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

                                   FORM 10-KSB

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

                        For the year ended June 30, 2005

                                       or

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

         For the transition period from ____________ to ________________

                        Commission file number: 000-28277

                            HERITAGE WORLDWIDE, INC.
                        ---------------------------------
                 (Name of Small Business Issuer in Its Charter)

                           Delaware                    13-4196258
              ----------------------------------- --------------------
                 (State or Other Jurisdiction of   (I.R.S. Employer
                  Incorporation or Organization)   Identification No.)


             337 Avenue de Bruxelles La Seyne-Sur-Mer (France) 83507
           -----------------------------------------------------------
              (Address of Principal Executive Offices) (Zip Code)

                              (011) (33) 494-109810
                        ---------------------------------
                (Issuer's Telephone Number, Including Area Code)

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

Securities registered under Section 12(g) of the Exchange Act:
         Common Stock, $.001 par value
         (Title of Class)

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X]

Issuer's revenues for its most recent fiscal year: $13,572,317

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates as of September 14, 2005, was approximately [$12,196,000].

The total  number  of shares of the  issuer's  common  stock,  $.001 par  value,
outstanding on September 14, 2005, was 17,410,299.

Transitional Small Business Disclosure Format:  Yes |_| No |X|

<PAGE>

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


Certain statements in this Annual Report constitute  forward-looking  statements
within the meaning of Section 21E of the  Securities  Exchange  Act of 1934,  as
amended  (the  "Exchange  Act").  These  include  statements  about  anticipated
financial  performance,   future  revenues  or  earnings,   business  prospects,
projected  ventures,  new products,  anticipated  market performance and similar
matters. The words "budgeted,"  "anticipate,"  "project,"  "estimate," "expect,"
"may,"  "believe,"  "potential" and similar  statements are intended to be among
the statements  that are  forward-looking  statements.  Because such  statements
reflect the reality of risk and  uncertainty  that is inherent in our  business,
actual  results may differ  materially  from those  expressed or implied by such
forward-looking statements. Some of these risks and uncertainties are related to
our current business  situation and include,  but are not limited to our lack of
sufficient  revenues  to cover  operating  expenses,  our  history of  operating
losses,  our need for additional  financing for working  capital  purposes,  the
uncertainty  about our ability to continue as a going concern and  dependence on
our current  management team.  Readers are cautioned not to place undue reliance
on these forward-looking  statements,  which are made as of the date this report
was filed with the Securities and Exchange Commission.

Readers are advised  that we  undertake no  obligation  to release  publicly any
revisions to the  forward-looking  statements to reflect events or circumstances
after the date hereof or to reflect unanticipated events or development.  To the
extent that the  information  presented in this Annual Report on Form 10-KSB for
the year ended June 30, 2005  discusses  financial  projections,  information or
expectations about our products or markets,  or otherwise makes statements about
future  events,  such  statements  are  forward-looking.  We  are  making  these
forward-looking  statements  in reliance on the safe  harbor  provisions  of the
Private Securities  Litigation Reform Act of 1995.  Although we believe that the
expectations  reflected  in  these  forward-looking   statements  are  based  on
reasonable assumptions, there are a number of risks and uncertainties that could
cause actual results to differ materially from such forward-looking  statements.
These risks and uncertainties  are described,  among other places in this Annual
Report, in "Management's  Discussion and Analysis of Financial Condition or Plan
of Operation."


                                       2

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

HISTORY

Heritage   Worldwide,   Inc.   ("Heritage"  or  the  "Company")  was  originally
incorporated  in  Louisiana  in 1983 and changed its domicile to Delaware in the
third quarter of 2001.

Heritage entered into an Acquisition  Agreement (the "Agreement") dated February
28, 2003 with Milo  Finance,  S.A.  ("Milo"),  a  Luxembourg  limited  liability
entity.  Milo was the principal  shareholder  of Poly Implants  Protheses,  S.A.
("PIP"),  a French limited liability entity formed in 1991 that manufactures and
internationally  distributes  breast  implants,  body support products and other
implants.  The  transactions  contemplated  by the Agreement  closed on March 1,
2003.  Under the terms of the Agreement,  the Company acquired 225,504 shares of
the capital stock of PIP from Milo,  which  represented  approximately  99.3% of
PIP's  outstanding  capital  stock.  As of June 30, 2005,  our  ownership of PIP
amounts to 93.27%, following a financing in October 2004 in which Milo increased
its ownership of PIP.

As consideration  for the PIP capital stock,  Heritage issued to Milo a total of
13,741,667  shares of its common  stock.  After the closing of the  acquisition,
Milo had direct and beneficial ownership and control of approximately 85% of the
outstanding common stock of the Company.  The common stock was issued to Milo in
a private  placement without  registration  under the Securities Act of 1933, as
amended (the "Securities Act.").

As one of the largest  manufacturer of breast implants sold in the international
market and manufacturer of body support products, the Company intends to develop
and market other implants.  The Company markets its products in approximately 45
countries worldwide. The Company previously sold certain breast implant products
in the U.S. market until May 2000, when due to changes in FDA  regulations,  the
Company withdrew its products. We intend to re-enter the U.S. market when we can
satisfy current FDA requirements relating to breast implants.  Meanwhile, during
fiscal 2005,  we have entered  numerous  new markets in Latin  America,  Eastern
Europe, and Australia.

STRATEGY

Our strategy in growing our operations consists of the following four-prong
approach:

     o    Expanding  the  geographical  markets in which we market our products.
          For example,  we intend to re-enter the U.S. market as soon as Medicor
          Ltd   ("Medicor"),   our  US   distributor,   satisfies   certain  FDA
          requirements on our behalf;

     o    Developing  and  enhancing  new products to meet the needs of existing
          and  potential  users,  physicians  and  patients,  such as developing
          different body support products;

     o    Developing and maintaining strategic technology relationships allowing
          us to improve  existing  product  offerings and to develop new product
          lines; and

     o    Developing and maintaining our  distribution  channels,  from which we
          can leverage the efforts of national,  regional and local distributors
          in order to comply with the respective governmental regulations and to
          increase our knowledge of markets in which such distributors operate.

PRODUCTS

Our principal products are breast implants. We develop,  manufacture, and market
a diverse line of such implants,  consisting of a variety of shapes,  sizes, and
textures.  Our primary breast  implants  consist of a silicone shell filled with
silicone  gel.  This  shell may be  produced  with  either a smooth or  textured
surface. Our breast implants are available in many variations to meet customers'
preferences  and  needs.  Our  breast  implants  are  sold  for  use  in  breast
augmentation for cosmetic  reasons and for  reconstructive  surgery  following a
mastectomy.

                                       3

<PAGE>

In 1993,  we  marketed  the first  saline  pre-filled  breast  implants.  Unlike
inflatable  implants,  they  do  not  require  additional  manipulations  during
surgery. Such manipulation can be a source of complications,  such as infection,
leakage and deflation.  Our saline  pre-filled breast implants were successfully
sold in the U.S. market until May 15, 2000, when, due to a change in certain FDA
regulations, we withdrew from the U.S. market.

We were the first  company  to  market  hydrogel  breast  implants,  which  were
developed in response to claimed  problems with silicone  implants.  We have not
yet distributed or sold hydrogel breast implants in the U.S. market.

In 2002,  we produced  the first  asymmetric  prostheses.  Asymmetric  protheses
consist of a set of two implants,  each of which is designed for one side of the
chest,  and is  specially  fitted to  conform to the shape of the  thorax.  This
design  alleviates  the risks of rotation  that exists in the case of  so-called
anatomical prostheses.

In March 2003, we entered into an agreement with GFE Medizintechnik GmbH ("GFE")
located in Nuremberg  Germany,  a  manufacturer  of  titanium-based  coating for
medical  devices.  Under the terms of the  agreement,  we have  obtained for six
years  (a)  the  exclusive  right  to  manufacture  breast  implants  using  the
titanium-based  coating  developed by GFE and (b) except for GFE, the  worldwide
exclusive right to distribute such implants.

The GFE  process  allows the  coating of the  silicone  based  shell of a breast
implant with a titanium/silicone  compound produced by a chemical reaction based
on  nano-technology.  The silicone  shell of the breast implant is coated inside
and outside by 20 layers of the silicon/titanium  compound,  followed by another
30 layers of pure titanium. This process is also applied to the closing patch of
the  implant.  Using  this  technology,  only the  titanium  coating  of the new
implants  will be in contact with the body of the  recipient.  Based on numerous
studies in the field of biology and  dentistry,  titanium is known for being one
of the most  biocompatible  materials  available and reduces the risk associated
with rejection of implants.

In December 2003, we received CE Mark ("Conformite Europeene") approval from the
European  Union  certifying  that our  titanium-coated  breast  implants met the
applicable health, safety, and environmental requirements. We are completing the
planning  phase of our  European  clinical  trials and  anticipate  that we will
market such breast implants in the European Union within 24 months.

In March 2004, our U.S. distributor (Medicor, Inc. and/or III Acquisition Corp.)
agreed  to  sponsor  the  regulatory  process  for  marketing  approval  of  our
saline-filled  breast  implant  products in the U.S. The exclusive  distribution
agreement  provides  that the  distributor  will  submit a  Pre-Market  Approval
("PMA") to the FDA by  December  2005 and allow  Medicor to  distribute  all our
products in the US. The agreement terminates in 2014 and may be extended for two
five-year periods at Medicor's options.  The agreement may be terminated earlier
if either we or Medicor compete directly or indirectly in the US. Should Medicor
fail to timely secure the FDA's acceptance of our products, Medicor will forgive
a debt we owe them amounting to approximately $1 million.  The Company is unable
to determine  whether the distributor will complete the required filings by such
date.

MANUFACTURING

We  are  an   "ISO9001-2000"   company.   The   International   Organization  of
Standardization  ("ISO") created this designation to award to organizations that
design, develop,  produce,  install, and service products in accordance with ISO
quality  control  standards.  Outside  the U.S.,  ISO9001  is the  international
standard for quality  assurance and quality design requiring those entities that
seek such award to satisfy twenty sets of quality system criteria.

We are also  certified as an ISO 13485  manufacturer.  ISO 13485  standards  are
analogous to ISO 9001 quality control standards but apply to manufacturing.  All
PIP products are CE Mark labeled and certified,  which allows them to be sold in
the European Community.  Manufacturing is performed in accordance with the FDA's
Good  Manufacturing  Practices and the equivalent French standard,  regulated by
the French Health Product Safety Agency ("AFSSAPS"), which is known as "BFP." We
are registered with ANVAR, a French agency that,  based under certain  criteria,
provides funding for those  registered on terms that can be  substantially  more
favorable than those available in the marketplace.

                                       4

<PAGE>

Our pre-filled  implants are manufactured by methods that are proprietary to us,
including,  in the case of gel-filled  implants, a French patent. We also hold a
U.S. and a European Community patent on certain of our breast implants.

COMPETITION AND MARKET

The number of breast augmentations  reportedly performed in the U.S. during 2004
was 250,000, which constitutes only a portion of the worldwide market for breast
implants.  Our  major  international  competitors  are  two  U.S.  based  public
companies,  Mentor Corp.  and Inamed  Corp.  Based on publicly  available  sales
figures,  these two  companies  rank first and second,  respectively,  in global
sales of breast implants.  Mentor and Inamed currently  control the U.S. market,
which  represents  the majority of the global  market.  We are currently  ranked
first in implant sales in Colombia and Great  Britain,  and second in France and
Spain.  We also  compete  internationally  with  Silimed,  Eurosilicone,  Nagor,
Laboratories  Sebbin  and  LPI.  Medicor,  which  is  also  our US  distributor,
purchased Eurosilicone in 2004. To our knowledge,  these companies tend to focus
their sales efforts on their own respective  regional or local  markets,  rather
than national or international markets.

Management  believes  that the  principal  factors  permitting  PIP  products to
compete effectively are:

     o    high-quality manufacturing;

     o    product design and product consistency;

     o    knowledge of and sensitivity to market demands;

     o    regulatory  and  marketing  knowledge  of local  markets  through  the
          selection of national and regional distributors;

     o    surgeons' familiarity with PIP's products and its brand names; and

     o    our  ability  to  identify   and  develop   products   embodying   new
          technologies.

DISTRIBUTION

We sell our products directly and indirectly  through  independent  distributors
and  sales  representatives  to  surgeons  and  clinics  in  approximately  [45]
countries   (with  the  exception  of  the  U.S.).   The  Company  also  employs
telemarketing,  which is designed to increase sales through  follow-up on leads,
and the distribution of product information to potential customers.  The Company
supplements  its  other  marketing  efforts  with  appearances  at trade  shows,
advertisements  in trade  journals,  sales  brochures,  and national  media.  In
addition,  the Company sponsors symposia and educational programs to familiarize
surgeons with the techniques and methods of using the Company's products.

Prior to its  withdrawal  from the U.S.  market in 2000, the Company sold breast
implants in that market under a non-exclusive  distribution  agreement. In March
2004,  the Company  entered into an agreement  with Medicor Ltd.  ("Medicor") in
which the Company  assigned its rights to market its breast implants in the U.S.
to Medicor. In exchange,  Medicor agreed to obtain the required FDA approvals to
distribute such products by December 2005. Additionally, the Company will become
the exclusive manufacturer of the breast implants of Medicor in the U.S.

During 2005, we have significantly  expanded the number of geographical  markets
in which we distribute  our products,  which are available in countries  such as
Brazil, Argentina, Russia, Australia, among others.

Two of our major customers  accounted for 16.4% and 13.3% of our revenues during
2005,  and 12.9% and 11.8% during 2004.  We are trying to diversify our customer
base and  introduce  our  products in new  countries to minimize  dependence  on
certain customers.

                                       5

<PAGE>

GOVERNMENT REGULATION

All of our current  products are medical devices  intended for human use. In the
U.S.,  implants such as those manufactured by PIP are subject to regulations and
approval by the FDA and state agencies. In certain other countries, implants are
subject to regulation and approval by their respective  health  agencies.  These
regulations  regulate the  manufacturing,  labeling,  record  keeping,  clinical
testing,  and  marketing  of such  implants  and most of our other  existing and
future products.  Seeking required approvals, and complying with applicable laws
and regulations on a continuing  basis,  requires the expenditure of substantial
resources.  Depending  on the  jurisdiction,  regulatory  approval,  when and if
obtained,  may be limited in scope,  which may significantly  limit the uses for
which  a  particular  product  may be  marketed.  Approved  products  and  their
manufacturers are subject to ongoing review, and discovery of previously unknown
problems  with such a product  may result in  restrictions  on its  manufacture,
sale, or use, or require its withdrawal from the market.

Specifically,  unless an  exemption  applies,  each  medical  device that we may
market  in  the  U.S.  in  the  future  will  require  510(k)   clearance  or  a
Pre-Marketing  Approval  ("PMA") in accordance with the Federal Food,  Drug, and
Cosmetic Act. The FDA regulations  issued pursuant to that Act set standards for
such  products,  require proof of safety and  effectiveness  prior to marketing,
require  safety data and  clinical  protocol  approval  prior to  evaluation  in
humans, establish "good manufacturing practices," and permit detailed inspection
of manufacturing facilities. These regulations also require reporting of product
defects to the FDA and  prohibit  export from the U.S. of any product  that does
not comply with FDA regulations, unless the product does comply with established
foreign  regulations  and,  in  addition,  the FDA and the health  agency of the
importing country determine that it is not contrary to public health.

FDA regulation  divides medical devices into three classes.  Breast implants are
now regulated as Class III medical devices. Class III devices are subject to the
most extensive  regulation and in most cases require  submission to the FDA of a
PMA application that includes information on the safety and effectiveness of the
device.  Other  products that we may market in the U.S. in the future may or may
not be regulated as Class III devices.

Until  May  15,  2000,  breast  implants  of  PIP  satisfied  then-existing  FDA
regulations.  However,  as a result of the concerns raised about silicone breast
implants,  the FDA  regulations  were changed to require  formal FDA approval of
implants  under the PMA  process.  Although PIP has never  manufactured  or sold
silicone-filled  breast  implants and had initiated the required  clinical study
for PMA approval of its breast implant  products being  distributed  and sold in
the U.S.  market,  not enough data was available by the  regulatory  deadline to
obtain FDA  approval  at that time.  As a result,  on May 15,  2000,  PIP breast
implants were removed from distribution in the U.S.

During  July  2005,  the FDA  has  approved,  with  some  pre-conditions,  a PMA
application to market  silicone gel filled breast implants in the US from one of
our  competitors,  Mentor,  Inc.  We are unable to  determine  whether  FDA will
ultimately  accept the  distribution  in the US of  silicone  gel-filled  breast
implants by us or any of our competitors.

Medicor,  the company  responsible in securing the required FDA approval for the
marketing of the Company's saline breast implants in the U.S., is in the process
of gathering all the critical information necessary to obtain such approval. The
Company is unable to determine  whether  Medicor will submit a complete PMA with
the FDA by December 2005.

Our products are subject to  regulation  in the  countries in which we currently
market  those  products  and are  likely to be subject  to  regulation  in other
countries  in which we may market them in the future.  Products  marketed in the
European  Community must comply with the  requirements  of the European  Medical
Device Directive,  or MDD, and be CE-marked to show their  acceptability in that
region. We have received CE approval for velvet  microtexturized breast implants
in December 2003 and for silicon-gelfree testicular prothesis in December 2003.


Medical device laws and regulations similar to those described above are also in
effect in some of the other  countries  in which our  products  are sold.  These
range from  comprehensive  device approval  requirements for some or all of such
medical device products, to requests for product data or certifications. Failure
to comply with these  regulatory  standards and requirements in any jurisdiction
could significantly adversely affect our ability to market and sell our products
in those jurisdictions.

                                       6

<PAGE>

RESEARCH AND DEVELOPMENT

The Company  focuses its  research and  development  efforts on  developing  new
products  and core  technologies  for its  markets  and  further  enhancing  the
reliability,  design,  and  consistency  of its existing  products.  The Company
solicits   extensive  input  concerning   product   development  from  surgeons,
distributors, and consumers.

During fiscal years 2005 and 2004, the Company incurred research and development
expenses of approximately  $1.1 million and $1.3 million,  respectively.  We own
three  patents.  We hold one patent in France for  certain of our  manufacturing
processes  associated  with the  gel-filled  implants,  as well as one  European
Community patent, and one U.S. patent for breast implants design. The French and
European  patents are valid for 20 years  while the U.S.  patent is valid for 15
years.

EMPLOYEES AND HEALTH AND SAFETY/ENVIRONMENTAL REGULATIONS.

As of June 30, 2005, the Company had 108 total and full-time employees in active
service. We consider our relations with our employees to be satisfactory.

We recognize the importance of being environmentally responsible and the need to
provide a safe and healthy  workplace  for our  employees by complying  with all
applicable laws,  rules,  and regulations.  During the past fiscal year, we have
received no  citations,  notices of  violations  or other  censures  from public
agencies  regulating  environmental  compliance  or our  employees'  health  and
safety. We do not expect to make any significant capital  expenditures to comply
with  environmental,  health,  or safety  regulations in fiscal 2006. We believe
that our current  systems and  processes  are adequate for our current needs and
for the foreseeable future.

ITEM 2.  DESCRIPTION OF PROPERTY

We  maintain  our  headquarters,  offices  and  manufacturing  facilities  in la
Seyne-sur-Mer in southern France.  This facility is approximately  33,000 square
feet. We rent such  facilities  from a real estate  holding  company in which we
hold an interest of 38.05%.  Our  Chairman of the Board,  Mr.  Jean-Claude  Mas,
holds an interest of approximately 30.5% in the real estate holding company. The
rental expense  associated with the French facilities  amounted to approximately
$488,000 and $475,000 during 2005 and 2004, respectively.

We also  have  office  facilities  of  approximately  4,000  square  feet in San
Sebastian,  Spain,  which we rent  from an  unaffiliated  entity  pursuant  to a
short-term  lease.  These  office  facilities  are  used for our  marketing  and
distribution   activities  in  Spain  and  Latin  America.  The  rental  expense
associated with the Spain facilities  amounted to  approximately  $10,000 during
each of 2005 and 2004.  We believe  that such  facilities  are  adequate for our
current activities and for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS


Each of the  following  are legal  proceedings  that have been filed against the
Company:

In October 1999, June 2000 and July 2003,  separate but related  complaints were
filed by Saul Kwartin, Ruth Kwartin,  Steven M. Kwartin, Robert Kwartin and Nina
Kwartin  against our  subsidiary  Poly  Implant  Protheses,  S.A.  ("PIP"),  III
Acquisition Corp. d/b/a PIP .America, PIP/USA, Inc., Jean Claude Mas, our former
CEO, personally, and others, in the Circuit Court of Miami-Dade County, Florida.
Plaintiffs  are all  members  of one family who  purport to be  shareholders  of
PIP/USA,  Inc., a distributor  of PIP,  suing  derivatively  on its behalf,  and
individually,  and seeking to rescind various  transactions between PIP .America
and PIP, and seeking to impose liability  against PIP and its  co-defendants for
unspecified monetary damages arising out of alleged tortious and other purported
wrongful acts concerning alleged relationships  between plaintiffs,  PIP and the
other defendants.

                                       7

<PAGE>

Initially, two cases were filed: one in October of 1999 by Saul and Ruth Kwartin
and assigned Case No.  99-25227-CA-01  and one in June of 2000 by Steven Kwartin
and  assigned  Case  No.  00-14665-CA-01.  Case  No.  99-25227  was  voluntarily
dismissed by the  Plaintiffs,  who then  unsuccessfully  tried to withdraw their
dismissal.  The Plaintiffs  then appealed.  In May of 2004, the appellate  court
affirmed the trial court's Order approving the voluntary dismissal.  A motion by
PIP/USA  and Mr. Mas to recover  their  attorneys'  fees is pending in the trial
court,  as is a motion to disqualify  the  Plaintiffs'  counsel in that lawsuit.
Case No.  00-14665-CA-01  by Steven Kwartin  remains  pending.  In June of 2003,
Robert and Nina Kwartin  commenced a lawsuit  assigned Case No.  03-15006.  That
lawsuit  remains  pending.  In  September of 2003,  Saul and Ruth Kwartin  filed
another  lawsuit  assigned Case No.  0322537-CA-27,  alleging  similar claims to
those  included  in the  dismissed  case.  Within a day or two of that  lawsuit,
Steven  Kwartin  filed his  second  lawsuit  assigned  Case No.  03-22399-CA-15,
against Mr. Mas and Donald McGhan only.

In November of 2003,  Jessica  Fischer  Schnebel and fifteen other women filed a
Second Amended  Consolidated  Class Action Complaint against PIP, PIP/USA,  Inc.
and III  Acquisition  Corp.  d/b/a PIP  .America  in the  Circuit  Court of Cook
County,  Illinois.  The  Second  Amended  Consolidated  Class  Action  Complaint
contains counts alleging product liability,  breach of the implied warranties of
merchantability and fitness for a particular purpose,  violation of the Illinois
Consumer Fraud Act and a contract claim alleging third-party beneficiary status.
Unspecified monetary damages, exemplary damages and attorneys fees and costs are
sought.  Motions to dismiss  filed by PIP and PIP .America  remains  pending and
discovery is  underway.  The  plaintiffs  have not sought to date to certify any
putative class.  Our U.S. distributor has tendered this case to PIP, for defense
and indemnity pursuant to the distributor agreement.

Salinas I. Landers, et al. v. Poly Implants Protheses, S.A., et al., Case No. CV
030377 was filed in June 2003 in the Superior  Court of San Luis Obispo  County,
California.  Plaintiffs  purport to sue on behalf of  themselves  and an alleged
class of persons allegedly  similarly situated for unspecific  monetary damages,
exemplary  damages,  attorneys' fees and costs and injunctive relief for alleged
breach of express warranty and alleged  violations of California's  Song-Beverly
Consumer Warranty Act and Unfair  Competition Law. This action was settled and a
dismissal of the action by the court is expected shortly.

Marsha Dicken, et al. v. PIP/USA,  Inc., et al., Case No. 2003-05588,  was filed
in  January  2003 in the  District  Court of Harris  County,  Texas.  Plaintiffs
purported  to sue on  behalf  of  themselves  and an  alleged  class of  persons
allegedly  similarly  situated for alleged strict  liability,  breach of express
warranty,  breach  of  implied  warranties,  violation  of  Section  402B of the
Restatement (Second) of Torts, negligence,  misrepresentations, and violation of
Texas'  Deceptive  Trade  Practices  Act  with  respect  to  implant   products.
Plaintiffs  seek  an  unspecified  amount  in  alleged   compensatory   damages,
additional  statutory  damages,   interest,   attorneys'  fees  and  costs.  The
Plaintiffs have since given up the class action  allegations of the petition and
the Court entered an Order on August 10, 2005, striking eighteen plaintiffs from
the lawsuit. The lawsuit is in the discovery phase Our distributor, PIP America,
has  settled  the  lawsuit  against it. PIP  .America  had,  prior to  settling,
tendered this case to Poly Implant Prostheses, S.A., for defense and indemnity.

PIP and PIP America were sued by Alice Holt in the Circuit Court of Lake County,
Illinois in May of 2003 for alleged product  liability and other related claims.
PIP denied any  liability  to the  Plaintiff  and  answered  the  Complaint  and
asserted  affirmative  defenses.  This  lawsuit  has been  settled and the Court
dismissed the lawsuit on May 10, 2005.

                                        8

<PAGE>

Heritage  Worldwide,  Inc.  and PIP and other  defendants  were sued by Madeline
Sanchez in New York Supreme Court in July of 2004 for alleged product  liability
and  other  related  claims.  Both  Heritage  Worldwide,  Inc.  and PIP deny any
liability  to the  Plaintiff  and  have  answered  the  Complaint  and  asserted
affirmative defenses. Discovery is ongoing.

PIP and PIP .America were sued by a Susan Largent in the United States  District
Court for the  District  of New  Mexico in  August of 2004 for  alleged  product
liability  and other related  claims.  PIP denies any liability to the Plaintiff
and has answered the Complaint and asserted affirmative defenses.

In April,  2005,  Heritage  Worldwide,  Inc. and PIP were sued in New York state
court by a New York law firm,  Morrison  Cohen,  Singer and  Weinstein,  LLP for
alleged  unpaid  legal fees and  expenses of  approximately  $165,000.  Heritage
removed the lawsuit to federal court, where it remains pending. Heritage has not
yet responded to the Complaint as a result of an extension obtained to do so and
PIP has not yet been served with process.

Though  it is not yet  possible  to  predict  the  outcome  of any of the  cases
described above, the Company and its  subsidiaries,  as applicable,  have denied
plaintiffs'  allegations and are vigorously defending themselves upon the merits
of each lawsuit and against  certification of any class in the Illinois Schnebel
lawsuit,  which  is the only  remaining  putative  class  action.  We have  been
informed by PIP .America that it is administering and fulfilling its obligations
to its customers in the ordinary course of business,  and for which it has taken
appropriate reserves.

Other  than  certain  of  its  own  product   replacement   claims  that  it  is
administering,  PIP .America is  indemnified  by PIP/USA,  Inc.,  Poly  Implants
Protheses,  S.A., and Jean Claude Mas,  personally,  from all claims,  including
those asserted above.  As a result,  the Company  believes the costs  associated
with these  matters  will not have a material  adverse  impact on the  Company's
business,  results of operations or financial position. The Company has recorded
a provision of approximately  $520,000 at June 30, 2005 in connection with these
matters.

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

None.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is quoted on the  Over-the-Counter  Bulletin  Board operated by
the National Association of Securities Dealers, Inc. Our shares are listed under
the symbol "HWWI."

The following table sets forth, for the fiscal quarters indicated,  the high and
low  closing   prices  per  share  of  our  common  stock  as  reported  on  the
Over-the-Counter  Bulletin  Board.  The quotations  reflect inter dealer prices,
without retail mark-up,  mark-down or commissions  and may not represent  actual
transactions.

                                       9

<PAGE>

         Year Ended June 30, 2005        High                  Low

         First Quarter                   2.70                   .38
         Second Quarter                  1.55                   .32
         Third Quarter                    .60                   .48
         Fourth Quarter                  1.01                   .48



         Year Ended June 30, 2004        High                  Low

         First Quarter                   3.35                  1.50
         Second Quarter                  5.24                  1.55
         Third Quarter                   8.50                  2.80
         Fourth Quarter                  4.75                  2.50

At August 22, 2005, the closing price for our common stock was $0.80.

At August 22, 2005, there were 17,410,299  shares of our common stock issued and
outstanding  and 1,175,000  options  issued or  outstanding,  which were granted
during  fiscal 2005.  There are  approximately  [95]  shareholders  of record at
August 22, 2005.  During the last two fiscal years,  no cash dividends have been
declared on our common stock and management  does not anticipate  that dividends
will be paid in the foreseeable future.

Equity Compensation Plan Information
<TABLE>
<CAPTION>

Heritage Worldwide Inc.             Number of securities      Weighted-average       Number of securities
2004 Stock Option Plan              to be issued upon         exercise price of      remaining available for
                                    exercise of outstanding   outstanding options,   future issuance under
                                    options, warrants,        warrants, and rights   equity compensation
                                    and rights                                       plans ( excluding
                                                                                     securities reflect in
                                                                                     column (a))

                                          (a)                        (b)                     (c)
<S>                                    <C>                          <C>                     <C>
Equity compensation plans
approved by security holders               -                          -                        -
Equity compensation plans not
approved by security holders           1,175,000                    $2.16                   825,000
                                       ---------                    -----                  --------
Total                                  1,175,000                    $2.16                   825,000
                                       ---------                    =====                  ========
</TABLE>

                                       10

<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
         OPERATION

Overview

We ceased making sales in the U.S. market in May 2000, as a result of changes in
FDA  regulations.  At that time, the U.S. market  represented  approximately  $4
million,  or 40% of our revenues.  We are continuing our efforts to re-enter the
U.S. market by conducting  extensive clinical trials, which is a prerequisite to
securing FDA approval.

We are also in the process of developing new products.  We are introducing a new
product  line of breast  implants  which is based on  titanium  coating.  We are
completing  the planning  phase of our European  clinical  trials and anticipate
that we will market such breast implants in the European Union within 24 months.
We  believe  that  the  costs  of  monitoring  the  clinical  trials  will  cost
approximately  $500,000 over this period. We will continue to invest in research
and  development  to enhance and  introduce new and existing  products.  To meet
these operational costs, we depend upon equity financings,  collaborations,  and
proceeds from short and long term debt.

Critical Accounting Policies and Estimates

A summary  of  significant  accounting  policies  is  provided  in Note 1 to our
consolidated  financial  statements  included  in this Form  10-KSB.  Management
believes that the  application of these  policies on a consistent  basis enables
the  Company to provide  useful and  reliable  financial  information  about the
Company's operating results and financial condition.

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

Stock-Based  Compensation.  We account for stock options  issued to employees in
accordance  with the provisions of Accounting  Principles  Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
As such, compensation cost is measured on the date of grant as the excess of the
current  market  price of the  underlying  stock over the exercise  price.  Such
compensation  amounts, if any, are amortized over the respective vesting periods
of the option  grant.  We adopted  the  disclosure  provisions  of SFAS No. 123,
"Accounting  for  Stock-Based   Compensation"  and  SFAS  148,  "Accounting  for
Stock-Based Compensation -Transition and Disclosure",  which permits entities to
provide  pro forma net  income  (loss) and pro forma  earnings  (loss) per share
disclosures for employee stock option grants as if the fair-valued  based method
defined in SFAS No. 123 had been applied. We account for stock options and stock
issued to non-employees  for goods or services in accordance with the fair value
method of SFAS 123.

Revenues.  We recognize  product  revenue,  net of estimated sales discounts and
returns and allowances,  in accordance with Staff  Accounting  Bulletin No. 104,
"Revenue  Recognition  in  Financial   Statements"  and  SFAS  No.  48  "Revenue
Recognition  When Right of Return  Exists." These  statements  established  that
revenue can be recognized when persuasive evidence of an arrangement exists, the
product has been shipped,  all  significant  contractual  obligations  have been
satisfied,  the fee is  fixed  or  determinable  and  collection  is  reasonably
assured.

Accounts  receivables  and related  allowance  for doubtful  accounts.  Accounts
receivable  are  reported  at net  realizable  value.  We  have  established  an
allowance for doubtful accounts based upon factors pertaining to the credit risk
of specific  customers,  historical trends,  and other  information.  Delinquent
accounts  are   written-off   when  it  is  determined   that  the  amounts  are
uncollectible.

Inventories.  Inventories  are  stated  at the  lower  of cost or  market,  cost
determined by the first-in, first-out (FIFO) method. The Company writes down its
inventory for estimated  obsolescence  or  unmarketable  inventory  equal to the
difference  between the cost of inventory and the  estimated  market value based
upon assumptions about future demand and market conditions.

                                       11

<PAGE>

Goodwill.  At June 30, 2005, we had approximately $1 million in indefinite lived
goodwill  related to our  acquisition  of our  subsidiary in Spain.  We evaluate
goodwill based on the future  contributing  margins of such  subsidiary.  We use
judgment  in  assessing  goodwill  for  impairment.  Goodwill  is  reviewed  for
impairment  annually,  or sooner if events or changes in circumstances  indicate
that the  carrying  amount  could  exceed fair  value.  Fair values are based on
discounted  cash flows using a discount rate  determined by our management to be
consistent  with industry  discount  rates and the risks inherent in our current
business  model.  In  accordance  with SFAS No. 142, we  completed  the required
impairment  tests of goodwill at the date of adoption  and annually as required.
There were no  impairment  charges  recorded as a result of the adoption of SFAS
No. 142 or annual  impairment  tests.  Due to uncertain  market  conditions  and
potential changes in our strategy and product portfolio, it is possible that the
forecasts we use to support our goodwill could change in the future, which could
result in non-cash charges that would adversely affect our results of operations
and financial condition.

Deferred Tax Assets. We are required to estimate our income taxes in each of the
jurisdictions  in which we  operate  as part of the  process  of  preparing  our
consolidated  financial  statements.  At June 30,  2004,  the Company has no net
deferred  tax assets.  SFAS No. 109,  Accounting  for Income  Taxes,  requires a
valuation  allowance to reduce the deferred tax assets reported if, based on the
weight of the evidence,  it is not more likely than not that some portion or all
of the  deferred tax assets will be realized.  Management  reviews  deferred tax
assets  periodically  for  recoverability  and  makes  estimates  and  judgments
regarding  the  expected  geographic  sources  of  taxable  income,  gains  from
investments,  as well as tax planning  strategies  in  assessing  the need for a
valuation  allowance.  We determined that a valuation allowance of approximately
$570,000  relating to foreign tax net operating loss carryovers was necessary to
reduce our  deferred  tax assets to the amount that will more likely than not be
realized.  If the estimates and assumptions used in our determination  change in
the  future,  we could be  required  to revise our  estimates  of the  valuation
allowances  against  our  deferred  tax assets and  adjust  our  provisions  for
additional  income taxes. In the ordinary course of global  business,  there are
transactions  for which the ultimate tax outcome is uncertain,  thus judgment is
required in determining the worldwide provision for income taxes. We provide for
income taxes on transactions based on our estimate of the probable liability. We
adjust our  provision  as  appropriate  for changes  that impact our  underlying
judgments.  Changes  that  impact  provision  estimates  include  such  items as
jurisdictional  interpretations  on tax filing positions based on the results of
tax audits and general tax authority rulings.  Due to the evolving nature of tax
rules combined with the large number of jurisdictions in which we operate, it is
possible  that our estimates of our tax  liability  and the  realization  of our
deferred tax assets could change in the future,  which may result in  additional
tax  liabilities  and  adversely  affect our  results of  operations,  financial
condition and cash flows.

Product replacements.  We provide a product replacement program on our products.
Management  estimated the amount of potential future product  replacement claims
based on statistical analysis.  Expected future obligations are determined based
on the history of product  shipments and  claimsand are  discounted to a current
value.  Changes to actual claims and interest rates could have a material impact
on the  statistical  calculation  which could  materially  impact the  Company's
reported expenses and results of operations.

Results of Operations

           CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                                                                                     Increase/       Increase/
                                                For the Year Ended                  (Decrease)      (Decrease)
                                                    June 30,                       2004 vs 2003    2004 vs 2003
                                        -----------------------------------------
                                               2005                   2004               $               %
                                        ------------------     --------------------------------------------------
<S>                                          <C>                    <C>               <C>                  <C>
Revenues                                     $ 13,572,317           $ 11,729,777      $1,842,540           15.7%

Cost of revenues                                6,022,825              6,797,037        (774,212)         -11.4%
                                        ------------------     --------------------------------------------------

     Gross Profit                               7,549,492              4,932,740       2,616,752           53.0%
                                        ------------------     --------------------------------------------------

Operating expenses:
  Selling, general and administrative           4,939,083              7,460,244      (2,521,161)         -33.8%
  Write-down of obsolete inventory                      -                755,264        (755,264)            NM
  Research and development                      1,068,139              1,283,420        (215,281)         -16.8%
                                        ------------------     --------------------------------------------------

     Total operating expenses                   6,007,222              9,498,928      (3,491,706)         -36.8%
                                        ------------------     --------------------------------------------------

Loss before other expenses and
Operating income (loss)                         1,542,270             (4,566,188)      6,108,458         -133.8%
                                        ------------------     --------------------------------------------------

Other expenses:
  Other expense                                         -                (57,175)         57,175         -100.0%
 Gain (loss) in equity investment                  70,101                (62,421)        132,522             NM
  Interest expense                               (664,841)              (339,633)       (325,208)          95.8%
                                        ------------------     --------------------------------------------------

     Total other expenses                        (594,740)              (459,229)       (135,511)          29.5%
                                        ------------------     --------------------------------------------------

 Income (loss) before provision for
    income taxes                                  947,530             (5,025,417)      5,972,947         -118.9%

  Provision for from income taxes                       -               (572,348)        572,348         -100.0%
                                        ------------------     --------------------------------------------------

Income (loss) before minority interest            947,530             (5,597,765)      6,545,295         -116.9%

Minority interest                                 (66,046)               (32,684)        (33,362)         102.1%
                                        ------------------     --------------------------------------------------

Net income (loss)                                 881,484             (5,630,449)     $6,511,933         -115.7%
                                        ==================     ==================================================
</TABLE>


NM: not meaningful


Year Ended June 30, 2005 Compared with Year Ended June 30, 2004

   Revenues

Revenues consist primarily of the sale of breast implants and other body support
products.  Revenues in fiscal 2005 increased by approximately  $1.8 million when
compared to fiscal 2004. The increase in revenues is primarily  attributable  to
increased  volume of breast implants sold to existing  distributors in countries
other  than  France  of $2.8  million  offset  by a  decreased  volume of breast
implants in France of  approximately  $800,000 and an increase in provision  for
returns of approximately $200,000.

                                       12

<PAGE>

   Cost of Revenues

Cost of revenues  consists  primarily  of materials  and direct  labor  expenses
associated  with the  production  of breast  implants.  Costs of revenues,  as a
percentage of revenues, decreased in fiscal 2005 by 14% to 44%, when compared to
fiscal 2004.  The  decrease of cost of revenues as a  percentage  of revenues is
primarily  due  to  reduced  costs  of  direct  labor   resulting   from  higher
productivity and procurement efficiencies.

   Gross Profit

Gross  profit  increased  in fiscal  2005 by  approximately  $2.6  million  when
compared to fiscal 2004.  The increase is  primarily  attributable  to increased
sales of breast  implants  and by reduced  direct  labor  costs and  procurement
efficiencies.

   Selling and General Administrative Expenses

Selling,  general and administrative  expenses consist primarily of compensation
and related  benefits of sales  representatives  which  market our  products and
general  and  administrative  staff used to support our  operations,  as well as
facilities-related  expenses  and  professional  fees.  Selling  and general and
administrative  expenses  decreased in fiscal 2005 by approximately $2.5 million
when   compared  to  fiscal  2004.   The   decrease  in  selling,   general  and
administrative  expenses is primarily  due to a reduction in the  provision  for
doubtful accounts offset by increased  professional fees required to comply with
requirements  associated  with  being  a  publicly-traded   company,   increased
personnel  costs  associated  with the growth in revenues  as well as  increased
provisions for litigation.

   Research and Development

Research and development  expenses primarily consist of compensation and related
benefits of  personnel  associated  with the  development  and  introduction  of
existing and future product lines.  Research and development  expenses decreased
in fiscal 2005 by  approximately  $200,000  when  compared to fiscal 2004.  This
decrease was due to non-recurring  research and development  related to entering
new markets incurred in fiscal 2004.

   Write-Down of Obsolete Inventory

Write-down  of obsolete  inventory  consists of the value of  inventory  we have
deemed to be obsolete and not marketable.  The write-down of obsolete  inventory
decreased in fiscal year 2005 by approximately  $750,000 resulting from a change
in estimating  obsolete  inventory we have  implemented  in fiscal 2004. No such
changes occurred in fiscal 2005.

   Interest Expense

Interest expense consists primarily of amortization of debt discount  associated
with the issuance of convertible debentures and interest expense associated with
our lines of credit and other  long-term  debt.  Interest  expense  increased in
fiscal 2005 by  approximately  $325,000.  The  increase  in interest  expense is
primarily due to the amortization of debt discount  associated with the issuance
of convertible debentures issued during fiscal 2004. Such convertible debentures
were outstanding during a portion of fiscal 2004 and throughout fiscal 2005.

   Provision for Income Tax

The provision for income tax consists of a valuation  allowance for deferred tax
assets.  Our provision for income tax decreased in fiscal 2005 by  approximately
$570,000 when compared to fiscal 2004.  The decrease in provision for income tax
is  primarily  due to the full  valuation  allowance  for deferred tax assets in
2004.  We have not  recognized  income  tax  benefits  in  fiscal  2005 and will
continue to provide for valuation  allowances  for our deferred tax assets until
we believe that it is more likely than not that we will realize such benefits.

                                       13

<PAGE>

Liquidity and Capital Resources

During 2005, we generated  approximately  $700,000 in cash flows from  operating
activities  primarily  from  our  profitable  operations.  Our cash  flows  from
operating  activities  funded capital  expenditures of  approximately  $520,000.
Additionally,  we repaid approximately  $350,000 of our debt using proceeds from
our  lines of credit  generating  approximately  $100,000  and  contribution  of
approximately $175,000 from Milo Finance.

During  fiscal  2004,  we  used  approximately  $2.3  million  in our  operating
activities,  of which  approximately  $1.3 million was due to an increase in our
accounts  receivables  due to our  increased  sales.  Additionally,  we incurred
approximately  $300,000 in capital expenditures.  We funded our use of cash from
operating activities and investing activities by issuing convertible  debentures
and shares of common stock which  generated net proceeds of  approximately  $2.4
million and $1.2  million,  respectively.  We used a portion of such proceeds to
reduce our lines of credit by $1.2 million during fiscal year 2004.

Going Concern

As reflected in the accompanying  consolidated financial statements, at June 30,
2005, we had an accumulated  deficit of approximately $4.2 million.  Our ability
to continue as a going concern is dependent on our ability to achieve profitable
operations,  positive cash flows from operations,  and additional  equity and/or
debt financing to pay off outstanding debt obligations and unpaid payroll taxes.
Management  reduced the number of employees in its French operation during 2004.
Additionally, the Company is considering completing other financing transactions
in the future,  depending on its needs and market conditions.  Furthermore,  the
Company intends to resume its U.S.  marketing  operations upon approval from the
FDA.

New Accounting Pronouncements

In November 2004, the Financial  Accounting  Standards  Board (FASB) issued SFAS
151 "Inventory Costs". This Statement amends the guidance in ARB No. 43, Chapter
4, "Inventory  Pricing,  to clarify the accounting for abnormal  amounts of idle
facility expense,  freight,  handling costs, and wasted material (spoilage).  In
addition,  this Statement requires that allocation of fixed production  overhead
to the costs of  conversion  be based on the normal  capacity of the  production
facilities.  The  provisions of this Statement will be effective for the Company
beginning with its fiscal 2006.  The Company is currently  evaluating the impact
this new Standard  will have on its  operations,  but believes  that it will not
have  a  material  impact  on  the  Company's  financial  position,  results  of
operations or cash flows.

In June 2004,  the Emerging  Issues Task Force (EITF) issued EITF No. 03-01 "The
Meaning  of  Other-Than-Temporary  Impairment  and Its  Application  to  Certain
Investments"  (EITF  03-01).  EITF  03-01  provides  guidance  with  respect  to
determining the meaning of  other-than-temporary  impairment and its application
to debt and  equity  securities  within  the  scope of  Statement  of  Financial
Accounting  Standards No. 115,  "Accounting for Certain  Investments in Debt and
Equity Securities",  including  investments  accounted for under the cost method
and  new  disclosure   requirements  for  investments  that  are  deemed  to  be
temporarily  impaired. We understand the Financial Accounting Standards Board is
currently   reconsidering   disclosure,    measurement,   and   recognition   of
other-than-temporary impairments of debt and equity securities under EITF 03-01.
Until new guidance is issued,  the  disclosure  requirements  of EITF 03-01 were
effective for our fiscal 2005 annual consolidated financial statements.

                                       14

<PAGE>

In December 2004, the Financial  Accounting  Standards Board finalized Statement
of Financial  Accounting Standards No. 123R,  "Share-Based  Payment" (FAS 123R),
amending FAS No. 123, effective  beginning our first quarter of fiscal 2006. FAS
123R will require us to expense  stock options based on grant date fair value in
our  financial  statements.  Further,  the  adoption  of FAS 123R  will  require
additional   accounting  related  to  the  income  tax  effects  and  additional
disclosure  regarding the cash flow effects  resulting from share-based  payment
arrangements. The effect of expensing stock options on our results of operations
using  a  Black-Scholes  option-pricing  model  is  presented  in our  financial
statements in Note 1 -- Basis of Presentation-Stock-Based  Compensation. We will
adopt FAS 123R using the modified  prospective  method and the adoption  thereof
will  have no effect  on our cash  flows,  but is  expected  to have a  material
adverse  impact on our results of  operations.  We anticipate the pre-tax charge
for FAS  123R to be in the  range of  $250,000  to  $500,000  for  fiscal  2006,
however,  the actual pre-tax charge could significantly differ from our estimate
if facts  and  assumptions  used to  estimate  fair  value  during  fiscal  2006
significantly differ from those used in modeling our estimate.

In May 2005,  the  Financial  Accounting  Standards  Board  issued  Statement of
Financial   Accounting   Standards  No.  154,   "Accounting  Changes  and  Error
Corrections" (FAS 154). FAS 154 replaces Accounting Principals Board Opinion No.
20 (APB 20) and  Statement of Financial  Accounting  Standards  No. 3 "Reporting
Accounting  Changes  in  Interim  Financial  Statements",  and  applies  to  all
voluntary  changes in accounting  principle,  and changes the  requirements  for
accounting  for and  reporting  of a  change  in  accounting  principle.  APB 20
previously  required  that most  voluntary  changes in  accounting  principle be
recognized  by  including  in net  income of the  period of change a  cumulative
effect of  changing to the new  accounting  principle  whereas FAS 154  requires
retrospective  application to prior periods' financial statements of a voluntary
change in accounting principle, unless it is impracticable. FAS 154 enhances the
consistency of financial  information between periods. FAS 154 will be effective
beginning the first quarter of our fiscal 2007. We do not expect the adoption of
FAS 154 will  have a  material  impact on our  financial  position,  results  of
operations, or cash flows.

Certain risk factors which may impact our business, results of operations and
financial condition

IF WE ARE  UNABLE TO AVOID  SIGNIFICANT  PRODUCT  LIABILITY  CLAIMS  OR  PRODUCT
RECALLS,  WE MAY BE FORCED TO PAY  SUBSTANTIAL  DAMAGE AWARDS AND OTHER EXPENSES
THAT COULD EXCEED OUR ACCRUALS AND INSURANCE COVERAGE.

We conduct  our  product  development,  manufacturing,  marketing,  service  and
support  activities with regard for the  consequences  to patients.  As with any
body support  manufacturer,  however,  we are often exposed to product liability
claims and  product  recalls,  some of which may have a  negative  impact on our
business. To incur the substantial costs and expenses as a result of such claims
and recalls,  we maintain product liability insurance policies that collectively
carry a policy  limit of $1 million  worldwide  except in the United  States and
Canada and reserves that  amounted to $540,000 at June 30, 2005. At present,  we
have  no  third-party  liability  insurance  in  the  U.S.  and  Canada  and  no
risk-shifting  liability  insurance  to  protect us from the costs of claims for
damages due to the use or recall of our products under certain circumstances and
for  specific  amounts.  If a product  liability  claim or class  action suit is
brought against us for uninsured liabilities in excess of our insurance coverage
and  reserves,   our  business  will  likely   suffer.   Other  breast   implant
manufacturers  that  suffered  such claims in the past have been forced to cease
operations  or even to declare  bankruptcy.  In  addition  to product  liability
claims, we may in the future need to recall or issue field  corrections  related
to our products due to manufacturing or design deficiencies, labeling errors, or
other  safety or  regulatory  reasons.  This recall of products may expose us to
additional product liability claims.

THE SUCCESS OF OUR  BUSINESS IS  SUBSTANTIALLY  DEPENDENT ON THE SALES OF BREAST
IMPLANTS

                                       15

<PAGE>

We anticipate  that sales of breast implants will continue to play a significant
role in our  revenues  for the  foreseeable  future.  Declines  in demand of our
breast  implants  could occur as a result of changes in government  regulations;
new competitive  product release and  enhancements to existing  products;  price
competition;  technological changes and the inability to maintain our technology
relationships; and negative publicity that our products are unsafe. In addition,
because the  majority of breast  augmentation  and  reconstruction  are elective
procedures,  they are not typically covered by insurance.  As a result,  adverse
changes in the economy may cause  consumers to reassess their  spending  choices
and reduce the demand for cosmetic surgery.  If our customers do not continue to
purchase  our  breast  implants  as a result  of these and  other  factors,  our
revenues,  results  of  operations,  and cash  flows  from  operations  would be
adversely affected.

IF  WE  ARE  UNABLE  TO  CONTINUE  TO  DEVELOP  AND  MARKET  NEW   PRODUCTS  AND
TECHNOLOGIES,  WE MAY  EXPERIENCE  A DECREASE IN DEMAND FOR OUR  PRODUCTS OR OUR
PRODUCTS COULD BECOME OBSOLETE.

The body support  industry is highly  competitive  and is subject to significant
and rapid  technological  change. We believe that our ability to respond quickly
to  consumer  needs or advances in medical  technologies,  without  compromising
product  quality,  is  crucial to our  success.  We are  continually  engaged in
product  development  and  improvement  programs  to  maintain  and  improve our
competitive position. We cannot,  however,  guarantee that we will be successful
in enhancing  existing  products or developing new products or technologies that
will timely achieve regulatory approval.

There is also a risk that our  products  may not gain  market  acceptance  among
physicians,  patients and the medical community generally.  The degree of market
acceptance of any medical device or other product that we develop will depend on
a number of  factors,  including  demonstrated  clinical  efficacy  and  safety,
cost-effectiveness,  potential  advantages over  alternative  products,  and our
marketing  and  distribution  capabilities.  Physicians  will not  recommend our
products  until  clinical  data or other  factors  demonstrate  their safety and
efficacy compared to other competing  products.  Even if the clinical safety and
efficacy  of using our  products  is  established,  physicians  may elect not to
recommend  using them for any number of other  reasons,  including  whether  our
products best meet the perceived particular needs of the individual patient.

Our  products  compete  with a number of other  products  manufactured  by major
medical device companies, and may also compete with new products currently under
development  by others.  If our new products do not achieve  significant  market
acceptance,  or if our  current  products  are not  able to  continue  competing
successfully in the changing  market,  our revenues,  income from operations and
cash flows from operations may not grow as much as expected or may even decline.

IF CLINICAL  TRIALS FOR OUR PRODUCTS  ARE  UNSUCCESSFUL  OR DELAYED,  WE WILL BE
UNABLE TO MEET OUR ANTICIPATED DEVELOPMENT AND COMMERCIALIZATION  TIMELINES, AND
OUR BUSINESS PROSPECTS WILL SUFFER.

Before obtaining  regulatory  approvals for the commercial sale of any products,
we must demonstrate  through  pre-clinical  testing and clinical trials that our
products are safe and effective for use in humans. Conducting clinical trials is
a lengthy,  time-consuming and expensive process.  Completion of clinical trials
may take several  years or more.  Our  commencement  and rate of  completion  of
clinical trials may be delayed by many factors, including:

         o lack of efficacy during the clinical trials;

         o unforeseen safety issues;

         o slower than expected patient recruitment for clinical trials;

         o inability to follow patients after treatment in clinical trials;

         o inconsistencies between early clinical trial results and results
           obtained in later clinical trials; and

         o varying interpretations of data generated by clinical trials.

                                       16

<PAGE>

The results from  pre-clinical  testing and early clinical  trials are often not
predictive  of  results  obtained  in later  clinical  trials.  A number  of new
products  have shown  promising  results in clinical  trials,  but  subsequently
failed to  establish  sufficient  safety and efficacy  data to obtain  necessary
regulatory  approvals.  Data obtained from pre-clinical and clinical  activities
are susceptible to varying  interpretations,  which may delay,  limit or prevent
regulatory approval.  Any delays in, or termination of, our clinical trials will
materially and adversely affect our development and commercialization timelines,
increase our  development  costs and harm our financial  results and  commercial
prospects.

WE ARE SUBJECT TO  SUBSTANTIAL  GOVERNMENT  REGULATION,  WHICH COULD  MATERIALLY
ADVERSELY AFFECT OUR BUSINESS.

The  production  and  marketing  of our  products  and our ongoing  research and
development,  pre-clinical  testing and clinical trial activities are subject to
extensive regulation and review by numerous governmental authorities both in the
U.S.  and abroad.  Most of the  products we develop  must  undergo an  extensive
regulatory  approval process before they can be marketed.  This process makes it
longer,  harder and more costly to bring our  products to market,  and we cannot
guarantee  that any of our products  will be approved,  or, once  approved,  not
recalled.  The  pre-marketing  approval  process can be particularly  expensive,
uncertain  and lengthy,  and a number of devices for which FDA approval has been
sought by other companies have never been approved for marketing. In addition to
these  approval  procedures,   extensive   regulations  also  govern  marketing,
manufacturing,  distribution,  labeling, and record-keeping procedures. If we do
not comply with applicable regulatory requirements, such violations could result
in warning letters,  non-approval,  suspensions of regulatory  approvals,  civil
penalties  and  criminal  fines,   product   seizures  and  recalls,   operating
restrictions, injunctions, and criminal prosecution.

Delays in or rejection of any government  entity,  including the FDA, of our new
products may also adversely affect our business. Such delays or rejection may be
encountered  due to, among other  reasons,  government or regulatory  changes in
policy  during the  period of  product  development  in each  jurisdiction.  For
example,  in the U.S.,  there has been a continuing  trend of more stringent FDA
oversight in product  clearance  and  enforcement  activities,  causing  medical
device  manufacturers to experience  longer approval cycles,  more  uncertainty,
greater risk, and higher expenses. Internationally,  there is a risk that we may
not be  successful  in meeting  the  quality  standards  or other  certification
requirements. Even if regulatory approval of a product is granted, this approval
may  entail  limitations  on uses for  which  the  product  may be  labeled  and
promoted.  It is  possible,  for example,  that we may not receive  proper local
regulatory  approval to market our  current  products  for broader or  different
applications  or to market  updated  products that  represent  extensions of our
basic  technology.  In addition,  we may not receive  French export  approval to
export our products in the future,  and  countries  to which  products are to be
exported may not approve them for import.

Our manufacturing  facilities are also subject to continual  governmental review
and inspection.  French regulations related to manufacturing are complex and our
manufacturing  facilities  are  subject to  frequent  scrutiny.  A  governmental
authority may challenge  our  compliance  with  applicable  national,  regional,
local, and foreign regulations. In addition, any discovery of previously unknown
problems with one of our products or facilities  may result in  restrictions  on
the product or the facility, including withdrawal of the product from the market
or other enforcement actions.

From time to time,  regulatory  proposals  are  introduced  that could alter the
review and approval process relating to medical devices. It is possible that the
FDA or other governmental  authorities will issue additional regulations further
restricting  the  sale of our  present  or  proposed  products.  Any  change  in
regulations  that govern the review and approval process relating to our current
and future  products could make it more difficult and costly to obtain  approval
for new products, or to produce, market, and distribute existing products.

Our products  compete with a number of other medical  products  manufactured  by
major  companies,  and may  also  compete  with  new  products  currently  under
development  by others.  On January 8, 2004, the FDA released new Draft Guidance
for Saline, Silicone Gel, and Alternative Breast Implants. This new guidance has
additional  requirements  from the FDA's prior  guidance dated February 2003. We
intend to complete our application to the FDA for the pre-market approval of our
saline-filled  implants  for breast  augmentation,  reconstruction  and revision
during  fiscal 2005,  using this new  guidance.  Any  additional  changes in FDA
guidance may further delay or may otherwise  adversely affect our application or
our review or approval by the FDA. A delay, denial, or "not approvable" response
by the  FDA  would  have a  material  adverse  affect  on our  commercialization
timelines and competitive position. If our competitors gain regulatory approvals
before us in the U.S.  or in any other  geographical  locations,  our  revenues,
income  from  operations  and  cash  flows  from  operations,  may  not  grow as
anticipated and may even decline.

                                       17

<PAGE>

HEALTHCARE REFORM LEGISLATION COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

If any national healthcare reform or other legislation or regulations are passed
that  imposes  limits on the  number or type of medical  procedures  that may be
performed or that has the effect of restricting a physician's  ability to select
specific  products  for use in patient  procedures,  such  changes  could have a
material adverse effect on the demand for our products.  In the U.S., there have
been,  and we expect  that there will  continue  to be, a number of federal  and
state  legislative and regulatory  proposals to implement  greater  governmental
control over the healthcare  industry.  These proposals create uncertainty as to
our ability to obtain the regulatory authority approvals required for us to sell
our products in the largest market. In a number of foreign markets,  the pricing
and profitability of healthcare  products are subject to governmental  influence
or control. In addition,  legislation or regulations that impose restrictions on
the price that may be charged for  healthcare  products  or medical  devices may
adversely  affect  our  revenues,  income  from  operations  and cash flows from
operations.

IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL  PROPERTY RIGHTS RELATED
TO OUR PRODUCTS OR TECHNOLOGIES,  OR WE INFRINGE UPON THE INTELLECTUAL  PROPERTY
RIGHTS OF OTHERS,  WE MAY NOT BE ABLE TO SUCCESSFULLY  DEVELOP AND COMMERCIALIZE
OUR PRODUCTS AND MAINTAIN PROFITABILITY.

Our  success  depends  in part on our  ability  to obtain  patents  or rights to
patents,  protect trade secrets, operate without infringing upon the proprietary
rights of others, and prevent others from infringing on our patents,  trademarks
and  other  intellectual  property  rights.  We  will be  able  to  protect  our
intellectual  property from unauthorized use by third parties only to the extent
that it is covered by valid and  enforceable  patents,  trademarks and licenses.
Patent  protection  generally  involves complex legal and factual questions and,
therefore,  enforceability  of patent rights cannot be predicted with certainty.
Patents,  if issued, may be challenged,  invalidated or circumvented.  Thus, any
patents that we own or license from others may not provide  adequate  protection
against competitors and further, our technologies may infringe on the patents of
third parties.  Moreover,  the laws of certain foreign  countries do not protect
our  intellectual  property rights to the same extent as do the laws of the U.S.
or the European Community.  In the event of an infringement or violation, we may
face  litigation,  become subject to damages,  and may be prevented from selling
existing products and pursuing product development or commercialization.

In addition to patents and trademarks,  we rely on trade secrets and proprietary
know-how.  We seek protection of these rights, in part, through  confidentiality
and  proprietary  information  agreements.  These  agreements  may  not  provide
meaningful  protection  or adequate  remedies for violation of our rights in the
event  of  unauthorized  use  or  disclosure  of  confidential  and  proprietary
information.  Failure to protect our proprietary  rights could seriously  impair
our competitive position.

                                       18

<PAGE>

IF OUR COLLABORATIVE  PARTNERS DO NOT PERFORM,  WE WILL BE UNABLE TO DEVELOP AND
MARKET PRODUCTS AS ANTICIPATED.

We have entered into collaborative  arrangements with third parties, such as GFE
to develop  certain  products in Europe and Medicor to market breast implants in
the US. We cannot assure you that these  collaborations  will produce successful
products or marketing efforts. If we fail to maintain our existing collaborative
arrangements or fail to enter into additional  collaborative  arrangements,  the
number of products and markets from which we could receive future revenues would
decline.

Our dependence on collaborative arrangements with third parties subjects us to a
number of risks. These collaborative  arrangements may not be on terms favorable
to  us.  Agreements  with   collaborative   partners  typically  allow  partners
significant  discretion in electing  whether or not to pursue any of the planned
activities.   We  cannot   control  the  amount  and  timing  of  resources  our
collaborative  partners may devote to products based on the  collaboration,  and
our partners  may choose to pursue  alternative  products.  Our partners may not
perform  their  obligations  as  expected.  Business  combinations,  significant
changes  in a  collaborative  partner's  business  strategy,  or its  access  to
financial  resources may adversely affect a partner's  willingness or ability to
complete  its  obligations  under the  arrangement.  Moreover,  we could  become
involved  in  disputes  with  our  partners,  which  could  lead  to  delays  or
termination of the collaborations and time-consuming and expensive litigation or
arbitration. Even if we fulfill our obligations under a collaborative agreement,
our partner can  terminate the agreement  under  certain  circumstances.  If any
collaborative  partner  were to terminate  or breach our  agreement  with it, or
otherwise fail to complete its  obligations  in a timely manner,  our chances of
successfully   commercializing   products  would  be  materially  and  adversely
affected.

WE  DEPEND ON A  LIMITED  NUMBER  OF  SUPPLIERS  FOR  CERTAIN  PRODUCTS  AND RAW
MATERIALS  AND THE LOSS OF ANY SUPPLIER  COULD  ADVERSELY  AFFECT OUR ABILITY TO
MANUFACTURE MANY OF OUR PRODUCTS.

We  currently  rely on a single  supplier  for  titanium-based  coating  for our
products,  used primarily in the  manufacturing of breast  implants.  We rely on
this  supplier to provide us with such coating on our  products.  Our  agreement
terminates in 2009. If we cannot maintain the  relationship  with this supplier,
we may have to discontinue the manufacturing of certain  products.  Furthermore,
we  would  have  to  substitute  the  raw  materials   currently  utilized  with
alternative  raw materials which may be of lesser quality and provided at higher
cost to us. The termination of this relationship or any disruption in the supply
of these materials could have a material adverse effect on our revenues,  income
from operations and cash flows from operations.

OUR INTERNATIONAL BUSINESS EXPOSES US TO A NUMBER OF RISKS.

We conduct  all our  marketing,  manufacturing,  and  research  and  development
outside of the U.S. More than 78.2% of our sales are derived from  international
operations  outside  of  France,   where  our  main  operations  are  conducted.
Accordingly,  any  material  decrease  in  foreign  sales  would have a material
adverse effect on our overall sales and profitability. Most of our international
sales  are  denominated  in  Euros.  Depreciation  or  devaluation  of the local
currencies  of  countries  where we sell our products may result in our products
becoming  more  expensive  in  local  currency  terms,   thus  reducing  demand.
Furthermore,  all our  operating  activities  are  located  outside  of the U.S.
Therefore,  substantially  all of our  operating  expenses  are  denominated  in
currencies  other than the U.S.  dollar.  We cannot  guarantee  that we will not
experience  unfavorable  currency  fluctuation effects in future periods,  which
could  have an adverse  effect on our  operating  results.  Our  operations  and
financial  results  also may be  significantly  affected by other  international
factors, including:

         o foreign government regulation of body support products;
         o product liability, intellectual property and other claims;
         o new export license requirements;
         o political or economic instability in our target markets;
         o trade restrictions;
         o changes in tax laws and tariffs;
         o inadequate protection of intellectual property rights in some
           countries;
         o managing foreign distributors and staffing;
         o managing foreign subsidiaries; and
         o competition.
                                       19

<PAGE>

If these risks  actually  materialize,  our revenues,  results of operations and
cash flows from operations may decrease.

WE RELY ON INDIRECT DISTRIBUTION CHANNELS AND MAJOR DISTRIBUTORS THAT WE DO NOT
CONTROL.

We rely  significantly on independent  distributors to market and distribute our
products. We do not control our distributors. Additionally, our distributors are
not  obligated  to buy our  products  and could also  represent  other  lines of
products.  Some of our  distributors  maintain  inventories  of our products for
resale to physicians.  If  distributors  reduce their inventory of our products,
our  business  could  be  adversely   affected.   Further,   we  could  maintain
individually significant accounts receivable balances with certain distributors.
The financial  condition of our distributors  could deteriorate and distributors
could  significantly  delay  or  default  on  their  payment  obligations.   Any
significant  delays or  defaults  could  have a material  adverse  effect on our
revenues, income from operations and cash flows from operations.

IF OUR USE OF HAZARDOUS  MATERIALS  RESULTS IN CONTAMINATION OR INJURY, WE COULD
SUFFER SIGNIFICANT FINANCIAL LOSS.

Our  manufacturing  and  research  activities  involve  the  controlled  use  of
hazardous materials. We cannot eliminate the risk of accidental contamination or
injury  from  these  materials.  In the event of an  accident  or  environmental
discharge, we may be held liable for any resulting damages, which may exceed our
financial  resources.  We  currently  do not carry  insurance  specifically  for
hazardous  material  claims.  We may be required to incur  significant  costs to
comply with  environmental  laws and regulations,  which may change from time to
time. To date, we have not been the subject of any  environmental  investigation
by governmental authorities.

OUR STOCK PRICE HAS BEEN VOLATILE AND OUR TRADING VOLUME HAS  HISTORICALLY  BEEN
LOWER THAN THAT OF MANY PUBLICLY-TRADED COMPANIES.

Historically,  the  market  price of our  common  stock  has  from  time to time
experienced  price  fluctuations,  some of which are  unrelated to our operating
performance and beyond our control. These factors include:

     o    availability of shares offered for sale;
     o    quarter-to-quarter variations in our operating results;
     o    the results of testing,  technological innovations,  or new commercial
          products by us or our competitors;
     o    governmental actions, regulations, rules, and orders;
     o    general  conditions  in the  healthcare,  medical  device,  or plastic
          surgery industries;
     o    changes in earnings estimates by securities analysts;
     o    developments and litigation  concerning  patents or other intellectual
          property rights;
     o    litigation or public concern about the safety of our products; and
     o    general economic factors, such as foreign exchanges rates.

Historically,  our common  stock has also had a low trading  volume,  and likely
will continue to have a low trading  volume in the future.  We cannot  guarantee
that an active public market for our common stock will develop and be sustained.
Additionally,  we have not always timely filed our quarterly and annual reports,
which  resulted in our common stock being  temporarily  delisted from trading on
the  Over-The-Counter  Bulletin Board interruptions in the trading of our stock.
This low volume may  contribute  to the  volatility  of the market  price of our
common  stock.  It is likely  that the  market  price of our  common  stock will
continue to fluctuate significantly in the future.

                                       20

<PAGE>

OUR REPORTED  EARNINGS PER SHARE MAY BE MORE VOLATILE  BECAUSE OF THE CONTINGENT
CONVERSION PROVISION OF OUR DEBENTURES.

Holders of our 1% and 10%  convertible  debentures  are  entitled to convert the
notes into our common stock during any fiscal  quarter  prior to October 9, 2008
and March 25, 2009, respectively.  In addition,  certain holders are entitled to
anti-dilution  protection.  Until the notes are converted, the shares underlying
the notes are not included in the  calculation of our basic or diluted  earnings
per share.  Should a  contingency  be met,  diluted  earnings per share would be
expected to decrease as a result of the  inclusion of the  underlying  shares in
the  diluted  earnings  per  share  calculation.  Additionally,  the  per  share
conversion  price for the  convertible  debentures  are based on the lesser of a
fixed price  percentage of the average of our lowest  closing prices for certain
periods.  Thus,  volatility,  low volume of trades and lower stock  prices could
cause further dilution to our existing and future shareholders. FUTURE CHANGES

IN  FINANCIAL  ACCOUNTING  STANDARDS  MAY CAUSE  ADVERSE  UNEXPECTED  REVENUE OR
EXPENSE FLUCTUATIONS AND AFFECT OUR REPORTED RESULTS OF OPERATIONS.

A change in accounting standards could have a significant effect on our reported
results and may even affect our reporting of transactions  completed  before the
change is effective.  Any changes requiring that we record compensation  expense
in the  statement of operations  for employee  stock options as an example using
the fair value method could have a significant  negative  effect on our reported
results.  New pronouncements and varying  interpretations of pronouncements have
occurred  and  may  occur  in the  future.  Changes  to  existing  rules  or the
questioning  of current  practices may adversely  affect our reported  financial
results and the manner in which we conduct our business.

IF WE DETERMINE  THAT ANY OF OUR GOODWILL OR INTANGIBLE  ASSETS IS IMPAIRED,  WE
WOULD BE  REQUIRED TO RECORD A CHARGE TO  EARNINGS,  WHICH COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.

We have a significant amount of goodwill and other intangible assets,  primarily
as a result of the acquisition of our Spain operations. In July 2001, we adopted
SFAS No. 141,  Business  Combinations,  and in January 2002, we adopted SFAS No.
142,  Goodwill and Other Intangible  Assets.  As a result, we no longer amortize
goodwill and  intangible  assets that are deemed to have  indefinite  lives.  We
periodically  evaluate our intangible  assets,  for  impairment.  As of June 30,
2005,  we had  approximately  $1 million of goodwill.  We review for  impairment
annually,  or sooner if events or changes  in  circumstances  indicate  that the
carrying  amount  could exceed fair value.  Fair values are based on  discounted
cash flows using a discount rate  determined by our  management to be consistent
with  industry  discount  rates and the risks  inherent in our current  business
model. Due to uncertain market  conditions and potential changes in our strategy
and product  portfolio,  it is possible that the forecasts we use to support our
goodwill could change in the future, which could result in non-cash charges that
would adversely affect our results of operations and financial condition.

IF WE FAIL TO MANAGE OUR OPERATIONS OR FAIL TO CONTINUE TO  EFFECTIVELY  CONTROL
EXPENSES, OUR REVENUES, RESUTS OF OPERATIONS AND CASH FLOW FROM OPERATIONS COULD
DECREASE.

The scope of our operations, the number of our employees and the geographic area
of our operations have varied and may grow rapidly.  In addition,  we acquired a
company  in  Spain  in  2002.  This  growth  and the  assimilation  of  acquired
operations and their employees  could continue to place a significant  strain on
our managerial,  operational and financial  resources.  To manage our growth, if
any,  effectively,  we need to continue  to  implement  and  improve  additional
management and financial systems and controls.  We may not be able to manage the
current scope of our operations or future growth  effectively  and still exploit
market  opportunities for our products in a timely and  cost-effective  way. Our
future operating results could also depend on our ability to manage an expanding
product line, marketing and sales.

                                       21

<PAGE>

WE COULD CHANGE OUR MARKETING PROGRAMS, WHICH COULD NEGATIVELY IMPACT THE TIMING
OF OUR RECOGNITION OF REVENUES.

We continually  re-evaluate our marketing  programs,  including specific pricing
models,  delivery methods,  and terms and conditions,  to effectively market our
current  and future  products  and  services.  We may  implement  new  marketing
programs,  including  offering  specified and  unspecified  enhancements  to our
current and future  products.  Such changes  could result in deferring  revenues
over a future  period as opposed to upon the initial  shipment  of the  product.
Changes  to our  marketing  programs,  including  the  timing of the  release of
enhancements,  discounts  and other  factors,  could  impact  the  timing of the
recognition of revenue for our products and could adversely affect our operating
results and financial condition.

IF WE LOSE KEY PERSONNEL, CANNOT INTEGRATE NEWLY HIRED PERSONNEL, OR CANNOT HIRE
ENOUGH  QUALIFIED  EMPLOYEES,  OUR  ABILITY  TO  MANAGE  OUR  BUSINESS  COULD BE
ADVERSELY AFFECTED.

Our  success  depends,  in large  part,  upon the  services  of a number  of key
employees,  such as our Chairman of the Board of directors  and Chief  Financial
Officer and General Manager, Mr. Mas and Mr. Couty, respectively.  The effective
management  of our growth,  if any,  depends  upon our ability to retain  highly
skilled technical,  managerial, finance and marketing personnel. The loss of the
services of key personnel might  significantly  delay or prevent the achievement
of our development and strategic objectives.  We do not maintain key person life
insurance  on any of our  employees,  and none of our  employees  is  under  any
obligation to continue providing services to us.

We must  continue to attract key  personnel  to develop  new  products,  product
enhancements and  technologies.  Competition for highly skilled employees in our
industry  is high,  and we  cannot  be  certain  that we will be  successful  in
recruiting or retaining such personnel. We also believe that our success depends
to a  significant  extent  on  the  ability  of our  key  personnel  to  operate
effectively,  both  individually  and as a group.  If we are unable to identify,
hire and  integrate  new employees in a timely and  cost-effective  manner,  our
ability to develop  future  enhancements  and features to our existing or future
products as well as expand to new markets  could be  delayed.  Any delays  could
have a  material  adverse  effect on our  business,  results of  operations  and
financial  condition.

                                       22

<PAGE>

ITEM 7.  FINANCIAL  STATEMENTS

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Heritage Worldwide, Inc.
La Seyne-Sur-Mer, France


     We have audited the  accompanying  consolidated  balance  sheet of Heritage
Worldwide,  Inc.  and  Subsidiaries  as  of  June  30,  2005,  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the years ended June 30, 2005 and 2004. These consolidated  financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

     We  conducted  our audits in  accordance  with the  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  The  Company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial reporting.  Our audit included  consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the circumstances,  but not for the purposes of expressing an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting.  Accordingly, we express no such opinion. An audit includes examining
on a  test  basis,  evidence  supporting  the  amount  and  disclosures  in  the
consolidated  financial  statements.   An  audit  also  includes  assessing  the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly,  in all material  respects,  the financial  position of Heritage
Worldwide,  Inc. and  Subsidiaries as of June 30, 2005, and the results of their
operations  and their cash flows for the years ended June 30, 2005 and 2004,  in
conformity with accounting principles generally accepted in the United States of
America.





                                                 /s/ Sherb & Co., LLP
                                                 -------------------------------
                                                 Sherb & Co., LLP
                                                 Certified Public Accountants

Boca Raton, Florida
September 20, 2005



                                       23

<PAGE>

                    HERITAGE WORDWIDE, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  June 30, 2005



                                     ASSETS

Current Assets:
  Cash                                                          $       441,983
  Accounts receivable, net of provisions for
   doubtful accounts and returns of $1,020,274                        4,486,303
  Inventories                                                         3,337,862
  Prepaid expenses and other current assets                             823,229
                                                                ----------------

     Total current assets                                             9,089,377

Property and equipment, net of accumulated
 depreciation of $3,420,804                                           1,632,045
Goodwill                                                              1,004,671
Investment in SCI Lucas                                                 514,085
Other assets                                                            332,427
                                                                ----------------


     Total assets                                               $    12,572,605
                                                                ================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Lines of credit                                              $     1,030,156
  Accounts payable and accrued expenses                               4,481,242
  Current portion of long term debt                                     289,004
  Due to related parties                                                 51,649
  Reserve for product replacements                                      430,959
                                                                ----------------

     Total current liabilities                                        6,283,010

Convertible debentures and related accrued interest
 payable, net of discount of $1,966,427                               2,171,268
Long term debt, net of current portion                                  191,616
                                                                ----------------

     Total liabilities                                                8,645,894
                                                                ----------------

Minority interest                                                       876,210
                                                                ----------------

Stockholders' Equity:
  Common stock; $.001 par value, 50,000,000 shares
    authorized, 18,160,299 issued and 17,410,299
    outstanding                                                          17,411
  Additional paid-in capital                                          5,686,193
  Accumulated other comprehensive income                              1,547,402
  Accumulated deficit                                                (4,200,505)
                                                                ----------------

     Total stockholders' equity                                       3,050,501
                                                                ----------------

     Total liabilities and stockholders' equity                 $    12,572,605
                                                                ================


                 See Notes to Consolidated Financial Statements.

                                       24

<PAGE>

                    HERITAGE WORDWIDE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                       For the Years Ended
                                                            June 30,
                                             ----------------------------------------
                                                   2005                  2004
                                             ------------------   -------------------
<S>                                               <C>                   <C>
Revenues                                     $      13,572,317    $       11,729,777

Cost of revenues                                     6,022,825             6,797,037
                                             ------------------   -------------------

     Gross profit                                    7,549,492             4,932,740
                                             ------------------   -------------------

Operating expenses:
  Selling, general and administrative                4,939,083             7,460,244
  Write-down of obsolete inventory                           -               755,264
  Research and development                           1,068,139             1,283,420
                                             ------------------   -------------------

     Total operating expenses                        6,007,222             9,498,928
                                             ------------------   -------------------

Operating income (loss)                              1,542,270            (4,566,188)
                                             ------------------   -------------------
Other expenses:
  Other expense                                              -               (57,175)
  Gain (loss) in equity investment                      70,101               (62,421)
  Interest expense                                    (664,841)             (339,633)
                                             ------------------   -------------------

     Total other expenses                             (594,740)             (459,229)
                                             ------------------   -------------------

 Income (loss) before provision for
    income taxes                                       947,530            (5,025,417)

  Provision for income taxes                                 -              (572,348)
                                             ------------------   -------------------

Income (loss) before minority interest                 947,530            (5,597,765)

Minority interest                                      (66,046)              (32,684)
                                             ------------------   -------------------

Net income (loss)                                      881,484            (5,630,449)

Other comprehensive income, net of taxes
  Foreign currency translation adjustment              128,954                38,657
                                             ------------------   -------------------

     Comprehensive income (loss)             $       1,010,438    $       (5,591,792)
                                             ==================   ===================

Basic net income (loss) per common share     $            0.05    $            (0.32)
                                             ==================   ===================

Basic weighted average common
shares outstanding                                  17,410,299            17,382,399
                                             ==================   ===================

Diluted net income (loss) per share          $            0.05    $            (0.32)
                                             ==================   ===================

Diluted weighted average common shares
outstanding                                         17,425,813            17,382,399
                                             ==================   ===================

</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       25

<PAGE>

                    HERITAGE WORDWIDE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND OTHER COMPREHENSIVE INCOME
                   FOR THE YEARS ENDED JUNE 30, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                                             Accumulated
                                                                  Additional                   Other
                                              Shares    Common    Paid-In     Subscriptions Comprehensive  Accumulated   Total
                                                        Stock     Capital       Receivable     Income        Deficit
                                           ----------------------------------------------------------------------------------------
<S>             <C> <C>                     <C>         <C>       <C>           <C>         <C>            <C>          <C>
Balance at June 30, 2003                    16,196,667  $ 16,197  $ 3,268,916   $        -  $  1,379,791   $  548,460   $5,213,364

Issuance of share of common stock for
 services July 2003                             60,000        60      104,940            -             -            -      105,000
Issuance of share of common stock for
 services March 2004                            35,000        35      113,715            -             -            -      113,750
Sale of shares of common stock at $1 per
 share                                          66,000        66       65,934      (28,000)            -            -       38,000
Payment of subscriptions of common stock             -         -            -       13,482             -            -       13,482
Exchange of shares with an investment trust  1,052,632     1,053    1,132,688            -             -            -    1,133,741
Beneficial conversion feature of
 convertible debentures                              -         -    1,000,000            -             -            -    1,000,000
Net loss                                             -         -            -            -             -   (5,630,449)  (5,630,449)
Foreign currency translation adjustments             -         -            -                     38,657            -       38,657
                                           ----------------------------------------------------------------------------------------
Balance at June 30, 2004                    17,410,299    17,411    5,686,193      (14,518)    1,418,448   (5,081,989)   2,025,545

Payment of subscriptions of common stock                       -            -       14,518             -            -       14,518
Net income                                                     -            -            -             -      881,484      881,484
Foreign currency translation adjustments                       -            -            -       128,954            -      128,954
                                           ----------------------------------------------------------------------------------------
Balance at June 30, 2005                    17,410,299  $ 17,411  $ 5,686,193   $        -  $  1,547,402   $(4,200,505) $3,050,501
                                           ========================================================================================
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                       26

<PAGE>

             HERITAGE WORDWIDE, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                       Years Ended
                                                                        June 30,
                                                         ---------------------------------------
                                                               2005                 2004
                                                         ------------------   ------------------
Cash flows from operating activities:
<S>                                                      <C>                  <C>
Net income (loss)                                        $         881,484    $      (5,630,449)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
   Interest expense related to debenture discount                  447,812              170,507
   Depreciation and amortization                                   704,178              842,699
   Stock-based compensation                                              -              218,750
   Provision for doubtful accounts                              (1,465,447)           1,996,202
   Provision for returns                                           196,523                    -
   Provision for obsolete inventories                                    -              755,264
   Deferred income tax                                                   -              572,348
   (Gain) loss on equity investment                                (70,101)              62,421
   Minority interest                                                66,046               32,684
  Loss on disposition of property and equipment                        992                    -
Change in operating assets and liabilities:
   Accounts receivable                                              51,336           (1,264,925)
   Inventories                                                    (543,391)             205,565
   Prepaid expenses and other current assets                        (1,636)             (64,765)
  Other assets                                                           -              (31,274)
  Accrued interest on convertible debentures                       118,088               19,603
   Provision for product replacements                              152,848              143,128
   Accounts payable and accrued expenses                           233,946             (288,956)
                                                         ------------------   ------------------
Net cash (used in) provided by operating activities                772,678           (2,261,198)
                                                         ------------------   ------------------
Cash flows from investing activities:
   Proceeds from sale of property and equipment                     51,520                    -
   Purchases of property and equipment                            (517,507)            (299,274)
                                                         ------------------   ------------------
Net cash used in investing activities                             (465,987)            (299,274)
                                                         ------------------   ------------------
Cash flows from financing activities:
   (Decrease) increase in lines of credit                          101,267           (1,191,212)
   Proceeds from long term debt                                     91,498              178,417
   Repayment of long term debt                                    (347,528)            (275,683)
   Proceeds from convertible debentures                                  -            2,413,006
  Payment of deferred financing costs                                    -              (70,651)
   Proceeds from sale of common stock                               14,518            1,185,223
   Increase (decrease) in due to related parties                   174,634              481,834
                                                         ------------------   ------------------

Net cash provided by financing activities                           34,389            2,720,934
                                                         ------------------   ------------------

Effect of exchange rate changes on cash                            (67,845)             (98,778)
                                                         ------------------   ------------------

Increase in cash                                                   273,235               61,684

Cash, beginning of year                                            168,748              107,064
                                                         ------------------   ------------------

Cash, end of period                                      $         441,983    $         168,748
                                                         ==================   ==================

Supplemental disclosures of cash flow information:
     Cash paid during the year for interest              $         103,054    $         138,902
                                                         ==================   ==================

     Cash paid during the year for taxes                 $               -    $               -
                                                         ==================   ==================


Non-Cash Investing and Financing Activities:

Beneficial feature of convertible debentures, increasing
additional paid-in capital and decreasing convertible
debentures                                               $               -    $       1,000,000
                                                         ==================   ==================

</TABLE>


                 See Notes to Consolidated Financial Statements.

                                       27

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2005

NOTE 1 - NATURE OF BUSINESS AND ACQUISITION

Heritage  Worldwide,  Inc.  (the  "Company")  was  incorporated  in the State of
Delaware in 2001. The Company and its  subsidiaries  develop,  manufacture,  and
market breast and other body implants and body support products  worldwide.  The
Company  maintains  its  production  facility  and  headquarters  in the  Toulon
metropolitan  area in Southern  France.  It also has a distribution  facility in
Spain.

NOTE 2 - BASIS OF PRESENTATION AND CONSOLIDATION

The  accompanying  consolidated  financial  statements  present  the  results of
operations of the Company's French and Spanish  subsidiaries for the years ended
June 30, 2005 and 2004,  respectively  and OS MXM,  Inc.  from  October 14, 2003
through June 30,  2005.  All material  inter-company  accounts and  transactions
between the Company and its subsidiaries have been eliminated in consolidation.

The  accompanying  consolidated  financial  statements  include  the  results of
operations of SCI Lucas,  a real estate  holding  company,  in which the Company
holds an  interest  of  38.05%.  SCI  Lucas  owns the  production  facility  and
headquarters in which the Company  operates in Southern  France.  The results of
operations of SCI Lucas are accounted for using the equity method of accounting.
All material inter-company accounts and transactions between the Company and SCI
Lucas have been eliminated.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

In preparing  financial  statements in  conformity  with  accounting  principals
generally  accepted  in the  United  States,  management  is  required  to  make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the  financial  statements  and revenues and  expenses  during the  reporting
period.  Actual results will differ from those estimates.  Significant estimates
during the periods  include the provision for doubtful  accounts,  provision for
product returns,  evaluation of obsolete inventory, the useful life of long-term
assets, such as property,  plant and equipment and goodwill,  and the accrual of
product replacement liability reserve.

Accounts receivable

Accounts  receivable  are  reported  at net  realizable  value.  The Company has
established an allowance for doubtful accounts based upon factors  pertaining to
the credit risk of specific customers, historical trends, and other information.
Delinquent  accounts are written-off  when it is determined that the amounts are
uncollectible.  At June 30,  2005,  the  provision  for  doubtful  accounts  was
approximately  $1.02  million.  Additionally,  the  Company has  established  an
allowance  for product  returns  based upon  factors  pertaining  to  historical
trends.  At June 30, 2005, the provision for product  returns was  approximately
$200,000.

Revenue recognition

The Company  recognizes  product  revenue,  net of estimated sales discounts and
returns and allowances,  in accordance with Staff  Accounting  Bulletin No. 104,
"Revenue  Recognition  in  Financial   Statements"  and  SFAS  No.  48  "Revenue
Recognition  When Right of Return  Exists." These  statements  established  that
revenue can be recognized when persuasive evidence of an arrangement exists, the
product has been shipped,  all  significant  contractual  obligations  have been
satisfied,  the fee is  fixed  or  determinable  and  collection  is  reasonably
assured.


                                       28

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock options

The Company  accounts for stock options  issued to employees in accordance  with
the  provisions  of  Accounting   Principles   Board  ("APB")  Opinion  No.  25,
"Accounting  for Stock Issued to  Employees,"  and related  interpretations.  As
such,  compensation  cost is  measured on the date of grant as the excess of the
current  market  price of the  underlying  stock over the exercise  price.  Such
compensation  amounts, if any, are amortized over the respective vesting periods
of the option  grant.  We adopted  the  disclosure  provisions  of SFAS No. 123,
"Accounting  for  Stock-Based   Compensation"  and  SFAS  148,  "Accounting  for
Stock-Based Compensation -Transition and Disclosure",  which permits entities to
provide  pro forma net  income  (loss) and pro forma  earnings  (loss) per share
disclosures for employee stock option grants as if the fair-valued  based method
defined in SFAS No. 123 had been applied. The Company accounts for stock options
and stock issued to  non-employees  for goods or services in accordance with the
fair value method of SFAS 123.

No stock-based  employee  compensation  cost is reflected in net income,  as all
options  granted  under the  Company's  plans had an exercise  price equal to or
above market  value of the  underlying  common  stock on the date of grant.  Had
compensation  cost  for  the  Company's  stock-based   compensation  plans  been
determined  based on the fair value at the grant  dates for grants  under  those
plans consistent with the method of SFAS No. 123, the Company's cash flows would
have  remained  unchanged,  however net income and earnings per share would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>

                                                                      2005                2004
                                                                    ----------       ------------
<S>                                                                 <C>              <C>
Net income (loss) as reported:                                      $ 881,484        $(5,630,449)
Deduct: Total stock-based employee compensation expense
           determined under fair value based method for all
           awards, net of related tax effects                        (247,625)                 -
                                                                    ----------       ------------
Net income (loss) pro forma                                         $ 633,859        $(5,630,449)
                                                                    ==========       ============
</TABLE>




The fair value of the  options  granted  during  2005 was  determined  using the
Black-Scholes  option-pricing  model with the following  assumptions:  risk-free
interest of 3.7%;  stock  volatility of 44%; no dividends;  estimated life of 48
months; and no dividend expected during the term.

Foreign currency translation

For  foreign  operations  with the local  currency as the  functional  currency,
assets  and  liabilities  are  translated  from the local  currencies  into U.S.
dollars at the exchange rate  prevailing  at the balance  sheet date.  Revenues,
expenses  and cash flows are  translated  at the average  exchange  rate for the
period to approximate  translation at the exchange rate  prevailing at the dates
those  elements  are  recognized  in  the  financial   statements.   Translation
adjustments  resulting  from the  process  of  translating  the  local  currency
financial statements into U.S. dollars are included in determining comprehensive
loss.  As of June 30, 2005,  the  exchange  rate for the Euros (EUR) was $1.2092
U.S. for 1.00 EUR.

The  functional  currency  of the  Company's  French  subsidiaries  is the local
currency.  The financial  statements of the  subsidiary  are  translated to U.S.
dollars using period-end  rates of exchange for assets and liabilities,  and the
average rate of exchange for the period for revenues,  costs, and expenses.  Net
gains and losses  resulting from foreign  exchange  transactions are included in
the consolidated statements of operations.


                                       29

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Inventories

Inventories  are stated at the lower of cost or market,  cost  determined by the
first-in,  first-out  (FIFO)  method.  The Company writes down its inventory for
estimated obsolescence or unmarketable inventory equal to the difference between
the cost of inventory  and the  estimated  market  value based upon  assumptions
about future demand and market  conditions.  The Company  writes down  inventory
during the  period in which such  products  are no longer  marketable  in any of
their markets due to governmental regulations as well as inventory which matures
within the next three months.

Property and Equipment

Property and  equipment  are stated at cost less  accumulated  depreciation  and
amortization.  Depreciation  is  recorded  on the  straight-line  basis over the
estimated  useful  lives of the  assets,  which  range  from three to ten years.
Amortization of leasehold  improvements  and capital leases is recorded over the
shorter of the  straight-line  basis over the estimated useful life or the lease
term of the asset.  Normal maintenance and repairs of property and equipment are
expensed  as  incurred  while  renewals,  betterments  and  major  repairs  that
materially  extend the useful life of property and  equipment  are  capitalized.
Upon retirement or disposition of property and equipment,  the asset and related
accumulated  depreciation  or  amortization is removed from the accounts and any
resulting gain or loss is charged to operations.

Goodwill

Goodwill  represents the excess of costs over fair value of assets of businesses
acquired.  In June  2001  the  Financial  Accounting  Standards  Board  ("FASB")
approved the issuance of Statement of Financial  Accounting  Standards  ("SFAS")
No.  141,  "Business  Combinations"  and  SFAS  No.  142,  "Goodwill  and  Other
Intangible  Assets." The new  standards  require that all business  combinations
initiated  after June 30, 2001 be accounted  for using the purchase  method.  In
addition,  all intangible assets acquired that are obtained through  contractual
or legal right, or are capable of being separately sold, transferred,  licensed,
rented  or  exchanged  shall be  recognized  as an asset  apart  from  goodwill.
Goodwill  and  intangibles  with  indefinite  lives will no longer be subject to
amortization,  but  will  be  subject  to at  least  an  annual  assessment  for
impairment by applying a fair value based test.

The Company's goodwill at June 30, 2005 results from its 2002 acquisition of its
Spain  subsidiary.  Management has  established  that based on future cash flows
generated from its operations in Spain, the Company's  goodwill at June 30, 2005
is not impaired.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever  circumstances and
situations change such that there is an indication that the carrying amounts may
not be recovered.  In such  circumstances,  the Company will estimate the future
cash  flows  expected  to  result  from the use of the  asset  and its  eventual
disposition.  Future  cash  flows are the future  cash  inflows  expected  to be
generated  by an asset less the future  outflows  expected  to be  necessary  to
obtain those inflows. If the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying amount of the asset, the
Company  will  recognize an  impairment  loss to adjust to the fair value of the
asset. At June 30, 2005, the Company  believes that there has been no impairment
of its long-lived assets.


                                       30
<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Investment

The Company's  investment is reported on the equity method of accounting.  Under
this  method the initial  investment  is  recorded  at cost.  Subsequently,  the
investment is increased or decreased to reflect the  Company's  share of income,
losses and dividends paid.

Income Taxes

The Company uses the  liability  method for income taxes as required by SFAS No.
109  "Accounting  for Income Taxes." Under this method,  deferred tax assets and
liabilities are determined based on differences  between financial reporting and
tax basis of assets and  liabilities.  Deferred tax assets and  liabilities  are
measured  using  enacted  tax rates  and laws  that  will be in effect  when the
differences are expected to reverse.  Valuation  allowances are established when
it is more likely than not that the deferred tax assets will not be realized.

Shipping and Handling Costs

Shipping and handling costs are included in cost of revenues in accordance  with
guidance  established  by the  Emerging  Issues  Task  Force,  issue No.  00-10,
"Accounting for Shipping and Handling Costs."

Advertising

Advertising  costs are expensed as incurred and included in selling  general and
administrative   expenses  in  the  accompanying   consolidated   statements  of
operations.  The Company incurred advertising expenses of approximately  $89,000
and $40,000 during 2005 and 2004, respectively.

Research and Development

Research  and  development  costs are  charged to  operations  as  incurred  and
consists primarily of salaries and related benefits, raw materials and supplies.

Income (Loss) per Share

The Company presents basic income (loss) per share and, if appropriate,  diluted
earnings per share in accordance  with the  provisions of SFAS No. 128 "Earnings
per Share" ("SFAS 128").

Under SFAS 128,  basic net income  (loss) per share is computed by dividing  the
net income (loss) for the year by the weighted  average  number of common shares
outstanding  during  the year.  Diluted  net  income  per share is  computed  by
dividing  the net income for the year by the weighted  average  number of common
shares and common share equivalents outstanding during the year. The Company has
1,175,000 options  outstanding at June 30, 2005.  Additionally,  the Company may
have to issue up to  2,220,512  shares upon  conversion  of certain  convertible
debentures,  including  those  exchanged  during  September  2005.  The weighted
average  amount  of  common  stock  equivalents  included  in the 2005  dilutive
earnings per share  amounts to 15,514.  All other common stock  equivalents  are
antidilutive


                                       31

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments

The  carrying  amounts  of  financial  instruments,   including  cash,  accounts
receivable,   lines  of  credit  and  accounts   payable  and  accrued  expenses
approximate fair value at June 30, 2005 because of the relatively short maturity
of the  instruments.  The  carrying  value of,  capitalized  lease  obligations,
long-term debt, and convertible  debentures  approximate  fair value at June 30,
2005 based upon terms available for companies under similar arrangements.

New Accounting Pronouncements

In November 2004, the Financial  Accounting  Standards  Board (FASB) issued SFAS
151 "Inventory Costs". This Statement amends the guidance in ARB No. 43, Chapter
4, "Inventory  Pricing,  to clarify the accounting for abnormal  amounts of idle
facility expense,  freight,  handling costs, and wasted material (spoilage).  In
addition,  this Statement requires that allocation of fixed production  overhead
to the costs of  conversion  be based on the normal  capacity of the  production
facilities.  The  provisions of this Statement will be effective for the Company
beginning with its fiscal 2006.  The Company is currently  evaluating the impact
this new Standard  will have on its  operations,  but believes  that it will not
have  a  material  impact  on  the  Company's  financial  position,  results  of
operations or cash flows.

In June 2004,  the Emerging  Issues Task Force (EITF) issued EITF No. 03-01 "The
Meaning  of  Other-Than-Temporary  Impairment  and Its  Application  to  Certain
Investments"  (EITF  03-01).  EITF  03-01  provides  guidance  with  respect  to
determining the meaning of  other-than-temporary  impairment and its application
to debt and  equity  securities  within  the  scope of  Statement  of  Financial
Accounting  Standards No. 115,  "Accounting for Certain  Investments in Debt and
Equity Securities",  including  investments  accounted for under the cost method
and  new  disclosure   requirements  for  investments  that  are  deemed  to  be
temporarily  impaired. We understand the Financial Accounting Standards Board is
currently   reconsidering   disclosure,    measurement,   and   recognition   of
other-than-temporary impairments of debt and equity securities under EITF 03-01.
Until new guidance is issued,  the  disclosure  requirements  of EITF 03-01 were
effective for our fiscal 2005 annual consolidated financial statements.

In December 2004, the Financial  Accounting  Standards Board finalized Statement
of Financial  Accounting Standards No. 123R,  "Share-Based  Payment" (FAS 123R),
amending FAS No. 123, effective  beginning our first quarter of fiscal 2006. FAS
123R will require us to expense  stock options based on grant date fair value in
our  financial  statements.  Further,  the  adoption  of FAS 123R  will  require
additional   accounting  related  to  the  income  tax  effects  and  additional
disclosure  regarding the cash flow effects  resulting from share-based  payment
arrangements. The effect of expensing stock options on our results of operations
using  a  Black-Scholes  option-pricing  model  is  presented  in our  financial
statements in Note 1 -- Basis of Presentation-Stock-Based  Compensation. We will
adopt FAS 123R using the modified  prospective  method and the adoption  thereof
will  have no effect  on our cash  flows,  but is  expected  to have a  material
adverse  impact on our results of  operations.  We anticipate the pre-tax charge
for FAS  123R to be in the  range of  $250,000  to  $500,000  for  fiscal  2006,
however,  the actual pre-tax charge could significantly differ from our estimate
if facts  and  assumptions  used to  estimate  fair  value  during  fiscal  2006
significantly differ from those used in modeling our estimate.

In May 2005,  the  Financial  Accounting  Standards  Board  issued  Statement of
Financial   Accounting   Standards  No.  154,   "Accounting  Changes  and  Error
Corrections" (FAS 154). FAS 154 replaces Accounting Principals Board Opinion No.
20 (APB 20) and  Statement of Financial  Accounting  Standards  No. 3 "Reporting
Accounting  Changes  in  Interim  Financial  Statements",  and  applies  to  all
voluntary  changes in accounting  principle,  and changes the  requirements  for
accounting  for and  reporting  of a  change  in  accounting  principle.  APB 20
previously  required  that most  voluntary  changes in  accounting  principle be
recognized  by  including  in net  income of the  period of change a  cumulative
effect of  changing to the new  accounting  principle  whereas FAS 154  requires
retrospective  application to prior periods' financial statements of a voluntary
change in accounting principle, unless it is impracticable. FAS 154 enhances the
consistency of financial  information between periods. FAS 154 will be effective
beginning the first quarter of our fiscal 2007. We do not expect the adoption of
FAS 154 will  have a  material  impact on our  financial  position,  results  of
operations, or cash flows.

                                       32

<PAGE>

Provision for returns

In the normal course of business,  the Company does not provide  stock-balancing
or price  protection  rights to its  distributors;  however,  on a non-recurring
basis, we have historically  accepted product returns. The Company estimates its
provision for product  returns to amount to  approximately  $200,000 at June 30,
2005. Management  establishes provisions for estimated returns concurrently with
the  recognition  of  revenue.   The  provisions  are  established   based  upon
consideration of a variety of factors, including, among other things, recent and
historical  return rates for both specific  distributors and projected  economic
conditions.

Provision for Product Replacements

The Company provides a product replacement program on its products.  The Company
provides an accrual for the estimated  cost of product  replacement  and product
liability  claims at the time revenue is recognized.  Such accruals are based on
estimates,  which are based on relevant  factors such as historical  experience,
the warranty period,  estimated  replacement  costs,  identified product quality
issues and are discounted to a current value. Management estimated the amount of
potential  future  product  replacement  claims based on  statistical  analysis.
Changes to actual claims and interest rates could have a material  impact on the
statistical  calculation  which could materially  impact the Company's  reported
expenses and results of operations.











                                       33

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentration of Credit Risks

The Company is subject to  concentrations of credit risk primarily from cash and
cash equivalents and accounts  receivable.  The Company maintains  accounts with
French  financial  institutions,  which  at times  exceeds  the  insured  French
statutory  limit of  approximately  $150,000.  The Company  minimizes its credit
risks associated with cash by periodically  evaluating the credit quality of its
primary financial institutions.  The Company's accounts receivables are due from
surgeons  in France and from  distributors  in all other  countries  in which it
markets its  products.  The Company  does not require  collateral  to secure its
accounts receivables. However, the Company regularly insures a proportion of its
accounts  receivable  through a financial  institution.  At June 30,  2005,  the
financial  institution  insured  approximately  $3.3  million  of the  Company's
accounts receivables. One of the Company's customers accounted for approximately
20% of its net  accounts  receivable  at  June  30,  2005.  No  other  customers
accounted for more than 10% of its net accounts receivables.

Product Concentration Risk

Substantially  all of the  Company's  revenues  derive  from the sale of  breast
implants.

Supplier Concentration Risk

One of the Company's  suppliers  procures  titanium  which is used as coating in
substantially  all of the Company's  breast  implants.  The agreement  with this
supplier  terminates in 2009. The Company cannot  guarantee that it will be able
to renew  such  agreement  on  acceptable  terms,  or if  unable  to  renew  the
agreement,  that it will  secure the  procurement  of such  titanium  from other
suppliers on similar terms, if at all.

Customers Concentration Risk

Two of the  Company's  customers  accounted for 16.4% and 13.3% of its revenues,
respectively,  during  2005,  as  well  as  12.9%  and  11.8%  of its  revenues,
respectively,   during  2004.  The  Company  minimizes  its  concentration  risk
associated with customers by diversifying  its customer base and introducing its
products in new countries.

Reclassifications

Certain items in the prior years'  consolidated  financial  statements have been
reclassified to conform to the current year presentation.


                                       34

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 4 - INVENTORIES

Inventories at June 30, 2005 consist of the following:

Finished goods                                         $ 2,164,745
Work-in-process                                            856,499
Raw materials                                              316,618
                                                       -----------
                                                       $ 3,337,862
                                                       ===========

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment and related accumulated depreciation at June 30, 2005
consist of the following:



Tenant improvements                                    $ 2,171,276
Machinery and equipment                                  2,104,771
Office equipment                                           170,935
Transportation equipment                                   210,344
Other                                                      395,520
                                                       ------------
                                                         5,052,846
Accumulated depreciation                                (3,420,804)
                                                       ------------
Property and equipment, net                            $ 1,632,042
                                                       ============

Depreciation expense amounted to approximately $700,000 and $840,000 during 2005
and 2004, respectively.

NOTE 6 - INVESTMENTS

At June 30,  2005 the Company has a 38.05%  investment  in SCI Lucas,  a related
French real estate  company.  The equity in income of the investee  amounting to
approximately  $71,000  during  2005  and an  equity  in  loss  of the  investee
amounting to approximately  $62,000 during 2004. SCI Lucas leases its facilities
to the Company,  which is the sole tenant.  The leases expire in November  2009.
The leases are renewable automatically unless the Company cancels the leases six
months prior to the renewal date.

At June 30, 2005, the Company owed SCI Lucas approximately $10,000,  relating to
amounts  due for  rent,  which is  included  in  accounts  payable  and  accrued
expenses.  The  Company  paid rent to SCI Lucas of  approximately  $569,000  and
incurred  rental  expense  of  approximately  $487,000  in 2005.  The  Company's
remaining  obligation  to SCI Lucas  does not bear  interest  and is  payable on
demand.



                                       35
<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses at June 30, 2005 consist of the following:

Vendors payable                                       $1,843,149
Accounts payable to U.S. distributor                   1,050,000
Compensation payable and related accrued benefits        788,498
Provision for litigations                                562,442
Other                                                    237,153
                                                      -----------
                                                      $4,481,242
                                                      ===========
NOTE 8 - LONG TERM DEBT

The Company's long term debt consists of various notes payable with  outstanding
principal amounts ranging from approximately  $1,000 to $200,000,  with interest
rates  ranging from 3.56% to 5.75% per year and due dates between March 2006 and
June 2010. In addition,  the Company has received  non-interest bearing advances
from ANVAR,  an agency of the French  government,  which  finances or subsidizes
certain research and development  projects. If the research does not result in a
commercially  feasible product and certain other conditions are met, the Company
will not have to repay some or all of the  advances.  The  Company is  currently
unable to determine whether the research associated with the advance will result
in a commercially  feasible product and does not anticipate  knowing the outcome
of such research  efforts in the foreseeable  future.  Accordingly,  the Company
includes  the  advances in the  long-term  portion of its debt.  Long-term  debt
consists of the following at June 30, 2005:

                                Notes Payable              $  299,420
                               ANVAR Advances                 181,200
                                                            ---------
                                                              480,620
                       Less:  Current Portion               ( 289,004)
                                                            ----------
       Long term debt, net of current portion               $ 191,616
                                                            ==========

The aggregate maturities of long-term debt at June 30, 2005 are as follows:

                                    June 30,
                                    ---------
                                      2006              $ 289,004
                                      2007                 49,862
                                      2008                 49,862
                                      2009                 49,862
                                      2010                 42,030
                                                        ----------
                                                        $ 480,620
                                                        ==========




                                       36

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 9 - INCOME TAXES

Deferred  income  taxes  reflect  the net tax  effect of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the net deferred taxes at June 30, 2005 are as follows:


Deferred tax assets:
Net operating loss carryforward                     $      2,105,279
Other                                                        (39,318)
Less valuation allowance                                 ( 2,065,961)
                                                    -----------------
Total net deferred tax assets:                      $              -
                                                    =================

<PAGE>

SFAS No. 109 requires a valuation allowance,  if any, to reduce the deferred tax
assets reported if, based on the weight of the evidence,  it is more likely than
not that some  portion or all of the  deferred  tax assets will not be realized.
Management has determined that a valuation  allowance of $ 2,065,961 at June 30,
2005 is necessary to reduce the deferred tax assets to the amount that will more
likely than not be realized.  The change in the valuation allowance for 2005 and
2004 was approximately $400,000 and $2,560,000, respectively.

At June 30, 2005, the Company had net operating loss carryforwards  amounting to
approximately  $0.7 million and $5.1  million for U.S. and French tax  purposes,
respectively,  that expire in various amounts from 2021 through 2025 in the U.S.
and never expire in France.

The federal statutory tax rate reconciled to the effective tax rate for 2005 and
2004, respectively, is as follows:

                                                         2005           2004
                                                         ----           ----
Tax at U.S statutory rate:                               35.0%          35.0%
State tax rate, net of federal benefits                   0.0            0.0
Foreign tax rate  in excess of U.S. statutory tax rate    5.0            5.0
Change in valuation allowance                           (40.0)         (40.0)
                                                        ------         ------
Effective tax rate                                        0.0%           0.0%
                                                        ======         ======


                                       37

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 10 - CONVERTIBLE DEBENTURES

On October 9, 2003, OS entered into a convertible  debentures purchase agreement
(the "Agreement")  with HEM Mutual Assurance,  LLC ("HEM") to sell $1,000,000 of
1% convertible debentures due on October 9, 2008. Interest accrues from the date
of the  transaction and is payable in cash or common stock, at the option of the
debenture holder. In the event of default, as defined in the Agreement, interest
shall  accrue  at 15% per  annum.  The  conversion  price  for  one  convertible
debenture  amounting to $498,750 shall be the lesser of (a) $1.25 or (b) 100% of
the average  three lowest  closing bid prices during the last forty trading days
immediately  preceding the conversion.  The conversion price for one convertible
debenture  amounting to $500,000 shall be the lesser of (a) $1.56 or (b) 100% of
the average  three lowest  closing bid prices during the last forty trading days
immediately  preceding the conversion.  The conversion price for one convertible
debenture  amounting  to  $1,250  is  $0.001.  As part of the  Agreement,  OS is
required to maintain a common stock escrow account with 10,000,000 unrestricted,
free-trading  shares of common stock. As part of the Company's merger with OS on
October 9, 2003, the Company assumed all the obligations and responsibilities of
the Agreement. In return for issuing the debentures to HEM, the Company received
$500,000 in December 2003 and the remaining $500,000 on January 9, 2004.

On September 9, 2005, Eurofortune Holding, S.A. ("Eurofortune"), an affiliate of
the Company's chief executive  officer,  purchased three convertible  debentures
from HEM .  Simultaneously,  Eurofortune  exchanged the three debentures for two
convertible  debentures issued by the Company each having an aggregate principal
amount of $500,000. The outstanding principal amount and accrued interest at the
rate of 1% per annum of the  debentures  is due and  payable on October 9, 2008.
The  conversion  prices  of  the  debentures  are  fixed  at  $1.25  and  $1.56.
Additionally,  the 10 million unrestricted  free-trading shares of the Company's
common stock held in escrow were returned to the treasury.

The  convertible   debentures  initially  issued  to  HEM  contain  an  imbedded
beneficial  conversion  feature  since the fair market value of the common stock
exceeds the most beneficial  exercise price on the debenture  issuance date. The
value was computed as  $1,000,000,  which will be amortized  over the respective
term of the  debentures.  During  2005 and 2004,  the  amortization  of the debt
discount amounted to approximately $205,000 and $123,000,  respectively, and has
been included in interest  expense in the  accompanying  consolidated  financial
statements.


                                       38

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 10 - CONVERTIBLE DEBENTURES (continued)

In  April  2004,  the  Company  sold  its  Senior  Convertible   Debenture  (the
"Debenture") in the face amount of $3,000,000 to Armadillo Investments,  PLC. In
consideration for the Debenture,  the Company received 1,595,745 ordinary shares
of  Armadillo  Investments.  The  Company  immediately  sold  these  shares  for
approximately $1,420,000.  The Debenture does not bear interest. In the event of
default,  as defined under the Debenture,  the Debenture accrues interest at the
rate of 10% per annum. The Debenture matures on March 25, 2009. The Debenture is
convertible  into our common stock at a  conversion  price per share of (a) four
dollars  ($4.00) (the "Fixed  Conversion  Price") or (b) eighty percent (80%) of
the lowest  closing bid price for the Common Stock in the ten (10) business days
preceding the date of conversion,  but in no event less than fifty percent (50%)
of the Fixed Conversion Price (the "Floating Conversion Price"). For purposes of
determining the closing bid price on any day,  reference shall be to the closing
bid price for a share of Common Stock on such date on the OTC Bulletin Board, as
reported on Bloomberg, L.P. (or similar organization or agency succeeding to its
functions of  reporting  prices).  The Company  granted  piggyback  registration
rights with respect to the common stock into which the Debenture is convertible.
The Company is required to  maintain in escrow  750,000  shares of common  stock
upon conversion of the Debenture.

The  difference  between  the face  amount  of the  Debenture  and the  proceeds
generated  from the shares  received in exchange of the  Debentures  amounted to
approximately  $1,580,000  and has been recorded as a debt  discount.  Such debt
discount is amortized over the term of the Debenture.  During 2005 and 2004, the
amortization  of the  debt  discount  amounted  to  approximately  $238,000  and
$50,000,  respectively,  and  has  been  included  in  interest  expense  in the
accompanying financial statements.

NOTE 11 - LINES OF CREDIT

The  Company  entered  into  lines  of  credit  agreements  with  two  financial
institutions up to the aggregate amount of approximately $1,630,000. The Company
has used  approximately  $1,030,000 under such lines of credit at June 30, 2005.
The lines of credit bear  interest at the EURIBOR rate plus 2.0% (2.516% at June
30, 2005).  The  outstanding  principal  balance plus any interest is payable on
demand and is secured by accounts  receivables of  approximately  $1,140,000 and
inventories of approximately $3.3 million.

Effective March 31, 2004, concurrent with an amended distribution agreement, the
Company issued to a distributor a revolving  promissory note for certain sums to
come due to Medicor based on Medicor's and the manufacturer's  administration of
product  replacement  claims.  The note bears  interest at the rate of 6.75% per
annum.  The  principal  amount  under the note as of June 30,  2005 was $0.  The
distributor  claims  that the  Company  owes  approximately  $460,000  under the
promissory  note as well as  approximately  $70,000 in legal costs and interest.
The Company denies that such amounts are due under the promissory  note since it
has not yet approved the sums due for product replacement claims.  However,  the
Company has  provided a provision of  approximately  $520,000 for the payment of
such claims in its accounts payable and accrued expenses as of June 30, 2005.



                                       39
<PAGE>


                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 12 - STOCK OPTIONS

In July 2004, the Board of Directors adopted the Heritage  Worldwide,  Inc. 2004
Stock Option Plan (the "2004 Plan").  The Company  intends to attract and retain
employees and valuable  contractors by allowing them an additional  incentive to
promote the financial success of the Company.

The  2004  Plan  allows  for the  grant  of both  incentive  stock  options  and
nonstatutory stock options.  The 2004 Plan may be administered,  interpreted and
constructed by the Board of Directors or a compensation  committee.  The maximum
number of shares of common stock which may be issued pursuant to options granted
under the 2004 Plan may not exceed  2,000,000  shares.  During  July  2004,  the
Company issued  1,175,000  options.  If any options  granted under the 2004 Plan
expires or terminates without having been exercised or ceased to be exercisable,
such options will be available  again under the 2004 Plan.  All employees of the
Company and its subsidiaries are eligible to receive incentive stock options and
nonstatutory stock options.  Non-employee  directors and outside consultants who
provided  bona-fide  services  not in  connection  with  the  offer  or  sale of
securities in a capital raising transaction are eligible to receive nonstatutory
stock  options.  Incentive  stock  options  may not be granted  below their fair
market value at the time of grant or, if to an individual who beneficially  owns
more than 10% of the total  combined  voting  power of all stock  classes of the
Company or a subsidiary,  the option price may not be less than 110% of the fair
value of the  common  stock  at the time of  grant.  The  expiration  date of an
incentive  stock option may not be longer than ten years from the date of grant.
Option holders, or their  representatives,  may exercise their vested options up
to three months after their employment termination or one year after their death
or permanent and total  disability.  The 2004 Plan provides for adjustments upon
changes in capitalization.

There  were no  transactions  in the 2004 Plan  during  2004.  A summary  of the
activity during 2005 of the Company's stock option plan is presented below:



                                       40

<PAGE>

                                                                   Weighted
                                                                    Average
                                      Options                   Exercise Price

Outstanding at July 1, 2004              -                             -

Granted                             1,175,000                        $2.16
Exercised                                -                             -
Expired                                  -                             -
                                  -----------------         --------------------
Outstanding at June 30, 2005        1,175,000                        $2.16
                                  =================         ====================

Exercisable at July 1, 2004              -                           $   -
                                  =================         ====================
Exercisable at June 30, 2005             -                           $   -
                                  =================         ====================

The weighted  average  remaining  contractual life and weighted average exercise
price of options  outstanding  at June 30,  2005,  for selected  exercise  price
ranges, is as follows:

Options outstanding:
<TABLE>
<CAPTION>

---------------------------- -------------------------- -------------------------- --------------------------
 Range of exercise prices        Number of options          Weighted average           Weighted average
                                                          remaining contractual         exercise price
                                      life
---------------------------- -------------------------- -------------------------- --------------------------
<S>        <C>                        <C>                         <C>                       <C>
          $ 0.55                       25,000                      9.75                      $ 0.55
---------------------------- -------------------------- -------------------------- --------------------------
            2.20                    1,150,000                      9.0                         2.20
---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>



                                       41

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 13- COMMITMENTS

Lease commitments:

The Company has entered into  various  noncancellable  operating  leases for its
corporate offices,  manufacturing and distribution facilities.  These leases all
expire within 4 years.  Rental expense was  approximately  $450,000 and $390,000
during 2005 and 2004, respectively,  inclusive of leases for facilities owned by
related parties, which amounted to approximately  $380,000 and $380,000,  during
2005 and 2004, respectively.

At June 30, 2005 total minimum  rentals under  operating  leases with  remaining
noncancellable lease terms of more than one year were as follows:

               Year  Ending
               June  30,
               ---------
                 2006                    $  431,988
                 2007                       430,000
                 2008                       409,904
                 2009                       395,488
                                         ----------
                                         $1,667,380
                                         ==========

NOTE 14 - SEGMENT AND GEOGRAPHIC INFORMATION

The Company  operates in one single  market,  breast  implants  and analyzes its
revenues  derived  from two  geographic  locations:  France  and the rest of the
world.  The Company did not have  revenues  from the U.S.  during 2005 and 2004.
Information  about the  Company's  sales in different  geographic  locations for
fiscal 2005 and 2004 is shown below  pursuant to the provisions of SFAS No. 131,
"Disclosures about segments of an Enterprise and Related Information."

                                           Year ended June 30,
                                        2005               2004
                                      -------          -----------
France                             $  2,999,427        $ 3,701,731
Outside of France                    10,573,990          8,028,046
                                   ------------        -----------
                                   $ 13,573,417        $11,729,777

Substantially all of the identifiable operating assets and liabilities of the
Company are within France.



                                       42

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 15 - LEGAL CONTINGENCIES

In October 1999, June 2000 and July 2003,  separate but related  complaints were
filed by Saul Kwartin, Ruth Kwartin,  Steven M. Kwartin, Robert Kwartin and Nina
Kwartin  against our  subsidiary  Poly  Implant  Protheses,  S.A.  ("PIP"),  III
Acquisition Corp. d/b/a PIP America,  PIP/USA, Inc., Jean Claude Mas, our former
CEO, personally, and others, in the Circuit Court of Miami-Dade County, Florida.
Plaintiffs  are all  members  of one family who  purport to be  shareholders  of
PIP/USA,  Inc., a distributor  of PIP,  suing  derivatively  on its behalf,  and
individually,  and seeking to rescind various  transactions  between PIP America
and PIP, and seeking to impose liability  against PIP and its  co-defendants for
unspecified monetary damages arising out of alleged tortious and other purported
wrongful acts concerning alleged relationships  between plaintiffs,  PIP and the
other defendants.

Initially, two cases were filed: one in October of 1999 by Saul and Ruth Kwartin
and assigned Case No.  99-25227-CA-01  and one in June of 2000 by Steven Kwartin
and  assigned  Case  No.  00-14665-CA-01.  Case  No.  99-25227  was  voluntarily
dismissed by the  Plaintiffs,  who then  unsuccessfully  tried to withdraw their
dismissal.  The Plaintiffs  then appealed.  In May of 2004, the appellate  court
affirmed the trial court's Order approving the voluntary dismissal.  A motion by
PIP/USA  and Mr. Mas to recover  their  attorneys'  fees is pending in the trial
court,  as is a motion to disqualify  the  Plaintiffs'  counsel in that lawsuit.
Case No.  00-14665-CA-01  by Steven Kwartin  remains  pending.  In June of 2003,
Robert and Nina Kwartin  commenced a lawsuit  assigned Case No.  03-15006.  That
lawsuit  remains  pending.  In  September of 2003,  Saul and Ruth Kwartin  filed
another  lawsuit  assigned Case No.  0322537-CA-27,  alleging  similar claims to
those  included  in the  dismissed  case.  Within a day or two of that  lawsuit,
Steven  Kwartin  filed his  second  lawsuit  assigned  Case No.  03-22399-CA-15,
against Mr. Mas and Donald McGhan only.

In November of 2003,  Jessica  Fischer  Schnebel and fifteen other women filed a
Second Amended  Consolidated  Class Action Complaint against PIP, PIP/USA,  Inc.
and III Acquisition Corp. d/b/a PIP America in the Circuit Court of Cook County,
Illinois. The Second Amended Consolidated Class Action Complaint contains counts
alleging product liability,  breach of the implied warranties of merchantability
and fitness for a particular  purpose,  violation of the Illinois Consumer Fraud
Act and a contract claim alleging  third-party  beneficiary status.  Unspecified
monetary  damages,  exemplary  damages and attorneys  fees and costs are sought.
Motions to dismiss filed by PIP and PIP .America  remains  pending and discovery
is  underway.  The  plaintiffs  have not sought to date to certify any  putative
class.Our  U.S.  distributor  has  tendered  this case to PIP,  for  defense and
indemnity pursuant to the distributor agreement.

Salinas I. Landers, et al. v. Poly Implants Protheses, S.A., et al., Case No. CV
030377 was filed in June 2003 in the Superior  Court of San Luis Obispo  County,
California.  Plaintiffs  purport to sue on behalf of  themselves  and an alleged
class of persons allegedly  similarly situated for unspecific  monetary damages,
exemplary  damages,  attorneys' fees and costs and injunctive relief for alleged
breach of express warranty and alleged  violations of California's  Song-Beverly
Consumer Warranty Act and Unfair  Competition Law. This action was settled and a
dismissal of the action by the court is expected shortly.

Marsha Dicken, et al. v. PIP/USA,  Inc., et al., Case No. 2003-05588,  was filed
in  January  2003 in the  District  Court of Harris  County,  Texas.  Plaintiffs
purported  to sue on  behalf  of  themselves  and an  alleged  class of  persons
allegedly  similarly  situated for alleged strict  liability,  breach of express
warranty,  breach  of  implied  warranties,  violation  of  Section  402B of the
Restatement (Second) of Torts, negligence,  misrepresentations, and violation of
Texas'  Deceptive  Trade  Practices  Act  with  respect  to  implant   products.
Plaintiffs  seek  an  unspecified  amount  in  alleged   compensatory   damages,
additional  statutory  damages,   interest,   attorneys'  fees  and  costs.  The
Plaintiffs have since given up the class action  allegations of the petition and
the Court entered an Order on August 10, 2005, striking eighteen plaintiffs from
the  lawsuit.  The  lawsuit is in the  discovery  phase.  Our  distributor,  PIP
America, has settled the lawsuit against it. PIP America had, prior to settling,
tendered this case to Poly Implant Prostheses, S.A., for defense and indemnity.

PIP and PIP America were sued by Alice Holt in the Circuit Court of Lake County,
Illinois in May of 2003 for alleged product  liability and other related claims.
PIP denied any  liability  to the  Plaintiff  and  answered  the  Complaint  and
asserted  affirmative  defenses.  This  lawsuit  has been  settled and the Court
dismissed the lawsuit on May 10, 2005.

Heritage  Worldwide,  Inc.  and PIP and other  defendants  were sued by Madeline
Sanchez in New York Supreme Court in July of 2004 for alleged product  liability
and  other  related  claims.  Both  Heritage  Worldwide,  Inc.  and PIP deny any
liability  to the  Plaintiff  and  have  answered  the  Complaint  and  asserted
affirmative defenses. Discovery is ongoing.

PIP and PIP America were sued by a Susan Largent in the United  States  District
Court for the  District  of New  Mexico in  August of 2004 for  alleged  product
liability  and other related  claims.  PIP denies any liability to the Plaintiff
and has answered the Complaint and asserted affirmative defenses.

In April,  2005,  Heritage  Worldwide,  Inc. and PIP were sued in New York state
court by a New York law firm,  Morrison Cohen, for alleged unpaid legal fees and
expenses.  Heritage  removed  the  lawsuit  to federal  court,  where it remains
pending.  Heritage  has not yet  responded  to the  Complaint  as a result of an
extension obtained to do so and PIP has not yet been served with process.

Though  it is not yet  possible  to  predict  the  outcome  of any of the  cases
described above, the Company and its  subsidiaries,  as applicable,  have denied
plaintiffs'  allegations and are vigorously defending themselves upon the merits
of each lawsuit and against  certification of any class in the Illinois Schnebel
lawsuit,  which  is the only  remaining  putative  class  action.  We have  been
informed by PIP America that it is administering  and fulfilling its obligations
to its customers in the ordinary course of business,  and for which it has taken
appropriate reserves.

Other  than  certain  of  its  own  product   replacement   claims  that  it  is
administering,  PIP America is  indemnified  by  PIP/USA,  Inc.,  Poly  Implants
Protheses,  S.A., and Jean Claude Mas,  personally,  from all claims,  including
those asserted above.  As a result,  the Company  believes the costs  associated
with these  matters  will not have a material  adverse  impact on the  Company's
business,  results of operations or financial position. The Company has recorded
a provision of approximately  $520,000 at June 30, 2005 in connection with these
matters.

                                       43

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 15 - LEGAL CONTINGENCIES (continued)

The Company and its subsidiaries  have been and will continue to be periodically
named as a  defendant  in other  lawsuits  in the  normal  course  of  business,
including   product   liability  and  product   warranty   claims.   Litigation,
particularly  product liability  litigation,  can be expensive and disruptive to
normal business  operations and the results of complex legal  proceedings can be
very difficult to predict.  Claims against the Company or its subsidiaries  have
been and are  periodically  reviewed  with  counsel  in the  ordinary  course of
business. The Company presently believes it or its subsidiaries have meritorious
defenses in all  lawsuits in which the  Company or any of its  subsidiaries  are
defendants,  subject to the subsidiaries' continuing warranty obligations, which
the  subsidiaries  intend to continue to  satisfy.  While it is not  possible to
predict the outcome of these matters,  we believe that the costs associated with
them will not have a material adverse impact on the Company's business,  results
of operations or financial position.

NOTE 16 - GOING CONCERN CONSIDERATIONS

As reflected in the accompanying consolidated financial statements,  the Company
has an accumulated  deficit of  approximately  $4.2 million.  The ability of the
Company to continue as a going  concern is  dependent  on  achieving  profitable
operations, its ability to generate positive cash flows from operations, and the
obtaining of additional equity and/or debt financing to pay off outstanding debt
obligations  and  unpaid  payroll  taxes.  There  can be no  assurance  that the
Company's efforts will be successful.  The consolidated  financial statements do
not include any adjustments  that might be necessary if the Company is unable to
continue as a going concern.  No estimate has been made should management's plan
be unsuccessful.


                                       44


<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005

NOTE 17 - RELATED PARTY TRANSACTIONS

One of the Company's shareholders advanced approximately $160,000 to the Company
during  2005.  This   shareholder   had  previously   advanced  to  the  Company
approximately $610,000 prior to July 1, 2004. The shareholder  contributed these
advances  of  approximately  $770,000  as an  infusion  of capital in one of the
Company's  subsidiaries  during 2005. This capital  infusion is accounted for as
minority  interest in the accompanying  balance sheet. The remaining amounts due
at June 30, 2005 consists of operating expenses paid on behalf of the Company by
its Chairman of the Board.

All  amounts  owed  to the  shareholders  of the  Company's  subsidiary  and its
Chairman of the Board are non-interest bearing and are due upon demand.























                                       45

<PAGE>

Note 18-  Subsequent Events

On September 9, 2005, Eurofortune Holding, S.A. ("Eurofortune"), an affiliate of
the Company's chief executive  officer,  purchased three convertible  debentures
from HEM .  Simultaneously,  Eurofortune  exchanged the three debentures for two
convertible  debentures issued by the Company each having an aggregate principal
amount of $500,000. The outstanding principal amount and accrued interest at the
rate of 1% per annum of the  debentures  is due and  payable on October 9, 2008.
The  conversion  prices  of  the  debentures  are  fixed  at  $1.25  and  $1.56.
Additionally,  the 10 million unrestricted  free-trading shares of the Company's
common stock held in escrow were returned to the treasury.




























                                       46

<PAGE>

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

None

ITEM 8A. CONTROLS AND PROCEDURES

Our Chief  Executive  Officer and Chief  Financial  Officer  (collectively,  the
"Certifying   Officers")  are  responsible  for   establishing  and  maintaining
disclosure  controls and procedures  which include  controls and procedures that
are designed to ensure that information  required to be disclosed in the reports
which we file with or submit to the SEC is recorded,  processed,  summarized and
reported within the time periods  specified by the SEC. The Certifying  Officers
have evaluated these controls and procedures and they have concluded (based upon
their  evaluation of these  controls and  procedures as of the end of the period
covered  by this  report)  that  our  disclosure  controls  and  procedures  are
effective to: i) ensure that information  required to be disclosed by us in this
report is accumulated and  communicated  to management,  including our principal
executive officers as appropriate,  to allow timely decisions regarding required
disclosure;  and ii) ensure that  information  required to be  disclosed  in the
reports which we file or submit with the SEC is recorded, processed,  summarized
and reported within the time periods specified by the SEC.

The  Certifying  Officers  have  indicated  that  there  were no  changes in our
internal  controls  which  occurred  during our last  fiscal  quarter  that have
materially affected, or are reasonably likely to materially affect, our internal
control over  financial  reporting,  and there were no  corrective  actions with
regard to significant deficiencies and material weaknesses.

Our  management,  including the  Certifying  Officers,  does not expect that our
disclosure  controls or our  internal  controls  will  prevent all error and all
fraud. A control system, no matter how well conceived and operated,  can provide
only  reasonable,  not absolute,  assurance  that the  objectives of the control
system are met. In  addition,  the design of a control  system must  reflect the
fact that there are resource  constraints,  and the benefits of controls must be
considered relative to their costs.  Because of the inherent  limitations in all
control systems,  no evaluation of controls can provide absolute  assurance that
all control  issues and instances of fraud,  if any,  within a company have been
detected.  These  inherent  limitations  include the realities that judgments in
decision-making  can be faulty,  and that breakdowns can occur because of simple
error or mistake.  Additionally,  controls can be circumvented by the individual
acts of some  persons,  by  collusion  of two or more  people  or by  management
override of the control.  The design of any systems of controls is also based in
part upon certain  assumptions about the likelihood of future events,  and there
can be no assurance  that any design will succeed in achieving  its stated goals
under all potential future conditions.  Because of these inherent limitations in
a cost-effective  control system,  misstatements due to error or fraud may occur
and not be detected.

ITEM 8B.          OTHER INFORMATION.

None.

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The table  below  shows  certain  information  about each of our  directors  and
executive officers:

Name                        Age                 Position

Jean-Claude Mas             66                  Chairman of the Board of
                                                Directors
Alain Sereyjol Garros       64                  Chief Executive Officer and
                                                Director
Claude Couty                53                  Chief Financial Officer and
                                                General Manager

Under the  Company's  By-Laws,  each  director  of the Company is elected at the
annual  meeting of  stockholders  and serves until his or her  successor is duly
elected and  qualified.  Each  executive  officer is elected or appointed by the
directors and serves at the discretion of the Board of Directors.

Jean Claude Mas, Chairman of the Board of Directors

Mr. Mas was elected  Chairman of the Board of Directors  in April 2003.  Mr. Mas
also served as our Chief  Executive  Officer  through  October 2004. Mr. Mas has
been the  Chairman of PIP, and its wholly owned  subsidiary  PIP Espagne,  since
1998. Mr. Mas has extensive experience operating a company in the breast implant
business.

Alain Sereyjol Garros, Chief Executive Officer and Director

Mr.  Sereyjol has been a director since March 2003 and was named Chief Executive
Officer in October 2004. Mr. Sereyjol is a finance  professional  with extensive
experience  in investment  management  and is certified as an  Administrator  of
Finance in Luxembourg.  Since 1998,  Mr.  Sereyjol has served as the Chairman of
Graham  Turner,  S.A., an investment  holding  company.  Mr.  Sereyjol is also a
member of the boards of directors  of  Groupement  Financier  de  Developpement,
S.A., Soparfinanz,  S.A., Immo Finanz, S.A., Graham Turner Trust Services, S.A.,
and Graham Turner Ltd.

                                       47

<PAGE>

Claude Couty, Chief Financial Officer and General Manager

Mr. Couty was appointed to the position of Chief  Financial  Officer and General
Manager  in  January  2004.  Mr.  Couty has  extensive  experience  in  advising
multinational  publicly  traded  companies on  operational,  financial,  and tax
matters.  Prior to that, Mr. Couty served as Chief Financial Officer of European
Casinos, a large European casino owner and operator from 1998 to September 2003.

Management Changes

During October 2004, we named Mr.  Sereyjol as our Chief Executive  Officer.  We
retained Mr. Mas' services as Chairman of the Board of Directors.

Committees

We do not have an audit committee or a compensation committee. We intend to form
such committees once we have selected  directors who shall meet the independence
requirements and audit committee  financial expert requirements under applicable
Securities and Exchange Commission rules and regulations.  We are developing the
criteria we will use in identifying,  attracting,  and retaining such directors.
We are unable to determine  when and if we will  complete the  recruiting of new
directors during fiscal year 2006.

Code of Business Conduct and Ethics

The Company has  adopted a Code of Business  Conduct and Ethics that  applies to
its directors,  officers and employees.  A copy of the Code of Business  Conduct
and Ethics was  attached  as an exhibit  to the  Company's  Form  10-KSB for the
fiscal  year ended  June 30,  2004.  If the  Company  grants  any waiver  from a
provision of this Code, the Company will disclose the nature of such waiver in a
Current Report on Form 8-K.

CERTAIN LEGAL PROCEEDINGS

To the knowledge of the Company,  there are no material proceedings to which any
director,  executive officer or beneficial owner of more than 5% of any class of
voting  securities  of  the  Company,   with  the  exception  of  certain  legal
proceedings  against Mr. Mas as  discussed  in Legal  Proceedings  under Item 3.
Additionally,  to the  knowledge  of  the  Company,  no  affiliate  of any  such
director, executive officer or security holder is a party adverse to the Company
or has a material interest adverse to the Company.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

To our  knowledge  and  based  on our  review  of the  various  filings  made by
directors,  executive  officers and 10% or greater  shareholders of the Company,
all persons  required to file  Section  16(a)  reports  during  fiscal year 2005
timely filed such reports.

ITEM 10. EXECUTIVE COMPENSATION

The  following  table  sets  forth in summary  form the  compensation  earned or
received by the Company's Chief Executive  Officer and Chief Financial  Officer.
No other  executive  officer  of the  Company  earned or  received  in excess of
$100,000 during the past three fiscal years.

                                       48

<PAGE>

<TABLE>
<CAPTION>

                              Annual Compensation                        Long-Term Compensation
                                                                         Awards                  Payouts
                              Fiscal                    Other Annual     Restricted  Securities             All Other
Name and Principal Position   Year     Salary   Bonus   Compensation     Stock       Underlying   LTIP      Compensation ($)
                                       ($)       ($)        ($)          Awards ($)  Options (#)  Payouts

<S>                           <C>      <C>       <C>    <C>              <C>          <C>         <C>       <C>
Jean-Claude Mas, Chairman of  2005     $47,927   $-0-   $-0-             $-0-        -400,000     $-0-      $-0-
the Board and Secretary,      2004     $110,570  $-0-   $-0-             $-0-        -0-          $-0-      $-0-
former Chief Executive        2003     $-0-      $-0-   $-0-             $-0-        -0-          $-0-      $-0-
Officer (1)

Claude Couty, Chief Financial 2005     $181,771  $-0-   $-0-             $-0-        300,000      $-0-      $-0-
Officer and General Manager
                              2004     $-0-      $-0-   $-0-             $-0-        -0-          $-0-      $-0-


                              2003     N/A       $-0-   $-0-             $-0-        -0-          $-0-      $-0-

Alain Sereyjol-Garros, Chief  2005     $-0-      $-0-   $-0-             $-0-        400,000      $-0-      $-0-
Executive Officer

                              2004     $-0-      $-0-   $-0-             $-0-        -0-          $-0-      $-0-

                              2003     $-0-      $-0-   $-0-             $-0-        -0-          $-0-      $-0-
</TABLE>

-----------------------------
(1) Mr. Mas became the Chairman,  Chief Executive Officer and President in April
2003.  Mr Mas  resigned  as Chief  Executive  Officer  in  October  2004 and was
replaced by Mr. Sereyjol-Garros.

Executive Employment Agreements

Mr.  Sereyjol-Garros  and Mr. Mas do not have written employment  agreements and
does not receive cash compensation for their services.

Mr. Couty's  employment  agreement,  provides for, among other things, an annual
salary of $127,286  and the use of an  automobile  for business  purposes.  Upon
termination  without cause, and except for gross  negligence or retirement,  Mr.
Couty would be entitled to severance payments of 40% of his salary  compensation
during the prior year.  If Mr. Couty is  terminated  upon a  restructuring  or a
change in control of the Company,  Mr. Couty shall  receive  severance  payments
that  shall not be lower  than  twelve  months of his  average  compensation  if
employed  between  one  and two  years  and  thirty-six  months  of his  average
compensation if employed more than two years.

Currently, the Company does not maintain a pension plan, profit sharing or other
retirement plan. The Company may adopt one or more of such plans in the future.

                                       49

<PAGE>

Compensation of Directors

     Standard Arrangements

The Company does not currently  pay its directors for attending  meetings of the
Board of Directors.  The Company currently has no standard  arrangement in place
pursuant to which directors of the Company would be compensated for any services
provided  as a director  or for  potential  committee  participation  or special
assignments.  The Company may adopt a director  compensation  arrangement in the
future.

     Other Arrangements

During  fiscal  year 2005,  no  director  of the  Company  received  any form of
compensation from the Company other than the aforementioned grant of options.


Compensation Committee Interlocks and Insider Participation

The Company has not established a compensation committee. During fiscal 2005, no
executive officer of the Company served as a member of the board of directors or
compensation   committee  (or  other  board  committee   performing   equivalent
functions) of any other entity that had an executive officer serving as a member
of the Company's Board of Directors.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

The following  table and footnotes sets forth certain  information  known to the
Company  with  respect to the  beneficial  ownership  of its common  stock as of
September 14, 2005, by (i) each person known by the Company to be the beneficial
owner of more than 5% of the Company's  outstanding common stock, (ii) the Chief
Executive  Officer  and  the  Named  Executive  Officer,   (iii)  the  Company's
directors,  and  (iv)  all of the  Company's  current  directors  and  executive
officers as a group.

Except as otherwise indicated,  each person has sole investment and voting power
(or  shares  that power with his or her  spouse)  over the shares  listed in the
table.  The  percentage  ownership  of  each  person  listed  in the  table  was
calculated using the total number of shares outstanding at September 16, 2005.

<TABLE>
<CAPTION>

5% Shareholders, Directors and Officers       Number of           Number of Shares       Total Number of    Percent of Class
                                          Outstanding Shares    Subject to Options,   Shares Beneficially
                                                                 Warrants or Other          Owned
                                                                      Rights
---------------------------------------   ------------------   --------------------   -------------------   ----------------
<S>                <C>                    <C>                  <C>                    <C>                   <C>
Milo Finance, S.A.                           13,741,667  (1)               --              13,741,667            75.8%
MediCor Ltd.                                  1,212,500  (2)               --               1,212,500             6.9%
Jean-Claude Mas                                      --                    --                      --                *
Alain Sereyjol Garros                        13,775,096  (3)               --              13,775,096            75.9%
Claude Couty                                         --                    --                      --             -0-%
All directors and executive officers         13,775,096                    --              13,775,096            75.9%
as a group (3 persons)
</TABLE>


(1)    Based on the Schedule 13D filed with the Securities and Exchange
       Commission on March 11, 2003. The address of Milo Finance, S.A. is 2 rue
       Jean Engling, LX 1510, Luxembourg.

(2)    Based on the Schedule 13G filed with the Securities and Exchange
       Commission on February 17, 2004.  The address of MediCor Ltd. is 4560 S.
       Decatur Blvd., Suite 300, Las Vegas, Nevada  89103.

(3)    Based on the Schedule 13D filed with the Securities and Exchange
       Commission on September 16, 2005. Mr. Sereyjol is the indirect beneficial
       owner of 13,054,584 shares through his ownership of Graham Turner Ltd.,
       an investment holding company, and 720,512 shares issuable upon
       conversion of debentures held by EuroFortune.

                                       50

<PAGE>

EQUITY COMPENSATION PLAN INFORMATION

In July 2004, the Board of Directors adopted the Heritage  Worldwide,  Inc. 2004
Stock Option Plan (the "2004 Plan").  The Company  intends to attract and retain
employees and valuable  contractors by allowing them an additional  incentive to
promote the financial success of the Company.

The  2004  Plan  allows  for the  grant  of both  incentive  stock  options  and
nonstatutory stock options.  The 2004 Plan may be administered,  interpreted and
constructed by the Board of Directors or a compensation  committee.  The maximum
number of shares of common stock which may be issued pursuant to options granted
under the 2004 Plan may not exceed  2,000,000  shares.  During 2005, the Company
issued  options to purchase  1,175,000  shares of common  stock.  If any options
granted under the 2004 Plan expires or terminates  without having been exercised
or ceased to be exercisable, such options will be available again under the 2004
Plan. All employees of the Company and its  subsidiaries are eligible to receive
incentive stock options and nonstatutory stock options.  Non-employee  directors
and outside  consultants who provided  bona-fide services not in connection with
the offer or sale of securities in a capital raising transaction are eligible to
receive  nonstatutory stock options.  Incentive stock options may not be granted
below their fair market value at the time of grant or, if to an  individual  who
beneficially  owns more than 10% of the total combined voting power of all stock
classes of the Company or a  subsidiary,  the option  price may not be less than
110% of the fair value of the common stock at the time of grant.  The expiration
date of an incentive stock option may not be longer than ten years from the date
of grant.  Option holders, or their  representatives,  may exercise their vested
options up to three months after their employment  termination or one year after
their  death or  permanent  and total  disability.  The 2004 Plan  provides  for
adjustments upon changes in capitalization.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On September 9, 2005, Eurofortune Holding, S.A. ("Eurofortune"), an affiliate of
the Company's chief executive  officer,  purchased three convertible  debentures
from HEM .  Simultaneously,  Eurofortune  exchanged the three debentures for two
convertible  debentures issued by the Company each having an aggregate principal
amount of $500,000. The outstanding principal amount and accrued interest at the
rate of 1% per annum of the  debentures  is due and  payable on October 9, 2008.
The  conversion  prices  of  the  debentures  are  fixed  at  $1.25  and  $1.56.
Additionally,  the 10 million unrestricted  free-trading shares of the Company's
common stock held in escrow were returned to the treasury.

We lease our  headquarters,  offices,  and  manufacturing  facility  from a real
estate  holding  company,  SCI  Lucas,  in which we hold an  interest  of 38.05%
pursuant to the lease  agreement.  Our Chairman of the Board,  Mr. Mas, holds an
interest of approximately 31% in SCI Lucas. Each lease expires in November 2009.
The leases are  renewable  automatically  unless we cancel the leases six months
prior to the renewal date. We paid rent to SCI Lucas of  approximately  $569,000
and incurred rental expense of approximately $487,000 in 2004. At June 30, 2005,
we owed SCI Lucas approximately  $10,000. This amount owed to SCI Lucas does not
bear interest and is payable on demand.

Our controlling shareholder, Milo Finance advanced approximately $160,000 to the
Company  during  fiscal  2005.  Milo  Finance  had  previously  advanced  to  us
approximately  $610,000 prior to July 1, 2004.  Milo Finance  contributed  these
advances  of  approximately  $770,000  as an  infusion  of capital in PIP France
during fiscal 2005.

ITEM 13. EXHIBITS

                                       51

<PAGE>

        Exhibit No.            Description
        -----------            -------------------------------------------------
        2.1                    Agreement and Plan of Reorganization between
                               Heritage Productions, Inc. and Heritage
                               Worldwide, Inc. dated May 18, 2001.  Filed with
                               the SEC as Exhibit C to the Company's Definitive
                               Information Statement on Schedule 14C on June 21,
                               2001 and incorporated herein by reference.
        2.2                    Acquisition Agreement between Heritage Worldwide,
                               Inc., Poly Implants Protheses, S.A. and Milo
                               Finance, S.A. dated February 28, 2003. Filed with
                               the SEC as Exhibit 2.1 to the Company's Current
                               Report on Form 8-K on March 13, 2003 and
                               incorporated herein by reference.
        2.3                    Agreement and Plan of Merger dated as of October
                               9, 2003 between Heritage Worldwide, Inc., PIP
                               Acquisition II, Inc. and OS MXM, Inc.  Filed with
                               the SEC as Exhibit 2.3 to the Company's Annual
                               Report on Form 10-KSB on November 12, 2003 and
                               incorporated herein by reference.
        3.1                    Certificate of Incorporation of the Company.
                               Filed with the SEC as Exhibit A to the Company's
                               Definitive Information Statement on Schedule 14C
                               on June 21, 2001 and incorporated herein by
                               reference.
        3.2                    By-Laws of the Company, as amended. Filed with
                               the SEC as Exhibit B to the Company's Definitive
                               Information Statement on Schedule 14C on June 21,
                               2001 and incorporated herein by reference.
        10.1                   Stockholders' Agreement dated March 1, 2003
                               between Heritage Worldwide, Inc., GEM Global
                               Yield Fund, certain restricted stockholders and
                               Milo Finance, S.A. Filed with the SEC as Exhibit
                               10.1 to the Company's Current Report on Form 8-K
                               on March 13, 2003 and incorporated herein by
                               reference.
        10.2                   Registration Rights Agreement dated March 1, 2003
                               Heritage Worldwide, Inc. and GEM Global Yield
                               Fund.  Filed with the SEC as Exhibit 10.2 to the
                               Company's Current Report on Form 8-K on March 13,
                               2003 and incorporated herein by reference.
        10.3                   Form of Advisor Warrants dated March 1, 2003.
                               Filed with the SEC as Exhibit 10.4 to the
                               Company's Current Report on Form 8-K on March 13,
                               2003 and incorporated herein by reference.
        10.4                   Warrant Escrow Agreement dated March 1, 2003
                               between GEM Global Yield Fund, Heritage
                               Worldwide, Inc., Milo Finance, S.A. and Morrison
                               Cohen Singer & Weinstein, LLP. Filed with the SEC
                               as Exhibit 10.3 to the Company's Current Report
                               on Form 8-K on March 13, 2003 and incorporated
                               herein by reference.
        10.5                   Restricted Stock Escrow Agreement dated March 1,
                               2003 between GEM Global Yield Fund, Heritage
                               Worldwide, Inc., Milo Finance, S.A. and Kaplan
                               Gottbetter & Levenson, LLP. Filed with the SEC as
                               Exhibit 10.5 to the Company's Current Report on
                               Form 8-K on March 13, 2003 and incorporated
                               herein by reference.

                                       52

<PAGE>

        10.6                   Convertible Debenture Purchase Agreement dated
                               October 9, 2003 between OS MXM, Inc. and the
                               purchasers named therein.  Filed with the SEC as
                               Exhibit 10.6 to the Company's Annual Report on
                               Form 10-KSB on November 12, 2003 and incorporated
                               herein by reference.
        10.7                   Convertible Debenture issued to HEM Mutual
                               Assurance, LLC in principal amount of $498,750.
                               Filed with the SEC as Exhibit 10.7 to the
                               Company's Annual Report on Form 10-KSB on
                               November 12, 2003 and incorporated herein by
                               reference.
        10.8                   Convertible Debenture issued to HEM Mutual
                               Assurance, LLC in principal amount of $1,250.
                               Filed with the SEC as Exhibit 10.8 to the
                               Company's Annual Report on Form 10-KSB on
                               November 12, 2003 and incorporated herein by
                               reference.
        10.9                   Convertible Debenture issued to HEM Mutual
                               Assurance, LLC in principal amount of $500,000.
                               Filed with the SEC as Exhibit 10.9 to the
                               Company's Annual Report on Form 10-KSB on
                               November 12, 2003 and incorporated herein by
                               reference.
        10.10                  Senior Convertible Debenture Purchase Agreement
                               dated March 26, 2004 between Heritage Worldwide,
                               Inc. and the purchasers named therein. Filed with
                               the SEC as Exhibit 10.3 to the Company's
                               Quarterly Report on Form 10-QSB on May 28, 2004
                               and incorporated herein by reference.
        10.11                  Senior Convertible Debenture issued to Armadillo
                               Investments, Plc. in principal amount of
                               $3,000,000. Filed with the SEC as Exhibit 10.4 to
                               the Company's Quarterly Report on Form 10-QSB on
                               May 28, 2004 and incorporated herein by
                               reference.
        10.12                  Registration Rights Agreement dated March 26,
                               2004 between Heritage Worldwide, Inc. and
                               Armadillo Investments, Plc. Filed with the SEC as
                               Exhibit 10.4 to the Company's Quarterly Report on
                               Form 10-QSB on May 28, 2004 and incorporated
                               herein by reference.
        10.13*                 Amended and Restated Non-Exclusive Distribution
                               Agreement dated March 30, 2004 between Poly
                               Implants Protheses, S.A. and III Acquisition
                               Corp. Filed with the SEC as Exhibit 10.13 to the
                               Company's Annual Report on Form 10-KSB for the
                               fiscal year ending June 30, 2004 and incorporated
                               herein by reference.
        10.14*                 6.75% Revolving Promissory Note dated March 30,
                               2004 between Poly Implants Protheses, S.A. and
                               III Acquisition Corp.  Filed with the SEC as
                               Exhibit 10.14 to the Company's Annual Report on
                               Form 10-KSB for the fiscal year ending June 30,
                               2004 and incorporated herein by reference.
        10.15**                Employment Contract dated October 2, 2003 between
                               Poly Implants Protheses, S.A. and Mr. Claude
                               Couty. Filed with the SEC as Exhibit 10.15 to the
                               Company's Annual Report on Form 10-KSB for the
                               fiscal year ending June 30, 2004 and incorporated
                               herein by reference.
        14                     Code of Business Conduct and Ethics. Filed with
                               the SEC as Exhibit 10.15 to the Company's Annual
                               Report on Form 10-KSB for the fiscal year ending
                               June 30, 2004 and incorporated herein by
                               reference

        21                     List of Subsidiaries. Filed herewith.
        31.1                   Certification of Chief Executive Officer pursuant
                               to Section 302 of the Sarbanes-Oxley Act of 2002.
                               Filed herewith.
        31.2                   Certification of Chief Financial Officer pursuant
                               to Section 302 of the Sarbanes-Oxley Act of 2002.
                               Filed herewith.
        32                     Certifications pursuant to 18 U.S.C. Section
                               1350.  Filed herewith.
---------------------------------------

*        Certain confidential information contained in the document has been
         omitted and filed separately with the Securities and Exchange
         Commission pursuant to Rule 406 of the Securities Act of 1933, as
         amended, or Rule 24b-2 promulgated under the Securities and Exchange
         Act of 1934, as amended.

**       Indicates a management contract or compensatory plan.

                                       53

<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTANT AND SERVICES

The firm  Sherb & Co.,  LLP  independent  auditor,  has  audited  our  financial
statements  for the years ended June 30, 2004 and 2005.  The Board of  Directors
has appointed Sherb & Co., LLP to serve as our independent auditors for the 2004
year-end audit and to review our quarterly financial reports for filing with the
Securities and Exchange  Commission during fiscal year 2005. The following table
shows the fees paid or accrued by us for the audit and other  services  provided
by Sherb & Co. for fiscal year 2004 and 2005.

                                   2005                    2004
                            -------------------    -------------------
Audit Fees(1)               $            81,455    $            47,504
Audit-Related Fees                           --    $                --
Tax Fees                                     --    $                --
All Other Fees                            6,700                     --
                            -------------------    -------------------
Total                       $            88,155    $            47,504


(1) Audit fees represent fees for professional  services  provided in connection
with the audit of our annual  financial  statements  and review of our quarterly
financial  statements  and audit  services  provided  in  connection  with other
statutory or regulatory filings.


         Pre-Approval of Non-Audit Services

The  Company  does not  currently  have an audit  committee  in place  and thus,
management must obtain the specific prior approval of the Board of Directors for
each  engagement of the  independent  auditor to perform any non-audit  services
that exceed any pre-approved amounts determined by the Board of Directors.

                                       54

<PAGE>

                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on the 23th day of September 2005.

                                                HERITAGE WORLDWIDE, INC.

                                                By: /s/  Alain Sereyjol-Garros
                                                    ---------------------------
                                              Name: Alain Sereyjol-Garros
                                             Title: Chief Executive Officer


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

Signature                          Title                      Date

/s/ Jean Claude Mas                Chairman of the Board      September 23, 2005
-------------------
Jean Claude Mas


/s/ Claude Couty                   Chief Financial Officer    September 23, 2005
----------------                   and General Manager
Claude Couty


/s/   Alain Sereyjol Garros        Chief Executive Officer    September 23, 2005
---------------------------
Alain Sereyjol Garros