UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  AMENDMENT NO. 2 TO FORM 10-KSB  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended May 31, 2004  Commission File Number 0-31611  AVVAA WORLD HEALTH CARE PRODUCTS, INC. (Exact name of registrant as specified in its charter)  Nevada
        88-395714(State or other jurisdiction of incorporation
or organization)
        (I.R.S. Employer Identification No.)  Box 459, 1710 Shuswap Ave Lumby,BC, Canada V0E 2G0 (Address of principal executive offices) (Zip Code)  (250) 379-2727 (Registrants telephone number, including area code)  PO Box 335, 3018 Schaeffer Road
Falkland, BC Canada V0E 1W0 (Former name, former address and former fiscal year, if changed since last report)  Securities registered pursuant to Section 12(b) of the Act:
        None  Securities registered pursuant to Section 12(g) of the Act:
        Common Stock, $0.001 par value  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNo o  Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B not 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. ( )    1     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes |_| No |X|




Revenues for year ended May 31, 2004:
        $-0-

Aggregate market value of the voting common stock held by non-affiliates of the registrant as of September 10, 2004, was: $7,143,501.60



Number of shares of the registrants common stock outstanding as of September 10, 2004 is: 23,811,672



Transfer Agent for the Company is:




Signature Stock Transfer, Inc.2301 Ohio Drive, Suite 100Plano, Texas 75093

EXPLANATION OF AMENDED FILING: THIS FORM 10-KSB IS BEING AMENDED IN THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MAY 31,
2004. THE COMPANY IS RESTATING THE FINANCIAL STATEMENT TO CORRECT THE CALCULATION OF THE FAIR VALUE OF STOCK OPTIONS GRANTED TO
OUTSIDE CONSULTANTS AND THE CORRECTION OF PREVIOUSLY RECORDED SHARE ISSUANCES.



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PART I



ITEM 1. DESCRIPTION OF BUSINESS



GENERAL



We were incorporated on June 3, 1998, in the State of Nevada. We currently have
yet to generate significant revenues and in accordance with SFAS #7, are
considered a development stage company.



From inception to March 14, 2000, we were actively engaged in the acquisition and exploration of mineral properties containing gold, silver, copper, zinc and/or other mineral deposits. We operated our preliminary business as an exploration stage company with the intent to receive income from property sales, joint ventures or other business arrangements with larger companies, rather than developing and placing our properties into production on our own.



Pursuant to an Assignment Agreement dated March 14, 2000 and completed May 9, 2000, we acquired an Internet Web Site. We arranged for 500,000 previously issued restricted common shares be transferred to the vendor. The fair value of the shares was $100,000 at the time of issuance. The transaction was recorded as additional paid in capital as the transaction did not result in the issuance of treasury shares. The vendor also received a stock option to acquire 50,000shares at a price of $0.40 per share expiring two years from date of grant which were subsequently cancelled. We do not intend to commercially exploit the business concept and management charged the net carrying value of $62,500 to operations during fiscal 2001.



Pursuant to an Agreement and Plan of Merger (the Acquisition Agreement) effective September 12, 2000, we acquired 100% of all the issued and outstanding shares of common stock of Anmore Management Inc., a Delaware corporation, for $90,000 and 10,000 of our shares valued at a nominal $10. On May 22, 2002, we and Anmore Management Inc. agreed to reduce the cash settlement of the Acquisition Agreement to $40,000 from $90,000. The acquisition was approved by the Board of Directors and a majority of the shareholders of both Anmore Management Inc. and us on September 12, 2000. Upon effectiveness of the acquisition, we elected to become the successor issuer to Anmore Management Inc. for reporting purposes under the Securities Exchange Act of 1934 (the Act) and elect to report under the Act effective September 12, 2000. Anmore Management Inc. assumed the name Sierra Gigante Resources, Inc. Our
officers and directors became the officers and directors of Anmore Management Inc. The $40,010 was treated, for accounting purposes, as a reduction of additional paid in capital and not as goodwill as the nature of the transaction was to allow us to report under the Act by way of reorganization.



On June 28, 2002 (the Effective Date), pursuant to a Share Exchange and Share Purchase Agreement (Share Exchange) among us; 648311 B.C. Ltd. (648311), a British Columbia corporation and our wholly owned subsidiary; and Mind Your Own Skin Products, Inc., (MYOSP) a British Columbia corporation, 648311 acquired12,112,500 shares of MYOSP and we acquired 225,000 shares of MYOSP. The aggregate of 12,337,500 shares of MYOSP represented all of the issued and outstanding shares of MYOSP. In consideration for this transaction, the shareholders that transferred 12,112,500 shares to 648311, received 12,112,500



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exchangeable shares of 648311. At the time of closing of this transaction, we issued 12,112,500 of our shares to 648311. The exchangeable shares can be converted into an equivalent amount of our shares. The one shareholder that transferred 225,000 shares in MYOSP to us received 225,000 of our shares. Prior to this transaction, we had 2,708,879 shares issued and outstanding. After this transaction, we had 15,046,379 shares issued and outstanding.



On the Effective Date, Raymond Merry resigned as our President and Chief Executive Officer, but remained as our director until September 26, 2002 when James MacDonald replaced him. William G. Davenport resigned as our director. The  following persons became members of our board of directors: Jack Farley, Charles Austin and Dr. Mark Alden. Mr. Farley also became President and Chief Executive Officer and Mr. Austin also became Chief Financial Officer and Secretary.



The Share Exchange was approved by the unanimous consent of the Board of Directors of Sierra Gigante, 648311 and MYOSP on June 28, 2002.



We changed our name to AVVAA World Health Care Products, Inc.



On June 28, 2002, pursuant to the terms of the MYOSP transaction, we completed a reverse split of our common stock on 5 for 1 basis, such that every five shares of common stock issued and outstanding immediately prior to the reverse split was changed into one share of fully paid common stock.



Business Plan



We are a global biotechnology company specializing in providing all natural, therapeutic skin care products. We intend to manage the manufacturing, distribution, marketing and sale of health-care products throughout the world.  Our mission is to provide to the public medically safe, natural, non-toxic health-care products. Specifically, products that treat skin abnormalities as well as enhance the natural clarity and texture of healthy skin. We are presently licensed to manufacture and distribute patented European skin care products which are scientifically developed to treat the symptoms of skin diseases including eczema, psoriasis and acne. We intend to manufacture and market over-the-counter Neuroskin line of products through mass marketing food and drug channels in the United States. The four flagship core products of the Neuroskin lines are FDA compliant. We have developed a business plan and conducted
research with respect to marketing the products.



The Companys flagship products are Neuroskin Spray, Dermac and ItchX. These products are registered FDA compliant products for over-the-counter pharmaceutical sales and also for cosmetic skin care sales. These products are ready to be manufactured, distributed and marketed worldwide. Two other FDA compliant products Nail Fit and Razor-Rash will be launched as complementary products. Seven other key products, including a line of animal/pet skin care products, will be introduced into the Americas based on a priority basis defined by market potential studies for these products. We have developed a business plan and conducted research with respect to marketing the products.





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Pursuant to two separate license agreements, as amended, we have been granted, by the inventor of certain products known as Neuroskin, Nail Fit, Razor Rash, Dermac and Itch-X, the sole and exclusive right and license to manufacture, produce, package, distribute, market, promote, use and sell, among other things, certain human and animal skin care treatments and products. These products have received US FDA approvals as compliant products for over the counter pharmaceuticals as well as cosmetics skin care products. Canadian DIN approvals for these products are in the process of renewal. The license rights include all countries in the world with the exception of Germany, Switzerland, Austria, The Netherlands, Belgium, Luxembourg and Lithuania.



The agreements provide for the joint ownership of all applicable patents and patents pending, patent applications, trade marks, copyright, secret processes, formulae, technical data and other scientific and technical information has been secured.



Terms of the license agreements call for total advance royalty payments of $220,000. The licensor will be entitled to royalties on the sale of products by the Company at a rate of approximately 7% of sales. The Company has paid $220,000 to May 31, 2004. The terms of the agreements are for thirty years with automatic renewal rights.



The original registrant for the various approvals was the inventor and licensor.
During the year ended May 31 2004, the various approvals were transferred to
reflect the Company as the owner and manufacturer.



An amount of $10,000 was paid to protect certain Canadian patent rights for the Neuroskin product. These costs will be amortized to operations once sales of Neuroskin products begin.



With a team of American doctors and industry leaders, in pharmaceutical marketing and manufacturing, we are poised to globally market, manufacture and distribute over-the-counter, non-toxic, all natural skin care products to control specific skin disorders including eczema, psoriasis, dermatitis, acne and various other types of skin conditions.



The initial launch of products will take place in the United States which has an estimated market size of 40 million skin disease sufferers and a potential market spending of US $4 Billion. US market share projections reflect a 0.09% of total market share in Year 1, increasing to 1.6% in Year 5.



Markets in Canada and the rest of North and South America, and the Caribbean will be penetrated in Years 4 and 5.



To carry out the marketing strategies, we will concentrate on a strong relationship with consumer and channel customers to drive sales in the market areas of direct consumer, institutional, mainstream retail & specialty merchants, private brand and cosmetic companies, and health and natural food stores. The core products will be initially introduced throughout the US followed by the rest of the Americas and the world. Contacting of both pharmaceutical sales and marketing specialists, as well as manufacturing and distribution, companies has been ongoing.







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Our confidence in the effectiveness and safety of these products is founded in extensive data including European clinical trials and evaluation and research spanning over a decade. Our major goal is to provide a better quality of life for our customers by relieving the severe and underlying pain caused by skin disorders while at the same time generating substantial returns for investors.



On January 2, 2004, we completed the October 15, 2003 agreement (as amended January 1, 2004) to purchase certain operational business assets of 5943609 B.C.Ltd. (dba Mystic Mountain Body and Spa Products) (Mystic), a company based in British Columbia, Canada. Mystic is a manufacturer and seller of bath, skin, body and aromatherapy products. The assets purchased included inventory, property and equipment, including all intellectual property and intangible assets of Mystic. In return, we issued two promissory notes totaling CAD$100,000to the owner of Mystic due on April 30, 2004 (CAD$15,000 was previously due on January 31, 2004 and CAD$85,000 on March 15, 2004, but the deadlines were extended by the owner of Mystic). Both promissory notes are non-interest bearing and unsecured. The Company and Mystic have decided to terminate the agreement but have not yet settled the terms. As of May 31, 2004, the
Company wrote-off all the assets it acquired from Mystic totaling $79,520.



On December 22, 2003, we entered into a Letter of Commitment to participate in a
Joint Venture with a First Nations Band (the Band). According to the
terms of the Agreement, the Joint Venture was to be owned 51% by the Band and
49% by us. We were to have contributed all the property and equipment, including
all intellectual property and intangible assets, and inventory of Mystic. We
were also to have provided its management expertise to supervise the
construction ofa manufacturing facility on the Bands land, purchase and
install suitable equipment, and prepare a business plan. The band was to
contribute a total ofCAD$5,000,000 to be used to construct the manufacturing
facility, to purchase manufacturing equipment and to fund start up and operating
costs. The Band contributed CAD$50,000 on December 22, 2003 (see Note 7(b)) and
made an additional advance of CAD$52,000 on March 2, 2004 to help develop the
business plan and a start-up plan. The total advances of CAD$102,000 was
refundable should the Band not approve the start-up plan. Upon acceptance of the
start-up plan the remaining CAD$4,898,000 was to be advanced according to the
approved schedule in the start-up plan. Subsequent to year-end, the Company and
the Band decided not to proceed with the Joint Venture and the Company will
refund the CAD$102,000.



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On July 23, 2004, we entered into a Stock Purchase Agreement with Seaside Investments PLC, a private London investment company, for the purchase by the investment company US$1,177,970 of AVVAA common shares at $.46 per share, in exchange for shares of the investment company. The investment company has entered into a lock-up agreement with us pursuant to which it has agreed not to trade the AVVAA shares it will receive as a result of this transaction for a period of one year from the closing date. We have agreed to file a registration statement with the SEC allowing the public resale of the common shares by the investment company, commencing at the expiration of the lock-up period. In full payment for our shares, the investment company will issue to us USD $1,177,970 equivalent of its shares at a price per share, valued at One Pound Sterling.





Thirty percent of the investment companys shares will be held in escrow for one year following their issuance and in the event the per share market price of the AVVAA common stock at such time is less than the per share value of the AVVAAstock at the time of the closing, the investment company shall be entitled to receive out of escrow a percentage of the shares equal to the percentage of such decline. The remaining shares held in escrow shall be released to us at such time. The closing of this transaction is subject to certain contingencies, including the listing of the investment company shares on the London Stock Exchange on or before September 30, 2004.



EMPLOYEES



As of September 13, 2004 , we have eight management employees all of whom are covered by employment contracts.



Our management team combines more than 80 years of corporate management, and sales and marketing experience with strong emphasis in financial accounting, pharmaceutical and banking experience. The medical research team is comprised of world-renowned medical professionals in the fields of dermatology and radiation oncology.



ITEM 2. DESCRIPTION OF PROPERTY



During the year ending May 31, 2004, we used an office and warehouse space located in at 740 Waddington Drive, Vernon , British Columbia, Canada. The office and warehouse provided sufficient space for our operations during such period. Our office provided sufficient work space for our operations during such period. The office and warehouse consisted of a 4000 square feet leased at a rate of approximately $4.00 (Canadian) per square foot or $4000 (Canadian) per month including goods and services tax.



AVVAAs corporate office is located in Philadelphia, Pennsylvania at Two Penn Center, Suite 200, Philadelphia, Pennsylvania 19102. The office consists of approximately 750 square feet leased to us at an annualized rate of $2,400. The operations center is currently located at the home of our President, Chief Financial Officer and Director, Jack Farley at 3018 Schaeffer Road, Falkland, B.C. Canada and there is no charge.



ITEM 3. LEGAL PROCEEDINGS



There is no litigation pending or threatened by or against us.



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



On May 1, 2004, by unanimous consent of the Board of Directors and a majority of the shareholders of record, we increased the authorized common shares from 25,000,000 to 100,000,000. The increase in authorized shares was approved by 51% of the shareholders of record.





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PART II



ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



On September 13, 2004 there were approximately 180 shareholders of record of our common stock. Our shares of common stock are currently traded on the OTC Electronic Bulletin Board under the symbol AVVW.



The reported high and low bid prices for our common stock are shown below for each quarter since February 23, 2001. The quotations reflect inter-dealer prices and do not include retail mark-ups, mark-downs or commissions. The prices do not necessarily reflect actual transactions.




Period
        HIGHBID
        LOWBID2001First Quarter from February 23, 2001
        .156
        .05Second Quarter
        .18
        .10Third Quarter
        1.40
        .11Fourth Quarter
        1.25
        .1252002First Quarter
        .60
        .10Second Quarter
        .90
        .135Third Quarter
        .88
        .36Fourth Quarter
        .70
        .302003First Quarter
        .65
        .28Second Quarter
        .50
        .31Third Quarter
        .56
        .34Fourth Quarter
        .51
        .302004First Quarter
        .77
        .32Second Quarter
        .64
        .22Third Quarter to September 13, 2004
        .53
        .28

DIVIDENDS





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We intend to retain future earnings to support our growth. Any payment of cash dividends in the future will be dependent upon: the amount of funds legally available; our earnings; financial condition; capital requirements; and other factors which our Board of Directors deems relevant.



RESTATEMENT OF FINANCIAL STATEMENTS



We have  determined that it is appropriate to restate our financial  statements as previously  filed in our Annual Report filed on Form
10-KSB.  The restatement is a result of accounting  adjustments  required to record the fair value of $75,825 for stock options granted
to  consultants  on March 11, 2004. As a result of the  restatement,  as of May 31 2004,  additional  paid-in  capital has increased by
$75,825 and deficit  accumulated  during the development  stage has increased by $75,825.  The Company also corrected the accounting of
previously recorded share issuances.

The financial data set forth below presents our condensed consolidated balance sheet as of May 31, 2004 and condensed consolidated statement of operations for the year ended May 31, 2004 showing amounts as previously reported and as restated.


As of May 31, 2004Condensed Consolidated Balance Sheet
        As Reported
        As Restated
        ChangeAssets
        $
        $
        $Current assets
        42,787
        42,787
        -Other assets
        239,624
        239,624
        -Total assets
        282,411
        282,411
        -Liabilities and Stockholders DeficitCurrent liabilities
        1,683,759
        1,790,290
        -Stockholders deficit
        (1,401,348)
        (1,507,888)
        -Total liabilities and stockholders deficit
        282,411
        282,411
        -


Year ended May 31, 2004Condensed Consolidated Statement of Operations
        As Reported
        As Restated
        Impact on Net LossGross Profit
        3,205
        3,205
        -General and administrative expenses
        1,557,249
        1,633,074
        75,825Selling and marketing expenses
        441,704
        441,704
        -Research and development expenses
        155,690
        155,690
        -Write-down of assets
        (79,520)
        (79,520)
        -Net loss for the year
        2,230,958
        2,306,783
        75,825Basic and diluted net loss per share
        $        (0.11)
        $          (0.11)



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ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with our financial statements and notes thereto appearing in this prospectus. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward- looking statements.



OVERVIEW



We were incorporated on June 3, 1998 in the State of Nevada. On June 28, 2002,
we completed the acquisition of 100% of the common shares of Mind Your Own Skin
Products Inc. (MYOSP), a company incorporated under the Company Act
of the Province of British Columbia, Canada. The purchase transaction consisted
of 12,112,501 common shares, after a 1 new for 5 old reverse stock split of our
issued common shares. This share issuance resulted in a reverse takeover of us
by the shareholders of MYOSP. Certain directors and officers of MYOSP became our
directors and officers. The financial statements included in this annual report
are a continuation of MYOSP (date of inception March 25, 1999).



We are a global biotechnology company specializing in providing all natural, therapeutic skin care products. We intend to manage the manufacturing, distribution, marketing and sale of health-care products throughout the world. Our mission is to provide to the public medically safe, natural, non-toxic health-care products and specifically products that treat skin abnormalities as well as enhance the natural clarity and texture of healthy skin. We are presently licensed to manufacture and distribute patented Europeans skin care products, which are scientifically developed to treat the symptoms of skin diseases including eczema, psoriasis and acne. We intend to manufacture and market over-the-counter the Neuroskin line of products through mass marketing food and drug channels in the United States. The three flagship core products of the Neuroskin lines are FDA compliant. We have developed a business plan and
conducted research with respect to marketing the products.



In September 1999, Mind Your Own Skin Products, Inc. (which is our subsidiary now) signed a license agreement with Stalwart United Participations Limited to obtain a license for various human and animal skin care products. A subsequent agreement was signed in February 2002. The agreements are for certain human health care products, human skin care products, animal health care products and animal skin care products.. The original license fee was $110,000. The territory granted is the entire world except for Germany, Switzerland, Austria, The Netherlands, Belgium, Luxembourg and Lithuania. Neuro Skin is the United States trademark for our products. It is registration number 2,235,063 with the United States Patent and Trademark office. In March 2005, our trademark counsel filed certain declarations to maintain this trademark.





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The Company is obligated to pay out 7% of sales to the inventor on marketing
goals of 2 million dollars in sales in year one, 4 million in year two, 6
million in year 3, and 8 million in year four from the start up date of Jan 1,
2005. As required by the license agreement, the Company has prepaid $220,000 in
royalty advances.



We are considered a development stage company in accordance with Statement of Financial Accounting Standards (SFAS) No. 7. These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We commenced manufacturing operations and launched a consumer web site to generate Internet sales on December 1, 2004.



As of May 31, 2004, we have a working capital deficit of $1,747,512 and have
accumulated operating losses of $4,028,864 since our inception. Our continuation
is dependent upon the continuing financial support of creditors and
stockholders, obtaining long-term financing, the completion of product
development and achieving profitability. These conditions raise substantial
doubt about our ability to continue as a going concern. These financial
statements do not include any adjustments that might arise from this
uncertainty.



Key trend and analytical points on the potential effects of known trends.



Avvaa management has studied trends in the aging population and the widespread problem of Skin Diseases. The emotional and social consequences of skin disease are often profound and life altering. In cases where psoriasis plaques are visible, patients can suffer severe humiliation and depression; some even withdraw from society and become isolated. In one study, 75% of patients reported that psoriasis undermined their confidence. Another study reported that 8% felt their life was not worth living. 1 Dr. Iona Ginsburg, MD, Associate Clinical Professor of Psychiatry in Dermatology at New Yorks Columbia-Presbyterian Medical Center, wrote in a 1995 journal article: Psoriasis is a disease that, in attacking the skin, attacks the very identity of the individual. Many patients have to deal on a daily basis with shame, guilt, anger and fear of being thought dirty and infectious by others





        Seventeen million (17 million) Americans have acne (*The National Institute of Arthritis and Musculoskeletal and Skin Diseases).



        There are 7 million people living in the United States that are affected by some form of psoriasis. Approximately two hundred and fifty thousand new cases are reported each year. (*Well-Connected Report, 1999 Nidus Information Services Inc., June 1999).



        Skin problems are exceedingly common: 30% of Americans have dermatological conditions requiring a physicians care. Moreover, the skin and its appendages (the hair and nails) play a paramount role in our psychological makeup. (*Cecil Textbook of Medicine20thedition, 1996).

_________________________

11999 Nidus Information Services, Inc. Well-Connected Report: Psoriasis. June 1999





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
        Over 16 million people living in the United States are affected by eczema (*The National Institute of Arthritis and Musculoskeletal and Skin Diseases).



        *Research by the National Psoriasis Association, the USA Dermatologist Association and other institutions indicate that close to $4 billion is spent on treatments for psoriasis, eczema, and acne per year.



        85% of the US population between ages 12-25 develop some form of acne. (*FDA Consumer Report, On the Teen Scene section of WebMD Health).



        The psoriasis market is continuing to grow with the aging population and affects between 0.5% - 3% of the worlds population, (*Well-Connected Report, 1999 Nidus Information Services Inc., June 1999).



        *Forrester Research states in their article B2B Healthcare Spending Shifting Online (Jan. 2000), Over-the-counter drugs, health and beauty aids will contribute $1.9 billion and $900 million, respectively, to the online retail category.



        The market size for the health and natural food store market tops 9,245 stores in USA with sales reaching $14 billion in 2000. (*source:www.marketresearch.com)

Because of these growing trends AVVAA management has set site on these Primary Target Markets and Secondary Target Markets.



Primary



        Individuals suffering with psoriasis, eczema and acne and various other skin diseases;
        Pharmacy Retail outlets;
        Mainstream and Specialty Drug and Food Chain outlets; and
        Institutions  hospitals, clinics, prisons.

Secondary



        Private brand companies;
        Cosmetic companies; and
        Health and Natural Food Store Market.

In addition to the direct AVVAA employees, and to insure that AVVAA can sell through to the Primary and Secondary markets the following actions have been taken:



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1)
        Crossfire Network Inc. was hired as a consultant / Independent Contractor in January of 2005 for the sole purpose of assisting and executing the sales plan in conjunction with AVVW. Crossfire Network personnel and associates have a strong track record of sales and marketing on a global basis that positions products on retail shelves, which will assist in accomplishing AVVWs sales targets in the Primary Markets. Additionally, Crossfire Network Inc. will place products with the Health and Natural Food Store Markets. Crossfire has the necessary associates and reputation to accomplish the AVVAA sales objectives. One of Crossfires principals is Jim Walgreen Jr., who of course has the Walgreens business contacts, but also will be instrumental in placing the AVVAA products on other mass retail shelves.



PLAN OF OPERATIONS FOR THE NEXT TWELVE MONTHS



We are presently licensed to manufacture and distribute patented European skin care products, which were scientifically developed to treat the symptoms of skin diseases including eczema, psoriasis and acne. We intend to manufacture and market over-the-counter the Neuroskin line of products through direct to consumer sales followed by penetration into the food, drug and mass distribution channels in the United States. The three flagship core products of the Neuroskin lines are FDA compliant. We have developed a business plan and have conducted research with respect to marketing the products.



We will initially seek to generate sales and begin building brand awareness by aggressively marketing these products through the Internet. The Internet is only one element in the overall business strategy. An integrated approach will ensure cohesive efforts support both online and offline sales and marketing strategies. A comprehensive marketing plan has been developed.



Manufacturing operations commenced in November 2004 at Natures Formulae manufacturing facility in Kelowna, British Columbia with the production of the three core products of the Neuroskin line. In addition, a consumer web site was launched on December 1, 2004, which can be viewed at http://www.help4skincare.com. This consumer-orientated information and product purchase web site was developed specifically to open a direct line to consumer sales channel.



On May 10, 2004, we offered a private placement subscription for up to 2,000,000 units (subsequently increased to 2,200,000) at a purchase price of $0.25 per unit. Each unit consisted of one common share and one non-transferable share purchase warrant. Each warrant may be exercised within one year of the date of issuance to the purchaser at a price of $0.45.



RESULTS OF OPERATIONS FOR THE YEAR ENDED MAY 31, 2004 ( 2004) COMPARED TO THE YEAR ENDED MAY 31, 2003 ( 2003)



We are in the development stage. We generated revenues of $9,000 in 2004 related to the sales of Mystic Mountain products. We decided not to proceed with the purchase of Mystic Mountain. There were no revenues during 2003.





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The net loss in 2004 was $2,306,783 compared to a net loss of $819,608 in 2003, an increase of $1,487,175. The increased loss is a reflection of our efforts to implement our business plan, which contributed $224,731 to our increased loss. We have intensified our efforts to manage the manufacturing, distribution, marketing and sale of health care products throughout the world which increased our loss by $348,423. We have undertaken intense market research studies in both the consumer goods and animal care industries which added $229,693 to the increased loss. In addition, we have increased our fundraising activities which added $684,328 to our increased loss.



Consulting  fees paid to management and to consultants  for advice in obtaining  funding for us and for market  research  assistance in
2004 totaled $966,013 compared to $537,846 in 2003, an increase of $428,167.



In 2004, stock-based compensation for services provided to us totaled $1,053,670
compared to $169,342 in 2003, an increase of $884,328.



LIQUIDITY AND CAPITAL RESOURCES



During the year ended May 31, 2004, operations were financed through the
following sources: advances from related parties, net of repayments, of
$300,338, advances from others of $80,920, issuance of common shares and
subscriptions received of $581,220. Expenditures on advanced royalty deposits
totaled $25,000.



These funds raised were spent on operating activities of $918,838. Of this
amount increases in accounts payable contributed $333,157.





As of May 31, 2004, there was a cash balance of $42,787 and current liabilities
of $1,790,299 for a working capital deficit of $1,747,512. It is our
intention through our fundraising activities to obtain sufficient funding to
cover our working capital deficit and to finance our further development,
marketing and promotion of our products, an investor relations program, and to
secure additional products.

It is our intention through our fundraising activities to obtain sufficient funding to cover our working capital deficit and to finance our further development, marketing and promotion of our products, an investor relations program, and to secure additional products.



CRITICAL ACCOUNTING POLICIES



We have chosen accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial position, and apply those accounting policies in a consistent manner.



The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires that management make estimates and assumptions. Assets, liabilities, revenue and expenses, and disclosure of contingent liabilities are affected by such estimates and assumptions. The most significant assumptions are employed in estimates used in determining values of inventories and intangible assets, as well as estimates used in applying the revenue recognition policy. We are subject to risks and uncertainties that may cause actual results to differ from those estimates, such as changes in the industry environment and competition. We believe the following accounting policies are the most critical because they



14



involve the most significant judgments and estimates used in the preparation of our consolidated financial statements.



Inventory.Raw materials are recorded at the lower of cost and replacement cost and finished goods are recorded at the lower of cost and net realizable value. The Company evaluates inventory for estimated obsolescence based on the length of time the inventory has been unsold and on projections of future demand and market conditions. For those units in inventory that are so identified, we estimate their net realizable value based on current realization trends. If the projected net realizable value is less than cost, on a product basis, we provide a provision to reflect the lower value of that inventory. We have only recently produced our inventory and started the sales process. We have no record of historical returns. We believe we will be able to realize our projected margins and recover our inventory costs; however, there is no assurance that this will be the case.



Intangible assets and other long-lived assets.We review our property and intangible assets for possible impairment on an annual basis whenever events of circumstances indicate that the carrying amount of an asset may not be recoverable. Assumptions and estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment charges in future periods. Such assumptions include projections of future cash flows and, in some cases, the current fair value of the asset. In addition, our depreciation and amortization policies reflect judgment on the estimated useful lives of assets. Our estimate of future cash flows is critical to our ability to recover the value of our intangible and other long-lived assets. In particular, our licensing agreement has specific sales targets which we must meet under our licensing agreement. Should
actual sales be lower than our projections there is a possibility that we would not meet the requirements of our licensing agreement.



Revenue recognition.Revenue is recognized upon delivery of the product, when persuasive evidence of an arrangement exists, the price is fixed or determinable and collection is probable. This is generally at the time products are received by the customer. Until the Company can establish a history or returns, recognition of revenue will be deferred on sales to distributors who have right of return privileges until the return period expires. Once a reliable return history is established, such returns will be estimated using historical return rates. We have only recently begun selling products to retail customers through the internet and have not developed a history of returns. Our retail customers are permitted to return our products for a refund. We have not to date, had any of our products returned. Once historical patterns are established, this will allow us to develop sales
return allowances. At this time it will be necessary to reduce gross revenue for projected returns. To date we have not made any sales to distributors.













15



ITEM 7.
        FINANCIAL STATEMENTS



AVVAA World Health Care Products, Inc.

(A Development Stage Company)



Index






Independent Auditors Report
        F1


Consolidated Balance Sheets
        F2


Consolidated Statements of Operations
        F3


Consolidated Statements of Cash Flows
        F4


Consolidated Statement of Stockholders Equity
        F5


Notes to the Consolidated Financial Statements
        F6

Report of Independent Auditors



To The Stockholders and Board of Directors

of AVVAA World Health Care Products, Inc.



We have audited the accompanying consolidated balance sheets of AVVAA World Health Care Products, Inc. (A Development Stage Company) as of May 31, 2004 and 2003, and the related consolidated statements of operations, stockholders equity and cash flows for the period from March 25, 1999 (date of inception) to May 31, 2004 and the years ended May 31, 2004 and 2003. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



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



In our opinion, the consolidated financial statements referred to above presents fairly, in all material respects, the financial position of AVVAA World Health Care Products, Inc. (A Development Stage Company), as of May 31, 2004 and 2003, and the related consolidated statements of operations, stockholders equity and cash flows for the period from March 25, 1999 (date of inception) to May 31, 2004 and the years ended May 31, 2004 and 2003, in conformity with generally accepted accounting principles used in the United States.



The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has losses from operations since inception, no source of revenues and a significant working capital deficit. These factors raise substantial doubt about the Companys ability to continue as a going concern. Managements plans in regard to these matters are also discussed in Note 1. These consolidated financial statements do not include any adjustments, which might result from the outcome of this uncertainty.



As discussed in Note 12 to the consolidated financial statements, the Company has restated the financial statements for the year ended May 31, 2004 to reflect the fair value of stock options granted to outside consultants and the correction of previously recorded share issuances.



/s/ Manning Elliott



Chartered Accountants

Vancouver, Canada

September 13, 2004, except for Note 12 as to which the date is October 21, 2005




F-1



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Consolidated Balance Sheets

(expressed in U.S. Dollars)






May 31,
        
        May 31,2004
$
        
        2003
$(Restated - see Note 12)AssetsCurrent AssetsCash
        42,787
        
        4,290Total Current Assets
        42,787
        
        4,290Patent Protection Costs (Note 3)
        11,378
        
        10,000Advance Royalty Deposits (Note 3)
        220,000
        
        220,000Property and Equipment (Note 4)
        8,246
        
        12,958Total Assets
        282,411
        
        247,248Liabilities and Stockholders DeficitCurrent LiabilitiesAccounts payable (Note 5)
        610,331
        
        503,665Accrued liabilities
        99,490
        
        69,949Due to related parties (Note 6)
        859,612
        
        779,928Other advances (Note 7)
        220,866
        
        139,946Total Liabilities
        1,790,299
        
        1,493,488Contingency (Note 1)Subsequent Events (Note 11)Stockholders DeficitCommon Stock (Note 8)  100,000,000 shares authorized at $0.001 par value; 22,455,672 and 17,411,701 issued and outstanding respectively
        22,456
        
        17,412Additional Common Stock Subscribed
        70,000
        
        181,198Additional Paid-in Capital
        2,972,212
        
        954,003Deferred Compensation (Note 8)
        (496,031)
        
        (607,876)Accumulated Other Comprehensive Loss
        (47,661)
        
        (68,896)Deficit Accumulated During the Development Stage
        (4,028,864)
        
        (1,722,081)Total Stockholders Deficit
        (1,507,888)
        
        (1,246,240)Total Liabilities and Stockholders Deficit
        282,411
        
        247,248





F-2



(The Accompanying Notes are an Integral Part of these Consolidated Financial Statements)



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Consolidated Statements of Operations

(expressed in U.S. Dollars)






AccumulatedfromMarch 25, 1999(Date of Inception)
        
        Year Endedto May 31,
        
        May 31,2004
$
        
        2004
$
        
        2003
$(Restated - see Note 12)
        
        (Restated - see Note 12)Sales
        9,409
        
        9,409
        
        Cost of Sales
        6,204
        
        6,204
        
        Gross Profit
        3,205
        
        3,205
        
        ExpensesGeneral and AdministrativeAmortization
        7,484
        
        6,098
        
        1,386Consulting
        882,821
        
        460,942
        
        236,211Foreign exchange
        23,064
        
        (1,797)
        
        Interest
        35,842
        
        8,440
        
        9,245Office, telephone and rent
        51,634
        
        34,040
        
        10,312Professional fees
        229,553
        
        57,941
        
        72,970Stock-based compensation(1)
        1,223,012
        
        1,053,670
        
        169,342Transfer agent and regulatory fees
        16,906
        
        6,162
        
        10,744Travel
        17,743
        
        7,578
        
        1,9602,488,059
        
        1,633,074
        
        512,170Selling and MarketingConsulting
        739,266
        
        423,853
        
        281,283Promotion
        12,579
        
        12,027
        
        158Wages and benefits
        5,824
        
        5,824
        
        757,669
        
        441,704
        
        281,441Research and DevelopmentConsulting
        510,479
        
        81,218
        
        20,352Health agency approvals
        185,700
        
        74,472
        
        4,791Rent
        10,642
        
        
        
        854706,821
        
        155,690
        
        25,997Net Loss from Operations
        (3,949,344)
        
        (2,227,263)
        
        (819,608)Write-down of assets
        (79,520)
        
        (79,520)
        
        Net Loss for the Period
        (4,028,864)
        
        (2,306,783)
        
        (819,608)Basic and Diluted Net Loss Per Share
        
        
        (0.11)
        
        (0.07)Weighted Average Common Shares Outstanding
        
        
        20,156,000
        
        12,453,000(1)   Stock-based compensation is excluded from the followingConsulting
        1,223,012
        
        1,053,670
        
        169,342





F-3



(The Accompanying Notes are an Integral Part of these Consolidated Financial Statements)



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Consolidated Statements of Cash Flows

(expressed in U.S. Dollars)


Accumulated fromMarch 25, 1999(Date of Inception)
        
        Year Ended
May 31,to May 31,2004
$
        
        2004
$
        
        2003
$(Restated - see Note 12)
        
        (Restated - see Note 12)Operating ActivitiesNet loss for the period
        (4,028,864)
        
        (2,306,783)
        
        (819,608)Adjustments to reconcile net loss to net cash used in operating activitiesAmortization
        7,484
        
        6,098
        
        1,386Recapitalization costs
        (115,730)
        
        
        
        (115,730)Amortization of deferred compensation and other stock-based compensation
        1,138,512
        
        969,170
        
        169,342Write-down of assets
        79,520
        
        79,520
        
        Change in operating assets and liabilitiesAccounts payable and accrued liabilities
        914,271
        
        333,157
        
        348,718Net Cash Used In Operating Activities
        (2,004,807)
        
        (918,838)
        
        (415,892)Investing ActivitiesPatent protection costs
        (11,378)
        
        (1,378)
        
        Purchase of property and equipment
        (14,136)
        
        
        
        (14,136)Advance royalty deposits
        (220,000)
        
        (25,000)
        
        (30,000)Net Cash Used In Investing Activities
        (245,514)
        
        (26,378)
        
        (44,136)Financing ActivitiesAdvances from others
        220,866
        
        80,920
        
        7,854Advances from related parties
        1,387,517
        
        561,832
        
        397,202Repayments to related parties
        (332,251)
        
        (261,494)
        
        (45,757)Issuance of convertible debentures
        300,000
        
        
        
        Issuance of common shares
        590,939
        
        581,220
        
        Subscriptions received
        173,698
        
        
        
        173,698Net Cash Provided by Financing Activities
        2,340,769
        
        962,478
        
        532,997Effect of Exchange Rate Changes on Cash
        (47,661)
        
        21,235
        
        (68,896)Change in Cash
        42,787
        
        38,497
        
        4,073Cash  Beginning of Period
        
        
        4,290
        
        217Cash  End of Period
        42,787
        
        42,787
        
        4,290Non-cash Investing and Financing ActivitiesAdvance royalty deposits payable
        
        
        25,000
        
        Shares issued to settle debt
        204,510
        
        204,510
        
        Shares issued for convertible debenture conversions
        300,000
        
        
        
        Shares to be issued to settle debt included in subscriptions received
        7,500
        
        
        
        7,500Promissory notes issued to acquire assets
        73,346
        
        73,346
        
        Shares issued for consulting fees
        781,500
        
        781,500
        
        Shares issued to settle related party debt
        269,000
        
        269,000
        
        Supplemental DisclosuresInterest paid
        
        
        
        
        Income taxes paid
        
        
        
        
        

F-4



(The Accompanying Notes are an Integral Part of these Consolidated Financial Statements)



AVVAA World Health Care Products,  Inc.
(A Development Stage Company)
Consolidated Statement of Stockholders Deficit
(expressed in U.S. Dollars)
(Restated -see Note 12)Common  Stock
        Additional
Common  Stock
        Additional
Paid-in
        Deferred
        Accumulated  Other Comprehensive
        AccumulatedShares
#
        Amount
$
        Subscribed
$
        Capital
$
        Compensation
$
        Loss
$
        Deficit
$Balance  March 25, 1999 (Date of Inception)
        1
        
        
        
        
        
        Stock issued for cash pursuant to a private placement
        10,125,000
        10,125
        
        (1,500)
        
        
        Net loss for the period
        
        
        
        
        
        
        Balance  May 31, 1999
        10,125,001
        10,125
        
        (1,500)
        
        
        Net loss for the year
        
        
        
        
        
        
        (131,611)Balance  May 31, 2000
        10,125,001
        10,125
        
        (1,500)
        
        
        (131,611)Net loss for the year
        
        
        
        
        
        
        (261,767)Balance  May 31, 2001
        10,125,001
        10,125
        
        (1,500)
        
        
        (393,378)Stock issued for cash pursuant to a private placement
        1,537,500
        1,538
        
        (257)
        
        
        Stock issued pursuant to conversion of convertible debentures
        450,000
        450
        
        299,550
        
        
        Net loss for the year
        
        
        
        
        
        
        (509,095)Balance  May 31, 2002
        12,112,501
        12,113
        
        297,793
        
        
        (902,473)Re-capitalization transactions  June 28, 2002: Shares of AVVAA World Health Care Products, Inc. (formerly Sierra Gigante Resources Inc.)
        2,709,200
        2,709
        
        (99,300)
        (19,118)
        
        Shares issued for services to be rendered
        2,590,000
        2,590
        
        755,510
        (758,100)
        
        Amortization of deferred compensation
        
        
        
        
        169,342
        
        Common stock to be issued
        
        
        181,198
        
        
        
        Foreign currency translation adjustment
        
        
        
        
        
        (68,896)
        Net loss for the year
        
        
        
        
        
        
        (819,608)Balance at May 31, 2003
        17,411,701
        17,412
        181,198
        954,003
        (607,876)
        (68,896)
        (1,722,081)Shares issued for cash
        2,776,131
        2,776
        (173,698)
        682,142
        
        
        Shares issued to settle debt
        637,840
        638
        (7,500)
        211,372
        
        
        Shares issued to settle related party debt
        390,000
        390
        
        268,610
        
        
        Shares issued for services
        1,450,000
        1,450
        
        780,050
        (781,500)
        
        Amortization of deferred compensation
        
        
        
        
        893,345
        
        Stock options granted
        
        
        
        75,825
        
        
        Share subscription received
        
        
        70,000
        
        
        
        Shares cancelled
        (210,000)
        (210)
        
        210
        
        
        Foreign currency translation adjustment
        
        
        
        
        
        21,235
        Net loss for the year
        
        
        
        
        
        
        (2,306,783)Balance at May 31, 2004
        22,455,672
        22,456
        70,000
        2,972,212
        (496,031)
        (47,661)
        (4,028,864)

(The change in par value ($0.001) of stock pursuant to the re-capitalization was retroactively adjusted)




F-5



(The Accompanying Notes are an Integral Part of these Consolidated Financial Statements)



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








1.
        Nature of Operations and Continuance of BusinessAVVAA World Health Care Products, Inc. (the Company) was incorporated on June 3, 1998 in the State of Nevada.

On June 28, 2002 the Company completed the acquisition of 100% of the common shares of Mind Your Own Skin Products Inc. (MYOSP), a company incorporated under the Company Act of the Province of British Columbia, Canada. The purchase transaction consisted of 12,112,501 common shares, after a 1 new for 5 old reverse stock split of the Companys issued common shares. This share issuance resulted in a reverse takeover of the Company by the shareholders of MYOSP. Certain directors and officers of MYOSP became directors and officers of the Company. The consolidated financial statements include the accounts of the Company since the reverse merger and the historical accounts of MYOSP since the date of its inception, March 25, 1999.

The Company is a global biotechnology company specializing in providing all natural, therapeutic skin care products. The Company intends to manage the manufacturing, distribution, marketing and sale of health-care products throughout the world. The Companys mission is to provide to the public medically safe, natural, non-toxic health-care products and specifically products that treat skin abnormalities as well as enhance the natural clarity and texture of healthy skin. The Company is presently licensed to manufacture and distribute patented Europeans skin care products, which are scientifically developed to treat the symptoms of skin diseases including eczema, psoriasis and acne. The Company intends to manufacture and market over-the-counter the Neuroskin line of products through mass marketing food and drug channels in the United States. The three flagship core products of the
Neuroskin lines are FDA compliant. The Company has developed a business plan and conducted research with respect to marketing the products.

The Company is considered a development stage company in accordance with Statement of Financial Accounting Standards (SFAS) No. 7. These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As at May 31, 2004, the Company has not recognized significant revenue, has a working capital deficit of $1,747,512, and has accumulated operating losses of $4,028,864 since its inception. The continuation of the Company is dependent upon the continuing financial support of creditors and stockholders and obtaining short-term and long-term financing, the completion of product development and achieving profitability. These conditions raise substantial doubt about the
Companys ability to continue as a going concern. These financial statements do not include any adjustments that might arise from this uncertainty.

In 2004 the Company issued 3,230,471 units at $0.25 per unit for proceeds of $684,918 in cash and $122,585 in debt settlement. Each unit consisted of one common share of the Company and one non-transferable share purchase warrant. Each warrant is exercisable within two years of the date of issuance to the purchaser at a price of $0.45 during the first 12 months and $0.40 (repriced from $0.65 subsequent to year end) for the remaining 12 months.

On December 22, 2003, the Company entered into a Letter of Commitment to participate in a Joint Venture with a First Nations Band (the Band). The Joint Venture was to be 51% owned by the Band and 49% by the Company. The Company was to contribute all the property and equipment, including all intellectual property and intangible assets, and inventory of Mystic. The Company was also to provide its management expertise to supervise the construction of a manufacturing facility on the Bands land, purchase and install suitable equipment, and prepare a business plan. The band was to contribute a total of CAD$5,000,000 to be used to construct the manufacturing facility, to purchase manufacturing equipment and to fund start up and operating costs. The Band contributed CAD$50,000 on December 22, 2003 and made an additional advance of CAD$52,000 on March 2, 2004 to help
develop the business plan and a start-up plan. The total advances of CAD$102,000 are refundable should the Band not approve the start-up plan. Upon acceptance of the start-up plan the remaining CAD$4,898,000 would have been advanced according to an approved schedule in the start-up plan. Subsequent to year-end, the Company and the Band decided not to proceed with the Joint Venture.





F-6



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








1.
        Nature of Operations and Continuance of Business (continued)On January 2, 2004, the Company completed the October 15, 2003 agreement (as amended January 1, 2004) to purchase certain operational business assets of 5943609 B.C. Ltd. (dba Mystic Mountain Body and Spa Products) (Mystic), a company based in British Columbia, Canada. Mystic is a manufacturer and seller of bath, skin, body and aromatherapy products. The assets purchased included inventory, property and equipment, including all intellectual property and intangible assets of Mystic. In return, the Company issued two promissory notes totalling CAD$100,000 to the owner of Mystic due on April 30, 2004 (CAD$15,000 was previously due on January 31, 2004 and CAD$85,000 on March 15, 2004, but the deadlines were extended by the owner of Mystic). Both promissory notes are non-interest bearing and unsecured. The Company and Mystic have decided to terminate the agreement but have
not yet settled the terms. As of May 31, 2004, the Company wrote-off all the assets it acquired from Mystic totalling $79,520. The promissory notes remain, pending release by Mystic.

On May 10, 2004, the Company offered a private placement subscription for up to 2,000,000 units of the Company at a purchase price of $0.25 per unit. Each unit will consist of one common share of the Company and one non-transferable share purchase warrant. Each warrant may be exercised within one year of the date of issuance to the purchaser at a price of $0.45. As at May 31, 2004, the Company had received $70,000 in subscriptions.

See Note 11 for Subsequent Events.






2.
        Summary of Significant Accounting Principles(a)
        Basis of AccountingThese consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and are expressed in United States dollars.


(b)
        ConsolidationThese consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Mind Your Own Skin Products Inc. and 648311 B.C. Ltd.


(c)
        Year EndThe Companys fiscal year end is May 31.


(d)
        Cash and Cash EquivalentsThe Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.


(e)
        InventoryRaw materials are recorded at the lower of average cost and replacement cost and finished goods are recorded at the lower of average cost and net realizable value. The Company provides inventory reserves for estimated obsolescence on unmarketable inventory equal to the difference between the cost of inventory and the estimated realizable value based on assumptions about future demand and market conditions. Shipping and handling costs are recorded as part of cost of sales.


(f)
        Property and EquipmentMolds are recorded at cost. Amortization is computed on a straight-line basis using an estimated useful life of three years.





F-7



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








2.
        Summary of Significant Accounting Principles (continued)(g)
        Long-lived AssetsIn accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment losses when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.


(h)
        Foreign Currency TranslationThe functional currency of the Companys Canadian subsidiary is the Canadian dollar. The financial statements of this subsidiary are translated to United States dollars in accordance with SFAS No. 52 Foreign Currency Translation using period-end rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders equity. Foreign currency transaction gains and losses are included in current operations.


(i)
        Revenue RecognitionRevenue is derived from the sale of personal care products sold directly to retailers or indirectly through distributors. The Company follows the provisions of Staff Accounting Bulletin (SAB) No. 104; Revenue Recognition in Financial Statements. Revenue from the sale of products is only recognized upon delivery of the product, when persuasive evidence of an arrangement exists, the price is fixed or determinable and collection is probable. If collection is not considered probable, revenue will be recognized when the fee is collected. Until the Company can establish a history of returns, recognition of revenue will be deferred on sales to distributors having right of return privileges until the return period expires. Once a reliable return history is established, such returns will be estimated using historical return rates.

In accordance with Emerging Issues Task Force (EITF) No. 00-10, Accounting for Shipping and Handling Fees and Costs, freight and handling charges billed to customers are recorded as revenue while the corresponding freight and handling costs are recorded as cost of sales.


(j)
        Other Comprehensive LossSFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. The Company had a comprehensive loss of $2,209,723 and $888,504, which includes a foreign currency translation gain (loss) of $21,235 and $(68,896), at May 31, 2004 and 2003, respectively.


(k)
        Basic and Diluted Net Income (Loss) per ShareThe Company computes net income (loss) per share in accordance with SFAS No. 128, Earnings per Share (SFAS 128). SFAS 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their
effect is anti-dilutive.





F-8



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








2.
        Summary of Significant Accounting Principles (continued)(l)
        Use of EstimatesThe preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from managements best estimates as additional information becomes available in the future.


(m)
        Financial InstrumentsThe fair values of cash, accounts payable, accrued liabilities, due to related parties and other advances were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The Companys operations are in Canada and virtually all of its assets and liabilities are giving rise to significant exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Companys operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.


(n)
        Income TaxesThe Company utilizes the liability method of accounting for income taxes as set forth in SFAS No. 109, Accounting for Income Taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.


(o)
        Recent Accounting PronouncementsIn December 2003, the United States Securities and Exchange Commission issued Staff Accounting Bulletin No. 104, Revenue Recognition (SAB 104), which supersedes SAB 101, Revenue Recognition in Financial Statements. The primary purpose of SAB 104 is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, which was superseded as a result of the issuance of EITF 00-21, Accounting for Revenue Arrangements with Multiple Deliverables. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. The adoption of SAB 104 did not have a material impact on the Companys financial statements.


(p)
        Stock-based CompensationThe Company accounts for stock-based awards using the intrinsic value method of accounting in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). Under the intrinsic value method of accounting, compensation expense is recognized if the exercise price of the Companys employee stock options is less than the market price of the underlying common stock on the date of grant. Stock-based compensation for employees is recognized on a straight-line basis over the vesting period of the individual options.

Stock-based awards for non-employees are accounted for under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, (SFAS 123), which establishes a fair value based method of accounting for stock-based awards and recognizes compensation expense based on the fair value of the stock award or fair value of the goods and services received, whichever is more reliably measurable. Under the provisions of SFAS 123, companies that elect to account for stock-based awards in accordance with the provisions of APB 25 are required to disclose the pro forma net income (loss) that would have resulted from the use of the fair value based method under SFAS 123.







F-9



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








2.
        Summary of Significant Accounting Principles (continued)(p) Stock-based Compensation (continued)During the year ended, May 31, 2004, the Company recognized stock-based compensation of $1,053,670. Of this amount, $75,825 was recognized as the fair value of stock options granted to non-employees while the remaining amount of $977,845 represented the fair value of shares issued for consulting services rendered by employees and non-employees.

During the year, the Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure an Amendment of FASB Statement No. 123 (SFAS 148), to require more prominent disclosures in both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reported results.

As the Company has not granted any stock options to employees for the years ended May 31, 2004 and 2003, no pro forma information has been presented.

The fair value of the options granted during the year (no options were granted in the previous year) was measured at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:


Year Ended
May 31,
2004
$Expected dividend yield
        
        0%Risk-free interest rate
        
        1.19%Expected volatility
        
        123%Expected option life (in years)
        
        1




3.
        Advance Royalty Deposits and Related License AgreementsPursuant to two separate license agreements, the Company has been granted by the inventor of certain products known as Neuroskin, Nail Fit, Razor Rash, Dermac and Itch-X, the sole and exclusive right and license to manufacture, produce, package, distribute, market, promote, use and sell, among other things, certain human and animal skin care treatments and products. These products have received approval from the US Food and Drug Administration (FDA) as compliant products for over the counter pharmaceuticals as well as cosmetics skin care products. Canadian DIN approvals for these products have been renewed. The license rights include all countries in the world with the exception of Germany, Switzerland, Austria, The Netherlands, Belgium, Luxembourg and Lithuania.

The agreements provide for the joint ownership of all applicable patents, pending patents, patent applications, trade marks, copyright, secret processes, formulae, technical data and other scientific and technical information has been secured.

Terms of the license agreements call for total advance royalty payments of $220,000, which has been paid in full. The licensor will be entitled to royalties on the sale of products by the Company at a rate of approximately 7% of sales. The term of the agreements are for thirty years with automatic renewal rights.

The original registrant for the various approvals was the inventor and licensor. The various approvals have been transferred to reflect the Company as the manufacturer and owner. The inventor retains the licensing rights to the products.

A total amount of $11,379 has been paid to protect certain Canadian patent rights for the Neuroskin product. These costs will be amortized to operations once sales of Neuroskin products begin.





F-10



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








4.
        Property and EquipmentProperty and equipment is stated at cost less accumulated amortization.


2004
        
        2003Accumulated
        
        Net Carrying
        
        Net CarryingCost
        
        Amortization
        
        Value
        
        Value$
        
        $
        
        $
        
        $Moulds
        14,136
        
        5,890
        
        8,246
        
        12,958




5.
        Liability to AgentIncluded in accounts payable is $146,849 (2003 - $112,377) owing to the Agent processing the applications related to the US FDA registration as compliant products and Canadian DIN approvals for the licensed products and is the original registrant in that regard. As original registrant it is the only entity able to effect any changes to the FDA registration as compliant products and DIN applications and/or registrations for the products. Originally retained by the inventor, the Agent is now the agent for both the Company and the inventor. The Agent and the inventor agreed that the FDA and DIN registrations will be amended to show the Company as the manufacturer and owner. The inventor retains the licensing rights to the products. The Agent was previously retaining control of the applications and registrations as security for the payment of its outstanding fees. The fees do not bear
interest and are currently payable. During the year, the Agent amended the FDA and DIN registrations to show the Company as the manufacturer and owner.






6.
        Related Party Advances and Transactions2004
$
        
        2003
$(a)          Advances(i)            Shield-Tech Products Inc.
        410,227
        
        415,049(ii)           Owing to the licensor (Note 3)
        
        
        25,000(iii)          Owing to directors and/or officers
        449,385
        
        339,879859,612
        
        779,928(i)
        Shield-Tech Products Inc., a company under common control, conducted research and incurred development expenditures on the Companys behalf. The advances are without interest, unsecured and there are no agreed repayment terms.(ii)
        The licensor is a minority shareholder.(iii)
        The amounts due to directors and/or officers are unsecured, without fixed repayment terms and are non-interest bearing.(b)
        TransactionsSix directors/officers were paid $640,000 (2003 - $287,877) during the year for consulting services rendered.


(c)
        Debt SettlementDuring the year, the Company issued 390,000 shares to settle $269,000 of related party debt.





F-11



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








7.
        Other Advances(a)
        The Company received advances from a non-related party totalling $114,000 to assist in research and development. The advance is currently payable, unsecured and includes interest at prime plus 1% per annum. Interest of $6,107 was accrued and charged to operations for the year ended May 31, 2003 (2003 - $7,854).(b)
        The Company received $74,813 (CAD$102,000) from the Band to assist the Company in developing the business and start-up plan for a proposed joint venture as described in Note 1. The advance is non-interest bearing, unsecured and repayable only if the Band did not approve the start-up plan. Subsequent to year end, the Company and the Band decided not to proceed with the joint venture.




8.
        Common Stock(a)
        Reverse Stock SplitOn June 28, 2002, pursuant to the terms of the MYOSP acquisition, the Company completed a reverse split of its common stock on 5 for 1 basis, such that every five shares of common stock issued and outstanding immediately prior to the reverse split was changed into and constitute one share of fully paid common stock of the Company. All per share amounts have been retroactively adjusted.


(b)
        The Company issued 12,112,501 common shares to the shareholders of MYOSP to effect a reverse merger of the Company.(c)
        In 2004 the Company issued 3,230,471 units at $0.25 per unit for proceeds of $684,918 in cash and $122,585 in debt settlement. Each unit consisted of one common share of the Company and one non-transferable share purchase warrant. Each warrant is exercisable within two years of the date of issuance to the purchaser at a price of $0.45 during the first 12 months and $0.40 (repriced from $0.65 subsequent to year end) for the remaining 12 months.(d)
        On May 1, 2004, the Board and the stockholders approved an amendment to the Companys Articles of Incorporation to increase the number of authorized shares of common stock to 100,000,000. The amendment was processed by the Company subsequent to year end.(e)
        On May 10, 2004, the Company offered a private placement subscription for up to 2,000,000 units of the Company at a purchase price of $0.25 per unit. Each unit will consist of one common share of the Company and one non-transferable share purchase warrant. Each warrant may be exercised within one year of the date of issuance to the purchaser at a price of $0.45. As at May 31, 2004, the Company had received $70,000 in subscriptions.



F-12



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








8.
        Common Stock (continued)(f)
        Stock OptionsOn December 2, 2002, the Company filed a Form S-8 Registration Statement with the U.S. Securities and Exchange Commission to register 1,450,000 shares of common stock pursuant to the Companys 2002 Benefit Plan (the Plan). The determination of those eligible to receive options under this plan, and the amount, type, price and timing of each stock option and the terms and conditions shall rest at the sole discretion of the Companys Board of Directors.

During the year, the Company granted 225,000 stock options to non-employees pursuant to the Plan at a weighted average grant date fair value of $0.34. The Company charged stock-based compensation expense of $75,825 to operations in accordance with SFAS 123 during the year.

A summary of the changes in the Companys stock options is presented below:


May 31, 2004
        
        May 31, 2003Number
        Weighted Average Exercise
Price
        
        Number
        Weighted Average Exercise
PriceBalance, beginning of year
        
        $           
        
        
        $        Granted
        225,000
        0.87
        
        
        Exercised
        
        
        
        
        Forfeited/Expired
        
        
        
        
        Balance, end of year
        225,000
        $      0.87
        
        
        $       Additional information regarding stock options outstanding as at May 31, 2004 is as follows:


Outstanding
        
        ExercisableExercise prices$
        Number ofshares
        Weightedaverageremainingcontractuallife (years)
        Weightedaverageexercise price$
        
        Number ofshares
        Weightedaverageexercise price$0.70
        100,000
        0.78
        0.70
        
        100,000
        0.701.00
        125,000
        0.78
        1.00
        
        125,000
        1.00225,000
        0.78
        0.87
        
        225,000
        0.87(g)
        Non-cash ConsiderationAll transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

On August 9, 2002, the Company issued 300,000 shares of common stock for investor relations services. These shares were issued at an aggregate value of $135,000 for services to have been rendered over a six-month period. The services were never provided therefore no stock-based compensation has been recorded and the 300,000 shares are to be cancelled.





F-13



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








8.
        Common Stock (continued)(g)
        Non-cash Consideration (continued)On December 11, 2002, the Company issued 240,000 shares of common stock for consulting services. These shares were issued at an aggregate fair value of $100,800 for services to have been rendered over a one-year period. The consultant earned 30,000 shares for a fair market value of $12,600, which was charged to operations as compensation expense. The remaining 210,000 shares were cancelled in 2004.

On January 9, 2003, the Company issued 300,000 shares of common stock for consulting services. These shares were issued at an aggregate fair value of $93,000 for services rendered. The Company charged to operations compensation expense of $93,000 in 2003.

On March 11, 2003, the Company issued 250,000 shares of common stock for consulting services. These shares were issued at an aggregate fair value of $127,500 for services to be rendered over a two-year period. The Company charged to operations compensation expense of $63,750 for the year ended May 31, 2004 (2003 - $13,281) and recorded deferred compensation of $50,469 that will be charged to operations over the remainder of the term.

On April 10, 2003, the Company issued 500,000 shares of common stock to two officers. These shares were issued at an aggregate fair value of $175,000 for services to be rendered over a two-year period. The Company charged to operations compensation expense of $87,500 for the year ended May 31, 2004 (2003 - $10,938) and recorded deferred compensation of $75,562 that will be charged to operations over the remainder of the term.

On April 22, 2003, the Company issued 250,000 shares of common stock for financing services. These shares were issued at an aggregate fair value of $87,500 as compensation for the successful arrangement of $3,000,000 in financing for the Company. The Company has recorded deferred compensation of $87,500 that will be charged to operations when it is earned.

On May 6, 2003, the Company issued 750,000 shares of common stock to three officers. These shares were issued at an aggregate fair value of $262,500 for services to be rendered over a one-year period. The Company charged to operations compensation expense of $240,624 for the year ended May 31, 2004 (2003 - $21,876).

On June 1, 2003, the Company issued 100,000 shares of common stock to two employees. These shares were issued at an aggregate fair value of $40,000 for services to be rendered over a two-year period. The Company charged to operations compensation expense of $20,000 for the period ended May 31, 2004 and recorded deferred compensation of $20,000 that will be charged to operations over the remainder of the term.

On August 1, 2003, the Company issued 250,000 shares of common stock to an officer. These shares were issued at an aggregate fair value of $120,000 for services to be rendered over a two-year period. The Company charged to operations compensation expense of $50,000 for the period ended May 31, 2004 and recorded deferred compensation of $70,000 that will be charged to operations over the remainder of the term.

On January 2, 2004 the Company issued 200,000 shares to an officer. These shares were issued at a fair value of $96,000 for services to be rendered over a two-year period. The Company charged to operations compensation expense of $20,000 for the period ended May 31, 2004 and recorded deferred compensation of $76,000 to be charged to operations over the remainder of the term.

On February 15, 2004 the Company issued 300,000 shares of common stock for consulting services. These shares were issued at an aggregate fair value of $129,000 for services to be rendered over a three-month period, which was charged to operations.





F-14



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








8.
        Common Stock (continued)(g)
        Non-cash Consideration (continued)On March 9, 2004, the Company issued 300,000 shares of common stock for consulting services. These shares were issued at an aggregate fair value of $219,000 for services rendered which was charged to operations.

On March 10, 2004, the Company issued 100,000 shares of common stock for consulting services. These shares were issued at an aggregate fair value of $70,500 for services to be rendered over a one-year period. The Company charged to operations compensation expense of $17,500 and recorded deferred compensation of $52,500 that will be charged to operations over the remainder of the term.

On March 18, 2004, the Company issued 50,000 shares of common stock for consulting services. These shares were issued at an aggregate fair value of $35,500 for services rendered which was charged to operations.






9.
        Income TaxesThe tax effects of the significant temporary differences, which would comprise tax assets at May 31, 2004 and 2003, are as follows:


2004
        
        2003$
        
        $Deferred tax asset:Operating loss carryforward
        399,022
        
        246,000Valuation allowance
        (399,022)
        
        (246,000)Net deferred tax asset
        
        
        In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The amount of the deferred tax asset considered realizable could change materially in the near term based on future taxable income during the carryforward period.

The Company has approximately $826,000 of net operating loss carry forwards available for US income tax purposes to reduce taxable income of future years. These net operating loss carry forwards expire in years ranging from 2019 to 2024. In addition, the Company has approximately CAD$2,596,000 of non-capital losses available for Canadian income tax purposes to reduce taxable income of future years.





F-15



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








10.
        Business AcquisitionOn January 2, 2004, the Company acquired certain operational business assets from Mystic for two promissory notes totalling CAD$100,000.

The purchase price allocation was as follows:


CAD$Inventory
        83,363Property and equipment
        16,637Total purchase price
        100,000The Company and Mystic decided to terminate the agreement but have not yet settled the terms. As at May 31, 2004, the Company wrote off all the assets it acquired from Mystic totalling $79,520. The promissory notes remain, pending release by Mystic.






11.
        Subsequent Events(a)
        On June 1, 2004, 3,000,000 common shares were reserved pursuant to a stock option plan for officers, directors, key employees and consultants.(b)
        On June 10, 2004, the Company issued 300,000 shares of common stock for consulting services. These shares were issued at an aggregate fair value of $87,000 for services to be rendered over a three month period starting on May 7, 2004. The Company charged $14,500 to operations in fiscal 2004 and this amount was included in accrued liabilities as at May 31, 2004.(c)
        On June 10, 2004 the Company issued 76,000 shares of common stock to settle debt of $22,040.(d)
        On June 24, 2004, the Company granted 2,800,000 stock options to various employees and outside consultants at an exercise price of $0.28 per share (except 1,000,000 stock options granted to the President and CEO, which has an exercise price of $0.31 per share). The stock options expire on June 24, 2009.(e)
        On June 29, 2004, the Company issued 250,000 shares of common stock for consulting services. These shares were issued at an aggregate fair value of $70,000 for services rendered which was charged to operations in fiscal 2004. The agreement to settle the services rendered was entered into on May 14, 2004 and $70,000 was included in accrued liabilities as at May 31, 2004.(f)
        On July 10, 2004, the Company granted 100,000 stock options to a director at an exercise price of $0.42 per share expiring on July 9, 2009.(g)
        On July 15, 2004, the Company issued 400,000 shares of common stock having an aggregate fair value of $180,000 for consulting services to be rendered over a two year period.(h)
        On July 28, 2004, the Company issued 250,000 shares of common stock having an aggregate fair value of $112,500 for consulting services rendered.(i)
        On July 29, 2004, the Company entered into an agreement with a consultant to help raise financing. The Company is to pay the consultant a 7% finders fee on the total proceeds received by the Company, which is attributable to the consultant. The consultant has the option to receive this finders fee in cash or equity of the Company. The consultant was also granted 200,000 stock options at an exercise price of $0.38 per share expiring in three years.(j)
        On August 4, 2004, the Company issued 80,000 shares of common stock to settle debt of $30,400.(k)
        Subsequent to year end the Company and the Band decided not to proceed with the joint venture described in Note 1.



F-16



AVVAA World Health Care Products, Inc.

(A Development Stage Company)

Notes to the Consolidated Financial Statements

(expressed in U.S. dollars)








12.
        RestatementThe Company has restated its consolidated financial statements for the year ended May 31, 2004. The Company is restating the financial statements to reflect the fair value of stock options granted to outside consultants. In addition, previously recorded stock-based compensation and share issuances were reversed and liabilities were reinstated as it was determined that these shares were not physically issued as at May 31, 2004.


May 31, 2004
As Previously Reported
$
        Adjustment
$
        May 31, 2004
As Restated
$Balance SheetAccounts payable
        588,291
        22,040
        610,331Accrued liabilities
        14,990
        84,500
        99,490Common stock
        23,082
        (626)
        22,456Additional paid-in capital
        3,150,626
        (178,414)
        2,972,212Deferred compensation
        (568,531)
        72,500
        (496,031)As OriginallyReportedDeficit accumulated during the development stage
        (3,953,039)
        (75,825)
        (4,028,864)


Year Ended
May 31, 2004
As Originally Reported
$
        Adjustment
$
        Year Ended
May 31, 2004
As Restated
$Statement of OperationsGeneral and administrativeStock-based compensation
        977,845
        75,825
        1,053,670Net loss for the year
        (2,230,958)
        (75,825)
        (2,306,783)There was no change to the basic and diluted net loss per share resulting from the restatement.

In addition to the restatements noted above, certain other revisions to the financial statement note disclosures were made to improve the overall presentation of the Companys financial statements.





F-17











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

FINANCIAL DISCLOSURE



ITEM 8A. CONTROLS AND PROCEDURES



Our Chief Executive Officer and Chief Financial Officer (collectively the
"Certifying Officers") maintain a system of disclosure controls and procedures
that is designed to provide reasonable assurance that information, which is
required to be disclosed, is accumulated and communicated to management timely.
The Certifying Officers have reevaluated our control procedures with respect to
the accurate and timely recording of stock options granted and common share
issuances in the Company's financial statements. As a result of this
reevaluation, the Company has implemented control procedures to correct a
deficiency, in the recording of stock options and common share issuances.
Controls implemented include the numerical sequencing of all stock options
granted and common shares issued as approved by the Company's Board of
Directors. A separate control log is maintained by the Company's Administrative
Accounting Assistant. This log is independently reviewed by the Company's
Controller and Chief Accounting Officer. These procedures were executed in July
2005 and carried out retroactively to June 1, 2003. No additional errors were
detected. As a result of this reevaluation, the Company continues to believe
that its disclosure controls and procedures were effective.



Changes in internal controls



Restatement of our financial statements for the year ended May 31, 2004 was
required to correct the calculation of the fair value of stock options granted
to outside consultants.



Our principle executive and principal financial officers reevaluated our control
procedures. As a result of this reevaluation, the Company has implemented
control procedures to correct a deficiency, in the recording of stock options
and common share issuances. Controls implemented include the numerical
sequencing of all stock options granted and common shares issued as approved by
the Company's Board of Directors. A separate control log is maintained by the
Company's Administrative Accounting Assistant. This log is independently
reviewed by the Company's Controller and Chief Accounting Officer. These
procedures were executed in July 2005 and carried out retroactively to June 1,
2003. No additional errors were detected.




PART III



ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT



Our directors and officers are set forth below. The directors hold office for their respective term and until their successors are duly elected and qualified.  Vacancies in the existing Board are filled by a majority vote of the remaining directors. The officers serve at the will of the Board of Directors.




Name
        Age
        PositionJack Farley
        61
        President, Chief Executive Officer and DirectorCharles Austin
        67
        Chief Financial Officer, Secretary and DirectorDr. Mark Alden
        52
        DirectorJames MacDonald
        67
        Director

JACK FARLEY has been our President, Chief Executive Officer and a member of the Board of Directors since June 28, 2002. Since November 1995 he has been the President of Mind Your Own Skin Products, Inc. Since such time he was also President and Chief Executive Officer of Shield- Tech Products Inc. an environmental products company which Mr. Farley founded. In December 2000 here signed as officer of Shield-Tech Products, Inc. to work full time for Mind Your Own Skin Products, Inc. Mr. Farley has undertaken extensive training courses in public speaking skills, financial analysis, marketing, negotiating, management and labor relations.



From September 1963 to 1995, Mr. Farley worked for Petro-Canada Marketing, a major international petroleum corporation. Between 1963 and 1972, Mr. Farley was employed in several capacities at Petro-Canada Marketing as a Sales Trainee up to a Senior Marketing Representative for all markets in Northern Manitoba. From1973 to 1989 he was employed at Petro-Canada Marketing in the following capacities: Manager, Planning Advisor, Merchandising Advisor, Forestry Account Executive. From1989 to 1995 he was the Senior Forestry Account Executive for Western Canada and manager of Bunker (heavy fuel) sales out of the Western Canadian Refineries. As the Senior Forestry Account Executive he was responsible for the sales and distribution to all major forestry companies in Western Canada. Mr. Farley was also a





Lubricant Technical Sales and Marketing Consultant for the United Stated markets from June 1996 to June 1998. He brings extensive experience in planning, distribution, retailing, merchandising and contract negotiation.



CHARLES AUSTIN has been our Chief Financial Officer, Secretary and a member of the Board of Directors since June 28, 2002. Mr. Austin was the Chief Financial Officer and Manager of Development and Planning of Mind Your Own Skin Products, Inc. In such capacity he assisted the President in preparing business plan and operating budgets and prepared long range financial projections and facility plans. He also completed all required financial statements and conducted the annual strategic planning meeting with the Executive Team.



From 1999 to 2000 he worked as a consultant for BC businesses. He conducted assessment of businesses and profitability improvement checkups and identified and reported areas for profit improvement. He also assisted these companies in the development of business plans and assisting in the implementation of related action plans.



From 1997 to 1999 he was the managing director of Triathlon Canada where he facilitated in the development and implementation of a strategic plan entitled Towards 2000 and Beyond. He also participated in the development of prizewinning marketing materials and had extensive involvement in the fund raising and communications program.



From 1970 to 1996 he was a Senior Audit Partner for Ernst & Young, Mr. Austin provided audit, accounting, taxation, information systems and general business advice to a wide range of clients including many public companies ranging from start-ups to multi-nationals. Some of his clients included: Luscar, Echo Bay Mines, ZCL Manufacturing, Falconbridge and Inventronics. He was also a member of Ernst & Youngs National Audit Policy and Accounting Policy Committees. Mr. Austin received his Bachelor of Business Administration (honours) from the University of Western Ontario in 1961 and became a chartered accountant in 1964.



DR. MARK ALDEN has been a member of our Board of Directors since June 28, 2002. Dr. Alden has been associated with Mind Your Own Skin Products, Inc. for the last 7 years and has worked on applications of Mind Your Own Skin Products, Inc.s products. He is in the process of commencing clinical trials that include effective burn treatment.



Since August 2000 he has been the Clinical Service Chief and Assistant Professor at the Medical College of Pennsylvania-Hahnemann University. From February 1999to August 2000 he was the Chairman of the Radiation Oncology Department at the Wiles-Barre General Hospital. From April 1997 to January 1999 he was the medical director of the Tri County Regional Cancer Center (Holy Redeemer Hospital and Warminster General Hospital) in Southampton, Pennsylvania. From December 1995 to April 1997 he was employed at the St. Mary Regional Cancer Center in Langhorne, Pennsylvania. From January 1993 to December 1995 Dr. Alden was an Assistant Professor and Instructor at the Department of Radiation Oncology and Nuclear Medicine at the Thomas Jefferson University Hospital.









Dr. Alden received his Associate Arts Degree in 1973 from the Academy of the New Church College in Bryn Athyn, Pennsylvania. He received in Bachelor of Arts Degree from Penn State University in 1975. In 1979, he received his Master of Divinity from the Academy of the New Church Theological School in Bryn Athyn, Pennsylvania. He received his Doctor of Medicine in 1988 from the Jefferson Medical Hospital in Philadelphia, Pennsylvania in 1988 and his General Surgery PGYI from Abington Memorial Hospital in 1989. He was a resident and a fellow in

the Department of Radiation Oncology and Nuclear Medicine at Thomas Jefferson University Hospital from 1989 to 1992. He is licensed in Pennsylvania, New Jersey and Indiana and was Board Certified in Radiation Oncology in 1994. He has also published many articles and been involved in both National and Local Presentations.



JAMES MACDONALD became our director on September 26, 2002. He has a 38 year career in Canadian and international banking and finance. He presently serves as a senior executive in a privately operated offshore finance company. He previously worked as a commercial credit analyst for the Canadian Imperial Bank of Commerce headquartered in Toronto, Ontario, Canada. He started working for them in 1954 until his retirement in May, 1992. His portfolio included the support of over 1,500 lending accounts with more than $100 million in loan requirements. In 1978, he was an Honor graduate of the University of Toronto and York University, located in Ontario, Canada. Recently, from 1998 through 2002,he was Vice President - Commercial Finance for Monex International, Inc. based in Burlington, Ontario, Canada.



None of our Officers and/or Directors have filed any bankruptcy petition, been convicted of or been the subject of any criminal proceedings or the subject of any order, judgment or decree involving the violation of any state or federal securities laws within the past five (5) years.



CERTAIN LEGAL PROCEEDINGS



No director, nominee for director, or executive officer of the Company has appeared as a party in any legal proceeding material to an evaluation of his ability or integrity during the past five years.



Compliance with Section 16(a) of the Exchange Act



ITEM 10. EXECUTIVE COMPENSATION



The following information relates to compensation received by our officers in
fiscal year ending May 31, 2004 and 2003 whose salary and compensation exceeded
$100,000. In fiscal year ending May 31, 2003, Jack Farley, our President, Chief
Executive Officer and director received $103,138 in compensation. This was all
in the form of cash salary. In fiscal year ending May 31, 2004, Jack Farley, our
President, Chief Executive Officer and director received $102,000 in
compensation. This was all in the form of cash salary.



Employment Agreements. All senior officers have been granted an employment contract that provides a future benefit to be received upon separation from service with us.









ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



The following table sets forth as of September 13, 2004, information with respect to the beneficial ownership of our common stock by (i) each person known by us to own beneficially 5% or more of such stock, (ii) each Director who owns our common stock, and (iii) all Directors and Officers as a group, together with their percentage of beneficial holdings of our outstanding shares. We currently have a total of 23,811,672 shares issued and outstanding.



Security Ownership of Beneficial Owners




Name of Beneficial Owner
        Shares of Common Stock
        Percent of ClassJack Farley (2)
        5,200,000(1)
        21.84%Charles Austin (2)
        437,500
        1.84%Dr. Mark Alden (2)
        475,000
        1.99%Directors and Officers as
a group (3 persons)
        6,112,500
        25.67%

(1)  This amount includes 2,475,000 shares owned by Lorie Dale Campbell-Farley,


Mr. Farleys wife.

(2)  The address for such individuals is c/o AVVAA World Health Care Products,


Inc., 3018 Schaeffer Road, Falkland, B.C. Canada V0E 1W0.


Officers and DirectorsName ofBeneficial Owner
        Shares of Common Stock
        Percent of ClassJack Farley (2)
        5,200,000(1)
        21.84%Charles Austin (2)
        437,500
        1.84%Dr. Mark Alden (2)
        475,000
        1.99%Directors and Officers as a
group (3persons)
        6,112,500
        25.67%

(1)  The address for such individuals is c/o AVVAA World Health Care Products,


Inc., 3018 Schaeffer Road, Falkland, BC, Canada V0E 1W0.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.



There are no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-B apart from the following:







Our operations center is currently located at the home of our President, Chief Financial Officer and Director, Jack Farley at 3018 Schaeffer Road, Falkland, B.C. Canada and there is no charge.



Related Party Advances and Transactions




2003
        2002$
        $(a)   Advances(i)Shield-Tech Products Inc.
        415,049
        -(ii) Owing to the licensor (Note 3)
        25,000
        -(iii)Owing to directors and/or officers
        339,879
        97,759779,928
        97,759






(i)
        Shield-Tech Products Inc., a company under common control,conducted research and incurred development expenditures on theCompanys behalf. The advances are without interest, unsecuredand there are no agreed repayment terms.


(ii)
        The licensor is a minority shareholder. The amount owing iswithout interest, unsecured, and without fixed repayment terms.Subsequent to May 31, 2003 the outstanding balance was paid.


(iii)
        The advances from directors and/or officers are unsecured,without fixed repayment terms and are non-interest bearing.

(b) Transactions



Six directors/officers were paid $287,877 (2002 - $111,643 paid to two directors (officers)) during the year.



None of the directors, executive officers nor any member of the immediate family of any director or executive officer has been indebted to us since its inception. We have not and do not intend to enter into any additional transactions with our management or any nominees for such positions. We have not and do not intend to enter into any transactions with our beneficial owners.



Our management is involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests. We have not and do not intend in the future to formulate a policy for the resolution of such conflicts.









PART IV



ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K




(a)
        The following documents are filed as part of this report:


1.
        Financial statements; see index to financial statement and schedulesunder Item 7 herein.


2.
        Financial statement schedules; see index to financial statements andschedules under Item 7 herein.


3.
        Exhibits:



The following exhibits are filed with this Form 10-KSB and are identified by the numbers indicated: see index to exhibits immediately following financial statements and schedules of this report.



3.1  Certificate of Incorporation, as amended (1)



3.2  Bylaws, as amended (1)



14   Code of Ethics




(1)
        Incorporated by reference to the Registrants Form 8-K12G3, filed onSeptember 22, 2000 (SEC File No. 000-31611).


(b)
        Reports on Form 8-K


On January 22, 2004, we filed a Form 8-K to report the completion of theOctober 15, 2003 agreement (as amended January 1, 2004) to purchase certainoperational business assets of 5943609 B.C. Ltd. (dba Mystic Mountain Bodyand Spa Products)

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



Audit Fees



For the Company's fiscal year ended May 31, 2004, we were billed $29,500 for professional services rendered for the audit of our
financial statements, respectively.






Tax Fees



For the Company's fiscal year ended May 31, 2004, we were billed $2,800 for professional services rendered for tax compliance, tax
advice, and tax planning, respectively.



The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal year ended May 31,
2004.



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



SIGNATURES






AVVAA WORLD HEALTH CARE PRODUCTS, INC.


By:  /s/
        Jack FarleyJACK FARLEYPRESIDENT, CHIEF EXECUTIVE OFFICERAND DIRECTOR



Dated:  October 26,  2005



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




By:  /s/Jack Farley
Jack Farley
        President, Chief Executive
Officer and Director
        Dated:  October 26, 2005By:   /s/Charles Austin
Charles Austin
        Chief Financial Officer,
Secretary and Director
        Dated:  October 26, 2005By:  /s/Mark Alden
        Director
        Dated:  October 26, 2005Mark AldenBy:  /s/James MacDonald
        Director
        Dated: October 26, 2005James MacDonald