SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

For Fiscal Year ended July 31, 1999    Commission File Number 0-25659

                           VIRILITEC INDUSTRIES, INC.
             (Exact Name of Registrant as Specified in its Charter)

        Delaware                                            11-3447894
(State or other jurisdiction of incorporation       (I.R.S. Employer
or organization)                                     Identification No.)

100 Cedarhurst Ave., Suite 201, Cedarhurst, NY                 11516
(Address of Principal Executive Offices)                     (Zip Code)

Registrant's telephone number, including Area Code:  (800) 775-0712 ext. 4144

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

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

                                 Title of Class

                         Common Stock, par value $.0001

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
registrant's  best  knowledge,  in definitive  proxy or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

The aggregate market value of voting stock held by non-affiliates of the
Registrant: Indeterminate -  No existing market

The number of shares outstanding of Registrant's Common Stock as of
December 31, 1999: 4,702,100

<PAGE>

ITEM 1.           BUSINESS

(a) Business Development

         Virilitec Industries, Inc. ("Virilitec",  or the "Company"), a Delaware
corporation, was organized on August 11, 1998. The Company has not been involved
with any bankruptcy,  receivership or similar  proceedings.  The Company has not
had any material reclassification, merger, consolidation, or purchase or sale of
a significant amount of assets not in the ordinary course of business.

(b) Business of Issuer

         The  Company  was  formed  to  license   and   distribute   a  line  of
bioengineered virility nutritional  supplements,  designed to enhance human male
sperm count and potency (the "Product"). The product is a nutritional supplement
derived from natural  materials  and  compounds.  While the Company  believes it
contains  properties that could stimulate human male sperm production and sexual
virility,  it does not make any claims  whatsoever that the product does in fact
induce the desired results.  The Company has not clinically  tested the product,
nor has it  been  clinically  tested  in a  previous  formulation.  There  is no
statistical data to support any claims of effectiveness and the Company makes no
such clinical claims. In this manner, the product could be compared to a vitamin
or herb, in that it is a nutritional supplement taken by individuals who believe
that such  supplements will have an effect upon a certain  condition  whether or
not such result has been determined  clinically to be a product of utilizing the
supplement.  There are other nutritional  supplements that claim to have similar
effectiveness as the Company's  Product.  However,  to the Company's  knowledge,
none of them have demonstrated recognized clinical effectiveness.

         Management  believes that the current  success and widespread  coverage
generated by Pfizer's Viagra(R) has positioned the market to be receptive to the
introduction of a naturally derived  nutritional  supplement that is cheaper and
may produce a positive  effect upon male potency.  As such, the Company  entered
into an agreement  with  Vitahealth  Scientific,  Inc.,  a New York  corporation
("Vitahealth"),  regarding the distribution of its nutritional supplement geared
toward enhancing male potency and sperm count.  Management  believes that it can
be  successful  in  capitalizing  on the market  awareness of concerns over male
potency by introducing the Product into worldwide markets.

         Due to the nature of the Product,  and the high cost of qualifying  for
US FDA approval,  management  determined that the best way to market the Product
initially  was to pursue sales  internationally.  The Company has not gotten any
professional  or   governmental   opinion  that  it  would  not  be  subject  to
governmental  regulation in those countries in which the Company intends to sell
the Product. However, in the Company's research of the market (via the internet,
contacts  with  other   providers  of  nutritional   supplements   and  informal
discussions  with counsel),  the Company has found  overseas  markets to be much
more  liberal in  regulation  than the United  States.  In fact a  principal  of
Vitahealth  (the Company's  supplier) has sold a similar product to the overseas
market without  governmental  regulatory  involvement.  As such, the Company has
identified independent sales agents in England and Israel where it could, in the
opinion of  management,  successfully  introduce  the Product  with little or no
regulatory  approval needed.  Due to the delays involved with commencing Product
production,  the Company was  uncertain as to the start of the sales process and
could not, in good faith, make commitments to potential  distributors.  As such,
management has delayed interviewing

<PAGE>

potential  distributors  in other  countries.  As soon as initial  sales via the
Israel and England  distributors  are  processed,  the  Company  will resume its
efforts to identify and engage additional international distributors.

         Vitahealth has sold a nutritional  supplement  designed to enhance male
potency  and  sperm  count  in  the  past.  However,   Vitahealth  is  currently
reformulating  its product to produce  what it believes  will be a Product  with
greater efficacy in producing the desired results.  Vitahealth is in the process
of opening a new manufacturing  facility in Jerusalem,  Israel where the Product
will be  manufactured.  In conjunction  with the  reformulation  of the Product,
Vitahealth  also revamped its production  line,  with all new  commercial  grade
production  and  encapsulation  equipment  intended  to allow it to produce  the
Product at a high volume.  The  facility is expected to have full  certification
from the  Israel  Department  of  Health.  The  certification  from  the  Israel
Department  of  Health  is not a drug  review or  certification  of the  product
itself.  The  facility  is being  built  with "off the shelf"  equipment,  under
standard health  procedures.  One of the principals of Vitahealth has previously
manufactured a similar  product in Israel,  and is well versed in the applicable
regulations.  The  production  facility was designed and  constructed  under his
direct  supervision.  The certification from the Israeli Department of Health is
akin to  certification  from any local health  department.  They verify that the
premises are clean and  sanitary  for the usage  intended.  As  construction  is
supervised by an individual who is experienced with the health requirements, the
Company  expects  that  there  should  be no  problem  in  the  issuance  of its
certification.

         The industry is extremely fragmented.  There are many small operators -
companies or individuals  that sell nutritional  supplements,  and as such it is
difficult  to  accurately  determine  what market  share a specific  vendor has.
Additionally,  while a principal of the  Company's  supplier has sold an earlier
version of the  Product,  the  Company  is in the start up phase of selling  its
first product, and as such has no established position in the industry.

         There are currently  many  purveyors of  nutritional  supplements.  The
Company  intends  to  compete by  placing a focused  advertising  campaign  with
testimonial information (when available),  and by referral.  Management believes
the product will produce the desired effect upon its users, and that the success
of those users will prompt others to add the Company's nutritional supplement to
their diet.

Licensing and Distribution Agreement

         On August 25, 1998,  the Company  entered into a 50 year  Licensing and
Distribution  Agreement  with  Vitahealth,   whereby  the  Company  was  granted
exclusive  rights to distribute the Product.  Under terms of the agreement,  the
Company's  independent  sales  agents  will place  sales  orders  directly  with
Vitahealth,  which will fill such orders.  The sales agents will pay  Vitahealth
upon  order  placement,  and  Vitahealth,  acting as  collections  agent for the
Company,  will  forward  the  Company's  portion  of the sales  proceeds  to the
Company. Vitahealth has agreed to periodic

<PAGE>

reviews of its order  receipts in order to ensure that the Company is receiving
its appropriate revenue.

         The  Company  has  paid  an  initial  non-refundable  one  time  $8,500
licensing fee to Vitahealth.  The Company will also pay Vitahealth an annual fee
of $10,000,  beginning 90 days after the Product is  manufactured  and ready for
delivery to the Company's agents and then annually thereafter on the anniversary
of the first  payment's  due date,  as long as the  Licensing  and  Distribution
Agreement has not been terminated for any reason before the date such payment is
due. The agreement also calls for Vitahealth to be paid $1.45 per capsule of the
product - to be sold in thirty day  supplies  (the  Product's  expected  minimum
usage period before a user would  potentially  achieve  positive  results).  The
Company  expects to  distribute  the  Product to its sales  agents for $1.85 per
capsule (thereby making $0.40 per capsule),  and the Company's independent sales
agents are projected to sell them for approximately $2.15 to $2.25 per capsule.

         As of July 31, 1999  Vitahealth had not yet completed  construction  of
its manufacturing  facility,  so the Company allowed  Vitahealth a 95 day period
from the signing of the  Licensing  Agreement  before the Product would be ready
for  production  and sale.  Should the  Product  not be ready at such time,  the
Company had the right to either  terminate the agreement within the following 30
days or extend the  production  deadline.  As the  production  facility  was not
timely been  completed,  the Company and Vitahealth  agreed to extend the 95 day
production deadline until September 30, 1999, when it believed the Product would
be  available.  Vitahealth  had  originally  planned to lease and  construct the
facility  based on commitments  made to Vitahealth by the Company  regarding the
initial licensing fee and ongoing support.  Because the Company's  financing via
its offering did not proceed according to management's  initial  timetable,  the
Company could not honor those commitments on a timely basis. As such, Vitahealth
had to abandon the original site selected for its production facility. As it now
had a new time window available due to the financing delays,  Vitahealth decided
to  reformulate  the Product and to try to refine the  production  run. When the
Company completed its offering, the reformulation was not yet finished. Once the
reformulation  was  completed,  Vitahealth  had to reselect a site and negotiate
tenancy as well as redesign and outfit the production facility in the new plant.
Management  was  advised  by  Vitahealth  that  the  facility  would be ready by
September 30, 1999.

         As of December 31, 1999, the production  facility was completed  enough
to begin modest  production  runs.  However,  due to the recent  development  of
competitive  products,  Vitahealth is  reformulating  the Product to enhance its
competitive  position.  Due to the  vagaries  of the  development  process,  the
Company  does not  currently  have a firm  date for  when  the  Product  will be
available.

         Vitahealth  and the  Company  have agreed upon  certain  minimal  sales
quotas to be maintained for the agreement to remain in effect.  Should the sales
levels  fall  below  the  sales  quotas,  the  Company  shall  have the right to
terminate the Licensing and Distribution Agreement.  The sales quotas follow the
following schedule;  a) within the 2nd month of production and sales - a minimum
of 22,500 capsules,  b) within the 3rd month of production and sales - a minimum
of 55,000 capsules,  c) within the 6th month of production and sales - a minimum
of 150,000 capsules,  d) a minimum of 200,000 capsules for every month following
the end of the 6th month of production and sales of the product. There is also a
10%  increase in the sales  quota  effective  annually  on January 1,  beginning
January 1, 2000.  The Company and  Vitahealth  are currently  renegotiating  the
terms for the quotas.

Marketing and Growth

         With  the  broad  based   recognition  of  products  such  as  Pfizer's
Viagra(R),  Management  believes  the  market is ready for the  introduction  of
nutritional  supplements  designed to enhance human male potency and sperm count
on a long term basis.  Should the Company  begin  distribution  of this  Product
domestically,  it will be  subject  to  regulation  by the  U.S.  Food  and Drug
Administration  ("FDA") and most likely  also by the  Federal  Trade  Commission
("FTC") but possibly under similar  circumstances as standards  applied to other
mainstream  food  company  product  lines.   However,   certain  more  stringent
regulations can be applied by the FDA and FTC to companies  making health and/or
nutritional  claims  beyond those  approved by existing  regulations.  While the
Company does not believe the more stringent regulations will apply, it cannot be
certain.   Therefore,   the   Company   intends  to   distribute   the   Product
internationally, at least initially.

         The  Product   will  be  subject  to   regulation   by  the   presiding
jurisdictional drug and/or food regulatory commissions of the countries in which
the Company  intends to  distribute  the  Product.  While the  Company  does not
believe  that any  regulations  will apply to the  distribution  of the  Product
within the various  countries in which it intends to initiate  distribution,  it
cannot be certain. At this time the Company has selected the countries of Israel
and England as its initial  markets.  Management  believes  that the  regulatory
requirements  of those  countries  to be such that the  Company  will be able to
launch sales in those  countries  without  concern of violating food and/or drug
regulations. The Company intends to increase its distribution to such additional
countries  as allow for the sale of the  Product  without  expensive  regulatory
approval.

         The Company is presently in the process of  selecting  qualified  sales
agents to be its direct representatives in the countries the Company will market
the Product.  The Company intends to support its sales agents with focused media
(internet,  magazine, newspaper) advertisements introducing the Product designed
to heighten  awareness of the  availability  of alternative  products to enhance
human male sperm count and potency  such as the  Product.  The Company will also
endeavor  to provide  its sales  agents with  promotional  materials  containing
testimonials (when available) from users of the Company's products.

Acquisitions

         The Company has no specific acquisition plans at this time.

Employees

         Mrs. Bella Roth, the Company's  President,  is the Company's only full
time employee.  The Company intends to retain marketing and public relations
consultants as necessary.

Special Note Regarding Forward-Looking Statements

         Some of the statements under "Business" are forward-looking  statements
that involve risks and uncertainties.  These forward-looking  statements include
statements about our plans, objectives, expectations, intentions and assumptions
and other statements contained herein are not statements of historical fact. You
can  identify  these  statements  by  words  such as  "may,"  "will,"  "should,"
"estimates," "plans," "expects,"  "believes," "intends" and similar expressions.
We  cannot  guarantee  future  results,  levels  of  activity,   performance  or
achievements.  Our actual  results  and the timing of certain  events may differ
significantly  from the results  discussed  in the  forward-looking  statements,
based  specifically upon the ability of our manufacturer to produce the Product,
which we do not control.  You are cautioned  not to place undue  reliance on any
forward-looking statements.

<PAGE>

ITEM 2. PROPERTIES

         The Company  maintains its corporate  offices rent free at an office of
one of its shareholders at 100 Cedarhurst Ave, Suite 201, Cedarhurst,  NY 11516.
The Company  has agreed to either  sublet the space it is  currently  using at a
cost of $150 monthly, or to relocate its office to another location on the first
day of the month commencing after the Product is available.

ITEM 3. LEGAL PROCEEDINGS

         The  Company  is  not   currently   involved  in  any  material   legal
proceedings.

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

         Not applicable.

<PAGE>

                                     PART II

ITEM 5.  MARKET PRICE OF REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS

         (a) Market Information

         There is no public trading market for the Company's securities.

         The  Company   currently  has  42,100  class  A  warrants   issued  and
outstanding.  Each  Warrant  entitles  the  holder  to  purchase  one  Share  of
restricted  Common Stock at an exercise price of $10.00,  subject to adjustment,
through the first  anniversary  of the date the  Company's  Shares are initially
approved for trading in any public market.

         Under the terms of the Company's licensing  agreement,  the Company has
agreed to grant  Vitahealth  stock options to purchase up to 300,000  additional
restricted  shares of the Common  Stock of the  Company  for a period of 5 years
beginning June 30,1999 according to the following schedule:

Date Option to be Effective     Amount of Options   Exercise Price (per Share)
--------------------------------------------------------------------------------
         6/30/1999                  .100,000        $10.00
         11/30/1999                  100,000        $10.00
         6/30/2000                  .100,000        $10.00

         These  options shall become  effective  only in the event the Licensing
and Distribution agreement between the Company and Vitahealth is still in effect
on  the  date  the  options  are  due  to be  effective.  The  options  have  no
registration rights. See "BUSINESS - Licensing And Distribution Agreement."

         The Company has also granted stock options to the following officers to
purchase  additional  shares of common  stock of the  Company  according  to the
following schedule:

Name of Option Holder      Amount of Options      Exercise Price (per Share)
--------------------------------------------------------------------------------
Bella Roth                   175,000                   $2.50
Bella Roth                   150,000                   $4.00
Arnold Lipton, M.D.           25,000                   $2.00
Arnold Lipton, M.D.           50,000                   $3.00
Moshe Laufer                  25,000                   $2.50
Moshe Laufer                  50,000                   $4.00

         The shares underlying the options have no registration rights.

         Of the  4,667,100  shares of common stock  outstanding,  3,625,000  are
currently  subject to the resale  restrictions  and  limitations of Rule 144. In
general,  under Rule 144 as currently in effect,  subject to the satisfaction of
certain other  conditions,  a person,  including an affiliate,  or persons whose
shares are aggregated with affiliates, who has owned restricted shares of common
stock  beneficially  for at least  one year is  entitled  to  sell,  within  any
three-month  period,  a number  of shares  that does not  exceed 1% of the total
number of outstanding shares of the same class. In the event the shares are sold
on an exchange or are reported on the automated quotation system of a registered
securities association, you could sell during any three-month period the greater
of such 1% amount or the average  weekly trading volume as reported for the four
calendar weeks preceding the date on which notice of your sale is filed with the
SEC. Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about us.
A person who has not been an affiliate for at least the three months immediately
preceding the sale and who has beneficially  owned shares of common stock for at
least two years is entitled to sell such shares under Rule 144 without regard to
any of the limitations described above.

(b) Holders

         On December 31, 1999,  there were 12% holders of the  Company's  common
stock, and 9 holders of the Company's Class A Warrants.

(c) Dividends

         The Company has had no earnings to date,  nor has the Company  declared
any dividends to date.  The payment by the Company of dividends,  if any, in the
future,  rests within the  discretion of its Board of Directors and will depend,
among other things,  upon the Company's earnings,  its capital  requirements and
its financial condition,  as well as other relevant factors. The Company has not
declared any cash dividends  since  inception,  and has no present  intention of
paying any cash dividends on its Common Stock in the foreseeable  future,  as it
intends to use earnings, if any, to generate growth.

ITEM 6.  SELECTED FINANCIAL DATA

         The following  selected  financial  data for the period August 11, 1998
(inception)  through  July  31,  1999 is  derived  from  the  Company's  audited
financial  statements  included  elsewhere herein.  The following data should be
read  in  conjunction   with  the  financial   statements  of  the  Company  and
Predecessor.

<PAGE>

Statement of Operations Data

                                    From 8/11/98
                                    (inception) to
                                         7/31/99

Net Revenues                               -0-
Cost and Expenses                       $(166,880)
General and Administrative
         Expenses                          (5,374)
Interest Income                                24
Income Taxes                                -0-
Net Loss                                 (172,354)
Loss Per Share                              $(.04)

Balance Sheet Data

                           December 31, 1998

Working Capital                 $  9,850
Total Assets                      11,200
Total Liabilities                  1,350
Stockholders' Equity            $  9,850


<PAGE>


ITEM 7.  PLAN OF OPERATIONS

The  following  discussion  should  be read in  conjunction  with the  financial
statements  and  related  notes which are  included  elsewhere  in this  report.
Statements  made  below  which  are not  historical  facts  are  forward-looking
statements.   Forward-looking   statements   involve   a  number  of  risks  and
uncertainties  including,  but not  limited  to,  general  economic  conditions,
competition, availability of the Product and our ability to market our product.

Plan of Operation

         As noted in Item 1 above,  the  Company is  currently  waiting  for the
initial production date of the Product.  Until the production  facilities of its
supplier,  Vitahealth Scientific, Inc. are operational, the Company cannot begin
to market the Product with an  expectation  to be able to deliver goods within a
reasonable  amount of time.  The Company has been advised by Vitahealth  that it
expects to begin delivery of the Product during the first quarter of 2000.

         Vitahealth had  originally  planned to lease and construct the facility
based on  commitments  made to Vitahealth  by the Company  regarding the initial
licensing  fee and ongoing  support.  Because the  Company's  financing  via its
offering  did not proceed  according  to  management's  initial  timetable,  the
Company could not honor those commitments on a timely basis. As such, Vitahealth
had to abandon the original site selected for its production facility. As it now
had a new time window available due to the financing delays,  Vitahealth decided
to  reformulate  the Product and to try to refine the  production  run. When the
Company completed its offering, the reformulation was not yet finished. Once the
reformulation  was  completed,  Vitahealth  had to reselect a site and negotiate
tenancy as well as redesign and outfit the production facility in the new plant.

         The Company has  interviewed  sales  agents only in Israel and England,
and has  identified  agents it  intends  to retain  as  distributors  as soon as
production  commences.  Because of the delays involved with  commencing  Product
production, the Company was uncertain as to exactly when such agents could begin
the sales process and could not, in good faith,  make  commitments  to potential
distributors.   As  such,   management   has  delayed   interviewing   potential
distributors  in other  countries.  As soon as initial  sales via the Israel and
England  distributors  are  processed,  the  Company  will resume its efforts to
identify and engage additional international distributors.

         The Company intends to allow each master  distributor  exclusive rights
within his/her own country.  Any sales generated in their territory shall be for
the sole benefit of the sales  agents.  When a sales agent becomes a distributor
for the  Company,  they agree to purchase the Product from the Company for $1.85
per capsule,  and the Company's  independent  sales agents are projected to sell
them for approximately $2.15 to $2.25 per capsule. However, the sales agents can
sell  the  capsules  at  whatever  price  they   determine.   The  sales  agents
compensation is the difference between what they pay the Company for the product
and the price they sell the Product.

         At the present time,  management has full faith in Vitahealth's ability
to deliver the Product.  However,  the Company cannot  guarantee that additional
delays  will not  further  delay the  commencement  of sales  and  distribution.
Currently,  management  is  prepared to give  Vitahealth  every  opportunity  to
complete the production facility,  even at the cost of postponing the production
deadline  again.  While  management   continually  reviews  the  status  of  the
production  facility to determine when the Company will begin sales there are no
plans or intentions  at this time to exercise the  Company's  right to terminate
the Vitahealth agreement due to missing the production deadline.

         As the Company has not yet begun to sell the  Product,  it is difficult
for management to evaluate the growth curve of Product sales.  Additionally,  it
is expected that the delays  involved with  initiating  production has tarnished
the earlier market  'excitement'  for human sexual virility and potency products
created by Viagra(R). When considering those factors,  Management believes it is
likely that the initial sales quotas will not be met and it will have a right to
terminate the Vitahealth  Agreement  pursuant to the sales quota clauses present
in the agreement.  Having considered the various factors involved with its right
to terminate the agreement based on sales quota requirements,  management has no
plans to do so at this time. It is management's  opinion, that there is a market
for a human sexual  potency  nutritional  supplement  and is fully  committed to
providing  Vitahealth  with the  opportunity  to be the sole  supplier of such a
product to the Company. While the Company will review the sales numbers as sales
are  commenced,  and retains the right to reevaluate  its position on an ongoing
basis,  there are no plans or  intentions at this time to exercise the Company's
right to terminate  the  Vitahealth  agreement  due to sales quotas for at least
three months following initial production and sale of the Product.

         The  Company  expects to fund $4,000 of initial  advertising  in health
journals and media so distributors will have such publications in hand for sales
purposes.  The Company also intends to use the Internet for  advertising as that
currently  allows the greatest  visibility  for very small costs.  In fact,  the
Company  believes that it may be able to obtain free access on certain  websites
looking for products such as the Company's. Subsequently, the company intends to
reserve 20% of revenues for ongoing  advertising and marketing up to $10,000 (in
advertising  expenditures - or $50,000 total revenues) monthly per country,  and
10% of all additional revenues.

         While the Company is committed to retaining Vitahealth as its supplier,
there is no guarantee  that  Vitahealth's  production  delays or lack of product
salability as evidenced by underpreforming the sales quotas will not necessitate
the eventual  termination of the Vitahealth  agreement.  Should the agreement be
terminated  for any reason,  the Company at this time intends to locate  another
provider of human sexual potency and virility nutritional  supplements to become
its supplier.  There is no guarantee that the Company will be able to locate and
retain  such a provider  and the Company has not even begun to attempt to locate
one. The Company  continually  evaluates the business market to attempt to place
itself at the most profitable  position.  While the Company currently intends to
continue to operate as discussed,  there can be no guarantee that uncontrollable
variables  will not force a  substantive  change in the  Company's  operation or
plans of operation.

         At present the only cash  outlay of the Company is in banking  fees and
in legal and  accounting  fees  incurred by the  Company as it prepares  filings
associated with being a reporting company (quarterly  unaudited reports,  annual
reports,  etc.).  Management  believes there is enough cash on hand to fund such
activities for the next 12 months. When the Company becomes operational, further
costs  (such as salary  for Mrs.  Roth) are  expected  to be  covered by revenue
generated by the Company's  sales. The agreement with Mrs. Roth calls for her to
be paid up to $40,000 from the  proceeds of sales of the  Product.  Should sales
levels  not allow for her to receive  her full  compensation,  she will  receive
compensation  from  available  funds after the Company  satisfies  all its other
obligations.  The only other anticipated  expense not currently  provided for is
the  advertising  budget.  Management  is currently  exploring  various  options
including  the sale of  additional  stock  and/or  warrants,  bank  financing or
personal  loans by  management  or family  members.  Other than as  specifically
identified,  the Company does not forsee the need to raise  additional  funds in
the next 12 months.

         The  Company  does not  expect to  conduct  any  product  research  and
development or to purchase or sell a plant or significant equipment. The Company
intends to retain marketing and public relations  consultants as necessary,  and
to hire support staff for its President only if warranted by its sales volume on
an as needed basis.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial  statements are included  herein  commencing on page F-1.
The Company is not required to provide supplementary financial information.

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

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Name                         Age          Position

Bella Roth                    50           President & Chairman of the Board
Arnold A. Lipton, M.D.        69           VP - Scientific Advisor & Director
Moshe Laufer                  40           Secretary/Treasurer & Director

Directors serve for five year terms.

Bella Roth - President & Chairman of the Board of Directors - Mrs.  Roth founded
the Company in August 1998, and has been its President and Chairman of the Board
since  inception.  From 1988 to 1995 Mrs.  Roth was  Treasurer,  Secretary and a
Director of  Providential  Securities  Inc.  (OTC:BB  PRVH),  a publicly  traded
holding company.  From 1996 to 1998, Mrs. Roth was involved in various community
projects as she searched for a business  opportunity.  From 1983 to 1987 she was
an officer and Director of Innovative  Medical  Technologies,  a public  company
involved with the development and marketing of electronic medical devices.

Arnold A. Lipton,  M.D. - Vice President & Director - has been a Vice President,
the scientific  advisor and a Director of the Company since August 17, 1998. Dr.
Lipton is a physician  in private  practice in Brooklyn,  NY since 1970,  with a
specialty in Obstetrics and  Gynecology.  Dr. Lipton holds an M.D. from Lausanne
Medical School, a Masters in Science from the  Philadelphia  College of Science,
and a Bachelors of Science from the Brooklyn College of Pharmacy.  Dr. Lipton is
a member of the New York State  Medical  Society  and the Kings  County  Medical
Society.

Moshe  Laufer  -  Secretary/Treasurer  &  Director  - Mr.  Laufer  has  been the
Secretary/Treasurer and a director of the Company since its inception. From 1995
to 1998 he has been primarily  occupied with managing his  investment  portfolio
and pursuing various personal and professional interests.  From 1986 to 1995 Mr.
Laufer was a licensed distributer of NY Bottling,  Inc. a company engaged in the
bottling and distribution of soft drinks in the Northeastern  United States. Mr.
Laufer is the brother-in-law of Mrs. Roth.

(b) Significant Employees

None

Indemnification of Directors and Officers

         Section  145 of the  Delaware  General  Corporation  Law,  as  amended,
authorizes  the  Company to  Indemnify  any  director or officer  under  certain
prescribed  circumstances  and subject to certain  limitations  against  certain
costs and expenses,  including  attorney's fees actually and reasonably incurred
in connection  with any action,  suit or proceeding,  whether  civil,  criminal,
administrative or investigative, to which a person is a party by reason of being
a director or officer of the Company if it is determined  that such person acted
in  accordance  with  the  applicable  standard  of  conduct  set  forth in such
statutory  provisions.  The  Company's  Certificate  of  Incorporation  contains
provisions  relating to the  indemnification  of director  and  officers and the
Company's  By-Laws  extends  such  indemnities  to the full extent  permitted by
Delaware law.

The Company may also  purchase  and  maintain  insurance  for the benefit of any
director  or  officer  which may cover  claims for which the  Company  could not
indemnify such persons.

Compensation of Directors

         No  Director  receives  any cash  compensation  for their  service as a
Director.  Each Director of the Company will receive 5,000 restricted  Shares of
the Common Stock of the Company per year,  provided they attend no less than 50%
of the Board of Directors meeting in that year.

ITEM 11.  EXECUTIVE COMPENSATION OF EXECUTIVE OFFICERS

(a) General

         Commencing  November 12, 1998, the Company has agreed to pay Mrs. Bella
Roth,  its President & Chairman of the Board of  Directors,  an annual salary of
$40,000.  Mrs. Roth's compensation has been waived until October 1999. Mrs. Roth
provides her services on a full-time  basis.  While the Company did not pay Mrs.
Roth any salary during fiscal year 1999, the Company's financial  statements for
that period  reflect  the  pro-rata  amount  under  general  and  administrative
expenses with a corresponding amount in paid-in-capital.  Similarly,  $52,500 is
reflected as "other  compensation  expense" and "additional  paid-in-capital" on
the  Company's  financial  statements.  No executive  officer or employee of the
Company is paid more than $100,000 per year in salary and benefits.

(b) Summary Compensation Table

                           SUMMARY COMPENSATION TABLE

<TABLE>

<S>                       <C>       <C>        <C>         <C>           <C>


Name and                                                      Other       Long-term
Principal Position         Year       Salary      Bonus    Compensation   Compensation: Options (1)
------------------         ----     ----------  --------   -------------  -------------------------
Bella Roth                 1998     $31,282(3)      0       $50,000(2)    325,000 options worth $0
President &
Chairman

Arnold Lipton, M.D.        1998          0          0        $2,500(2)     75,000 options worth $0
V.P.-Scientific
Advisor &
Director

Moshe Laufer               1998          0          0            0         75,000 options worth $0
Secretary,
Treasurer &
Director

</TABLE>

(1) Based on the  Company's  Offering  Memorandum  dated  September 25, 1998, in
which the Shares of the Company's  stock was sold for an arbitrarily  determined
price of $1.00 per  share for  unrestricted  shares of the  Company's  of common
stock,  the  relatively  high  exercise  price and the  limited  time before the
Options expire, the options are essentially valueless.
(2) Consists of shares purchased at par value which for accounting purposes are
being valued at $.10.

<PAGE>

(3) Reflects  amounts  recorded  on  Company's  financial  statements  as
compensation.  This  is  purely  an accounting entry as no compensation was
actually paid.

(c) Options/SAR Grants Table

                        OPTION GRANTS IN LAST FISCAL YEAR
                               (Individual Grants)

<TABLE>

<S>                        <C>                      <C>                       <C>                     <C>

                                                     % of Options              Exercise Price
Name                       Number of Options         Granted (1998)            (per share)             Expiration
----                       -----------------         --------------            --------------          -----------

Bella Roth                 175,000                   36.84                      $2.50                  11/12/01
                           150,000                   31.58                      $4.00                  11/12/01
                           -------                   -----
         Total             325,000                   68.42
                           =======                   =====

Arnold Lipton, M.D.
                           25,000                     5.26                      $2.00                  11/12/01
                           50,000                    10.53                      $3.00                  11/12/01
                           ------                    -----
         Total             75,000                    15.79
                           ======                    =====

Moshe Laufer
                           25,000                     5.26                      $2.50                  11/12/01
                           50,000                    10.53                      $4.00                  11/12/01
                           ------                    -----
         Total             75,000                    15.79
                           ======                    =====

</TABLE>

(d) Aggregated Option/SAR Exercises and Fiscal Year End Option/SAR Value Table

None

(e) Long Term Incentive Plan ("LTIP") Awards Table

None

(f) Compensation of Directors

Commencing  January 1, 1999 each Director shall receive 5,000 restricted  shares
annually. Said compensation is contingent upon attendance at no less than 50% of
that year's Board of Director's meetings.

(g) Employment Contracts and Termination of Employment, and Change-in-Control
Arrangements

The Company has no employment contracts with any of its executive officers. Mrs.
Bella Roth serves as  President  of the Company for $40,000  annually,  and will
continue  to serve  under  such  terms  without  the  benefit  of an  employment
contract.  There are no provisions for  compensation to be paid to any executive
officer or director of the Company  upon the  termination  of their  services by
either party or by the actions of a third party.

(h) Report on Repricings of Options/SARs

None.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's officers and directors, and persons who own more than ten percent of a
registered  class  of the  Company's  equity  securities,  to  file  reports  of
ownership and changes in ownership with the Securities and Exchange  Commission.
Officers,  directors and  greater-than-ten-percent  shareholders are required by
SEC  regulation  to furnish the Company  with copies of all Section  16(a) forms
they file. During fiscal 1999, the directors, did not file Forms 3.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

         The following  table sets forth,  as of December 31, 1999,  information
regarding the beneficial  ownership of the Company's Common Stock based upon the
most recent  information  available  to the Company for (i) each person known by
the Company to own  beneficially  more than five (5%) percent of its outstanding
Common  Stock,  (ii) each of its  officers and  directors,  and (iii) all of its
officers and directors as a group.


<PAGE>

<TABLE>

<S>                       <C>                       <C>                               <C>

                           Name and Address          Amount and Nature
Title of Class             of Beneficial Owner       of Beneficial Owner                Percent of Class
--------------             -------------------       --------------------               -----------------
Common Stock               Bella Roth                   3,825,000(1)                          76.1%
                           543 Bedford Ave.
                           Brooklyn, NY

Common Stock               Moshe Laufer                   175,000(2)                           3.7%
                           172 Rodney Street
                           Brooklyn, NY

Common Stock               Arnold Lipton, M.D.            100,000(2)                           2.1%
                           225 West 86 Street
                           New York, NY

Common Stock               All Directors and            4,100,000(3)                          79.2%
                           Executive Officers
                           as a Group

</TABLE>

(1)      Includes  underlying  securities for 325,000 options to purchase
         additional  shares of common stock. Does not  include  3,800
         shares  owned  by  adult  daughter  residing  in home.  Mrs.  Roth
         disclaims beneficial ownership of these shares.
(2)      Includes underlying securities for 75,000 options to purchase
         additional shares of common stock.
(3)      Includes  underlying  securities  for an aggregate  of 475,000
         options to purchase  additional  shares of common stock.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         None.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K

(a)

1.  Financial Statements
         The  financial   statements  are  listed  in  the  Index  to  Financial
         Statements on page F-1 and are filed as part of this annual report.
2.  Not Applicable.
3.  Exhibits 27 - Financial Data Schedule.

(b) Reports on Form 8-K         None.

<PAGE>


                            VIRILITEC INDUSTRIES INC.

                          (A DEVELOPMENT STAGE COMPANY)

                          100 CEDARHURST AVE. SUITE 201

                           CEDARHURST, NEW YORK 11516


                              FINANCIAL STATEMENTS


                         FOR THE PERIOD AUGUST 11, 1998

                          (INCEPTION) TO JULY 31, 1999


<PAGE>

                          INDEPENDENT AUDITOR'S REPORT



Virilitec Industries Inc.
100 Cedarhurst ave. Suite 201
Cedarhurst, NY 11516

I have audited the  accompanying  balance sheet of Virilitec  Industries Inc. (a
development  stage company) as of July 31, 1999,  and the related  statements of
operations,  stockholders' equity, and cash flows for the period August 11, 1998
(inception) to July 31, 1999. These financial  statements are the responsibility
of the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material  respects,  the  financial  position of  Virilitec  Industries  Inc. (a
development  stage  company)  as of  July  31,  1999,  and  the  results  of its
operations and its cash flows for the period August 11, 1998 (inception) to July
31, 1999 in conformity with generally accepted accounting principles.


                                       /s/Joseph Morgenstern

                                       Joseph Morgenstern
                                       Certified Public Accountant

January 10, 2000

<PAGE>

                            VIRILITEC INDUSTRIES INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET
                                  JULY 31, 1999

                                     ASSETS
                                                       Subsequent
                                                         Event
                                           Actual       Pro-Forma



Current Assets:
  Cash                                   $     300     $ 35,300
  Equipment, net                             2,400        2,400
  License fee                                8,500        8,500
                                          --------     --------


     Total Assets                        $  11,200    $  46,200
                                          ========     ========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued
   expenses                              $   1,270    $  1,270
  Due to Officer                                80          80
                                          --------    --------

                                             1,350       1,350

Commitments and other matters

Stockholders' Equity:

Common stock, $.0001 par value;  20,000,000 shares authorized;  4,667,100 shares
 issued and outstanding, of which 3,175,000
 shares are restricted shares                  467         471

 Additional paid-in capital                181,737     216,733
                                         ---------   ---------
                                           182,204     217,204
 Deficit accumulated during
   the development stage                  (172,354)   (172,354)
                                         ----------  ----------

    Total Stockholders' Equity               9,850      44,850
                                         ---------   ---------

      Total Liabilities &
       Stockholders' Equity             $   11,200  $   46,200
                                         =========   =========

The accompanying notes are an integral part of these financial statements.


<PAGE>


                            VIRILITEC INDUSTRIES INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF OPERATIONS
                             AND ACCUMULATED DEFICIT
                      FOR THE PERIOD ENDED AUGUST 11, 1998
                          (INCEPTION) TO JULY 31, 1999
                          ----------------------------

                                                Cumulative Amounts
                                                   For the Period
                                   August 11, 1998 August 11, 1998
                                     Inception To  (Inception) To
                                    July 31, 1999   July 31, 1999

Sales                                  $   -0-         $   -0-

Costs and expenses:

 Officer's salary                        (38,460)       (38,460)

 Other compensation expense              (52,500)       (52,500)

 Management fees                         (38,500)       (38,500)

 Compensation expense of
 international counsel                   (30,064)       (30,064)

 General and administrative
    expenses                              (5,374)        (5,374)

  Travel                                  (5,780)        (5,780)
  Depreciation                            (1,200)        (1,200)
  Taxes                                    ( 500)        (  500)
  Interest income                             24             24
                                        ---------      --------

     Net Loss                           (172,354)      (172,354)

Accumulated deficit,
 beginning of period                       -0-             -0-
                                         --------       ------

Accumulated deficit,
 end of period                         $(172,354)     $(172,354)
                                       ==========     ==========

The accompanying notes are an integral part of these financial statements.


<PAGE>

                            VIRILITEC INDUSTRIES INC.
                          (A DEVELOPMENT STAGE COMPANY)
                        STATEMENT OF STOCKHOLDERS' EQUITY
                         FOR THE PERIOD AUGUST 11, 1998
                          (INCEPTION) TO JULY 31, 1999
                          ----------------------------
                                                        Deficit
                           Common Stock                Accumulated
                         $.0001 Par Value  Additional  During The
                                           Paid - In   Development
                           Shares  Amount   Capital       Stage

Common stock issued in     3,100,000 $  310  $(  310)
connection with the
formation of the Company

Common stock issued          933,000     93   41,417
Contributed services:
  Officer's salary                            14,615
  Rent                                           750
  Other comp. expenses       525,000     52   52,448
  Compensation of
  international counsel       50,000      5   10,091

Net loss - August 11,1998
through December 31, 1998                              $   (78,783)
                          ---------- ------  -------   ------------
Balance-December 31, 1998  4,608,000    461  119,010       (78,783)
                          ---------- ------ --------   ------------

Common stock issued            4,100           4,400
Contributed services:
  Officer's salary                            16,667
  Rent                                           750
  Management fees             55,000      6   38,494
  Compensation of
   international counsel                      14,135
Stock issuance costs                         (24,440)

Net loss - five months
ended May 31, 1999                                          (79,342)
                           ---------- ------  -------   ------------
Balance - May 31, 1999     4,667,100    467   169,016      (158,125)
                          ---------- ------  --------   ------------


Contributed services:
  Officer's salary                             7,178
  Rent                                           300
  Compensation of
   international counsel                       5,833
Stock issuance costs                            (540)

Net loss - two months
ended July 31, 1999                                         (14,729)
                          ---------- ------   -------   ------------
Balance - July 31, 1999    4,667,100 $  467  $181,732   $  (172,354)
                          ========== ======  ========   ============



The accompanying notes are an integral part of these financial statements.

<PAGE>

                            VIRILITEC INDUSTRIES INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF CASH FLOWS
                         FOR THE PERIOD AUGUST 11, 1998
                          (INCEPTION) TO JULY 31, 1999
                          ----------------------------

                                                Cumulative Amounts
                                                   For the Period
                                   August 11, 1998 August 11, 1998
                                    Inception To  (Inception) To
                                    July 31, 1999   July 31, 1999




Cash Flows From Operating Activities
  Net loss                              $( 172,354)    $( 172,354)
  Adjustments to reconcile net
   loss to net cash used in operating
   activities:
    Depreciation                             1,200          1,200
    Contributed services                   161,324        161,324
    Changes in operating assets
     and liabilities:
    Accrued expenses                         1,270          1,270
    Due to officer                              80             80
                                          --------       --------
     Net cash used in operating
      activities                            (8,480)        (8,480)
                                          ---------      ---------

Cash Flows From Investing Activities
   Capital expenditures                     (3,600)        (3,600)
   License fee                              (8,500)        (8,500)
                                           --------       --------

         Net cash used in investing
      activities                           (12,100)       (12,100)
                                           --------       --------

Cash Flows From Financing Activities
  Stock offering                            45,910         45,910
  Cost of stock offering                   (25,030)       (25,030)

         Net cash from financing
           activities                       20,880         20,880
                                          ---------      --------

  Net increase in cash                         300            300

  Cash at beginning of period                 -0-            -0-
                                           --------       ------

  Cash at end of period                $       300    $       300
                                           ========       =======

The accompanying notes are an integral part of these financial statements.


<PAGE>

                            VIRILITEC INDUSTRIES INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1999

THE COMPANY
Virilitec Industries Inc. (the Company) was incorporated on August 11, 1998 with
total authorized shares of 20,000,000,  par value $.0001. The Company was formed
to  license  and  distribute  a  line  of  bioengineered  virility  supplements.
Initially,  the Company intends to market its product in international  markets,
using independent sales agents.  The Company is in the development stage and its
efforts through July 31, 1999 have been  principally  devoted to  organizational
activities and raising  capital.  Management  anticipates  incurring  additional
losses as it pursues its organizational and development  efforts.  The Company's
stock  offering  was closed on April 6, 1999.  The  Company  believed  it raised
sufficient  funds from the  offering to finance  its  operations.  Company  also
believes it will be able to obtain any additional funds required.

SIGNIFICANT ACCOUNTING POLICIES

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

Depreciation
Equipment,  primarily computers, is depreciated by the straight-line method over
its estimated  useful life.  When property is retired or otherwise  disposed of,
the cost and  accumulated  depreciation  are removed  from the  accounts and any
resulting gain or loss is included in operations.

Amortization
The licensing fee will be amortized on the straight-line  basis over the life of
the  agreement.  All  mandatory  additional  annual  payments will be charged to
operations as they become due.

Stock issuance costs
Stock issuance costs represent expenses related to the Company's offering. These
expenses  include the direct costs of the offering  such as legal,  filing fees,
printing  and  related  consulting  fees.  These  costs were  deducted  from the
proceeds of the offering.

Stock Offering
The Company's  initial stock  consited of up to 460,000 units at $1.00 per unit.
Each unit entitles the holder to one (1) share of common stock, $.0001 par value
and one (1) redeemable Class A warrant  entitling the holder to purchase one (1)
share of restricted common stock at an exercise price of $10.00 per share.

<PAGE>

                            VIRILITEC INDUSTRIES INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1999

SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The  Company  has  issued an  aggregate  of  525,000  shares of stock to certain
officers  and  directors  in exchange  for present  and  anticipated  management
services.  The stock has been recorded at its  estimated  fair value of $.10 per
share. The Company later issued an aggregate of 105,000 shares to consultants in
exchange for services.  The stock has been recorded at its estimated  fair value
of $.70 per share with a corresponding amount as compensation expense.

CAPITALIZATION

The Company currently has 4,667,100 shares of common stock outstanding, of which
management owns 3,675,000.  Included in the 3,675,000  shares owned by directors
and company  management are 3,175,000 shares of restricted  shares as defined in
the Securities Act of 1933 and the regulations thereunder. Management which owns
3,125,000  restricted  shares has  agreed  not to sell any of such  shares for a
period of one year following the final closing of the Stock Offering referred to
above.

OPTIONS

The Company has granted  stock  options to certain  officers  and  directors  to
purchase additional shares of restricted common stock of the Company as follows:
                                                          Exercise
Option Holders                      Number of Options  Price (Per Share)
President and Chairman                 175,000             2.50
of Board of Directors
President                              150,000             4.00
Vice President/Director                 25,000             2.00
Vice President/Director                 50,000             3.00
Secretary/Treasurer and Director        25,000             2.50
Secretary/Treasurer and Director        50,000             4.00

Under the terms of the  Company's  licensing  agreement,  the  Company  has also
agreed to grant  stock  options to its  manufacturer  to  purchase  up to 300,00
additional  restricted shares of the common stock of the Company for a period of
five years beginning October 31, 1999 according to the following schedule:
                                                   Exercise
Effective Date              Number of Shares     Price (Per Share)
--------------              ----------------     -----------------
10/31/1999                       100,000            10.00
03/31/2000                       100,000            10.00
10/31/2000                       100,000            10.00

This  options  shall  become  effective  only in the  event  the  licensing  and
distribution  agreement  between the Company  and the  manufacturer  is still in
effect on the date the options are due to be effective.


<PAGE>

                            VIRILITEC INDUSTRIES INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1999


LICENSING AND DISTRIBUTION AGREEMENT
The  Company  has  entered  into a fifty (50) year  licensing  and  distribution
agreement,  whereby the Company was granted  exclusive  rights to  distribute  a
certain  nutritional  supplement  designed to enhance human male sperm count and
potency.  Under the terms of the  agreement,  the  Company's  independent  sales
agents will place orders  directly with the  manufacturer,  which will fill such
orders. The sales agents will pay the manufacturer upon order placement, and the
manufacturer,  acting as  collections  agent for the  Company,  will forward the
Company's portion of sales proceeds to the Company.  The manufacturer has agreed
to periodic  review of its order receipts in order to ensure that the Company is
receiving its appropriate revenue.

The Company has paid an initial non-refundable one time licensing fee of $8,500.
The Company will also pay an annual  licensing fee of $10,000,  commencing on 90
days after the product is manufactured  and delivered and each year  thereafter,
on the  anniversary of the first payment's due date as long as the licensing and
distribution  agreement has not been terminated  before the date such payment is
due. The Company's  agents are required to pay the  manufacturer  $1.85 for each
unit of the product sold of which the  manufacturer  retains  $1.45 and forwards
$.40 to the  company.  The  parties  have  agreed to certain  minimum  sales and
production  quotas.  If either the company or the manufacturer  fail to meet the
minimum sales and  production  quotas,  either party may terminate the agreement
without penalties.


INCOME TAXES
At July 31,  1999,  the  Company  has an  operating  loss carry  forward for tax
purposes of approximately $172,000, which expires in 2014. The Company has fully
reserved  the tax  benefit of the  operating  loss  carry  forward  because  the
likelihood of realization of the benefit cannot be established.

COMMITMENTS
The Company maintains its corporate offices rent free at an office of one of its
shareholders at 100 Cedarhurst Ave. Suite 201, Cedarhurst, NY 11516. The Company
has agreed to either  sublet the space it is  currently  using at a cost of $150
monthly, or relocate its office to another location. Management anticipates that
the monthly rental cost of another item should be no more than $500. The company
included rent expense of $150 a month in the General and Administrative expenses
with a corresponding amount in paid in capital.

The  president  of the company  will  receive an annual  salary of $40,000.  The
President has waived  payment,  accordingly;  the pro-rata amount is included in
general  and  administrative  expenses  with a  corresponding  amount in paid in
capital.

<PAGE>

                            VIRILITEC INDUSTRIES INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                                  JULY 31, 1999



COMMITMENTS (CONTINUED)

On September 18, 1998, the Company  entered into an agreement with an individual
to  perform  the  duties of  international  counsel  for a period of one year in
exchange for 50,000 shares of company stock.  The total fair market value of the
shares and services has been determined to be $35,000; accordingly, the pro-rata
portion  of  this  amount  has  been  charged  to   compensation   expense  with
corresponding amounts charged to stock and paid-in capital.

The Company has also hired an  individual to act as its local agent in the State
of Israel. The agent's duties will include supervising the completion of the new
manufacturing  facility  of  its  supplier,  reviewing  applications  for  local
licenses  and  approvals,  as well as  overseeing  the initial  product runs and
testing for quality control. The agreement will terminate at the later of either
March 31, 2000, or 45 days after the  aforementioned  manufacturing  facility is
operational  and  delivers its first  shipment to the  Company.  The Company has
issued 55,000 shares to the agent as compensation for these services.  The value
of these services has been  determined to be $38,500 and has been recorded as an
expense with corresponding offsets to common stock and paid-in capital.

SUBSEQUENT EVENT

The Company is currently  conducting  a second  stock  offering of up to 100,000
shares at $1.00 per share. Subsequent to the date of these financial statements,
but prior to their issuance, 35,000 shares have been sold.

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                                   SIGNATURES

                  Pursuant  to the  requirements  of  Section 13 or 15(d) of the
Securities  Exchange Act of 1934,  Registrant  has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.

                                    VIRILITEC INDUSTRIES, INC.


                                    By:        /s/
                                        ---------------------------
                                        Bella Roth
                                        President

Dated: __th day of January, 2000


                  Pursuant to the requirements of the Securities Exchange Act of
1934,  this Report has been signed below by the  following  persons on behalf of
Registrant and in the capacities indicated.


                             Date: January 18, 2000
/s/Bella Roth
Bella Roth
President and Chairman
(Chief Executive Officer)


/s/Moshe Laufer               Date: January 18, 2000
Moshe Laufer
Secretary/Treasurer and Director
(Chief Financial/Accounting Officer)



----------------------       Date: January ___, 2000
Arnold A. Lipton, M.D.
V.P. and Director

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