SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

                      Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

[ ] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
    of 1934 For the fiscal year ended December 31, 2001

[X] Transition  report under section 13 or 15(d) of the Securities  Exchange Act
    of 1934 For the transition period from June 1, 2001 to December 31, 2001

                        Commission File Number 000-26875

                              VIRAL GENETICS, INC.
                 (Name of small business issuer in its charter)


                Delaware                               33-0814123
    (State or other jurisdiction of         (IRS Employer Identification No.)
     incorporation or organization)

                   905 Mission Street, So. Pasadena, CA 91030
                    (Address of principal executive offices)

                                 (323) 682-2171
                           (Issuer's telephone number)

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

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

                         Common Stock, par value $0.0001
                                (Title of class)

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B is contained in this form,  and no disclosure  will be contained,
to the best of the  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 ]

The issuer's revenue for its most recent fiscal year was: $0

The  aggregate  market value of the  issuer's  voting stock held as of April 15,
2002, by non-affiliates of the issuers was $5,492,183.

As of April 1,  2002,  the  issuer had  37,786,273  shares of its  common  stock
outstanding.

Transitional Small Business Format:   Yes [   ]   No [ X ]

Documents incorporated by reference:  None

<PAGE>

                                TABLE OF CONTENTS

ITEM NUMBER AND CAPTION                                                     Page

Part I

1.    Description of Business                                                  3
2.    Description of Properties                                                8
3.    Legal Proceedings                                                        9
4.    Submission of Matters to a Vote of Security Holders                      9

Part II

5.    Market for Common Equity and Related Stockholder Matters                 9
6.    Management's Discussion and Analysis or Plan of Operation                9
7.    Financial Statements                                                    12
8.    Changes in and Disagreements with Accountants                           12
      on Accounting and Financial Disclosure

Part III

9.    Directors, Executive Officers, Promoters and Control                    13
      Persons; Compliance with Section 16(a) of the Exchange Act
10.   Executive Compensation                                                  14
11.   Security Ownership of Certain Beneficial Owners and Management          14
12.   Certain Relationships and Related Transactions                          15
13.   Exhibits and Reports on Form 8-K                                        15



                           FORWARD LOOKING STATEMENTS

     This Annual Report on Form 10-KSB contains forward-looking  statements that
are subject to certain risks,  uncertainties  or assumptions and may be affected
by certain  other  factors,  including  but not limited to the specific  factors
discussed in Part I, Item 1 under "Description of business," and Part II, Item 6
under  "Management's  Discussion  and  Analysis or Plan of  Operation."  In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "could," "expects," "plans," "projected,"  "anticipates,"  "believes,"
"estimates,"  "predicts,"  "potential," or "continues," or the negative of these
terms or  other  comparable  terminology.  Should  one or more of  these  risks,
uncertainties or other factors  materialize,  or should  underlying  assumptions
prove incorrect,  actual results,  performance or achievements of Viral Genetics
may vary  materially  from  any  future  results,  performance  or  achievements
expressed or implied by such forward-looking statements.

     Forward-looking  statements  are based on beliefs and  assumptions of Viral
Genetics' management and on information  currently available to such management.
Forward-looking  statements  speak only as of the date they are made,  and Viral
Genetics undertakes no obligation to update publicly any of them in light of new
information  or  future  events.  Undue  reliance  should  not be placed on such
forward-looking   statements,   which   are  based  on   current   expectations.
Forward-looking statements are not guarantees of performance.


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                                     PART I
                        Item 1. Description of Business.

General

     Viral  Genetics,  Inc., was  incorporated on June 8, 1998 under the laws of
the state of Delaware under the name Hitech Investments Inc., for the purpose of
pursuing  certain high technology  opportunities  and alliances and to assist in
the  establishment  and  development  of an Internet  electronic  search  engine
venture.  We had no active business operations until April 1999, when we changed
our name to 5 Starliving  Online,  Inc.,  and began  pursing a business  plan to
implement an e-commerce luxury item auction site. We attempted to implement this
business  through 2000, but the timing for the venture was not good because just
as  we  launched  our  web  site  e-commerce  and  dot-com  businesses  declined
substantially,  and our  dot-com  business  was  not  successful.  The  Internet
business was abandoned at the beginning of 2001.

     In April 2001,  we entered  into an agreement  to acquire  Viral  Genetics,
Inc.,  a  California  corporation  ("VGI").  This  agreement  provided  for  the
acquisition of 51 percent of the outstanding common stock of VGI, with an option
to  acquire  the  balance at a later  date.  The  agreement  was  terminated  in
September  2001, in favor of a new agreement  pursuant to which we would acquire
all of the outstanding  capital stock of VGI for 29,750,580 shares of our common
stock, or approximately 78.7 percent of our then issued and outstanding  shares.
This  transaction  was effected on October 2, 2001,  so that VGI is now a wholly
owned subsidiary. There was no affiliation between Viral Genetics and VGI or any
of its officers, directors, and controlling stockholders prior the acquisition.

     VGI was  founded in 1995 to  discover,  develop,  and  commercialize  novel
therapeutic and diagnostic  systems for the treatment of viral  diseases.  Viral
Genetics' core technology  revolves around a biologically active linear protein,
Thymus Nuclear  Protein (TNP).  To date, our main focus has been the development
of a  treatment  to stop the  progression  of the Human  Immunodeficiency  Virus
(HIV),  which is the causative agent in AIDS. Based on Thymus Nuclear  Protein's
proposed  mechanism of action and the results of human clinical  testing,  Viral
Genetics  believes  TNP may be useful as a treatment  for HIV and as a treatment
for active Herpes Simplex infections (genital herpes).

Product Technology

     The AIDS virus was first  described in 1981,  and in the following 20 years
approximately 22 million died from the disease,  approximately 36 million people
are HIV  positive,  and AIDS is the  leading  cause of death in  Africa  and the
fourth leading cause globally.

     There are  approximately  15  anti-retro  viral  agents  available  for the
treatment of HIV-AIDS.  There are two categories of agents, reverse transcriptse
inhibitors ("RTI"), and protease inhibitors ("PI"). Combination therapy with two
or more of these  drugs,  which has become the  standard of care for HIV,  slows
multiplication  of the virus and delays  onset of AIDS.  Combination  anti-retro
viral  therapies,  however,  do not cure HIV infection or cure AIDS.  These drug
regimens  are complex,  requiring  ten or more pills a day,  expensive,  costing
upwards of $15,000 per patient in the United States, and have gastro intestinal,
neurological,  and hematological  side effects that adversely impact the quality
of life.  Furthermore,  HIV patients who use the drugs for a long period of time
develop  resistance to the drugs,  so they become less effective in delaying the
onset of AIDS.

     Because of what can be described as a worldwide  epidemic of HIV infection,
and the lack of an  effective  treatment  for the disease,  management  believes
there are substantial  opportunities  for new  biotechnologies  that prove to be
effective  treatments.  Viral Genetics has pursued the  development of TNP as an
anti-viral  agent for treatment of AIDS and other  diseases  based on its belief
that this product can be helpful in the fight against AIDS.

     Viruses  must  invade a host  cell in order  to  reproduce.  In the case of
HIV-1,  the host cell is  usually a type of white  blood cell known as a T cell,
which is  responsible  for defending the human body against the various types of
infection.  We  believe  the  process by which HIV binds with and enters T cells
involves  two  proteins on the  surface of the HIV-1  virus  (known as GP120 and
GP41)  and  two  receptors  on the  surface  of the T cell  (CD4  and  chemokine
receptors).  Once inside the T cell,  the HIV virus uses the T cell's  metabolic
machinery to produce millions of new viruses.  The T cell eventually bursts open
and the new HIV  particles  go on to  infect  and kill  more T cells.  HIV is so

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detrimental  to the human  host  because T cells play an  important  role in the
body's response to infection.  As more and more T cells are destroyed over time,
the immune system weakens and the body is left  defenseless  against  secondary,
opportunistic infections.

     Based on its research  and  preliminary  clinical  trials,  Viral  Genetics
believes  that the TNP product  works  against HIV by binding  itself to the HIV
GP41 surface protein,  which prevents the virus from invading T cells, and flags
the virus for recognition by  immuno-competent  T cells resulting in an increase
in HIV-1 antibodies that can combat the infection in the body.

     In three  preliminary  clinical  trials,  TNP was  studied  in 48  HIV-AIDS
patients. TNP was administered as an intra-muscular injection,  twice weekly for
eight  weeks.  The first trial  involved  18 HIV-1  infected  patients  who were
followed up for 18 months.  The second trial involved 20 HIV-1 infected patients
who were followed up for nine months. The third trial involved 10 HIV-1 patients
who were resistant to existing combination anti-retroviral therapy treatment and
who were followed up for six months.

     In all of the clinical  studies,  TNP did not show any significant  adverse
effects by physical exam,  subjective complaints from patients, or routine blood
work performed on patients.

     Based on blood tests of the principal  indicators of HIV  infection,  Viral
Genetics  believes  there  was a  dramatic  decrease  in HIV  viral  load in the
patients  tested,  which continued  through the follow-up  evaluations  periods,
patients  experienced  weight loss  stabilization  or weight gain, and more than
half the patients experienced a steady improvement in T cell count.

Product Development and Distribution

     Drug  development  is time  consuming,  expensive,  and  unpredictable.  On
average,  only one out of many  thousands of chemical  compounds  discovered  by
researchers  proves to be both medically  effective and safe enough to become an
approved  medicine.  The process from discovery to regulatory  approval can take
more than ten  years.  Drug  candidates  can fail at any  stage of the  process.
Candidates  may not  receive  regulatory  approval  even  after  many  years  of
research, and products that have been approved and marketed can be ordered to be
withdrawn from the market by regulatory authorities.

     Viral  Genetics  spent  approximately  $498,749  on  development  of TNP in
calendar year 2001,  compared to approximately  $2,022,6676 spent on development
in 2000.  We estimate we will spend an  additional  $500,000 in 2002, on product
testing and development.  As a result of this development work and completion of
the clinical trials described above,  Viral Genetics applied for registration of
TNP in Mexico for use on late-stage  AIDS patients in the beginning of 2002. The
issuance of a license under this application would permit Viral Genetics to sell
its  product for use on  late-stage  AIDS  patients in Mexico.  We also filed in
Mexico an  application  for an  expanded  human  clinical  trial on  patients in
earlier  stages of  HIV-AIDS.  The  purpose  of this trial is to  determine  the
efficacy of TNP on patients in the early stages of the disease.  The application
was presented in Mexico through Soluciones Avanzadas Para La Salud, S.A. De C.V.
("SAVSA"), and Labortorios Senosiain, S.A. de C.V. ("LSSA").

     In July 1999,  Viral Genetics  entered into a  distribution  agreement with
SAVSA to distribute TNP in Mexico and Central and South  America,  including the
Caribbean.  The agreement is for a term of seven years and automatically renewed
for an  additional  seven-year  term,  subject  to the right of either  party to
terminate the agreement at the end of the initial term. We are obligated to ship
product within 45 days following acceptance of an order placed by SAVSA. Product
will be offered and sold at prices Viral establishes from time to time, which we
currently  estimate  will be between  $3,000 and $4,000 per  16-dose  treatment.
SAVSA will receive a  distribution  fee equal to 30 percent of the product sales
price after deducting import taxes and duties.

     Under a related  agreement  between Viral Genetics,  SAVSA,  and LSSA, LSSA
participated  in  submission  of the  application  in  Mexico  and  will  render
additional services on distribution in Mexico for a fee equal to five percent of
the product  sales price,  which will be paid and deducted  from the sales price
before the  allocation  of the 30 percent  distribution  fee to SAVSA.  Based on
communications with Mexican authorities management believes that its license for
use of TNP on  late-stage  AIDS patients may be approved in the first six months

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of 2002,  and  marketing  of the product in Mexico will  commence in the current
year. If this comes to pass, Viral Genetics will pursue similar  applications in
China and Africa.

     To this end,  Viral  Genetics  entered into an agreement on March 25, 2002,
with  New  York  International   Commerce  Group,  Inc.   ("NYCG"),   to  pursue
distribution of TNP in China.  As part of the agreement,  NYCG will assist Viral
Genetics in securing a state drug administration  certification from the Chinese
government,  after which NYCG will distribute  product in China.  Viral Genetics
expects  to file the  application  for this  license in China by the end of June
2002. If the license is not granted within one year following  submission of the
application, Viral Genetics may terminate the agreement at its option; provided,
that NYCG's rights will continue under the agreement if Viral Genetics  conducts
further  testing  or takes  other  steps  after the  initial  year to obtain the
license from China. NYCG also has the exclusive right to pursue  applications in
other countries, including Japan, Korea, Taiwan, Hong Kong, Malaysia, Indonesia,
Singapore,  and Thailand. Once a license is granted, NYCG is required to use its
reasonable  best efforts to arrange for  manufacture of product China,  provided
that all  manufacturing  cost  will be borne  by  Viral  Genetics.  NYCG has the
exclusive right after a license is granted to market the product under the terms
of a definitive  distribution  agreement to be entered into by the parties.  The
terms of this definitive agreement will include the following.

     o    The  distribution  rights  will be for a term of 10 years,  subject to
          renewal for an additional  ten-year period based on achieving  minimum
          sales targets of 37,500  treatments within 12 months and 62,500 within
          24 months following the grant of a license.

     o    Shipment of product by Viral Genetics in bulk to a processing facility
          located in or near the territory covered by the license.

     o    Distribution of product by NYCG in the territory at its cost.

     o    Payment  of a  distribution  fee to NYCG  equal to 37 percent of gross
          profit  from sale of the  product,  which is the  greater of the sales
          price charged by Viral Genetics to NYCG and the sales price charged by
          NYGC to third  parties,  reduced  by the base cost of the  product  as
          determined   in  accordance   with   generally   accepted   accounting
          principles.

     Viral  Genetics is now working  through a draft of an  investigational  new
drug application to the FDA. We need to complete certain  laboratory work on TNP
before  filing the  application.  We do not  expect to file the FDA  application
until the third quarter of 2002, and then only if we have sufficient  capital to
complete required laboratory work.

     Unless and until we are  successful in our domestic  applications  with the
FDA,  our  operations  will  be  limited  to  those  we  can  conduct  overseas.
International  business  operations are subject, in varying degrees, to a number
of risks  inherent in carrying on business in other  countries.  These  include,
currency fluctuations,  capital and exchange control regulations,  expropriation
and nationalization, and other restrictive government actions. Our international
business may also subject us to government-imposed  constraints,  including laws
on pricing or reimbursement for use of products.

     Depending on the direction of change relative to the U.S.  dollar,  foreign
currency  values can either  improve or reduce the reported  dollar value of our
net assets and results of operations.  We cannot  predict with certainty  future
changes  in  foreign  exchange  rates  or  the  effect  they  will  have  on us.
Consequently,  we may attempt to mitigate their impact through operational means
and by  using  various  financial  instruments,  including  currency  derivative
instruments.

     Viral Genetics,  Inc., a California corporation and our subsidiary ("VGI"),
is a party to an  Assignment  of Patent  agreement  dated August 1, 1995,  under
which Therapeutic Genetics, Inc., a California corporation,  assigned all of its
rights  in the  patent  pertaining  to TNP,  a protein  used or  useful  for the
treatment of infectious  deceases,  to VGI for a note in the principal amount of
$5,000,000  and a  continuing  royalty  equal to five  percent of gross sales of
products using the patented technology. The stockholders of Therapeutic Genetics
are all of the same  persons  who were former  stockholders  of VGI prior to its
acquisition  by Viral  Genetics in October  2001.  At  December  31,  2001,  the
principal and accrued interest on the note was $6,562,500.

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<PAGE>

Product Manufacture

     Viral  Genetics  has  equipment  capable  of  producing  TNP in  commercial
quantities,  but we lack a facility  larger enough for laboratory and production
lines necessary for larger scale commercial production of TNP. At such time as a
license is issued in Mexico or any other  country for the sale and  distribution
of the product, we will either establish a laboratory and manufacturing facility
for the product if we have  sufficient  capital,  or  contract  with third party
manufacturers to produce TNP. In the past we have used third party manufacturers
to produce TNP used in our clinical trials. We may use such manufacturers in the
future for commercial  production,  but we have no agreement or understanding to
do  so  at  the  present  time.   Our  inability  to  establish   facilities  or
manufacturing   arrangements   in  the   future  to   commercialize   TNP  would
substantially impair our ability to implement our business.

Proprietary Rights

     In the aggregate,  our patent and related rights are of material importance
to our proposed  business in the United States and other countries.  Considering
the vigorous  competition among drug  manufacturers and the competition we might
expect should our product  prove to be accepted as a treatment  option for AIDS,
the patent rights we consider significant in relation to our business as a whole
are covered by U.S.  patent  application  number  08/641,936,  Compositions  and
Methods for  Detecting  and  Treating  Immunodeficiency  Syndrome,  which is now
pending.  We  are  evaluating  whether  additional  patent  applications  may be
appropriate to protect extensions and variations of our product.

     Under  international  agreements  in recent  years,  global  protection  of
intellectual property rights is improving.  The General Agreement on Tariffs and
Trade requires participant  countries to amend their intellectual  property laws
to  provide  patent  protection  for  pharmaceutical  products  by the  end of a
ten-year  transition  period.  A number  of  countries  are doing  this.  Patent
protection in other countries where we have registered patents,  including,  the
European  Patent  Office,  The  Eurasian  Patent   Organization,   New  Zealand,
Australia, and Israel extend for varying periods according to the date of patent
filing or grant and the legal  term of patents in the  various  countries  where
patent protection is obtained. The actual protection afforded by a patent, which
can vary from country to country,  depends upon the type of patent, the scope of
its coverage and the availability of legal remedies in the country.

     The expiration of a product patent or loss of patent  protection  resulting
from a legal  challenge  would be expected to result in significant  competition
from generic products against the covered product and, particularly in the U.S.,
can result in a significant  reduction in sales of the pioneering product. If we
were to loose patent protection, we may be able to continue to obtain commercial
benefits  from  product  manufacturing  trade  secrets,  patents  on  use of our
product,   and  patents  on  processes  and  intermediates  for  the  economical
manufacture of the active  ingredients.  The effect of product patent expiration
or loss also  depends  upon the  nature of the market  and the  position  of the
product in it, the growth of the  market,  the  complexities  and  economics  of
manufacture of the product, and the requirements of generic drug laws.

Competition

     Competition  is intense in the  pharmaceutical  business and includes  many
large and  small  competitors.  Technological  innovations  affecting  efficacy,
safety,  patient ease of use,  and cost  effectiveness  by other  pharmaceutical
companies with greater  financial and research  resources working on competitive
AIDS and viral  treatment  products could result in products that offer the same
or similar benefits as TNP or render our product obsolete.  We intend to compete
with existing AIDS and viral treatment  products on the basis of product quality
and  efficacy,  product  safety,  price,  and  promotion  directly  and  through
distributor relationships we are now forming.

Government Regulation

     Pharmaceutical  companies  are subject to extensive  regulation by numerous
national,  state and local agencies.  Of particular importance is the FDA in the
United  States.  It has  jurisdiction  over  virtually all of our businesses and
administers requirements covering the testing, safety, effectiveness,  approval,
manufacturing,  labeling, marketing, advertising and post-marketing surveillance

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of our pharmaceutical  products.  FDA requirements and/or reviews have increased
the amount of time and money necessary to develop new products and bring them to
market.

     Since 1998,  the approval of new drugs across the EU is possible only using
the European Medicines  Evaluation Agency's (EMEA) mutual recognition or central
approval processes.  The use of either of these procedures provides a more rapid
and consistent  approval  within the 15 member states than was the case when the
approval  processes  were  operating  independently  within each  member  state.
Further,  on January 1, 2000, Norway and Iceland became full participants in the
EU central approval processes.  In addition, the agreement between the EU and 12
other  European  states to base their  approvals on the  centralized EU approval
will  significantly  speed the regulatory  process in those countries.  The EMEA
does not have jurisdiction  over patient  reimbursement or pricing matters in EU
member countries, however. We will be required to deal with individual countries
on such issues.

     In  recent  years in the  U.S.,  various  legislative  proposals  have been
offered at the federal and state levels that would bring about major  changes in
the affected health care systems. Some states have passed such legislation,  and
further federal and state proposals are possible. Such proposals and legislation
include,  and future  proposals  could include,  price or patient  reimbursement
constraints  on  medicines,  increases  in  required  rebates or  discounts  and
restrictions on access to certain products. Similar issues exist in many foreign
countries  where we may do  business.  We cannot  predict  the  outcome  of such
initiatives,  but we will work to maintain patient access to our products and to
oppose price constraints.

     In the U.S.,  federal proposals have called for substantial  changes in the
Medicare  program,  and federal and state  proposals have called for substantial
changes in the Medicaid program.  If such changes are enacted,  they may require
significant  reductions from currently  projected  government  expenditures  for
these programs.  Driven by budget  concerns,  Medicaid managed care systems have
been implemented in many states. If the Medicare and Medicaid programs implement
changes that restrict the access of a significant  population of patients to our
innovative  medicines,  our business could be materially affected.  On the other
hand,  relatively little pharmaceutical use is currently covered by Medicare. If
changes to these  programs  shift  patients to managed care  organizations  that
cover  pharmaceuticals,  or if an outpatient  drug benefit is added to Medicare,
usage of pharmaceuticals could increase. Pricing pressures likely would ensue in
either case given the  enhancement of the  purchasing  power of the managed care
organizations or the federal government.

     U.S. law requires us to give rebates to state  Medicaid  agencies  based on
each  state's  reimbursement  of  pharmaceutical  products  under  the  Medicaid
program.  Some states are seeking  rebates in excess of the amounts  required by
federal   law.  We  also  must  give   discounts  or  rebates  on  purchases  or
reimbursements  of  pharmaceutical  products by certain  other federal and state
agencies and programs.  Also, in late 2000 and early 2001, the states of Vermont
and Maine  received  Centers for  Medicare  and  Medicaid  Services  approval of
waivers  that  would  expand  Medicaid   rebates  beyond  the  current  Medicaid
population.  Both of these waivers have been  challenged  in court.  The Vermont
program was struck down by a federal  appeals  court in 2001.  The Maine program
was  upheld by a federal  district  court in  February  2002;  an appeal of that
decision is expected. If the Maine program is upheld on appeal, other states may
seek similar  approval of waivers that would expand Medicaid  rebates beyond the
current  Medicaid  population.  Rebates  potentially  could be  viewed  as price
discounts without appreciable increases in volume as an offset.

     We  encounter  similar  regulatory  and  legislative  issues in most  other
countries.  In Europe  and some  other  international  markets,  the  government
provides   health  care  at  low  direct  cost  to   consumers   and   regulates
pharmaceutical  prices or patient  reimbursement levels to control costs for the
government-sponsored  health care system. This international  patchwork of price
regulation  has led to  inconsistent  prices and could lead to some  third-party
trade in our  products  from markets with lower  prices.  Such trade  exploiting
price  differences  between  countries could undermine our sales in markets with
higher prices.

Risks Associated With Our Business

     Notwithstanding  our efforts to foresee and mitigate the effects of changes
in our business and  industry,  we cannot  predict with  certainty all potential
changes that might affect our business. Consequently, our business is subject to
a number of risks, some of which are as follows.

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o    We have been engaged in research and  development of our TNP product in the
     past, and have not commenced commercial  distribution of our product. There
     is no assurance  that our product will gain  acceptance  as a treatment for
     AIDS  or  any  other  viral  infection.  If we  are  unable  to  gain  such
     acceptance,  it is  unlikely  we will be able  to  achieve  any  meaningful
     revenue or successfully implement our business.

o    Our  proposed  international  business  could be  affected  by  changes  in
     intellectual property legal protections and remedies, trade regulations and
     procedures   and   actions   affecting   approval,   production,   pricing,
     reimbursement and marketing of products, as well as by unstable governments
     and legal systems, intergovernmental disputes and possible nationalization.

o    Cost-containment  measures  employed by governments that have the effect of
     limiting  patient access to medicines and related issues described above in
     "Government  Regulation"  could affect the growth and  profitability of our
     operations in some countries.

o    Competition from manufacturers of generic drugs is a major challenge in the
     U.S. and is growing  internationally.  Loss of patent protection  typically
     leads to significant loss of sales in the U.S. market. The patents covering
     our product could be challenged by generic drug manufacturers and others.

o    Risks and uncertainties  particularly apply with respect to product-related
     forward-looking  statements.  There can be no assurance as to if or when we
     will  receive  regulatory  approval for our  products.  There are also many
     considerations that can affect marketing of pharmaceutical  products around
     the world.  Regulatory  delays,  the  inability  to  successfully  complete
     clinical  trials,  claims  and  concerns  about  safety and  efficacy,  new
     discoveries,  patent  disputes and claims about  adverse side effects are a
     few  of  the  factors  that  could  adversely  affect  the  realization  of
     product-related forward-looking statements.

o    Difficulties or delays in product  manufacturing  or marketing,  including,
     but  not  limited  to,  the  inability  to  build  up  production  capacity
     commensurate  with demand,  or the failure to predict market demand for, or
     to gain market  acceptance  of,  approved  products,  could  affect  future
     results.

o    We cannot predict with accuracy the timing or impact of the introduction of
     competitive products or their possible future effect on our sales. Products
     that  potentially  could compete with our products are in various stages of
     development, and could be introduced and become accepted forms of treatment
     before approval of our products.

o    Our future results could be affected by changes in business,  political and
     economic conditions,  including the cost and availability of insurance, due
     to the  September  11, 2001  terrorist  attacks in the U.S.,  the threat of
     future  terrorist  activity  in the U.S.  and other  parts of the world and
     related U.S. military action overseas.

o    We  may  become  involved  in  patent,  product  liability,   and  consumer
     litigations  and  additional  matters  that  arise from time to time in the
     ordinary course of our business.  These include  challenges to the coverage
     and/or  validity of patents on products or  processes  and  allegations  of
     injuries   caused  by  our  drug   products.   Litigation   is   inherently
     unpredictable,  and  excessive  verdicts  that  are  not  justified  by the
     evidence can occur.  Litigation  in the future may have a material  adverse
     impact on our financial condition and results of operations.

Employees

     We presently  have one full-time  executive  officer,  one full time office
person, and one full time researcher.

                        Item 2. Description of Property.

     Our corporate  office in located at 905 Mission  Street in South  Pasadena,
California  provided by Haig  Keledjian,  our president,  director and principal
stockholder at no cost to Viral Genetics.  The costs  associated with the use of
this  space are deemed by us to be  immaterial,  as Mr.  Keledjian  uses the for

                                       8
<PAGE>

other business  purposes.  Mr. Keledjian is under no legal obligation to provide
rent-free office space to Viral Genetics.  We lease  approximately  2,000 square
feet of space in South Pasadena, California as a laboratory and storage facility
at $1,850 per month.

                           Item 3. Legal Proceedings.

     No legal  proceedings  are  pending  against  Viral  Genetics or any of its
officers or directors.

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

     At October 30, 2001, the stockholders of Viral Genetics approved by written
consents  executed by the holders of 22,884,781 shares of common stock, or 60.56
percent of the issued and outstanding shares, the following proposals:

     (1) To change our name to "Viral Genetics, Inc.";

     (2) To affirm the  authority of the board of  directors to issue  preferred
stock in more or more series with such rights, privileges and preferences as may
be determined by resolution of the board; and

     (3) To  limit  the  liability  of  directors  and  officers  to the  extent
permitted by section 102(b)(7) of the Delaware General Corporation Law.

                                     PART II
        Item 5. Market for Common Equity and Related Stockholder Matters.

     Viral  Genetics'  common  stock is listed on the Over the Counter  Bulletin
Board  ("OTCBB"),  under  the  symbol  "VRAL".  As of  March  31,  2002,  we had
approximately 120 shareholders of record.

     The following  quotations,  as provided by the OTC Bulletin  Board,  Nasdaq
Trading & Market  Services,  represent prices between dealers and do not include
retail markup,  markdown or  commission.  In addition,  these  quotations do not
represent actual transactions.

Calendar Quarter Ended             High Bid ($)               Low Bid ($)

March 31, 2000                        9.0000                    7.5000
June 30, 2000                         9.0000                    4.7500
September 30, 2000                    5.0000                    1.6000
December 31, 2000                     2.1000                    0.7500

March 31, 2001                        3.1560                    0.8750
June 30, 2001                         3.3500                    0.8125
September 30, 2001                    3.4500                    0.3800
December 31, 2001                     1.9400                    0.8100

     Since its inception,  no dividends  have been paid on the common stock.  We
intend to retain any earnings for use in our business  activities,  so it is not
expected that any dividends on the common stock will be declared and paid in the
foreseeable future.

       Item 6. Management's Discussion and Analysis or Plan of Operation.

Plan of Operation

     In April 2001, Viral Genetics we entered into an agreement to acquire Viral
Genetics,  Inc., a California  corporation ("VGI").  This agreement provided for
the  acquisition of 51 percent of the  outstanding  common stock of VGI, with an
option to acquire the balance at a later date.  The agreement was  terminated in
September  2001, in favor of a new agreement  pursuant to which we would acquire
all of the outstanding  capital stock of VGI for 29,750,580 shares of our common
stock, or approximately 78.7 percent of our then issued and outstanding  shares.

                                       9
<PAGE>

This  transaction  was effected on October 2, 2001,  so that VGI is now a wholly
owned subsidiary. There was no affiliation between Viral Genetics and VGI or any
of its officers, directors, and controlling stockholders prior the acquisition.

     VGI was  founded in 1995 to  discover,  develop,  and  commercialize  novel
therapeutic and diagnostic  systems for the treatment of viral  diseases.  Viral
Genetics' core technology  revolves around a biologically active linear protein,
Thymus Nuclear  Protein (TNP).  To date, our main focus has been the development
of a  treatment  to stop the  progression  of the Human  Immunodeficiency  Virus
(HIV),  which is the causative agent in AIDS. Based on Thymus Nuclear  Protein's
proposed  mechanism of action and the results of human clinical  testing,  Viral
Genetics  believes  TNP may be useful as a treatment  for HIV and as a treatment
for active Herpes Simplex infections (genital herpes).

     VGI is a party to an Assignment of Patent  agreement  dated August 1, 1995,
under which Therapeutic Genetics,  Inc., a California corporation,  assigned all
of its rights in the patent pertaining to TNP to VGI for a note in the principal
amount of  $5,000,000  and a continuing  royalty  equal to five percent of gross
sales of products using the patented technology. The stockholders of Therapeutic
Genetics are all of the same persons who were former  stockholders  of VGI prior
to its  acquisition by Viral Genetics in October 2001. At December 31, 2001, the
principal and accrued  interest on the note was $6,562,500.  Viral Genetics does
not  expect  to be able to pay this  obligation  unless  it  obtains  additional
outside  financing or is able to generate  substantial  revenue from sale of its
products in the future, of which there is no assurance.

     Drug  development  is time  consuming,  expensive,  and  unpredictable.  On
average,  only one out of many  thousands of chemical  compounds  discovered  by
researchers  proves to be both medically  effective and safe enough to become an
approved  medicine.  The process from discovery to regulatory  approval can take
more than ten  years.  Drug  candidates  can fail at any  stage of the  process.
Candidates  may not  receive  regulatory  approval  even  after  many  years  of
research, and products that have been approved and marketed can be ordered to be
withdrawn from the market by regulatory authorities.

     Viral  Genetics  applied  for  registration  of TNP in  Mexico  for  use on
late-stage  AIDS  patients in the  beginning of 2002.  The issuance of a license
under this  application  would permit Viral Genetics to sell its product for use
on late-stage  AIDS patients in Mexico.  We also filed in Mexico an  application
for an expanded  human clinical trial on patients in earlier stages of HIV-AIDS.
The purpose of this trial is to determine the efficacy of TNP on patients in the
early stages of the disease.

     The application was presented in Mexico through  Soluciones  Avanzadas Para
La Salud,  S.A.  De C.V.  ("SAVSA"),  and  Labortorios  Senosiain,  S.A. de C.V.
("LSSA").  In July 1999,  Viral Genetics  entered into a distribution  agreement
with SAVSA to distribute TNP in Mexico and Central and South America,  including
the  Caribbean.  Dr.  Alberto  Osio  and  Horacia  Altamirano,   both  principal
stockholders of Viral Genetics,  are principal owners of SVASA. The agreement is
for a term of seven years and automatically renewed for an additional seven-year
term, subject to the right of either party to terminate the agreement at the end
of the initial term. We are obligated to ship product  within 45 days  following
acceptance  of an order  placed by SAVSA.  Product  will be offered  and sold at
prices Viral establishes from time to time, which we currently  estimate will be
between  $3,000  and  $4,000  per  16-dose  treatment.   SAVSA  will  receive  a
distribution  fee equal to 30 percent of the product sales price after deducting
import taxes and duties.

     Under a related  agreement  between Viral Genetics,  SAVSA,  and LSSA, LSSA
participated  in  submission  of the  application  in  Mexico  and  will  render
additional services on distribution in Mexico for a fee equal to five percent of
the product  sales price,  which will be paid and deducted  from the sales price
before the  allocation  of the 30 percent  distribution  fee to SAVSA.  Based on
communications with Mexican authorities management believes that its license for
use of TNP on  late-stage  AIDS patients may be approved in the first six months
of 2002,  and  marketing  of the product in Mexico will  commence in the current
year. If this comes to pass, Viral Genetics will pursue similar  applications in
China and Africa.

     To this end,  Viral  Genetics  entered into an agreement on March 25, 2002,
with  New  York  International   Commerce  Group,  Inc.   ("NYCG"),   to  pursue
distribution of TNP in China.  As part of the agreement,  NYCG will assist Viral
Genetics in securing a state drug administration  certification from the Chinese

                                       10
<PAGE>

government,  after which NYCG will distribute  product in China.  Viral Genetics
expects  to file the  application  for this  license in China by the end of June
2002. If the license is not granted within one year following  submission of the
application, Viral Genetics may terminate the agreement at its option; provided,
that NYCG's rights will continue under the agreement if Viral Genetics  conducts
further  testing  or takes  other  steps  after the  initial  year to obtain the
license from China. NYCG also has the exclusive right to pursue  applications in
other countries, including Japan, Korea, Taiwan, Hong Kong, Malaysia, Indonesia,
Singapore,  and Thailand. Once a license is granted, NYCG is required to use its
reasonable  best efforts to arrange for  manufacture of product China,  provided
that all  manufacturing  cost  will be borne  by  Viral  Genetics.  NYCG has the
exclusive right after a license is granted to market the product under the terms
of a definitive  distribution  agreement to be entered into by the parties.  The
terms of this definitive agreement will include the following.

     o    The  distribution  rights  will be for a term of 10 years,  subject to
          renewal for an additional  ten-year period based on achieving  minimum
          sales targets of 37,500  treatments within 12 months and 62,500 within
          24 months following the grant of a license.

     o    Shipment of product by Viral Genetics in bulk to a processing facility
          located in or near the territory covered by the license.

     o    Distribution of product by NYCG in the territory at its cost.

     o    Payment  of a  distribution  fee to NYCG  equal to 37 percent of gross
          profit  from sale of the  product,  which is the  greater of the sales
          price charged by Viral Genetics to NYCG and the sales price charged by
          NYGC to third  parties,  reduced  by the base cost of the  product  as
          determined   in  accordance   with   generally   accepted   accounting
          principles.

     In consideration  for assisting Viral Genetics in negotiating its agreement
with NYCG, Viral Genetics agreed to compensate L&M Global Ventures,  Inc., under
a Services  Agreement  dated March 25, 2002,  through a royalty payment equal to
five percent of its gross profit realized under the distribution  agreement with
NYGC.  Under the  Services  Agreement we also granted to L&M Global the right to
purchase a total of 1,000,000 common shares in increments of 250,000 shares at a
price of $62,500 for the first 250,000 shares, $125,000 for the second and third
tranches of 250,000 shares,  and $437,500 for the last 250,000 shares. The right
to  purchase  each  tranche of  250,000  shares is  exercisable  only after each
tranche of product sales under the NYCG distribution agreement of $50,000,000.

     Viral  Genetics is now working  through a draft of an  investigational  new
drug application to the FDA. We need to complete certain  laboratory work on TNP
before  filing the  application.  We do not  expect to file the FDA  application
until the third quarter of 2002, and then only if we have sufficient  capital to
complete required laboratory work.

     Unless and until we are  successful in our domestic  applications  with the
FDA,  our  operations  will  be  limited  to  those  we  can  conduct  overseas.
International  business  operations are subject, in varying degrees, to a number
of risks  inherent in carrying on business in other  countries.  These  include,
currency fluctuations,  capital and exchange control regulations,  expropriation
and nationalization, and other restrictive government actions. Our international
business may also subject us to government-imposed  constraints,  including laws
on pricing or reimbursement for use of products.

     Depending on the direction of change relative to the U.S.  dollar,  foreign
currency  values can either  improve or reduce the reported  dollar value of our
net assets and results of operations.  We cannot  predict with certainty  future
changes  in  foreign  exchange  rates  or  the  effect  they  will  have  on us.
Consequently,  we may attempt to mitigate their impact through operational means
and by  using  various  financial  instruments,  including  currency  derivative
instruments.

     Viral  Genetics  has  equipment  capable  of  producing  TNP in  commercial
quantities,  but we lack a facility  larger enough for laboratory and production
lines necessary for larger scale commercial production of TNP. At such time as a
license is issued in Mexico or any other  country for the sale and  distribution
of the product, we will either establish a laboratory and manufacturing facility
for the product if we have  sufficient  capital,  or  contract  with third party

                                       11
<PAGE>

manufacturers to produce TNP. In the past we have used third party manufacturers
to produce  TNP used in our  clinical  trials.  We may use the  services of such
manufacturers in the future for commercial production,  but we have no agreement
or  understanding  to do so at the present  time.  Our  inability  to  establish
facilities or  manufacturing  arrangements  in the future to  commercialize  TNP
would substantially impair our ability to implement our business.

     Until  Viral  Genetics  receives  outside  financing  to fund  its  capital
commitments,  its  operations  will be  limited  to those  that can be  effected
through its officers, directors and consultants.  Haig Keledjian, our president,
has served without  compensation  and without any agreement or  arrangement  for
compensation.  Viral  Genetics  expects  that it will  negotiate a  compensation
package for Mr.  Keledjian  covering  past and future  service at such time that
Viral Genetics has sufficient working capital to do so.

     From 1995 through 2000, certain directors of Viral Genetics have made loans
and other  advances to fund  operations.  At  December  31,  2001,  we owed Haig
Keledjian, an officer and director,  $775,481 of principal and accrued interest,
Hampar Karageozian,  a director,  $739,608 of principal and interest,  Dr. Harry
Zhabilov,  a  director,  $643,992 of  principal  and  accrued  interest,  Arthur
Keledjian,  a director,  $2,315 of principal  and accrued  interest,  and Eileen
Hayward  (the  mother of Paul  Hayward,  an officer  and  director)  $180,125 of
principal and accrued interest.  All of these loans bear interest at the rate of
five percent per annum, except the loan of Eileen Hayward,  which bears interest
at 10 percent.  Viral  Genetics does not expect to be able to repay any of these
obligations  unless  it  obtains  additional  outside  financing  or is  able to
generate  substantial  revenue from sale of its products in the future, of which
there is no assurance.

     At December 31, 2001,  we had no current  assets,  current  liabilities  of
$194,609,  and long-term  liabilities  of  $9,262,852.  In April 2002, we raised
$150,000  in cash from the sale of 215,000  shares of common  stock in a private
transaction effected in reliance on the exemption from registration set forth in
Section  4(2) of the  Securities  Act of 1933.  No broker  was  involved  in the
transaction and no commissions were paid to any person. These funds will be used
for our  working  capital  needs to fund  general and  administrative  costs and
ongoing  laboratory  work.  Viral  Genetics  also  entered  into an agreement to
convert approximately $1,250,000 of debt to equity and raise up to an additional
$250,000  in cash  through  the  issuance of up to  1,875,000  units,  each unit
consisting  of one  share of common  stock  and  one-half  warrant  to  purchase
one-half share at $0.50,  which increases to $0.625,  45 days following the date
TNP is licensed for sale in Mexico.  This  transaction was scheduled to close on
April 10, 2002, but has not closed yet and we cannot not predict when or whether
the transaction will close.

     We  estimate  that we will  need  approximately  $1,000,000  of  additional
capital in 2002 to fund  approximately  $500,000  of  research  and  development
costs,  $50,000 of patent  work,  and  $450,000 of  administrative  expenses and
product  manufacturing costs. We have raised only $150,000 thus far, and have no
meaningful  agreements or arrangements in place to raise the additional capital.
The factors,  together with our existing  liabilities,  raise  substantial doubt
about our ability to continue as a going concern.

                          Item 7. Financial Statements.

     The financial statements of Viral Genetics appear at the end of this report
beginning with the Index to Financial Statements on page 18.

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

     None.


                                       12
<PAGE>


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
                     With Section 16(a) of the Exchange Act

Directors and Officers

     The following  table sets forth the names,  ages, and positions for each of
the directors and officers of Viral Genetics.

Name                      Age   Positions                         Since

Haig Keledjian            40    President, Secretary, and         October 2001
                                Director

Paul Hayward              53    Treasurer and Director            January 1998

Hampar Karageozian        61    Director                          October 2001

Dr. Harry Zhabilov        62    Director                          October 2001

Arthur Keledjian          35    Director                          October 2001

     The following is  information  on the business  experience of each officer,
director and director appointee.

     Haig  Keledjian  is an attorney  in private  practice  since 1993,  with an
emphasis in federal and state taxes.

     Paul  Hayward was employed  from January 1994 to December  1997 as investor
relations counsel to Datotech  Systems,  Inc. and from December 1997 to December
1998 he was investor  relations counsel to Europa Resources,  Inc. Since 1998 he
has been President, Secretary and Director of the Viral Genetics.

     Hampar  Karageozian  has a Bachelor of Science and Masters of Science  from
the  American  University  of Beirut,  a Masters of Science  from  Massachusetts
Institute of Technology, and a MBA from the University of California, Irvine. He
has been with ISTA  Pharmaceuticals,  Inc. as Senior Vice President of Discovery
Research since 1994.

     Dr. Harry Zhabilov holds a Doctor of Science,  Ph. D, and M.D. degrees from
Sofia University in Bulgaria. He has been employed by Viral Genetics since 1995.

     Arthur   Keledjian  has  a  degree  of  Bachelor  of  Science  in  Business
Administration  from California  State  University in Los Angeles,  and has been
employed  by Farmers  Insurance  Group  since 1988,  and is  presently  District
Manager. He is the brother of Haig Keledjian.

Section 16(a) Beneficial Ownership ReportingCompliance

     Section 16(a) of the Securities  Exchange Act of 1934 requires officers and
Directors  of Viral  Genetics  and  persons  who own more than ten  percent of a
registered  class  of Viral  Genetics'  equity  securities  to file  reports  of
ownership  and  changes in their  ownership  with the  Securities  and  Exchange
Commission,  and forward copies of such filings to Viral Genetics.  Based on the
copies of filings  received by Viral  Genetics,  during the most  recent  fiscal
year, the directors, officers, and beneficial owners of more than ten percent of
the equity securities of Viral Genetics registered pursuant to Section 12 of the
Exchange Act, have filed on a timely basis,  all required  Forms 3, 4, and 5 and
any amendments thereto.


                                       13
<PAGE>


                         Item 10. Executive Compensation

Annual Compensation

     No executive officer of Viral Genetics received any compensation during the
year ended December 31, 2001. Haig Keledjian,  our president, has served without
compensation  and without any agreement or arrangement for  compensation.  Viral
Genetics expects that it will negotiate a compensation package for Mr. Keledjian
covering past and future service at such time that Viral Genetics has sufficient
working capital to do so.

Stock Options

     There  are no stock  options  issued  or  outstanding  for any of the Named
Executive  Officers of Viral Genetics.  Viral Genetics has not adopted any stock
option or other compensation plans for its executive officers.

     Item 11. Security Ownership of Certain Beneficial Owners and Management

     The  following  table  sets  forth as of  April 1,  2002,  the  number  and
percentage of the 37,786,273 outstanding shares of common stock which, according
to the information  supplied to Viral Genetics,  were beneficially  owned by (i)
each person who is currently a director,  (ii) each executive officer, (iii) all
current  directors and executive  officers of Viral Genetics as a group and (iv)
each person who, to our knowledge,  is the  beneficial  owner of more than 5% of
the outstanding common stock. Except as otherwise  indicated,  the persons named
in the table have sole voting and  dispositive  power with respect to all shares
beneficially owned, subject to community property laws where applicable.

                                             Common              Percent
Name and Address                             Shares              of Class

Haig Keledjian (1) (2)                     16,943,094             44.84
905 Mission Street
South Pasadena, CA 91030

Paul Hayward (1)                            1,000,000              2.65
8717 16th Avenue West
Seattle, Washington 98116

Hampar Karageozian (1)                      5,941,687             15.72
31021 Marbella Vista
San Juan Capistrano, CA 92675

Dr. Harry Zhabilov (1)(2)                     -0-                  -0-
905 Mission Street
South Pasadena, CA 91030

Arthur Keledjian (1)                          -0-                  -0-
905 Mission Street
South Pasadena, CA 91030

Dr. Alberto Osio                            2,380,046              6.30
Gobemador Ignacio
Esteva 71 Mexico 11850 D.F.

Caribou Investments, Inc. (3)               2,104,358              5.57
Gubemador Ignacio
Esteva 70, Mexico 11850 D.F.

                                       14
<PAGE>

Nazir Maherali                              2,800,000              7.41
Suite 11
31550, South Fraser Way
Abbotsford BC Canada

All officers and directors (5 persons)     23,884,781             63.21


(1)  Officer or Director of Viral Genetics.

(2)  Haig Keledjian holds 589,697 shares  personally.  He holds 6,004,162 shares
     as Trustee for an irrevocable voting trust for the benefit of his children,
     5,932,761 shares as Trustee for an irrevocable voting trust for the benefit
     of the children of Dr. Harry Zhabilov,  2,188,403  shares as Trustee for an
     irrevocable  trust  established  for a  group  of  private  investors,  and
     2,228,071  shares as Trustee for an  irrevocable  trust  established  for a
     group of Mr. Keledjian's family members.  Mr. Keledjian has sole voting and
     investment control over the shares he holds as Trustee.

(3)  Caribou  Investments,  Inc.,  is a  private  investment  company  owned and
     controlled by Horacia Altamirano of Mexico City, Mexico.

             Item 12. Certain Relationships and Related Transactions

     Viral Genetics,  Inc., a California corporation and our subsidiary ("VGI"),
is a party to an  Assignment  of Patent  agreement  dated August 1, 1995,  under
which Therapeutic Genetics, Inc., a California corporation,  assigned all of its
rights  in the  patent  pertaining  to TNP,  a protein  used or  useful  for the
treatment of infectious  deceases,  to VGI for a note in the principal amount of
$5,000,000  and a  continuing  royalty  equal to five  percent of gross sales of
products using the patented technology.  At December 31, 2001, the principal and
accrued  interest on the note was  $6,562,500.  The  stockholders of Therapeutic
Genetics are all of the same persons who were former  stockholders  of VGI prior
to its acquisition by Viral Genetics in October 2001. Consequently, all payments
made to Therapeutic  Genetics under this agreement will accrue indirectly to the
benefit of the former  stockholders  of VGI,  including Haig  Keledjian,  Hampar
Karageozian,  Dr.  Alberto  Osio,  and  Caribou  Investments,  Inc.,  who became
principal stockholders of Viral Genetics as a result of the acquisition of VGI.

     From 1995 through 2000, certain directors of Viral Genetics have made loans
and other  advances to fund  operations.  At  December  31,  2001,  we owed Haig
Keledjian, an officer and director,  $775,481 of principal and accrued interest,
Hampar Karageozian,  a director,  $739,608 of principal and interest,  Dr. Harry
Zhabilov,  a  director,  $643,992 of  principal  and  accrued  interest,  Arthur
Keledjian,  a director,  $2,315 of principal  and accrued  interest,  and Eileen
Hayward  (the  mother of Paul  Hayward,  an officer  and  director)  $180,125 of
principal and accrued interest.  All of these loans bear interest at the rate of
five percent per annum, except the loan of Eileen Hayward,  which bears interest
at 10 percent.  Viral  Genetics does not expect to be able to repay any of these
obligations  unless  it  obtains  additional  outside  financing  or is  able to
generate  substantial  revenue from sale of its products in the future, of which
there is no assurance.

     In the past we have used Prima Pharm,  Inc., a drug  manufacturer  based in
Sorrento Valley,  California,  owned by Hampar Karageozian,  a director of Viral
Genetics, to produce TNP used in our clinical trials. We may use the services of
Prima Pharm in the future for commercial production, but we have no agreement or
understanding to do so at the present time.

                    Item 13. Exhibits and Reports on Form 8-K

Reports on Form 8-K

     On October 17, 2001,  Viral  Genetics  filed a report on Form 8-K reporting
under  Item 1 and Item 2 a change  in  control  and  acquisition  of assets as a
result of the acquisition in October 2001, of Viral Genetics, Inc., a California
corporation.


                                       15
<PAGE>


Exhibits

     Copies of the  following  documents are included as exhibits to this report
pursuant to Item 601 of Regulation S-B.

Exhibit No.  Title of Document                                Location*

2.1          Agreement and Plan of Exchange dated September   Form 8-K/ Oct. 01
               6, 2001
3.1          Certificate of Incorporation                     Form 10-SB
3.2          Certificate of Amendment                         Page E-1
3.3          Bylaws                                           Form 10-SB
10.1         Assignment of Patent dated August 5, 1995        Page E-4
10.2         Agreement between Viral Genetics, Soluciones     Page E-5
               Avanzadas Para La Salud, S.A. de C.V.
               (formerly Esigar Quirurgica, S.A. de C.V.)
               Dated July 14, 1999 (English Translation)
10.3         Agreement between Viral Genetics, Soluciones     Page E-16
               Avanzadas Para La Salud, S.A. De C.V., and
               Labortorios Senosiain, S.A. de C.V.,
               Dated July 11, 2001 (English Translation)
10.4         Mutual Cooperation and Joint Venture Agreement   Page E-20
               between Viral Genetics and New York
               International Commerce Group, Inc., dated
               March 25, 2002
10.5         Services Agreement between Viral Genetics and    Page E-36
               L&M Global Ventures, Inc.,
               Dated March 25, 2002
10.6         Investment Banking Engagement between Viral      Page E-42
               Genetics and Burlington Capital Markets,
               Dated November 1, 2001
10.7         Letter Agreement (as amended) between VGI,       Page E-51
               Phillip C. Baker and Bake Consulting
               Dated May 23, 2000
21.1         List of Subsidiaries                             Page E-55

* Exhibit 2.1 is incorporated  herein by this reference to the Current Report on
Form 8-K  dated  October  2,  2001,  filed  with  the  Securities  and  Exchange
Commission  on October  17,  2001.  Exhibit  No.'s 3.1 and 3.3 are  incorporated
herein by this reference to Viral Genetics' Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission on July 29, 1999.


                                       16
<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.

                                 VIRAL GENETICS, INC.


Date:  April 22, 2002            By: /s/ Haig Keledjian, President
                                     Chief Executive and Chief Financial 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.


Date:  April 22, 2002            /s/ Haig Keledjian, Director


Date:  April 22, 2002            /s/ Paul Hayward, Director


Date:  April 23, 2002            /s/ Hampar Karageozian, Director


Date:  April ___, 2002           ___________________________________________
                                 Dr. Harry Zhabilov, Director


Date:  April 22, 2002            /s/ Arthur Keledjian, Director


                                       17
<PAGE>


                               VIRAL GENETICS, INC.

                                TABLE OF CONTENTS

                                December 31, 2001



      WILLIAMS & WEBSTER'S AUDIT REPORT                                 19

      AGOPIAN & SASAKI'S AUDIT REPORT                                   20

      FINANCIAL STATEMENTS

      Consolidated Balance Sheets                                       21

      Consolidated Statements of Operations                             22

      Consolidated Statement of Stockholders' Equity (Deficit)          23

      Consolidated Statements of Cash Flows                             25


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                              27



                                       18
<PAGE>





Board of Directors
Viral Genetics, Inc.
South Pasadena, California


                          INDEPENDENT AUDITOR'S REPORT

We have  audited  the  accompanying  balance  sheet of Viral  Genetics,  Inc. (a
development stage enterprise) as of December 31, 2001, and the related statement
of  operation,  stockholders  equity  (deficit) and cash flow for the year ended
December 31, 2001.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial  statements  based on our audit.  The  financial  statements  of Viral
Genetics,  Inc. as of December 31,  2000,  and for the period from July 11, 1995
(inception)  to December 31, 2000,  were audited by other  auditors whose report
dated May 23, 2001 expressed an unqualified opinion.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Viral  Genetics,  Inc. as of
December  31,  2001,  and the results of its  operations,  stockholders'  equity
(deficit) and its cash flows for the year ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  As discussed in Note 2, the Company
has been in development stage since its inception,  has no revenues,  and has an
accumulated  deficit of $8,381,861.  These factors raise substantial doubt about
the  Company's  ability  to  continue  as a going  concern.  Management's  plans
regarding  those matters also are described in Note 2. The financial  statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.



Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington

April 16, 2001



                                       19
<PAGE>




                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors of
Viral Genetics, Inc.
(A Development Stage Company)
South Pasadena, California

We have  audited  the  accompanying  balance  sheet of Viral  Genetics,  Inc. (A
Development Stage Company), (a California  corporation) as of December 31, 2000,
and the related statement of operations,  stockholders'  equity (deficiency) and
cash flows for the year ended December 31, 2000. These financial  statements are
the  responsibility of the corporation's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of Viral  Genetics,  Inc. (A
Development  Stage  Company) as of  December  31,  2000,  and the results of its
operations  and its cash flows for the year ended and from  inception  (July 11,
1995) to December 31, 2000 in  conformity  with  generally  accepted  accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  the Company has suffered recurring losses from operations
and is dependent  upon the continued  sale of its  securities or obtaining  debt
financing  for  funds  to  meet  its  cash  requirements.  These  factors  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.


Agopian & Sasaki, CPA's

Torrance, California

May 23, 2001, except for the Statement of Operation,  subtitles of Inventory and
Revenue  recognition in Note 1, and the second  paragraph of Note 7, at to which
the date is July 5, 2001.



                                       20
<PAGE>


                              VIRAL GENETICS, INC.
                    (FORMERLY 5 STARLIVING ONLINE, INC.)
                      (A DEVELOPMENT STAGE ENTERPRISE)
                        CONSOLIDATED BALANCE SHEETS

                                                     December 31,   December 31,
                                                         2001           2000
                                                    -------------- -------------
ASSETS
   CURRENT ASSETS
      Cash                                          $           -  $          -
      Inventory                                                 -       485,011
                                                    -------------- -------------
         Total Current Assets                                   -       485,011

   PROPERTY AND EQUIPMENT (NET)                           146,625       188,801

   OTHER ASSETS
      Goodwill                                          5,206,051     5,206,051
                                                    -------------- -------------
      TOTAL ASSETS                                  $   5,352,676  $  5,879,863
                                                    ============== =============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
   CURRENT LIABILITIES
      Accounts payable                              $     167,123  $    143,180
      Overdrafts payable                                    1,370           304
      Payroll taxes payable                                26,116        35,152
                                                    -------------- -------------
         Total Current Liabilities                        194,609       178,636
                                                    -------------- -------------

   LONG-TERM LIABILITIES
      Notes payable                                     9,262,852     8,225,838
                                                    -------------- -------------
         Total Long-Term Liabilities                    9,262,852     8,225,838
                                                    -------------- -------------
      TOTAL LIABILITIES                                 9,457,461     8,404,474
                                                    -------------- -------------

   COMMITMENTS AND CONTINGENCIES                                -             -
                                                    -------------- -------------

   STOCKHOLDERS' EQUITY (DEFICIT)
      Preferred stock, 20,000,000 shares authorized,
         $0.0001 par value; no shares issued and
         outstanding                                            -             -
      Common stock, 80,000,000 and 300,000,000
         shares authorized, $0.0001 par value;
         37,786,273 and 29,682,824 shares,
         issued and outstanding respectively                3,779         2,968
      Additional paid-in capital                        4,273,297     4,498,165
      Deficit accumulated during development stage     (8,381,861)   (7,025,744)
                                                    -------------- -------------
      TOTAL STOCKHOLDERS' EQUITY (DEFICIT)             (4,104,785)   (2,524,611)
                                                    -------------- -------------
   TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY (DEFICIT)                $   5,352,676  $  5,879,863
                                                    ============== =============

             See accompanying notes and accountant's review report.


                                       21
<PAGE>



                              VIRAL GENETICS, INC.
                      (FORMERLY 5 STARLIVING ONLINE, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                      From
                                                                     July 11,
                                                                       1995
                                          For The       For The     (Inception)
                                         Year Ended    Year Ended       to
                                        December 31,  December 31,  December 31,
                                            2001          2000          2001
                                        ------------ ------------- -------------

REVENUES                                $         -  $    347,750  $    347,750
                                        ------------ ------------- -------------

EXPENSES
 Research and development                   498,749     2,022,676     5,620,720
 Depreciation expense                        45,948        27,954        86,177
 General and administrative expenses        398,261       132,907     1,027,201
                                        ------------ ------------- -------------
 TOTAL EXPENSES                             942,958     2,183,537     6,734,098
                                        ------------ ------------- -------------


LOSS FROM OPERATIONS                       (942,958)   (1,835,787)   (6,386,348)

OTHER INCOME (EXPENSE)
 Interest expense                          (413,159)     (349,330)   (1,995,513)
                                        ------------ ------------- -------------

LOSS BEFORE INCOME TAXES                 (1,356,117)   (2,185,117)   (8,381,861)

INCOME TAXES                                      -             -             -
                                        ------------ ------------- -------------

NET LOSS                                $(1,356,117) $ (2,185,117) $ (8,381,861)
                                        ============ ============= =============

 NET LOSS FROM OPERATIONS
  PER COMMON SHARE, BASIC AND DILUTED   $     (0.04) $      (0.08) $      (0.32)
                                        ============ ============= =============

 WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING,
  BASIC AND DILUTED                      31,759,503    28,244,767    26,188,580
                                        ============ ============= =============



             See accompanying notes and accountant's review report.


                                       22
<PAGE>



                              VIRAL GENETICS, INC.
                      (FORMERLY 5 STARLIVING ONLINE, INC.)
                        (A DEVELOPMENT STAGE ENTERPRISE)
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<S>                                       <C>         <C>     <C>         <C>         <C>
                                                                            Deficit
                                              Common Stock                Accumulated    Total
                                          ------------------- Additional    During    Stockholders'
                                             Number            Paid-in    Development   Equity
                                            of Shares  Amount  Capital      Stage      (Deficit)
                                          ----------- ------- ----------- ------------ ------------

Issuance of common stock
 for cash at nill per share                23,800,079 $ 2,380 $   (1,380) $         -  $     1,000
Loss for year ending, December 31, 1995             -       -          -     (707,167)    (707,167)
                                          ----------- ------- ----------- ------------ ------------
Balance, December 31, 1995                 23,800,079   2,380     (1,380)    (707,167)    (706,167)
Issuance of common stock
 for cash at $0.84 per share                   59,500       6     49,994            -       50,000
Issuance of common stock
 for services at $0.84                        357,001      36    299,964            -      300,000
Loss for year ending, December 31, 1996             -       -          -     (810,189)    (810,189)
                                          ----------- ------- ----------- ------------ ------------
Balance, December 31, 1996                 24,216,580   2,422    348,578   (1,517,356)  (1,166,356)
Issuance of common stock
 for cash at $0.84 per share                  339,151      34    284,966            -      285,000
Issuance of common stock
 for services at $0.84 per share              499,802      50    419,950            -      420,000
Loss for year ending, December 31, 1997             -       -          -     (577,066)    (577,066)
                                          ----------- ------- ----------- ------------ ------------
Balance, December 31, 1997                 25,055,533   2,506  1,053,494   (2,094,422)  (1,038,422)
Issuance of common stock
 for cash at $0.84 per share                  345,101      35    289,965            -      290,000
Loss for year ending, December 31, 1998             -       -          -     (708,567)    (708,567)
                                          ----------- ------- ----------- ------------ ------------
Balance, December 31, 1998                 25,400,634   2,541  1,343,459   (2,802,989)  (1,456,989)
Issuance of common stock
 for cash at $0.42 per share                  595,002      59    249,941            -      250,000
Issuance of common stock
 for cash at $0.84 per share                   34,272       3     28,797            -       28,800
Loss for year ending, December 31, 1999             -       -          -   (2,037,638)  (2,037,638)
                                          ----------- ------- ----------- ------------ ------------
Balance, December 31, 1999                 26,029,908   2,603  1,622,197   (4,840,627)  (3,215,827)
Issuance of common stock
 for cash at $0.42                            595,002      59    249,941            -      250,000
Issuance of common stock
 for cash at $0.84                            842,523      84    707,916            -      708,000
Issuance of common stock
 for cash at $01.94                            51,567       6     99,994            -      100,000
Issuance of common stock
 for services at $0.84                      2,163,824     216  1,818,117            -    1,818,333
Loss for year ending, December 31, 2000             -       -          -   (2,185,117)  (2,185,117)
                                          ----------- ------- ----------- ------------ ------------
Balance, December 31, 2000                 29,682,824   2,968  4,498,165   (7,025,744)  (2,524,611)
Issuance of common stock
 for cash at $0.84                             29,464       3     24,747            -       24,750
Issuance of common stock
 for services at $0.84                         37,811       4     31,464            -       31,468
Recapitilization through reverse merger
 and acquisition of 5 Starliving
 Online, Inc.                               8,035,693     804   (281,079)           -     (280,275)
Miscellaneous adjustment due to merger            481       -          -            -            -
Loss for the year ended
 December 31, 2001                                  -       -          -   (1,356,117)  (1,356,117)
                                          ----------- ------- ----------- ------------ ------------
Balance, December 31, 2001                 37,786,273 $ 3,779 $4,273,297  $(8,381,861) $(4,104,785)
                                          =========== ======= =========== ============ ============
</TABLE>

             See accompanying notes and accountant's review report.

                                       23
<PAGE>



                                VIRAL GENETICS, INC.
                        (FORMERLY 5 STARLIVING ONLINE, INC.)
                          (A DEVELOPMENT STAGE ENTERPRISE)
                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                      From
                                                                     July 11,
                                                                       1995
                                          For The       For The     (Inception)
                                         Year Ended    Year Ended       to
                                        December 31,  December 31,  December 31,
                                            2001          2000          2001
                                        ------------ ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss from operations            $(1,356,117) $ (2,185,117) $ (8,381,861)
    Depreciation                             45,948        27,954        86,177
    Non cash operating expenses               4,901             -         4,901
    Inventory expensed as research and
     development                            485,010      (362,336)            -
    Issuance of common stock for services    31,468     1,818,333     2,569,801
    Increase in patent                            -       (90,476)   (5,206,052)
    Increase in accrued interest            413,159             -       413,159
    Increase (decrease) in accounts
     payable and accrued liabilities         15,973      (186,109)      194,609
                                        ------------ ------------- -------------
Net cash used in operations                (359,658)     (977,751)  (10,319,266)
                                        ------------ ------------- -------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Acquisition of equipment                 (3,672)     (197,519)     (232,702)
                                        ------------ ------------- -------------
Net cash used in investing activities        (3,672)     (197,519)     (232,702)
                                        ------------ ------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Increase (decrease) in Notes Payable    338,580       (12,655)    8,564,418
    Proceeds from sale of common stock       24,750     1,058,000     1,987,550
                                        ------------ ------------- -------------
Net cash provided by financing activities   363,330     1,045,345    10,551,968
                                        ------------ ------------- -------------


Change in cash                                    -      (129,925)            -

Cash, beginning of period                         -       129,925             -
                                        ------------ ------------- -------------
Cash, end of period                     $         -  $          -  $          -
                                        ============ ============= =============

Supplemental cash flow disclosures:
    Interest expense paid               $         -  $          -  $          -
                                        ============ ============= =============
    Income taxes paid                   $         -  $          -  $          -
                                        ============ ============= =============

Non-cash transactions:
    Issuance of common stock for
     services                           $    31,468  $  1,818,333  $  2,569,801
    Non cash operating expenses         $     4,901  $          -  $      4,901
    Inventory expensed and research
     and development                    $   485,010  $          -  $          -
    Non cash from reverse merger
     acquisition                        $       563  $          -  $          -

             See accompanying notes and accountant's review report.

                                       24
<PAGE>


                              VIRAL GENETICS, INC.
                       Formerly 5 Starliving Online, Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001


NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Business
Viral  Genetics Inc. (the  Company) was  incorporated  in California on July 11,
1995, and is in development  stage. The Company was organized for the purpose of
manufacturing  and  marketing a  pharmaceutical  product  named  Thymus  Nuclear
Protein  (the  current  formulation  of  which is now  known as and  hereinafter
referred to as "TNP").  This product,  TNP, is used in a drug being developed to
treat AIDS.  While the Company has had limited sales of this product,  primarily
for research  purposes,  the success of the Company will be based upon obtaining
certain  regulatory  approval  for its  pharmaceutical  product  TNP to commence
commercial  operations.  On October 1,  2001,  the  Company  was  acquired  by 5
Starliving Online, Inc. See Note 8.


NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This  summary of  significant  accounting  policies  is  presented  to assist in
understanding the financial  statements.  The financial statements and notes are
representations  of the Company's  management,  which is  responsible  for their
integrity  and  objectivity.  These  accounting  policies  conform to accounting
principles  generally  accepted in the United  States of America,  and have been
consistently applied in the preparation of the financial statements.

Accounting Methods
The Company's  financial  statements  are prepared  using the accrual  method of
accounting.

Development Stage Activities
The Company has been in the  development  stage since its  formation on July 11,
1995. It is primarily engaged in medical research and development.

Use of Estimates
The process of preparing  financial  statements  in conformity  with  accounting
principles  generally  accepted in the United States of America requires the use
of estimates and  assumptions  regarding  certain types of assets,  liabilities,
revenues,   and  expenses.   Such  estimates   primarily   relate  to  unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.


                                       25
<PAGE>

                              VIRAL GENETICS, INC.
                       Formerly 5 Starliving Online, Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Principles of Consolidation
The consolidated  financial  statements  include the accounts of the Company and
its wholly owned subsidiary, after elimination of the inter-company accounts and
transactions. The wholly owned subsidiary of the Company is listed in Note 8.

Reclassification
Certain  amounts  from prior  periods have been  reclassified  to conform to the
current period presentation. This reclassification has resulted in no changes to
the Company's accumulated deficit or net losses presented.

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

Fair Value of Financial Instruments
The Company's  financial  instruments  as defined by SFAS No. 107,  "Disclosures
about Fair Value of Financial  Instruments,"  include accounts payable,  accrued
expenses and borrowings from related parties.  All instruments are accounted for
on a historical cost basis, which approximates fair value at December 31, 2001.

Impaired Asset Policy
In October 2001, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards  No. 144,  "Accounting  for the  Impairment  or
Disposal of  Long-Lived  Assets"  (SFAS No. 144).  SFAS 144  replaces  SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed  Of." This new standard  establishes a single  accounting  model for
long-lived assets to be disposed of by sale, including discontinued  operations.
Statement 144 requires that these long-lived  assets be measured at the lower of
carrying amount or fair value less cost to sell,  whether reported in continuing
operations or discontinued operations. This statement is effective beginning for
fiscal years after December 15, 2001, with earlier application  encouraged.  The
Company  adopted  SFAS 144.  The Company  does not believe any  adjustments  are
needed to the carrying value of its assets at December 31, 2001.


                                       26
<PAGE>

                              VIRAL GENETICS, INC.
                       Formerly 5 Starliving Online, Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142,  "Goodwill  and Other  Intangible  Assets".  SFAS No. 141  provides for the
elimination  of the  pooling-of-interests  method  of  accounting  for  business
combinations  with an  acquisition  date of July 1, 2001 or later.  SFAS No. 142
prohibits  the  amortization  of  goodwill  and  other  intangible  assets  with
indefinite lives and requires  periodic  reassessment of the underlying value of
such assets for impairment.  SFAS No.142 is effective for fiscal years beginning
after December 15, 2001. An early adoption  provision  exists for companies with
fiscal years  beginning  after March 15, 2001. On September 1, 2001, the Company
adopted SFAS No. 142. Application of the non-amortization  provision of SFAS No.
142 is expected to result in no change in net income.

In October 2001, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards  No.  143,  "Accounting  for  Asset  Retirement
Obligations" (SFAS No. 143). SFAS No. 143 establishes  guidelines related to the
retirement  of tangible  long-lived  assets of the  Company  and the  associated
retirement costs. This statement requires that the fair value of a liability for
an asset  retirement  obligation  be  recognized  in the  period  in which it is
incurred  if a  reasonable  estimate of fair value can be made.  The  associated
asset  retirement  costs are  capitalized as part of the carrying  amount of the
long-lived assets.  This statement is effective for financial  statements issued
for the fiscal years beginning after June 15, 2002 and with earlier  application
encouraged.  The  Company  adopted  SFAS No. 143 and does not  believe  that the
adoption will have a material impact on the financial  statements of the Company
at December 31, 2001.

In September  2000, the FASB issued SFAS No. 140  "Accounting  for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." This statement
provides  accounting  and  reporting  standards  for  transfers and servicing of
financial assets and extinguishment of liabilities and also provides  consistent
standards for  distinguishing  transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS No. 140 is effective for recognition
and   reclassification   of   collateral   and  for   disclosures   relating  to
securitization  transactions  and  collateral  for  fiscal  years  ending  after
December 15, 2000,  and is effective  for  transfers  and servicing of financial
assets and  extinguishments  of liabilities  occurring after March 31, 2001. The
Company  believes  that the adoption of this  standard  will not have a material
effect on the Company's results of operations or financial position.

                                     27
<PAGE>

                              VIRAL GENETICS, INC.
                       Formerly 5 Starliving Online, Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Goodwill
Goodwill  represents  the excess of the purchase  price and related direct costs
over the fair value of net assets  acquired as of the date of the acquisition of
the patents from Therapeutic Genetics, Inc. Therapeutic acquired a notes payable
which is currently $6,562,500.  The Company periodically reviews its goodwill to
assess   recoverability   based  on  projected   undiscounted  cash  flows  from
operations.  Impairments  are  recognized in operating  results when a permanent
diminution in value occurs.  The Company has reviewed this asset for impairment,
and concluded it was not impaired at December 31, 2001.

Revenue Recognition
The Company  recognizes revenue from product sales upon shipment to the customer
and collectability is reasonably assured.

Compensated Absences
The  Company's  policy is to recognize  the cost of  compensated  absences  when
actually  paid to  employees.  If the amount were  estimatible,  it would not be
currently recognized as the amount would be deemed immaterial.

Research and Development
Research and  development  expenses are charged to operations  as incurred.  The
cost  of  intellectual  property  purchased  from  others  that  is  immediately
marketable or that has an alternative future use is capitalized and amortized as
intangible assets. The Company periodically  reviews its capitalized  intangible
costs to assess  recoverability  based on the projected  undiscounted cash flows
from  operations.  Impairments  are  recognized  in  operating  results  when  a
permanent diminution in value occurs.

Going Concern
As shown in the accompanying  financial statements,  the Company has incurred an
accumulated  deficit of  $8,381,861  through  December 31, 2001.  The Company is
currently in need of operating monies to continue their research and development
goals.  These  factors  and  uncertainties  raise  substantial  doubt  about the
Company's  ability to continue as a going concern.  The financial  statements do
not include any adjustments relating to the recoverability and classification of
recorded assets, or the amounts and  classification of liabilities that might be
necessary in the event the Company cannot continue in existence.  Management has
designed plans for sales of the Company's  products.  Management intends to seek
additional capital from new equity securities  offerings that will provide funds
needed to increase  liquidity,  fund  internal  growth and fully  implement  its
business  plan.  An  estimated  $1 million is  believed  necessary  to  continue
operations  and  increase  development  through  the next  fiscal  year.

                                       28
<PAGE>

                              VIRAL GENETICS, INC.
                       Formerly 5 Starliving Online, Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Derivative Instruments
The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting  Standards ("SFAS") No. 133,  "Accounting for Derivative  Instruments
and Hedging  Activities," as amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging  Activities - Deferral of the Effective Date of FASB No.
133",  and SFAS No. 138,  "Accounting  for Certain  Derivative  Instruments  and
Certain Hedging Activities", which is effective for the Company as of January 1,
2001.  This  standard   establishes   accounting  and  reporting  standards  for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts,  and for  hedging  activities.  It  requires  that  an  entity
recognize all  derivatives as either assets or  liabilities in the  consolidated
balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically  designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging  derivative  with the  recognition of (i) the changes in the fair
value of the hedged asset or liability that are  attributable to the hedged risk
or  (ii)  the  earnings  effect  of the  hedged  forecasted  transaction.  For a
derivative  not  designated  as a  hedging  instrument,  the  gain  or  loss  is
recognized in income in the period of change.

Historically,  the Company has not entered into  derivatives  contracts to hedge
existing risks or for speculative purposes.

At December 31, 2001, the Company has not engaged in any transactions that would
be considered derivative instruments or hedging activities.

Earnings Per Share
On January 1, 1998,  the  Company  adopted  SFAS No.  128,  which  provides  for
calculation  of "Basic" and  "Diluted"  earnings per share.  Basic  earnings per
share  includes no dilution and is computed by dividing net income  available to
common  shareholders by the weighted  average common shares  outstanding for the
period.  Diluted earnings per share reflect the potential dilution of securities
that could share in the earnings of an entity similar to fully diluted  earnings
per share. At December 31, 2001,  basic and diluted  earnings per share were the
same as there were no common stock equivalents outstanding.

                                       29
<PAGE>

                              VIRAL GENETICS, INC.
                       Formerly 5 Starliving Online, Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventory
Inventories  are  stated at the lower of  average  cost or  market.  The cost of
finished goods includes the cost of raw material, direct and indirect labor, and
other indirect manufacturing costs.

The components of inventory at December 31, 2001 consist of the following:

                         December 31, 2001             December 31,2000
                         -------------------           -------------------

        Finished goods                  $0                      $485,211
                                        ==                      ========


Inventory has a shelf life of approximately  twelve months. At December 31, 2001
management determined that inventory had expired and was completely impaired.


NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment are stated at cost.  Depreciation  is provided  using the
straight-line  method over the estimated useful lives of the assets.  The useful
lives of property,  plant and equipment  for purposes of computing  depreciation
are three to five years.

The following is a summary of property, equipment, and accumulated depreciation:

                                             December 31,         December 31,
                                                 2001                 2000
                                           -----------------    ----------------

Equipment                                        $ 232,702           $ 228,031
Less accumulated depreciation                      (86,077)            (39,230)
                                           -----------------    ----------------
                                                 $ 146,625           $ 188,801
                                           =================    ================

Depreciation  for the period ended  December  31, 2001 was $45,948.  The Company
evaluates  the   recoverability  of  property  and  equipment  when  events  and
circumstances   indicate  that  such  assets  might  be  impaired.  The  Company
determines  impairment by comparing the undiscounted future cash flows estimated
to  be  generated  by  these  assets  to  their  respective   carrying  amounts.
Maintenance and repairs are expensed as incurred.  Replacements  and betterments
are  capitalized.  The cost and  related  reserves of assets sold or retired are
removed  from the  accounts,  and any  resulting  gain or loss is  reflected  in
results of operations.

                                       30
<PAGE>

                              VIRAL GENETICS, INC.
                       Formerly 5 Starliving Online, Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

NOTE 4 - COMMITENTS AND CONTINGENCIES

Product Liability
The Company could be subjected to claims for adverse  reactions  resulting  from
the use of TNP, although the Company is unaware of any such claims or threatened
claims since TNP was initially marketed.  As of the date hereof the Company does
not have product liability insurance for TNP.

Investment Banking Agreement
In November  2001, the Company  signed a preliminary  agreement with  Burlington
Capital  Markets,  Inc. to provide  strategic  relationships  and  assistance in
connection with future financing of the Company in exchange for a combination of
cash  payments,  common  stock and stock  warrants.  As of  December  31,  2001,
Burlington has not complied with any of the provisions of the agreement, and the
Company has paid no compensation to Burlington.

Patents
The Company has the following patents issued:

                Country               Date Issued       Patent No.
        -------------------------   ----------------  ----------------

        Australia                   October 19, 2000     721463
        Euroasia                    July 4, 2000         001100
        Israel                      January 5, 1996      118103/5
        New Zealand                 March 17, 1999       308708
        South Africa                February 6, 1997     96/3474


The Company also has pending patent applications in Argentina, Brazil, Bulgaria,
Canada, China, European Community (Austria,  Belgium,  Denmark, Finland, France,
Germany,  Great  Britain,  Greece,  Ireland,  Italy,  Luxembourg,   Monaco,  The
Netherlands,  Portugal, Spain, Sweden, Switzerland,  Liechtenstein),  Hong Kong,
Japan and United States of America.

The Company can give no assurance that other companies,  having greater economic
resources,  will not be successful in developing a similar product. There can be
no assurance that such patents, if obtained, will be enforceable.


                                       31

<PAGE>

                              VIRAL GENETICS, INC.
                       Formerly 5 Starliving Online, Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

NOTE 5 - STOCKHOLDERS' EQUITY

During years 1996,  1997 and 2000, the Company issued shares of common stock for
$300,000,  $420,000  and  $1,818,333  respectively  in exchange for research and
development services.  During the years 1996 through 2000, the Company received,
$1,962,800 in cash for common stock.

During the year ended  December 31,  2001,  $24,750 was received for issuance of
common  stock for cash.  The  Company  issued  common  stock  for  research  and
development services based on the fair market value of the stock for $31,468.


NOTE 6 - INCOME TAXES

The Company  accounts  for income  taxes under the  provisions  of  Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. SFAS
No. 109 is an asset and liability approach for computing deferred income taxes.

As of December 31, 2001,  the Company had net operating  loss carry forwards for
Federal income tax reporting  purposes  amounting to  approximately  $8,358,931,
which  expires in varying  amounts to 2021.  The  components of the deferred tax
asset as of December 31, 2001 were as follows:

                                                            December 31,
                                                                2001
                                                           --------------

Benefit of net operating loss carry forwards                 $ 2,095,465
Less valuation allowance                                       2,095,465
                                                           --------------
Net deferred tax asset                                       $         -
                                                           ==============

As  of  December  31,  2001,   sufficient   uncertainty   exists  regarding  the
realizability  of these  operating  loss  carry  forwards,  and  accordingly,  a
valuation allowance of $2,095,465 has been established.

The benefit of net operating  loss carry  forwards were  calculated  based on an
average of 25% tax rate.

                                       32
<PAGE>


                              VIRAL GENETICS, INC.
                       Formerly 5 Starliving Online, Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001


NOTE 7 - RELATED PARTY TRANSACTIONS

Notes payable to stockholders and related parties             $2,700,352
Note payable to an affiliated company
      of the Company's stockholders                            6,562,500
                                                           --------------
Total                                                         $9,262,852
                                                           ==============

The notes payable to related parties  include accrued  interest and have various
maturities  starting  in the year  2002 and  ending  in the  year  2004  bearing
interest at 5% annually.

The note payable of  $6,562,500,  to an  affiliated  company  (i.e. A California
Limited  Liability Company owned primarily by the same stockholders of the Viral
Genetics, Inc.) is for a patent transfer. In the balance of the notes payable to
stockholders and other related parties are notes totaling  $280,275,  assumed as
part of the merger acquisition with 5 Starliving Online, Inc. See Note 8.


NOTE 8 - MERGER AND ACQUISITION

On October 1, 2001 5 Starliving  Online,  Inc.  acquired all of the  outstanding
common stock of Viral Genetics, Inc. For accounting purposes the acquisition has
been  treated  as a  recapitalization  of 5  Starliving  Online,  Inc with Viral
Genetics,  Inc.  as  the  acquirer  (reverse  acquisition).   Viral  became  the
continuing  reporting  entity  for  accounting  purposes.  The net book value of
liabilities  acquired was $280,275 as notes payable.  The  historical  financial
statements  prior to October 1, 2001 are those of Viral Genetics,  Inc., and are
restated for the exchange of 29,750,580  shares of common stock for the original
capital stock of Viral Genetics, Inc.


NOTE 9 - SUBSEQUENT EVENTS

In April,  2002 the Company  announced it has  submitted a New Drug  Application
(NDA)  with the  Mexican  Department  of Health,  registering  TNP for a license
permitting its sale for the treatment of late-stage AIDS patients in Mexico. The
Company also filed a request for an expanded  human  clinical  trial of TNP with
Mexican authorities.

                                       33
<PAGE>

                              VIRAL GENETICS, INC.
                       Formerly 5 Starliving Online, Inc.
                          (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001



NOTE 9 - SUBSEQUENT EVENTS (Continued)

Subsequent to December 31, 2001 and before the financial statements were issued,
the Company also  announced a mutual and joint venture  agreement  with New York
International  Commerce  Group,  Inc.  (NYIC) to pursue  distribution  of TNP in
China. As part of the agreement NYIC will assist the Company in securing a State
Drug Administration  certification from the Chinese government, after which NYIC
will be given exclusive distribution rights to TNP in China.

On April 3,  2002 the  Company  sold  215,000  shares of its  common  stock in a
private placement for $150,000 cash.


                                       34