SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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



FOR THE FISCAL YEAR ENDED                                 COMMISSION FILE NUMBER
-------------------------                                 ----------------------
MAY 31, 2001                                                     0-12561

                         MEDITECH PHARMACEUTICALS, INC.
              ----------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



    NEVADA                                                     95-3819300
---------------                                            -------------------
(STATE OR OTHER                                             (I.R.S.EMPLOYER
JURISDICTION OF                                            IDENTIFICATION NO.)
ORGANIZATION)


                        10105 E. VIA LINDA, #103, PMB-382
                                  SCOTTSDALE, AZ                       85258
                      --------------------------------------          --------
                     (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)        (ZIP CODE)

                                 (480) 614-2874
               --------------------------------------------------
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                          COMMON STOCK, $.001 PAR VALUE


INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

                          YES  X                 NO
                             -----                  -----

STATE THE ISSUER'S REVENUE FOR ITS MOST RECENT FISCAL YEAR.

$100,000

STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT. THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO THE
PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF SUCH
STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.

$7,442,086.47 (COMPUTED ON THE BASIS OF $.065 PER SHARE OF COMMON STOCK) AS OF
AUGUST 30, 2001.

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

150,860,432 SHARES OF $.001 PAR VALUE COMMON STOCK AS OF AUGUST 30, 2001.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE.

<PAGE>



PART I

Item 1. Business
----------------

     Meditech Pharmaceuticals, Inc. is a Nevada corporation. We began our
business in May 1982 and incorporated in Nevada on March 21, 1983.

Our Products

     We have developed two patented compounds: MTCH-24(TM) and Viraplex(R). Both
of these compounds show positive test results for treatment of a variety of
enveloped viruses. An enveloped virus is one in which the infectious particle is
surrounded by a coating made of protein, fatty substances and carbohydrate.

MTCH-24(TM)

     Herpes I and II are enveloped viruses. How MTCH-24(TM) acts against
enveloped viruses is not fully understood. However, based on laboratory tests
conducted for our Company, MTCH-24(TM) is believed to be effective against a
wide range of other enveloped viruses such as influenza, Epstein-Barr virus,
respiratory syncytial virus (a virus which affects the respiratory system),
pseudorabies (a specific virus in the rabies family), rhino tracheitis (an
infection of the lungs and throat), and cytomegalovirus. It is also believed to
be effective against rotavirus, a non-enveloped virus that is a major cause of
diarrhea and inflammation of the intestinal tract in infants and in certain
animals.

     Epstein-Barr Virus ("EBV") is a herpes virus that causes infectious
mononucleosis and may be a cause of Burkitt's lymphoma, a disease found mostly
in Africa and New Guinea, and less frequently in the United States. EBV causes
widespread early childhood disease in developing countries, and is also
associated with nasopharyngeal carcinoma, a malignant tumor of the nose usually
affecting young adults.

     Cytomegalovirus ("CMV") is a virus, the effects of which vary substantially
depending upon the age and immune status of the infected person. Infection of an
infant can result in a fatal disease involving the nervous system and liver.
Infection acquired later in life may cause a syndrome clinically
indistinguishable from mononucleosis. Generalized CMV infection, which can be
fatal, may also occur in patients whose immune systems have been compromised.

     Rotavirus is believed to be the causative agent in over 50% of all cases of
acute diarrhea in children requiring hospitalization. It can be highly
contagious and sometimes fatal. Rotavirus is also a major cause of
gastroenteritis in swine and lambs. Gastroenteritis is an inflammation often due
to an infectious agent of the intestinal tract with a mortality rate of 30% to
50%.

     Initial therapeutic uses of MTCH-24(TM) will include the topical treatment
of Herpes Simplex Virus I and acne. We have developed an over-the-counter
product containing MTCH-24(TM) for treating symptoms of herpes simplex virus
infections of the lips, mouth, and face (e.g. cold sores and fever blisters).
Initially, the active ingredients shown in the product will be drugs other than
MTCH-24(TM), that previously have been recognized by the Food and Drug
Administration ("FDA") as safe and effective for their intended use, as
specified in FDA monographs or proposed monographs. MTCH-24(TM) will be used in
these products as a non-active ingredient or a surfactant, an agent that is used
externally such as soap or topical anti-microbial agent plus wetting agent. An
anti-microbial agent is one that either prevents or kills microbes, including
bacterial germs and viruses. Under these conditions, we hope our
over-the-counter product will fall within the scope of the FDA regulations.
Consequently, we may be able to bring our product to market in the United States
without further FDA approval. Outside FDA and Federal Trade Commission counsel
will conduct extensive legal research prior to the release for sale of any of
our products.

                                       2

<PAGE>


Viraplex(R)

     Since 1987, the National Cancer Institute has conducted studies to screen
60,000 drugs against cancer related organisms. One of the final drugs remaining
in this study as being potentially effective against some cancers is
Viraplex(R). They have not yet completed the testing to determine actual
effectiveness.

     One of the problems in moving this project forward was the inherent
insolubility of Viraplex(R). In 1997 and 1998, we reformulated the drug into a
fully soluble form, now making it possible to deliver the maximum therapeutic
dose to the intended site of delivery.

     We are currently testing Viraplex(R), as well as MTCH-24(TM). Pending
satisfactory test results, we plan to develop additional products containing
these drugs. Viraplex(R) is administered orally in capsule form as a
prescription treatment for orofacial and genital herpes simplex virus infections
in humans. We received permission from the FDA in 1987 to initiate a 320-patient
Phase III study to test safety and effectiveness in humans, consisting of 160
patients with genital herpes and 160 patients with orofacial herpes. However, in
1987, these trials were suspended pending the obtaining of additional capital to
finance the trials. We had completed more than 50% of this testing prior to our
suspension of the testing due to lack of funds. Because this test was structured
as a double blind test (a test where half the patients unknowingly receive a
placebo and the other half unknowingly receive the drug) only the
bio-statistician has the ability to determine the test results prior to
completion of the testing. If we decide to complete this test instead of
commencing a new test, the results will be published upon completion.

Agricultural Products

     Fungal, bacterial and viral plant diseases cause loss of crops worldwide.
Fungi pose a major health hazard by producing mycotoxins, toxic chemical
substances that cause potentially deadly diseases in humans and animals. In
particular, aflatoxin produced by Aspergillus flavus is among the most deadly
substances known to mankind. Aflatoxin is a plant disease that affects grain
crops such as corn and wheat. Aspergillus is a group of fungi that causes
disease in humans, animals and plants. In humans, Aspergillus commonly causes
lung disease due either to direct growth of the organism or by allergic
mechanisms. The Aspergillus flavus strain often grows on stored grain, corn and
other foodstuffs causing spoilage, and may produce toxic substances that render
these foods poisonous. MTCH-24 (TM) has been shown to be effective in inhibiting
and preventing the growth of Aspergillus on wheat and corn.

     Organisms of the bacteria genus Xanthomonas cause citrus canker.
Xanthomonas consists of a group of bacteria that infects plants and causes
significant loss to commercially important fruits and vegetables. MTCH-24(TM)
has been shown to inhibit this organism at concentrations non-toxic to humans.
Biosciences Laboratories in Montana is currently conducting tests using
MTCH-24(TM) against this organism and two others.

     We have engaged in limited testing and development in this area and are
seeking to interest potential licensees or joint venture partners to provide
assistance in testing, obtaining the necessary approvals for, and marketing one
or more of our agricultural products. At this point, we have not decided which
of our agricultural products we will seek to develop commercially or the order
of such development. This will depend in large part on the identity of the
licensees or joint venture partners and the wishes and interests of such
parties.

Marketing Plan

     Presently, depending upon the timing and amount raised through our
investment agreement with Swartz Private Equity, LLC, we estimate that we will
have commercial products that we will market in the United States within the
next two years. In addition, we intend to bring out an MTCH-24(TM)-based Cold
Sore product in the United States. The target customers for our products are
drug chains, drug wholesalers, mass marketers and food chains. We also plan to
market our product directly over the Internet. If available, we intend to employ
independent sales representative organizations. There is no assurance that even
if we are successful in raising sufficient money through Swartz, that there will
be a market for our products within the United States, or that we will receive
the required regulatory approval.

                                       3

<PAGE>


     We would aim media at the appropriate segments of the population, as well
as publications targeting the self-medicating segment. We intend for most of the
advertising to be in print. We worked with a professional outside agency
specializing in drug naming to develop a brand name for MTCH-24(TM) that would
provide us with maximum consumer impact and long consumer attention span. We
have selected the name MDCH (TM) and have filed a trademark application with the
United States Patent and Trademark Office to register the mark.

     In addition to our selling efforts upon commercialization of our products,
we are currently attempting to enter into licensing arrangements with larger
pharmaceutical and consumer product companies, especially on an international
level. Because we can enter into licensing arrangements prior to
commercialization of our products, licensing arrangements can be used to raise
capital and obtain assistance with research and development. For example, we
previously entered into a letter agreement with Immune Network, Limited in
February 2000. Pursuant to the agreement, we granted INL an irrevocable option
for a period of one year to obtain an exclusive license to make, have made,
promote, sell and distribute Viraplex(R) and MTCH-24(TM), and any derivatives or
formulation of either product, throughout the world, excluding the United
States. INL has paid to us $100,000 in anticipation of entering into a formal
license agreement, pursuant to which we would receive a seven percent and four
percent royalty on INL's net sales of MTCH-24(TM) and Viraplex(R), respectively.
In addition, INL initiated and funded in excess of $20,000 of research and
development activities on MTCH-24(TM) and Viraplex(R), and provided to us all
data from these activities. In May 2001, we entered into an agreement with INL
which terminated the first agreement and pursuant to which we granted to INL a
2% royalty on worldwide sales, excluding the United States, of MTCH-24(TM), and
a 2% royalty on worldwide sales of any agricultural product. This agreement was
entered into in consideration of INL's work under the letter agreement and in
lieu of the license agreement contemplated there under.

     Pursuant to the letter agreement, we also granted to INL an irrevocable
option to purchase 10,000,000 shares of our common stock at an exercise price of
$0.03 per share. The shares of common stock issuable upon exercise of the option
have been registered. All of the INL options have been exercised.

Competition

     There is at least one FDA-approved product currently available, by
prescription, for the treatment of herpes infections. Burroughs-Wellcome Co.
sells it under the name Zovirax(R) (Acyclovir). FDA approval of Zovirax(R) is
limited to selected cases of genital and mucocataneous herpes and also to
specific usage. Mucocataneous herpes relates to certain lubricating linings in
the body and/or skin. Herpes Simplex Viruses typically cause infection at these
sites. Other companies are testing vaccines intended to prevent infection by
herpes viruses. Treatment of persons presently afflicted with recurrent herpes
infections is the primary focus of the products we are developing.

     Many pharmaceutical companies and other researchers have announced their
intention to introduce, or are believed to be in the process of developing a
variety of products that may perform some or all of the functions of our
Viraplex(R) and MTCH-24(TM) products. Competing products are already available
for many of the functions of our MTCH-24(TM) products. Other current competitors
include Uniliver (with Vaseline Intensive lip care), Avanir Pharmaceuticals
(with Docusanol), Blistex and Zila Pharmaceuticals with Zilactin.

                                       4

<PAGE>


Patents

     Our performance and ability to compete depends to a significant degree on
our proprietary knowledge. We rely or intend to rely on a combination of patent
and trade secret laws, non-disclosure agreements and other contractual
provisions to establish, maintain and protect our proprietary rights. Our policy
is to seek the issuance of patents that we consider important to our business.

     We have two U.S. patents pending for new formulations of MTCH-24(TM) and
Viraplex(R), and the following issued patents:

     MTCH-24(TM)

     1.   Canadian Patent #1,242,147 (Method for Treating Viral Infection),
          issued September 20, 1988 (6 claims)

     2.   Canadian Patent #1,256,032 (Method and Composition for Treating Viral
          Infections), issued July 20, 1989 (16 claims)

     VIRAPLEX (R)


     1.   Canadian Patent #1,261,269 (Herpes Simplex Treatment), issued
          September 26, 1989 (14 claims)

     We may file additional patent applications in the United States and under
international treaties depending on the evaluation of the costs and anticipated
benefits that may be obtained by expanding possible patent coverage.


Government Regulation

     Pharmaceutical products are subject to extensive regulation in the United
States and most foreign countries. In the United States, ethical pharmaceutical
products cannot be marketed or sold before they have passed the FDA's required
three-stage process. Providing adequate test data, completing filings and
obtaining final regulatory approval is usually a multi-year process.

     Once ethical pharmaceutical products are approved for sale, many of them
are purchased through health plans which are subject to state and Federal
regulations including the Health Maintenance Act of 1973, the Knox-Keene Act in
California, and numerous other regulations which bar some forms of treatment and
some pharmaceutical products as being "experimental" or "not medically
necessary."

     Similar regulations and regulatory oversight are in place in most
countries. This ongoing regulatory oversight can also result in the withdrawal
of products from the market after their approval for sale in instances where new
test data creates additional regulatory concerns.

Employees

     We currently have three employees. We currently contract with outside
partners to perform the testing and registration of our patented products. As we
move toward completion of testing and introduction of products to the market, we
plan to substantially increase the number of employees in administrative and
marketing roles.


Item 2. Properties
------------------

     We currently operate out of space owned by Gerald Kern, our Chairman and
CEO and Steven Kern, our President, Chief Financial Officer and Chief Operating
Officer, that is provided to us at nominal cost. This space will not be adequate
for operations as we move forward. We anticipate acquiring a small office in Los
Angeles within the next 12 months.


Item 3. Legal Proceedings
-------------------------

     We are not a party to any material legal proceedings nor are we aware of
any pending litigation against our Company.


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

     None.

                                       5

<PAGE>

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters
----------------------------------------------------------------

     The Company's common stock is traded on the over-the-counter ("OTC")
market. On May 31, 2001, the closing bid price for the common stock of the
Company was $.145. The high and low closing bid prices therefore during the
quarterly fiscal periods indicated were as follows:

Quarter Ended                         Low Bid                 High Bid
-------------                          -------                --------

August 31, 1998                         .015                     .078
November 30, 1998                       .015                     .052
February 28, 1999                       .00                      .02
May 31, 1999                            .00                      .00
August 31, 1999                         .06                      .15
November 30, 1999                       .008                     .054
February 29, 2000                       .31                      .97
May 31, 2000                            .27                      .44
August 31, 2000                         .23                      .45
November 30, 2000                       .095                     .32
February 28, 2001                       .075                     .29
May 31, 2001                            .095                     .25

Some of the above prices reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
The Company's common stock was reported on NASDAQ through April 30, 1986, at
which time it was delisted because of failure to meet the minimum capital,
surplus and asset requirements of the NASD by-laws.

     As of August 30, 2001, there were approximately 2,882 holders of record of
the Company's outstanding shares of common stock.

     The Company has not paid any dividends to its shareholders and has no
present intention of changing this policy.

     The following sets forth recent sales by the Company of unregistered
securities during the fiscal year ended May 31, 2001.

1. During the year ended May 31, 2001, we issued an aggregate of 10,000,000
shares of our common stock pursuant to the exercise of an option at an exercise
price of $0.03 per share.

2. During the year ended May 31, 2001, we issued an aggregate of 1,500,000
shares of our common stock pursuant to an employee's exercise of options for an
aggregate exercise price of $155,000.

3. During the year ended May 31, 2001, we exercised a put option pursuant to
which we put 605,055 shares of our common stock to Swartz for a total aggregate
purchase price of $48,404.

     No underwriter was involved in any of the above issuances of securities.
All of the above securities were issued in reliance upon the exemptions set
forth in Section 4(2) of the Securities Act of 1933 on the basis that they were
issued under circumstances not involving a public offering.


                                       6
<PAGE>


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

     You should read the following discussion of our financial condition and
operations in conjunction with the consolidated financial statements and the
related notes included elsewhere in this filing. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of many factors.

Overview

     We are a drug development company, founded in 1982, focused in the areas of
research, development, and marketing in the biomedical industry, with an
emphasis on anti-infective drugs. The Company has completed various stages of
planning and developing products containing its proprietary drugs Viraplex (R)
and MTCH-24(TM).

     Our development activities since inception (May 4, 1982) have included
efforts to secure financing, create a management and business structure, and
develop and test Viraplex (R) and MTCH-24(TM) for release as both
over-the-counter ("OTC") and ethical products. These activities have produced
very little in operating revenues.

     Since we became a public company, our operations have related primarily to
securing patents, initiating and continuing clinical tests, recruiting personnel
and raising capital. Through May 31, 2001, we have derived our revenues from the
sale of a license option to Immune Network, Limited to develop and market new
patented products.

Going Concern

     The Company's independent certified public accountants have stated in their
report included in this Form 10KSB, that the consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
As shown in the consolidated financial statements, the Company incurred a loss
before extraordinary items of $842,537 during the year ended May 31, 2001, we
had a cash balance of approximately $161,600, and had an accumulated deficit of
approximately $15,488,905 and a stockholders deficit of $7,040,328 at May 31,
2001. These factors, among others, raise substantial doubt about our ability to
continue as a going concern.

     We must raise additional funds in order to actively reinstate our research
and development efforts, to complete existing product testing which was
suspended in 1987, or commence new testing on such products, and to conduct
additional testing on our products. We intend to obtain the necessary financing
through our Investment Agreement with Swartz Private Equity, LLC. There can be
no assurance that we will be successful in raising from Swartz sufficient
additional capital in order to continue and complete our research and
development and testing. Our future success is dependent upon raising additional
money to provide for the necessary operations of the Company. If we are unable
to obtain such additional financing, there would be a material adverse effect on
our business, financial position, and results of operations. Our continuation as
a going concern is dependent on our ability to generate sufficient capital to
meet our obligations on a timely basis, and to continue and complete our
research and development and testing efforts. However, no assurance can be given
that additional capital, if needed, will be available when required or upon
terms acceptable to the Company.


RESULTS OF OPERATIONS

RESULTS OF OPERATIONS FOR THE YEARS ENDED MAY 31, 2001 AND 2000.

Results of Operations

     The consolidated May 31, 2001 financial statements included net income of
$562,695 as compared to a net loss of $1,150,100 for the year ended May 31,
2000. The decrease in net loss from fiscal year 2000 to fiscal year 2001 is due
primarily to the extraordinary items resulting from forgiveness of accounts
payable, debt and accrued interest on debt in the amount of $1,405,232 which
were no longer collectible against the company due to the statute of
limitations.

                                       7
<PAGE>


Sources of Revenues and Revenue Recognition

     Our revenues were $100,000 in 2001 as compared to $25,000 in 2000. Revenues
in 2001 consisted entirely of the fees paid to us by Immune Network, Limited in
anticipation of a license agreement and revenues in 2000 consisted entirely of a
$25,000 fee paid to us by INL in connection with the execution of our letter
agreement dated February 3, 2000. Pursuant to the letter agreement, we granted
INL an irrevocable option to license, develop and market several applications of
MTCH-24(TM) and Viraplex (R). In addition, pursuant to the letter agreement, INL
is obligated to pay to us the sum of $100,000 upon execution of a definitive
license agreement.

     We will recognize revenues from licenses over the period of the applicable
license.

Operating Expenses

     Our expenses include research and development and general and
administrative. Research and development consists of laboratory expenses,
consulting expenses, test expenses, and other costs associated with the
development of products not yet being marketed. General and administrative
expenses include the salaries and benefit costs of management and other
non-manufacturing employees, sales and marketing expenses, rent, accounting,
legal and operational costs. Personnel compensation and facilities costs
represent a high percentage of our operating expenses and are relatively fixed
in advance of each quarter.

     Research and Development Costs. Direct research and development costs for
2001 were $6,500, consisting of the costs of additional clinical trials on the
products. Research and development costs for 2000 were $1,200. The increase is
due to additional testing done on potential product offerings.

General and Administrative Expenses. Direct costs were approximately $601,937
for 2001, as compared with $864,900 for 2000. The decrease was primarily due to
lower miscellaneous expenses (INL option of $400,000), costs are lower in
consulting expenses ($162,000 of stock option expense for consultants) as off
set by higher salary costs (up $150,000 from fiscal year 2000) and higher
accounting fees (up $60,000 from fiscal year 2000) and legal fees incurred
throughout the fiscal year. In the future, we expect direct costs to increase in
absolute dollar terms but to decrease as a percentage of revenues due to OTC
products reaching the market and the sale of additional product licenses. In the
future, we expect selling, general and administrative expenses to increase in
absolute dollars but to decrease as a percentage of revenues due to improved
economies of scale and higher overall revenues.

Interest Expense. Interest expense was $334,100 for 2001 as compared to $309,000
for 2000. This increase was due to the additional interest on accrued debt. This
interest is accrued at a rate of 9% simple interest per annum on funds advanced
to the Company by Petro-Med Inc. Our Company's Chief Executive Officer, Gerald
N. Kern, also serves as Chairman of Petro-Med Inc.

Net Income. Net income was approximately $563,000 for 2001 as compared to a net
loss of $1,150,000 for 2000. The decrease in net loss was due to the
extraordinary item resulting from forgiveness of accounts payable and debt. The
debt items which were forgiven had gone beyond any statute of limitations on the
collection of debt.

LIQUIDITY AND CAPITAL RESOURCES FOR THE YEARS ENDED MAY 31, 2001 AND 2000

     Since inception, we have funded our operations and investments in property
and equipment through cash from equity financings and cash from licensing fees.

     Our cash and cash equivalents were $161,600 at May 31, 2001 (up from
$114,800 at May 31, 2000). This increase was due to additional fees received
from INL.

     Net cash used in operations in 2001 was approximately $130,000, as compared
to cash provided by operations of $108,200 in 2000. Cash was used in operations
in fiscal year 2001 for payment of increased accounting, legal and travel
expenses.

                                       8

<PAGE>


     Net cash used in investing activities in 2001 was $3,200, which is due to
purchases of office equipment in 2001. There was no net cash used in investing
activities in 2000.

     Net cash provided by financing activities in 2001 was approximately
$180,000, as compared to $6,600 in 2000. This increase was due to proceeds
received from INL for stock options exercised, as offset by payments for
registration costs and repayment of advances from stockholders.

     On June 30, 2000, we entered into an investment agreement with Swartz
Private Equity, LLC which was amended and restated on February 15, 2001. The
investment agreement entitles us to issue and sell our common stock to Swartz
for up to an aggregate of $30 million from time to time during a three-year
period beginning on the date that the registration statement registering the
resale of these shares became effective, which was May 4, 2001. This is also
referred to as a put right. The trading volume limits the dollar amount of each
sale and a minimum period of time must occur between sales. In order to sell
shares to Swartz, there must be an effective registration statement on file with
the SEC covering the resale of the shares by Swartz and we must meet certain
other conditions.

     We have incurred recurring operating losses and positive cash flows from
operating activities and have negative working capital. We believe that our
available equity financing arrangement with Swartz will be sufficient to meet
our working capital and capital expenditure requirements for at least the next
two years. However, there can be no assurance that we will receive financing
from Swartz, that we will not require additional financing within this time
frame or that such additional financing, if needed, will be available on terms
acceptable to us, if at all.

Inflation
---------

The Company has no experience with respect to the effect of inflation on its
business. However, the pharmaceutical industry is well developed and, based on
management's understanding of industry experience, it believes that inflation
will not have a significant impact on the results of the Company's operations in
the future.


Item 7.  Financial Statements and Supplementary Data
----------------------------------------------------

The financial statements required by this item are set forth as indicated in
Item 14(a)(1).


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

     On July 16, 2001, the Company dismissed Singer Lewak Greenbaum & Goldstein,
LLP as its independent auditor. Singer Lewak Greenbaum & Goldstein, LLP's audit
reports on the Company's financial statements for the years ended May 31, 2000,
1999 and 1998 were included in the Company's Form 10-K, which was filed on
August 8, 2000. None of the audit reports contained an adverse opinion or
disclaimer of opinion; however, the audit reports for such periods did contain a
going concern qualification. The decision to dismiss Singer Lewak Greenbaum &
Goldstein, LLP was approved by the Company's Board of Directors.

     Management of the Company knows of no past disagreements between the
Company and Singer Lewak Greenbaum & Goldstein, LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure. There were no "reportable events" (as such term is defined in Item
304 of Regulation S-K) that occurred within the Company's two most recent fiscal
years nor any subsequent interim period preceding the replacement of Singer
Lewak Greenbaum & Goldstein, LLP.

     On July 17, 2001, the Company engaged Corbin & Wertz, which appointment was
approved by the Company's Board of Directors. During the Company's two most
recent fiscal years and any subsequent interim period prior to the engagement of
Corbin & Wertz, neither the Company nor anyone on the Company's behalf consulted
with Corbin & Wertz regarding either (i) the application of accounting
principles to a specified transaction, either contemplated or proposed, or the
type of audit opinion that might be rendered on the Company's financial
statements or (ii) any matter that was either the subject of a "disagreement" or
a "reportable event."

     The Company has authorized Singer Lewak Greenbaum & Goldstein, LLP to
respond fully to all inquiries of Corbin & Wertz.

                                       9

<PAGE>


                                    PART III


Item 9.  Directors and Executive Officers
-----------------------------------------

The present directors and executive officers of the Company are listed below,
together with brief accounts of their experience and certain other information.

Name                     Age     Office                     Year first elected
----                     ---     ------                     ------------------

Gerald N. Kern           63      Chairman of the Board,              1982
                                 Chief Executive Officer,
                                 Director

Cynthia S. Kern          51      Vice Chairman                       2001
                                 Secretary                           1983

Steven I. Kern           34      President and Director              2001
                                 Chief Operating Officer,            2000
                                 Chief Financial Officer

Lester F. Goldstein      57      Director                            1983

Harry Hall               66      Director                            1990


                                       10

<PAGE>


All officers serve at the pleasure of the board. Directors are elected for a
period of one year at our annual meeting of shareholders and serve until the
next annual meeting of shareholders or until their respective successors are
elected and qualified.

Gerald N. Kern
Chairman of the Board and Chief Executive Officer; Director

     Mr. Gerald N. Kern has been our Chairman of the Board and Chief Executive
Officer since July 1982 and has been a director of our Company since July 1982.
Mr. Kern served as our President from July 1982 until June 1995. From August
1996 to February 1998, Mr. Kern also served as Chairman of the Board, President
and Chief Executive Officer of GumTech International, Inc., a chewing gum
manufacturer. From August 1994 to August 1996, Mr. Kern served as President of
AURA Interactive, an electronics company. Since July 1982, he has served as
President and Chief Executive Officer and a director of Petro-Med, Inc., a
shareholder of our Company.

Steven I. Kern
President, Chief Operating Officer, Chief Financial Officer and Director

     Mr. Steven I. Kern has served as a director of our Company and as our
President since August 2001, and as our Chief Operating Officer and Chief
Financial Officer since February 2000. Prior to joining our Company, Mr. Kern
was the Vice President of Marketing for Financial Management Advisors, Inc. from
February 1999 to January 2000. From July 1996 to January 1999, Mr. Kern served
as a Vice President for Merrill Lynch in its Private Client Group. Mr. Kern was
also a Vice President for Smith Barney from October 1993 to July 1996. He
graduated from the University of California, Los Angeles with a B.A. in English.

Cynthia S. Kern
Vice Chairman, Director and Corporate Secretary

     Mrs. Kern has served as our Vice Chairman since August 2001, and as a
director of our Company and our Corporate Secretary since July 1982. She also
served as our President from 1995 until August 2001. Prior to joining our
Company, Mrs. Kern served as President and Treasurer of FSL Cosmetics, Ltd. Mrs.
Kern received a B.A. in English from the University of California, Los Angeles.

Lester F. Goldstein, Ph.D.
Director

     Dr. Goldstein has been a member of our Board of Directors since July 1982.
Since January 2000, Dr. Goldstein has served as the President and Chief
Operating Officer of Island Mist, a manufacturer of portable misting systems.
From April 1998 to January 2000, Dr. Goldstein was Vice President of Coast
Energy, a manufacturer of energy saving devices. From August 1996 to February
1998, Dr. Goldstein served as Executive Vice President of Gumtech International,
Inc., a chewing gum manufacturer, where he was responsible for operations. Prior
to that position, from July 1992 to August 1996 Dr. Goldstein served as Vice
President of AURA Systems, an electronics company. Dr. Goldstein obtained a B.A.
from Hofstra University in Physics and Mathematics and an M.S. and Ph.D. in
Physics from the Polytechnic University of New York.

Harry Hall
Director

     Mr. Hall has been a member of our Board of Directors since 1984. Mr. Hall
has over 30 years of corporate management experience. Since 1986, Mr. Hall has
been a principal at Hall & Associates, a sales and marketing consulting firm.
Mr. Hall is a graduate of Auburn University where he received a B.S. in Business
Administration and he has completed the Effective Executive Program at Wharton
University. Mr. Hall has also served as the President of the Consumer Affairs
Committee of the American Apparel Manufacturers Association.

     Mrs. Kern is the wife of, and Mr. Steven Kern is the son of, Mr. Gerald
Kern, our Chairman and Chief Executive Officer.


Item 10. Executive Compensation
-------------------------------

The following table sets forth all cash compensation for the fiscal years ended
May 31, 2001, 2000 and 1999 for (1) the Company's Chief Executive Officer and
(2) each of its most highly compensated executive officers whose aggregate cash
compensation exceeded $100,000.

                                       11

<PAGE>
<TABLE>
<CAPTION>

                                             SUMMARY COMPENSATION TABLE


------------------------------------- --------------------------------------- -------------------------------
                                      Annual Compensation                     Long-Term Compensation Award
------------------------------------- --------------------------------------- -------------------------------
                                                                                 Restricted        Securities
                                      Fiscal                                      Stock            Underlying
Name and Principal Position           Year            Salary         Bonus        Grants           Options
------------------------------------- ----------- -------------- ------------ ----------------- -------------
<S>                                   <C>         <C>                <C>         <C>                <C>
Gerald N. Kern                        2001        $ 150,000          $ 0          0                      0
   Chairman of the Board and          2000        $  54,000          $ 0          0              4,500,000
   Chief Executive Officer            1999        $ 108,000          $ 0          0                      0
------------------------------------- ----------- -------------- ------------ ----------------- -------------
Steven I. Kern                        2001        $ 120,000          $ 0          0                      0
   Chief Operating Officer and        2000        $       0          $ 0          0              2,500,000
   Chief Financial Officer            1999        $       0          $ 0          0                      0
------------------------------------- ----------- -------------- ------------ ----------------- -------------

</TABLE>

 (1)  Of the cash compensation set forth for Mr. Kern, $108,000 was accrued but
     unpaid in 1999.  No additional compensation was accrued in 2000 or 2001.

                                       12

<PAGE>
<TABLE>
<CAPTION>


OPTION EXERCISES AND FISCAL YEAR-END VALUES

     The following table provides information on option exercises in the fiscal
year ended May 31, 2001, by the Named Executive Officers and the value of
unexercised options held by the Named Executive Officers as of May 31, 2001.

------------------------- --------------- ----------- ---------------------------------- ----------------------------------
                                                               Number of
                                                         securities underlying                Value of unexercised
                              Shares                       unexercised options              in-the-money options at
                           acquired on      Value            at May 31, 2001                      May 31, 2001
Name                         Exercise      realized(1) Exercisable     Unexercisable      Exercisable(1)    Unexercisable
----                         --------      --------    -----------     -------------     ---------------   ---------------
<S>                          <C>           <C>          <C>                 <C>                   <C>            <C>
Gerald N. Kern               500,000       $57,500      1,500,000           0                     0              0
-------------------------    --------      --------    -----------     -------------     ---------------   ---------------
Steven I. Kern               500,000       $47,500      2,000,000           0              $190,000              0
-------------------------   ---------      --------    -----------     -------------     ---------------   ---------------
</TABLE>

(1) Based on the closing price of our common stock of $0.145 for the last
business day of the fiscal year ended May 31, 2001.

Employment Agreements

     We entered into an employment agreement with Gerald N. Kern dated as of
February 3, 2000 and approved by our directors on April 20, 2000, providing for
his employment as Chief Executive Officer effective February 3, 2000 and amended
on May 3, 2001. During the period between February 3, 2000 and May 3, 2001, Mr.
Kern acted in his capacities without accruing salary. The agreement was
contingent upon completion of the Swartz offering, which took place on May 3,
2001. The agreement provides for a three-year term and a base salary of $150,000
per annum for the first year with a minimum annual increase equal to the
consumer price index. He is also eligible for bonuses at the discretion of our
Board of Directors. Certain other expenses, such as a car allowance, travel and
expense account, will also be paid to him on a monthly basis. We may terminate
Mr. Kern's employment with or without cause. However, if we terminate him
without cause this would result in a lump sum severance payment, including the
unearned salary for the remainder of the term plus any prorated earned bonuses.
Also, upon a change of control, Mr. Kern may elect to terminate his employment
and obtain a lump sum severance payment equal to the base salary for the
remaining term of the agreement plus any prorated earned bonuses. In addition,
we subsequently granted to Mr. Kern an option to purchase 23,450,000 common
shares that vested immediately.

     On February 3, 2000 we entered into an employment agreement with Steven I.
Kern, which was approved by our directors on February 3, 2000 andamended on May
3, 2001, providing for his employment as Chief Operating Officer and Chief
Financial Officer. During the period between February 3, 2000 and May 3, 2001,
Mr. Kern acted in his capacities without accruing salary. The agreement was
contingent upon completion of the Swartz offering, which closing took place on
May 3, 2001. The agreement provides for a three-year term and a base salary of
$120,000 per annum. The base salary may be increased at the discretion of our
Board. The agreement provides for payment of certain expenses, such as a car
allowance, expense account and travel, and eligibility for executive bonuses at
the discretion of our Board of Directors. We may terminate Mr. Kern's employment
with or without cause. However, if we terminate him without cause this would
result in a lump sum severance payment equal to the remainder of the base salary
due under the agreement. If within 12 months of a change in control Mr. Kern's
employment is terminated other than for cause, or if Mr. Kern refuses to accept
or voluntarily resigns from a position other than a qualified position, then he
will receive a lump sum severance payment equal to 12 months of his then current
salary. In addition, we subsequently granted to Mr. Kern an option to purchase
21,450,000 common shares that vested immediately.

                                       13

<PAGE>

Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------


     The following table sets forth, as of August 30, 2001, the stock ownership
of each officer and director of our Company, of all our officers and directors
as a group, and of each person known by us to be a beneficial owner of five
percent or more of our common stock. Except as otherwise noted, each person
listed below is the sole beneficial owner of the shares and has sole investment
and voting power over such shares. Unless otherwise indicated, the address of
each named beneficial owner is the same as that of our principal executive
offices located at 10105 E. Via Linda, No. 103, Scottsdale, Arizona 85258.

    Name and Address                   Amount and Nature of        Percentage of
    of Beneficial Owner(1)             Beneficial Ownership             Class
    -------------------                --------------------             -----

    Gerald N. Kern                         57,716,794(2)                32.8%

    Petro-Med, Inc.                        26,256,794                   17.4%

    Steven I. Kern                         23,805,000(3)                13.7%

    Cynthia S. Kern                         2,855,000(4)                 1.9%

    Lester Goldstein                          990,000(5)                  *

    Harry Hall                                800,000(6)                  *

    Immune Network, Limited                 9,145,000                    6.9%
    3650 Wesbrook Mall
    Vancouver, Canada, BC V6S ZLZ

    All directors & officers               86,166,794                   42.9%
    as a group (5 persons)

* Less than 1%.

     (1)  Beneficial ownership has been determined in accordance with Rule 13d-3
          under the Securities Exchange Act of 1934. Pursuant to the rules of
          the Securities and Exchange Commission, shares of common stock that
          each named person and group has the right to acquire within 60 days
          pursuant to options, warrants, conversion privileges or other rights,
          are deemed outstanding for purposes of computing shares beneficially
          owned by and the percentage ownership of each such person and group.
          However, such shares are not deemed outstanding for purposes of
          computing the shares beneficially owned by or percentage ownership of
          any other person or group.

     (2)  Mr. Kern is the Chairman of the Board and Chief Executive Officer of
          Petro-Med, Inc. and may be deemed the beneficial owner of the
          26,256,794 shares owned by Petro-Med, Inc. Includes 24,950,000 shares
          issuable upon exercise of outstanding stock options. Does not include
          an aggregate of 25,210,000 shares of our common stock beneficially
          owned by Mr. Kern's spouse and adult children. Mr. Kern disclaims
          beneficial ownership of the shares held by such persons.

     (3)  Includes 23,450,000 shares issuable upon exercise of outstanding stock
          options.

     (4)  Includes 500,000 shares issuable upon exercise of outstanding stock
          options. Does not include an aggregate of 7,260,000 shares of common
          stock held by Ms. Kern's spouse and adult children. Ms. Kern disclaims
          beneficial ownership of the shares held by such persons.

     (5)  Includes 450,000 shares issuable upon exercise of outstanding stock
          purchase warrants.

     (6)  Includes 450,000 shares issuable upon exercise of outstanding stock
          purchase warrants.

                                       14

<PAGE>

The directors of Petro-Med are Gerald N. Kern, Harry Hall and Jerry Tennant.
Gerald N. Kern is the Chairman, President and Chief Executive Officer of
Petro-Med.

Petro-Med may be deemed a "parent" or "promoter" of the Company under the
Securities Act. Gerald N. Kern may be deemed a "parent" of Petro-Med and
therefore a "parent" of the Company under the Securities Act.

The following table sets forth, as of May 31, 2001, the shares of common stock
of Petro-Med owned of record and beneficially by certain officers and directors
of the Company and by all such officers and directors of the Company as a group.

Name                             Shares Owned             Percentage of Class
----                             ------------             -------------------

Gerald N. Kern                   3,613,840 (1)                  15.85%

Lester F. Goldstein                  8,000                        .04%

All Directors and Officers       3,621,840                      15.89%
as a group (4 persons)

(1) 2,087,270 shares are owned by FSL Cosmetics, Ltd., of which Gerald N. Kern
is the sole shareholder. Cynthia S. Kern, as the wife of Gerald N. Kern, may be
deemed, as a result of community property laws, to be a beneficial owner of 50%
of the shares owned by Mr. Kern.

Except for Gerald N. Kern, the above table does not include those persons who
beneficially own more than 5% of Petro-Med's outstanding common stock, which
persons are Sergei Givotovsky who owns 1,683,640 shares, and Lakestone
Acceptance Corp., who owns 1,370,000 shares or approximately 7.4% and 6%
respectively.


Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

For a description of employment agreements between the Company and certain
officers, see "Directors and Executive Officers of the Registrant - Employment
Agreements."

                                       15

<PAGE>


                                     Part IV

Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

         A.  Documents filed with report:

                  1.  Financial statements and financial statement schedules.

                       The financial statements and financial statement
                       schedules listed in the accompanying index to financial
                       statements are filed as part of this report.

                  2.   Exhibits.

                        The exhibits listed on the accompanying index to
                        exhibits are filed are filed as part of this report.

         B.       Reports on Form 8-k

                        None.
--------------------------------------------------------------------------------


                                       16
<PAGE>


                                   Signatures

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

Meditech Pharmaceuticals, Inc.

By:  /s/  Gerald N. Kern
-----------------------------------------------------
          Gerald N. Kern, Chairman and Chief Executive Officer

Dated: September 13, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and/or the class indicated.

/s/  Gerald N. Kern                          Dated:   September 13, 2001
-----------------------------
     Gerald N. Kern, Chairman and
     Chief Executive Officer

/s/  Steven I. Kern                          Dated:   September 13, 2001
-----------------------------
     Steven I. Kern, Director, President,
     Chief Operating Officer and
     Chief Financial Officer

/s/  Cynthia S. Kern                         Dated:   September 13, 2001
-----------------------------
     Cynthia S. Kern, Vice Chairman,
     Director and Secretary

/s/  Harry Hall                              Dated:   September 13, 2001
-----------------------------
     Harry Hall, Director

/s/  Lester F. Goldstein                     Dated:   September 13, 2001
-----------------------------
     Lester F. Goldstein, Director

                                       17

<PAGE>


                                   MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                               CONSOLIDATED FINANCIAL STATEMENTS

                                       For The Years Ended May 31, 2001 and 2000

                                                                            with

                                           INDEPENDENT AUDITORS' REPORTS THEREON


================================================================================

<PAGE>


                                   MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                                               TABLE OF CONTENTS

================================================================================





INDEPENDENT AUDITORS' REPORTS............................................F-1-F-2

CONSOLIDATED FINANCIAL STATEMENTS

       Consolidated Balance Sheet as of May 31, 2001.........................F-3

       Consolidated Statements of Operations for the years ended
         May 31, 2001and 2000................................................F-4

       Consolidated Statements of Stockholders' Deficit for the years
         ended May 31, 2001and 2000.....................................F-5-F-13

       Consolidated Statements of Cash Flows for the years ended
         May 31, 2001and 2000...............................................F-14

       Notes to Consolidated Financial Statements for the years ended
         May 31, 2001and 2000..........................................F-15-F-29

<PAGE>


                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
Meditech Pharmaceuticals, Inc.

We have audited the accompanying consolidated balance sheet of Meditech
Pharmaceuticals, Inc. and subsidiary (development stage companies) as of May 31,
2001, and the related consolidated statements of operations, stockholders'
deficit and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides 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 Meditech
Pharmaceuticals, Inc. and subsidiary as of May 31, 2001, and the results of
their consolidated operations and their consolidated cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. During the years ended May
31, 2001 and 2000, the Company incurred net loss before extraordinary item of
$842,537 and net loss of $1,150,100, respectively. In addition, at May 31, 2001,
the Company's deficit accumulated during development stage was $15,488,905 and
had negative working capital of $6,858,971. Recovery of the Company's assets is
dependent upon future events, the outcome of which is indeterminable. In
addition, successful completion of the Company's transition, ultimately, to the
attainment of profitable operations is dependent upon obtaining adequate
financing to fulfill its development activities and achieving a level of sales
adequate to support the Company's cost structure. These factors, among others,
as discussed in Note 2 to the consolidated financial statements, raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.




                                            CORBIN & WERTZ

Irvine, California
August 24, 2001


                                                                             F-1
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors and Stockholders
Meditech Pharmaceuticals, Inc.

We have audited the accompanying consolidated statement of operations and cash
flows of Meditech Pharmaceuticals, Inc. and subsidiary (development stage
companies) for the year ended May 31, 2000, and the statements of stockholders'
deficit for the four years ended May 31, 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 have not
audited the consolidated statements of operations, the consolidated statements
of stockholders' deficit, and the consolidated statements of cash flows for the
periods from May 4, 1982 (inception) to May 31, 1996, which constituted
accumulated deficits aggregating to $12,621,500. These periods have been audited
by other auditors.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of their operations and cash flows
of Meditech Pharmaceuticals, Inc. and subsidiary as of May 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. During the year ended May 31,
2000, the Company incurred a net loss of $1,150,100. In addition, the Company's
accumulated deficit was $16,051,600 as of May 31, 2000. Recovery of the
Company's assets is dependent upon future events, the outcome of which is
indeterminable. In addition, successful completion of the Company's transition,
ultimately, to the attainment of profitable operations is dependent upon
obtaining adequate financing to fulfill its development activities and achieving
a level of sales adequate to support the Company's cost structure. These
factors, among others, as discussed in Note 2 to the consolidated financial
statements, raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
November 8, 2000, except for
the fifth paragraph of Note 4,
as to which the date is
November 30, 2000

                                                                             F-2

<PAGE>
<TABLE>
<CAPTION>


                                        MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                        (Development Stage Companies)

                                                           CONSOLIDATED BALANCE SHEET

=====================================================================================





ASSETS                                                                  May 31, 2001
                                                                        ------------

Current assets:
     <S>                                                                <C>
     Cash                                                               $    161,600
                                                                        ------------
         Total current assets                                                161,600

Property and equipment, net of accumulated depreciation of $1,100              2,100
Other assets                                                                   7,843
                                                                        ------------

                                                                        $    171,543
                                                                        ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
     Accounts payable and accrued expenses                              $    264,321
     Accrued compensation                                                  2,814,350
     Advances from affiliates                                              3,941,900
                                                                        ------------
         Total current liabilities                                         7,020,571
                                                                        ------------

Minority interest in consolidated subsidiary                                 191,300
                                                                        ------------

Commitments and contingencies

Stockholders' deficit:
     Preferred stock, $0.001 par value; 25,000,000 shares authorized;
       no shares issued and outstanding                                         --
     Common stock, $0.001 par value; 400,000,000 shares authorized;
       148,818,487 shares issued and outstanding                             148,805
     Subscriptions receivable                                               (213,404)
     Additional paid-in capital                                            8,513,176
     Deficit accumulated during development stage                        (15,488,905)
                                                                        ------------
         Total stockholders' deficit                                      (7,040,328)
                                                                        ------------

                                                                        $    171,543
                                                                        ============


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

                                                See independent auditors' reports and
                              accompanying notes to consolidated financial statements
                                                                                  F-3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                                   MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                                                   (Development Stage Companies)

                                                                           CONSOLIDATED STATEMENTS OF OPERATIONS

================================================================================================================



                                                                                                For The Period
                                                               For The Year     For The Year   May 4, 1982 (Date
                                                                  Ended            Ended       of Inception) to
                                                               May 31, 2001     May 31, 2000     May 31, 2001
                                                              -------------    -------------    -------------
<S>                                                           <C>              <C>              <C>
Revenue                                                       $     100,000    $      25,000    $     125,000
                                                              -------------    -------------    -------------

Operating expenses:
     Research and development                                         6,500            1,200        1,844,800
     General and administrative                                     601,937          864,900       12,684,937
     Aborted stock offering costs                                      --               --            325,400
                                                              -------------    -------------    -------------
         Total operating expenses                                   608,437          866,100       14,855,137
                                                              -------------    -------------    -------------

Loss before other income (expense)                                 (508,437)        (841,100)     (14,730,137)
                                                              -------------    -------------    -------------

Other income (expense):
     Interest expense                                              (338,100)        (309,000)      (2,871,900)
     Interest income                                                  4,000             --            302,500
     Other income, net                                                 --               --             75,600
                                                              -------------    -------------    -------------
         Total other income (expense)                              (334,100)        (309,000)      (2,493,800)
                                                              -------------    -------------    -------------

Loss before minority interest in losses of subsidiary
  and extraordinary item                                           (842,537)      (1,150,100)     (17,223,937)

Minority interest in losses of subsidiary                              --               --            329,800
                                                              -------------    -------------    -------------
Loss before extraordinary item                                     (842,537)      (1,150,100)     (16,894,137)

Extraordinary item - Gain on forgiveness of debt,
  net of income taxes of $0                                       1,405,232             --          1,405,232
                                                              -------------    -------------    -------------

Net income (loss)                                             $     562,695    $  (1,150,100)   $ (15,488,905)
                                                              =============    =============    =============

Net loss available to common shareholders per common share:

Loss before extraordinary item                                $       (0.01)   $       (0.01)

Extraordinary item - gain on forgiveness of debt                       0.01             --
                                                              -------------    -------------

Income (loss) per common share                                $        --      $       (0.01)
                                                              =============    =============

Weighted average shares outstanding                             140,897,179      136,272,691
                                                              =============    =============


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

                                                                           See independent auditors' reports and
                                                         accompanying notes to consolidated financial statements
                                                                                                             F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                     MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                     (Development Stage Companies)

                                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

               For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

==================================================================================



                                    Common Stock               Treasury Stock
                             -------------------------   -------------------------
                               Shares         Amount       Shares        Amount
                             -----------   -----------   -----------   -----------
<S>                           <C>          <C>                 <C>     <C>
Initial capitalization        48,000,000   $    48,000          --     $      --

Net loss                            --            --            --            --
                             -----------   -----------   -----------   -----------

Balance, May 31, 1983         48,000,000        48,000          --            --

Private placement of stock     4,715,000         4,700          --            --

Initial public offering       13,200,000        13,200          --            --

Offering costs                      --            --            --            --

Cash on sale of common
  stock to officer                50,000            50          --            --

Compensation on stock
  issued to officer               50,000            50          --            --

Net loss                            --            --            --            --
                             -----------   -----------   -----------   -----------

Balance, May 31, 1984         66,015,000        66,000          --            --

Net loss                            --            --            --            --
                             -----------   -----------   -----------   -----------

Balance, May 31, 1985         66,015,000        66,000          --            --


----------------------------------------------------------------------------------
Continued...
                                                                               F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                       MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                       (Development Stage Companies)

                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

                 For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

====================================================================================



                                                            Deficit
                                                          Accumulated
                                            Additional    During the
                            Subscriptions    Paid-in      Development
                              Receivable     Capital         Stage          Total
                             -----------   -----------    -----------    -----------
<S>                          <C>           <C>            <C>            <C>
Initial capitalization       $      --     $   529,400    $      --      $   577,400

Net loss                            --            --       (1,022,600)    (1,022,600)
                             -----------   -----------    -----------    -----------

Balance, May 31, 1983               --         529,400     (1,022,600)      (445,200)

Private placement of stock          --         584,700           --          589,400

Initial public offering             --       3,946,800           --        3,960,000

Offering costs                      --        (935,435)          --         (935,435)

Cash on sale of common
  stock to officer                  --           7,450           --            7,500

Compensation on stock
  issued to officer                 --          20,500           --           20,550

Net loss                            --            --       (1,338,400)    (1,338,400)
                             -----------   -----------    -----------    -----------

Balance, May 31, 1984               --       4,153,415     (2,361,000)     1,858,415

Net loss                            --            --       (1,794,100)    (1,794,100)
                             -----------   -----------    -----------    -----------

Balance, May 31, 1985               --       4,153,415     (4,155,100)        64,315


------------------------------------------------------------------------------------
Continued...
                                                                                F-5A
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                       MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                       (Development Stage Companies)

                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                 For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

====================================================================================



                                          Common Stock            Treasury Stock
                                   -----------------------   -----------------------
                                     Shares       Amount       Shares       Amount
                                   ----------   ----------   ----------   ----------
<S>                                <C>              <C>      <C>              <C>
Issuance of stock for
  subscriptions to officer          8,000,000        8,000         --           --

Issuance of options for services
  to consultants                         --           --           --           --

Net loss                                 --           --           --           --
                                   ----------   ----------   ----------   ----------

Balance, May 31, 1986              74,015,000       74,000         --           --

Conversion of advances from
  affiliates                       10,000,000       10,000         --           --

Rescission of common stock
  issued to officer and held in
  treasury                               --           --      8,000,000         --

Issuance of shares for services
  rendered                            310,000          300         --           --

Issuance of Viral Research
  Technologies, Inc. common
  stock for services                     --           --           --           --


------------------------------------------------------------------------------------
Continued...
                                                                                 F-6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                          MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                          (Development Stage Companies)

                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                    For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

=======================================================================================



                                                                 Deficit
                                                               Accumulated
                                                 Additional    During the
                                 Subscriptions    Paid-in      Development
                                   Receivable     Capital         Stage         Total
                                   ----------    ----------    ----------    ----------
<S>                                <C>            <C>          <C>           <C>
Issuance of stock for
  subscriptions to officer         (1,440,000)    1,440,000          --           8,000

Issuance of options for services
  to consultants                         --         160,200          --         160,200

Net loss                                 --            --      (1,533,800)   (1,533,800)
                                   ----------    ----------    ----------    ----------

Balance, May 31, 1986              (1,440,000)    5,753,615    (5,688,900)   (1,301,285)

Conversion of advances from
  affiliates                             --         549,900          --         559,900

Rescission of common stock
  issued to officer and held in
  treasury                          1,440,000    (1,440,000)         --            --

Issuance of shares for services
  rendered                               --          77,900          --          78,200

Issuance of Viral Research
  Technologies, Inc. common
  stock for services                     --         296,700          --         296,700


---------------------------------------------------------------------------------------
Continued...
                                                                                   F-6A
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                       MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                       (Development Stage Companies)

                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                 For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

====================================================================================



                                          Common Stock            Treasury Stock
                                   -----------------------   -----------------------
                                     Shares       Amount       Shares       Amount
                                   ----------   ----------   ----------   ----------
<S>                                <C>          <C>          <C>          <C>
Issuance of Viral Research
  Technologies, Inc. options
  for services                           --           --           --           --

Issuance of options for services         --           --           --           --

Net loss                                 --           --           --           --
                                   ----------   ----------   ----------   ----------

Balance, May 31, 1987              84,325,000       84,300    8,000,000         --

Issuance of shares to
  consultants for services          1,540,000        1,500         --           --

Stock options exercised               366,000          400         --           --

Stock options issued to
  employees and consultants              --           --           --           --

Issuance of common stock of
  subsidiary                             --           --           --           --

Net loss                                 --           --           --           --
                                   ----------   ----------   ----------   ----------

Balance, May 31, 1988              86,231,000       86,200    8,000,000         --


------------------------------------------------------------------------------------
Continued...
                                                                                 F-7
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                         MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                         (Development Stage Companies)

                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                   For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

======================================================================================



                                                               Deficit
                                                             Accumulated
                                                 Additional  During the
                                 Subscriptions    Paid-in    Development
                                   Receivable     Capital       Stage         Total
                                   ----------   ----------   ----------    ----------
<S>                                     <C>      <C>         <C>           <C>
Issuance of Viral Research
  Technologies, Inc. options
  for services                           --        190,400         --         190,400

Issuance of options for services         --         42,200         --          42,200

Net loss                                 --           --     (1,706,300)   (1,706,300)
                                   ----------   ----------   ----------    ----------

Balance, May 31, 1987                    --      5,470,715   (7,395,200)   (1,840,185)

Issuance of shares to
  consultants for services               --        125,800         --         127,300

Stock options exercised                  --          9,500         --           9,900

Stock options issued to
  employees and consultants              --         13,800         --          13,800

Issuance of common stock of
  subsidiary                             --        290,000         --         290,000

Net loss                                 --           --       (880,200)     (880,200)
                                   ----------   ----------   ----------    ----------

Balance, May 31, 1988                    --      5,909,815   (8,275,400)   (2,279,385)


--------------------------------------------------------------------------------------
Continued...
                                                                                  F-7A
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                                                      MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                                                                      (Development Stage Companies)

                                                                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                                                                For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

===================================================================================================================================



                                                                                                            Deficit
                                                                                                          Accumulated
                                   Common Stock             Treasury Stock                    Additional  During the
                             -----------------------   ----------------------- Subscriptions   Paid-in    Development
                               Shares       Amount       Shares       Amount     Receivable    Capital       Stage          Total
                             ----------   ----------   ----------   ----------   ----------   ----------   ----------    ----------
<S>                          <C>             <C>       <C>                <C>         <C>     <C>          <C>           <C>
Common stock issued to
  officer                     8,000,000        8,000         --           --           --       72,000         --          80,000

Stock options issued to
  employees and consultants        --           --           --           --           --         15,600         --          15,600

Sale of common stock          2,756,832        2,800         --           --           --        131,600         --         134,400

Net loss                           --           --           --           --           --           --       (641,400)     (641,400)
                             ----------   ----------   ----------   ----------   ----------   ----------   ----------    ----------

Balance, May 31, 1989        96,987,832       97,000    8,000,000         --           --      6,129,015   (8,916,800)   (2,690,785)

Sale of common stock            100,000          100         --           --           --          3,200         --           3,300

Stock options issued to
  employees                        --           --           --           --           --          7,300         --           7,300

Net loss                           --           --           --           --           --           --       (522,000)     (522,000)
                             ----------   ----------   ----------   ----------   ----------   ----------   ----------    ----------

Balance, May 31, 1990        97,087,832       97,100    8,000,000         --           --      6,139,515   (9,438,800)   (3,202,185)

Stock issued for services     2,750,000        2,800         --           --           --         38,300         --          41,100


-----------------------------------------------------------------------------------------------------------------------------------
Continued...
                                                                                                                                F-8
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                       MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                       (Development Stage Companies)

                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                 For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

====================================================================================



                                      Common Stock               Treasury Stock
                               -------------------------   -------------------------
                                  Shares       Amount        Shares         Amount
                               -----------   -----------   -----------   -----------
<S>                            <C>            <C>          <C>           <C>
Net loss                              --            --            --            --
                               -----------   -----------   -----------   -----------

Balance, May 31, 1991           99,837,832        99,900     8,000,000          --

Sale of common stock             2,000,000         2,000          --            --

Net loss                              --            --            --            --
                               -----------   -----------   -----------   -----------

Balance, May 31, 1992          101,837,832       101,900     8,000,000          --

Net loss                              --            --            --            --
                               -----------   -----------   -----------   -----------

Balance, May 31, 1993          101,837,832       101,900     8,000,000          --

Stock issued for services        7,385,300         7,400          --            --

Net loss                              --            --            --            --
                               -----------   -----------   -----------   -----------

Balance, May 31, 1994          109,223,132       109,300     8,000,000          --

Committed stock for services          --            --            --            --

Net loss                              --            --            --            --
                               -----------   -----------   -----------   -----------


------------------------------------------------------------------------------------
Continued...
                                                                                 F-9
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                         MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                         (Development Stage Companies)

                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                   For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

======================================================================================



                                                             Deficit
                                                           Accumulated
                                              Additional   During the
                              Subscriptions    Paid-in     Development
                               Receivable      Capital        Stage          Total
                               -----------   -----------   -----------    -----------
<S>                                  <C>      <C>           <C>            <C>
Net loss                              --            --        (479,100)      (479,100)
                               -----------   -----------   -----------    -----------

Balance, May 31, 1991                 --       6,177,815    (9,917,900)    (3,640,185)

Sale of common stock                  --          29,400          --           31,400

Net loss                              --            --        (483,100)      (483,100)
                               -----------   -----------   -----------    -----------

Balance, May 31, 1992                 --       6,207,215   (10,401,000)    (4,091,885)

Net loss                              --            --        (449,400)      (449,400)
                               -----------   -----------   -----------    -----------

Balance, May 31, 1993                 --       6,207,215   (10,850,400)    (4,541,285)

Stock issued for services             --         208,400          --          215,800

Net loss                              --            --        (753,900)      (753,900)
                               -----------   -----------   -----------    -----------

Balance, May 31, 1994                 --       6,415,615   (11,604,300)    (5,079,385)

Committed stock for services          --          13,600          --           13,600

Net loss                              --            --        (515,600)      (515,600)
                               -----------   -----------   -----------    -----------


-------------------------------------------------------------------------------------
Continued...
                                                                                 F-9A
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                      MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                      (Development Stage Companies)

                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

===================================================================================



                                    Common Stock                Treasury Stock
                              -------------------------   -------------------------
                                Shares        Amount         Shares        Amount
                              -----------   -----------   -----------   -----------
<S>                          <C>               <C>         <C>             <C>
Balance, May 31, 1995         109,223,132       109,300     8,000,000          --

Net loss                             --            --            --            --
                              -----------   -----------   -----------   -----------

Balance, May 31, 1996         109,223,132       109,300     8,000,000          --

Stock issued for services       3,360,300         3,300          --            --

Stock issued to employees
  as compensation              11,980,000        12,000          --            --

Net loss                             --            --            --            --
                              -----------   -----------   -----------   -----------

Balance, May 31, 1997         124,563,432       124,600     8,000,000          --

Net loss                             --            --            --            --
                              -----------   -----------   -----------   -----------

Balance, May 31, 1998         124,563,432       124,600     8,000,000          --

Stock issued to employees       3,500,000         3,500          --            --

Stock issued to consultants
  for services                  1,300,000         1,300          --            --


-----------------------------------------------------------------------------------
Continued...
                                                                               F-10
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                       MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                       (Development Stage Companies)

                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                 For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

====================================================================================



                                                            Deficit
                                                          Accumulated
                                             Additional   During the
                             Subscriptions    Paid-in     Development
                               Receivable     Capital        Stage          Total
                              -----------   -----------   -----------    -----------
<S>                                 <C>       <C>          <C>            <C>
Balance, May 31, 1995                --       6,429,215    (12,119,900)   (5,581,385)

Net loss                             --            --        (501,600)      (501,600)
                              -----------   -----------   -----------    -----------

Balance, May 31, 1996                --       6,429,215   (12,621,500)    (6,082,985)

Stock issued for services            --          89,100          --           92,400

Stock issued to employees
  as compensation                    --         322,900          --          334,900

Net loss                             --            --        (957,400)      (957,400)
                              -----------   -----------   -----------    -----------

Balance, May 31, 1997                --       6,841,215   (13,578,900)    (6,613,085)

Net loss                             --            --        (555,200)      (555,200)
                              -----------   -----------   -----------    -----------

Balance, May 31, 1998                --       6,841,215   (14,134,100)    (7,168,285)

Stock issued to employees            --         120,000          --          123,500

Stock issued to consultants
  for services                       --          51,700          --           53,000


------------------------------------------------------------------------------------
Continued...
                                                                               F-10A
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                           MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                           (Development Stage Companies)

                            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                     For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

========================================================================================



                                          Common Stock               Treasury Stock
                                   -------------------------   -------------------------
                                     Shares         Amount        Shares        Amount
                                   -----------   -----------   -----------   -----------
<S>                                <C>           <C>           <C>           <C>
Net loss                                  --            --            --            --
                                   -----------   -----------   -----------   -----------

Balance, May 31, 1999              129,363,432       129,400     8,000,000          --

Stock issued to employees
  as compensation                      450,000           400          --            --

Stock issued to vendors
  for services                       1,400,000         1,400          --            --

Exercise of options for
  accrued compensation               5,000,000         5,000          --            --

Exercise of options for
  subscriptions receivable             500,000           500          --            --

Stock options issued to
  consultants                             --            --            --            --

Stock option issued to employees          --            --            --            --

Contributed services                      --            --            --            --


----------------------------------------------------------------------------------------
Continued...
                                                                                    F-11
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                            MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                             (Development Stage Companies)

                              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                       For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

==========================================================================================



                                                                  Deficit
                                                                Accumulated
                                                  Additional    During the
                                  Subscriptions     Paid-in     Development
                                    Receivable      Capital        Stage          Total
                                   -----------    -----------   -----------    -----------
<S>                                   <C>          <C>          <C>             <C>
Net loss                                  --             --        (767,400)      (767,400)
                                   -----------    -----------   -----------    -----------

Balance, May 31, 1999                     --        7,012,915   (14,901,500)    (7,759,185)

Stock issued to employees
  as compensation                         --           10,850          --           11,250

Stock issued to vendors
  for services                            --           73,600          --           75,000

Exercise of options for
  accrued compensation                    --           45,000          --           50,000

Exercise of options for
  subscriptions receivable             (10,000)         9,500          --             --

Stock options issued to
  consultants                             --           29,000          --           29,000

Stock option issued to employees          --           35,435          --           35,435

Contributed services                      --          126,900          --          126,900


------------------------------------------------------------------------------------------
Continued...
                                                                                     F-11A
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                         MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                         (Development Stage Companies)

                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                   For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

======================================================================================



                                         Common Stock              Treasury Stock
                                 -------------------------   -------------------------
                                    Shares        Amount       Shares        Amount
                                 -----------   -----------   -----------   -----------
<S>                              <C>            <C>           <C>                <C>
Stock options issued to Immune
  Network Research, Ltd.                --            --            --            --

Net loss                                --            --            --            --
                                 -----------   -----------   -----------   -----------

Balance, May 31, 2000            136,713,432       136,700     8,000,000          --

Exercise of Immune Network
 Research, Ltd. stock option      10,000,000        10,000          --            --

Contributed services                    --            --            --            --

Employee option exercise           1,500,000         1,500          --            --

Exercise of put option to
 Swartz LLC                          605,055           605          --            --

Shares to be returned from
  Swartz LLC                            --            --         894,945          --

Costs incurred to register
  common stock                          --            --            --            --


---------------------------------------------------------------------------------------
Continued...
                                                                                   F-12
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                            MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                            (Development Stage Companies)

                             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                      For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

=========================================================================================



                                                                 Deficit
                                                               Accumulated
                                                 Additional    During the
                                Subscriptions     Paid-in      Development
                                 Receivable       Capital         Stage          Total
                                 -----------    -----------    -----------    -----------
<S>                                <C>            <C>          <C>             <C>
Stock options issued to Immune
  Network Research, Ltd.                --          400,000           --          400,000

Net loss                                --             --       (1,150,100)    (1,150,100)
                                 -----------    -----------    -----------    -----------

Balance, May 31, 2000                (10,000)     7,743,200    (16,051,600)    (8,181,700)

Exercise of Immune Network
 Research, Ltd. stock option            --          290,000           --          300,000

Contributed services                    --          336,150           --          336,150

Employee option exercise            (155,000)       153,500           --             --

Exercise of put option to
 Swartz LLC                          (48,404)        47,799           --             --

Shares to be returned from
  Swartz LLC                            --             --             --             --

Costs incurred to register
  common stock                          --          (76,973)          --          (76,973)


-----------------------------------------------------------------------------------------
Continued...
                                                                                    F-12A
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                      MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                      (Development Stage Companies)

                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

===================================================================================



                                  Common Stock                 Treasury Stock
                          ---------------------------   ---------------------------
                             Shares         Amount         Shares         Amount
                          ------------   ------------   ------------   ------------
<S>                        <C>           <C>             <C>                  <C>
Stock options issued to
 consultants                      --             --             --             --

Net income                        --             --             --             --
                          ------------   ------------   ------------   ------------

Balance May 31, 2001       148,818,487   $    148,805      8,894,945           --
                          ============   ============   ============   ============


-----------------------------------------------------------------------------------
                                              See independent auditors' reports and
                            accompanying notes to consolidated financial statements
                                                                               F-13
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                        MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                        (Development Stage Companies)

                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - CONTINUED

                  For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

=====================================================================================



                                                          Deficit
                                                         Accumulated
                                           Additional    During the
                          Subscriptions     Paid-in      Development
                           Receivable       Capital         Stage            Total
                          ------------    ------------   ------------    ------------
<S>                       <C>             <C>            <C>             <C>
Stock options issued to
 consultants                      --            19,500           --            19,500

Net income                        --              --          562,695         562,695
                          ------------    ------------   ------------    ------------

Balance May 31, 2001      $   (213,404)   $  8,513,176   $(15,488,905)   $ (7,040,328)
                          ============    ============   ============    ============


-------------------------------------------------------------------------------------
                                                See independent auditors' reports and
                              accompanying notes to consolidated financial statements
                                                                                F-13A
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                                       MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                                                       (Development Stage Companies)

                                                                               CONSOLIDATED STATEMENTS OF CASH FLOWS

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


                                                                                                     For The Period
                                                                                                       May 4, 1982
                                                                       For The Year    For The Year     (Date of
                                                                       Ended May 31,   Ended May 31,  Inception) to
                                                                           2001            2000        May 31, 2001
                                                                       ------------    ------------    ------------

Cash flows from operating activities:
     <S>                                                              <C>             <C>             <C>
     Net income (loss)                                                 $    562,695    $ (1,150,100)   $(15,488,905)
     Adjustments to reconcile net income (loss) to
       net cash (used in) provided by  operating activities:
         Depreciation and amortization                                        1,100            --           137,300
         Warrants and options issued to employees and
           vendors                                                           19,500          86,200         794,600
         Minority interest in losses of subsidiary                             --              --          (329,800)
         Stock issued to employees and vendors                                 --           514,500       1,667,300
         Contributed services                                               336,150         126,900         463,050
         Accrued interest on advances from affiliates                       338,100         309,000       2,871,900
         Gain on forgiveness of debt                                     (1,405,232)           --        (1,405,232)
         Changes in operating assets and liabilities:
              Other assets                                                   (5,143)         (2,100)         (8,443)
              Accounts payable and accrued expenses                          96,053          53,700       1,598,553
              Accrued compensation                                           27,250          70,100       2,814,350
              Deferred revenue                                             (100,000)        100,000            --
                                                                       ------------    ------------    ------------

     Net cash (used in) provided by operating activities                   (129,527)        108,200      (6,885,327)
                                                                       ------------    ------------    ------------

Cash flows used in investing activities:
     Purchases of furniture and equipment                                    (3,200)           --          (138,800)
                                                                       ------------    ------------    ------------

Cash flows from financing activities:
     Proceeds from advances from affiliates, net                               --             6,600       2,250,800
     Proceeds from loan payable                                                --              --            71,000
     Proceeds from sale of stock, net                                          --              --         4,684,400
     Proceeds from exercise of options                                      300,000            --           300,000
     Costs incurred to register securities                                  (76,973)           --           (76,973)
     Principal payments on advances from stockholder                        (43,500)           --           (43,500)
                                                                       ------------    ------------    ------------

     Net cash provided by financing activities                              179,527           6,600       7,185,727
                                                                       ------------    ------------    ------------

Net increase in cash                                                         46,800         114,800         161,600

Cash, beginning of period                                                   114,800            --              --
                                                                       ------------    ------------    ------------

Cash, end of period                                                    $    161,600    $    114,800    $    161,600
                                                                       ============    ============    ============


Supplemental disclosure of cash flow information:
 Cash paid during the period
     for:
         Interest                                                      $       --      $       --      $       --
                                                                       ============    ============    ============
         Income taxes                                                  $       --      $       --      $       --
                                                                       ============    ============    ============


See accompanying notes to consolidated financial statements for a detail of non-cash investing and financing
activities.


-------------------------------------------------------------------------------------------------------------------
                                                                              See independent auditors' reports and
                                                            accompanying notes to consolidated financial statements
                                                                                                               F-14
</TABLE>

<PAGE>


                                   MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


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

Meditech Pharmaceuticals, Inc. ("Meditech") is a drug development company, which
is focused in the areas of research, development and marketing in the biomedical
industry, with an emphasis on anti-infective drugs. Meditech was incorporated in
Nevada on March 21, 1983. Since then, it has been engaged in research and
development activities associated with bringing its products to market.

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

Principles of Consolidation
---------------------------

The consolidated financial statements include the accounts of Meditech and its
37% owned and controlled subsidiary Viral Research Technologies, Inc. ("Viral")
(collectively, the "Company"). All significant intercompany transactions and
balances have been eliminated in consolidation.

Development Stage Enterprise
----------------------------

The Company is a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development
Stage Enterprises." The Company is devoting substantially all of its present
efforts to establish a new business, and its planned principal operations have
not yet commenced. The Company has not generated significant revenues from
operations and has no assurance of any future revenues. All losses accumulated
since inception have been considered as part of the Company's development stage
activities. The Company will require substantial additional funding for
continuing research and development, obtaining regulatory approval and for the
commercialization of its products. There is no assurance that the Company will
be able to obtain sufficient additional funds when needed, or that such funds,
will be obtainable on terms satisfactory to the Company. The Company's products,
to the extent they may be deemed medical devices or biologics, are governed by
the Federal Food, Drug and Cosmetics Act and by the regulations of state
agencies and various foreign government agencies. There can be no assurance that
the Company will maintain or obtain the regulatory approvals required to market
its products.

Basis of Presentation
---------------------

The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern. The
Company incurred a net loss before extraordinary item of $842,537 and $1,150,100
during the years ended May 31, 2001 and 2000, respectively. In addition, at May
31, 2001, the Company had an accumulated deficit of $15,488,905, and had
negative working capital of $6,858,971. Management recognizes that the Company
must generate additional resources and the eventual achievement of sustained

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

                                                                            F-15

<PAGE>


                                   MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


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

profitable operations. Management's plans include obtaining additional capital
through equity financing and the extension of existing debt. However, no
assurance can be given that additional capital, if needed, will be available
when required or upon terms acceptable to the Company or that the Company will
be successful in its efforts to negotiate the extension of its existing debt.
The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts (including the realizability of long-lived assets under SFAS 121) or the
amount and classification of liabilities that might result from the outcome of
this uncertainty that might be necessary if the Company is unable to continue as
a going concern.

Estimates
---------

In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Cash and Cash Equivalents
-------------------------

For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with original maturity of three months or less to
be cash equivalents.

Offering Costs
--------------

Offering costs arose from warrants issued to the underwriter currently involved
with offerings of the Company's securities. Such costs were offset against
equity as the offering was successfully completed.

Revenue
-------

Revenue represents license fees that are recognized when earned over the period
of the applicable license agreement.

In December 1999, the Securities and Exchange Commission staff released Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition," to provide guidance
on the recognition, presentation, and disclosure of revenue in financial
statements. Changes in accounting to apply the guidance in SAB No. 101 may be
accounted for as a change in accounting principle effective January 1, 2000. The
adoption of SAB 101 did not have a material impact on the Company's financial
position and results of operations.

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

                                                                            F-16

<PAGE>


                                   MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


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

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

Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets,
which range from 3 to 5 years. Repairs and maintenance are charged to expense as
incurred while improvements are capitalized. Upon the sale or retirement of
property and equipment, the accounts are relieved of the cost and the related
accumulated depreciation, with any resulting gain or loss included in the
consolidated statement of operations.

Impairment of Long-Lived Assets
-------------------------------

The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount exceeds the fair value of the assets. Based on its analysis, the
Company believes that no impairment of the carrying value on its long-lived
assets exists at May 31, 2001. There can be no assurance, however, that market
conditions will not change or demands for the Company's products will continue
which could result in impairment on long-lived assets in the future.

Stock-Based Compensation
------------------------

The Company accounts for non-employee stock-based compensation under Statement
of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock
Based Compensation." SFAS 123 defines a fair value based method of accounting
for stock-based compensation. However, SFAS 123 allows an entity to continue to
measure compensation cost related to stock and stock options issued to employees
using the intrinsic method accounting prescribed by Accounting Principles Board
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." Under APB
25, compensation cost, if any, is recognized over the respective vesting period
based on the difference, on the date of grant, between the fair value of the
Company's common stock and the grant price. Entities electing to remain with the
accounting method of APB 25 must make pro forma disclosures of net income and
earnings per share, as if the fair value method of accounting defined in SFAS
123 had been applied. The Company has elected to account for its stock-based
compensation to employees under APB 25 (see Note 5).

In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "Accounting for
Certain Transactions Involving Stock Compensation," an interpretation of APB 25.
FIN 44 clarifies the application of APB 25 for (a) the definition of employee
for purposes of applying APB 25 (b) the criteria for determining whether a plan
qualifies as a non-compensatory plan, (c) the accounting consequence for various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, but certain provisions cover
specific events that occur after either December 15, 1998, or January 12, 2000.
The adoption of FIN 44 did not have a material effect on the financial
statements.

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

                                                                            F-17

<PAGE>


                                   MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


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

Income Taxes
------------

The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for the
tax consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each period end based
on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. A valuation allowance is
provided for significant deferred tax assets when it is more likely than not
that such assets will not be recovered.

Fair Value of Financial Instruments
-----------------------------------

The Company is required to estimate the fair value of all financial investments
included on its balance sheet at May 31, 2001. The Company considers the
carrying value of such amounts in the financial statements, including cash,
accounts payable and accrued expenses, and accrued compensation, to approximate
their fair value due to their short maturities. The fair value of advances from
affiliates are not determinable as the transactions are with related parties.

Concentrations of Credit Risk
-----------------------------

The financial instrument which potentially subjects the Company to
concentrations of credit risk is cash. The Company places its cash with high
quality financial institutions, and at times it may exceed the Federal Deposit
Insurance Corporation $100,000 insurance limit. As of May 31, 2001, uninsured
portions of cash amounted to $46,000.

Loss per Share
--------------

The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is
computed by dividing loss available to common stockholders by the
weighted-average number of common shares outstanding. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. For the years ended May 31, 2001 and 2000, the
Company incurred net losses (before extraordinary items); therefore, basic and
diluted loss per share are the same.

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

                                                                            F-18

<PAGE>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


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

Comprehensive Income
--------------------

The Company has adopted SFAS No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting comprehensive income and its
components in a financial statement. Comprehensive income as defined includes
all changes in equity (net assets) during a period from non-owner sources.
Examples of items to be included in comprehensive income, which are excluded
from net income, include foreign currency translation adjustments and unrealized
gains and losses on available-for-sale securities. Comprehensive income is not
presented in the Company's financial statements since the Company did not have
any of the items of comprehensive income in any period presented.

Segments of an Enterprise and Related Information
-------------------------------------------------

The Company has adopted Statement of Financial Accounting Standards No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 changes the way public companies report information about
segments of their business in their annual financial statements and requires
them to report selected segment information in their quarterly reports issued to
stockholders. It also require entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues and its major customers. As the Company operates in one
segment, the Company has not made segment disclosures in the accompanying
financial statements.

Accounting for Development Costs
--------------------------------

In March 2000, the Emerging Issues Task Force reached a consensus on Issue No.
00-2, "Accounting for Web Site Development Costs" ("EITF 00-2") to be applicable
to all web site development costs incurred for the quarter beginning after June
30, 2000. The consensus states that for specific website development costs, the
accounting for such costs should be accounted for under AICPA Statement of
Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer software
Developed or Obtained for Internal Use." The adoption of EITF 00-2 did not have
a material effect on the Company's financial statements.

Derivative Instruments
----------------------

The Company has adopted Statement of Financial Accounting Standards No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities."
SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities on the balance sheet at their fair
value. This statement is effective for financial statements for all fiscal
quarters of all fiscal years beginning after June 15, 2000 (as amended by SFAS
137 and 138). The adoption of this standard did not have a material impact on
the Company's results of operations, financial position or cash flows as it
currently does not engage in any derivative or hedging activities.

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

                                                                            F-19

<PAGE>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


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

Recent Accounting Pronouncement
-------------------------------

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143 ("SFAS 143"), "Accounting for Asset Retirement Obligations." SFAS 143
establishes standards associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. This statement is effective
for financial statements issued for fiscal years beginning after June 15, 2002.
The Company has not yet assessed the impact of this standard on its financial
statements, but does not expect the impact to be material.

Reclassifications
-----------------

Certain reclassifications have been made to the May 31, 2000 financial
statements to conform with the May 31, 2001 presentation.

NOTE 3 - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY
-----------------------------------------------------

On January 22, 1987, the Company and a 50% investor formed VRT, Inc. ("VRT"), a
Nevada corporation, for the purposes of developing a marketing strategy for its
products. On January 26, 1987, the Company granted certain exclusive rights to
VRT to market and distribute the Company's products. The agreement expired on
November 30, 1996.

On April 30, 1987, pursuant to a merger agreement, VRT was combined with Viral,
a Nevada corporation and an inactive public shell, which became the surviving
corporation. In the transaction, Viral issued 15,000,000 shares of common stock
to the Company and its investor for all outstanding shares of VRT. After the
merger, the Company owned 37% of Viral. Viral's Board of Directors is controlled
by officers and directors of the Company, whose Chief Executive Officer is the
Chairman. Additionally, the companies have the same management team, and Viral
is economically dependent on the Company to fund its continuing operations.
Therefore, Viral has been consolidated as it is effectively controlled by the
Company.

At May 31, 2001, the assets and liabilities of Viral were as follows:

         Assets
               Due from Meditech                                    $   400,000
                                                                    -----------
                     Total assets                                   $   400,000
                                                                    ===========

         Liabilities
               Accounts payable                                     $     5,000
               Due to Meditech                                          129,000
                                                                    ----------
                     Total liabilities                                  134,000

         Equity                                                         266,000
                                                                    -----------

                     Total liabilities and equity                   $   400,000
                                                                    ===========

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

                                                                            F-20

<PAGE>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


NOTE 3 - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY, continued
----------------------------------------------------------------

Amounts recorded in the minority interest on the accompanying balance sheet
represent the pro rata portion of Viral's equity attributable to minority
stockholders.

NOTE 4 - COMMITMENTS AND CONTINGENCIES
--------------------------------------

Leases
------

Currently, the Company uses its operating facilities, which are provided by its
Chief Executive Officer, without a lease. During the year ended May 31, 2001,
the Company incurred approximately $15,000 of rent expense related to this
lease. There is no guarantee the officer will be willing to provide these
facilities in the future (see Note 8).

Employment Agreements
---------------------

The Company entered into an employment agreement dated February 3, 2000 (amended
on May 3, 2001) with its Chief Executive Officer. The agreement is for a
three-year term beginning on March 15, 2000 and provides for a base salary of
$150,000 per annum for the first year with an increase at least equal to the
consumer price index over each succeeding year. The agreement provides for a
severance payment including the unearned salary for the remainder of the
contract plus any prorated earned bonuses in the event of termination without
cause or upon change of control. Additionally, on August 9, 2001 the Company
granted options to purchase 23,450,000 shares of common stock exercisable at
$0.056 per share and vesting immediately on the date of grant. No compensation
expense is to be recognized for the granting of these options as the exercise
price was equal to the market price on the date of grant.

The Company entered into an employment agreement dated February 3, 2000 (amended
May 3, 2001) with its Chief Financial Officer. The agreement is for a three-year
term beginning on March 15, 2000 and provides for a base salary of $120,000 per
annum for the first year with an increase at least equal to the consumer price
index over each succeeding year. The agreement provides for a severance payment
including the remainder of the base salary due under the agreement if the
officer is discharged without cause or if the officer is terminated within 12
months of a change of control of the Company. Additionally, on August 9, 2001
the Company granted options to purchase 21,450,000 shares of common stock
exercisable at $0.056 per share and vesting immediately on the date of grant. No
compensation expense is to be recognized for the granting of these options as
the exercise price was equal to the market price on the date of grant.

Litigation
----------

The Company may become involved in various legal proceedings and claims which
arise in the ordinary course of its business. Management does not believe that
these matters will have a material adverse effect on the Company's consolidated
position or results of operations.

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

                                                                            F-21

<PAGE>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


NOTE 4 - COMMITMENTS AND CONTINGENCIES, continued
-------------------------------------------------

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

On February 3, 2000, the Company received $25,000 from Immune Network Research,
Ltd. ("INR"), a Canadian pharmaceutical development company, under a letter of
intent. The payment was made for a one-year irrevocable option granting the
right to negotiate for an exclusive license for pharmaceutical applications
worldwide outside of the United States. The Company then received an additional
$100,000 from INR in anticipation of a definitive agreement. Under the terms of
the letter, if an agreement is reached, the Company will issue an option to INR
for up to 10,000,000 shares of common stock, exercisable at $0.03 per share. In
return, the Company will receive royalties equal to 7% of net sales for all
MTCH-24(TM) products sold and 4% of net sales for all Viraplex(R) products sold
by INR. The option was valued at $400,000 using the Black-Scholes option-pricing
model, which has been recorded as an operating expense on the date granted.

On May 25, 2001 the Company and INR entered into a definitive licensing
agreement, which terminated the letter of intent. Under this licensing agreement
the Company assigned its rights and interests in two applications of its
proprietary products. In consideration for the assignment INL agreed to pay a
royalty equal to 2% of the gross worldwide sales of each of the products. The
term of the royalty is the longer of 10 years or the life of any patent based on
the products. The Company has not yet recognized any licensing revenue related
to this agreement.

NOTE 5 - STOCKHOLDERS' DEFICIT
------------------------------

Preferred Stock
---------------

The Company is authorized to issue 25,000,000 shares of its $0.001 par value
preferred stock. The Company has not issued any preferred stock to date.

Common Stock
------------

In January 2000, the Company issued 450,000 shares of common stock to employees
for compensation. The shares were valued at $11,250.

In January 2000, the Company issued 1,400,000 shares of common stock to vendors
for services rendered. In connection with the issuance, the Company recorded
$75,000 in consulting expense.

In February 2000, holders of 5,000,000 employee options exercised their options
to purchase common stock for forgiveness of $50,000 of accrued compensation,
which represented the exercise price of the options.

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

                                                                            F-22

<PAGE>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


NOTE 5 - STOCKHOLDERS' DEFICIT, continued
-----------------------------------------

In February 2000, holders of 500,000 options exercised their option to purchase
common stock for a subscription receivable of $10,000.

In October 2000 and February 2001 holders of an aggregate 10,000,000 options
exercised their option to purchase common stock for cash of $300,000.

In May 2001 holders of 1,500,000 options exercised their option to purchase
common stock for a subscription receivable of $155,000.

In May 2001 the Company exercised a put option pursuant to an investment
agreement (see Note 6). Pursuant to the terms of the agreement the Company put
605,055 shares of its common stock to the investor for total proceeds of
$48,404, which was not received as of May 31, 2001 and has therefore been
recorded as a subscription receivable in the accompanying statement of
stockholders' deficit. The Company had originally put (and transferred)
1,500,000 shares of its common stock to the investor, but due to certain volume
restrictions the investor was obligated to purchase only 605,055 shares. The
Company is to receive back 894,945 shares which have not been sold, and has
presented these shares as treasury shares with no cost.

During the year ended May 31, 2001 the Company incurred $76,973 of expenses
related to registering securities underlying the investment agreement (Note 6).
These expenses have been offset against capital.

Stock Options
-------------

The Company has no formal stock option plan. From time to time, the Company
issues stock options pursuant to various agreements and other compensating
arrangements.

The following summarizes all transactions for the years ended May 31, 2001 and
2000 involving the Company's common stock purchase options.

On January 17, 2000, the Company issued options to purchase 5,000,000 shares of
common stock to employees and stockholders of the Company. The options are
exercisable at $0.21 per share for 2,500,000 options and $0.05 per share for
2,500,000 options and expire on February 3, 2007. The Company recognized $15,435
as compensation expense related to these options.

On February 1, 2000, the Company issued to employees of the Company options to
purchase 700,000 shares of common stock exercisable at $0.21 per share, vesting
immediately and expiring on May 1, 2007. No compensation expense was recognized
as the exercise price at the time of the grant approximated the fair market
value of the stock at the date of grant.

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

                                                                            F-23

<PAGE>
<TABLE>
<CAPTION>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


NOTE 5 - STOCKHOLDERS' DEFICIT, continued
-----------------------------------------

On February 1, 2000, the Company issued options to purchase 900,000 shares of
its common stock to consultants of the Company. The options are exercisable at
$0.21 per share and expire on May 31, 2006. Related to these options, the
Company recognized $27,000 in compensation expense, which represents the fair
market value of the options at the date of grant.

On February 1, 2000, the Company issued options to purchase 50,000 shares of its
common stock to a consultant of the Company. The options are exercisable at
$0.05 per share and expire on May 1, 2007. Related to these options, the Company
recognized consulting expense of $2,000.

During the year ended May 31, 2000, the Company issued options to purchase
5,800,000 shares of common stock exercisable at $0.01 per share, vesting
immediately and expiring on May 31, 2006 to employees of the Company. Related to
these options, the Company recognized $20,000 of compensation expense, which
represents the intrinsic value of the options. As of May 31, 2000, options
representing 300,000 shares of stock remained unexercised.

During the year ended May 31, 2000, the Company issued options to purchase
10,000,000 shares of common stock exercisable at $0.03 per share to INL as a
condition of the letter of intent signed between the two companies. These
options were vested immediately, and were exercisable for one year. Related to
the granting of these options the Company recognized $400,000 of compensation
expense, which represents the fair market value of the options at the date of
grant.

During the year ended May 31, 2001, the Company granted consultants options to
purchase 150,000 shares of common stock at an exercise price of $0.13 per share
valued at $19,300 (based on the Black-Scholes option pricing model pursuant to
SFAS 123). All of these options vested immediately. In accordance with SFAS 123,
the Company recorded compensation expense of approximately $19,500 under general
and administrative expenses in the accompanying statement of operations.

                                               2001                          2000
                                     --------------------------   --------------------------
                                                     Weighted                     Weighted
                                                 Average Exercise                  Average
                                       Options         Price        Options     Exercise Price
                                     -----------    -----------   -----------    -----------

<S>                                   <C>           <C>           <C>            <C>
Outstanding, beginning of year        16,950,000    $      0.08          --      $      0.00
     Granted                             150,000           0.13    22,450,000           0.06
     Exercised                       (11,500,000)          0.04    (5,500,000)          0.01
                                     -----------    -----------   -----------    -----------

Outstanding, end of year               5,600,000    $      0.14    16,950,000    $      0.08
                                     ===========    ===========   ===========    ===========

Exercisable, end of year               5,600,000    $      0.14    16,950,000    $      0.08
                                     ===========    ===========   ===========    ===========

Weighted average fair value of
  options granted                                   $      0.13                  $      0.03
                                                    ===========                  ===========

All of the options outstanding at May 31, 2001 have exercise prices between
$0.01 and $0.21 and a weighted average remaining contractual life of 3.7 years.

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

                                                                                        F-24

</TABLE>


<PAGE>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


NOTE 5 - STOCKHOLDERS' DEFICIT, continued
-----------------------------------------

Pro Forma Stock Option Information
----------------------------------

Pro forma information regarding net income is required by SFAS 123 and is
determined as if the Company had accounted for its employee stock options under
the fair value method pursuant to SFAS 123, rather than the method pursuant to
APB 25 as discussed in Note 2. The fair value of these options is estimated at
the date of grant based on the Black-Scholes options pricing model (the "Model")
with the following assumptions for the years ended May 31, 2001 and 2000,
respectively: risk free interest rate of 4.8% and 5.8%; expected dividend yield
of 0%; expected life of the options of 5 years; and volatility factor of the
expected market price of the Company's common stock of 190% and 90%.

The Model was developed for use in estimating the fair value of traded options
which have no vesting restrictions and are fully transferable. In addition, the
Model requires the input of highly subjective assumptions including the expected
stock price volatility. The Company's employee stock options have
characteristics significantly different from those of traded options; changes in
the subjective input assumptions can materially affect the fair value estimate.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option vesting period. Adjustments are made for
options forfeited prior to vesting. The effect on compensation expense and net
income had compensation cost for the Company's stock option issues been
determined based on fair value on the date of grant consistent with the
provisions of SFAS 123 is as follows for the years ended May 31:

                                                          2001         2000
                                                      -----------   -----------

Net income (loss), as reported                        $   562,695   $(1,150,100)

Additional compensation expense under SFAS 123               --        (176,000)
                                                      -----------   -----------

Pro forma net income (loss)                           $   562,695   $(1,326,100)
                                                      ===========   ===========

Pro forma net income (loss) per share                 $      --     $     (0.01)
                                                      ===========   ===========

Warrants
--------

From time to time, the Company issues warrants pursuant to various agreements.
On May 16, 2000, the Company issued warrants to purchase 7,000,000 shares of
common stock as a condition of entering into the investment agreement described
in Note 6. The warrants were exercisable immediately at $0.03 per share and are
to expire in 5 years. On June 30, 2000 the exercise price of these options was
modified to a variable exercise price which is determined by the trading price
of the Company's common stock on certain reset dates, as defined, but in no case
will the exercise price be less than $0.15 per share. No consulting expense is
to be recognized due to the fact that the warrants were issued in connection
with equity fund raising activities.

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

                                                                            F-25

<PAGE>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


NOTE 6 - INVESTMENT AGREEMENT
-----------------------------

On June 30, 2000, and subsequently amended on February 15, 2001, the Company
entered into an investment agreement with Swartz Private Equity, LLC ("Swartz").
The investment agreement entitles the Company to issue and sell common stock to
Swartz in the form of put rights for up to an aggregate of $30,000,000 from time
to time during a three-year period beginning on the date of an effective
registration statement which was May 3, 2001.

Under the agreement, in order to invoke a put right, the Company must provide
Swartz with at least 10 but not more than 20 business days advance notice of the
date on which the Company intends to exercise a put right and must indicate the
number of shares of common stock the Company intends to sell to Swartz. The
Company may also designate a maximum dollar amount of common stock (not to
exceed $2,000,000), which the Company will sell to Swartz during the put and/or
a minimum purchase price per common share at which Swartz may purchase shares
during the put. The number of shares of common stock sold to Swartz in a put may
not exceed the lesser of (i) 1,500,000 shares; (ii) 15% of the aggregate daily
reported trading volume of the Company's common shares, excluding certain block
trades, during the 20 business days after the date of a put notice, with certain
restrictions; (iii) 15% of the aggregate daily reported trading volume of common
shares during the 20 business days before the put date, excluding certain block
trades; or (iv) a number of shares that, when added to the number of shares
acquired by Swartz under the investment agreement during the 31 days preceding
the put date, would exceed 9.99% of the total number of shares of common stock
outstanding.

For each common share, Swartz will pay the Company the lesser of (i) the market
price for such put, minus $0.075 or (ii) 91% of the market price for the put.

Further, under the provisions of the agreement, during the term of the
investment agreement and for a period of one year thereafter, the Company is
prohibited from engaging in certain financing transactions involving the
Company's equity securities.

During the year ended May 31, 2001, the Company exercised a put option for
605,055 shares (see Note 5) for $48,404 in cash.

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

                                                                            F-26

<PAGE>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


NOTE 7 - INCOME TAXES
---------------------

Significant components of the Company's deferred tax assets and liabilities for
income taxes consisted of the following at May 31, 2001:

     Deferred tax assets:
         Reserve for finance charges                                $   439,000
         Accrued compensation                                         1,126,000
         Interest on related party advances                           1,148,000
         Net operating losses                                           965,000
         Valuation allowance                                         (3,678,000)
                                                                    -----------

              Net deferred tax asset                                $      --
                                                                    ===========

The valuation allowance decreased by $461,000 during the year ended May 31,
2001. No current provision for income taxes for the year ended May 31, 2001 and
2000 is required, since the Company absorbed previous net operating losses in
2001 and incurred losses in 2000.

As of May 31, 2001, the Company had net operating loss carryforwards of
approximately $3,015,000 and $4,525,000 for federal income tax reporting
purposes, which expire in 2020 and 2005, respectively.

NOTE 8 - RELATED PARTY TRANSACTIONS
-----------------------------------

Since inception, the Company has received advances from Petro-Med, Inc., an
affiliate, to fund its working capital requirements. At May 31, 2001, the
Company maintained short-term advances from affiliates of $3,941,900 which are
due on demand. Accrued interest is attributed to the outstanding balance as
incurred. The advances bear interest at 9% per annum on any outstanding balance.
Interest expense on the advances was $338,100, and $309,000 for the years ended
May 31, 2001 and 2000, respectively.

At May 31, 2000, the Company maintained unsecured advances from stockholders in
the amount of $43,500. The advances were unsecured, non-interest-bearing, and
are payable on demand. These advances were paid back to the stockholders during
the year ended May 31, 2001

Due to cash shortages, the Company has accrued deferred salaries and related
taxes payable to certain officers who are stockholders and directors of the
Company. At May 31, 2001, the aggregate amount of accrued compensation was
$2,814,350 which is recorded under accrued compensation in the accompanying
balance sheet.

The Company has entered into certain employment agreements with its officers and
stockholders (see Note 4).

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

                                                                            F-27

<PAGE>
<TABLE>
<CAPTION>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


NOTE 8 - RELATED PARTY TRANSACTIONS, continued
----------------------------------------------

The Company maintains its primary place of business in facilities owned by the
Chief Executive Officer (see Note 4). In addition, the Company has not paid
compensation to its officers for the years ended May 31, 2001. Related to these
services and based on the salary per the employment agreements (see Note 4), the
Company has recorded expenses in the amount of $336,150 and $126,900 for the
year ended May 31, 2001 and 2000, which have been reflected as an increase in
additional paid-in capital in the accompanying statement of stockholders'
deficit.

NOTE 9 - EXTRAORDINARY ITEM
---------------------------

During fiscal year 2001, the Company recognized extraordinary gain on
retirements of debt, accounts payable and accrued interest in the amount of
$1,405,232. The relief of debt was due to the fact that the liabilities are no
longer enforceable against the Company.

NOTE 10 - EARNINGS PER SHARE
----------------------------

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the years ended May 31,
2001 and 2000.

                                                                              2001                 2000
                                                                        --------------        --------------
     Numerator for basic and diluted earning per share:
         <S>                                                            <C>                   <C>
         Loss before extraordinary item                                 $     (842,537)       $   (1,150,100)
         Extraordinary item                                                  1,405,232                  --
                                                                        --------------        --------------
              Net income (loss) charged to common
                stockholders                                            $      562,695        $   (1,150,100)
                                                                        ==============        ==============
     Denominator for basic and diluted earnings per share:
         Weighted average shares                                        $  140,897,179        $  136,472,691
                                                                        ==============        ==============
     Basic and diluted earnings per share:
         Loss before extraordinary item                                 $        (0.01)       $        (0.01)
         Extraordinary item                                                       0.01                  --
                                                                        --------------        --------------

              Income (loss) per common share                            $         --          $        (0.01)
                                                                        ==============        ==============

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

                                                                                                        F-28
</TABLE>

<PAGE>


                                  MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
                                                   (Development Stage Companies)

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For The Period May 4, 1982 (Date of Inception) Through May 31, 2001

================================================================================


NOTE 11 - SUBSEQUENT EVENTS
---------------------------

Subsequent to year end May 31, 2001, the Company exercised a put option pursuant
to the Investment Agreement (see Note 6) for 1,147,300 shares of its common
stock. The amount the Company is to receive for this put is not determined at
this time.

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

                                                                            F-29