, Inc. (the "Company" or "Transform Pack")
is a company that has developed a cold dissolvable calibrating matrix that makes
it possible to apply seasoning and curing formulas onto roll-stock plastic food
packaging materials that are cut into sheets for the final application to the
food product. All dollar figures in the following discussion are in Canadian
dollars.

RESULTS OF OPERATIONS

THREE AND TWELVE MONTHS ENDED MAY 31, 2002 AND MAY 31, 2001

         Transform Pack had net sales of $84,002 and $270,235 for the three
months ended May 31, 2002 and May 31, 2001, respectively; which represents a 69%
decrease from 2001. Net sales for the twelve months ended May 31, 2002 were
$1,257,021, a 184% increase from $442,917 for the same period in 2001. This
increase is primarily a result of higher sales to new customers in the period
ending on May 31, 2002 and the contract between Transform Pack and Tilia that
started in the fourth quarter of 2001.

         Cost of sales for the three-months ended May 31, 2002 and May 31, 2001
were $56,751 and $188,520 respectively. Such costs, as a percentage of net sales
for the three months ended May 31, 2002 and May 31, 2001 were 69% and 70%
respectively. Cost of net sales for the twelve months ended May 31, 2002 and May
31, 2001 were $683,674 and $306,980, respectively. Such costs, as a percentage
of net sales for the twelve months ended May 31, 2002 and May 31, 2001 were 54%
and 69% respectively.

         Selling, general and administrative expenses for the three-month period
ended May 31, 2002 and May 31, 2001 were $649,481 and $241,552 respectively.
Operating expenses for the twelve months ended May 31, 2002 and May 31, 2001
were $1,298,899 and $901,569, respectively, a 44% increase. The increase in
operating expenses for the twelve months ended May 31, 2002 is attributable to
$542,500 in stock based compensation.

         Interest expense for the three months ended May 31, 2002 and May 31,
2001 were $8,218 and $14,222, respectively. Interest expense for the twelve
months ended May 31, 2002 and May 31, 2001 were $39,059 and $42,094
respectively.



                                       12
<PAGE>

         Due to the foregoing, Transform Pack suffered net losses of $629,621
and $180,883 for the three months ended May 31, 2002 and May 31, 2001,
respectively. As for the twelve months ended May 31, 2002 and May 31, 2001,
Transform Pack suffered net losses of $767,341 and $864,432 respectively.

LIQUIDITY AND CAPITAL RESOURCES

         At May 31, 2002, Transform Pack had a working capital deficit of
$876,343 as compared to a working capital deficit of $684,542 at May 31, 2001.

         Cash used in operations for the twelve-month period ended May 31, 2002
totaled $1,241 compared to cash use of $484,677 in the twelve-month period ended
May 31, 2001. Cash use consisted of a decrease of $76,210 in payables and a
decrease of $4,239 in prepaid expenses, which was offset by an increase of
$146,025 in receivables and an increase in inventory of $70,563.

         Our financing activities provided the Company with $13,424 for the
twelve-month period ended May 31, 2002, compared to $335,622 for the
twelve-month period ended May 31, 2001. This decrease in financing activities is
due to a decrease in proceeds from issuance of capital stock, proceeds on
long-term debt, repayment of long-term debt, due to related parties and proceeds
from (repayment of) bank indebtedness.

         Capital expenditures for the twelve months ended May 31, 2002 were
$12,183 compared to $21,878 for the twelve months ended May 31, 2001.

The company is in need of additional financing in order to pay outstanding
obligations, finance current operations and expand operations over the next
year. It is not likely that we will be able to take advantage of the opportunity
to increase our product sales unless we obtain additional capital to fund
operations. If we cannot find more funding, we will be forced to substantially
reduce our operations and it will take a much longer period for our business to
develop. Consequently, we may be subject to enforcement actions by our creditors
and may not be able to take advantage of the opportunity to expand our business.
If we are unable to generate working capital from our internal operations or
outside sources, our ability to continue in business will be seriously impaired.

         However, sales have been steadily increasing and the Company's client
base is wider, covering many different countries. Several of Transform Pack's
clients are continuously increasing their orders.

ITEM 7. FINANCIAL STATEMENTS

         The financial statements of the Company appear at the end of this
report beginning with the Index to Financial Statements on page F-1.

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

         Not applicable.



                                       13
<PAGE>

                                    PART III

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

Directors and Officers

         The following table sets forth the names, ages, and positions with the
Company for each of the directors and officers of the Company.

Name              Age   Position                         Since

Hans Meier        57   President and Director           February 2000
Nathalie Cormier  31   Secretary, Treasurer and         February 2000
                       Director

         Each director serves until the next annual meeting of stockholders and
until his or her successor is elected and qualified. Executive officers serve at
the discretion of the board of directors. The following is biographical
information on each of our officers and directors.

         Hans Meier served from November 1994 to February 2000 as Transform
Pack, Inc.'s Vice President of Research and Development where he was responsible
for developing our seasoning sheet. He became President in February 2000. For
the past 15 years Mr. Meier has owned and operated Meier Food Service Consulting
Limited, a private company engaged in the business of consulting on food
processing and delivery systems. He became president and a director of Transform
Pack in February 2000.

         Nathalie Cormier has been employed as an executive assistant and
manager of Transform Pack, Inc., from December 1997 to February 2000, when she
was appointed Secretary and Treasurer. For six years prior to December 1997 she
was employed as an administrative assistant with Gemini Investments Ltd., of
Moncton, New Brunswick. She became a director of Transform Pack in February
2000.



                                       14


<PAGE>

                         ITEM 10. EXECUTIVE COMPENSATION

         The following table sets forth certain information regarding the annual
and long-term compensation for services in all capacities to Transform Pack for
the prior fiscal years ended May 31, 2002, 2001, 2000 and 1999, of those persons
who were either the chief executive officer during the last completed fiscal
year or one of the other four most highly compensated executive officers as of
the end of the last completed fiscal year whose annual salary and bonuses
exceeded US$100,000.

                                           Annual
                                        Compensation
Name and Principal Position   Year       Salary (CND)

Hans Meier, President (1)     2002         82,800
                              2001         82,800
                              2000         56,350
                              1999         36,754

(1)      Transform Pack pays CDN $6,900 per month to Meier Food Service
         Consulting Limited, a private company owned by Hans Meier, for his
         services rendered to the Company. The figures for Mr. Meier's salary
         are the total of payments made to Meier Food Service Consulting Limited
         in the three fiscal years.

Other Compensation Arrangements

         None

Employee Options

         In February 2000, Transform Pack granted to Nathalie Cormier an option
to purchase 40,000 shares of common stock at an exercise price of USD $0.50 per
share exercisable for a term of three years. No trading market for our common
stock existed then or at the end of our fiscal year on May 31, 2001. The option
price is the same price at which Transform Pack sold common stock privately to
unrelated parties in February 2000. The option issued to Ms. Cormier represents
80% of all options issued to employees of Transform Pack in fiscal year 2000.

         In April 2000, Transform Pack granted to Chris Trevors an option to
purchase 10,000 shares of common stock at an exercise price of USD $1.00 per
share exercisable for a term of two years. The option issued to Mr. Trevors
represents 20% of all options issued to employees of Transform Pack in fiscal
year 2000. In April 2002, Mr. Trevors' option to purchase shares of common stock
was renewed; it now bears an expiration date of April 2004.


                                       15
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth as of May 31, 2002, the number and
percentage of the 12,118,957 shares of outstanding common stock which, according
to the information supplied to the Company, were beneficially owned by (i) each
person who is currently a director of the Company, (ii) each executive officer,
(iii) all current directors and executive officers of the Company as a group and
(iv) each person who, to the knowledge of the Company, is the beneficial owner
of more than 5% of the outstanding common stock. Except as otherwise indicated,
the persons named in the table have sole voting and dispositive power with
respect to all shares beneficially owned, subject to community property laws
where applicable.

 Name and Address             Common       Percent
                              Shares      of Class
 Principal stockholder

 Franz Schedlbauer (1)       1,128,120      9.3
 Muhlenstrasse 15
 Graz-Raaba, Austria

 Christian Schedlbauer (1)   1,128,120      9.3
 Muhlenstrasse 15
 Graz-Raaba, Austria

 #503485 NB Ltd. (1)         2,254,857      18.6
 Muhlenstrasse 15
 Graz-Raaba, Austria

(1)      #503485 NB Ltd., is a private New Brunswick, Canada corporation owned
         and controlled by Franz and Christian Schedlbauer. Accordingly, these
         persons may be deemed to have voting and investment control over the
         2,254,857 shares of common stock held of record by #503485 NB Ltd.
         Franz and Christian Schedlbauer each individually hold 1,128,120 shares
         of common stock of record.


                                       16
<PAGE>

                                    Common       Percent
                                    Shares      of Class (1)

 Officers and directors

 Hans Meier                        3,046,103        25.1
 310 Baig Blvd.
 Moncton, NB, Canada E1C 8T6

 Daniel Sham                         87,500         0.7
 39 Glen Watford Dr.
 Scarborough, ON, Canada  M1S 2C2

 Greg Phillips                      200,000         1.7
 160 Chestnut Street
 Englewood Cliffs, NJ 07632

 Nathalie Cormier (1)               40,000          0.3
 310 Baig Blvd.
 Moncton, NB, Canada E1C 8T6

 Bruce Weitz (1)                 1,016,000          8.4
 37 McGrath Drive
 Cressill, NJ 07626

 All Executive officers          4,389,603         36.22
 and Directors as a Group (5
 persons) (2)

(1)      The figures for each of these persons represent only options to
         purchase common shares that are vested or will vest within 60 days from
         the date as of which information is presented in the table. These
         figures represent the percentage of ownership of the named individuals
         assuming each of them alone has exercised his or her options, and
         percentage ownership of all officers and directors as a group assuming
         all purchase rights held by such individuals are exercised.


                                       17
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Franz and Christian Schedlbauer are principal stockholders of Transform
Pack and are also the controlling stockholders of Transform Pack GmbH Europe. We
had a Master License Agreement Transform Pack Europe, which we entered into in
July 1995, and hold a 2% ownership interest in Transform Pack Europe. Under the
license agreement, Transform Pack Europe had the exclusive right to manufacture
our proprietary equipment to produce seasoning sheets and to market seasoning
sheets in Europe, Southeast Asia, South America, and Japan. Transform Pack
further agreed to purchase at cost from Transform Pack Europe all production
equipment sold by Transform Pack to other persons outside of Transform Pack
Europe's territory, and pay to Transform Pack Europe 45% of the net profit from
sale of such equipment. Transform Pack Europe was required to purchase all
adhesive matrix used in the seasoning sheets from us, and pay us a royalty equal
to 10% of gross revenue from seasoning sheet sales. The Master License Agreement
with Transform Pack Europe was for an initial term of five years, which expired
in July 2000. Upon expiration of the Master License Agreement, Transform Pack
purchased certain production equipment from Transform Pack Europe for CDN
$100,000, and all marketing rights of Transform Pack Europe terminated.

         In April 2001, Transform Pack issued to Greg Phillips 100,000 shares of
common stock and 100,000 warrants to purchase common stock, all valued at
$75,500, as compensation for services to Transform Pack. The warrant is
exercisable at a price of USD $0.50 per share and expires February 15, 2004.
This is in addition the compensation otherwise payable to Plus Marketing
Corporation.

         In March 2000, Transform Pack granted to Bruce Weitz options to
purchase 200,000 shares of common stock at an exercise price of USD $1.00 per
share exercisable for a term of three years. No trading market for our common
stock existed then. The option price was based on Transform Pack's determination
that the exercise price is equal to or greater than the fair value of its common
stock.

         In September 2000, Transform Pack obtained a loan from Bruce Weitz, a
director, in the amount of $154,230. In February 2001, Mr. Weitz converted the
loan and contributed an additional $153,736 to acquire common stock and warrants
of the Company. As a result, Mr. Weitz contributed a total of CDN $307,965 to
Transform Pack to acquire 408,000 shares of the Company's common stock and a
warrant to purchase an additional 408,000 shares of common stock at an exercise
price of USD $0.50 per share that expires February 15, 2004.


                                       18
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

         Copies of the following documents are included as exhibits to this
report.

 Exhibit  Item 601    Title of Document
  No.     Ref. No.
 1         2.1*      Exchange Agreement dated January 28, 2000,
                     between Cybernetics, Inc., and Transform Pack, Inc.

 2         3.1*      Articles of Incorporation, as amended

 3         3.2*      By-Laws

 4        10.1*      License Agreement dated October 5, 1999, with
                     Compass Rose Ltd.

 5        10.2*      License Agreement dated December 29, 1997,
                     with Elias Brothers Restaurant Inc.

 6        10.3*      Master License Agreement dated July 24, 1995,
                     with Transform Pack Europe GmbH

 7        10.4*     Form of Stock Option issued to officers and
                    directors

 8        10.5*     Consulting agreement with Greg Phillips dated
                    May 23, 2000

 9        10.6*     Loan Conversion and Preferred Stock
                    Redemption Agreement
                    dated February 2, 1999 between Transform
                    Pack, Inc., and New Brunswick

 10       10.7*     Lease Agreement for Property at 310 Baig
                    Blvd., Moncton, NB

 11       10.8      Tilia / Transform Pack Exclusive Supply
                    Agreement dated April 1, 2001

 12       10.9     Warrant for purchase of common stock issued
                   to Bruce Weitz, dated February 15, 2001

 13       10.10    Warrant for purchase of common stock issued
                   to Greg Phillips, dated February 15, 2001

 13       99.1     List of Foreign Patents

*        Each of these documents are incorporated herein by this reference from
         the Registration Statement on Form 10-SB as filed by the Company with
         the Securities and Exchange Commission on October 10, 2000, as amended
         on December 20, 2000, February 8, 2001 and February 16, 2001.

FORM 8-K FILINGS

         No reports on Form 8-K were filed during the fiscal quarter ended May
31, 2002.

                                       19


<PAGE>
                           SIGNATURES

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

                                              Transform Pack International, Inc.

Date: September 9,2002                        By: /s/ Hans Meier, President

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


Dated: September 9, 2002                     /s/ Hans Meier, Chief Executive
                                             Officer and Director


Dated: September 9, 2002                     /s/ Nathalie Cormier, Chief
                                             Financial Officer and Director


                                       20


<PAGE>


               TRANSFORM PACK INTERNATIONAL, INC.

                      Financial Statements

                      May 31, 2001 and 2000

                              INDEX

                                                         Page

Independent Auditors' Report                              F-2

Consolidated Balance Sheets                               F-3
  As At May 31, 2001 and 2000

Consolidate Statements of Operations                      F-4
  Years Ended May 31, 2001 and 2000
  and the Period From October 31, 1994
  (Date of Incorporation) To May 31, 2001

Consolidate Statements Of Shareholders'                   F-5
  Deficiency Years Ended May 31, 2001 and 2000
  and the Period From October 31, 1994
  (Date of Incorporation) To May 31, 2001

Consolidate Statements of Cash Flows                      F-6
  Years Ended May 31, 2001 and 2000
  and the Period From October 31, 1994
  (Date of Incorporation) To May 31, 2001

Notes to the Consolidated Financial Statements            F-7

                                     F-1


<PAGE>


                              Deloitte & Touche LLP


          P.O. Box 2087                   Telephone:(902) 422-8541
          5161 George Street, Suite 800   Facsimile:(902) 423-5820
          Halifax, Nova Scotia B3J 3B7

                          INDEPENDENT AUDITORS' REPORT


To the Shareholders of
TRANSFORM PACK INTERNATIONAL INC.


We have audited the consolidated balance sheets of TRANSFORM PACK INTERNATIONAL
INC. as at May 31, 2002 and 2001 and the related consolidated statements of
operations, shareholders' deficiency and cash flows for the years then ended.
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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance 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, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at May 31, 2002 and
2001 and the results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the deficiency in working capital at May 31, 2002 and the
Company's operating losses since inception, raise substantial doubt about its
ability to continue as a going concern. Management's plans concerning these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of these uncertainties.




                                                      /s/ Deloitte & Touche, LLP
August 9, 2002                                             CHARTERED ACCOUNTANTS
Halifax, Nova Scotia, Canada

                                      F-2


<PAGE>
<TABLE>

                             TRANSFORM PACK INTERNATIONAL INC.
                                CONSOLIDATED BALANCE SHEETS
                                AS AT MAY 31, 2002 AND 2001

                                   (in Canadian Dollars)
<CAPTION>

                                                                  2002           2001
------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>
                             ASSETS
Current
     Accounts receivable (Note 3)                              $   123,006    $   269,031
     Inventory                                                      79,387        149,950
     Prepaid expense                                                 6,575          2,336
                                                               ------------   ------------
                                                                   208,968        421,317
CAPITAL ASSETS (NOTE 4)                                            383,166        458,444
INVESTMENT IN AFFILIATE (NOTE 5)                                     2,000          2,000
                                                               ------------   ------------

                                                               $   594,134    $   881,761
                                                               ============   ============

                          LIABILITIES
Current
     Bank indebtedness (Note 6)                                $   419,479    $   406,328
     Accounts payable and accrued liabilities (Note 7)             475,534        551,744
     Current portion of long-term debt (Note 8)                     66,176         87,787
     Current portion of redeemable preferred shares (Note 9)       120,000         60,000
                                                               ------------   ------------
                                                                 1,081,189      1,105,859
LONG-TERM DEBT (NOTE 8)                                            365,848        398,964
NON-CONTROLLING INTEREST IN PREFERRED EQUITY OF A
  SUBSIDIARY (NOTE 9)                                              446,250        506,250
DUE TO SHAREHOLDERS (NOTE 10)                                      194,077        139,077
                                                               ------------   ------------
                                                                 2,087,364      2,150,150
                                                               ------------   ------------

                    SHAREHOLDERS' DEFICIENCY

SHARE CAPITAL AND WARRANTS (NOTE 11)                             2,065,812      1,523,312
DEFICIT                                                         (3,559,042)    (2,791,701)
                                                               ------------   ------------
                                                                (1,493,230)    (1,268,389)
                                                               ------------   ------------

                                                               $   594,134    $   881,761
                                                               ============   ============


                                            F-3
</TABLE>



<PAGE>
<TABLE>

                          TRANSFORM PACK INTERNATIONAL INC.
                        CONSOLIDATED STATEMENT OF OPERATIONS
                          YEARS ENDED MAY 31, 2002 AND 2001


                                (in Canadian Dollars)
<CAPTION>

                                                         May 31          May 31
                                                          2002            2001
-----------------------------------------------------------------------------------
<S>                                                   <C>             <C>


Revenue                                               $  1,257,021    $    442,917
                                                      -------------   -------------

Cost of sales                                              683,674         306,980
Selling, general and administrative expenses
 (includes $542,500 (2001 - $75,500) in stock-based
  compensation)                                          1,298,899         901,569
Research and development expense                             7,070          85,466
Other income                                                (4,340)        (28,760)
                                                      -------------   -------------
                                                         1,985,303       1,265,255
                                                      -------------   -------------

Loss before interest expense                              (728,282)       (822,338)
Interest expense - long-term                                10,313           9,583
                 - other                                    28,746          32,511
                                                      -------------   -------------

NET LOSS                                              $   (767,341)   $   (864,432)
                                                      =============   =============

BASIC AND DILUTED NET LOSS PER SHARE                  $      (0.07)   $      (0.08)
                                                      =============   =============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING                                           11,418,957      11,164,957
                                                      =============   =============


                                        F-4
</TABLE>



<PAGE>
<TABLE>

                                            TRANSFORM PACK INTERNATIONAL INC.
                                   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIENCY
                                            YEARS ENDED MAY 31, 2002 AND 2001


                                                  (in Canadian Dollars)


<CAPTION>

                                             Warrants                   Share Capital
                                    --------------------------  --------------------------
                                       Shares        Amount        Shares        Amount       Deficit          Total
-----------------------------------------------------------------------------------------------------------------------
<S>                                   <C>         <C>            <C>          <C>           <C>            <C>

Balance - May 31, 2000                       --            --    10,910,957     1,139,847    (1,927,269)      (787,422)
Net loss                                     --            --            --            --      (864,432)      (864,432)
Issue of common stock
 to employee                            100,000            --       100,000        75,500            --         75,500
Issue of common stock                   408,000        48,545       408,000       259,420            --        307,965
                                    ------------  ------------  ------------  ------------  ------------   ------------

Balance - May 31, 2001                  508,000   $    48,545    11,418,957   $ 1,474,767   $(2,791,701)   $(1,268,389)
                                    ------------  ------------  ------------  ------------  ------------   ------------

Net loss                                     --            --            --            --   $  (767,341)   $  (767,341)

Issue of share rights to employee       700,000            --       700,000       542,500            --        542,500

Balance - May 31, 2002                1,208,000   $    48,545    12,118,957   $ 2,017,267   $(3,559,042)   $(1,493,230)
                                    ============  ============  ============  ============  ============   ============




                                                          F-5
</TABLE>



<PAGE>


                        TRANSFORM PACK INTERNATIONAL INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        YEARS ENDED MAY 31, 2002 AND 2001


                              (in Canadian Dollars)


                                                         May 31      May 31
                                                          2002        2001
-------------------------------------------------------------------------------


NET INFLOW (OUTFLOW) OF CASH AND CASH EQUIVALENTS
RELATED TO THE FOLLOWING ACTIVITIES:

OPERATING
     Net loss                                           $(767,341)   $(864,432)
     Items not affecting cash
         Amortization                                      87,461       90,083
         Stock based compensation                         542,500       75,500
     Changes in non-cash working capital items
         Accounts receivable                              146,025      (88,561)
         Inventory                                         70,563      (22,641)
         Prepaid expenses                                  (4,239)         393
         Accounts payable                                 (76,210)     324,981
                                                        ----------   ----------
                                                           (1,241)    (484,677)
                                                        ----------   ----------

FINANCING
     Proceeds from issuance of capital stock                   --      153,735
     Proceeds on long-term debt                                --        5,362
     Repayment of long-term debt                          (54,727)     (82,534)
     Due to related parties                                55,000      166,231
     Proceeds from (repayment of) bank indebtedness        13,151       92,828
                                                        ----------   ----------
                                                           13,424      335,622
                                                        ----------   ----------

INVESTING
     Acquisition of capital assets, net of government
       assistance received                                (12,183)     (21,878)
                                                        ----------   ----------


NET INFLOW (OUTFLOW) OF CASH AND CASH EQUIVALENTS              --     (170,933)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                   --      170,933
                                                        ----------   ----------


CASH AND CASH EQUIVALENTS, END OF YEAR                  $      --    $      --
                                                        ==========   ==========




                                      F-6



<PAGE>

                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)



1.     BASIS OF PRESENTATION

       Transform Pack International Inc. (the "Company") is incorporated under
       the laws of the State of Minnesota. The Company owns 100% of the
       outstanding common shares of Transform Pack Inc., a company incorporated
       under the laws of the Canadian province of New Brunswick, whose
       operations include the manufacturing and marketing of spice sheets for
       seasoning of meat, fish and poultry products.

       The accompanying financial statements have been prepared on a
       going-concern basis, which contemplates the realization of assets and the
       satisfaction of liabilities in the normal course of business. As shown in
       the financial statements, during the years ended May 31, 2002 and 2001,
       the Company incurred significant net losses and negative cash flows from
       operations; also, as of May 31, 2002 and 2001, the Company had a net
       shareholders' deficiency in assets. These factors, among others,
       indicated that the Company may be unable to continue as a going concern.
       The financial statements do not include any adjustments relating to the
       recoverability and classification of recorded asset amounts, or the
       amount of and classification of liabilities that might be necessary
       should the Company be unable to continue as a going concern. The
       Company's continuation as a going concern is dependent upon its ability
       to ultimately obtain profitable operations, generate sufficient cash flow
       to meet its obligations, and obtain additional financing as may be
       required.

       MANAGEMENT'S PLANS

       As shown in the consolidated financial statements, the Company has a
       negative working capital position, and a net shareholders' deficiency in
       assets. Since its inception, the Company has devoted substantially all of
       its efforts to developing the products, obtaining financing, assessing
       market demand, and obtaining customers. The success of the Company's
       operations and, ultimately, the attainment of profitable operations are
       dependent on achieving a level of sales adequate to support the Company's
       cost structure.

       The Company intends to increase sales through market penetration
       strategies designed to introduce the products to numerous North American
       and European customers. The Company is currently working on obtaining
       additional funding which will satisfy its working capital needs and allow
       the Company to increase its production.



                                      F-7


<PAGE>

                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)



2.     ACCOUNTING POLICIES

       The financial statements have been prepared in accordance with accounting
       principles generally accepted in the United States of America and include
       the following significant accounting policies:

       a)     GOVERNMENT ASSISTANCE

              Government assistance received as a reimbursement of a capital
              cost acquisition is recorded as a reduction of the capital cost
              and is amortized on the same basis as the asset. Contributions
              received for the development of the technology of spice sheets is
              recorded as a reduction of the related research and development
              expense.

       b)     INVENTORY

              Inventory consists only of raw materials and is recorded at the
              lower of cost (on a first-in, first-out basis) and net realizable
              value.

       c)     CAPITAL ASSETS

              Capital assets are recorded at cost less government assistance.
              Amortization is computed using the following rates and methods:

                Machinery and equipment              10 years straight-line
                Leasehold improvement                 5 years straight-line
                Office furniture and equipment      20% declining-balance
                Lab equipment                       20% declining-balance
                Patents                              10 years straight-line

       d)     USE OF ESTIMATES

              The preparation of financial statements in conformity with
              accounting principles generally accepted in the United States of
              America require management to make estimates and assumptions that
              affect the reported amounts of assets, liabilities, revenues and
              expenses, and disclosure of contingent liabilities in these
              financial statements. Actual results could differ from those
              estimates.

       e)     RESEARCH AND DEVELOPMENT

              Research and development costs are charged to expenses when
              incurred.


                                      F-8


<PAGE>


                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)


2.     ACCOUNTING POLICIES (CONTINUED)

       f)     INCOME TAXES

              Income taxes are provided for current taxes payable or refundable,
              and temporary differences arising from the future tax consequences
              of events that have been recognized in the Company's financial
              statements or income tax returns. The effect of income taxes is
              measured based on currently enacted tax laws and rates. A
              valuation allowance is provided for deferred tax assets when it is
              more likely than not that some or all of such assets will not be
              realized.

       g)     COMPREHENSIVE INCOME

              There are no differences between the Company's net earnings as
              reported and its comprehensive income. Accordingly, a separate
              statement of comprehensive income has not been presented.

       h)     CASH AND CASH EQUIVALENTS

              The Company considers investments in highly liquid investment
              instruments with maturities of 90 days or less at the date of
              purchase to be cash equivalents. The carrying amount reported in
              the balance sheets for cash and cash equivalents approximates
              their fair value. Cash equivalents consist principally of
              investments in certificates of deposit with financial
              institutions.

       i)     IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

              In June 2001, FASB issued Statements No. 141 "Business
              Combinations" and No. 142 "Goodwill and Other Intangible Assets."
              Statement No. 141 outlines the financial accounting and reporting
              for business combinations. Under this standard, all business
              combinations are to be accounted for using one method, the
              purchase method. Statement No. 142 outlines the financial
              accounting and reporting for acquired goodwill and other
              intangible assets and how they should be accounted for subsequent
              to their initial recognition. More specifically, it states that
              goodwill and intangible assets that have indefinite useful lives
              will not be amortized, but rather will be tested at least annually
              for impairment. The Company is required to adopt Statement No. 142
              on June 1, 2002.

              In June 2001, FASB issued Statement No. 143, "Accounting for Asset
              Retirement Obligations." This statement addresses financial
              accounting and reporting for obligations associated with the
              retirement of tangible long-lived assets and the associated asset
              retirement costs. The Company is required to implement Statement
              No. 143 on June 1, 2003.


                                      F-9


<PAGE>

                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)


2.     ACCOUNTING POLICIES (CONTINUED)

       i)     IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS (CONTINUED)

              In August 2001, FASB issued Statement No. 144, "Accounting for the
              Impairment or Disposal of Long-lived Assets." This statement
              supercedes Statement No. 121, "Accounting for the Impairment of
              Long-lived Assets and for Long-lived Assets to be Disposed Of."
              The statement retains the previously existing accounting
              requirements related to the recognition and measurement of the
              impairment of long-lived assets to be held and used while
              expanding the measurement requirements of long-lived assets to be
              disposed of by sale to include discontinued operations. It also
              expands the previously existing reporting requirements for
              discontinued operations to include a component of an entity that
              either has been disposed of or is classified as held for sale. The
              Company is required to implement Statement No. 144 on June 1,
              2002.

              The impact of implementing these accounting standards on the
              Company's financial statements is not expected to be material.

       j)     BASIC AND DILUTED NET LOSS PER SHARE

              Basic net loss per common share is based on the weighted average
              number of common shares outstanding during each period. Diluted
              net loss per share has not been presented as it would be
              anti-dilutive.

              LOSS PER SHARE

              The following table sets forth the computation of earnings per
              share:

                                                      YEAR ENDED     YEAR ENDED
                                                        MAY 31,       MAY 31,
                                                         2002           2001
              ------------------------------------------------------------------
              NUMERATOR:

              Net Loss                                $  (767,341)  $  (864,432)

              DENOMINATOR:

              Weighted average number of shares
                 outstanding during the period         11,418,957    11,164,957



              Loss per share                          $     (0.07)  $     (0.08)
              ------------------------------------------------------------------


                                      F-10


<PAGE>

                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)


2.     ACCOUNTING POLICIES (CONTINUED)

       k)     REVENUE RECOGNITION

              The Company recognizes revenue from spice sheet manufacturing
              after a purchase order has been received, the sheets have been
              completed and shipped to the customer, as this is the point of
              title transfer.


3.     ACCOUNTS RECEIVABLE

                                                          2002           2001
                                                       -----------   -----------

       Accounts receivable - trade                     $  123,006    $  270,751
       Allowance for doubtful accounts                         --        (9,653)
       Sales tax receivable                                    --         7,933
                                                       -----------   -----------

                                                       $  123,006    $  269,031
                                                       ===========   ===========


4.     CAPITAL ASSETS
<TABLE>
<CAPTION>

                                                 2002                                   2001
                                 ------------------------------------   ------------------------------------
                                             ACCUMULATED    NET BOOK                ACCUMULATED    NET BOOK
                                    COST     AMORTIZATION    VALUE        COST      AMORTIZATION    VALUE
                                 ----------   ----------   ----------   ----------   ----------   ----------
<S>                              <C>          <C>          <C>          <C>          <C>          <C>
       Machinery and equipment   $ 731,511    $ 374,690    $ 356,821    $ 720,007    $ 302,329    $ 417,678
       Leasehold improvements       51,802       51,802           --       51,802       42,502        9,300
       Office furniture and
         equipment                  63,172       47,018       16,154       62,492       43,149       19,343
       Lab equipment                23,718       16,597        7,121       23,718       14,816        8,902
       Patents                      60,414       36,637       23,777       60,414       30,596       29,818
                                 ----------   ----------   ----------   ----------   ----------   ----------
                                   930,617      526,744      403,873      918,433      433,392      485,041
       Government assistance       (64,972)     (44,265)     (20,707)     (64,972)     (38,375)     (26,597)
                                 ----------   ----------   ----------   ----------   ----------   ----------
                                 $ 865,645    $ 482,479    $ 383,166    $ 853,461    $ 395,017    $ 458,444
                                 ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>


5.     INVESTMENT IN AFFILIATE

       Transform Pack Inc. owns 10,000 shares of Transform Pack GmbH Europe,
       which represents a 2% ownership of the total common shares issued. This
       investment has been accounted for at cost as there is no readily
       determinable market value.


                                      F-11


<PAGE>


                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)


6.     BANK INDEBTEDNESS

       Transform Pack Inc. has an approved line of credit of $298,500 bearing
       interest at prime (4.00% at May 31, 2002) plus 1 1/8%, which is
       guaranteed by certain shareholders of the Company. At May 31, 2002 and
       2001, the full amount of this line of credit had been drawn, plus an
       additional $42,945 of interest is outstanding. The company also has
       $207,000 in approved line of credit facilities, bearing interest at rates
       between prime (4.00% at May 31, 2002) plus 1 1/2% and prime plus 2%,
       secured by general assignment of book debts, inventory and a guarantee
       from the Province of New Brunswick in the amount of $132,000. At May 31,
       2002, $70,000 had been drawn under this facility (2001 - $75,000).


7.     ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                                                          2002          2001
                                                       -----------   -----------
       Accounts payable - trade                        $  390,854    $  453,240
       Payroll deductions payable                          13,766        29,277
       Accrued liabilities                                 70,914        54,227
       Employee loan payable                                   --        15,000
                                                       -----------   -----------
                                                       $  475,534    $  551,744
                                                       ===========   ===========


8.     LONG-TERM DEBT

                                                          2002           2001
                                                       -----------   -----------

       Bank loan, repayable in monthly principal
       payments of $1,667 plus interest at prime
       (4.00% at May 31, 2002) plus 1.75%, through
       the Small Business Loan Act, secured by a
       chattel mortgage on specific machinery and
       equipment.                                      $   68,333    $   90,000



                                      F-12


<PAGE>


                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)


8.     LONG-TERM DEBT (CONTINUED)

                                                          2002          2001
                                                       -----------   -----------
       ACOA loan, repayable in 62 consecutive monthly
       installments of $5,772, followed by one final
       installment of $5,827 commencing Oct. 1, 2002
       non-interest bearing.                           $  363,691    $  396,751
                                                       -----------   -----------
                                                          432,024       486,751
       Less:  Current portion                              66,176        87,787
                                                       -----------   -----------
                                                       $  365,848    $  398,964
                                                       ===========   ===========

        Principal amounts due in the next five years are as follows:

            2003          2004          2005         2006         2007
            ----          ----          ----         ----         ----

          $66,176       $89,264       $89,264      $77,597      $69,264


9.     REDEEMABLE PREFERRED SHARES OF TRANSFORM PACK INC.

       Authorized:
              Class A preferred shares, $10 par value, non-voting,
              non-cumulative 10% dividend rate, redeemable at par, unlimited
              number


                                                           2002         2001
                                                       -----------   -----------
       Issued:
               56,625 Class A preferred shares         $  566,250    $  566,250
               Current portion                           (120,000)      (60,000)
                                                       -----------   -----------
                                                       $  446,250    $  506,250
                                                       ===========   ===========



                                      F-13


<PAGE>


                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)


9.     REDEEMABLE PREFERRED SHARES OF TRANSFORM PACK INC. (CONTINUED)

       The Province of New Brunswick received 30,000 Class A preferred shares
       during the year ended May 31, 2000 for $300,000. The proceeds were the
       conversion of the Province of New Brunswick loans. Transform Pack Inc.
       has agreed to redeem no less than 20% of the $300,000 of preferred shares
       issued to the Province of New Brunswick on August 31 of each year,
       commencing on August 31, 2000 and ending on August 31, 2002, at which
       time all remaining preferred shares shall be redeemed.

       The Company did not make its first redemption and is now in default under
       its agreement with the Province of New Brunswick. The Province has
       provided the Company with written documentation that they have agreed to
       defer the redemption of preferred shares to August 31, 2001 and the
       ultimate redemption to August 31, 2003.


10.    DUE TO SHAREHOLDERS

       Of the amount due to shareholders, $139,077 is interest-free with no
       fixed terms of repayment. The remaining $55,000 bears interest at 10% and
       is due on demand.


11.    SHARE CAPITAL

       Authorized:
              5,000,000 preferred stock of the Company, $.01 par value, none
                 issued or outstanding
             40,000,000 common stock of the Company, $.004 par value


                                                          2002           2001
                                                       -----------   -----------
       Issued and fully paid:
               11,418,957 (2001 - 11,418,957) common
                  stock of the Company                 $   13,916    $   13,916

       Additional paid-in capital of the Company        2,003,351     1,460,851
                                                       -----------   -----------
                                                       $2,017,267    $1,474,767
                                                       ===========   ===========




                                      F-14


<PAGE>


                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)



11.    SHARE CAPITAL (CONTINUED)

       In October 2001, the Company issued 700,000 share rights to the Chief
       Executive Officer, valued at $0.50 US per share ($542,500), in return for
       services rendered. These rights can be exercised at any time and allow
       the Chief Executive Officer to convert the rights for shares on a
       one-for-one basis at any time for no additional cost.

       In April 2001, the Company issued 408,000 new common shares at $.50 US
       per share, receiving gross cash proceeds of $307,965. In conjunction with
       this equity investment, the Company issued 408,000 warrants with an
       exercise price of $0.50 US per share that can be exercised at any time
       and which expire in 2004. These warrants were valued at $48,545.
       Accordingly, such amount has been accounted for as a reduction in share
       capital and allocated to warrants.

       In April 2001, the Company issued 100,000 shares to an employee, valued
       at $0.50 US per share, in return for services rendered. In conjunction
       with this equity investment, the Company issued 100,000 warrants with an
       exercise price of $.50 US per share that can be exercised at any time and
       which expire in 2004. No intrinsic value was allocated to these warrants,
       to be consistent with the accounting treatment adopted by the Company
       concerning employee stock options.

       STOCK OPTION PLAN

       The Company follows Accounting Principles Board Option No. 25,
       "Accounting for Stock Issued to Employees" (APB 25) and related
       interpretations in accounting for its employee stock options. The
       exercise price of the Company's employee stock options equals or is
       greater than the fair value of the underlying stock on the date the
       options were granted, and accordingly no compensation expense has been
       recognized in the accompanying financial statements in any of the periods
       presented.

       The Company has fixed stock options granted to specified employees by
       resolution of the board of directors. An aggregate of 670,000 common
       shares have been reserved for the granting of such options.

       On February 29, 2000, the Company established a stock option plan for its
       officers, directors and employees. In accordance with the plan, an
       aggregate of 670,000 common shares have been reserved for the granting of
       such options. The exercise price of each option is to be determined by
       the board of directors. All options issued under the plan will expire two
       or three years after the date of granting.




                                      F-15


<PAGE>


                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)



11.    SHARE CAPITAL (CONTINUED)

       The following table presents information concerning all stock options
       granted to the Company's employees:
<TABLE>
<CAPTION>

                                                  YEAR ENDED                       YEAR ENDED
                                                 MAY 31, 2002                      MAY 31, 2001
                                         -------------------------------   -------------------------------
                                                        Weighted Average                  Weighted Average
                                            Number of     Exercise Price      Number of     Exercise Price
                                              Options          per Share        Options          per Share
                                         ------------   ----------------   ------------   ----------------
<S>                                          <C>            <C>                <C>             <C>
       Outstanding, beginning of period      450,000        $0.73 US           670,000         $0.67 US
       Granted during the period                  --           --                   --
       Forfeited during the period                --           --             (220,000)
                                         ------------                     ------------
       Outstanding, end of period            450,000        $0.73 US           450,000         $0.73 US
                                         ============                     ============

       Exercisable, end of period            450,000        $0.73 US           450,000         $0.73 US
                                         ============                     ============

</TABLE>


       The above options vested immediately on grant.

       The life remaining on stock options outstanding as at May 31, 2002 was
       one year.

       Had compensation cost for the Corporation's stock-based compensation been
       determined based on the fair value at the grant dates consistent with
       SFAS 123, "Accounting for Stock-Based Compensation", the Company's
       proforma net loss would have been as follows:

                                                          MAY 31        MAY 31
                                                           2002          2001
                                                       -----------   -----------
       Net loss
               As reported                             $  767,341    $  864,432
               Pro-forma                               $  767,341    $  882,398

       Loss per share
               As reported                             $     0.07    $     0.08
               Pro-forma                               $     0.07    $     0.08





                                      F-16


<PAGE>


                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)



12.    INCOME TAXES

       Deferred tax assets and liabilities reflect the future income tax effects
       of temporary differences between the financial statement carrying amounts
       of existing assets and liabilities and their respective tax bases and are
       measured using enacted tax rates that apply to taxable income in the
       years in which those temporary differences are expected to be recovered
       or settled. As at May 31, 2002, the deferred income tax balance was
       comprised of the following:

                                                          2002           2001
                                                       -----------   -----------
       Deferred tax assets
               Loss carryforwards                      $  843,000    $  748,398
               Research and development expenditures
                 carried forward                           88,000        88,078
               Valuation allowance                       (745,000)     (649,069)
                                                       -----------   -----------
               Total deferred tax assets               $  186,000    $  187,407
                                                       ===========   ===========



                                                          2002           2001
                                                       -----------   -----------
       Deferred tax liabilities
               Amortization of capital assets          $  175,000    $  176,203
               Research and development tax credits        11,000        11,204
                                                       -----------   -----------
               Total deferred tax liabilities             186,000       187,407
                                                       -----------   -----------
       Net deferred tax assets                         $       --    $       --
                                                       ===========   ===========

       Losses carried forward which will expire over the next five years if not
       utilized against future taxable income, are as follows:

              2003       2004        2005        2006         2007    THEREAFTER
              ----       ----        ----        ----         ----    ----------

           $212,000    $132,000    $276,000    $353,000     $39,000    $938,000

        The Company also has a scientific research and expenditure pool balance
        of $191,474, which can also be used to reduce future taxable income.
        There is no expiry date on this future tax benefit. The Company has
        provided for amortization of its capital assets in excess of capital
        cost allowances claimed for income tax purposes of approximately
        $400,000 (2001 - $395,000). This excess is available to reduce taxable
        income of future years.



                                      F-17


<PAGE>


                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)



12.    INCOME TAXES (CONTINUED)

       The Company has available investment tax credits, which will reduce
       future federal income taxes by approximately 11,200 (2001 - $11,200).

       None of the above future benefits have been recorded in the financial
       statements since they are dependent upon future income.


13.    ADDITIONAL INFORMATION TO THE STATEMENT OF CASH FLOWS


                                                          2002          2001
                                                       -----------   -----------
        Interest paid                                  $   39,059    $   42,094
                                                       ===========   ===========


14.    COMMITMENTS

       As at May 31, 2001, the Company had commitments under operating leases
       for premises, maturing at various dates. Rent expense in 2002 totaled
       $44,064 (2000 - $48,231). Future minimum lease payments are as follows:

                         2003                      $72,348
                         2004                      $47,430
                         2005                      $ 6,882

       During the 2000 year, the Company entered into a contract wherein the
       Company has agreed to pay $25,000 US for four consecutive months for
       marketing services, if and/or when, the company is successful in
       completing its second issuance of shares worth $1,000,000 US.


15.    FINANCIAL INSTRUMENTS

       a)     FAIR VALUE OF FINANCIAL INSTRUMENTS

              The book values of the financial assets and liabilities of the
              Company approximate their estimated fair values as at May 31, 2002
              and 2001 because of either the short maturity of these instruments
              or their relationship with floating interest rates.

              The fair value of shareholder advances cannot be determined, as
              they do not include any terms of repayment.



                                      F-18


<PAGE>


                        TRANSFORM PACK INTERNATIONAL INC.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        YEARS ENDED MAY 31, 2002 AND 2001

                              (in Canadian dollars)



15.    FINANCIAL INSTRUMENTS (CONTINUED)

       b)     CREDIT RISK CONCENTRATION

              Credit risk concentration exists due to the small number of
              customers that make up the majority of trade accounts. The balance
              for one customer accounts for approximately 35% of the Company's
              accounts receivable (2001 - another customer for approximately
              90%).

       c)     INTEREST RATE RISK

              The Company is exposed to market risk related to fluctuations in
              interest rates on long-term debt. It currently does not hold any
              financial instruments that might mitigate this risk.


16.    REVENUE FROM MAIN CUSTOMERS

       For the year ended May 31, 2002, approximately 72% (2001 - 64%) of the
       Company's total revenue is derived from one customer.








                                      F-19