UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                                   (Mark One)
[x]      ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
         EXCHANGE ACT OF 1934 For the fiscal year ended July 31, 2001

[ ]      TRANSITION  REPORT  PURSUANT  TO SECTION 13 OR 15(D) OF THE  SECURITIES
         EXCHANGE ACT OF 1934 For the transition period from       to
                                                            -------  -------

                         Commission File Number 0-27727

                          BIOPULSE INTERNATIONAL, INC.
                          ----------------------------
                 (Name of small business issuer in its chapter)

              Nevada                                          87-0634278
              ------                                          ----------
(State or other jurisdiction of                       (I.R.S. Employer I.D. No.)
incorporation or organization)

10421 South Jordan Gateway, Suite 500, South Jordan, Utah                  84095
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)

         Issuer's telephone number, including area code     (801) 523-0101
                                                        ----------------------

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

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

                      $.001 par value, common voting shares
                      -------------------------------------
                                (Title of class)

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B is contained in this form,  and no disclosure  will be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this form  10-KSB or any
amendment to this Form 10-KSB.                                               [ ]

The issuer's revenue for its most recent fiscal year was: $ 2,136,674.

The  aggregate  market  value of the  issuer's  voting stock held as of July 31,
2001, by non-affiliates of the issuer was approximately $3,275,803.

As of July 31, 2000,  issuer had 10,958,246 shares of its $.001 par value common
stock outstanding.

Transitional Small Business                    Disclosure Format. Yes [ ] No [X]

Documents incorporated by reference: none      Exhibit Index is on page ___


<PAGE>

This Form 10-KSB contains certain forward-looking  statements within the meaning
of the Private  Securities  Litigation  reform Act of 1995. For this purpose any
statements  contained in this Form 10-KSB that are not  statements of historical
fact may be  deemed  to be  forward-looking  statements.  Without  limiting  the
foregoing,  words  such as "may,"  "will,"  "expect,"  "believe,"  "anticipate,"
"estimate"  or  "continue"  or  comparable  terminology  is intended to identify
forward-looking statements.  These statement by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors,  many of which are not within the Company's  control.  These
factors include but are not limited to economic conditions  generally and in the
industries  in  which  the  Company  may  participate;  competition  within  the
Company's chosen industry,  including  competition from much larger competitors;
technological  advances  and  failure  by the  Company to  successfully  develop
business relationships.

                                     PART 1


Item 1.  Description of Business

         We are seeking to develop and market  treatments  complementary  to the
body's natural processes that build and restore the body's immune system. In our
view, the accelerating trend toward alternative treatments is merging with rapid
advances  in  biotechnology.  Our goal is that  BioPulse  will become one of the
leading companies at the convergence of these two trends.

         We manage  clinical  studies of our products  and conduct  research and
development  of alternative  and  biotechnology  medicine.  We have acquired the
right to use and develop  proprietary  technologies  and  procedures  in various
aspects  of  alternative  medicine  and  biotechnology.  We  believe  that these
technologies will assist in the early detection and monitoring of cancer through
our TK1 cancer test and the treatment of cancer through immunotherapy treatments
that are designed to stimulate or supplement  the body's immune system and other
host non-toxic approaches.

Industry Background

Growing trend toward alternative medicine.
         Healthcare is one of the largest industries in the world,  estimated to
account  for over 10% of the gross  national  product  of the United  States.  A
growing trend in the healthcare field is the use of alternative or complementary
medical treatments and therapies.

         Complementary and alternative  treatments and therapies involve a broad
range of healing  philosophies,  practices and approaches that commonly  include
acupuncture,   herbs  and   vitamin   supplements,   aromatherapy,   homeopathy,
therapeutic massage,  acupressure,  traditional oriental medicine, mind and body
control  interventions such as visualization or relaxation,  and manual healing.
When these  treatments and approaches are used instead of  conventional  medical
treatment,  they are referred to as alternative medicine;  when they are used in
addition  to  conventional   treatments   they  are  commonly   referred  to  as
complementary or integrative medicine.

         Americans' use of complementary and alternative  medical treatments has
been  increasing  in recent  years.  A survey  published  in the  Journal of the
American  Medical  Association  in  November  1998  reflects  that the number of
Americans using  alternative  therapies  increased from 33% in 1990 to more than

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42% in 1997.  Information  available from the National Center for  Complementary
and Alternative Medicine indicates that Americans spent more than $27 billion on
alternative  therapies in 1997,  a spending  level that  exceeded  out-of-pocket
spending for all U.S. hospitalizations. Another article published in the Journal
of the American  Medical  Association  in September 1998 reported that 75 out of
117 U.S.  medical schools then offered  elective  courses in  complementary  and
alternative therapies.

         There are several  possible  reasons for increasing use of and interest
in alternative  medicine.  One survey reflected that, in addition to frustration
and dissatisfaction with conventional  medicine,  people elect complementary and
alternative  therapies because these health care alternatives mirrored their own
values,  beliefs and  philosophical  orientations  toward  life and  health.  We
believe, based on our anecdotal experience with patients at our facilities, that
in addition to these other dissatisfactions with conventional  medicine,  people
are  frustrated  by their  inability to receive  alternative  or new  treatments
domestically  that  are  readily  available  elsewhere  in the  world,  and this
frustration enhances their interest in alternative or integrative medicine.

         Readily  observable trends in marketing further  illustrate the growing
acceptance of alternative medicine.  For example,  herbal supplements that years
ago were produced only in limited  quantities by specialized  manufacturers  and
sold  primarily  through  niche  health  food  stores are now  produced by major
pharmaceutical companies and sold in grocery stores and mainstream pharmacies.

         The United States  government is also  increasing  its  involvement  in
alternative  medicine.  In 1992, the National  Institutes of Health, a branch of
the U.S.  Department  of Health and Human  Services,  established  the Office of
Alternative Medicine.  In 1999, pursuant to a congressional  mandate, the Office
of Alternative  Medicine was expanded to the National  Center for  Complementary
and Alternative  Medicine,  and continues to operate as a separate center of the
National  Institutes  of  Health.  For the year  2000,  NCCAM's  budget  was $75
million,  an increase  of 300% since 1997.  Additionally,  the  National  Cancer
Institute,  also a part of the National Institutes of Health, has established an
Office of Cancer Complementary and Alternative  Medicine,  which oversees a Best
Case  Series  Program  designed  to  collect  and  evaluate   complementary  and
alternative cancer treatments.

         The American Cancer Society also spends  approximately $3 million to $4
million on research and  education  about  alternative  medicine,  a significant
increase  over  past  years.  For  many  Americans,   the  alternative  medicine
marketplace  is  crowded  and  confusing.  There are  innumerable  products  and
services that claim to have medical  benefits.  We believe there is a tremendous
opportunity to become one of the principal brand names for reliable  alternative
medicine,  particularly with regard to cancer and other serious diseases. Cancer
Industry Background.

         Cancer  encompasses  diverse diseases that share the  characteristic of
abnormal cells that proliferate  uncontrollably  and spread throughout the body,
forming  collections  of tumor cells  called  metastases.  The  American  Cancer
Society  estimates  that  approximately  1.2  million  new cases of cancer  were
diagnosed  in the United  States in 2000.  Cancer  causes  over  550,000  deaths
annually, making it the second leading cause of death in the United States.

         The National  Institutes of Health  estimates  overall annual costs for
cancer at $107  billion;  $37 billion  for direct  medical  costs  (total of all
health  expenditures),  $11 billion for indirect  morbidity  costs (cost of lost
productivity due to illness), and $59 billion for indirect mortality costs (cost
of lost  productivity due to premature  death).  Treatment of breast,  lung, and
prostate cancers account for over half of the direct medical costs.

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         Traditional  treatments  for cancer  include  surgery,  radiation,  and
chemotherapy.  These traditional treatments have well-known adverse side effects
such as hair loss,  decreased  function  of various  organs,  and  substantially
impaired immune systems leading to  susceptibility  to other diseases.  The side
effects of these treatments, combined with relatively low success rates for most
cancers, has led some to question these methods of treatment.

         We believe that  dissatisfaction with traditional cancer treatments has
led to experimentation with an assortment of alternative  treatments,  including
many offered at cancer clinics in Mexico,  Europe, and Asia. The American Cancer
Society  estimates  that as many as 75% of  cancer  patients  use  some  sort of
alternative   medicine,   in  addition  to   traditional   treatments   such  as
chemotherapy.  Anecdotal  reports of success from these  alternative  treatments
have circulated, but, to our knowledge, no comprehensive studies have been made.

         Many  medical   authorities  accept  the  proposition  that  successful
management of cancer  involves  three  distinct  activities:  prevention,  early
detection,  and effective treatment.  Prevention  involves,  among other things,
lifestyle  changes that  include  eliminating  smoking and other  cancer-causing
activities, adoption of an improved diet, and a regular exercise regimen.

         We  plan  to  focus  primarily  on  the  development  of  products  and
procedures designed to permit early detection and effective treatment of cancer.
Early detection is important because, for most cancers, the earlier treatment is
rendered the greater the likelihood of success.  For example,  some studies show
that when breast cancer is detected while still localized and before  metastatic
spread,  the  five-year  survival rate is 97% or better.  If the cancer  spreads
regionally before treatment, the five-year survival rate drops to around 75%. If
there is distant metastasis, the five-year survival rate drops to 20%.

         The American Cancer Society and the National Cancer Institute recommend
that the  approximately  74 million  Americans age 50 and above undergo  regular
cancer screening tests for breast,  colorectal,  prostate, and other cancers. We
believe that many people do not undergo  regular  screening tests because of the
cost, inconvenience,  and invasiveness of the currently available procedures and
the relatively unreliable results for certain of these tests.

         Effective  treatment  of cancer  historically  has meant a reduction in
tumor size or,  ideally,  complete  remission  of the cancer.  The adverse  side
effects of  traditional  treatments  have led many  companies  to  research  new
treatments that can accomplish  remission without otherwise harming the patient.
Many of the promising  treatments are in the field of  immunotherapy.  The basic
premise of these  treatments  is that the  body's  own  immune  system can fight
cancer. This premise is shared by many of the alternative  treatments,  although
the methodologies differ substantially.

History

BioPulse International, Inc., was incorporated in Nevada on July 13, 1984, under
the name Universal  Financial  Capital Corp.,  and changed its name in September
1985, to International  Sensor  Technologies,  Inc ("IST").  As IST, the Company
incurred  heavy  losses,  had no  revenue  from  operations  and,  subsequently,
experienced five years of inactivity.

On January 9, 1999,  the Company  acquired  BioPulse,  Inc., a Utah  corporation
("BPI").  Jonathan Neville,  Loran Swensen, and Dr. Robert Morrow founded BPI in
June 1998. From the time it was formed,  until the time of its acquisition,  the
primary  operations  of BPI  were  related  to  developing  its  business  plan,
researching  alternative medical treatments and technologies,  and investigating

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clinics in Mexico. At the time of the acquisition, BPI had approximately $75,000
of liabilities and no material assets. Similarly, the Company had no liabilities
and no significant  assets. The acquisition of BPI was negotiated at arms length
between Jonathan  Neville,  Loran Swensen and Dr. Robert Morrow on behalf of BPI
and Briton  McConkie  and  Stephen  Fey on behalf of the  Company.  Prior to the
acquisition of BPI, the Company had approximately  70,000 shares of common stock
issued and outstanding. At the time of the acquisition,  the Company changed its
name  to  BioPulse   International  and  issued  3,200,000  restricted  BioPulse
International  common shares to the  shareholders of BPI, in exchange for all of
the issued and outstanding shares of BPI. In that transaction,  Jonathan Neville
received  1,089,200  shares,  Loran Swensen received  1,004,200,  and Dr. Morrow
received  317,000.  The  Company's   shareholders  received  800,000  shares  of
restricted  common stock in exchange  for their shares of IST. Of these  800,000
shares, Mr. Fey and Mr. McConkie each received 336,500 shares of common stock.

         During 1998 and 1999, our operations  consisted of evaluating a variety
of available  alternative  treatments  with a focus on treatments  that might be
effective in  rebuilding  the body's  natural  immune system to fight cancer and
other degenerative  diseases.  We also entered into a management  agreement with
the Dr. Omar  Sanchez  clinic in Mexico for which a locally  licensed  staff was
recruited  and  in  which  we  have  implemented  certain  selected  alternative
treatments discussed below.

         During 2000,  we began  expanding  the scope of the  treatments we were
evaluating  to include  developments  in  biotechnology.  We believe that recent
advances in  biochemistry  and  microbiology  have the  potential to explain the
observable  benefits  of  alternative   medicine  so  these  treatments  can  be
optimized.  At the same time, we believe that  developments in biotechnology and
immunotherapy  hold the promise of new treatments  that are consistent  with the
alternative  medicine philosophy of improving overall health by working with the
body's natural systems to fight disease.

         During 2001, the Mexican  government  revamped its oversight of medical
clinics subject to its jurisdiction. It sent new health department inspectors to
review the operations and permits of many clinics in Tijuana,  Mexico.  This led
to the closure of several clinics there. Dr. Sanchez' clinic also was inspected.
The  inspectors  determined  that  while  the  clinic  personnel  were  properly
qualified,  they had not submitted all of their protocols for government review.
On February  15,  2001,  one  treatment  room was closed  pending  review of the
protocols.  The clinic  submitted  applications  for licenses for four protocols
(insulin hypoglycemic therapy, chelation, colonic treatments, and dendrytic cell
therapies)  in May 2001.  On May 9, 2001,  the  Instituto  de Servicios de Salud
Publica Del Estado De Baja California (the Mexican health authorities)  reopened
the  treatment  room. As of September 13, 2001,  the  applications  for the four
protocols are still pending approval.  As a result of the new policy, the clinic
decided not to seek new  patients  until all the  necessary  protocols  had been
approved.  In addition, to the extent that the protocols are deemed experimental
by the Mexican  government,  the clinic will not charge patients who participate
in the clinical studies for the experimental portion of the treatments.

         During 2001, we have formed two Delaware  corporations  as wholly owned
subsidiaries.  One subsidiary,  Complesys,  Inc., has assumed responsibility for
developing the TK1 test described below. We have assigned the license  agreement
with BYU for the TK1 test to Complesys.  The other subsidiary,  Contiquity Labs,
Inc., has assumed  responsibility to develop and market consumer products in the
nutritional supplement sector.

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<PAGE>

Our Business Strategy

         Our  approach of combining  alternative  medicine  techniques  with the
latest  biotechnology  advances is designed to capitalize on the  convergence of
traditional and alternative medicines.

         Our objective is to continue to enhance the  management of an operating
clinic that provides up-to-date  alternative and biotechnology cancer treatments
and rely on our management and operational  experience to develop and test leads
for new cancer diagnostic and therapeutic products. We believe that our TK1 test
may enable the early detection and monitoring of cancer.  In addition to the TK1
test,  we are  developing  therapeutic  treatments  designed  to help the body's
natural  immune system to fight cancer,  including our continued  development of
therapies using the following types of products:

         o    Dendritic  cell  "cancer  vaccines"  using   broad-spectrum  tumor
              antigens;

         o    Angiogenesis,  the  formation  of  new  blood  vessel  inhibitors,
              including  PGM, a  substance  usually  capable of  stimulating  an
              immune response;

         o    Immune system stimulants such as MPGC; and

         o    Broad-spectrum cytokines - a class of immunotregulatory substances
              secreted by cells of the immune system.

         The key elements of our approach are to:

     1.  Develop improved diagnostics for early detection of cancer.

     2.  Discover and develop  improved  therapies and  diagnostics  directed at
enhancing natural immune resistance.

     3.  Offer promising therapies as quickly as possible, anywhere in the world
where such therapies are permitted,  through  qualified and licensed health care
providers and modern medical facilities.

     4.  Form collaborations with other research companies and operating clinics
to accelerate product development and adoption of our products.

         We plan to implement these elements through our clinic operations,  our
biotechnology product line, and our alternative medicine protocols.

Clinic Operations

         To date,  most of our revenues have been derived from our  relationship
with our clinic in Tijuana, Mexico called Clinica BioPulso. In December 1999, we
entered into a clinic  management  agreement  with Dr. Omar Sanchez,  a surgical
oncologist,  under  which we provided  clinic  management  services  for Clinica
BioPulso in return for all of the receipts of the clinic and we are  responsible
for all of the costs of operating the clinic.

         The clinic's entire medical staff is locally  licensed.  The clinic has
40 rooms for resident  patients,  three group  treatment  rooms,  a pharmacy,  a
laboratory,  a surgery room, and several offices for doctors and administration.
During  2000,  the  clinic  began  administering  a  comprehensive   alternative
treatment program including insulin  hypoglycemic  therapy,  chelation,  colonic
treatments treatments, and dendrytic cell therapies.

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         The  scientific  support  that  we  provide  includes  information  and
training  regarding  the  procedures  related  to our cancer  vaccines;  the PGM
angiogenesis inhibitor; the MPGC immune stimulant; and various cytokine mixtures
and preparations.

         We also provide  equipment  including  laboratory or medical  equipment
necessary  to  administer  the  clinic's  treatment  program,  including  liquid
nitrogen  containers,  sterile  hoods,  centrifuges,  incubators,  environmental
monitoring equipment,  and other related lab equipment. We do not manufacture or
assemble  any  equipment.  Supplies  that we provide  from time to time  include
common  laboratory  supplies  and various  reagents and  solutions  required for
laboratory processes.

         Clinica  BioPulso  has  drawn  patients  from  around  the  world,  but
primarily  from the United  States.  We may help develop  additional  clinics in
Mexico and other countries.

         Prior to June 2000,  we had an  association  with a German  clinic that
began in November  1999.  Since January 2000, the German clinic has not utilized
our  protocols,  and we have not  referred  patients to the clinic.  We have had
preliminary  discussions with clinics in other countries,  including  Australia,
China,  and Costa Rica,  that are  interested in  participating  in our clinical
studies.  As of July 31, 2001, we had no firm commitments or agreements with any
of these other clinics.

Our Biotechnology Product Line

         We have not yet sought  approval  from the FDA or any other  regulatory
agency for any of our products, including our cancer vaccine, anti-angiogenesis,
cytokine, or immune-stimulant products. We will not be able to commercialize any
of our potential products in the United States until we obtain FDA approval,  so
any delay in obtaining, or inability to obtain, FDA approval could substantially
harm our business.

         We  are   conducting   studies  of  our  cancer   vaccines   and  other
biotechnology  products discussed below on a  fee-for-services  basis at Clinica
BioPulso.  Participants apply to participate in the studies. The doctors who are
supervising the study review the applications.  Once an application is accepted,
participants  receive an explanation of the procedures,  including the potential
risks, and sign informed  consent forms.  Participants are free to withdraw from
these studies at any time.

         The  fee-for-services  program reduces the cost of conducting  clinical
studies of the products.  However, from time to time, we accept participants who
are unable to pay, and occasionally,  the cost of the treatment for a particular
participant may exceed the fee.  However,  the fees generated  usually cover the
cost of the studies,  and we do not expect to run a deficit in conducting  these
patient  studies.  The  primary  budgetary  impact  on us is in  purchasing  the
equipment necessary for diagnostics and treatment. This equipment includes blood
analysis machines,  patient  monitoring  equipment,  incubators,  sterile hoods,
centrifuges,  other  equipment  required to prepare and store the vaccines,  and
other laboratory supplies. We expect to purchase additional diagnostic equipment
as funds become  available  either through  operations or through future debt or
equity financing.

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         TK1 Cancer Screening Test.
         --------------------------

         We  consider  existing  tests for the early  detection  of cancer to be
invasive,  expensive,  and  not  sufficiently  reliable.  We also  believe  that
commercially  available  methods of monitoring  the progress of patients  during
cancer treatment are inadequate.

         We believe that our Thymidine  Kinase-1,  or TK1, test may enable early
detection and  monitoring of several types of common cancers in an efficient and
cost  effective  manner.  In addition,  we believe  that once we have  finalized
development of a kit using the Enzyme-Linked Immunosorbent Assay (ELISA) format,
administration of the TK1 test would require only a small blood sample and could
also be  incorporated  into a standard  blood test panel.  The ELISA format is a
fundamental   tool  of  clinical   immunology,   based  on  the   principle   of
antibody-antibody  interaction.  Incorporation  of the TK1 test into a kit using
this  format  would  provide  easy  visualization  of results  and would  enable
detection  of the  presence  and  amount  of TK1.  Moreover,  the test  could be
completed without the expense and other problems of using radioactive materials.
For these reasons, we believe that medical  practitioners would order our cancer
screening tests, if and when available,  as part of a regular  screening program
for the early detection of various cancers, for use in assessing the progress of
patients  undergoing  cancer  treatment,  and for use in  determining  prognosis
post-treatment.

         The TK1 test was originally  developed at Brigham Young  University and
is being  further  developed  by Covance  Research  Products,  Inc.,  in Denver,
Pennsylvania.  We licensed the intellectual property rights to the TK1 test from
BYU  under  a  license  agreement,  dated  as of  December  1,  2000  (the  "BYU
Agreement").

         Under the BYU Agreement, BYU granted us exclusive,  worldwide right and
license  (subject to an option  agreement  between BYU and a private  laboratory
which grants rights in the countries of Japan, China, Taiwan,  Korea,  Malaysia,
Indonesia,  Philippines,  and Singapore,  and to BYU's right to use the licensed
technology for continuing research and non-commercial academic uses) to develop,
manufacture,  sell, and otherwise  transfer the in vitro serum diagnostic TK and
TK1 tests and related  products.  We are  required  under the  agreement to make
royalty payments and meet performance milestones.

         We are collaborating  closely with BYU to monitor Covance's efforts. To
that end, we entered into a statement of work agreement with Covance in February
2001. Our responsibilities under the statement of work agreement include:

         -    supplying enough antigen to prepare the proposed calibrator lots;

         -    supplying  at  least  two cell  lines  that  make  the  monoclonal
              antibodies  suitable for use in the proposed  ELISA sandwich assay
              for TK1; and

         -    supplying purified  monoclonal antibody to be used in the proposed
              ELISA sandwich assay for TK1.

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We have provided these materials to Covance through BYU.

         The remaining  research and development  necessary to bring the product
to the stage where we can begin the process of receiving FDA approval,  which is
being done  primarily by Covance with our  assistance and the assistance of BYU,
includes cell culture, cloning and freezing;  antibody production,  purification
and labeling;  calibrator definition,  design, evaluation,  test lot production,
and stability testing;  assay design and optimization;  sensitivity;  precision;
and testing on patient  samples.  We estimate  that this process  will  continue
through  December  2001  at a cost to us of  approximately  $200,000.  The  work
Covance  is  doing  is  directly  related  to  development  of the  serum  ELISA
diagnostic kit required in the BYU agreement. Covance is not responsible for the
clinical  trials  or the  applications  for FDA  approval,  which  are  both our
responsibility.  We  have  identified  sources  of  blood  serum  for use in the
clinical trials, which we will commence once the ELISA kit is prepared.

         In April 2001, we modified our  agreement  with BYU to provide that BYU
would refund to us $400,000 of the initial  license fee, and that an  additional
$300,000  of the  initial  license  fee would be put into  escrow and  dedicated
toward the development of the TK1 technology.  Under the modified agreement,  we
agreed that within 60 days of the  commencement of marketing of the TK1 test, we
would repay to BYU the refunded $400,000, along with the portion of the escrowed
funds spent on development  of the TK1 test, as well as an additional  $100,000,
all as a revised initial license fee.

Biotechnology Cancer Treatments.
--------------------------------

         We  believe  immunotherapy  may  overcome  many of the  limitations  of
current cancer  therapies by enabling a patient's immune system to recognize and
destroy  cancerous  cells both at the site of origin and at sites of metastases.
We  believe  this  may  be  feasible  through  either  alternative   methods  or
biotechnology  methods,  but we  believe  the best  approach  is an  integrative
approach relying on both methods.

         One  immunotherapy  treatment we are researching is a "cancer vaccine."
In connection  with this research,  in August 2000, we entered into an agreement
with Aidan, Incorporated (the "Aidan Agreement"),  in which Aidan licensed to us
the intellectual property rights,  including the right to manufacture and market
a  proprietary  cancer  vaccine.  Aidan  also  licensed  to us the  intellectual
property rights to additional  cancer treatments to additional cancer treatments
that we believe may complement the cancer  vaccines.  Among these are a patented
anti-angiogenesis    product   that   can   be   administered   clinically;   an
immune-stimulant  product made from bacterial cell wall extracts that we believe
may act as a vaccine  adjuvant,  which  enhances the immune  system  response to
antigens;  and a proprietary  mixture of cytokines that we believe may act as an
adjuvant.  Under the Aidan  Agreement,  we paid BYU an initial license issue fee
and are required to make additional  royalty  payments based upon adjusted gross
sales of the licensed products,  improvements, or processes. In addition, we are
obligated to pay certain minimum royalty payments in calendar year 2003 and each
year thereafter.

         We plan to retain  commercial  rights  for our  products  in the United
States and many  parts of the  world,  although  we may  collaborate  with other
companies in some areas.

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         1.   Cancer Vaccine.

         A new approach to cancer  therapy  takes  advantage of the  possibility
that  dendritic  cells may  activate  the immune  system to attack  tumor cells.
Dendritic immune cells are specialized  antigen-presenting  cells found in trace
numbers  in the blood  stream  and in lymph and  non-lymph  tissues in the human
body.  They  play a  crucial  role in the  initiation  of the  immune  response,
including activation of cytotoxic T lymphocytes. They derive their name from the
branch-like  structures  (dendrites)  on their  cell  membranes,  on which  they
present  antigen.  The process of using dendritic cells to attack tumor cells is
referred to in both  scientific and popular media as a "cancer  vaccine."  These
are therapeutic,  as opposed to preventative,  vaccines.  The feasibility of the
cancer vaccine  approach has been tested in in vitro studies (studies done in an
artificial  environment)  and in animal and human studies.  Approval for Phase I
and Phase II human clinical trials of dendritic cell therapy has been granted to
several  companies and  institutions  by the FDA. We have not yet applied for or
received  regulatory  approval to begin  clinical  trials of our dendritic  cell
therapy, or cancer vaccine.

         The method of treatment in the protocol we have  licensed from Aidan is
as follows:  Monocytes  are  isolated  from  patient  blood and  converted  into
dendritic cells using  cytokines.  The dendritic cells are then exposed in vitro
to tumor antigens.  These "programmed"  dendritic cells are then re-infused into
the patient  intravenously,  through the blood, and  intradermally,  through the
skin. The re-infused  cells may come in contact with  lymphocytes and may induce
an immune response toward the tumor antigen.

         We believe that an important element in the success of a cancer vaccine
is the tumor-associated antigen that is exposed to the dendritic cells in vitro.
Tumor associated antigens are being discovered yearly. However,  identification,
purification,  and  characterization  of  these  antigens  are  costly  and time
consuming.  To date,  no  tumor-associated  antigen  with 100%  specificity  and
sensitivity has been identified.

         Aidan found that dendritic  cells pulsed with a high  molecular  weight
isolate  of  antigen-containing,   autologous  tumor,  without   identification,
purification,  or characterization of tumor associated antigens, can effectively
induce T lymphocyte  mediated  cytotoxicity of human tumor cells in vitro. Based
on studies  conducted  by Aidan,  we  believe  that an in vivo  immune  response
against  tumor cells can be elicited by infusion of autologous  dendritic  cells
that have been primed  (pulsed)  with high  molecular  weight  autologous  tumor
isolates.

         Aidan also found that  dendritic  cells  pulsed  with a high  molecular
weight isolate of autologous urine,  without  identification,  purification,  or
characterization of tumor associated antigens,  can induce T lymphocyte mediated
cytotoxicity  of human tumor cells in vitro as  effectively  as dendritic  cells
pulsed with a target cell membrane derived antigen.  Based on Aidan's  research,
we believe that an in vivo immune  response  against tumor cells can be elicited
by infusion of autologous  dendritic  cells that have been primed  (pulsed) with
high molecular weight extracts of autologous human urine.

         2.   PGM, Angiogenesis inhibitor.

         A healthy  human  body  controls  blood  vessel  development  through a
process of  stimulating or inhibiting  angiogenesis,  the formation of new blood
vessels.  Normally, the inhibitors dominate the stimulators so angiogenesis does

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<PAGE>

not  occur.  Excessive  angiogenesis  is  noted in  cancer  and  other  diseases
including diabetic blindness, rheumatoid arthritis, and psoriasis. The new blood
vessels feed the diseased  tissues,  which  destroys  normal tissue  because the
diseased  cells  produce  abnormal  amounts of  angiogenic  stimulants or growth
factors, overwhelming the natural inhibitors. These new blood vessels also allow
tumor cells to escape into the blood system and find their way to other  organs.
This migration is known as tumor metastases.

         In  1971,  Judah  Folkman,  a  well-known   physician  and  researcher,
hypothesized  that  controlling  angiogenesis,  the growth of new blood vessels,
could be a feasible anti-tumor  strategy.  Anti-angiogenesis  therapies help the
body fight tumors by halting new blood vessel  growth.  This may help starve the
tumor and prevent metastases.

         Because of an anecdotal report of complete remission in a case of human
ovarian  carcinoma  after  consumption  of an  extract of the  ubiquitous  plant
Convolvulus arvensis,  Aidan tested extracts of this plant for anti-angiogenesis
and immune stimulating  effects.  Convolvulus arvensis is known to contain toxic
alkaloids.  Aidan  developed  a method  to  process  the plant to  minimize  the
alkaloids while preserving the anti-angiogenic  and immune stimulating  effects.
The extract is primarily comprised of proteoglycan  molecules and has been named
PGM. Aidan has shown that the extracted plant product does have  anti-angiogenic
and immune system stimulating effects on human tumor cell lines. Aidan currently
offers PGM in both clinical  preparations and oral preparations for consumer use
as a food supplement. Aidan's studies showed that the clinical preparations were
more  effective.  We have licensed the right to use clinical  preparations  from
Aidan  on an  exclusive  basis.  We also  distribute  the oral  preparations  to
participants  in clinical  studies as determined by doctors.  The trademark name
for the  commercial  product  containing PGM is  "C-statin(TM)."  The product is
covered by U.S. patent No.  6,083,510  issued in July 2000. Aidan is the current
licenseholder of this patent.

         3.   MPGC, Immune stimulant.

         MPGC (Muramul  polysaccharide  glycan complex) is a preparation created
from a bacterial  cell wall  extract  that we believe is capable of  stimulating
conversion of inactive  immune cells into active  immune cells.  We believe that
MPGC may also act as a powerful  vaccine  adjuvant.  Like PGM,  Aidan  currently
offers MPGC in both clinical preparations and oral preparations for consumer use
as a food supplement. Aidan's studies showed that the clinical preparations were
more  effective.  We have  licensed the clinical  preparations  from Aidan on an
exclusive  basis. We distribute the oral  preparations to patients at the clinic
in Mexico as determined by attending physicians.  Aidan has applied for a patent
on MPGC. The application is still pending.

         Aidan's  studies  also show that PGM and MPGC are more  effective  when
used in combination  than when used  separately.  This synergy is the subject of
continued research by us in connection with Aidan.

         4.   Cytokine mixture.

         Cytokines are a family of small, intercellular regulatory proteins that
mediate a variety  of  immunologic  and  non-immunologic  biological  functions.
Cytokines  are grouped by function and  include:  interleukins;  tumor  necrosis
factors; lymphotoxins; interferons;  colony-stimulating factors; chemokines; and
miscellaneous cytokines.

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<PAGE>

         Cytokines  produced by other  companies have been used  successfully in
cancer treatment. For example, recombinant interleukin 2 (formulated and sold as
Proleukin,  by Chiron  Corporation)  has received  approval for human use in the
treatment of metastatic renal cell carcinoma and malignant melanoma. Recombinant
interferon alfa-2B (formulated and sold as Intron A, by Shering Corporation) has
received  approval  for  human use for the  treatment  of hairy  cell  leukemia,
malignant melanoma, follicular lymphoma, and Kaposi's sarcoma.

         Cytokines are produced by a variety of cell types. Both lymphocytes and
monocytes  produce  several  cytokines  in response to immune  challenge.  Cells
naturally  produce  several  cytokines  simultaneously.   Several  studies  have
suggested that synergistic  anti-tumor  effects occur when cytokines are used in
combination as opposed to being used singularly.

         One of the reasons  that the normal  immune  system does not respond to
cancer is that dendritic cells naturally found in proximity to tumors are unable
to effectively  present antigen to T cells,  which have a role in  cell-mediated
immunity  and   immunoregulation.   These  dendritic  cells  lack  costimulatory
molecules  on their  cellular  surface,  including  CD 80 and CD 86,  which  are
necessary  for T cell  activation.  They also lack  CMRF-44 and CD 83, which are
markers indicating the maturity of the dendritic cells. We believe that inducing
the  expression  of CD 80  and  CD 86 may  be of  therapeutic  advantage  in the
treatment of malignancies.

Aidan has developed and licensed to us a method for using a monocyte-conditioned
medium  (MCM) to convert  inactive,  ineffective  dendritic  cells into  active,
migrating,  effective  dendritic cells. In addition,  the MCM contains cytokines
that may have direct anti-tumor activities.  Aidan's pilot clinical trial showed
that the MCM induced rapid tumor cell death.

Our Alternative Medicine Protocols.

         We  consider  all of our  treatment  methodologies  currently  to be in
clinical  experimental  status and so inform all participants in our studies. In
all cases,  our  approach  is to assist and enhance  the body's  natural  immune
system in the context of whole body-mind healthiness. A major thrust of our plan
of operations is to develop thorough,  long-term clinical studies of the results
of our treatment  methodologies and any products we may develop. We then plan to
obtain  regulatory  approval for these  treatments as necessary to allow further
commercialization.

         One of the treatments  being studied in Clinica  BioPulso is the use of
insulin-induced  hypoglycemic  therapy (IHT) as an aggressive  cancer treatment.
IHT  uses a  regulated  level of  insulin  and  other  medications  to  induce a
hypoglycemic  state in the  patient  that  allows  the  attending  physician  to
regulate blood oxygen levels, body temperature,  and pH levels. This enables the
attending  physician to create an environment  that we believe is intolerable to
fast-growing cancer cells. Patients are continually monitored by a physician and
medical personnel  throughout the procedure using standard  hospital  monitoring
equipment and medicine to maintain safety.

         In  addition to studying  IHT,  Clinica  BioPulso  also  studies  other
alternative  treatments that we believe may prove  beneficial to cancer patients
such as targeted nutritional programs and cleansing procedures.

Regulatory  Environment

         Regulation by governmental authorities in the United States and foreign
countries  is a  significant  factor in the  manufacture  and  marketing  of our
proposed  products  and our  research  and  development  activities.  All of our
products will require  regulatory  approval by  governmental  agencies  prior to

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<PAGE>

commercialization.  In  particular,  human  therapeutic  products  must  undergo
rigorous  pre-clinical  and  clinical  testing  and  other  pre-market  approval
procedures  by the FDA and  similar  authorities  in  foreign  countries.  Since
certain of our potential  products involve the application of new  technologies,
regulatory  approvals  may take longer  than for  products  produced  using more
conventional  methods.  Various  federal and, in some cases,  state statutes and
regulations  also  govern or  influence  the  manufacturing,  safety,  labeling,
storage,  record keeping and marketing of such products.  The lengthy process of
seeking these approvals,  and the subsequent  compliance with applicable federal
statutes and regulations, requires the expenditure of substantial resources.

         Additionally,  the  healthcare  industry is heavily  regulated.  In the
United States, a variety of governmental  agencies have jurisdiction over health
care products and services.  For example,  each state has licensing  boards that
regulate the ability of  individuals  to work as  physicians,  nurses,  or other
health care  providers.  The FDA  regulates  the use of drugs  within the United
States. Other countries have comparable regulatory frameworks.  We have a policy
of obtaining all required permits, licenses, and bonds to operate our facilities
and sell our products and  services.  We have  retained  counsel to assist us in
understanding  and complying with these various  regulations  both in the United
States and abroad.

FTC Regulation

         Additionally,  the Federal Trade  Commission  (FTC)  regulates  certain
aspects of the practice of medicine,  including advertising and marketing.  As a
general rule,  anyone who makes a statement or claim in advertising a product or
service must possess and rely on a reasonable basis for such statement or claim.
The FTC oversees  the  enforcement  of the legal  requirement  that  advertisers
substantiate  express or implied claims,  however conveyed,  that make objective
assertions about the item or service  advertised.  Objective claims for products
or services  represent  explicitly or by  implication  that the advertiser has a
reasonable basis supporting claims made.

         To the extent that the  labeling  or the  advertising  of our  products
include express or implied claims regarding the products,  we will be subject to
federal laws and regulations  regarding truth in advertising and may be required
to substantiate any or all claims made. We will continue to work with counsel to
assist us in understanding and complying with these various  regulations both in
the United States and abroad.

         On February 2, 2001, we received a letter from the FTC's Western Region
notifying  us that the FTC is  conducting  an inquiry  into our  advertising  of
health care products and treatments.  The purpose of the inquiry is to determine
whether we have  engaged in unfair or  deceptive  acts or  practices,  including
whether we can  substantiate  claims we have made  relating  to  treatments  for
cancer and other diseases.  The FTC's Western Region has advised us that neither
this  notification,  nor the  existence of this  inquiry  should be viewed as an
accusation by the FTC or its staff of any  wrongdoing.  We have responded to the
FTC and are awaiting further comments.

FDA Approval Process

         Our  cancer  screening  tests and cancer  treatments  may be subject to
regulation by the FDA and by state and foreign  authorities or their  designated
representatives.  Under the U.S.  Federal  Food,  Drug and  Cosmetic Act and the
regulations promulgated thereunder, as a manufacturer of medical devices, we may
be  required  to  comply  with  policies  and   procedures   that  regulate  the
manufacturing,  composition,  labeling,  testing,  packaging and distribution of
medical devices. In addition, medical devices are subject to different levels of
government approval  requirements,  the most comprehensive of which requires the

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<PAGE>

completion of an FDA approved clinical  evaluation  program and submission,  and
approval of a premarket approval application before a device may be commercially
marketed.  The FDA  also  conducts  inspections  before  approving  a  premarket
approval application to determine compliance with the quality system regulations
which cover manufacturing and design.

         After premarket  approval is received,  the FDA may require testing and
surveillance  programs to monitor the  effectiveness of approved  products which
have been commercialized. It has the power to prevent or limit further marketing
of a product based on the results of such post-marketing  programs. In addition,
the FDA may, at any time after the approval of a premarket approval application,
conduct  periodic  inspections to determine  compliance with good  manufacturing
practice  regulations and current medical device reporting  regulations.  If the
FDA concludes that we are not in compliance with applicable laws or regulations,
it can institute proceedings to:
         o    seize our product;

         o    issue a product recall;

         o    impose operating restrictions; and/or

         o    assess civil penalties or recommend criminal prosecution.

         The FDA also regulates  recordkeeping  for medical  devices and reviews
hospital and manufacturers'  required reports of adverse experiences to identify
potential problems with FDA-authorized devices.

         Some of the  products  that we  intend to  develop  and  market  can be
cleared  under Section  510(k) of the Federal  Food,  Drug and Cosmetic Act. The
process of obtaining Section 510(k) clearance  typically  requires less time and
expense than the premarket  approval process.  Section 510(k) clearance normally
takes from six months to one year,  but can take years,  and generally  requires
the  submission of  supporting  data,  which in some cases can be extensive.  In
addition,  the FDA may require  review by an advisory  panel as a condition  for
Section  510(k)  clearance.  We intend to continue to rely on the Section 510(k)
process with regard to certain products,  such as any additional cancer vaccines
or cancer  screening tests we may develop.  However,  we may develop and produce
enhancements  to our existing  products  that will require  clearance  under the
FDA's more lengthy and expensive  premarket  approval process,  which can take a
number  of years  and can  require  extensive  supporting  documentation.  If we
encounter  difficulties  in  the  premarket  approval  process,  the  commercial
marketing  of  any  future  canceer   screening  tests  and  vaccines  could  be
substantially delayed or prevented.

         We  expect  that the TK1 test will be our  first  product  that will go
through  the FDA  process,  and we are  taking  steps  to begin  generating  the
necessary data and other  requirements to successfully  obtain FDA approval.  We
may need to obtain additional funding through grants,  debt or equity financing,
or corporate  partnerships to complete the steps necessary for FDA approval.  We
intend to develop our TK1 technology in three ways:

         -    perform cancer screening services in our own laboratories;

         -    license  our  intellectual  property  and sell our  reagents  that
              target TK1 to leading  clinical  reference  laboratories  to allow
              them to perform their own screening tests, using their own methods
              and equipment; and

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<PAGE>

         -    package our  technologies in the form of diagnostic test kits that
              clinical laboratories can use to conduct screening services.

The FDA treats each of these alternatives differently.

Providing testing services directly

         The FDA does not actively regulate most laboratory tests that have been
developed and used by the laboratory  conducting the test. However, the FDA does
regulate  reagents  such as ours  that  react  with a  biological  substance  to
identify a specific chemical substance. These regulations provide that most such
reagents, which the FDA refers to as analyte-specific  reagents, are exempt from
the FDA's premarket review requirements.

         If the FDA were to decide to  regulate  in-house  developed  laboratory
tests,  to require  premarket  approval or  clearance  of our  analyte  specific
reagents,  or to conclude that licensing our intellectual  property  constitutes
non-compliant labeling, the commercialization of our products and services could
be delayed, halted, or prevented. In addition, the FDA could impose penalties on
us or seek other enforcement  actions.  Similarly,  if the FDA were to determine
that our blood collector requires  premarket approval or clearance,  the sale of
our products and services could be delayed,  halted,  or prevented,  and the FDA
could impose penalties on us or seek other enforcement action.

         Finally,  our reagents will be subject to a number of FDA requirements,
including  compliance with the FDA's quality system  regulation that establishes
extensive regulations for quality control and manufacturing procedures.  Failure
to comply with these regulations could subject us to enforcement action. Adverse
FDA action in any of these areas could  significantly  increase our expenses and
limit our revenue and profitability.

Licensing our technology

         Reagents generally do not require FDA approval or clearance if they are
sold to  clinical  laboratories  licensed  by the  government  to  perform  high
complexity  testing  and  are  labeled  in  accordance  with  FDA  requirements,
including a statement that their analytical and performance characteristics have
not  been  established.  A  similar  statement  would  also be  required  on all
advertising and promotional materials relating to analyte specific reagents such
as ours.  Laboratories  are also  subject to  restrictions  on the  labeling and
marketing of tests that have been developed using analyte specific reagents. The
analyte  specific  reagent  regulatory   category  is  relatively  new  and  its
boundaries  are not well defined.  It is unclear  whether any changes to current
reagent regulation would affect the licensing of our tests.

         We believe that our in-house testing and the analyte specific  reagents
we intend to sell to clinical reference laboratories do not require FDA approval
or clearance.  We cannot be sure, however, that the FDA will not assert that our
tests or one or more of our reagents require premarket approval or clearance. In
addition,  we cannot be sure that the FDA would not treat the  licensing  of the
intellectual  property we rely on as labeling  that would subject the reagent to
premarket approval or clearance and other FDA regulation. Moreover, we cannot be
sure that the FDA will not change  its  position  in ways that could  negatively
affect our operations.

         Any diagnostic test kits that we may sell would require FDA approval or
clearance  before they could be  marketed.  There are two review  procedures  by
which a product may  receive  this  approval or  clearance.  Some  products  may
qualify for clearance under a premarket notification  procedure,  referred to as
510(k)  procedure,  in which the  manufacturer  provides  to the FDA a premarket
notification  that it intends to begin marketing the product and demonstrates to
the FDA's satisfaction that the product is substantially equivalent to a legally

                                       14
<PAGE>

marketed product,  which means that the product has the same intended use as, is
as  safe  and  effective  as,  and  does  not  raise  questions  of  safety  and
effectiveness  different  from  those of a  legally  marketed  device.  A 510(k)
submission   for  an  in  vitro   diagnostic   device   generally  must  include
manufacturing and performance data, and in some cases, it must include data from
human clinical  studies.  Marketing may commence when the FDA issues a clearance
letter.

         If a medical device does not qualify for the 510(k) procedure,  the FDA
must approve a premarket  approval  application  ("PMA")  before  marketing  can
begin. PMA applications must demonstrate,  among other matters, that the medical
device is safe and effective. A PMA application is a complex submission, usually
including the results of preclinical and extensive clinical studies.  Before the
FDA  will  approve  a PMA,  the  manufacturer  must  pass an  inspection  of its
compliance with the requirements of the FDA's quality system regulations.

         We believe that our TK1  diagnostic  test kit may require PMA approval.
Once Covance has completed  development  of the serum  diagnostic  ELISA kit, we
intend to apply for pre-market approval.  The PMA process is lengthy and costly,
and we cannot  be sure  that the FDA will  approve  PMAs for our  products  in a
timely fashion, or at all. FDA requests for additional studies during the review
period are not uncommon and can significantly  delay approvals.  Even if we were
able to gain approval of a product for one  indication,  changes to the product,
its indication, or its labeling would be likely to require additional approvals.

         Physicians who order our TK1 cancer  screening test will need to obtain
blood serum from  patients.  This blood serum will have to be  transported  to a
laboratory.  Tissue  transport and storage  containers are also medical  devices
regulated by the FDA,  although  they  generally  have been exempt by regulation
from the FDA's premarket clearance or approval requirement.  We believe that our
blood serum container falls within the exemption, but we cannot be sure that the
FDA will not  assert  that our  container  is not  exempt  and seek to  impose a
premarket clearance or approval requirement.

         Regardless  of  whether a  medical  device  requires  FDA  approval  or
clearance,  a number of other FDA  requirements  apply to its  manufacturer  and
distributors.  Device manufacturers must be registered and their products listed
with the FDA. Certain adverse events and product  malfunctions  must be reported
to the FDA. The FDA also regulates the product labeling,  promotion, and in some
cases, advertising, of medical devices. Manufacturers must comply with the FDA's
quality control system  regulations  that establish  extensive  requirements for
quality  control  and   manufacturing   procedures.   Thus,   manufacturers  and
distributors  must  continue  to spend  time,  money,  and  effort  to  maintain
compliance.   Failure  to  comply  can  lead  to  enforcement  action.  The  FDA
periodically  inspects  facilities to ascertain  compliance with these and other
requirements.

         To the  extent  that  we  perform  cancer  screening  tests  in our own
laboratories in the United States,  we will be subject to federal and state laws
and regulations  regarding the operation of clinical  laboratories.  The federal
Clinical   Laboratory   Improvement  Act  and  laws  of  certain  states  impose
certification requirements for clinical laboratories and establish standards for
quality  assurance and quality  control.  Clinical  laboratories  are subject to
inspection  by  regulators  and  possible  sanctions  for failing to comply with
applicable  requirements.  Sanctions  available  under the  Clinical  Laboratory
Improvement Act include prohibiting a laboratory from running tests, requiring a
laboratory to implement a corrective  plan, and imposing civil money  penalties.
If we fail to meet the requirements of the Clinical  Laboratory  Improvement Act
or other federal or state law, we could be stopped from  providing  services and
incur significant expense, thereby limiting our revenue and profitability.

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<PAGE>

         All of our potential cancer vaccine,  anti-angiogenesis,  cytokine, and
immune-stimulant  products,  as well as our cell  processing  and  manufacturing
activities,  are subject to  comprehensive  regulation  by the FDA in the United
States  and by  comparable  authorities  in  other  countries.  The  process  of
obtaining  FDA  and  other  required  regulatory  approvals,  including  foreign
approvals,  is expensive  and often takes many years and can vary  substantially
based upon the type, complexity,  and novelty of the products involved.  Because
our cancer vaccines and our other products are novel, regulatory agencies do not
have  experience  with them.  This may lengthen the regulatory  review  process,
increase our development  costs, and delay or prevent  commercialization  of our
cancer  vaccines and our other  products.  To our  knowledge,  no cancer vaccine
using dendritic cell  technologies has been approved for marketing in the United
States. Consequently, there is no precedent for the successful commercialization
of our cancer vaccine products.  Our other products differ in many respects from
other  anti-angiogenesis  cytokine and immune-stimulant  products that have gone
through  the FDA  process,  so we do not know  whether  the FDA will  treat  our
products as it has  treated  related  products.  In  addition,  we have had only
limited  experience  in  filing  and  pursuing  applications  necessary  to gain
regulatory  approvals,  which may impede our ability to obtain timely  approvals
from the FDA. We have not yet sought FDA or other  regulatory  approval  for our
cancer vaccine,  anti-angiogenesis,  cytokine, or immune-stimulant  products. We
will not be able to  commercialize  any of our potential  products in the United
States until we obtain FDA approval, and so any delay in obtaining, or inability
to obtain, FDA approval would harm our business.

         If we violate regulatory  requirements at any stage,  whether before or
after  marketing  approval  is  obtained,  we may be  fined,  forced to remove a
product from the market,  or  experience  other adverse  consequences  including
delay, which could materially harm our financial results.  Additionally,  we may
not be able to obtain the labeling  necessary or desirable  for the promotion of
our products.  We may also be required to undertake  post-marketing  trials.  In
addition,  if we or others  identify  side effects  after any of our vaccines or
other products are on the market, or if manufacturing problems occur, regulatory
approval may be withdrawn and the FDA and other regulatory  agencies may require
reformulation of our vaccines,  additional clinical trials,  changes in labeling
of our vaccines, and additional marketing applications.

         An  investigational  new drug  application must become effective before
human clinical trials may commence in the United States. The investigational new
drug  application is  automatically  effective 30 days after receipt by the FDA,
unless before that time the FDA requests an extension to review the  application
or raises  concerns or questions  about the conduct of the trials as outlined in
the application.  In the latter case, the sponsor of the application and the FDA
must  resolve any  outstanding  concerns  before  clinical  trials can  proceed.
However,  the  submission of an  investigational  new drug  application  may not
result in the FDA authorizing us to commence clinical trials in any given case.

         Preclinical   studies   involve   laboratory   evaluation   of  product
characteristics  and animal  studies to assess  the  efficacy  and safety of the
product.  The FDA regulates  preclinical  studies under a series of  regulations
called the Good Laboratory Practices regulations.  If the sponsor violates these
regulations, the FDA, in some cases, may invalidate the studies and require that
the sponsor replicate those studies.

         If testing of a particular  product does not yield successful  results,
we will be unable to  commercialize  that product.  We must demonstrate that our
products are safe and  effective in humans  through  extensive  preclinical  and
clinical testing.  We may experience  numerous unforeseen events during, or as a

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<PAGE>

result of, the testing process that could delay or prevent  commercialization of
our  products,  including  different  or  unexpected  results in later  clinical
trials, risk to participating subjects or patients, undesirable side effects, or
other problems that would preclude  regulatory  approval or limit the commercial
use of the  products if approved.  Moreover,  it may take longer to complete our
clinical trials than we project,  or we may not be able to complete them at all.
Clinical  testing is very expensive and may take many years,  and the outcome is
uncertain.  The data collected from our clinical trials may not be sufficient to
support approval by the FDA of any of our cancer vaccines or other products. The
FDA may not  ultimately  approve any of our product  candidates  for  commercial
sale. Our failure to demonstrate  adequately the safety and efficacy of a cancer
vaccine or any other product would delay or prevent regulatory  approval of that
product,  which could prevent us from  achieving  profitability  in that product
line.

Mexican Regulatory Issues

         During 2001, the Mexican  government  revamped its oversight of medical
clinics subject to its jurisdiction. It sent new health department inspectors to
review the operations and permits of many clinics in Tijuana,  Mexico.  This led
to the closure of several clinics there. Dr. Sanchez' clinic also was inspected.
The  inspectors  determined  that  while  the  clinic  personnel  were  properly
qualified,  they had not submitted all of their protocols for government review.
On February  15,  2001,  one  treatment  room was closed  pending  review of the
protocols.  The clinic  submitted  applications  for licenses for four protocols
(insulin hypoglycemic therapy, chelation, colonic treatments, and dendrytic cell
therapies)  in May 2001.  On May 9, 2001,  the  Instituto  de Servicios de Salud
Publica Del Estado De Baja California (the Mexican health authorities)  reopened
the  treatment  room. As a result of the new policy,  the clinic  decided not to
seek new  patients  until all the  necessary  protocols  had been  approved.  In
addition,  to the  extent  that the  protocols  are deemed  experimental  by the
Mexican  government,  the clinic will not charge patients who participate in the
clinical  studies for the  experimental  portion of the treatments.  The Company
feels  that it was in  compliance  with  all  applicable  regulations  regarding
operation of the clinic prior to the alteration of oversight of medical clinics.
Nevertheless, the Company will continue to work closely with appropriate Mexican
government officials to ensure ongoing compliance with applicable regulations.

         International  sales of our products may also be subject to  additional
extensive  regulation.   Foreign  regulatory  bodies  have  established  varying
regulations  governing  product  standards,  packaging  requirements,   labeling
requirements,   import   restrictions,   tariff  regulations,   duties  and  tax
requirements.  Generally, the extent and complexity of the regulation of medical
devices is increasing  worldwide,  with  regulations in some  countries  already
nearly as extensive as those in the U.S. This trend may  continue,  and the cost
and time  required to obtain  marketing  approval in any given  country thus may
increase.  We cannot assure you that any foreign  approvals will be allowed on a
timely basis, or at all.

Competitive Environment

         The  market  for  alternative  clinics  consists  primarily  of foreign
owner-operated  medical  clinics  that  specialize  in one form of  treatment or
another.  Many of these  clinics  attract  Americans  who cannot get the type of
medical  treatment  they  desire in the United  States.  The  largest  number of
alternative  clinics are in Europe and Mexico,  although  they are found in many
other  countries.  The  majority of the  alternative  treatments  offered at the
Clinica  BioPulso in Mexico are similar to those  offered at many other  clinics
and are well-known in literature discussing alternative medicine.

                                       17
<PAGE>

         We  operate  in a highly  competitive  environment  and focus on highly
competitive areas of product development. Our competitors include, among others,
major pharmaceutical companies and biotechnology companies, including those that
focus on cancer detection and treatments.  Academic  institutions,  governmental
agencies,   and  other  public  and  private  research  organizations  are  also
conducting   research   activities  and  seeking   patent   protection  and  may
commercialize products on their own or through joint ventures.

         Many  existing and potential  competitors  have  substantially  greater
scientific  research and product  development  capabilities,  as well as greater
financial,  marketing,  and  human  resources,  than we do.  In  addition,  many
biotechnology  firms  have  formed   collaborations   with  large,   established
pharmaceutical companies to support research, development, and commercialization
of products that may be competitive with ours.

         Our  competitive  position  also  depends  on our  ability  to  develop
effective  proprietary  products;  obtain the necessary  regulatory approvals as
discussed   above;   implement   production  and  marketing   plans,   including
collaborations  with other companies with greater marketing resources than ours;
obtain patent protection; and secure sufficient capital resources.

         There  are many  companies  developing  cancer  tests  based on  tissue
samples. To our knowledge,  none of these are using an approach which is similar
to our TK1  test.  We  believe  most are using a form of DNA  testing  to detect
proteins or nucleic acids that are produced by various  cancers.  There are also
many companies that are developing cancer vaccines and related  immunotherapies,
including  Dendreon,  Inc., Cell Genesys,  Inc.,  Biomira Inc., ImClone Systems,
Inc.,  and Corixa  Corporation.  Many of these  companies are seeking a specific
antigen  that they can  patent  or  otherwise  protect.  Others  are  developing
specialized  equipment  to  improve  the  procedures.  Most of these  companies,
including us, have proprietary methods for preparing the dendritic cells and the
antigens for  presentation to the patient's  immune system.  Many  biotechnology
companies are also researching angiogenesis inhibitors.

Marketing

         We engage in a variety of marketing efforts,  including  advertising in
magazines,  participation  in trade shows,  and  maintenance  of a web page that
describes  our research and  development  efforts and refers to clinical  trials
that use our  treatments.  We have continuing  dialog with industry  leaders and
specialists,  and we have  participated in radio call-in shows and  discussions.
When  required  regulatory  approvals  are  obtained,  we intend  to market  our
approved products directly or through  co-marketing or licensing  agreements and
strategic alliances with pharmaceutical or biotechnology companies.

Principal suppliers

         Principal  suppliers of equipment and supplies for our clinics  include
Merit  Pharmaceuticals,  Bayer Diagnostics,  and Beckman Coulter, Inc. Equipment
and supplies are provided to us by these companies on an as-ordered basis.

Intellectual property

Our patent and trademark policy

         It is our policy to seek patent  protection in the United States and in
foreign countries. Primarily because of differences among patent laws in various
jurisdictions,  the scope of, and hence the protection  afforded by, any patents
we may  receive  may vary from  jurisdiction  to  jurisdiction  even though they
relate essentially to the same subject matter.

         The patent position of firms in our industry  generally involves highly
complex  legal and other  issues,  resulting  in both an apparent  inconsistency

                                       18
<PAGE>

regarding  the breadth of claims  allowed in United  States  patents and general
uncertainty as to their legal  interpretation and  enforceability.  Accordingly,
there can be no assurance that patent applications owned from time to time by us
or our licensees  will result in patents  being issued or that,  if issued,  the
patents will afford competitive  protection.  Further, there can be no assurance
that products or processes  developed by us or our licensees will not be covered
by third party  patents,  in which case continued  development  and marketing of
those products or processes could require a license under those patents.

         There can be no  assurance  that if a legal  action  were to be brought
against  us on the  basis of any  third  party  patents,  such  action  would be
resolved in our favor.  Such an  unfavorable  result  against us could result in
monetary damages and injunctive relief.  Further,  even a favorable result could
cause expenditure of substantial monetary and other resources in connection with
our defense against any of these actions.

Granted patents and pending  applications

         We have licenses for five patents  (issued and pending)  related to the
cancer screening test, anti-angiogenesis, cancer vaccines, cytokines, and immune
stimulants.  Because U.S. patent  applications  are maintained in secrecy by the
U.S. Patent and Trademark Office until patents issue and because  publication of
discoveries  in the  scientific  or patent  literature  often lags behind actual
discoveries,  we cannot be certain that the parties  from whom we have  licensed
inventions  were the first creators of the  inventions  that we have licensed or
that  such  creators  were  the  first to file  patent  applications  for  those
inventions.

         In December  2000,  we entered into an  Exclusive  License and Bailment
Agreement  with BYU which granted us exclusive,  worldwide  right and license to
develop, manufacture, sell, and otherwise transfer the in vitro serum diagnostic
TK and TK1 tests and  related  products.  Our  rights  are  subject to an option
agreement  between  BYU and a  private  laboratory  which  grants  rights in the
countries of Japan, China, Taiwan, Korea, Malaysia, Indonesia,  Philippines, and
Singapore,  and to BYU's right to use the  licensed  technology  for  continuing
research and non-commercial academic uses. Under this license agreement, we paid
BYU an initial license issue fee and must pay additional  royalty payments based
upon adjusted gross sales of the licensed products,  improvements, or processes.
In  addition,  we are  obligated  to pay  certain  minimum  royalty  payments in
calendar  year 2003 and each  year  thereafter.  This  agreement  terminates  in
December 2005,  subject to our right to extend the agreement for additional five
year periods by giving written notice to BYU. BYU has the right to terminate the
agreement  in the event of any uncured  breach by us,  including  the failure to
meet certain  performance  milestones or our financial  inability to perform our
obligations under the agreement.

         Under this  agreement,  we must meet certain  performance  requirements
including:  developing a serum ELISA  diagnostic  kit for the  detection of TK-1
isoenzyme  by December  31,  2001;  completing  clinical  trials to validate the
clinical  usefulness  of the in vitro  serum  diagnostic  ELISA test by June 30,
2002;  and  submitting  applications  for FDA  approval  for the in vitro  serum
diagnostic ELISA test by December 31, 2002, and thereafter  vigorously  pursuing
approval  of the  application.  If we  believe  we will be unable  to  develop a
functional test, we may notify BYU and terminate the agreement.

         In August 2000,  we entered into a  sublicensing  agreement  with Aidan
which granted us an exclusive,  worldwide sublicense (excepting experimental use
in the United  States)  to use and  exploit  certain  products  and  procedures,
including MPGC, PGM, dendritic cell therapy,  cytokines,  and different forms of

                                       19
<PAGE>

cancer  antigens.  This license does not include the rights  related to the oral
preparations  of MPGC and PGM.  Under  this  sublicense  agreement,  we must pay
certain  license  fees to Aidan.  In  addition,  we  granted  Aidan an option to
purchase  1,500,000  shares of our common  stock,  subject  to vesting  upon the
occurrence of certain conditions.  This sublicensing  agreement will expire upon
the  last to  expire  of any  patents  obtained  with  respect  to the  licensed
products,  subject to Aidan's right to terminate the  sublicensing  agreement in
the event of any uncured breach of the agreement or our insolvency.

         Trade secrets

         While we generally will pursue a policy of seeking patent protection to
preserve  proprietary  technology as  appropriate,  we also have relied and will
continue  to rely on trade  secrets,  unpatented  proprietary  information,  and
continuing  technological  innovation  to develop and maintain  our  competitive
position. There can be no assurance, however, that others will not independently
develop  substantially  equivalent  proprietary  information  and  technology or
otherwise  gain  access  to  such  or  equivalent  trade  secrets,   proprietary
information,  or  technology or that we can  meaningfully  protect its rights to
such secrets, proprietary information, and technology.

         The majority of the alternative  treatments offered at Clinica BioPulso
are  comparable  to those  offered at many other  clinics and are  well-known in
alternative treatment  literature.  We have developed some proprietary protocols
that  may be  beneficial  to  patients,  but  these  have  limited  value in the
marketplace.

Environmental  law costs and  effects

         Compliance  with  currently   existing   federal,   state,   and  local
regulations  pertaining to the discharge of materials  into the  environment  or
otherwise  relating to the protection of the  environment is not  anticipated to
have an impact on our capital expenditures, earning, and competitive position.

Employees

         As of July 31, 2001, we had seven full-time  administrative  employees.
We consider our relations with these  administrative  employees to be good. None
of  the  our  current  administrative  employees  is  covered  by  a  collective
bargaining  agreement.  Clinica  BioPulso has  approximately  50  employees.  We
consider our relations with the clinic's employees to be good. To our knowledge,
these employees are not covered by a collective bargaining agreement.

Consultants

         Liviakis Financial Communications, Inc.

         On October 13, 2000,  we entered into a one year  consulting  agreement
with Liviakis Financial Communications, Inc. We canceled this agreement in March
2001. In exchange for  1,050,000  shares of  restricted  common stock,  Liviakis
Financial  agreed to  consult  and  assist  us in  developing  and  implementing
appropriate  plans and means for  presenting us to the  financial  community and
creating  a  foundation  for  subsequent  financial  public  relations  efforts;
introduce  us  to  the  financial  community;  consult  with  and  assist  us in
communicating  appropriate information to the financial community;  advise us as
to relations with stockholders,  brokers,  dealers,  analysts,  other investment
professionals, and with financial public relations in general; perform functions
associated  with  stockholder  and public  relations,  including  responding  to
telephone   inquiries  and  preparing  press  releases  with  our   involvement;
disseminate  information  to the public  pursuant to our approval;  assist us in
meetings with  investment  professionals;  and otherwise  advise us as to public
relations and financial relations.

                                       20
<PAGE>

         In  addition  to  the  1,050,000  restricted  common  shares,  Liviakis
Financial also was to receive a finder's fee for any introduction to a lender or
equity investor that led to us obtaining additional funding.  During the term of
the agreement, we paid $100,000.

Roth Capital Partners, Inc.

         On December 20, 2000,  we entered into a Private  Placement  Engagement
Agreement  with Roth Capital  Partners,  Inc., to act as an exclusive  financial
advisor and placement  agent for private  placements of our securities on a best
efforts  basis for six months.  Under the  agreement,  Roth  received a total of
$270,000 in connection with a private placement completed during the term of the
agreement. The agreement was terminated in February 2001.

Environmental Law Costs and Effects

         Compliance with federal,  state and local regulations pertaining to the
discharge  of  materials  into the  environment  or  otherwise  relating  to the
protection  of the  environment  is not  anticipated  to have an  impact  on the
Company's capital expenditures, earning and competitive position.



Reports to Security Holders

         The Company files annual and quarterly  reports with the Securities and
Exchange Commission ("SEC"). The public may read and copy any materials filed by
the Company with the SEC at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. The public may obtain information on the operation
of the Public Reference Room by calling the SEC at  1-800-SEC-0330.  The Company
is an electronic  filer and the SEC maintains an Internet site that will contain
reports  and other  information  regarding  the  Company  which may be viewed at
http://www.sec.gov.

Item 2:  Description of Property

Property & Facilities

         The  Company  currently  leases  5,514  square  feet of  space in South
Jordan, Utah for its administrative operations at a cost of $8,730.50 per month,
which is  calculated  at the lease rate of $19 per square foot.  The term of the
lease is through the year 2003.

         The Company  manages a 12,000  square  foot  clinic in Tijuana,  Mexico
owned by Dr.  Jesus Omar  Sanchez  Tiznado.  The Company owns medical and office
equipment valued at $850,000 which is located at the clinic in Tijuana, Mexico.

                                       21
<PAGE>

Item 3.  Legal Proceedings.

         The Company is not a party to any pending material legal proceeding. To
the knowledge of management,  no federal, state, or local governmental agency is
presently  contemplating any proceeding against the Company. To the knowledge of
the  management,  no  director,  officer or affiliate of the Company or owner of
record or beneficiary  of more than 5% of the Company's  common stock is a party
adverse to the Company or has a material  interest adverse to the Company in any
proceeding.

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

         None.

PART II

Item 5.  Market for Common Equity and Other Shareholder Matters.

         The Company's  common stock is listed on the Over the Counter  Bulletin
Board  ("OTCBB"),  under the symbol "BIOP." As of July 31, 2001, the Company had
265 shareholders  holding  10,958,246  shares of common stock. Of the issued and
outstanding common stock 2,031,486 are free trading,  the balance are restricted
sock as that term is used in rule 144. The Company has never declared a dividend
on its Common Stock.

         The following quotations, as provided by the National Quotation Bureau,
LLC.,  represent  prices  between  dealers  and do not  include  retail  markup,
markdown or commission.  In addition,  these  quotations do not represent actual
transactions.

                                             High                 Low
                                             ----                 ---
Fiscal Year Ended
July 31, 2000

First Quarter
   (Aug 1-Oct 31)                            $  7.88              $4.00
Second Quarter
   (Nov 1-Jan 31)                            $   .00              $4.50
Third Quarter
   (Feb 1-Apr 30)                            $  6.00              $3.00
Fourth Quarter
   (May 1-July 31)                           $  3.75              $2.00

Fiscal Year Ended
July 31, 2001

First Quarter
   (Aug 1-Oct 31)                            $  4.00              $2.75
Second Quarter
   (Nov. 1-Jan  31)                          $ 11.50              $3.75
Third Quarter
   (Feb 1-Apr 30)                            $  8.63              $0.26
Fourth Quarter
   (May 1-July 31)                           $  0.58              $0.34

                                       22
<PAGE>


         On  November  19,  1998,  a 400 to 1 reverse  split  took  place on the
outstanding shares of the Company.

         The  Company  has not  paid,  nor  declared,  any  dividends  since its
inception and does not intend to declare any such  dividends in the  foreseeable
future. The Company's ability to pay dividend is subject to limitations  imposed
by Nevada law.  Under Nevada law,  dividends  may be paid to the extent that the
corporation's  assets exceed it  liabilities  and it is able to pay its debts as
they become due in the usual course of business.

         The present  intention of management is to utilize all available  funds
for the development of the Company's business.

 Description of Securities.

         The  Company  is  presently  authorized  to issue one  hundred  and ten
million  (110,000,000)  shares,  which shall be divided into one hundred million
(100,000,000)  of Common  Stock  having a par value of $.001  each;  two million
(2,000,000)  shares of Class A Preferred Stock having a par value of $.001;  two
million  (2,000,000)  shares of Class B  Preferred  Stock  having a par value of
$.001;  two million  (2,000,000)  shares of Class C Preferred Stock having a par
value of $.001: two million (2,000,000) shares of Class D Preferred Stock having
a par value of $.001; two million (2,000,000) shares of Class E Preferred Stock.

                                       23
<PAGE>

Common Stock

         The  holders  of  common  stock are  entitled  to equal  dividends  and
distributions,  per share,  with  respect to the common  stock  when,  as and if
declared by the Board of Directors  from funds legally  available  therefor.  No
holder of any shares of common stock has a preemptive right to subscribe for any
securities of the Company.  Upon  liquidation,  dissolution or winding up of the
Company, and after payment of creditors and preferred stockholders,  if any, the
assets will be divided pro-rata on a share-for-share  basis among the holders of
the shares of common stock. All shares of common stock now outstanding are fully
paid, validly issued and non-assessable.  Each share of common stock is entitled
to one vote with  respect to the  election of any  director or any other  matter
upon which  shareholders  are  required  or  permitted  to vote.  Holders of the
Company's common stock do not have cumulative voting rights, so that the holders
of more than 50% of the combined shared voting for the election of directors may
elect all of the  directors,  if they choose to do so and,  in that  event,  the
holder of the remaining shares will not be able to elect members to the Board of
Directors.

Preferred Stock

         The  rights  of our  Series  A, C, D,  and E  preferred  stock  will be
determined in the future by the Board of Directors.  At the present time,  there
are no issued and outstanding  shares of Series A, Series C, Series D, or Series
E preferred stock.

         There  are  3,000  shares  of  Series  B  preferred  stock  issued  and
outstanding.  The Series B preferred stock has a liquidation  value per share of
$1,000.  The  holders  of Series B  preferred  stock  are  entitled  to  receive
dividends  out of  any  assets  legally  available  therefor  prior  to,  and in
preference  to, any  declaration or payment of any dividend on our common stock,
at a rate of seven  percent  per annum of the amount of the  liquidation  value,
which is payable upon  conversion  based upon a 360  calendar  day year.  At our
discretion,  dividends  will be paid in cash or in shares of common  stock which
have been registered with the SEC. The holders of our Series B preferred  stock,
at any time after issuance, have the right to convert any whole preferred shares
into that  number of fully paid  nonassessable  shares of common  stock which is
determined  per share of preferred  stock by dividing  $1,000 by the  conversion
price.  The  conversion  price is the lesser of $9.75 or eighty percent (80%) of
the average of the three  lowest  closing bid prices of the common  stock during
the 20 day tradings  immediately prior to the conversion date. For so long as we
have not received a notice of conversion for the shares, we may redeem shares of
our Series B preferred  stock by serving a notice of redemption.  The redemption
price  equals  130% of the  liquidation  value,  plus  all  accrued  but  unpaid
dividends on such shares.  If we deliver  notice of  redemption  pursuant to the
foregoing sentence, the holders will retain their conversion rights with respect
to up to a maximum of 100% of the number of shares subject to the redemption.

Transfer Agent

         The Company has appointed Interwest Transfer Company,  1981 E. 4800 S.,
Salt  Lake  City,  Utah  84117,  as the  transfer  agent and  registrar  for the
Company's securities.

                                       24
<PAGE>

Item 6.  Management's Discussion and Analysis

         The  following   discussion   contains  comments  about  the  financial
condition  of BioPulse  International,  Inc.  for the Fiscal Year Ended July 31,
2001.

Overview

         Since  inception in January 1999, we have been refining our  operations
and developing our market. We have advertised in periodicals targeting potential
patients,  rented booths at trade shows, and sought to develop a good reputation
through  positive  results  and  satisfied  patients.  We  have  introduced  new
treatments for our patients and expanded our market.

         From January 1999 through  June 2001,  we managed  Clinica  BioPulso in
Tijuana,  Mexico,  through a management  contract  with a physician  licensed in
Mexico. We were entitled to all revenues and are responsible for all expenses of
the clinic.  More than 90% of our  operating  revenues  and expenses and profits
were  generated  by the  Mexican  operations  in all periods  discussed  in this
prospectus.  In June 2001, we changed our relationship  with Clinica BioPulso so
that we currently are leasing  equipment and licensing  technology to the clinic
rather than directly managing it.

         During 2001, the Mexican  government  revamped its oversight of medical
clinics subject to its jurisdiction. It sent new health department inspectors to
review the operations and permits of many clinics in Tijuana,  Mexico.  This led
to the closure of several clinics there. Dr. Sanchez' clinic also was inspected.
The  inspectors  determined  that  while  the  clinic  personnel  were  properly
qualified,  they had not submitted all of their protocols for government review.
On February  15,  2001,  one  treatment  room was closed  pending  review of the
protocols.  The clinic  submitted  applications  for licenses for four protocols
(insulin hypoglycemic therapy, chelation, colonic treatments, and dendrytic cell
therapies)  in May 2001.  On May 9, 2001,  the  Instituto  de Servicios de Salud
Publica Del Estado De Baja California (the Mexican health authorities)  reopened
the  treatment  room. As a result of the new policy,  the clinic  decided not to
seek new  patients  until all the  necessary  protocols  had been  approved.  In
addition,  to the  extent  that the  protocols  are deemed  experimental  by the
Mexican  government,  the clinic will not charge patients who participate in the
clinical studies for the experimental portion of the treatments.

         Prior acquiring TK-1 technology in December, 2000, we have not incurred
material research and development  expenses outside of the treatment of patients
at the clinic in Tijuana,  Mexico.  We conducted  research and development using
data from records of the  patients  treated at the clinic in Mexico to determine
the  effectiveness  of the  treatments.  Additionally,  we are working  with the
doctors who are  modifying  the  treatments  based on the data received from the
treatment of patients. This limited research and development has been integrated
into the patient care given to paying patients, and we have not had any material
research and development  costs to date that were  distinguishable  from patient
care.  All costs of patient care have been  expensed in the period in which they
were incurred.  We paid $100,000 for the TK-1  technology that is not refundable
should we not be able to develop a marketable  product.  This  $100,000 has been
expenses as research and development expenses plus the costs incurred to develop
TK-1 into a marketable product.

                                       25
<PAGE>

         During 2000,  we had an  outpatient  clinic at our office in Utah.  The
revenues and expenses generated by this clinic were not material, and the clinic
no longer has any ongoing patient care operations.

         Prior to June 2000,  we had an  association  with a German  clinic that
began in November 1999.  During the year ended July 31, 2000, we sold equipment,
provided training for the clinic staff, provided general business oversight, and
sent  patients to the  clinic.  During the year ended July 31,  2000,  we earned
$395,000 in  revenues in  connection  with the sale of  equipment  to the German
clinic and training of its  personnel.  However,  several key staff members left
the clinic in spring 2000, and we have not sent any patients to the clinic since
that time.  We have not  determined  when,  if ever,  we will  resume  referring
patients to the German clinic.

Revenues

         Revenues of $2,136,674  from clinic  operations for the year ended July
31, 2001,  were down  $970,000  over the year ended July 31,  2002.  The primary
reason for the  decrease  was the  regulatory  problems  the clinic had with the
Mexican clinic discussed above.  Furthermore,  we entered into the contract with
the German clinic, in fiscal year 2000, which generated $395,000 in revenues.

         Prior to February 2001,  revenues were up  substantially  over the same
period of the prior year. Due to a change in the  regulatory  climate in Mexico,
licenses  that were  previously  considered  adequate for the  operations of the
clinic in Mexico  were no  longer  considered  adequate  by the  Mexican  health
officials.  The IHT  treatment  room was closed in February 2001 and reopened in
May 2001.  The  clinic  was not able to offer  some of its  therapies  until new
licenses  were  acquired,  and  we  were  therefore  required  to  curtail  some
treatments  at the clinic  pending the issuance of the necessary  licenses.  The
clinic is expected  to receive  these new  licenses  by the end of in  November,
2001.


Costs and Expenses

         During fiscal year 2000, Clinica BioPulso moved its operations from the
Grand Hotel to a larger and more functional facility. Dr. Sanchez entered into a
lease and Biopulse advanced the funds to make building  improvements to the area
to be occupied by the clinic  offices and treatment  rooms.  We received  credit
against its future rent  obligations  for the funds  advanced  for the  building
improvements,  and  the  amounts  that  will be  credited  against  future  rent
obligations are capitalized by us as prepaid rent. Rent expense increased during
fiscal year 2001 as a result of moving into the new facilities.

         During  year  ended  July  31,  2001  we  acquired  additional  medical
equipment  to enhance  our  ability to treat  patients.  In addition we acquired
licenses to new technology.  These new acquisitions have increased  depreciation
and amortization expense.

                                       26
<PAGE>

         We have added new  personnel  at  Clinica  BioPulso  and  significantly
increased  the pay level of clinic  employees  to  attract  and  retain the best
personnel at the clinic.  Salaries for fiscal year 2001 were twice that of those
paid in fiscal year 2000

         General and  administrative  costs  increased  $5,262,799  for the year
ended July 31,  2001,  compared  to the year ended July 31,  2000.  The  primary
factor for this was an  expense  of  $3,186,600  for stock  issued for  services
during the year ended July 31, 2001. No cash was used to pay for these services.
In addition, the Company acquired rights to TK-1 technologies.  We had increased
costs associated with exploring  additional  business  opportunities  and due to
increased medical and clinic  operations,  salaries,  clinic and  administrative
office rent and travel during the year ended July 31, 2001.

Liquidity and Capital Resources

         As of July 31,  2001,  the Company had current  assets of $672,959  and
current  liabilities of $854,029.  Clinic  operations had been  generating  near
breakeven cash flow through January 2001 but due to the change in the regulatory
climate in Mexico and  resulting  decrease in the number of  patients  that have
been treated at the clinic,  the clinic has  generated  net  negative  cash flow
since January  2001.  We have used most of our cash  resources as of October 31,
2001 and have  laid off most of our  administrative  personnel  and the  Mexican
clinic has laid off most of it personnel until operations  resume.  The officers
have  continued to work and their  salaries  have accrued but have not been paid
during  September  and October.  As of October 31, 2001,  we have  approximately
$250,000 in cash in escrow with Brigham Young  University  and expect to be able
to access  $150,000  of that.  That would  leave more than enough to pay for the
expected  costs to  complete  development  of the TK-1  diagnostic  test.  As of
October 1, 2001 we are in default on our loan of $500,000  with Hunts Drive Ltd.
That loan was secured by the  2,093,400  shares of stock owned by Loran  Swensen
and Johathan  Neville,  Officers and  Directors of the company.  We expect to be
able to reopen the  clinic in Tijuana  under a new  agreement  with the  doctors
where they would use our  equipment and facility and would pay us a flat fee for
that and consulting services

         We believe that cash flow from the  operations of the Clinica  BioPulso
in Tijuana, Mexico, will be positive in the foreseeable future.


Seasonal Aspects

         We have experienced  lower patient occupancy during late fall and early
winter months than during other times of the year.  Although  there may be other
reasons  for this,  our  treatments  are  elective  treatments,  and  typically,
patients  may  choose  to not seek  these  treatments  during  holiday  seasons,
preferring instead to seek treatment at other times of the year.

Known Trends

         There are no known  trends,  events or  uncertainties  that have had or
that are  reasonable  expected  to have a  material  impact  on the net sales or
revenues or income from continuing operations.

                                       27
<PAGE>

Material Commitments for Capital Expenditures and Capital Resources

         There are no material  commitments for capital  expenditures.  BioPulse
has made all of the capital  expenditures  necessary  to carry on its  business.
BioPulse is  exploring  raising  additional  equity to finance  expansion  at an
greater pace than can be financed from current operations.

Item 7.  Financial Statements



                                    PART III



Item 9.  Directors, Executive Officers, Promoters and Control  Persons.

The  following  table sets forth the name,  age, and position of each  executive
officer and director as of July 31, 2001.

Name              Age              Position           Director or Officer Since
----              ---              --------           -------------------------
Reid Jilek, Ph.D. 49               CEO &              January 2001
                                   Director

Loran Swensen     43               President &        January 1999
                                   Director

John M. Allen     55               Director           February 2001

Michael L. Jones  48               Chief Financial
                                   Officer,Treasurer  January 2000

Anthony Jessop    60               Director           January 2001

Jonathan Neville  46               Director           January 1999

         Our directors hold office until the next annual meeting of shareholders
or until their successors are elected or appointed.  Thereafter,  at each annual
meeting of  shareholders,  the  successors to the  directors  will be elected to
serve from the time of election and qualification  until the next annual meeting
following election. Officers serve at the will of the board of directors.

         The following summary sets forth biographical  information  relating to
our officers and directors:

                                       28
<PAGE>

         Reid Jilek,  Ph.D., CEO, Director.  Dr. Jilek has been a director since
January 2001, and the CEO since February 2001.  From 1994 to 2001, Dr. Jilek has
served as a Senior Partner at Asia Pacific  Alliance  Company.  At Asia Pacific,
Dr. Jilek has been responsible for setting up preclinical and clinical  research
programs for North American  pharmaceutical and biotechnology companies in Asia.
He has also been involved in forming alliances,  joint ventures,  and partnering
arrangements  between  U.S.  and Asian  companies.  Dr. Jilek has over ten years
experience in the biomedical  and  pharmaceutical  industry.  In 1974, Dr. Jilek
received a B.S. in microbiology from Southern Illinois  University.  In 1975, he
received an M.S. in zoology from the same university. In 1977, he earned an M.S.
in physiology  from the University of Illinois.  In 1980, he received a Ph.D. in
pathology from Ohio State University. In 1981, he received an M.S. in biomedical
engineering  from the  University  of Virginia.  In 1986,  he received a B.S. in
electrical engineering from McGill University in Montreal, Canada.

         Loran   Swensen,   President,   Director.   Mr.  Swensen  has  been  an
entrepreneur  since 1980  ,when he  started  Alternate  Energy  Corp.,  where he
developed high insulating  security  windows.  Mr. Swensen sold Alternate Energy
Corp. in 1981 and developed  Home Based  Business  News.  In 1984,  Mr.  Swensen
co-founded  three  companies:  Enhanced  Simulation,  where he co-developed  and
patented   a   rotating   motion   simulator   for   the   amusement   industry;
Multi-Dimensional  Studios where he co-developed  the MDS 3D EFX Thunder Theater
and 3D movies; and Advanced Technology Group, where he co-developed the Realeyes
3D box.  In  1985,  Mr.  Swensen  founded  Swensen  Research  Company,  where he
developed  Brain   Neuro-Simulators  which  were  sold  throughout  the  medical
industry. In 1998, Mr. Swensen co-founded BPI with Mr. Neville.

         John M. Allen,  Director.  From 1999 to 2001,  Mr.  Allen was the Chief
Financial Officer for Oversea Systems,  LLC, a provider of hardware and software
and Internet  solutions for capturing and linking data and images. Mr. Allen was
responsible for finance functions in the United States, Europe, and the Far East
and for analyzing  and  assessing  Oversea  Systems'  growth  potential in those
markets.  He also  oversaw  the  management  of the its U.S.  facilities,  human
resources, purchasing, and materials. From 1987 to 1999, Mr. Allen served as the
controller for XOMA Corporation, a biopharmaceutical  developer and manufacturer
of therapeutic  drugs. At XOMA, Mr. Allen oversaw financial  planning,  analysis
and reporting,  cost accounting,  budgeting,  forecasting,  project costing, and
accounting operations. Mr. Allen has also worked as an Audit Senior, a certified
public  accountant  at  Deloitte  &  Touche,  and  holds an MBA in  finance  and
accounting  from  University of  California,  Berkeley.  He became a director in
February 2001.

         Michael L. Jones,  Chief Financial Officer,  Treasurer.  Mr. Jones is a
graduate  of Brigham  Young  University  in  Business  Management  and  attended
Graduate School at California  State  University,  Northridge in accounting.  He
worked in public  accounting  for over 15 years  and was vice  president  of the
accounting  firm of Tanner + Co. in Salt Lake City,  Utah. He served three terms
as chairman of the Utah Association of CPAs Taxation Committee. He was listed in
the May 1989 issue of Money Magazine as one of America's Best Tax Practitioners.
From 1986 to 1991, Mr. Jones served as Treasurer of the Utah  Republican  Party.
Mr. Jones has also worked as a management consultant and computer consultant. He
joined the Company in January 2000.

                                       29
<PAGE>

         Anthony  Jessop,  Director.  Mr. Jessop  founded  Jessop  International
Group, Ltd., and served as its president from 1991 to 2000. Jessop International
acts as a financial advisor with particular  emphasis in corporate financing and
investor relations.  From 1975-1991,  Mr. Jessop worked for a number of New York
Stock  Exchange firms  including  Hayden Stone,  Delafield and  Delafield,  E.F.
Hutton,  John Muir,  Bankers Trust,  Rooney Pace, Grady Hatch, and First Hanover
Securities.  His primary responsibility was institutional sales. Mr. Jessop is a
graduate of the University of New Brunswick. He joined BioPulse in January 2001.

         Jonathan Neville,  Director. Mr. Neville is a graduate of Brigham Young
University where he earned a B.S. in Agricultural  Economics in 1978, an M.S. in
Agribusiness and a J.D. in 1981.  After graduating from law school,  Mr. Neville
clerked for H. Vern Payne,  Chief Justice of the New Mexico  Supreme  Court.  He
then spent  five years in the U.S.  Air Force as a Judge  Advocate  General.  In
1986,  Mr.  Neville  became  General  Counsel for Genesis  Seed  Corporation,  a
national turf seed producer and  distributor.  In 1991, Mr.  Neville  co-founded
Tempus  Entertainment,  Inc.  After  selling his interest in Tempus in 1993,  he
co-founded  Multi-Dimensional  Studios,  a producer of 3D computer animation and
videos.  He has  advised  a  variety  of other  startups  and  small  companies,
including Advanced  Technologies  Group, Inc. Mr. Neville co-founded BPI in 1998
with Mr. Swensen and Mr. Morrow. Since 1980, he has written in 30 volumes of the
Legalines series for Harcourt Brace Jovanovich.

                Compensation of Directors and Executive Officers

                           Summary Compensation Table


Involvement in Legal Proceedings

         To the knowledge of management,  during the past five years, no present
or former director,  executive  officer or person nominated to become a director
or an executive officer of the Company:

         (1) filed a petition  under the  federal  bankruptcy  laws or any state
insolvency law, nor had a receiver, fiscal agent or similar officer appointed by
a court for the business or property of such person, or any partnership in which
he was a general  partner at or within two years before the time of such filing,
or any corporation or business  association of which he was an executive officer
at or within two years before the time of such filing;

         (2) was  convicted  in a  criminal  proceeding  or named  subject  of a
pending  criminal  proceeding  (excluding  traffic  violations  or  other  minor
offenses);

         (3) was the subject of any order,  judgment or decree, not subsequently
reversed,  suspended  or  vacated,  of  any  court  of  competent  jurisdiction,
permanently  or  temporarily  enjoining  him  from or  otherwise  limiting,  the
following activities;

                  (i)   acting  as a  futures  commission  merchant, introducing
broker,  commodity  trading  advisor,  commodity  pool  operator,  floor broker,
leverage transaction merchant,  associated person of any of the foregoing, or as

                                       30
<PAGE>

an investment  advisor,  underwriter,  broker or dealer in securities,  or as an
affiliate person, director or employee of any investment company, or engaging in
or continuing any conduct or practice in connection with such activity;

                  (ii)  engaging in any type of business practice; or

                  (iii) engaging in any activity in connection with the purchase
or sale of any  security or  commodity or in  connection  with any  violation of
federal or state securities laws or federal commodities laws;

         (4) was the subject of any order, judgment, or decree, not subsequently
reversed,  suspended,  or vacated,  of any federal or state  authority  barring,
suspending, or otherwise limiting for more than 60 days the right of such person
to engage in any activity  described  above under this Item, or to be associated
with persons engaged in any such activity;

         (5) was found by a court of competent jurisdiction in a civil action or
by the Securities and Exchange  Commission to have violated any federal or state
securities  law,  and the  judgment  in such  civil  action  or  finding  by the
Securities  and  Exchange   Commission  has  not  been  subsequently   reversed,
suspended, or vacated

         (6) was found by a court of competent jurisdiction in a civil action or
by the  Commodity  Futures  Trading  Commission  to have  violated  any  federal
commodities  law,  and the  judgment  in such  civil  action or  finding  by the
Commodity  Futures  Trading  Commission  has  not  been  subsequently  reversed,
suspended or vacated.

Item 10. Executive Compensation.

         The following chart sets forth the planned compensation payable to each
Officer  and  Director of the  Company  from the Company  during the next twelve
months.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
                                                                       Long Term Compensation
                           Annual Compensation                         Awards         Payouts
Name and Principal                                                     Restricted
Position                                      Bonus   Other Annual     Stock Options/    LTIP          All Other
                           Year     Salary      $     Compensation     Awards SARs                     Payout Compensation
                           ----     ------      -     ------------     -----------       ----          -------------------
<S>                        <C>      <C>         <C>       <C>              <C>              <C>            <C>
Reid Jilek                 2001     76,000     -0-       -0-              -0-              -0-            -0-
CEO

Jonathan Neville           2000     116,500    -0-       -0-              -0-              -0-            -0-
Director

Jan Morse                  2000     44,000     -0-       -0-              -0-              -0-            -0-
Secretary

Loren Swensen              2000     116,500    -0-       -0-              -0-              -0-            -0-
President

Michael L. Jones           2000     57,000     -0-       -0-              -0-              -0-            -0-
Treasurer, CFO
</TABLE>


                                       31
<PAGE>

         No other  compensation  has been paid  directly or accrued to any other
officer or  director  of the  Company  to date.  The  Company  has no policy for
compensating its directors for attendance at Board of Directors  meetings or for
other services as directors.

         Compensation  of officers and  directors is determined by the Company's
Board of Directors and is not subject to shareholder  approval.  The Company has
no agreement at this time, with any officer, director or key employee, regarding
employment with the Company or compensation for services.

         The Company has no retirement,  pension, or benefit plan at the present
time,  however,  the  Board  of  Directors  may  adopt  plans  as it deems to be
reasonable under the circumstances.

Employment  Contracts  and  Termination  of  Employment  and  Change in  Control
Arrangement

         The  Company  has  no  employment  agreements  with  its  employees  or
executive  officers.  No executive  officer has received in the last three years
any amounts in connection with an executive officer's  resignation,  retirement,
or other  termination.  No  executive  officer  received any amounts in the last
three years in connection with a change in control of the Company of a Change in
the executive officer's responsibilities after a change in control.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         The following  table sets forth the name and the number of Common Stock
of the  Company,  owned of record or  beneficially,  by each person who owned of
record,  or was known by the  Company to own  beneficially,  more than 5% of the
Company's  Common  Stock  ("Principal  Shareholders"),  and the name  and  share
holding of each officer and director, and all officers and directors as a group:

<TABLE>
<CAPTION>

Title of          Name and Address of              Amount and Nature of
Class             Beneficial Owner (1)             Beneficial Ownership         Percentage of Class
-----             --------------------             --------------------         -------------------
<S>               <C>                                  <C>                        <C>
Common            Stephen R. Fey (2)                     336,500                   3.07%.
                  Ivy Lane Row
                  Provo, UT 84604

Common            F. Briton McConkie (2)                 336,500                   3.07%
                  4014 Splendor Way
                  Salt Lake City, UT 84124

Common            Loran Swensen(3)                     1,004,200                   9.16%
                  10070 Chattle Cir.
                  S. Jordan, UT 84095

Common            Jonathan Neville (3)                 1,089,200                   9.94%
                  1089 Ridgetop Corp. Drive
                  S. Jordan, UT 84095

Common            Robert Morrow (3)                      317,600                   2.90%
                  6814 E. 300 N
                  Huntsville, UT 84317

                                       32
<PAGE>

Common            Kauser Partners, LTD                 2,542,954                  23.21%
                  570 Taxter Road, Suite 570
                  Elmsford, New York 10523

Common            John Liviakis                          841,500                   7.68%
                  495 Miller Ave, Third Floor
                  Mill Valley, CA 94941

Common            Officers, Directors and              3,065,000                  27.97%
                  Nominees as a Group:
                  (5 people)

                                    Total:             6,449,554                  58.86%
</TABLE>


(1) The term  "beneficial  owner"  refers to both the power of  investment  (the
right  to buy  and  sell)  and  rights  of  ownership  (the  right  to  received
distributions from the company and proceeds from sales of the shares).  Inasmuch
as these  rights or shares may be held by more than one person,  each person who
has a  beneficial  ownership  interest  in share is deemed to be the  beneficial
owner of all the shares. Therefore, the chart indicates that several persons may
be deemed the beneficial owners of the same shares because there is shared power
or investment or share rights of ownership.

(2) Officers of the Company

(3) Directors of the Company

Change in Control

         To the knowledge of the management,  there are no present  arrangements
or pledges of the Company's securities that may result in a change in control of
the Company.


Item 12. Certain Relationships and Related Transactions.

         The  Company  is  not  expected  to  have  significant   dealings  with
affiliates. However, if there are such dealings the parties will attempt to deal
on terms competitive in the market and on the same terms that either party would
deal with a third person.


Recent Sales of Unregistered Securities.

Fiscal Year 2001

         On August 3, 2000,  we granted an option to  purchase  up to  1,500,000
restricted common shares to Aidan, Incorporated. This option was issued pursuant
to an exemption for  registration  under Section 4(2) of the Securities Act. The
exercise price of the options is $2.75. The options expire on August 3, 2010.

                                       33
<PAGE>

         Pursuant to the terms of a sublicensing  agreement between the parties,
the option vests pursuant to the accomplishment by Aidan of certain  activities.
As of the date of this  prospectus,  Aidan's  option  had  vested up to  900,000
shares.  This option was not offered for sale in any public  offering or as part
of a public distribution.

         On August 18, 2000,  we issued 60,000  restricted  common shares to Rob
Reeder  in  exchange  for  medical  equipment  for  Clinica  BioPulso  valued at
approximately  $60,000.  The  restricted  shares were not publicly  offered,  or
offered as part of a public distribution.  The shares were issued pursuant to an
exemption from registration under Section 4(2) of the Securities Act.

         On August 18, 2000, we issued 6,000 restricted  common shares to Robert
Perez, a  sophisticated  investor,  pursuant to an exemption  from  registration
under Section 4(2) of the Securities Act. These shares were not offered for sale
to the  public  or as part of a public  distribution.  We  received  $18,000  in
connection with the sale of the shares.

         On August 18, 2000, we issued 7,500  restricted  common shares to Perez
Makasian  Williams,  a  sophisticated  investor,  pursuant to an exemption  from
registration  under Section 4(2) of the Securities  Act. We received  $22,500 in
connection  with the sale of the shares.  These shares were not offered for sale
to the public or as part of a public distribution.

         On August 18, 2000, we issued 2,500 restricted  common shares to Robert
Williams, a sophisticated  investor,  pursuant to an exemption from registration
under Section 4(2) of the Securities  Act. We received $7,500 in connection with
the sale of the shares.  These shares were not offered for sale to the public or
as part of a public distribution.

         On September 7, 2000, we issued 9,000 restricted  common shares to Jack
Schear, an accredited  investor pursuant to an exemption from registration under
Section 4(6) of the Securities  Act. We received  $27,000 in connection with the
sale of the shares.  These  shares were not offered for sale to the public or as
part of a public distribution.

         On September 22, 2000,  25,000 shares of Series A preferred  stock held
by Brad Fey were converted to 50,000 shares of restricted  common stock pursuant
to an exemption from  registration  under Section 4(2) of the Securities Act. We
received no money in connection with the issuance of the shares. This conversion
offer was not made to the public or as part of a public distribution.

         On November 20, 2000,  we issued  781,500  restricted  common shares to
John  Liviakis,   60,000   restricted   common  shares  to  Liviakis   Financial
Communications,  Inc., Mr.  Liviakis'  company;  and 104,250  restricted  common
shares  to  Anthony  Altavilla  and  104,250  restricted  common  shares to Jens
Dalsgaard,  each  employees of Livakis  Financial,  for  consulting  services on
financial  and public  relations  and business  and  personnel  related  matters
pursuant to an exemption from registration  under Section 4(2) of the Securities
Act. We received no cash in  connection  with the issuance of the shares.  These
shares  were  not  offered  for  sale  to the  public  or as  part  of a  public
distribution.

         On November 20, 2000, we issued  353,636  restricted  common shares and
warrants to purchase up to an  additional  189,318  restricted  common shares to
Kauser Partners,  L.P., pursuant to an exemption from registration under Section
4(2) of the Securities  Act. We received  $1,000,000 in connection with the sale
of the shares.  The  exercise  price of the warrants is  currently  $6.375.  The

                                       34
<PAGE>

exercise  price  can be  adjusted  downward  depending  upon the date  when this
registration statement becomes effective. These shares were not offered for sale
to the  public or as part of a public  distribution.  We issued  and  additional
2,000,000  shares to Kauser  Partners on July 17,  2001 as part of the  original
agreement of November 20, 2000.

         On November 29, 2000,  we issued  10,000  restricted  common  shares to
Peter Kristensen,  a sophisticated investor, for consulting services pursuant to
an exemption  from  registration  under Section 4(2) of the  Securities  Act. We
received no cash in  connection  with the  issuance of the shares.  These shares
were not offered for sale to the public or as part of a public distribution.

         On December 18, 2000,  we issued  40,000  restricted  common  shares to
Edesio Biffoni, a sophisticated investor, for consulting services pursuant to an
exemption  from  registration  under  Section  4(2) of the  Securities  Act.  We
received no cash in  connection  with the sale of the shares.  These shares were
not offered for sale to the public or as part of a public distribution.

         On December 18, 2000,  we issued  30,000  restricted  common  shares to
Tiger-Lewis, Inc., a sophisticated investor, for consulting services pursuant to
an exemption  from  registration  under Section 4(2) of the  Securities  Act. We
received no cash in  connection  with the shares.  These shares were not offered
for sale to the public or as part of a public distribution.

         On January 24, 2001,  we issued 3,000  restricted  Series B convertible
preferred  shares and a warrant to purchase  up to 100,000  shares of our common
stock to Hunts  Drive,  LLC, a Qualified  Institutional  Buyer,  as that term is
defined  under  Rule  144A  under the  Securities  Act,  in a private  placement
pursuant to an  exemption  from  registration  provided  by Section  4(2) of the
Securities  Act. The warrants have an exercise  price of $8.53 per share.  After
deducting  offering  costs,  we  received  approximately  $2,660,000  in cash in
connection with the sale of the securities.

         On January  24,  2001,  we issued a warrant to  purchase  up to 110,300
common shares to Hunts Drive,  LLC pursuant to a private equity credit agreement
entered into between the parties, whereby the Company may sell up to $10,000,000
of its  common  stock to Hunts  Drive,  in a private  placement  pursuant  to an
exemption from registration  provided by section 4(2) of the Securities Act. The
warrants have an exercise price of $8.40 per share.

                                       35
<PAGE>

         On January 24,  2001,  we granted  warrants to Roth  Capital  Partners,
Inc., Anthony Soich, and Carbon Mesa Partners,  to purchase up to 40,500, 4,500,
and  5,000  common  shares,  respectively.  Each of these  investors  is  either
accredited  or  sophisticated.  These  warrants  were  granted  for  services in
connection  with the sale of Series B preferred  stock to Hunts Drive,  LLC. The
warrants have an exercise  price of $8.53 per share.  These warrants were issued
pursuant to an exemption from registration under Section 4(2) and/or 4(6) of the
Securities  Act.  We  received no cash in  connection  with the  issuance of the
warrants. These warrants were not offered for sale to the public or as part of a
public distribution.

         On January 24,  2001,  we granted  warrants to Roth  Capital  Partners,
Inc., Anthony Soich, and Carbon Mesa Partners,  to purchase up to 60,000, 6,600,
and  7,400  common  shares,  respectively.  Each of these  investors  is  either
accredited  or  sophisticated.  These  warrants  were  granted  for  services in
connection  with the private  equity  credit  agreement  entered into by us with
Hunts Drive,  LLC.  These  warrants  were issued  pursuant to an exemption  from
registration  under Section 4(2) and 4(6) of the Securities  Act. We received no
cash in connection  with the issuance of the warrants.  These  warrants were not
offered for sale to the public or as part of a public distribution.



Indemnification of Directors and Officers.

         There are no provisions in the Nevada  corporation  law or the Articles
of  Incorporation of the Registrant  requiring the corporation  indemnify any of
the Registrant  officers and  directors.  The articles of  incorporation  of the
registrant provide for indemnification as follows:

         1) No director of the  Corporation  shall be  personally  liable to the
         Corporation  or its  stockholders  for monetary  damages for any action
         taken or an  failure  to take  any  action  as a  director,  except  as
         provided in this Article.

         2) The limitation of liability  contemplated  in this Article shall not
         extend to (a) the amount of a financial  benefit received by a director
         to which he is not entitled,  (b) an intentional  infliction of harm on
         the corporation or the  shareholders,  (c) an intentional  violation of
         criminal law, or (d) unlawful distributions.

         3) Any repeal or  modification  of this Article by the  stockholders of
         the corporation shall not adversely affect any right or protection of a
         director  of the  corporation  existing  at the time of such  repeal or
         modification.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to officers and  directors of the Company  pursuant
to the provisions of the Company's Certificate of Incorporation, the Company has
been informed that in the opinion of the Securities and Exchange Commission such
indemnification  is against  public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.

                                       36
<PAGE>




                                    PART F/S

                          BIOPULSE INTERNATIONAL, INC.



INDEX TO FINANCIAL STATEMENTS

Report of Independent Accountants

Balance Sheet as of July 31, 2001, and July 31, 2000

Statement of Operations for the year ended July 31, 2001 and July 31, 2000

Statement of Stockholder's Equity

 Statements of Cash Flows for the year ended July 31, 2001 and  July 31, 2000

Notes to the Financial Statements





                                       37
<PAGE>

                          Biopulse International, Inc.

                        Consolidated Financial Statements

                         July 31, 2001 and July 31, 2000



                                       38
<PAGE>


                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors and Stockholders of
Biopulse International, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of  Biopulse
International,  Inc. as of July 31,  2001 and 2000 and the related  consolidated
statements  of  operations,  stockholders'  equity  and cash flows for the years
ended July 31, 2001 and 2000. These financial  statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits 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 consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial   position  of  Biopulse
International,  Inc.  as of July  31,  2001  and  2000  and the  results  of its
operations  and  cash  flows  for the  years  ended  July  31,  2001 and 2000 in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  The Company's operating loss and lack
of working  capital raise  substantial  doubt about its ability to continue as a
going  concern.  The financial  statements do not include any  adjustments  that
might result from the outcome of this uncertainty.




Salt Lake City, Utah
November 14, 2001



                                       39
<PAGE>

<TABLE>
<CAPTION>
                          Biopulse International, Inc.
                           Consolidated Balance Sheet


  Assets
                                                                       July 31,                July 31,
                                                                         2001                    2000
                                                                 ----------------------    ------------------
Current Assets
<S>                                                                          <C>                    <C>
       Cash                                                                  $ 331,584              $ 42,055
       Escrow Account                                                          272,275
       Accounts receivable (net of allowance for                                     -                17,030
            doubtful accounts)
       Inventory                                                                69,100                77,094
       Note Receivable - Employee                                                    -                 9,800
       Note Receivable                                                               -                19,032
       Prepaid Rent , Current                                                        -               133,925
                                                                 ----------------------    ------------------
 Total Current Assets                                                          672,959               298,936
                                                                 ----------------------    ------------------

 Property & Equipment, Net (Note 2)                                          1,281,139               659,729
 Intangable Assets                                                             650,000                     -

 Other Assets
       Deposits                                                                  8,731                 8,731
       Prepaid Rent - Net of Current Portion                                                         182,749
                                                                 ----------------------    ------------------
 Total Other Assets                                                              8,731               191,480
                                                                 ----------------------    ------------------
 Total Assets                                                              $ 2,612,829            $1,150,145
                                                                 ======================    ==================

              Liabilities and Stockholders' Equity

 Current Liabilities
       Accounts Payable                                                      $ 281,805             $ 104,787
       Accrued Expenses                                                         20,487                30,146
       Notes Payable (Note 7)                                                  500,000                86,000
       Credit Card                                                              51,737                     -
       Unearned Revenue                                                              -                77,784
                                                                 ----------------------    ------------------
 Total Current Liabliities                                                     854,029               298,717
                                                                 ----------------------    ------------------
 Total Liabilities                                                             854,029               298,717
                                                                 ----------------------    ------------------

 Stockholders Equity
       Preferred Stock                                                       3,000,000                    25
       Common Stock                                                             10,927                 7,329
       Additional Paid in Capital                                            4,925,386             1,092,044
       Less Subscriptions Receivable                                           (99,266)             (159,566)
       Treasury Stock                                                           (4,283)
       Accumulated Deficit                                                  (6,073,964)              (88,404)
                                                                 ----------------------    ------------------
       Total Stockholders' Equity                                            1,758,800               851,428
                                                                 ----------------------    ------------------
 Total Liabilities and Stockholders' Equity                                $ 2,612,829            $1,150,145
                                                                 ======================    ==================
</TABLE>




                                       40
<PAGE>

                          Biopulse International, Inc.
                      Consolidated Statement of Operations

<TABLE>
<CAPTION>
                                                                                 For the               For the
                                                                                Year Ended           Year Ended
                                                                               July 31,2001         July 31, 2000
                                                                            -------------------  --------------------
<S>                                                                                <C>                   <C>
Revenues                                                                           $ 2,136,674           $ 3,107,636
Cost of Goods Sold                                                                     859,990             1,163,598
                                                                            -------------------  --------------------
Gross Profit                                                                         1,276,684             1,944,038
                                                                            -------------------  --------------------
Operating Expenses
General and Administrative                                                           7,051,806             1,789,007
                                                                            -------------------  --------------------
Research & Development                                                                 210,438
                                                                            -------------------  --------------------
Total Expenses                                                                       7,262,244             1,789,007
                                                                            -------------------  --------------------
Net Profit (Loss) From Operations                                                   (5,985,560)              155,031
Net Income (Loss) before taxes                                                      (5,985,560)              155,031
Provision for Income taxes                                                                 --                    --
                                                                            -------------------  --------------------
Net Income  (Loss)                                                                $ (5,985,560)            $ 155,031
                                                                            ===================  ====================

Net Income Per Share                                                                    ($0.67)                $0.02

Weighted average Shares Outstanding                                                  8,881,260             7,329,610

Fully diluted earnings per share                                                        ($0.36)                $0.02

Fully diluted weighted-average shares outstanding                                   16,636,904             7,329,610
</TABLE>





                                       41
<PAGE>

                 Biopulse International, Inc.
             Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
                                                                      For The Year Ended                  For nine months
                                                                         July 31, 2001                      July 31, 2000
                                                               ---------------------------       -----------------------------
<S>                                                                          <C>                                    <C>
Cash flows from operating activities
Net Income                                                                   $ (5,985,560)                          $ 155,031
Adjustment to reconcile net income
       to cash provided by operations
       Depreciation and Amortization                                              195,973                              60,508
       (Increase) decrease in receivables                                         (17,030)                            (15,421)
       (Increase) decrease in Inventory                                            (7,994)                            (77,094)
       (Increase) decrease in Prepaid rent                                         63,000                            (316,674)
       Increase (decrease) in payables                                            177,018                               4,058
       Increase (decrease) in credit card debt                                     51,737
       Increase (decrease) in accrued expenses                                     (9,659)                             (7,014)
       Increase (decrease) in unearned fees                                       (77,784)
       Increase (decrease) in notes receivable                                     28,832                               9,232
       Stock issued for services                                                3,186,600
                                                               ---------------------------       -----------------------------
       Net cash provided by operating activities                               (2,394,867)                           (187,374)
                                                               ---------------------------       -----------------------------


Cash flows from investment activities
       Purchase of Equipment                                                     (403,692)                           (555,365)
       Acquisition of Intangable assets                                          (700,000)
                                                               ---------------------------       -----------------------------
Net Cash (used) provided by investing activities                               (1,103,692)                           (555,365)
                                                               ---------------------------       -----------------------------

Cash flows from Financing Activities
       Issued common stock for cash                                             1,064,646                             885,434
       Issued perfered stock for cash                                           2,525,700
       Increase (decrease) in short-term debt                                     414,000                            (104,628)
       (Increase) decreace in subscription receivable                              60,300
       Purchase of treasury stock                                                  (4,283)
                                                               ---------------------------       -----------------------------
Net cash (used) provided by financing activities                                4,060,363                             780,806
                                                               ---------------------------       -----------------------------

Net increase (decrease) in cash                                                   561,804                              38,067

Cash, beginning of period                                                          42,055                               3,988
                                                               ---------------------------       -----------------------------
Cash, end of period                                                             $ 603,859                            $ 42,055
                                                               ===========================       =============================
</TABLE>




                                       42
<PAGE>

<TABLE>
<CAPTION>
                          Biopulse International, Inc.
                 Consolidated Statement of Stockholders' Equity

                                                                                                        Additional
                                          Preferred Stock            Common Stock       Subscdriptions    paid-in      Retained
                                         Shares      Amount       Shares      Amount      Receivable      capital      Earnings
                                      ---------------------------------------------------------------------------------------------
<S>                                         <C>             <C>   <C>             <C>         <C>          <C>            <C>
Balances at Inception                            -           -            -           -              -             -             -
Net Loss for the yeay
     ended July 31, 1998                         -           -            -           -              -             -             -
                                      ---------------------------------------------------------------------------------------------
Balance, July 31, 1998                           -           -            -           -              -             -             -
Stock for cash to organizers                     -           -    4,000,000       4,000              -             -             -
Recapitalization for accounting
     purposes of Biopulse, Inc.                  -           -       73,862          74              -           (74)            -
Stock issued for subscription
     receivable at $.49 per share                -           -    2,000,000       2,000       (970,000)      968,000             -
Stock issued for cash
     at $1.00 per share                     25,000          25            -           -              -        24,975             -
Stock issued for services
     at $1.00 per share                     25,374          25            -           -              -        25,348             -
Net loss for the year
     ended July 31, 1999                         -           -            -           -              -             -      (243,435)
                                      ---------------------------------------------------------------------------------------------
Balance July 31, 1999                       50,374          50    6,073,862       6,074       (970,000)    1,018,249      (243,435)
Conversion of preferrred stock                   -           -            -           -              -             -             -
     To common stock                       (25,374)        (25)      50,748          50              -                           -
Stock issued for services                        -           -      600,000         600              -          (600)            -
Stock issued for subscription
     receivable at $.10 per share                -           -      600,000         600        (60,000)       59,400
Stock issued for $3 per share                    -           -        5,000           5              -        14,995             -
Collection of subscription
     receivable                                  -           -            -           -        870,434             -             -
Net Income for the year ended
     July 31, 2000                               -           -            -           -              -             -       155,031
                                      ---------------------------------------------------------------------------------------------
Balance July 31, 2000                       25,000          25    7,329,610       7,329       (159,566)    1,092,044       (88,404)
Conversion of preferrred stock             (25,000)        (25)      50,000          50                          (25)
     To common stock
Preferred stock issued for                   3,000   3,000,000                                              (474,300)
     $1,000 per share
Stock issued for $3 per share                    -           -       35,000          35              -       104,965             -
Stock issued for $0.41 per share                                  2,353,636       2,354                      957,292
Stock Issued for equipment                                           60,000          60                       59,940
Collection of subscription
     receivable                                  -           -            -           -         60,300             -             -
Stock issued for services                                         1,130,000       1,130                    3,185,470
Net Income for the year
     ended July 31, 2001                         -           -            -           -              -             -    (5,985,560)
                                      ---------------------------------------------------------------------------------------------
Balance July 31, 2000                        3,000   3,000,000   10,958,246    $ 10,958      $ (99,266)  $ 4,925,386  $ (6,073,964)
                                      =============================================================================================
</TABLE>



                                       43
<PAGE>



                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000

NOTE 1 - Summary of Significant Accounting Policies

         a.  Organization

         Biopulse  International,  Inc. (BioPulse) was incorporated in the State
of Nevada on July  13,1984  originally  under  the name of  Universal  Financial
Capital  Corp (UFC).  UFC changed its name in  September  1985 to  International
Sensor  Technologies,  Inc.(IST).  IST incurred heavy losses and no revenue from
operations and thereafter  experienced five years of inactivity.  On January 12,
1999,  IST  changed its name to BioPulse  International,  Inc.  when it acquired
BioPulse,  Inc.  BioPulse  is in the  business of  managing  integrated  medical
clinics, and medical research programs.

         BioPulse issued  4,000,000 common shares in exchange for 100 percent of
the  outstanding  stock of Biopulse Inc., a Utah  corporation  organized June 4,
1998.  The share  exchange  with  Biopulse,  Inc. was accounted for as a reverse
acquisition  (recapitalization),  therefore all historical financial information
is that of the accounting survivor Biopulse, Inc.

         The Company also paid  $100,000 to an  officer/director  of the Company
for accounting,  legal and  organization  expenses to recapitalize  the Company.
This was recorded as general and  administrative  expense  during the year ended
July 31, 1999.

         b.  Recognition of Revenue

         The  Company  recognizes  income and  expense on the  accrual  basis of
accounting.  Patients  are  generally  charged  a flat fee for  treatment  for a
specified period of time and recorded as unearned revenue. Revenue from services
to patients  is  recognized  as  services  are  performed.  Patients  who do not
complete the entire  treatment  schedule are refunded  fees  prorated on a daily
basis.

         Patient  recruitment  fees,  consulting fees and provision of equipment
for other  non-affiliated  clinics are  recognized as revenue when services have
been rendered, equipment installed and no right of return of fees exists.

         c.  Earnings (Loss) Per Share

         The  computation  of earnings per share of common stock is based on the
weighted  average  number of  shares  outstanding  at the date of the  financial
statements.

         d.  Cash and Cash Equivalents

         BioPulse  considers all highly liquid  investments  with  maturities of
three months or less to be cash equivalents.




                                       44
<PAGE>


                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000

NOTE 1 - Summary of Significant Accounting Policies (continued)

         e.  Provision for Income Taxes

         No provision  for income taxes has been  recorded due to net  operating
loss carryforwards totaling approximately  2,370,000 that will be offset against
future  taxable income  pursuant to  limitations  of the Internal  Revenue Code.
These NOL  carryforwards  begin to expire in the year 2000.  No tax  benefit has
been reported in the financial  statements  because BioPulse believes there is a
50% or greater  chance the  carryforward  will  expire  unused,  and are limited
pursuant to the  Internal  Revenue  Code.  The loss from the year ended July 31,
1999  can be used  to  offset  income  for  the  period  ended  July  31,  2000.
Accordingly, no tax provision has been recorded.

     Deferred  tax  assets and the  valuation  account is as follows at July 31,
2001 and July 31, 2000:

                                                      July                July
                                                  31, 2001            31, 2000
-----------------------------------------------------------  ------------------
     Deferred tax asset:
         NOL carrryforward               $         700,000    $        700,000
     Valuation allowance                          (700,000)           (700,000)
                                         ------------------  ------------------

         Total                           $               -   $               -
                                         ==================  ==================

         f.  Principles of Consolidation

         These financial statements include the books of Biopulse International,
Inc and its wholly owned subsidiary Biopulse, Inc. All intercompany transactions
and balances have been eliminated in the consolidation.

         h.  Use of Estimates in the Preparation of Financial Statements

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect reported  amounts of assets and liabilities,  disclosure
of contingent assets and liabilities at the date of the financial statements and
expenses during the reporting  period.  In these financial  statements,  assets,
liabilities and expenses involve extensive  reliance on management's  estimates.
Actual results could differ from those estimates.

         i.  Accounts Receivable Allowance

         BioPulse periodically reviews accounts receivable and the allowance for
doubtful  accounts.  At July 31, 2000 the  allowance  was $8,435 and at July 31,
2001 the allowance was $0.



                                       45
<PAGE>

                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000

NOTE 1 - Summary of Significant Accounting Policies (continued)

         j.  Inventory

         Inventory  is recorded at the lower of cost or market on the  first-in,
first-out  basis,  and  consists  primarily of  medicine,  medical  supplies and
nutritional supplements.

         Direct  operating  costs  consist  of  direct  costs  incurred  in  the
providing of care to patients. These costs include the cost of medicine, medical
supplies, nutritional supplements, laboratory fees, patient hotel rooms, patient
meals and other direct  costs.  The salaries of in-house  doctors and nurses are
included in general and administrative costs.

         k.  International Exchange

         All fees are charged in U. S. dollars and most  expenses are paid in U.
S. dollars.  Expenses that are paid in a foreign  currency are converted into U.
S. dollars at the exchange rate in effect on the date of the transaction.

         l.  Research and Development Costs

         As an  integral  part of its  patient  treatment  operations,  BioPulse
conducts research  designed to evaluate the effectiveness of patient  treatment.
All costs  associated  with the  patient's  care are expensed in the period that
they are incurred. During the year ended July 31,2001, the company licensed TK-1
diagnostic  technology from Brigham Young  University.  It paid a non refundable
fee of $100,000 for right to license this technology. This fee has been expensed
as research and development costs along with the cost the company has paid third
party laboratories to develop this technology into a marketable product.

NOTE 2 - Property and Equipment

         BioPulse capitalizes  purchases of equipment with a useful life of more
than one year.  BioPulse also capitalizes  improvements and costs that increases
the value of or extend the life of an asset.

         Capitalized  assets are depreciated  over the estimated useful lives of
the  assets  (five to seven  years for  furniture  and  fixtures  and  leasehold
improvements,  three to five years for autos, medical and computer equipment) on
the straight line basis.


                                       46
<PAGE>


                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000

<TABLE>
<CAPTION>
                                                                      July                July
                                                                  31, 2001            31, 2000
---------------------------------------------------------------------------  ------------------
<S>                                                       <C>                <C>
Property and Equipment consists of the following:
     Furniture & Equipment                                $        172,031   $         144,228



                                       47
<PAGE>


     Medical Equipment                                             676,497             543,087
     Lab Equipment                                                 209,061                   -
     Leasehold improvements                                        437,416              44,306
     Auto                                                            4,000                   -
     Accumulated Depreciation                                     (217,866)            (71,892)
                                                          -----------------  ------------------
         Total Property & Equipment                       $      1,281,139   $         659,729
                                                          =================  ==================
</TABLE>

NOTE 2 - Property and Equipment (continued)

         Depreciation expense was $ 145,973 and $60,508 for the years ended July
31, 2001 and 2000, respectively.

NOTE 3 - Intangible Assets

         BioPulse  capitalized  as  intangible  assets the purchase  cost of the
rights to certain  technologies  acquired from Aidan Inc. in August 2000.  These
assets amortized over their estimated useful life or the life of related patents
whichever is shorter. The patents have a remaining life of 17 years and BioPulse
does not expect the technology to become obsolete during the 17 year useful life
of the patents.  The technology and licenses acquired cover the world except for
experimental use in the United States.



         Intangible assets consist of the following at July 31, 2001:

         Intangible Assets                            $             700,000
         Accumulated Amortization                                   (50,000)
                                                      ----------------------
              Total Intangible Assets                 $             650,000
                                                      ======================

         Amortization expense was $50,000 for the year ended July 31, 2001.

NOTE 4 - Equity/Reverse stock split

         In November 1998, the board of directors authorized a 1 for 400 reverse
stock split. These statements have been  retroactively  restated to reflect this
reverse split.

         During the year ended July 31, 1999, BioPulse issued the following:

                  -        4,000,000  shares of common  stock for 100 percent of
                           the  outstanding  stock of Biopulse,  Inc.  valued at
                           $4,000.

                  -        2,000,000  shares of common  stock for  subscriptions
                           receivable of $970,000.



                                       48
<PAGE>

                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000


                  -        25,000 shares of preferred stock,  class "A" for cash
                           of $25,000.

                  -        25,374  shares  of  preferred  stock,  class  "A" for
                           services  valued at $25,374.  Cost of these  services
                           was recorded as general and administrative costs.

NOTE 4 - Equity/Reverse stock split (continued)

         During the year ended July 31, 2000 BioPulse had issued the following:

                  -        600,000  shares  to  the   underwriter  for  services
                           rendered in the offering.

                  -        600,000  shares  at  $.10  per  share  pursuant  to a
                           subscription agreement.

                  -        5,000 shares for $3 per share.

         During the year ended July 31, 2001 BioPulse issued the following:

                  -        25,000 shares for $3 per share.

                  -        60,000 shares for equipment at $1 per share.

                  -        2,353,636  shares of common  stock at $0.41 per share
                           with  warrants to purchase  189,000  shares of common
                           stock.  The exercise  price shall be fifty percent of
                           the lesser of $6.375 and the  average  closing  price
                           for the five trading days  immediately  preceding the
                           effective date of a registration  statement  covering
                           these warrants.

                  -        1,050,000   shares  of  common   stock   pursuant  to
                           consulting  with  Liviakis  Financial  Communications
                           (LFC) for investor  relations  services for one year.
                           The  shares  were non-  assessable  upon  signing  on
                           November 2, 2000. In addition,  the contract provides
                           for cash  commissions  to LFC of 2.5% of the value of
                           debt or equity  financing  and 2% of the value of the
                           merger  or  acquisition  for which LFC has acted as a
                           finder.

                  -        80,000  shares were issued to three  individuals  for
                           services  valued  at  $679,370.  The  cost  of  these
                           services    will   be   recorded   as   general   and
                           administrative costs during the quarter ended January
                           31, 2001.


                                       49
<PAGE>

                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000

         Options:

                  -        At  August  3,  2000  issued  1,500,000   options  to
                           purchase  common  stock at $2.75  (market  price)  to
                           Aiden,  Inc. in partial  consideration for technology
                           rights. The shares are exercisable as follows:

                  -        700,000 immediately,


                                       50
<PAGE>

                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000

NOTE 4 - Equity/Reverse stock split (continued)

                  -        200,000 upon  submission  of patent  application  for
                           production of tissue vaccine,

                  -        200,000 upon  submission  of patent  application  for
                           MPGC,

                  -        200,000 upon  submission  of patent  application  for
                           Cytokines,

                  -        200,000 upon  submission  of patent  application  for
                           Tissue Vaccine.

         We have  outstanding  warrants to purchase up to 184,300  common shares
with an  exercise  price of $8.40 per  share.  These  warrants  were  granted on
January 24, 2001 and expire on January 24, 2006.  If all of these  warrants were
exercised, we would receive $1,548,120.

         We also have  outstanding  warrants  to  purchase  up to 150,00  common
shares with an exercise price of $8.53 per share. These warrants were granted on
January 24, 2001 and expire on January  24,2006.  If all of these  warrants were
exercised, we would receive $1,279,500.

         In January 2001, in connection with a private  placement  offering,  we
issued to Hunts Drive,  LLC,  3,000 shares of Series B Convertible  Preferred at
$1,000 per share. The Series B preferred shares may be converted at any time.

         Under the terms of a  securities  purchase  agreement,  Hunts Drive may
convert each share of Series B preferred  stock to shares of common stock having
a market value of $1,000.  The conversion price of the common stock upon receipt
by us of a notice of  conversion  is equal to the  lesser of $9.75 or 80% of the
average of the three  lowest  closing bid prices of the common  stock during the
20-day trading period  immediately prior to the conversion date as quoted on the
OTC Bulletin Board.

         For so long as we have not  received  a notice  of  conversion  for the
shares, we may redeem shares of our Series B preferred stock by serving a notice
of redemption.  The redemption price equals 130% of the liquidation  value, plus
all  accrued  but unpaid  dividends  on such  shares.  If we  deliver  notice of
redemption  pursuant to the  foregoing  sentence,  the holders will retain their
conversion  rights  with  respect  to up to a maximum  of 100% of the  number of
shares subject to the redemption.

         In connection  with the sale of the Series B preferred  stock,  we also
issued to Hunts Drive a warrant to  purchase up to 100,000  shares of our common
stock.  The  warrants  have an exercise  price of $8.53 per share.  Based on the
Black Shoals calculation,  the value of the beneficial conversion feature of the
warrants is $7,000.



                                       51
<PAGE>

                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000

NOTE 5 - Commitments and Contingencies

         The Company is  committed  to an  operating  lease for office  space in
Sandy,  Utah.  The lease  requires the Company to pay monthly rent of $8,731 and
expires  December  2003. The landlord has agreed to terminate the lease December
1, 2001 for a payment of $70,000 due in July 2002.

         The Company is responsible for an operating lease for clinic and office
space in Tijuana,  Mexico.  The lease  requires the payment of $42,000 per month
and expires  February 28,  2005.  The lease  states the rent  obligation  on the
clinic and office space in U.S. dollars.

         Future  minimum  operating  lease  payments  are as follows at July 31,
2001:

         2001                           $           244,924
         2002                                       574,000
         2003                                       504,000
         2004                                       504,000
         2005                                        84,000
                                        -------------------
              Total                     $         1,910,924
                                        ===================

         BioPulse  entered into a contract with Aidan  Incorporated on August 3,
2000, to license  patented and  patentable  technology.  The license term is the
life of the  patents.  The license  covers world wide rights  except  rights for
experimental use in the United States. The Company paid $700,000 for the license
between  August  2000 and  January  2000 and as further  consideration,  granted
1,500,000 options described in Note 4.



                                       52
<PAGE>

                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000

NOTE 5 - Commitments and Contingencies (continued)

         Aidan is required to apply for patents and pay the expenses of issuance
of the patents.

         BioPulse  has paid the $700,000 to Aidan but is still  obligated  under
the options.  BioPulse is required to file a registration  statement to register
the stock that will be issued upon exercise of the options.

         The Company  entered  into a contract  with  Brigham  Young  University
effective December 1, 2000 to license patented  technology.  The license term is
five years  with an option to review  for an  additional  5 years.  The  license
covers the world wide rights to this technology  except for the following Aisian
countries : China, Japan, Taiwan, Malaysia,  Indonesia,  Philippines,  Singapore
and Korea.  The company  paid $ 100,000 for the license in December  2000 and is
required to pay for further  development of the technology.  It will be required
to pay an additional $800,000 when the technology is developed into a marketable
product.  It  is  estimated  that  this  further  development  will  require  an
expenditure  of $ 100,000.  The  License  requires  payment of a 7% royalty  due
quarterly with the following minimum annual payments through 2005.

         2000              $                0
         2001                               0
         2002                               0
         2003                         100,000
         2004                         200,000
         2005                         400,000
                           ------------------
         Total             $          700,000
                           ==================

If the company does not make these  future  payments  BYU's only  resource is to
terminate the license.

The  company  placed  $300,000  in escrow to assure that there would be adequate
funds to pay for the research and  development of the TK-1  technology.  Brigham
Young University and the Company jointly control the escrow.  There was $272,275
in the escrow account as of July 31, 2001.

The  company has  arranged  with  Covance  Development  to conduct the  research
required by its contract with BYU. The  agreement  with Covance is that Biopolse
will pay Covance on a time and  materials  basis The agreement may be terminated
at any time by either party without notice.

The clinic that the company  manages in Tijuana,  Mexico was visited on February
15, 2001 by Mexican health authorities  (Instituto de Servicios de salud Publica
Del  Estado De Baja  California).  The  clinic  held a license  to operate as an
alternative  health clinic but did not have a specific  license to offer each of
its therapies.  The IHT (insulin hypoglycemic therapy) treatment room was closed
by the health  authorities  and reopened on May 19, 2001. . These other licenses
have never been an issue in the past.  Licenses  for IHT  (insulin  hypoglycemic
therapy), Chelation,  Colonics, and Dendrytic Cell therapies have been approved.
A potential fine of $25,000 is expected to be assessed for the violation.



                                       53
<PAGE>

                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000

The  company  entered  into an  agreement  with the Wicker  Clinic in Germany in
November, 1999 to train Wicker Clinic personnel in Biopulse's protocols and sell
equipment.  The agreement  also allowed  Biopulse to send patients to the Wicker
Clinic and for Biopulse to retain a portion of the fee that the patient paid for
treatment.  The equipment was delivered and training  completed by February 2000
that completed the obligations  Biopulse had under the agreement.  Biopulse sent
some  patients  to the  Wicker  Clinic but after key  personnel  left the Wicker
Clinic,  Biopulse  stopped  sending  patients  there.  Revenue  from the sale of
equipment and training of clinic staff was  recognized in fiscal year ended July
31,  2000.  There was no reserve for  impairments  because  Biopulse had met its
obligations under the agreement and there was no evidence that the Wicker Clinic
was seeking a return of any of the consideration.

In November  2000 the company  entered into an agreement  with The Geneva Group,
Inc. to list the company's stock on the Frankfurt  stock  exchange.  The company
paid $20,000 in cash and issued  25,000  shares of stock to The Geneva Group for
their services. There is no future obligation under this contract.

A  lawsuit  has  been  filed  in U.S.  District  Court by  Duchess  Advisors  in
connection  with the raising of capital for the company in January  2001.  Their
claim is that they are due a  commission  in  relation  to the  raising  of that
capital.  The company paid commissions to Liviakis Financial and Roth Capital in
connection with this  transaction and does not believe that Duchess  Advisors is
entitled a commission. The potential liability is $30,000.

Note 6 - Notes Payable

The Company  borrowed  $500,000 from Hunts Drive,  LLC in July 2001. The note is
due with  interest at 6.5% simple  interest on October,  1, 2001.  The 2,093,400
shares of stock  owned by Loran  Swensen  and  Jonathan  Neville  (officers  and
directors of the company) are security for the note. The note is in default.

Note 7 - Segment Reporting

During the year ended July 31,  2000,  the  company  had a major  customer  (The
Wicker  Clinic) that was  responsible  for more than 10% of  revenues.  Biopulse
trained some of its staff in it protocols sold  equipment,  and sent patients to
the clinic.  Most of the  training  was done at the clinic  Biopulse  managed in
Tijuana,  Mexico.  The basis of segment  reporting is due to the single customer
requirements  rather than geographic  areas because  revenue  generated with the
customers was generated in two geographic areas the second  geographic area does
not meet to the segment reporting requirement.

This segment only existed during the year ended July 31, 2000.  Biopulse has not
generated  any revenue  from this  customer in prior or  subsequent  years.  The
following table  summarizes the operating  results from the segment for the year
ended July 31, 2000:


                                       54
<PAGE>

                          Biopulse International, Inc.
                        Notes to the Financial Statements
                         July 31, 2001 and July 31, 2000

Note 8 - Stock Option Plan

         2000 Stock Option Plan

         On October 5, 2000, our board of directors adopted a Stock Option Plan.
The Plan  authorizes the granting of awards of up to 4,000,000  shares of voting
common stock to our key employees,  officers, directors,  consultants,  advisors
and sales  representatives.  The plan required that the shareholders approve the
plan within one year of the board of directors  adopting the plan.  The plan was
not approved by the shareholders during the one year time period,  therefore the
plan is void.



                                       55
<PAGE>

                                    PART III


Item 1. Index and Description of Exhibits.

Exhibit
Number   Title of Document                                         Location
------   -----------------                                         --------

3.01     Amended and Restated Articles of Incorporation,           As filed
         as amended

3.02     Bylaws                                                    As filed

10.01    Contract with Dr. Jesus Omar Sanchez Tiznado              As filed

16.01    Letter on Change in Certifying Accountant                 As filed

23.01    Consent of Accountant                                     See attached




SIGNATURES



In  accordance  with  Section 12 of the  Securities  Exchange  Act of 1934,  the
registrant  caused  this  registration  statement  to be signed  on its  behalf,
thereunto duly authorized.


                                             BioPulse International, Inc.


Date:    November 13, 2001                   /s/ Reid Jilek
                                             --------------
                                             Reid Jilek
                                             CEO



Date:    November 13, 2001                   /s/ Michael L. Jones
                                             --------------------
                                             Michael L. Jones
                                             Treasurer, CFO

                                       56
<PAGE>

                                    PART III


Item 1.  Index and Description of Exhibits.

Exhibit
Number      Title of Document                                      Location
------      -----------------                                      --------
3.01        Amended and Restated Articles of Incorporation,        As filed
            as amended

3.02        Bylaws                                                 As filed

10.01       Contract with Dr. Jesus Omar Sanchez Tiznado           As filed

16.01       Letter on Change in Certifying Accountant              As filed

23.01       Consent of Accountant                                  See attached




SIGNATURES



In  accordance  with  Section 12 of the  Securities  Exchange  Act of 1934,  the
registrant  caused  this  registration  statement  to be signed  on its  behalf,
thereunto duly authorized.


                                             BioPulse International, Inc.


Date:    November 13, 2001                   By: /s/ Reid Jilek
                                             ------------------
                                                     Reid Jilek
                                                     CEO



Date:    November 13, 2001                   By: /s/ Michael L. Jones
                                             ------------------------
                                                     Michael L. Jones
                                                     Treasurer, CFO



                                       57