<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

For the Fiscal Year Ended                                        Commission File
      March 31, 2001                                              Number 0-15654
-------------------------                                                -------

                         TRANSPIRATOR TECHNOLOGIES, INC.
                         -------------------------------
             (Exact name of registrant as specified in its charter)


           Delaware                                                   22-2789408
-------------------------------                              -------------------
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                               Identification No.)

             8 Nathan Drive
    North Brunswick, New Jersey                                            18902
----------------------------------------                              ----------
(Address of principal executive offices)                              (Zip Code)

Registrant's telephone number, with area code 732-297-4468
                                              ------------

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                        Name of each exchange
      Title of each class                                on which registered
      -------------------                               ---------------------
<S>                                                     <C>
               NONE                                     NONE
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $0.01 par value
                          -----------------------------
                                (Title of class)

         Indicate by a 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 as the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                Yes    [X]                         No    [ ]



<PAGE>   2


On June 15, 2001 the aggregate market value of the voting stock of Transpirator
Technologies, Inc. held by nonaffiliates of the registrant was approximately
$443,803 based upon the average bid and asked prices of such common stock on
said date as reported by NASDAQ. On such date, there were 3,245,950 shares of
common stock of the registrant outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE












                                       2
<PAGE>   3


                         TRANSPIRATOR TECHNOLOGIES, INC.
                                      INDEX
                                TABLE OF CONTENTS

                                     PART I

Item 1. Descriptions of Business

Item 2. Descriptions of Property

Item 3. Legal Proceedings

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

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

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

Item 7. Financial Statements

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

                                    PART III

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

Item 10. Executive Compensation

Item 11. Security ownership of Certain Beneficial owners and Management

Item 12. Certain Relationships and Related Transactions

                                     PART IV

Item 13. Exhibits and Reports on Form 8-K










                                       3


<PAGE>   4

ITEM I. DESCRIPTION OF BUSINESS

FORWARD-LOOKING

Transpirator Technologies, Inc. (the "Company") cautions readers that certain
important factors may affect the Company's actual results and could cause such
results to differ materially from any forward-looking statements which may be
deemed to have been made in this report or which are otherwise made by or on
behalf of the Company. For this purpose, any statements contained in this report
that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as
"May," "Will," "Expect," "Believe," "Anticipate," "Intend," "Could," "Would,"
"Estimate," or "Continue" or the negative other variations thereof or comparable
terminology are intended to identify forward-looking statements. Factors which
may affect the Company's results include, but are not limited to, the risks and
uncertainties associated with a medical apparatus company which has only
recently licensed its sole product including a history of net losses, some
unproven technologies, limited manufacturing experience, current and potential
competitors with significant technical and marketing resources, need for future
capital and dependence on collaborative partners and on key personnel.
Additionally, the Company is subject to the risks and uncertainties associated
with all medical apparatus companies, including compliance with government
regulations. The Company is also subject to other risks detailed herein or
detailed from time to time in the Company's filings with the Securities and
Exchange Commission (the "Commission").

GENERAL

The Company was organized on December 22, 1986 as a Delaware corporation and
filed an S-1 Registration Statement on April 8, 1987. The Company was organized
to design, develop and market respiratory therapy products for veterinary and
human use. The main products developed by the Company were the ET-1000 Equine
Unit and the MT-1000 Human Unit.

In the initial years of operation, the Company had sales of the Equine Unit as
well as rental revenue of the Equine Units. However, sales of the Equine product
were not substantial enough to be profitable and on January 25, 1990, the
Company granted all rights to the future sales of the Equine Unit to another
party in exchange for a note in the amount of $263,000, plus $20,000 in cash and
royalties of $200 for each unit sold. The note was payable monthly and was paid
off by 1993. Since inception the Company has received no royalties under this
agreement.

Subsequent to March 31, 1989, and the sale of the rights to the Equine Unit, the
Company wound down its activities by paying off its creditors. The Company could
not continue the development and marketing plans for the MT-1000 Unit without
additional funding.

The Company has been dormant since March 31, 1990 except for keeping its patents
current. For the year ended March 31, 1991, the Company had no revenues and had
expenditures of approximately $116,009, comprised primarily of salaries, legal
fees, consulting and the remaining product development.






                                       4
<PAGE>   5



For the year ended March 31, 1992, the Company had minimal activity, resolving
the remainder of the Company's debts by negotiating with creditors for final
settlements. As a result of these negotiations there was debt forgiveness of
approximately $143,000 in that year. Otherwise, the expenditures for accounting
and office supplies, etc., were less than $30,000. For the years March 31, 1993
through 1997, the Company had kept its charter effective to protect its patents
and product rights for the Human MT-1000 Unit.

In May of 1997, the Company entered into a licensing agreement ("Licensing
Agreement") with Vapotherm, Inc. formally known as Healthcare Quality Solutions,
Inc., a Maryland corporation (the "Licensee"). The Licensee has completed
development and has received FDA approval of a new version of its product. The
Licensee has the option to purchase the Company's technology for 2 million
dollars. The Licensee has paid $92,500 in cash and $82,500 by delivery of a
promissory note representing $175,000 in minimum royalties due under the
licensing agreement. Additional royalties are to be paid to the Company for
sales of products equal to 2.5-10% of gross sales, depending upon the product
and the total gross sales amounts for the year. The agreement can be terminated
at the discretion of the licensee and by giving 30 days notice.

Vapotherm, Inc. has received FDA approval for its initial device, the
Vapotherm(TM) 2000I which it started shipping in April 2001. The device uses
membrane technology in circulating warm water to saturate a stream of air/oxygen
at or near 100% humidity. The stream is delivered directly into the nasal
passages through a high flow nasal cannula at flow rates of 40 liters per minute
at temperatures between 34(degree)C and 43(degree)C. The device has broad
applications across numerous respiratory indications including but not limited
to Chronic Obstructive Pulmonary Disease, asthma, allergic and atrophic
rhinitis, chronic sinusitis and cystic fibrosis. The device sells for $2,000 and
it rents for $100 per month. To date, private insurers have reimbursed the
providers for as much as $250 per month under a miscellaneous pulmonary
category.

The Company received a copy of a Schedule 13D, on January 4, 1989, as amended
April 18, 1989, filed on behalf of J.T. Moran & Co., Inc. ("Moran"). Moran was a
registered broker dealer and was the underwriter of the Company's 1986 initial
public offering. The Schedule 13D reported that Moran had acquired a total of
1,023,650 shares of which 812,500 were acquired in a private transaction with
Oxygen Enrichment Company, Ltd (OECO). The balance of 211,150 shares was
reported to have been acquired by Moran in its capacity as a market maker in the
Company's stock at various prices relative to the market. Management has been
informed that OECO and Moran have been liquidated by the Bankruptcy Courts
approximately four years ago. The Company intends to hire counsel to settle out
the rights of the parties in a declaratory judgement action in the proper
jurisdiction. The Company will assert that these shares have been terminated.
Management has stated that no one from the Bankruptcy Court ever contacted the
Company.

PROPRIETARY RIGHTS

The Company follows a policy of protecting its proprietary rights to its
products to the full extent permissible by law.

The Company's U.S. patent applications regarding the method for the treatment of
the human respiratory and equine tract with vapor phase water were issued in
September 1988 into U.S. Patent No. 4,773,410.

The Company believes that alternative suppliers exist for all products presently
licensed by the Company.




                                       5
<PAGE>   6


CONTRACTS

The Licensing Agreement is for the licensing of United States Patent No.
4,773,410 issued September 27, 1988 ("Patent"). This Patent is the method and
apparatus for the treatment of the respiratory track with vapor-phase water. The
licensee is responsible for the payment of fees on the Patent. Licensee has
agreed to spend time, money and effort at no set amount to develop and market
new and/or improved respiratory therapy units for the human market which may or
may not incorporate the Patent; ("New Products") and which New Products will be
the sole property of Licensee. For sales of products developed by the Licensor,
Licensee shall pay an annual royalty as follows:

a)  Ten percent (10%) of gross sales up to one million dollars ($1,000,000)
b)  Seven percent (7%) of gross sales from one million and one dollar to two
    million dollars ($2,000,000)
c)  Five percent (5%) of gross sales above two million dollars ($2,000,000) and
d)  50% of the above commission rate to be paid on membrane cartridges sold
    separately.

For sales of New Products the Licensor shall receive annual royalties as
follows:

a)  Five percent (5%) of gross sales up to one million dollars ($1,000,000)
b)  Three and one half percent (3.5%) of gross sales from one million and one
    dollar ($1,000,001) to two million dollars ($2,000,000)
c)  Two and one half percent (2.5%) of gross sales above two million dollars
    ($2,000,000) and
d)  50% of the above commission rate to be paid on membrane cartridges sold
    separately.

The minimum to be paid for all products is $50,000 for the year ended March 31,
1999 and $100,000 for the year ended March 31, 2000. The Licensee has advised
management that it is continuing development of New Products and patents are in
process. Management expects the first royalty check for new products in the
first quarter of fiscal 2002.

The Licensee is now the owner of the trademarks of the Company Transpirator and
Vapotherm.

COMPETITION

There are a number of companies, including presently manufacturing devices,
which serve the function of introducing humidity into an individual's air stream
or oxygen stream for the treatment of illness or maintenance of respiratory
health.

The Company believes its proposed less expensive human Transpirator device will
principally differ from existing personal humidifiers known to the Company in
that existing personal humidifiers are primarily intended for hospital use in
conjunction with other breathing support systems, deliver substantially lower
flow rates, do not provide for direct administration to the user, and/or are
designed to be used with medication.

Many, if not all, of the symptoms, which the Company's devices are intended to
address, can also be treated by various medications.

Many of the companies competing in the human humidification or human medication
markets have greater resources than the Company and there can be no assurance
that at some point in the future



                                       6
<PAGE>   7

devices or medications will not be developed which may be less expensive or more
effective than the Transpirator devices.

EMPLOYEES

At March 31, 2001, the Company had no full-time employees.

ITEM 2. DESCRIPTION OF PROPERTY

None.

ITEM 3. LEGAL PROCEEDINGS

There are no pending legal proceedings, the outcome of which would have a
material adverse effect on the Company's financial position.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None

                                     PART II

ITEM 5. MARKET OF COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company has been dormant since 1990 and there currently is no active trading
in the Company's common stock on a recognized exchange.

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

RESULTS OF OPERATIONS

FISCAL 2001 AS COMPARED TO FISCAL 2000 AND 1999

The following discussion and analysis should be read in conjunction with the
Company's financial statements and the notes thereto included in Part II, Item 7
of this report.

There were no royalties earned for fiscal year 2001 other than the balance of
the minimum royalties due of $8334. For fiscal year 2000, the Company had
royalty income of $95,833 as compared to royalty income of $47,916 in 1998. This
income is pursuant to a royalty agreement signed in May 1997. The royalty
agreement provides for minimum royalties for three years from the signing of the
agreement in the amounts of $25,000, $50,000 and $100,000. The agreement
provides for royalties on a percentage basis from the sale of products developed
from use and further enhancement of the patents. The royalty agreement also
provides an option for the patents to be purchased for $2,000,000.

Selling, general and administrative expenses were $29,225 in 2001 consisting
mostly of an accrual for officers compensation of $12,000, register and transfer
fees of $7,500 and accounting and audit fees of approximately $7,000. The
expenses incurred in fiscal 2000 and 1999 were relatively consistent and
included common stock issued for services in the amount of $23,500 and $7,500
respectively and amortization of patents in the amounts of $11,811 and $5,332
respectively.


                                       7
<PAGE>   8


LIQUIDITY AND CAPITAL RESOURCES

Statement of Cash Flows

Net cash used in operations in fiscal 2001 amounted to $13,345 compared to net
cash provided from operations of $43,306 for fiscal 2000. The decrease in cash
from operations was principally due to the completion of minimum royalties
received under its licensing agreement with Vapotherm, Inc.

LIQUIDITY

The Company's annual and quarterly operating results will be affected by a
number of factors. The Company expects to receive in October $82,500
representing the balance of minimum royalty payments due under its licensing
agreement. Additionally, the Company will incur legal, accounting, printing and
other costs associated with keeping its financial records current with the SEC.
At the same time, the Company has employment agreements with two officers for
salaries of $1,000 per month for 36 months which began in August, 1998. The
Company expects increased liquidity from royalty payments in excess of the
operating expenses.

NET OPERATING LOSS CARRY FORWARDS

As of March 31, 2000, the Company had a net operating loss ("NOL") for Federal
Income Tax purposes of approximately $2,985,000, which begin to expire in 2001.
The ability of the Company to utilize the NOL is not probable at March 31, 2001
and therefore, no benefit has been recorded.

ITEM 7. FINANCIAL STATEMENTS

The response to this item is incorporated by reference to pages F1 - F11 herein.

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

None

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

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
                                                                     DIRECTOR
     NAME              AGE        POSITIONS                           SINCE
     ----              ---        ------------                       --------
<S>                    <C>        <C>                                <C>
Raymond Romano         49         Chairman of the Board,
                                  Chief Executive Officer and
                                  Director                             1985

John Porcella          50         President and Director               1985

John Signorelli        58         Director                             1987
</TABLE>



                                       8

<PAGE>   9

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's executive officers, directors and holders of more
than 10% of the Company's Common Stock, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission. Such persons are
required to furnish the Company with copies of all Section 16(a) forms they
file.

Based solely on its review of the forms filed and oral and written
representations from certain reporting persons no Forms 4 or Forms 5 were filed.
Each person has been informed and each officer is in the process of updating
these filings.

ITEM 10. EXECUTIVE COMPENSATION

The Company paid compensation in the form of a stock grant of $7,500 each to
Raymond Romano, Chief Executive Officer, John Porcella, President and John
Signorelli, a director, for the fiscal year ended March 31, 2000. Additionally,
the Company has employment agreements with each officer. The employment
agreements commenced August 1, 1998 and provide for the payment of an aggregate
salary of $1,000 per month for 36 months. To date, the Company has accrued
$32,000 of compensation under these agreements.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Previously a Company (OECO) owned 32% of the Company's common stock. OECO
transferred ownership of that stock to another company in 1989. Both companies
are bankrupt and out of business. The Company's position is that those shares
are still outstanding although the bankruptcy court has not contacted the
Company.

The following table sets forth certain information as of June 30, 2000 with
respect to each officer, director, all directors as a group, and the persons
(including and "group" as that term is used in section 13(d)(3) of the
Securities Exchange Act of 1934. known by the Corporation's voting securities:

<TABLE>
<CAPTION>
        --------------------------------------------------------------------------------------------------------
                                                                                   Amount of and
                                                                                     Nature of
                                             Name and Address                        Beneficial       Title of
           Title of Class                   of Beneficial Owner                      Ownership          Class
        --------------------------------------------------------------------------------------------------------
<S>                                   <C>                                          <C>                <C>
        Common Stock, $.01
           par value                  Oxygen Enrichment Company, Ltd.
                                      See Description of Business General
                                      for additional information                      812,500           25.00%
        --------------------------------------------------------------------------------------------------------
                                      Raymond J. Romano
                                      850-870 US Highway 1
                                      North Brunswick, NJ 08902                       364,000           11.21%
        --------------------------------------------------------------------------------------------------------
                                      John E. Porcella
                                      850-870 US Highway 1
                                      North Brunswick, NJ 08902                       285,000            8.78%
        --------------------------------------------------------------------------------------------------------
                                      John J. Signorelli
                                      850-870 US Highway 1
                                      North Brunswick, NJ 08902                       230,000            7.09%
        --------------------------------------------------------------------------------------------------------
                                      All Officers, directors as a
                                      group (3 persons)                               879,000           27.08%
        --------------------------------------------------------------------------------------------------------
</TABLE>


                                       9

<PAGE>   10

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company conducts its operations at the office facilities of an officer of
the Company at no cost. During fiscal 1998, the Company entered into employment
agreements with two officers of the company. The employment agreements commence
August 1, 1998 and provide for the payment of an aggregate salary of $1,000 per
month for 36 months.

On April 6, 1999 the Board of Directors approved the payment of 450,000 shares
of common stock to the three directors of the Company and 20,000 shares to an
attorney for services valued at $23,500.

On February 2, 1999 the Board of directors approved the payment of 150,000
shares of common stock to the three directors of the Company for services valued
at $7,500.

The officers of the Company who received stock inadvertently omitted filing form
4 and form 5 respectively. Each officer is currently in the process of updating
these filings.

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K


23.1     Consent of Accountants

99.1     Letter of Independence






                                       10
<PAGE>   11


                                   Signatures

         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.

                                         By /s/ Raymond J. Romano
                                            ------------------------------------
                                            Raymond J. Romano
                                            Chairman and Chief Executive Officer


         Pursuant to the requirements of the Securities and 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.


/s/ Raymond J. Romano
--------------------------------------------
Raymond J. Romano
Chairman and Chief Executive Officer
July 20, 2001

/s/ John E. Porcella
--------------------------------------------
John E. Porcella
President
July 20, 2001

Directors:


/s/ Raymond J. Romano
--------------------------------------------
Raymond J. Romano
July 20, 2001

/s/ John E. Porcella
--------------------------------------------
John E. Porcella
July 20, 2001

/s/ John Signorelli
--------------------------------------------
John Signorelli
July 20, 2001






                                       11
<PAGE>   12

                          INDEX TO FINANCIAL STATEMENTS

                         TRANSPIRATOR TECHNOLOGIES, INC.



<TABLE>
<CAPTION>
<S>                                                                    <C>
AUDITED FINANCIAL STATEMENTS

Independent Auditors' Report..................................................F-2

Balance Sheets, March 31, 2001 and 2000 ......................................F-3

Statements of Operations for the Years Ended
         March 31, 2001 and 2000..............................................F-4

Statements of Changes in Stockholders' Equity for the
         Years Ended March 31, 2001 and 2000..................................F-5

Statements of Cash Flows for the Years Ended
         March 31, 2001 and 2000 .............................................F-6

Notes to Financial Statements for the Years
         Ended March 31, 2001 and 2000.................................F-7 - F-11
</TABLE>











                                      F-1
<PAGE>   13


                          INDEPENDENT AUDITORS' REPORT


Stockholders and Board of Directors of
Transpirator Technologies, Inc
North Brunswick, New Jersey:

We have audited the accompanying balance sheets of Transpirator Technologies,
Inc., (the "Company") at March 31, 2001 and 2000 and the related statements of
operations, changes in stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at March 31, 2001
and 2000, and the results of its operations and its cash flows for each of the
years then ended in conformity with generally accepted accounting principles.


                                        BRIMMER, BUREK & KEELAN LLP




                                        Certified Public Accountants


June 29, 2001






                                      F-2
<PAGE>   14

                         TRANSPIRATOR TECHNOLOGIES, INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               MARCH 31,
                                                                      ----------------------------
                                                                         2001             2000
                                                                      -----------      -----------
<S>                                                                   <C>              <C>
    ASSETS

Current assets:
    Cash                                                              $    44,781      $    58,126
    Royalties receivable                                                   82,500           74,166
    Other current assets                                                    1,730               --
                                                                      -----------      -----------

       Total current assets                                               129,011          132,292
                                                                      -----------      -----------

       Total                                                          $   129,011      $   132,292
                                                                      ===========      ===========

    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable and accrued expenses                             $    34,780      $    23,818
    Notes payable - related parties                                        29,750           29,750
                                                                      -----------      -----------

       Total current liabilities                                           64,530           53,568
                                                                      -----------      -----------

Related party transactions (Note 2 and 3)

Stockholders' equity:
    Preferred stock, $.10 par value - 1,000,000 shares authorized
       none outstanding                                                        --               --
    Common stock, $0.01 par value, 3,500,000 shares authorized;
       3,245,950 shares issued and outstanding in 2001 and
       2000, respectively                                                  32,460           32,460
    Additional paid-in capital                                          3,593,897        3,593,897
    Accumulated deficit                                                (3,561,876)      (3,547,633)
                                                                      -----------      -----------

       Total stockholders' equity                                          64,481           78,724
                                                                      -----------      -----------

       Total                                                          $   129,011      $   132,292
                                                                      ===========      ===========
</TABLE>









The accompanying notes are an integral part of the financial statements.




                                      F-3
<PAGE>   15

                         TRANSPIRATOR TECHNOLOGIES, INC.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                            YEARS ENDED MARCH 31,
                                                        ----------------------------
                                                            2001            2000
                                                        -----------      -----------
<S>                                                     <C>              <C>
Revenue                                                 $     8,334      $    95,833

General and administrative expenses                          29,225           59,005
                                                        -----------      -----------

    Income (loss) from operations                           (20,891)          36,828

Interest income (expense)                                     6,648           (2,082)
                                                        -----------      -----------

    Net earnings (loss)                                 $   (14,243)     $    34,746
                                                        ===========      ===========

Basic and diluted earnings (loss) per share                   (.004)            .011
                                                        ===========      ===========

Weighted-average number of shares outstanding
    for basic and diluted earnings (loss) per share       3,245,950        3,245,950
                                                        ===========      ===========
</TABLE>

















The accompanying notes are an integral part of the financial statements.





                                      F-4
<PAGE>   16
                      TRANSPIRATOR TECHNOLOGIES, INC.

                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                   FOR THE YEARS ENDED MARCH 31, 2001 AND 2000


<TABLE>
<CAPTION>
                                              COMMON STOCK
                                             .01 PAR VALUE          ADDITIONAL                       TOTAL
                            PREFERRED     --------------------       PAID-IN       ACCUMULATED   STOCKHOLDERS'
                              STOCK       SHARES        AMOUNT       CAPITAL         DEFICIT         EQUITY
                            ---------     ------        ------       -------         -------         ------
<S>                         <C>          <C>           <C>          <C>            <C>           <C>
Balance at March 31, 1998       --       2,625,950     $ 26,260     $3,569,097     $(3,568,554)     $ 26,803

Net loss                        --              --           --             --         (13,825)      (13,825)

Common stock issued for
  services                      --         150,000        1,500          6,000              --         7,500
                              ----       ---------     --------     ----------     -----------      --------

Balance at March 31, 1999       --       2,775,950       27,760      3,575,097      (3,582,379)       20,478

Net earnings                    --              --           --             --          34,746        34,746

Common stock issued for
  services                      --         470,000        4,700         18,800              --        23,500
                              ----       ---------     --------     ----------     -----------      --------

Balance at March 31, 2000       --       3,245,950       32,460      3,593,897      (3,547,633)       78,724

Net loss                        --              --           --             --         (14,243)      (14,243)
                              ----       ---------     --------     ----------     -----------      --------

Balance at March 31, 2001       --       3,245,950     $ 32,460     $3,593,897     $(3,561,876)     $ 64,481
                              ====       =========     ========     ==========     ===========      ========
</TABLE>














The accompanying notes are an integral part of the financial statements.




                                      F-5
<PAGE>   17


                         TRANSPIRATOR TECHNOLOGIES, INC.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                      YEARS ENDED MARCH 31,
                                                                      ----------------------
                                                                        2001          2000
                                                                      --------      --------
<S>                                                                   <C>           <C>
Cash flows from operating activities:
    Net earnings (loss)                                               $(14,243)     $ 34,746
       Adjustments to reconcile net earnings (loss) to net
          cash provided by (used in) operating activities:
          Common stock issued for services - legal expenses                 --        22,500
          Common stock issued for services - Directors fees                 --         1,000
          Amortization                                                      --        11,811
       (Increase) decrease in:
          Royalties receivable                                          (8,333)      (40,833)
          Other current assets                                          (1,729)           --
          Accounts payable and accrued expenses                         10,960        14,082
                                                                      --------      --------

              Net cash provided by (used in) operating activities      (13,345)       43,306
                                                                      --------      --------

Net increase (decrease) in cash                                        (13,345)       43,306

Cash at beginning of year                                               58,126        14,820
                                                                      --------      --------

Cash at end of year                                                   $ 44,781      $ 58,126
                                                                      ========      ========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Interest Paid                                                         $     --      $     --
                                                                      ========      ========


Common stock issued for services                                      $     --      $ 23,500
                                                                      ========      ========
</TABLE>











The accompanying notes are an integral part of the financial statements.





                                      F-6
<PAGE>   18


                         TRANSPIRATOR TECHNOLOGIES, INC.

                          NOTES TO FINANCIAL STATEMENTS
                           AT MARCH 31, 2001 AND 2000


(1) DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING PRINCIPLES

    DESCRIPTION OF BUSINESS. Transpirator Technologies, Inc. was organized on
       December 22, 1986 as a Delaware corporation and filed an S-1 Registration
       Statement on April 8, 1987. The Company was organized to design, develop
       and market respiratory therapy products for veterinary and human use. The
       main products developed by the Company were the ET-1000 Equine
       Transpirator Respiratory Unit ("Equine Unit") and the MT-1000 Human
       Transpirator Respiratory Unit ("Human Unit").

       In the initial years of operation, the Company had sales of the Equine
       Unit as well as rental of the Equine Unit. However, sales of the Equine
       product were not substantial enough to be profitable and on January 25,
       1990, the Company granted all rights to the future sales of the Equine
       Unit to another party in exchange for a note in the amount of $263,000,
       plus $20,000 in cash and royalties of $200 for each unit sold. The note
       was payable monthly and was paid off by 1993. The Company has received no
       royalties from the sale of Equine Units under the royalty agreement.

       Subsequent to March 31, 1989, and the sale of the rights to the Equine
       Unit, the Company wound down its activities by paying off its creditors.
       The Company could not continue the development and marketing plans for
       the Human Unit without additional funding. The Company has been fairly
       dormant since March 31, 1990 except for keeping its patents current and
       the receipt of royalty income as stated in Note 5.

    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. A summary of the significant
       accounting policies followed in preparing the accompanying financial
       statements is as follows:

    REVENUE RECOGNITION. Revenue consists of royalties and is recognized when
       the royalty is earned under the terms of the associated licensing
       agreement. Royalty payments received prior to the consummation of the
       earnings process are included in deferred royalty income and are
       recognized in accordance with the terms of the licensing agreement.

    INCOME TAXES. Deferred tax assets and liabilities are recognized for the
       future tax consequences attributable to differences between the carrying
       amounts of existing assets and liabilities measured using enacted tax
       rates expected to apply to taxable income in the years in which those
       temporary differences are expected to be recovered or settled. The effect
       on deferred tax assets and liabilities of a change in tax rates is
       recognized in income in the period that includes the enactment date.

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

                                                                     (continued)


                                      F-7
<PAGE>   19

                         TRANSPIRATOR TECHNOLOGIES, INC.

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


(1) DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING PRINCIPLES, CONTINUED

    PATENTS. Amortization of patent costs is based upon the royalty income as a
       percentage of projected minimum royalties under the terms of the Human
       Unit royalty agreement commencing in the fiscal year ended March 31,
       1998. Amortization expense totaled $-0- and $11,811 for the years ended
       March 31, 2001 and 2000, respectively.

    BASIC AND DILUTED EARNINGS (LOSS) PER SHARE. Basic and diluted earnings
       (loss) per share were computed based on the weighted average number of
       common shares outstanding during the period. There were no Diluted
       Potential Common Shares outstanding during the years ended March 31, 2001
       and 2000.

    STOCK-BASED COMPENSATION. Statement of Financial Accounting Standards No.
       123, "Accounting for Stock-Based Compensation," encourages, but does not
       require companies to record compensation cost for stock-based employee
       compensation plans at fair value. The Company has chosen to account for
       stock-based compensation using the intrinsic value method prescribed in
       Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
       to Employees," and related interpretations. Accordingly, compensation
       cost for stock options is measured as the excess, if any, of the quoted
       market price of the Company's stock at the date of the grant over the
       amount an employee must pay to acquire the stock.

     ACCOUNTING REQUIREMENTS. Financial Accounting Standards 130 - Reporting
       Comprehensive Income establishes standards for reporting comprehensive
       income. The Standard defines comprehensive income as the change in equity
       of an enterprise except those resulting from stockholder transactions.
       All components of comprehensive income are required to be reported in a
       new financial statement that is displayed with equal prominence as
       existing financial statements. The company had no comprehensive income in
       the years ended March 31, 2001 and 2000.

    FAIR VALUE OF FINANCIAL INSTRUMENTS. The Company, in estimating its fair
       value disclosures for financial instruments, uses the following methods
       and assumptions:

         CASH, ROYALTIES RECEIVABLE AND ACCRUED EXPENSES: The carrying amounts
         reported in the balance sheet for cash, royalties receivable and
         accrued expenses approximate their fair value due to the relatively
         short maturity.

(2) NOTES PAYABLE - RELATED PARTIES

    Notes payable - related parties consists of the following:

<TABLE>
<CAPTION>
                                                                                 MARCH 31,
                                                                        -------------------------
                                                                            2001           2000
                                                                        ----------     ----------
<S>                                                                     <C>            <C>
          7% notes payable to related parties payable on demand         $   29,750     $   29,750
                                                                        ==========     ==========
</TABLE>



                                                                     (continued)



                                      F-8
<PAGE>   20
                         TRANSPIRATOR TECHNOLOGIES, INC.

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


(3) RELATED PARTY TRANSACTIONS

    The Company conducts its operations at the office facilities of an officer
       of the Company at no cost. During fiscal 1998, the Company entered into
       employment agreements with two officers of the company. The employment
       agreements commenced August 1, 1998 and provide for the payment of an
       aggregate salary of $1,000 per month for 36 months. Included in accrued
       expenses is an amount of $12,000 which is officers' salary accrual for
       the years ended March 31, 2001 and 2000.

    The Board of Directors approved the payment of 450,000 shares of common
       stock to the three directors of the Company for services valued at
       $22,500 for the year ended March 31, 2000. The Board of Directors also
       approved the payment of 20,000 shares of common stock for legal services
       valued at $1,000. These items have been included in general and
       administrative expenses in the accompanying statements of operations for
       the year ended March 31, 2000.

(4) STOCK OPTION PLAN

    The Company has a stock option plan whereby key full or part-time employees
       are eligible to receive Incentive Stock Options (ISO) and Nonqualified
       Stock Options and certain directors are eligible to receive nonqualified
       stock options. The plan provides for awarding options for a minimum of
       450,000 shares of the Company's common stock at an exercise price not
       less than fair market value at the date of the grant. Options are
       nontransferable and expire within ten years from the date of grant. The
       period for which options are exercisable is determined by the Board of
       Directors, however, in no event can options designated as an ISO vest
       more than $100,000 in any one year, determined at the time of grant. At
       March 31, 2001 and 2000, no options are issued or outstanding. The plan
       has been extended through May 17, 2008.

(5) ROYALTY LICENSING AGREEMENT

    The Company entered into a royalty license agreement with a unrelated party
       on May 17, 1997. The agreement provides for the payment of royalties
       based on sales of the Human Unit products. The agreement provides for the
       payment of minimum royalty payments of $25,000, $50,000 and $100,000 for
       the fiscal years ended March 31, 1998, 1999 and 2000, respectively. The
       royalty being accounted for from the date of the contract which was
       signed on May 17, 1997. In addition, the agreement provides for the
       payment of royalties based on the percentage of sales of products ranging
       from 5% to 10% on existing Human Unit products and 2.5% to 5% for sales
       of newly developed Human Unit products. The agreement provides the
       licensee with the option to purchase the patents subject to the licensing
       agreement for $2,000,000. The agreement can be cancelled by the licensee
       at any time by giving the Company thirty days written notice of
       termination. The Company received $55,000 during the year ended March 31,
       2000. A royalty receivable of $82,500 and $74,166 is included in the
       years ended March 31, 2001 and 2000, respectively. The royalty receivable
       was converted to a promissory note in June 2000. The unpaid principal and
       interest will be payable in full on October 31, 2001.


                                                                     (continued)



                                      F-9
<PAGE>   21

                         TRANSPIRATOR TECHNOLOGIES, INC.

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


(5) ROYALTY LICENSING AGREEMENT, CONTINUED

    The Company has also entered into a technology licensing agreement with
       respect to the Equine Unit. The agreement expires January 25, 2010. The
       agreement provides for the payment of $200 for each Equine Unit produced
       by the licensee. During the three year period ended March 31, 2001, the
       Company has not received any payments with respect to this agreement
       because no Equine Units have been produced by the licensee.

(6) INCOME TAXES

    The tax effects of temporary differences that give rise to significant
       portions of the deferred tax asset are presented below:

<TABLE>
<CAPTION>
                                                                             AT MARCH 31,
                                                                    ----------------------------
                                                                       2001              2000
                                                                    -----------       ----------
<S>                                                                 <C>               <C>
             Deferred tax assets:
                  Net operating loss carryforwards                  $ 1,179,540       $1,205,750
                  General business credit carryforwards                   2,739            2,739
                  Amortization                                               --            3,943
                                                                    -----------       ----------

                  Total gross deferred tax assets                     1,182,279        1,212,432

             Less valuation allowance                                (1,182,279)      (1,212,432)
                                                                    -----------       ----------

                  Net deferred tax assets                           $        --       $       --
                                                                    ===========       ==========
</TABLE>

     A valuation allowance has been established to reduce the deferred tax
         assets to an amount that management believes will ultimately be
         realized. Realization of deferred tax assets is dependent upon
         sufficient future taxable income during the period that temporary
         differences and carryforwards are expected to be available to reduce
         taxable income. With respect to the resulting deferred tax assets at
         March 31, 2001 and 2000, based on the Company's history of operating
         earnings and expectations for the future, management believes
         sufficient uncertainty exists regarding the realizability of these
         items that a valuation allowance is required.



                                                                     (continued)



                                      F-10

<PAGE>   22

                         TRANSPIRATOR TECHNOLOGIES, INC.

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


6) INCOME TAXES, CONTINUED

     At March 31, 2001, the Company has net operating loss carryforwards for
         tax reporting purposes totaling approximately $2,984,090. These
         carryforwards will expire in the following fiscal years:

<TABLE>
<CAPTION>
             FISCAL YEAR                               AMOUNT
             -----------                               ------
<S>                                                  <C>
             2002                                    $  352,000
             2003                                       926,000
             2004                                     1,468,000
             2005                                       204,000
             2007                                         7,000
             2008                                         4,000
             2009                                        13,000
             2010                                         2,000
             2011                                         2,000
             2012                                         6,000
             2013                                            90
                                                     ----------
                                                     $2,984,090
                                                     ==========
</TABLE>


     At March 31, 2001, the Company has a general business credit carryforward
         of $2,739, which will expire in fiscal year 2002.






                                      F-11