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, 2000       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 Identification
or organization)                                 No.)

236 Broadway Ave., Suite 201, Brooklyn, NY                  11211
(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. [X]

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 September
30, 2000:4,716,130

<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 received 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

                                       2

<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  spent  most of the
fiscal year reformulating its product to produce a Product with greater efficacy
in producing the desired results.  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  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. Due to the longer than expected  delays,  the Company and  Vitahealth  have
agreed to waive the $10,000  annual fee for this year.  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

                                       3

<PAGE>

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 once again reformulated the Product to enhance
its  competitive  position.  During May 2000,  the new  production  facility was
completed  as  well  as the  reformulation  of the  Product.  On May  15,  2000,
Vitahealth  filed a patent  application  in Israel  covering  the  Product.  The
application is currently pending.

         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

                                       4

<PAGE>

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 has selected the initial sales force in Israel and now that
the Product will be available in  commercial  quantities,  the Company  plans to
begin the  process of  selecting  additional  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.

                                       5

<PAGE>

ITEM 2. PROPERTIES

         The Company  maintains  its corporate  offices at 236 Broadway  Avenue,
Suite 201,  Brooklyn,  NY 11211 on a month-to-month  basis at a rate of $300 per
month.

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.

                                     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:

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

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

</TABLE>

         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:

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

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

</TABLE>

         The shares underlying the options issued to Vitahealth and the officers
have no registration rights.

                                       6

<PAGE>

         Of the  4,716,130  shares of common stock  outstanding,  3,674,030  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 September 30, 2000,  there were 159 holders of the Company's  common
stock, and 9 holders of the Company's Class A Warrants.

(c) Dividends

         The Company has not 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.  PLAN OF OPERATIONS

Selected Financial Data

         The following  selected  financial  data for the period August 11, 1998
(inception)  through  July  31,  2000 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.

Statement of Operations Data

                                    From 8/11/98
                                    (inception) to
                                         7/31/00

Net Revenues                         $ 10,200
Cost and Expenses                    (213,074)
General and Administrative
         Expenses                      (7,755)
Interest Income                            24
Income Taxes                              -0-
Net Loss                             (210,605)
Loss Per Share                       $   (.05)

                                       7

<PAGE>

Balance Sheet Data

                          July 31, 2000

Working Capital              $ 26,429
Total Assets                   29,504
Total Liabilities               7,075
Stockholders' Equity         $ 29,504

Plan of Operation

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.

         As  noted in Item 1  above,  until  the  production  facilities  of its
supplier, Vitahealth Scientific, Inc. became operational, the Company was unable
to market the  Product  as it had no  expectation  to be able to  deliver  goods
within a reasonable  amount of time.  Vitahealth  began  delivery of the Product
during the fourth quarter of fiscal 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.

         As the Company only recently began 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

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<PAGE>

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  primary  cash  outlays of the  Company  are for travel
expenses and 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 that between cash on hand, cash flow
from revenues and anticipated  equity  financing there will be sufficient  funds
for the Company's  operations 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 7.  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.

                                       9

<PAGE>

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

                  On October 2, 2000, the Company  dismissed Joseph  Morgenstern
CPA as its independent  accountants ("JM"). This action had been approved by the
Company's  Board of Directors.  During its tenure,  JM did not issue a report on
the Company's financial statements that either contained an adverse opinion or a
disclaimer  of opinion,  or was qualified or modified as to  uncertainty,  audit
scope or accounting principles.

                  During   the   period  of  its   engagement   there   were  no
disagreements  between the Company and JM on any matter of accounting principles
or practices,  financial  statement  disclosure,  or audit scope and  procedure,
which disagreement, if not resolved to the satisfaction of JM, would have caused
it to make  reference to the subject  matter of the  disagreement  in connection
with its opinion.

                  On October  2, 2000,  the Board of  Directors  of the  Company
appointed Mark Cohen CPA ("MC") as its  independent  accountants.  Prior to such
engagement,  the Company did not consult with MC regarding  the  application  of
accounting principles to a specified  transaction,  or the type of audit opinion
that may be rendered with respect to the Company's financial statements.


                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Name                               Age        Position

Bella Roth                          50        President & Chairman of the Board
Arnold A. Lipton, M.D.              70        VP - Scientific Advisor & Director
Moshe Laufer                        41        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  Secureties  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

                                       10

<PAGE>

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 10.  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  was  disclaimed  for this year.  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                 1999          0          0        0                  0
President &                1998    $31,282(3)       0      $50,000(2)      325,000 options worth $0
Chairman

Arnold Lipton, M.D.        1999          0          0        0                  0
V.P.-Scientific            1998          0          0       $2,500(2)       75,000 options worth $0
Advisor &
Director

</TABLE>

                                       11

<PAGE>

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

Moshe Laufer               1999          0          0        0                  0
Secretary,                 1998          0          0        0               75,000 options worth $0
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.
(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

None

(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 2000, no  transactions  occurred  which  required the
filing of any forms under Section 16(a).

                                       12

<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

         The following table sets forth,  as of September 30, 2000,  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.

<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)                          75.9%
                           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)                          79.0%
                           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 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         None.

                                     PART IV

ITEM 13.  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

         A Report on Form 8-K dated  October  2, 2000 was filed on  October  10,
2000 reporting a change of auditor.

                                       13

<PAGE>


                                Mark Cohen C.P.A.
                           1772 East Trafalgar Circle
                               Hollywood, Fl 33020
                                (954) 922 - 6042
--------------------------------------------------------------------------------


                          INDEPENDENT AUDITORS' REPORT




Board of Directors
Virilitec Industries, Inc.

We have audited the accompanying balance sheet of Virilitec Industries,  Inc. (a
company in the development stage) as of July 31, 2000 and the related statements
of operations,  shareholders'  equity  (deficiency)  and cash flows for the year
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 audit. The financial statements of Virilitec Industries,
Inc. as of July 31,  1999 were  audited by other  auditors  whose  report  dated
January 20, 2000, expressed an unqualified opinion on those statements.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Virilitec Industries,  Inc. at
July 31, 2000, and the results of its operations and its cash flows for the year
then ended, in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 5 to the
financial statements,  the Company has experienced an operating loss that raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these  matters are also  described  in Note 5. The  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.



/s/Mark Cohen
Mark Cohen C.P.A.
A Sole Proprietor Firm


Hollywood, Florida
October 20, 2000

<PAGE>

                           VIRILITEC INDUSTRIES, INC.
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                                 BALANCE SHEET
                           AT JULY 31, 2000 AND 1999

                                     Assets

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

                                                                                      July 31, 2000           July 31, 1999

Current Assets
     Cash and cash equivalents                                                            $ 20,117                 $ 300
     Other current assets (principally related party)                                          537                     -

       Total current assets                                                                 20,654                   300
Property and equipment, net                                                                  1,200                 2,400
Other Assets                                                                                 7,650                 8,500

       Total assets                                                                         29,504                11,200
                                                                                   ===============        =================

                      Liabilities and Shareholder's Equity

Current Liabilities
     Accounts payable                                                                        3,075                 1,270
     Other current liabilities                                                               4,000                    80

       Total current liabilities                                                             7,075                 1,350

 Shareholder's Equity
     Common Stock, $.0001 par value; authorized 20,000,000 shares;                             472                   467
          issued and outstanding - 4,716,130 in 2000 4,667,100 in 1999
     Paid in Capital                                                                       232,562               181,737
     Deficit accumulated during the development stage                                     (210,605)             (172,354)

       Total Shareholder's Equity                                                           22,429                 9,850

        Total liabilities and shareholder's equity                                        $ 29,504              $ 11,200
                                                                                    ==============        =================

</TABLE>

Read the accompanying summary of significant accounting policies and notes to
financial statements, both of which are an integral part of this financial
statement.

<PAGE>

                           VIRILITEC INDUSTRIES, INC.
                            STATEMENT OF OPERATIONS
                   FOR THE YEARS ENDED JULY 31, 2000 AND 1999
               FROM INCEPTION (AUGUST 11, 1998) TO JULY 31, 2000


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

                                                                                                   Inception
                                                                                                (August 11, 1998)
                                                                   Years Ended                      through
                                                        July 31, 2000        July 31, 1999       July 31, 2000
                                                    -------------------------------------------------------------

Revenue                                                   $ 10,200            $       -                 $ 10,200

Operating expenses:
      Salaries and payroll related                               -               38,460                   38,460
      Other compensation expense                                 -               52,500                   52,500
      Management fees                                            -               38,500                   38,500
      Travel                                                14,183                5,780                   19,963
      Rent                                                   1,800                1,800                    3,600
      Depreciation                                           1,200                1,200                    2,400
      Amortization                                             850                                           850
      Professional fees                                     26,738               30,064                   56,802
      Selling, general and administrative expenses           3,681                4,074                    7,755
                                                    ---------------      ---------------       ------------------
           Total operating expenses                         48,451              172,378                  220,829

           Loss before other income (expense)              (38,251)            (172,378)                (210,629)

Other income (expense):
      Interest income                                            -                   24                       24
      Interest expense                                           -                    -                        -
                                                    ---------------      ---------------       ------------------
           Total other income (expense)                          -                   24                       24

                                                    ---------------      ---------------       ------------------
Net Loss                                                   (38,251)            (172,354)                (210,605)
                                                    ===============      ===============       ==================

Basic weighted average common shares outstanding         4,704,135            4,032,566                4,363,474
                                                    ===============      ===============       ==================

Basic Loss per common share                                $ (0.01)             $ (0.04)                 $ (0.05)
                                                    ===============      ===============       ==================


</TABLE>

Read the accompanying summary of significant accounting policies and notes to
financial statements, both of which are an integral part of this financial
statement.

<PAGE>

                           VIRILITEC INDUSTRIES, INC.
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                       STATEMENT OF SHAREHOLDERS' EQUITY
             FROM INCEPTION (AUGUST 11, 1998) THROUGH JULY 31, 2000

<TABLE>
<S>                                            <C>            <C>           <C>            <C>            <C>             <C>
                                                                                                          Accumulated
                                                                                                          Deficit during
                                                                    Common Stock                          Shareholder's
                                                 ---------------------------------------   Paid in        Development     Total
                                                   Shares      Par Value      Amount       Capital        Stage           Equity
                                                 -----------  ------------  ------------ -------------  ------------- -------------


Balance, beginning:  August 11, 1998                      -           $ -           $ -           $ -            $ -           $ -

August 11, 1998 - Issuance of shares              3,100,000        0.0001           310          (310)                           -

Proceeds from the sale of Common Stock              933,000        0.0001            93        41,417                       41,510

September 18, 1998 - Issuance of shares for          50,000        0.0001             5        10,091                       10,096
professional fees

December 31, 1998 - Issuance of shares as           525,000        0.0001            53        52,447                       52,500
compensation to officers

Proceeds from the sale of common stock                4,100        0.0001             0         4,400                        4,400

March 30, 1999 Issuance of shares for mgmt fee       55,000        0.0001             6        38,494                       38,500

July 31, 1999 - Officer's salary from August 1998                                              38,410                       38,410
to July 31, 1999 applied against paid in capital

July 31, 1999 - Office rent from August 1998                                                    1,800                        1,800
to July 31, 1999 applied against paid in capital

July 31, 1999 - Amortization of Issuance of shares for                                         19,968                       19,968
professional fees

July 31, 1999 - Stock issuance costs applied                                                  (24,980)                     (24,980)
against paid in capital

Net loss year ended July 31, 1999                                                                           (172,354)     (172,354)
                                                 -----------  ------------  ------------ -------------  ------------- -------------

Balance, ending July 31, 1999:                    4,667,100                         467       181,737       (172,354)        9,850

Proceeds from the sale of common stock               49,030        0.0001             5        49,025                       49,030

July 31, 2000 - Office rent from August 1999                                                    1,800                        1,800
through July 31, 2000 applied against paid in capital

Net loss year ended July 31, 2000                                                                            (38,251)      (38,251)
                                                 -----------  ------------  ------------ -------------  ------------- -------------

Balance, ending July 31, 2000                     4,716,130      $ 0.0001         $ 472     $ 232,562     $ (210,605)     $ 22,429
                                                 ===========  ============  ============ =============  ============= =============

</TABLE>

Read the accompanying summary of significant accounting policies and notes to
financial statement, both of which are an integral part of this financial
statement.

<PAGE>

                           VIRILITEC INDUSTRIES, INC.
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                            STATEMENT OF CASH FLOWS
                   FOR THE YEARS ENDED JULY 31, 2000 AND 1999
          FROM INCEPTION (AUGUST 11, 1998) THROUGH JULY 31, 2000

<TABLE>
<S>                                                                 <C>                <C>                 <C>
                                                                                                              Inception
                                                                                                          (August 11, 1998)
                                                                                  Years Ended                  through
                                                                    July 31, 2000       July 31, 1999       July 31, 2000
                                                                 -----------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income (Loss)                                                   $ (38,251)         $ (172,354)               $ (210,605)
Adjustments to reconcile net income (loss) to net cash
 used in operating activities:
            Depreciation and amortization                               2,050               1,200                     3,250
            Issuance of shares for officer compensation                     -              52,500                    52,500
            Issuance of shares for professional fees                        -              30,064                    30,064
            Issuance of shares for management fee                           -              38,500                    38,500
            Officers salary applied to paid in capital                      -              38,410                    38,410
            Office rent applied to paid in capital                      1,800               1,800                     3,600


Changes in Operating assets and liabilities:
            Other current assets                                         (537)                  -                      (537)
            Accounts Payable and Accrued Liabilities                    5,725               1,350                     7,075
                                                                 -------------       -------------       -------------------

Net cash provided by/(used in) operating activities                   (29,213)             (8,530)                  (37,743)


CASH FLOWS FROM INVESTING ACTIVITIES:

            Purchase of Property and equipment                              -              (3,600)                   (3,600)
            Payment for license                                             -              (8,500)                   (8,500)
                                                                 -------------       -------------       -------------------

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


CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from:
              Issuance of common shares                                49,030              45,910                    94,940
              Cost of common share offering                                 -             (24,980)                  (24,980)
                                                                 -------------       -------------       -------------------

Net cash provided by/(used in) financing activities                    49,030              20,930                    69,960
                                                                 -------------       -------------       -------------------


Net increase (decrease) in cash and cash equivalents                   19,817                 300                    20,117
Cash and cash equivalents, beginning of period                            300                   -                         -
                                                                 -------------       -------------       -------------------

Cash and cash equivalents, end of period                             $ 20,117               $ 300                  $ 20,117
                                                                 =============       =============       ===================

</TABLE>

Read the accompanying summary of significant accounting policies and notes to
financial statement, both of which are an integral part of this financial
statement.

<PAGE>

                           VIRILITEC INDUSTRIES, INC.
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2000 AND 1999

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

    Virilitec  Industries,  Inc. (the Company) was  incorporated in the State of
Delaware on August 11,  1998.  Through an  exclusive  licensing  agreement,  the
Company  will  distribute  a line of  bioengineered  virility  supplements.  The
Company  intends  to  market  its  product  in  international   markets,   using
independent sales agents.

Virilitec Industries,  Inc. prepares its financial statements in accordance with
generally accepted accounting principles.  This basis of accounting involves the
application  of  accrual  accounting;   consequently,  revenues  and  gains  are
recognized  when earned,  and expenses and losses are recognized  when incurred.
Financial   statement  items  are  recorded  at  historical  cost  and  may  not
necessarily represent current values.

NOTE 2 - SUMMARY OF 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.  Certain  amounts  included in the financial  statements  are
estimated based on currently available  information and management's judgment as
to the outcome of future conditions and circumstances.  Changes in the status of
certain facts or circumstances could result in material changes to the estimates
used in the preparation of financial  statements and actual results could differ
from the estimates and assumptions. Every effort is made to ensure the integrity
of such estimates.

Fair value of Financial Instruments

     The  carrying  amounts  reported  in the  balance  sheet  for cash and cash
equivalents  because of the immediate or short-term  maturity of these financial
instruments.

Property and Equipment:

     Property and  equipment are stated at cost less  accumulated  depreciation.
Depreciation  is computed  using the  straight-line  method  over the  estimated
useful lives when the property and equipment is placed in service.

                                                  Estimate Useful Life
                                                      (In Years)

     Computer Equipment & Software. . . . . . . . . . . . .3

The cost of fixed assets retired or sold,  together with the related accumulated
depreciation,  are removed from the appropriate asset and depreciation accounts,
and the  resulting  gain or loss is included in net  earnings.  Maintenance  and
repairs are expensed as incurred.

<PAGE>

                           VIRILITEC INDUSTRIES, INC.
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                         NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2000 AND 1999

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

Revenue Recognition

     Revenues are derived  principally from commissions  received on the sale of
product. Revenue is recognized when agent orders are filled by the manufacturer.

     In December 1999, the  Securities  and Exchange  Commission  ("SEC") issued
Staff  Accounting  Bulletin No. 101 ("SAB 101"),  "Revenue  Recognition,"  which
provides guidance on the recognition,  presentation and disclosure of revenue in
financial  statements  filed with the SEC. SAB 101  outlines the basic  criteria
that must be met to  recognize  revenue and  provide  guidance  for  disclosures
related to revenue  recognition  policies.  Management  believes that  Virilitec
Industrustries,  Inc.'s revenue recognition practices are in conformity with the
guidelines of SAB 101.

Recent Accounting Pronouncements:

The Statement of Financial Accounting Standards Board (SFAS) No. 130, "Reporting
Comprehensive  Income," was issued by the Financial  Accounting  Standards Board
(FASB) in June 1997. This Statement  establishes standards for the reporting and
display  of  comprehensive  income  and  its  components.  Comprehensive  income
including,  among other things,  foreign  currency  translation  adjustments and
unrealized  gains  and  losses  on  certain   investments  in  debt  and  equity
securities.  This  Statement is effective  for fiscal  periods  beginning  after
December 15, 1997.  The Company does not expect the adoption of this  statements
to have a material impact on its financial condition or results of operations.

     In June 1997,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Financial  Accounting  Standards Board (SFAS) No. 131,  "Disclosure
about  Segments  of an  Enterprise  and  Related  Information."  This  Statement
establishes  standards for reporting  information  about  operating  segments in
annual  financial  statements,  and requires that an enterprise  report selected
information about operating  segments in interim reports issued to shareholders.
This  Statement is effective for fiscal  periods  beginning  after  December 15,
1997.  The Company  does not expect the  adoption of this  statements  to have a
material impact on its financial condition or results of operations.

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of  Financial  Accounting  Standards  Board  (SFAS)  No.  133,  "Accounting  for
Derivative  Instruments and Hedging  Activities." This new standard  establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts,  and for hedging activities.
It  requires  that  entities  recognize  all  derivatives  as  either  assets or
liabilities in the consolidated  balance sheet and measure those  instruments at
fair value.

Earnings Per Share of Common Stock

     Basic  earnings  (loss) per share is  computed  using the  weighted-average
number of common shares outstanding during the period.  Options and warrants are
not considered since considering such items would have an antidilutive effect.

Statement of Cash Flows

     For purposes of the  statement  of cash flows,  the Company  considers  all
highly liquid instruments with original maturities of three months or less to be
cash equivalents.

<PAGE>

                           VIRILITEC INDUSTRIES, INC.
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                         NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2000 AND 1999

NOTE 3 - DETAILS OF FINANCIAL STATEMENT COMPONENTS

Proper Equipment:                                           2000        1999
                                                            ----        ----

Computer Equipment                                        $3,600     $ 3,600
Less:  Accumulated depreciation                            2,400       1,200
                                                           -----       -----
         Property and equipment, net                      $1,200     $ 2,400
                                                           =====       =====

NOTE 4 - COMMITMENTS AND CONTIGENCIES

Distribution Agreement

     On August 25, 1998,  the Company  entered  into an  exclusive  distribution
agreement with a manufacturer of bioengineered viritlity supplements whereby the
Company  was  granted  exclusive  rights to  distribute  a  certain  nutritional
supplement  designed to enhance human male sperm count and potency.  The term of
the  agreement is 50 years.  The Company's  independent  sales agents will place
orders with payment  directly with the manufacturer who will fill the orders and
forward  the  Company's  portion  of  the  sales  proceeds  to  the  Company.  A
non-refundable one-time fee of $8,500.00 has been paid by the Company. An annual
payment of $10,000 as a license fee is due and payable 90 days after the product
is initially  manufactured  and ready for delivery to the  Company's  agents and
then annually  thereafter on the  anniversary of the first payments due date. In
May, June and July of 2000, the company's  agents  ordered and the  manufacturer
delivered  25,500 capsules of the  supplement.  Due to the low volume of orders,
the  manufactured  agreed to waive the annual  payment  of $10,000  due from the
Company as a license fee.

Leases

     The Company  maintained  its  corporate  offices at an office of one of its
shareholders at 100 Cedarhurst Ave. Suite 201, Cedarhurst, NY 11516 at a cost of
$150 monthly.  No payments have been made to the  shareholder for the rent cost.
The company  included  rent expense of $1,800 for 2000 and 1999 in the financial
statements with a corresponding  offset to paid in capital. In October 2000, the
company relocated and maintains its corporate office at 236 Broadway Ave - Suite
201,  Brooklyn,  NY 11211 on a month to  month  basis at a cost of  $300.00  per
month.

Employment Contract

     On November 12, 1998,  the Company agreed to pay its President and Chairman
of the Board of Directors,  Mrs. Bella Roth, an annual salary of $40,000.  While
the Company did not pay Mrs.  Roth any salary  during the fiscal year 1999,  the
financial  statements  reflect the pro-rata share of salary with a corresponding
amount in paid in  capital.  For the fiscal year 2000,  Mrs.  Roth agreed not to
accept any salary as the Company has incurred  losses since  inception and is in
the development stage.

International Counsel

     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 common stock.  The total fair market value
of the shares and services had been determined to be $35,000.

<PAGE>

                           VIRILITEC INDUSTRIES, INC.
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                         NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2000 AND 1999

NOTE 4 - COMMITMENTS AND CONTIGENCIES (continued):

Management Fee

   The  Company  hired an  individual  to act as its local agent in the State of
Israel.  The  agent's  duties  included  monitoring  the  completion  of the new
manufacturing  facility  of  its  supplier,  reviewing  applications  for  local
licenses  and  approvals,  as well as  monitoring  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 which were
determined to have a fair market value of $38,500.  This non-cash management fee
was included in the financial  statements with a corresponding  offset to common
stock and paid-in capital.

Private Placement Offering

     On July 10,  2000 the  Board of  Directors  approved  a  Private  Placement
Offering, whereby the Company will sell up to 75,000 shares of common stock at a
price of $1.00 per share.

NOTE 5 - GOING CONCERN

         The accompanying  financial  statements have been prepared assuming the
Company will  continue as a going  concern.  The company  reported a net loss of
$38,251  and  $172,354  for the  twelve  months  ended  July  31,  2000 and 1999
respectively as well as reporting net losses of $210,605 from inception  (August
11, 1998) to July 31,  2000.  As reported on the  statement  of cash flows,  the
Company incurred negative cash flows from operating activities of of $29,313 and
$8,530  for twelve  months  ended July 31,  2000 and 1999  respectively  and has
reported  deficient  cash  flows  from  operating  activities  of  $37,743  from
inception  (August 11, 1998). To date,  these losses and cash flow  deficiencies
have been  financed  principally  through  the sale of common  stock  ($94,940).
Continuation  of the  Company as a going  concern is  dependent  upon  obtaining
sufficient  working  capital for its planned  activity and the management of the
Company  has  developed  a  strategy  which it  believes  will  accomplish  this
objective through additional equity funding, and long term financing, which will
enable the Company to operate for coming  year.  The  Company  anticipates  more
orders to be submitted by agents and filled by the manufacturer in the next year
and the volume to increase  which will  contribute  to  attaining  a  profitable
operations for the Company.

NOTE 6 - STOCKHOLDER'S EQUITY

     On August 11, 1998, the company issued  3,100,000 shares of common stock to
the officers of the company at $0.0001 per share.

     On September  18,  1998,  the Company as part of a  contractual  agreement,
issued  50,000 shares of common stock to an individual  for  performance  of the
duties of international  counsel for a period of one year. The total fair market
value of the shares and services had been determined to be $35,000.

     From August 1998  through  December  1998,  the Company sold 933,000 with a
sale price range from $0.01 to $1.00 per share.

<PAGE>

                           VIRILITEC INDUSTRIES, INC.
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                         NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2000 AND 1999

NOTE 6 - STOCKHOLDER'S EQUITY (continued):

     On December 31, 1998,  the company issued 525,000 shares of common stock to
officers  of the  company in lieu of  salaries.  The value of the  salaries  and
shares was determined to be $53,500.

     From  January  1999  through  July 1999,  the Company  sold 4,100 shares of
common stock at price of $1.00 per share.

     On March 30, 1999 the Company as part of a  contractual  agreement,  issued
55,000 shares of common stock to an individual  for  management  fees. The total
fair market value of the shares and services had been determined to be $38,500.

     From August 1999  through  July 2000,  the  Company  sold 49,030  shares of
common stock at a price of $1.00 per share.


NOTE 7 - PAID IN CAPITAL

     On July 31, 1999, the Company incurred  officers  salaries in the amount of
$38,410.  This amount was applied  against paid in capital since it was not paid
and deemed contributed by the officer who is also a shareholder.

     On July 31, 1999, the Company incurred office rent in the amount of $1,800.
The  Company  maintains  its  corporate  offices  at an  office  of  one  of its
shareholders.  This amount was applied  against paid in capital since it was not
paid and deemed contributed by the shareholder.

     On July 31, 1999, the Company  recorded its stock offering  expenses in the
amount of $24,980 against paid in capital.

     On July 31, 2000, the Company incurred office rent in the amount of $1,800.
The  Company  maintains  its  corporate  offices  at an  office  of  one  of its
shareholders.  This amount was applied  against paid in capital since it was not
paid and deemed contributed by the shareholder.

NOTE 8 -  WARRANTS AND OPTIONS

         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 distributor agreement,  the Company agreed
to grant stock options to its  manufacturer  to purchase up to 300,000 shares of
restricted  common stock for a period of five years  beginning  October 31, 1999
according to the following:

         Effective                  Number of                   Exercise
            Date                     Shares                   Price (per share)
         ---------            --------------------            -----------------

         06/30/99                   100,000                          10.00
         11/30/00                   100,000                          10.00
         06/30/00                   100,000                          10.00

This option shall become effective only in the event the 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 COMPANY IN THE DEVELOPMENT STAGE)
                         NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2000 AND 1999

NOTE 8 - OPTIONS (continued):

     The Company has granted stock options to certain  officers and directors to
purchase additional shares of restricted shares of common stock as follows:

          Option                    Number of                       Exercise
          Holder                       Options                 Price (per share)
         ---------                  -------------              -----------------

         President                  175,000                            2.50
         President                  150,000                            4.00
         Vice President              25,000                            2.00
         Vice President              50,000                            3.00
         Secretary                   25,000                            2.50
         Secretary                   50,000                            4.00

In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards  ("SFAS") No. 123,  "Accounting for Stock-Based
Compensation".  The Company has determined  that it will continue to account for
employee stock-based  compensation under Accounting  Principles Board No. 25 and
elect the  disclosure-only  alternative  under SFAS No. 123. The fair value of a
share of nonvested stock is measured at the market price of a share on the grant
date.  The proforma  effect to net income and earnings per share is reflected as
follows:

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


                                                                              Year ended          Year ended
         FAS 123 "Accounting for stock based compensation                   July 31, 2000       July 31, 1999
         Paragraph 47 (a)
1.       Beginning of year - outstanding
i.       number of options                                                      475,000              0
ii.      weighted average exercise price                                           3.16              0
2.       End of year - outstanding
                  i.      number of options                                     475,000        475,000
                 ii.      weighted average exercise price                          3.16           3.16

3.       End of year - exercisable
                  i.       number of options                                    475,000        475,000
                  ii.      weighted average exercise price                         3.16           3.16
4.       During the year - Granted
                  i.       number of options                                          0        475,000
                  ii.      weighted average exercise price                         3.16
5.       During the year - Exercised
                  i.       number of options                                          0              0
                 ii.       weighted average exercise price                            0              0
6.       During the year - Forfeited
                  i.       number of options                                          0              0
                 ii.       weighted average exercise price                            0              0
7.       During the year - Expired
                  i.       number of options                                          0              0
                 ii.       weighted average exercise price                            0              0

</TABLE>

<PAGE>

                           VIRILITEC INDUSTRIES, INC.
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                         NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2000 AND 1999

NOTE 8 - OPTIONS (continued):

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

         Paragraph  47 (b)  Weighted-average  grant-date  fair  value of options
         granted during the year:
         1.       Equals market price                                                                0
         2.       Exceeds market price                                                            2.44
         3.       Less than market price                                                             0

         Paragraph 47(C)Equity instruments other than options                     none            none

         Paragraph 47(d)  Description of the method and significant  assumptions
         used during the year to estimate the fair value of options:
         1.       Weighted average risk-free interest rate                                        6.00%
         2.       Weighted average expected life (in months)                                     48.00
         3.       Weighted average expected volatility                                             N/A
         4.       Weighted average expected dividends                                             0.00

         Paragraph 47(e) Total compensation cost recognized in income for            0               0
         stock-based employee compensation awards.

         Paragraph  47(f) The terms of  significant  modifications  of none none
         outstanding  awards.
         Paragraph 48 - Options outstanding at the date of
         the latest statement of financial position presented:
         1.       (a) Range of exercise prices                             $2.00-$4.00     $2.00-$4.00
                  (b) Weighted-average exercise price                             2.44            2.44
         2.    Weighted-average remaining contractual life (in months)           24.00           36.00

                                                                                               Inception
                                                                                             Aug. 11, 1998
                                                          Year ended   Year ended              Through
                                                        July 31, 2000  July 31, 1999         July 31, 2000
                                                        -------------  -------------         -------------
     Net Income after proforma effect                      (38,251)      (172,354)             (210,605)
     Earnings per share after proforma effect           $    (0.01)    $    (0.04)           $    (0.05)

</TABLE>

NOTE 9 - INCOME TAXES

    The Company did not provide any current or deferred  United States  federal,
state or  foreign  income tax  provision  or  benefit  for the period  presented
because it has experienced  operating  losses since  inception.  The Company has
provided a full  valuation  allowance  on the  deferred  tax  asset,  consisting
primarily of net operating loss carryforwards,  because of uncertainty regarding
its realizability.

<PAGE>

                                   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
                              --------------------------------------------------
                                 Bella Roth
                                 President

Dated: 26th day of October, 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.


/s/Bella Roth                               Date: October 26, 2000
---------------------
Bella Roth
President and Chairman
(Chief Executive Officer)

/s/Moshe Laufer
---------------------                       Date: October 26, 2000
Moshe Laufer
Secretary/Treasurer and Director
(Chief Financial/Accounting Officer)



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