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, 2006

                                       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. [ X ]

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: $15,269,330

The aggregate market value of the voting and non-voting common equity held by
non-affiliates as of September 25, 2006, was approximately $3,920,000.

The total number of shares of the issuer's common stock, $.001 par value,
outstanding on September 25, 2006, 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
penetration of new geographical markets, competition, governmental regulations,
and 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, 2006 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."

<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, 2006,  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 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,  such as the People's Republic of
          China,  in which we market our  products.  Additionally,  we intend to
          re-enter the U.S. market when and if 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.

                                       2

<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 option.  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. Due to Medicor's delay
in  submitting  the  PMA  to the  FDA,  we are  in  the  process  of  requesting
information  from  Medicor as to its status.  The Company is unable to determine
whether the distributor will ever complete the PMA.

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.

                                       3

<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 2005
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, purchase
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 44 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.

Two of our major  customers  accounted  for 22% and 12% of our  revenues  during
2006,  and 16% and 13% during 2005. We are trying to diversify our customer base
and introduce  our products in new  countries to minimize  dependence on certain
customers.

                                       4

<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 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.,  has advised us
that it is in the process of gathering all the critical information necessary to
obtain such approval.  The Company is unable to determine  whether  Medicor will
ever submit a complete PMA to the FDA.

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.

                                       5
<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 2006 and 2005, the Company incurred research and development
expenses of approximately $1.5 million and $1.1 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, 2006, the Company had 126 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
$407,000 and $488,000 during 2006 and 2005, 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 2006 and 2005.

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.

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.

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. PIP denied any
liability to the Plaintiffs and answered the Complaint and asserted affirmative
defenses. This lawsuit was settled under confidential terms in March 2006.

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 denied any liability to the Plaintiff
and answered the Complaint and asserted affirmative defenses. This lawsuit was
settled in under confidential terms in August 2006 and the action was dismissed
on August 21, 2006.

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. This lawsuit was
settled under confidential terms in December 2005 and the action was dismissed
in January 2006.

In April 2006,  PIP was served  with four  product  liability  lawsuits in Texas
entitled Melissa Stoltz,  et al. v. Poly Implant  Protheses,  S.A., et al., Case
No.:  2005CI18773,  District Court of Bexar County, Texas; Lisa Anderson, et al.
v. Poly Implant Protheses, S.A. et al., Case No.: DC-05-12614, District Court of
Dallas County,  Texas;  Rose Healey, et al. v. Poly Implant  Protheses,  S.A. et
al., Case No.: 2005-65625, District Court of Harris County, Texas; Landa Joly et
al. v. Poly Implant Protheses,  S.A. et al., Case No.: 05-11-63,596-B,  District
Court of Victoria County, Texas. PIP has removed these lawsuits to federal court
and filed Answers and Affirmative Defenses. PIP denies all liability.  Discovery
is ongoing.

                                       6
<PAGE>

PIP was sued by Jo Ann Sagona Carimi in United States District Court for the
Eastern District of Louisiana in August, 2006, Case No. 04-2813, for alleged
product liability and other related claims. PIP denies any liability and has not
responded to the Complaint.

In July 2005,  IP Resource  Ltd  ("IP"),a  British  corporation  sued PIP at the
Tribunal of Paris, 1st Section of the 3rd Chamber for alleged patent
infringement of a breast implant design and claims in excess of $2.1 million  in
damages. No trial date has been scheduled yet.

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 $470,000 at June 30, 2006 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, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES

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.

         Year Ended June 30, 2006        High             Low

         First Quarter                   1.07             0.81
         Second Quarter                  0.95             0.80
         Third Quarter                   0.99             0.75
         Fourth Quarter                  0.75             0.55



         Year Ended June 30, 2005        High             Low

         First Quarter                   2.70             0.38
         Second Quarter                  1.55             0.32
         Third Quarter                   0.60             0.48
         Fourth Quarter                  1.01             0.48

                                       7
<PAGE>

At September 25, 2006, there were 17,410,299 shares of our common stock issued
and outstanding and 1,125,000 options issued or outstanding, which were granted
during fiscal 2005. There are 77 shareholders of record at September 25, 2006.
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.


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.  by  conducting  extensive  clinical  trials,  which is a  prerequisite  to
securing FDA approval.  Our US  distributor,  Medicor,  which is responsible for
filing the PMA with the FDA, is  experiencing  delays in  preparing  the PMA. We
have requested  information  from Medicor has to the reasons for such delays and
we have not yet received such information.

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 3 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.

                                       8
<PAGE>

Stock-Based Compensation. Prior to January 1, 2006, the Company accounted for
its stock-based compensation plans under the recognition and measurement
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations, as permitted by SFAS No.
123, Accounting for Stock-Based Compensation. The Company did not recognize
compensation cost related to stock options granted to its employees and
non-employee directors that had an exercise price equal to or above the market
value of the underlying common stock on the date of grant in its condensed
consolidated statement of income prior to January 1, 2006. Effective January 1,
2006, the Company adopted the fair value recognition provisions of SFAS No.
123R, Share-Based Payment, and related interpretations using the
modified-prospective transition method. Under that method, compensation cost
recognized in the third quarter of 2006 includes (a) compensation cost for all
stock-based awards granted prior to, but not yet vested as of January 1, 2006
based on the grant date fair value estimated in accordance with the original
provisions of SFAS No. 123 and (b) compensation cost for all stock-based awards
granted on or subsequent to January 1, 2006, based on the grant-date fair value
estimated in accordance with the provisions of SFAS No. 123R. Results for prior
periods have not been restated. Prior to the adoption of SFAS No. 123R, the
Company did not recognize any tax benefits from deductions resulting from the
exercise of stock options as operating cash flows in its statement of cash
flows, because no options have ever been exercised. SFAS No. 123R requires that
the portion of benefits resulting from tax deductions in excess of recognized
compensation (the "excess tax benefits") be presented as financing cash flows.

In November 2005, the FASB issued FASB Staff Position FAS123(R)-3, Transition
Election to Accounting for the Tax Effects of Share-Based Payment Awards, (the
"FSP"). This FSP requires an entity to follow either the transition guidance for
the additional-paid-in-capital pool as prescribed in SFAS No. 123R or the
alternative transition method as described in the FSP. An entity that adopts
SFAS No. 123R using the modified prospective method may make a one-time election
to adopt the transition method described in this FSP. An entity may take up to
one year from the later of its initial adoption of SFAS No. 123R or the
effective date of this FSP to evaluate its available transition alternatives and
make its one-time election. This FSP became effective in November 2005. The
Company is still evaluating whether it will adopt the alternative method for
calculating its additional-paid-in-capital pool described in the FSP.

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.

As of June 30, 2006, we entered into certain bill and hold arrangements. Such
bill and hold arrangements meet the following criteria for revenue recognition:

     o    The risks of ownership passed to the buyer;
     o    The customer made a fixed  commitment to purchase the breast implants,
          in writing;
     o    The buyer,  not us,  requested  that the  transaction be on a bill and
          hold basis. The buyer had a substantial  business purpose for ordering
          the  goods  on  a  bill  and  hold  basis-primarily  its  on  lack  of
          warehousing space;
     o    There is a fixed  schedule  for  delivery  of the goods.  The date for
          delivery are reasonable and are consistent  with the buyer's  business
          purpose;
     o    We did not retain any specific  performance  obligations such that the
          earning process is not complete;
     o    The ordered  breast  implants were  segregated  from our inventory and
          were not subject to being used to fill other orders;
     o    The breast implants were complete and ready for shipment;
     o    The date by which we expect  payment was not  modified and we have not
          modified our normal billing and credit terms for this buyer;
     o    Our past experiences with and pattern of bill and hold transactions;
     o    The buyer has the  expected  risk of loss in the event of a decline in
          the market value of the breast implants;
     o    Our custodial risks are insurable and insured;
     o    The  business  reasons  for the bill and hold  have not  introduced  a
          contingency to the buyer's commitment.

                                       9
<PAGE>

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

Goodwill.  At June 30, 2006, 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, 2006, 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
$[] 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 claims and 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.

                                       10
<PAGE>

Results of Operations

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>


                                                      For the Year Ended           Increase/      Increase/
                                                           June 30,                (Decrease)     (Decrease)
                                            -------------------------------------- 2004 vs 2003   2004 vs 2003
                                                  2006                  2005             $              %
                                            ------------------    ----------------------------------------------
<S>                                         <C>                   <C>                <C>                  <C>
Revenues                                    $      15,269,330     $     13,572,317   $  1,697,013         12.5%

Cost of revenues                                    6,818,343            6,022,825        795,518         13.2%
                                            ------------------    ----------------------------------------------

     Gross margin                                   8,450,987            7,549,492        901,495         11.9%
                                            ------------------    ----------------------------------------------

Operating expenses:
  Selling, general and administrative               5,663,352            4,939,083        724,269         14.7%
  Research and development                          1,519,312            1,068,139        451,173         42.2%
                                            ------------------    ----------------------------------------------

     Total operating expenses                       7,182,664            6,007,222      1,175,442         19.6%
                                            ------------------    ----------------------------------------------

Loss before other expenses and
Operating income (loss)                             1,268,323            1,542,270       (273,947)       -17.8%
                                            ------------------    ----------------------------------------------

Other expenses:
 Gain (loss) in equity investment                      44,520               70,101        (25,581)     NM
  Interest expense-related party                     (251,115)                   -       (251,115)     NM
  Interest expense                                   (388,769)            (664,841)       276,072        -41.5%
                                            ------------------    ----------------------------------------------

     Total other expenses                            (595,364)            (594,740)          (624)         0.1%
                                            ------------------    ----------------------------------------------

 Income (loss) before provision for
    income taxes                                      672,959              947,530       (274,571)       -29.0%

  Provision for from income taxes                           -                    -              -      NM
                                            ------------------    ----------------------------------------------

Income (loss) before minority interest                672,959              947,530       (274,751)       -29.0%

Minority interest                                     (66,046)             (66,046)             -          0.0%
                                            ------------------    ----------------------------------------------

Net income (loss)                           $         606,913     $        881,484   $   (274,751)       -31.1%
                                            ==================    ==============================================
</TABLE>


NM: not meaningful

                                       11
<PAGE>

Year Ended June 30, 2006 Compared with Year Ended June 30, 2005

   Revenues

Revenues consist primarily of the sale of breast implants and other body support
products. The increase in revenues is primarily attributable to increased volume
of breast implants sold to existing distributors in Latin American countries of
$2.0 million offset by a decreased volume of breast implants in France of
approximately $200,000.

   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, remained consistent at 44% in fiscal 2006 and 2005.

   Gross Profit

The increase in gross profit in fiscal 2006 when compared to fiscal 2005 is
primarily attributable to increased sales of breast implants offset by a
commensurate increase in cost of revenues associated with such increased sales.

   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. The increase in selling,
general and administrative expenses is primarily due to increased legal fees
associated with the lawsuits filed in the US and increased marketing expenses
associated with marketing our products in a larger number of countries worldwide
offset by a reduction in the provision for doubtful accounts.

   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. The increase in research and development
expenses in fiscal 2006 when compared to fiscal 2005 is primarily due to higher
salaries and related benefits associated with the hiring of research and
development to development and expand our product offerings.

   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 together with the
interest expense-related party, in fiscal 2006 is at levels comparable to those
incurred during fiscal 2005.

Liquidity and Capital Resources

During fiscal 2006, we generated approximately $275,000 in cash flows from
operating activities primarily from our profitable operations. Our net income
for fiscal 2006 amounted to approximately $607,000, adjusted for amortization of
debt discount of approximately $482,000, depreciation of approximately $658,000,
a decrease in provision for doubtful accounts of approximately $764,000, and
increased provisions of returns of approximately $201,000. Additionally, our
accounts receivable increased by approximately $1.7 million due to increased
revenues, our inventories increased by approximately $360,000 from higher level
of inventories to meet the growing demand of our products, and our accounts
payable and accrued expenses increased by approximately $452,000 due to our
higher level of expenses commensurate with our increased revenues.

                                       12
<PAGE>

During fiscal 2006, our cash flows from operating activities funded capital
expenditures of approximately $204,000. Additionally, we repaid approximately
$268,000 of our debt using proceeds from new debt of approximately $521,000. We
also made an advance of approximately $73,000 to SCI Lucas, an entity in which
we have a minority interest.

During fiscal 2005, we generated approximately $773,000 in cash flows from
operating activities primarily from our profitable operations. Our net income
for fiscal 2006 amounted to approximately $881,000, adjusted for amortization of
debt discount of approximately $448,000, depreciation of approximately $704,000,
a decrease in provision for doubtful accounts of approximately $1.5 million, and
increased provisions of returns of approximately $197,000. Additionally, our
inventories increased by approximately $543,000 from higher level of inventories
to meet the growing demand of our products, and our accounts payable and accrued
expenses increased by approximately $233,000 due to our higher level of expenses
commensurate with our increased revenues.

During fiscal 2005, our cash flows from operating activities funded capital
expenditures of approximately $518,000. Additionally, we repaid approximately
$348,000 of our debt using proceeds from new debt and increased lines of credit
of approximately $192,000 as well as by a contribution in our French
subsidiary's capital of approximately $175,000 from a shareholder, Milo Finance.

New Accounting Pronouncements

In July 2005, the FASB issued FASB Staff Position ("FSP") 150-5, "Accounting
Under SFAS 150 for Freestanding Warrants and Other Similar Instruments on
Redeemable Shares". FSP 150-5 clarifies that warrants on shares that are
redeemable or puttable immediately upon exercise and warrants on shares that are
redeemable or puttable in the future qualify as liabilities under SFAS 150,
regardless of the redemption feature or redemption price. The FSP is effective
for the first reporting period beginning after June 30, 2005, with resulting
changes to prior period statements reported as the cumulative effect of an
accounting change in accordance with the transition provisions of SFAS 150. We
adopted the provisions of FSP 150-5 on July 1, 2005, which did not have a
material effect on our financial statements.

In July 2005, the FASB issued EITF 05-6, "Determining the Amortization period
for Leasehold Improvements Purchased After Lease Inception or Acquired in a
Business Combination", which addressed the amortization period for leasehold
improvements made on operating leases acquired significantly after the beginning
of the lease. The EITF is effective for leasehold improvements made in periods
beginning after June 29, 2005. We adopted the provisions of EITF 05-6 on July 1,
2005, which did not have a material impact to the Company's financial position,
results of operations and cash flows.

     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.

                                       13
<PAGE>

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, 2006. 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

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.

                                       14
<PAGE>

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.

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.

                                       15
<PAGE>

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. Using
the services of an affiliate of Medicor Ltd, 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 2007, 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.

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.

                                       16
<PAGE>

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.

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.

If we fail to prevail in our claim that we owe our U.S. distributor more than
$1.3 million, it may adversely impair our financial position, net income and
cash flows.

We are disputing an unsubstantiated claim that we owe our U.S. distributor more
than $3.3 million. We have recorded an amount due to our U.S. distributor of
$1.3 million. While we believe that this claim is without merit, we cannot
assure you that we will prevail if this matter is arbitrated. If we fail to
prevail this case in arbitration, we could owe an additional $2 million to our
U.S. distributor and may adversely impact our financial position, net income and
cash flows.

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.

                                       17
<PAGE>

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.

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.

                                       18
<PAGE>

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.
Consequently, investors may have difficulty selling a large number of our shares
at the price that might be  attainable  if our shares of common  stock were more
actively traded. 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.

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 had 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,
2006,  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.

                                       19
<PAGE>

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.

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.

ITEM 7. FINANCIAL STATEMENTS

Response  to  this  item is  submitted  as a  separate  section  of this  report
immediately following the signature page.

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

None

                                       20
<PAGE>

ITEM 8A. CONTROLS AND PROCEDURES

            Our principal executive officer and our principal financial officer
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended) as of the end of the period covered by this report. Based on
this evaluation, our principal executive officer and our principal financial
officer have concluded that our controls and procedures are effective in
providing reasonable assurance that the information required to be disclosed in
this report has been recorded, processed, summarized and reported as of the end
of the period covered by this report.

            During the period covered by this report, there have not been any
significant changes in our internal controls or, to our knowledge, in other
factors that could significantly affect our internal controls.

ITEM 8B.  OTHER INFORMATION.

During April 2006, we were informed by the District Attorney's office of the
Appeals Court of Aix-en-Provence, France, that our chief executive officer,
Alain Sereyjol-Garros, cannot directly or indirectly, manage or control a French
commercial, professional, or industrial enterprise, such as our main subsidiary,
PIP. Mr. Sereyjol-Garros resigned from our subsidiary's oversight committee on
April 26, 2006 We are in discussion with Mr. Garros to secure his resignation as
the Company's chief executive officer and director.

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                 67                      Chairman of the Board of
                                                        Directors

Alain Sereyjol Garros           66                      Chief Executive Officer
                                                        and Director

Claude Couty                    54                      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.

                                       21
<PAGE>

During April 2006, we were informed by the District Attorney's office of the
Appeals Court of Aix-en-Provence, France, that our chief executive officer,
Alain Sereyjol-Garros, cannot directly or indirectly, manage or control a French
commercial, professional, or industrial enterprise, such as our main subsidiary,
PIP. According to the District Attorney's office, on November 15, 2000, Mr.
Garros was convicted by a French court of breach of trust and misuse of funds
and fraudulent use of corporate property for his personal use, in the last 10
years. As a result of the aforementioned conviction, he was by the Criminal
Chamber division of the Division of the Appeal Court of Aix-en-Provence (5th
Chamber) to a term of at least three months of imprisonment without suspension
in this particular case, to 10 months of imprisonment with suspended sentence,
and to three years' probation from which three months were revoked by a decision
of such division on November 22, 2005. Mr. Sereyjol-Garros resigned from our
subsidiary's oversight committee on April 26, 2006. Mr. Sereyjol-Garros has so
far refused to resign his position as the Company's Chief Executive Officer and
Director to comply with the Appeals Court order. We are in discussion with
Mr. Garros to secure his resignation as the Company's chief executive officer
and director.

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

None

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 2007.

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 the 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 2006
timely filed such reports, with the exception of Alain Sereyjol-Garros and
Eurofortune who filed a schedule 13D on September 16, 2005 while the date of the
event requiring the filing of such statement was September 9, 2005.

                                       22
<PAGE>

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.

<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     2006     $185,367  $-0-   $-0-             $-0-         -0-          $-0-      $-0-
the Board and Secretary,         2005     $47,927   $-0-   $-0-             $-0-         -400,000     $-0-      $-0-
former Chief Executive           2004     $110,570  $-0-   $-0-             $-0-         -0-          $-0-      $-0-
Officer (1)

Claude Couty, Chief Financial
Officer and General Manager      2006     $182,927  $-0-   $-0-             $-0-         -0-          $-0-      $-0-
                                 2005     $181,771  $-0-   $-0-             $-0-         300,000      $-0-      $-0-
                                 2004     N/A       $-0-   $-0-             $-0-         -0-          $-0-      $-0-

Alain Sereyjol-Garros, Chief
Executive Officer                2006     $-0-      $-0-   $-0-             $-0-         -0-          $-0-      $-0-
                                 2005     $-0-      $-0-   $-0-             $-0-         400,000      $-0-      $-0-
                                 2004     $-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

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

Mr. Couty's employment agreement, provides for, among other things, an annual
salary of approximately $183,000 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.

                                       23
<PAGE>

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.

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

None

Compensation Committee Interlocks and Insider Participation

The Company has not established a compensation committee. During fiscal 2006, 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, 2006, 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, 2006.

<TABLE>
<CAPTION>

                                                                Number of Shares
                                                                Subject to Options,     Total Number of
                                          Number of             Warrants or Other       Shares Beneficially
5% Shareholders, Directors and Officers   Outstanding Shares    Rights                  Owned                 Percent of Class

<S>                                        <C>                                              <C>                    <C>
Milo Finance, S.A.                         13,741,667(1)                     --             13,741,667             78.9%
MediCor Ltd.                                1,212,500(2)                     --              1,212,500              6.9%
Jean-Claude Mas                                       --                     --                     --                 *
Alain Sereyjol Garros                      13,775,096(3)                     --             13,775,096             79.1%
Claude Couty                                          --                     --                     --              -0-%
All directors and executive officers          13,775,096                     --             13,775,096             79.1%
as a group (3 persons)
</TABLE>
________________________________
*      Less than 1%.

                                       24
<PAGE>

(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.

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 1,125,000 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.

                                       25
<PAGE>

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                    1,125,000                     $2.16                       875,000

Total                                           1,125,000                     $2.16                       875,000
</TABLE>

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We lease our headquarters, offices, and manufacturing facility from a real
estate holding company, SCI Lucas, in which we holds 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 and incurred rental expense to SCI Lucas
of approximately $407,000 and $487,000 during fiscal 2006 and 2005 respectively.
At June 30, 2006 the Company had a non-interest bearing advance of approximately
$70,000 owed by SCI Lucas.

Our controlling shareholder, Milo Finance advanced approximately $160,000 to the
Company during fiscal 2006. 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 2006.

ITEM 13. EXHIBITS

(a)(1) Financial Statements and Financial Statement Schedule.

All financial statement schedules are omitted because they are not applicable or
the required information is shown in the financial statements or notes thereto.

                                       26
<PAGE>

(a)(2) Exhibits:
        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.
        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.

                                       27
<PAGE>

        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.
        32.1                   Certification of Principal Executive Officer
                               pursuant to 18 U.S.C. Section 1350.
                               Filed herewith.
        32.2                   Certification of Chief Financial Officer 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.

                                       28
<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTANT AND SERVICES

The firm Sherb & Co., independent auditor, has audited our financial statements
for the years ended June 30, 2004 and 2006. The Board of Directors has appointed
Sherb & Co. 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 2006. The following table shows the fees
paid or accrued by us for the audit and other services provided by Sherb & Co.
for fiscal year 2005 and 2006.
                                               2006                   2005
                                --------------------   --------------------
Audit Fees(1)                   $            95,000    $            81,455
Audit-Related Fees                               --    $                --
Tax Fees                                         --    $                --
All Other Fees                                2,100                  6,700
                                --------------------   --------------------
Total                           $            97,100    $            81,455
_______________________________
(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.

                                       29
<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 28th day of September 2006.

                                          HERITAGE WORLDWIDE, INC.

                                          By: /s/   Jean-Claude Mas
                                              --------------------------
                                          Name:     Jean-Claude Mas
                                          Title:    Chairman of the Board
                                          (Principal 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 28, 2006
Jean Claude Mas


/s/ Claude Couty               Chief Financial Officer        September 28, 2006
Claude Couty                   and General Manager


/s/ Alain Sereyjol Garros      Chief Executive Officer        September 28, 2006
Alain Sereyjol Garros

<PAGE>

             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, 2006, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended June 30, 2006 and 2005. 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, 2006, and the results of their
operations and their cash flows for the years ended June 30, 2006 and 2005, 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 28, 2006


<PAGE>

                    HERITAGE WORDWIDE, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  June 30, 2006



                                     ASSETS
Current Assets:
  Cash                                                           $      695,509
  Accounts receivable, net of an allowance for doubtful
    accounts of $ 467,560 and allowance for product returns
    of $201,523                                                       6,976,445
  Inventories                                                         3,828,958
  Due from a related party                                               73,634
  Prepaid expenses and other current assets                             722,032
                                                                 ---------------

     Total current assets                                            12,296,578

Property and equipment, net of accumulated depreciation
 of $3,142,706                                                        2,104,038
Goodwill                                                              1,098,027
Investment in SCI Lucas                                                 578,853
Other assets                                                            115,430
                                                                 ---------------

     Total assets                                                   $16,192,926
                                                                 ===============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Lines of credit                                                $    1,101,211
  Accounts payable and accrued expenses                               5,154,442
  Current portion of long term debt                                     403,299
  Current portion of capitalized lease obligations                      207,827
  Reserve for product replacements                                      534,571
                                                                 ---------------

     Total current liabilities                                        7,401,350

Convertible debentures, net of discount of $1,017,076                 1,982,924
Convertible debentures and related accrued interest payable,
  net of discount of $466,808-related party                             782,822
Capitalized lease obligations, net of current portion                   526,005
Long term debt, net of current portion                                  491,201
                                                                 ---------------

     Total liabilities                                               11,184,302
                                                                 ---------------

Minority interest                                                       942,256
                                                                 ---------------

Stockholders' Equity:
  Common stock; $.001 par value, 50,000,000 shares authorized,
    40,160,299 issued and 17,410,299 outstanding                         17,411
  Additional paid in capital                                          5,810,568
  Accumulated other comprehensive income                              1,835,401
  Accumulated deficit                                                (3,593,592)
                                                                 ---------------

     Total stockholders' equity                                       4,066,368
                                                                 ---------------

     Total liabilities and stockholders' equity                  $   16,192,926
                                                                 ===============




                 See Notes to Consolidated Financial Statements.
<PAGE>

                    HERITAGE WORDWIDE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS




                                                        For the Year Ended
                                                              June 30,
                                                   -----------------------------
                                                       2006           2005
                                                   -------------  --------------
Revenues                                           $ 15,269,330   $  13,572,317

Cost of revenues                                      6,818,343       6,022,825
                                                   -------------  --------------

     Gross profit                                     8,450,987       7,549,492
                                                   -------------  --------------

Operating expenses:
  Selling, general and administrative                 5,663,352       4,939,083
  Research and development                            1,519,312       1,068,139
                                                   -------------  --------------

     Total operating expenses                         7,182,664       6,007,222
                                                   -------------  --------------

Operating income (loss)                               1,268,323       1,542,270
                                                   -------------  --------------
Other expenses:
  Gain in equity investment                              44,520          70,101
  Interest expense-related party                       (251,115)              -
  Interest expense                                     (388,769)       (664,841)
                                                   -------------  --------------

     Total other expenses                              (595,364)       (594,740)
                                                   -------------  --------------

 Income (loss) before provision for
    income taxes                                        672,959         947,530

  Provision for from income taxes                             -               -
                                                   -------------  --------------

Income (loss) before minority interest                  672,959         947,530

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

Net income (loss)                                       606,913         881,484

Other comprehensive income, net of taxes
  Foreign currency translation adjustment               284,579         128,954
                                                   -------------  --------------

     Comprehensive income (loss)                   $    891,492   $   1,010,438
                                                   =============  ==============

Basic net income (loss) per common share                 $ 0.03          $ 0.05
                                                   =============  ==============

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

Diluted net income per share                             $ 0.03          $ 0.05
                                                   =============  ==============

Diluted weighted average common shares
 outstanding                                         17,421,643      17,425,813
                                                   =============  ==============



                 See Notes to Consolidated Financial Statements.

<PAGE>

                    HERITAGE WORDWIDE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND OTHER COMPREHENSIVE INCOME
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
<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>
Balance at July 1, 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

Fair value of options issued                -           -      124,375           -                -             -      124,375
Net income                                  -           -            -           -                -       606,913      606,913
Foreign currency translation                -           -            -           -          284,579             -      284,579
 adjustments                   ------------------------------------------------------------------------------------------------
Balance at June 30, 2006           17,410,299    $ 17,411  $ 5,810,568         $ -      $ 1,831,981  $ (3,593,592) $ 4,066,368
                               ================================================================================================
</TABLE>



                 See Notes to Consolidated Financial Statements.

<PAGE>

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



                                                               Year Ended
                                                                 June 30,
                                                      -------------------------
                                                         2006         2005
                                                      ------------ ------------
Cash flows from operating activities:
Net income (loss)                                     $    606,913 $    881,484
Adjustments to reconcile net income (loss) to
 net cash (used in) provided by operating
 activities:
   Interest expense related to debenture discount          482,543      447,812
   Depreciation and amortization                           657,701      704,178
   Fair value of options                                   124,375            -
   Provision for doubtful accounts                        (763,835)  (1,465,447)
   Provision for returns                                   201,523      196,523
   Gain on equity investment                               (44,520)     (70,101)
   Minority interest                                        66,046       66,046
   Loss on disposition of property and equipment                 -          992
Change in operating assets and liabilities:
   Accounts receivable                                  (1,697,142)      51,336
   Inventories                                            (359,480)    (543,391)
   Prepaid expenses and other current assets                     -       (1,636)
  Other assets                                             351,404            -
  Accrued interest on convertible debentures               111,935      118,088
   Provision for product replacements                       85,731      152,848
   Accounts payable and accrued expenses                   452,229      233,946
                                                       ------------ ------------

Net cash (used in) provided by operating
 activities                                                275,423      772,678
                                                       ------------ ------------

Cash flows from investing activity:

   Proceeds from sale of property and equipment                  -       51,520
   Purchases of property and equipment                    (204,172)    (517,507)
                                                       ------------ ------------

Net cash used in investing activities                     (204,172)    (465,987)
                                                       ------------ ------------

Cash flows from financing activities:
   (Decrease) increase in lines of credit                   31,575      101,267
   Proceeds from long term debt                            521,601       91,498
   Repayment of long term debt                            (143,786)    (347,528)
   Repayment of capitalized lease obligations             (124,239)           -
   Proceeds from sale of common stock                            -       14,518
   Increase (decrease) in due to related
     parties                                              (123,928)     174,634
                                                       ------------ ------------

Net cash provided by financing activities                  161,223       34,389
                                                       ------------ ------------

Effect of exchange rate changes on cash                     21,050      (67,845)
                                                       ------------ ------------

Increase in cash                                           253,526      273,235

Cash, beginning of year                                    441,983      168,748
                                                       ------------ ------------

Cash, end of year                                      $   695,509  $   441,983
                                                       ============ ============

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

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

Non-Cash Investing and Financing Activities:

Acquisition of property and equipment financed with
capitalized lease obligations                          $   855,228  $         -
                                                       ============ ============


                 See Notes to Consolidated Financial Statements.
<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2006

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, 2006 and 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
Cash and Cash Equivalents

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

Use of estimates

In preparing financial statements in conformity with accounting principles
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 allowance for doubtful accounts, allowance 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 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, 2006, the allowance for doubtful accounts was
approximately $468,000. Additionally, the Company has established an allowance
for product returns based upon factors pertaining to historical trends,
including, among other things, recent and historical return rates for both
specific products and distributors, the impact of any new product releases in a
new jurisdiction and projected economic conditions. At June 30, 2006, the
provision for product returns was approximately $202,000.

Revenue recognition

The Company recognizes product revenue, net of estimated sales discounts and
provisions for returns, 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.

<PAGE>

As of June 30, 2006, the Company entered into certain bill and hold
arrangements. Such bill and hold arrangements meet the following criteria for
revenue recognition:

     o    The risks of ownership passed to the buyer;
     o    The customer made a fixed  commitment to purchase the breast implants,
          in writing;
     o    The buyer,  not the Company,  requested  that the  transaction be on a
          bill and hold basis. The buyer had a substantial  business purpose for
          ordering the goods on a bill and hold  basis-primarily  its on lack of
          warehousing space;
     o    There is a fixed  schedule  for  delivery  of the goods.  The date for
          delivery are reasonable and are consistent  with the buyer's  business
          purpose;
     o    The Company did not retain any specific  performance  obligations such
          that the earning process is not complete;
     o    The  ordered  breast  implants  were  segregated  from  the  Company's
          inventory and were not subject to being used to fill other orders;
     o    The breast implants were complete and ready for shipment.
     o    The date by which the Company  expect payment was not modified and the
          Company has not modified its normal  billing and credit terms;
     o    This bill and hold arrangement is in line with the Company's past
          experiences with and pattern of bill and hold transactions;
     o    The buyer has the  expected  risk of loss in the event of a decline in
          the market value of the breast implants;
     o    The Company's custodial risks are insurable and insured;
     o    The  business  reasons  for the bill and hold  have not  introduced  a
          contingency to the buyer's commitment.


<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock options

Prior to January 1, 2006, the Company accounted for its stock-based compensation
plans under the recognition and measurement provisions of Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related Interpretations, as permitted by SFAS No. 123, Accounting for
Stock-Based Compensation. The Company did not recognize compensation cost
related to stock options granted to its employees and non-employee directors
that had an exercise price equal to or above the market value of the underlying
common stock on the date of grant in its condensed consolidated statement of
income prior to January 1, 2006. Effective January 1, 2006, the Company adopted
the fair value recognition provisions of SFAS No. 123R, Share-Based Payment, and
related interpretations using the modified-prospective transition method. Under
that method, compensation cost recognized in the first quarter of 2006 includes
(a) compensation cost for all stock-based awards granted prior to, but not yet
vested as of January 1, 2006 based on the grant date fair value estimated in
accordance with the original provisions of SFAS No. 123 and (b) compensation
cost for all stock-based awards granted on or subsequent to January 1, 2006,
based on the grant-date fair value estimated in accordance with the provisions
of SFAS No. 123R. Results for prior periods have not been restated. Prior to the
adoption of SFAS No. 123R, the Company never recognized tax benefits from
deductions resulting from the exercise of stock options because no options have
ever been recognized.

In November 2005, the FASB issued FASB Staff Position FAS123(R)-3, Transition
Election to Accounting for the Tax Effects of Share-Based Payment Awards, (the
"FSP"). This FSP requires an entity to follow either the transition guidance for
the additional-paid-in-capital pool as prescribed in SFAS No. 123R or the
alternative transition method as described in the FSP. An entity that adopts
SFAS No. 123R using the modified prospective method may make a one-time election
to adopt the transition method described in this FSP. An entity may take up to
one year from the later of its initial adoption of SFAS No. 123R or the
effective date of this FSP to evaluate its available transition alternatives and
make its one-time election. This FSP became effective in November 2005. The
Company is still evaluating whether it will adopt the alternative method for
calculating its additional-paid-in-capital pool described in the FSP.


Pro Forma Information Under SFAS No. 123 for Periods Prior to January 1, 2006
The following table illustrates the effect on net earnings and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123 to stock-based awards for fiscal 2006 and 2005:
<PAGE>

                                                   Year Ended      Year Ended
                                                   June 30,        June 30,
                                                   2006            2005
                                                   ------------    ------------
Net income:
As reported                                        $   606,913     $   881,484
Add: Total stock-based employee compensation
included in net income as reported, net of
related tax effects                                          -               -
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects            (123,813)       (247,625)
                                                   ------------    ------------

Pro forma                                          $   483,100     $   633,859
                                                   ============    ============

Basic earnings per share:
As reported                                             $ 0.03          $ 0.05
                                                   ============    ============

Pro forma                                               $ 0.03          $ 0.04
                                                   ============    ============

Diluted earnings per share:
As reported                                             $ 0.03          $ 0.05
                                                   ============    ============

Pro forma                                               $ 0.03          $ 0.04
                                                   ============    ============

For purposes of the pro forma calculations, the fair value of each option was
estimated on the date of the grant using the Black-Scholes option-pricing model,
assuming no expected dividends, and the following assumptions: expected
volatility rate: 44%, risk-free interest rate: 3.7%, expected term: 4 years

At the date of the issuance of the options, the Company's common stock was
publicly-traded for less than 18 months and it was thinly-traded. Accordingly,
the Company estimated the expected volatility factor based upon the expected
volatility of similar publicly-traded companies. The approximate risk free
interest rate was based on the implied yield available on U.S. Treasury constant
maturities issues with remaining terms equivalent to the Company's expected
term. The expected term of the Company's stock options was based on the expected
term of services of the individuals who received the options.

As of June 30, 2006, the unrecognized compensation costs related to non-vested
awards amounted to approximately $477,000, which will be recognized over the
following 24 months.

The Company recognized a compensation expense of approximately $124,000 during
fiscal 2006 in connection with all options outstanding during that period.

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, 2006, the exchange rate for the Euros (EUR) was $1.25 U.S.
for 1.00 EUR.

The functional currency of the Company's French and Spanish subsidiaries is the
local currency, or the Euro. 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.

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

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 of the measurement date.

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, 2006 results from its 2002 acquisition of its Spain subsidiary. Management
has established that based on future cash flows generated from its Spain's
operations, the Company's goodwill at June 30, 2006 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, 2006, the Company believes that there has been no impairment
of its long-lived assets.

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

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 $20,000
and $89,000 during 2006 and 2005, 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 1,125,000 options outstanding at June 30, 2006.
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 2006 and 2005 dilutive earnings per share amounts to 11,344 and 15,514,
respectively. All other common stock equivalents are antidilutive.

<PAGE>


                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

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, 2006 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,
2006 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 has evaluated the impact this new
Standard has on its operations and 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

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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 $202,000 at June 30,
2006. 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.

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, 2006, the
financial institution insured approximately $4.3 million of the Company's
accounts receivables. Two of the Company's customers accounted for approximately
21% and 10%, respectively, of its net accounts receivable at June 30, 2006. No
other customers accounted for more than 10% of its net accounts receivables.

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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
certain 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 22% and 12% of its revenues,
respectively, during 2006, as well as 16% and 13% of its revenues, respectively,
during 2005. 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.


NOTE 4 - INVENTORIES

Inventories at June 30, 2006 consist of the following:

Finished goods                 $ 2,238,335
Work-in-process                  1,174,733
Raw materials                      415,890
                               ------------
                               $ 3,828,958
                               ============

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006


NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment and related accumulated depreciation at June 30, 2006
consist of the following:



Tenant improvements                                   $2,298,384
Machinery and equipment                                2,233,302
Office equipment                                         392,281
Transportation equipment                                 322,877
                                                      -----------
                                                       5,246,744
Accumulated depreciation                              (3,142,706)
                                                      -----------
Property and equipment, net                           $2,104,038
                                                      ===========

Depreciation expense amounted to approximately $658,000 and $704,000 during 2006
and 2005, respectively.

NOTE 6 - INVESTMENTS

At June 30, 2006 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 $44,000 and $71,000 during 2006 and 2005, respectively. 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, 2006, the Company had a non-interest bearing advance of
approximately $70,000 owed by SCI Lucas. The Company incurred rental expense and
paid rent to SCI Lucas in amounts aggregating approximately $407,000 and
$487,000 in 2006 and 2005, respectively.

NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses at June 30, 2006 consist of the following:

Vendors payable                                      $1,965,986
Accounts payable to U.S. distributor                  1,344,246
Compensation payable and related accrued benefits     1,513,826
Other                                                   330,384
                                                     -----------
                                                     $5,154,442
                                                     ===========

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 8 - LONG TERM DEBT

The Company's long term debt consists of various notes payable with outstanding
principal amounts ranging from approximately $189,000 to $314,000, with variable
interest rates, based on the EURIBOR plus 1.6% to 3%, ranging from 4.65% to
6.05% per year at June 30, 2006, and due dates between June 2006 and December
2012. 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, 2006:

                                    Notes Payable         $  743,900
                                   ANVAR Advances            150,600
                                                          -----------
                                                             894,500
                           Less:  Current Portion           (403,299)
                                                          -----------
           Long term debt, net of current portion         $  491,201
                                                          ===========

The aggregate maturities of long-term debt at June 30, 2006 are as follows:

                             June 30,
                             ---------
                             2007                 $  403,299
                             2008                    123,247
                             2009                    123,247
                             2010                    123,247
                             2011 and therafter      121,460
                                                  -----------
                                                  $  894,500
                                                  ===========

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

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, 2006 are as follows:


Deferred tax assets:
Net operating loss carryforward           $      2,074,436
Less valuation allowance                       ( 2,074,436)
                                          -----------------
Total net deferred tax assets:            $              -
                                          =================

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 $ 2,074,436 at June 30,
2006 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 2006 and
2004 was approximately $10,000 and $400,000, respectively.

At June 30, 2006, the Company had net operating loss carryforwards amounting to
approximately $0.8 million and $5.4 million for U.S. and French tax purposes,
respectively, that expire in various amounts from 2021 through 2026 in the U.S.
and never expire in France.

The federal statutory tax rate reconciled to the effective tax rate for 2006 and
2005, respectively, is as follows:

                                                     2006              2005
                                                     ----              ----
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                                             0.0               0.0
Change in valuation allowance                       (35.0)            (35.0)
                                                     -----             -----
Effective tax rate                                    0.0%              0.0%
                                                     =====             =====
<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

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 2006 and 2005, the amortization of the debt
discount amounted to approximately $205,000 and $205,000, respectively, and has
been included in interest expense in the accompanying consolidated financial
statements. Accrued interest associated with the convertible debentures amounted
to $249,630 at June 30, 2006.

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

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 2006 and 2005, the
amortization of the debt discount amounted to approximately $278,000 and
$238,000, 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 $4.8 million. The
Company has used approximately $1.1 million under such lines of credit at June
30, 2006. The lines of credit bear interest at the EURIBOR rate plus 2.0% (3.05%
at June 30, 2006). The outstanding principal balance plus any interest is
payable on demand and is secured by accounts receivables of approximately $7.0
million and inventories of approximately $4.0 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, 2006 was $0. During the second quarter of
2006, the distributor notified the Company that the distributor is owed $3.3
million under a promissory note. The Company disputes that it presently owes the
distributor the $3.3 million claimed to be due under the amended distribution
agreement and is currently discussing the issues related to the amended
distribution agreement and the promissory note with the distributor. The Company
believes that the distributor is in breach of the amended distribution agreement
and that the Company has incurred significant damages in excess of the $3.3
million that the distributor claims to be owed under the promissory note. The
Company has provided for a provision for such claims aggregating $1.3 million at
June 30, 2006, which is included in accounts payable and accrued expenses in the
accompanying balance sheet.

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

NOTE 12-  CAPITALIZED LEASE OBLIGATIONS

The Company leases certain machinery, computer equipment and transportation
equipment under various capital leases expiring between July 2008 and April
2011. The leases provide for monthly payments ranging between $1,434 and $14,050
at an implicit interest rate of 5% per annum. The assets and liabilities under
the capital lease are recorded at lease inception at the lower of the present
value of the minimum lease payments or the fair market value of the related
assets. The asset is depreciated over its estimated useful life. The schedule of
future minimum payments under capital lease is as follows:
YearsEnding
June 30,
     2007 ..................................         $ 228,836
     2008 ..................................           222,412
     2009 ..................................           187,192
     2010 ..................................           102,766
     2011 ..................................            64,784
                                                      --------
                                                       942,039
Less: imputed interest .....................          (208,207)
                                                      --------
                                                       733,832
Less: current portion ......................          (207,827)
                                                      --------
Long-term portion                                      526,005


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 2006 and 2005 of the Company's stock option plan is presented
below:

<TABLE>
<CAPTION>

                                                                                    Weighted
                                                                Weighted              Average        Aggregate
                                                                 Average           Contractual       Intrinsic
                                            Options           Exercise Price          Terms              Value
                                            ---------         --------------       -----------       ----------
<S>                                         <C>                   <C>
Outstanding at July 1, 2004                        -                -

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

Granted                                            -                -
Exercised                                          -                -
Expired                                       (50,000)             2.20
Outstanding at June 30, 2006                1,125,000             $2.16                8.02            $952,000

Vested and exercisable at June 30, 2005            -              $ -                   -              $    -
Vested and exercisable at June 30, 2006            -              $ -                   -              $    -
</TABLE>

The weighted average grant-date value of the options granted during 2005
amounted to $0.85. The options granted during 2005 vest three years after their
grant date.

The weighted average remaining contractual life and weighted average exercise
price of options outstanding at June 30, 2006, for selected exercise price
ranges, is as follows:

Options outstanding:
<TABLE>
<CAPTION>

---------------------------- -------------------------- ------------------------ ------------------------
     Range of exercise           Number of options          Weighted average         Weighted average
         prices                        life              remaining contractual       exercise price
---------------------------- -------------------------- ------------------------ ------------------------
<S>        <C>                        <C>                         <C>                     <C>
           $0.55                      25,000                      8.75                    $ 0.55
---------------------------- -------------------------- ------------------------ ------------------------
            2.20                     1,100,000                     8.0                      2.20
---------------------------- -------------------------- ------------------------ ------------------------
</TABLE>

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

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 3 years. Rental expense was approximately $407,000 and $450,000
during 2006 and 2005, respectively, inclusive of leases for facilities owned by
a related party.

At June 30, 2006 total minimum rentals under operating leases with remaining
noncancellable lease terms of more than one year were as follows:

         Year Ending
           June 30,
         -----------
            2007               $  407,000
            2008                  407,000
            2009                  407,000
                               -----------
                               $1,221,000
                               ===========

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 2006 and 2004.
Information about the Company's sales in different geographic locations for
fiscal 2006 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,
                                           2006                2004
France                                $  2,750,598       $  2,999,427
Outside of France                       12,518,732         10,573,990
                                      -------------      -------------
                                      $ 15,269,330       $ 13,572,317
                                      =============      =============

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

<PAGE>

                    HERITAGE WORLDWIDE, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

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. On October 5, 2005, the
Administrative Judge transferred all of the Kwartin family lawsuits to one judge
in the Eleventh Judicial Circuit.

In November of 2003, Jessica Fischer Schnebel and fifteen other women commenced
a putative class action lawsuit against PIP, PIP/USA, Inc. and III Acquisition
Corp. d/b/a PIP America in the Circuit Court of Cook County, Illinois. The Third
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. PIP's response
to the Third Amended Consolidated Class Action Complaint is due on May 26, 2006.
Our U.S. distributor has tendered this case to PIP, for defense and indemnity
pursuant to the distributor agreement.

<PAGE>

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. This action was
settled in the third quarter of fiscal 2006 for approximately $280,000. The
Company had previously provided for this claim and there were no impact on the
2006 results of operations.

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. The litigation is not set for trial
yet.

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. The lawsuit is
set for trial in December of 2006.

In April of 2006, PIP was served with four product liability lawsuits in Texas
entitled Melissa Stoltz, et al. v. Poly Implant Protheses, S.A., et al., Case
No.: 2005CI18773, District Court of Bexar County, Texas; Lisa Anderson, et al.
v. Poly Implant Protheses, S.A. et al., Case No.: DC-05-12614, District Court of
Dallas County, Texas; Rose Healey, et al. v. Poly Implant Protheses, S.A. et
al., Case No.: 2005-65625, District Court of Harris County, Texas; Landa Joly et
al. v. Poly Implant Protheses, S.A. et al., Case No.: 05-11-63,596-B, District
Court of Victoria County, Texas. PIP has removed these lawsuits to federal court
and filed Answers and 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. The parties reached an amicable resolution in December 2005 and the
lawsuit is awaiting dismissal by the Court. The Company has paid $100,000 to
settle this claim.

In July 2005, IP Resource Ltd ("IP"), a British corporation sued PIP for alleged
patent infringement and claims in excess of $2.1 million in damages. This
litigation is in its early stage of discovery and the Company believes that the
likelihood that any contingencies associated with it is remote.
PIP is aware of two other product liability lawsuits ( one filed in February
2004 and the other one in October 2004) as well a lawsuit claiming breach of
client arising out of the sale by PIP America of the Company's products, but it
has not been served with process in any such lawsuit.

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 $470,000 at June 30, 2006 in connection with these
matters.

<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 - OTHER RELATED PARTY TRANSACTIONS

One of the Company's shareholder advanced approximately $160,000 to the Company
during 2006. 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 2006. This capital infusion is accounted for as
minority interest in the accompanying balance sheet.