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<PAGE>

                                  UNITED STATES
                       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

                  For the fiscal year ended September 30, 2001

                         Commission file number 1-14725
                                                -------

                          BIOZHEM COSMECEUTICALS, INC.
                 (Name of Small Business Issuer in its Charter)

Texas                                                       76-0118305
-----                                                       ----------
(State or other jurisdiction of                             (IRS Employer
 incorporation or organization)                             Identification No.)


25651 Atlantic Ocean Drive A-10
-------------------------------
Lake Forest, CA                                               92630
---------------                                               -----
(Address of principal executive offices)                    (Zip code)

Issuer's telephone number, including area code (949) 707-4030
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock. $.001 par value
-----------------------------

(Title of Class)
----------------

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 of 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
                  Yes   X                            No
                     --------                          -------

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         Issuer's revenues for its most recent fiscal year were $636,586

         As of September 28, 2001, the aggregate market value of the issuer's
common stock, $.001 par value, held by nonaffiliates of the issuer, is
$13,329,896 computed based upon the market price at that date. The number of
shares outstanding of the Common Stock of the Issuer as of the close of business
on December 31, 2001 was 23,567,741.

<PAGE>

<TABLE>
                                             TABLE OF CONTENTS
<CAPTION>

PART I

<S>            <C>                                                                                    <C>
Item 1         Description of Business ................................................................2-5

Item 2         Description of Property...................................................................5

Item 3         Legal Proceedings.........................................................................5

Item 4         Submission of Matters to a Vote of Security Holders.......................................5


PART II

Item 5         Market for Common Equity and Related Stockholder Matters................................5-7

Item 6         Management's Discussion and Analysis ..................................................7-13

Item 7         Financial Statements..................................................................14-39

Item 8         Changes In and Disagreements With Accountants
                     on Accounting and Financial  Disclosure............................................40


PART III

Item 9         Directors, Executive Officers, Promoters and Control Persons; Compliance
                     with Section 16 (a) of the Exchange Act............................................40

Item 10        Executive Compensation...................................................................42

Item 11        Security Ownership of Certain Beneficial Owners and Management...........................44

Item 12        Certain Relationships and Related Transactions...........................................45

Item 13        Exhibits, Lists and Reports on Form 8-K..................................................46
</TABLE>

                                                    1
<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

         INTRODUCTION
         ------------

         Biozhem Cosmeceuticals, Inc. ("Biozhem" or "the Company") incorporated
         in Texas in 1984 as Entourage International, Inc. in the business of
         marketing proprietary personal care products through a worldwide
         multilevel distributor network. In December 1995, the Company sold the
         network marketing division to the existing management team and
         reorganized as a retail specialty store concept under the Biozhem Skin
         Care Center service mark and its direct response regional infomercial,
         catalog and other direct marketing promotions.

         Biozhem is currently a direct marketer of premium quality bioengineered
         and botanically based skin care products for women and men. The Company
         markets its proprietary line of advanced skin care products under its
         brand names Biozhem(TM) and the RevitaCel System(TM) through a national
         direct response television (infomercial) campaign, its Customer Care
         Center telemarketing operation, shopping channels, a website, and
         planned print advertising, catalog and direct mail campaigns. The
         Company also enters into marketing and distribution agreements with
         manufacturers of specific products or product lines for resale through
         its marketing channels.

         As of September 30, 2001, because of continuing losses Biozhem entered
         into a plan to restructure its operation through the phasing out of its
         retail presence by closing the Company's owned stores and servicing its
         clientele through the Biozhem Customer Care Center and its developing
         Biozhem e-commerce website. In the future, the Company will sell its
         Biozhem and RevitaCel System products primarily through its national
         infomercial and other direct response television, shopping channels,
         and through its call center, website, and direct advertising campaigns.
         The Company anticipates expanding into international markets in mid
         2002 through established direct response marketing channels.

         On September 22, 2000, Biozhem entered into a Supply & License
         Agreement with Advanced Tissue Sciences, Inc., a Delaware corporation
         ("ATS"), (NASDAQ:ATIS), which grants Biozhem the exclusive rights to
         become the sole, worldwide direct response marketing partner for an ATS
         nutrient solution, NouriCel(TM). The exclusive rights are for ten
         years, providing that certain sales goals beginning at $15,000,000 per
         year and increasing to $100,000,000 per year in the sixth year are
         reached. In addition, Biozhem will pay to ATS a minimum royalty of 10%
         of gross sales up to $50,000,000 per year and increasing to 13% of
         gross sales over $100,000,000 per year. Biozhem will also pay periodic
         milestone payments beginning at $1,000,000 for the first $10,000,000 in
         gross sales and continuing until cumulative gross sales levels reach
         the $1,000,000,000 level.

         We will sell the RevitaCel System, which incorporates ATS' Nutrient
         Solution, NouriCel, through a number of direct response channels,
         including infomercials, cable shopping networks, Biozhem-branded or
         co-branded websites, direct mail and telemarketing. We engaged Script
         to Screen, a full-service production company specializing in direct
         response television to assist in the production of a 30-minute
         infomercial. The actress Lindsay Wagner has been signed as the
         celebrity host of the infomercial. The infomercial was completed in
         November, 2001 and was aired on a test basis in November and December.
         We anticipate that the infomercial will be aired nationally beginning
         in late January, 2002.

         During the fiscal year ended September 30, 2000, we operated seven
         Company-owned retail stores under the name Biozhem Skin Care Center,
         two of which were closed by September 30, 2000. In 2000 essentially all
         sales were made through Company-owned retail stores. During the fiscal
         year ended September 30, 2001, we made all sales through the five
         stores open at that time. Since September 30, 2001, we have closed four
         stores and have planned the closing of the single remaining store. The
         locations (with opening and closing dates) of these Company-owned and
         operated retail stores are:
                Dallas, Texas (March 1991)(closed November 2001)
                Phoenix, Arizona (March 1992)(closed December 2001)
                Denver, Colorado (March 1993)(planned closing in February 2002)

                                       2
<PAGE>

                Santa Ana, California (February 1997)(closed October 2001)
                San Diego, California (February 1997)(closed November 1999)
                Tulsa, Oklahoma (July 1997)(closed November 2001)
                Oklahoma City, Oklahoma (July 1997)(closed March 2000)

         On September 22, 2000, we entered into a Management Agreement
         ("Agreement") with Beauty Resource, Inc. ("BR"). We engaged BR to
         provide and perform all management services reasonably necessary for
         the proper operation of the Business during the five-year term of the
         Agreement. We agreed to pay or grant to BR, as compensation for the
         services it provided to the Company pursuant to the Agreement, a
         Management Fee and other consideration based upon attaining certain
         profit and revenue levels. On May 24, 2001, the Board of Directors
         determined that BR was not adequately managing the business and decided
         that it was necessary to assume all functions and duties of BR under
         the Agreement. On August 13, 2001, Biozhem and BR agreed to cancel the
         Agreement and we agreed to pay BR the sum of $100,000 and to issue BR
         337,500 shares of Biozhem common stock.


         BUSINESS OF ISSUER
         ------------------

         A. PRODUCTS

         Biozhem is a specialty retailer of premium quality skin care products
         for men and women. The Company has marketed its proprietary line of
         advanced skin care products under its brand names Biozhem and the
         RevitaCel System through Company-owned skin care centers. However, we
         will now sell these proprietary products primarily through nationally
         aired infomercials. The Company also enters into marketing and
         distribution agreements with manufacturers of specific products or
         product lines for resale through its marketing channels.

         B. OPERATIONS
                          (1)  Company-owned Retail Stores
                               ---------------------------

         During fiscal year ended September 30, 2000, we operated seven
         Company-owned retail stores under the name Biozhem Skin Care Center,
         two of which were closed by September 30, 2000. In 2000 essentially all
         sales were made through Company-owned retail stores. During the fiscal
         year ended September 30, 2001, we made all sales through the five
         stores open at that time. Since September 30, 2001, we have closed four
         stores and have planned the closing of the single remaining store. The
         locations with opening and closing dates (during the current and
         previous fiscal years) of the Company-owned and operated retail stores
         as of September 30, 2001 were:

                Dallas, Texas (March 1991)(closed November 2001)
                Phoenix, Arizona (March 1992)(closed December 2001)
                Denver, Colorado (March 1993)(planned closing in February 2002)
                Santa Ana, California (February 1997)(closed October 2001)
                San Diego, California (February 1997) (closed November 1999)
                Tulsa, Oklahoma (July 1997)(closed November 2001)
                Oklahoma City, Oklahoma (July 1997) (closed March 2000)
                San Jose, California (March 1993) (closed September 1997)
                Tampa, Florida (April 1993) (closed September 1997)
                Chicago (Oakbrook), Illinois (September 1993) (closed
                    September 1996)
                Louisville, Kentucky (October 1993) (closed January 1999)

         The San Jose, Santa Ana, San Diego, Tulsa, Oklahoma City and Louisville
         stores were acquired from franchisees; the Company opened the other
         stores.

         Management evaluated the profitability of all its retail stores and
         closed the unprofitable stores in Chicago in September of 1996 and
         Tampa in September of 1997. These stores had shown losses since their
         opening. The San Jose store was closed at the end of its lease with the
         intention of relocating to a large regional mall. The Louisville store

                                       3
<PAGE>

         closed in fiscal 1999. The San Diego and Oklahoma City stores were
         closed during fiscal 2000 due to reduced walk-in sales and
         unprofitability.

                          (2)  Franchised and Licensed Retail Stores
                               -------------------------------------

         In addition to the Company-owned stores, during fiscal 1999 Biozhem
         products were distributed through one franchised and one licensed
         retail store under the Biozhem Skin Care Center name. These retail
         stores were located in Kentucky and Nevada. In January 1999, the
         Company purchased the Kentucky location, closed the store and made
         telephone and mail sales to customers in the database from the
         corporate headquarters. During the 2nd quarter of fiscal 2000, the
         Nevada licensee ceased purchasing product from the Company and the
         license was revoked.

         Sales to franchised and licensed retail stores were less than 1% of
         total sales in fiscal 2000.

         C. COMPETITION

         Biozhem competes with a large number of companies and product lines in
         the markets in which its products are sold. Many competitive companies
         are well established and have research, financial and manufacturing
         capabilities and other resources substantially greater than those of
         Biozhem. Retail competition consists of major department store based
         cosmetic companies such as Estee Lauder, Clinique and Lancome and
         national specialty retailers such as Body Shop. We will compete with
         several companies in the infomercial market that have much more
         experience and more proven successes than we do. These companies are
         larger and have significantly greater financial resources than Biozhem.
         We will compete directly with Gunthy Renker and their beauty product
         infomercials.

         D. SUPPLIERS AND INVENTORY

         Our RevitaCel System and our Biozhem Skin Care System are exclusive,
         proprietary formulations of Biozhem. We have a Supply & License
         Agreement with Advanced Tissue Sciences, Inc., which grants Biozhem the
         exclusive direct response marketing rights for an ATS nutrient
         solution, NouriCel. This solution is the primary ingredient in the
         premier product within the RevitaCel System. The formulas for our
         products are provided to outside contract manufacturers for formulation
         and packaging according to our specifications.

         The Company previously maintained its inventory at the warehouse in its
         office facility and at the company-owned retail skin care centers. With
         the closing of all the skin care centers, inventory will be held in two
         locations. Products sold through Biozhem's Customer Care Center will be
         shipped directly from the corporate office warehouse to customers. In
         October 2001 the Company also began stocking inventory at an outside,
         full-service fulfillment company which will ship, bill and collect for
         sales resulting from direct response advertising, including the
         television infomercial.

         E.  PATENTS, TRADEMARKS AND COPYRIGHTS

         The Company utilizes no patents or copyrights in connection with any of
         its operations. The Company operates under a trademark registration for
         "Biozhem". A service mark application was filed on May 27, 1997 for
         Biozhem's "Advanced Skin Care Solutions". Trade name and trademark
         applications were also filed on May 27, 1997, for Biozhem, Biozhem Skin
         Basics, Biozhem Body Basics and Colour Concepts by Biozhem. NouriCel is
         trademarked by Advanced Tissue Sciences. A trademark application has
         been filed for RevitaCel. The Company seeks to protect its proprietary
         interests in its products by applying for patents, trademarks and/or
         copyrights as circumstances warrant.

                                       4
<PAGE>

         F.  GOVERNMENT REGULATIONS

         Certain federal agencies regulate, among other things, the purity and
         packaging of cosmetic products. Similar regulations are in effect in
         various states. Manufacturers and distributors of cosmetic products are
         also subject to the jurisdiction of the Federal Trade Commission with
         respect to such matters as advertising content and other trade
         practices. Our formulations are manufactured and packaged by
         non-affiliated companies that manufacture products in compliance with
         such regulations and submit their products periodically to independent
         laboratories for testing. However, the extent of potentially adverse
         governmental regulations which might arise from future legislation or
         administrative action cannot be predicted.

         G.  EMPLOYEES AND CONSULTANTS

         Biozhem employs 7 full-time, 12 part-time and 3 contract personnel.
         Three of these individuals are officers of the Company.

ITEM 2.  DESCRIPTION OF PROPERTY

         We lease for our executive office approximately 3,000 square feet of
         office and warehouse space within a business park setting in Lake
         Forest, California. This lease expires in September 2004. We also
         leased retail space for each company-owned retail center in which we
         operated a Biozhem Skin Care Center. The retail centers in Dallas,
         Texas; Phoenix, Arizona; Santa Ana, California; and Tulsa, Oklahoma
         have been closed. The retail center in Denver, Colorado is planned to
         be closed in February, 2002. The total lease commitments are
         approximately $60,000, $22,000, and $2,000 in fiscal years 2002, 2003,
         and 2004, respectively. The Company recognized a restructuring charge
         of $62,390 for the present value of the non-cancelable leases for the
         closed and planned closing stores.

ITEM 3.  LEGAL PROCEEDINGS

         None

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

         None


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND
         RELATED STOCKHOLDER MATTERS

         Historically, the Company's common stock was traded in the
         over-the-counter market of NASDAQ under the symbol "ENTG". On January
         23, 1991, the Company was notified that its stock was delisted from the
         NASDAQ system because of the limited number of firms making a market
         for the Entourage stock under the NASDAQ system. The Company's common
         stock now trades under the symbol "BZHM" on the Over-the-Counter
         Bulletin Board ("OTC BB"). The following table sets forth the high and
         low bid prices of Biozhem common stock for the periods shown.

                  QUARTER ENDED                       BID PRICES
                  -------------                       ----------
                                                     LOW      HIGH
                  December 31, 1999                  $.20     $.30
                  March 31, 2000                     $.15     $.25
                  June 30, 2000                      $.15     $.35
                  September 30, 2000                 $.25     $.60
                  December 31, 2000                  $.31     $.62
                  March 31, 2001                     $.31     $.50
                  June 30, 2001                      $.35    $1.04
                  September 30, 2001                 $.51    $1.00
                  December 31, 2001                  $.28     $.73

                                       5
<PAGE>

         The above quotations reflect inter-dealer prices, without retail
         mark-up, markdowns or commissions, and may not necessarily reflect
         actual transactions.

         As of September 30, 2001, there were approximately 620 holders of
         record for the Company's common stock.

         The Company has paid no dividends on its common stock and has no
         present plans to do so. The Company's Board of Directors intends to
         retain earnings, if any, to finance the growth and development of the
         business of Biozhem. Any payment of cash dividends in the future will
         be at the discretion of the Board of Directors and will depend upon the
         financial condition, capital requirements and earnings, if any, of
         Biozhem, as well as other factors, which the Board of Directors may
         deem relevant.

         RECENT SALES OF UNREGISTERED SECURITIES
         ---------------------------------------

         The following sets forth information relating to all securities of the
         Company sold during the past three fiscal years without registration
         under the Securities Act of 1933.

         FY 1999

         On February 15, 1999, the Company issued 35,000 shares as the $15,750
         down payment for the purchase of the Kentucky franchise.

         On June 29, 1999, the Company issued 10,000 shares as a bonus to an
         employee. On July 15, 1999, the Company issued a total of 528,750
         shares of common stock as follows: 442,540 shares of common stock were
         issued to shareholders to convert $163,183 of debt to equity; 86,210
         shares of common stock were issued in lieu of cash payments for
         consulting fees totaling $28,566; 32,056 shares of common stock were
         issued in lieu of cash payments for unpaid directors' fees for a total
         of $11,875.

         During 1999, the Company sold 1,181,371 shares of its common stock.
         Proceeds to the Company were $370,950, net of offering costs of
         $77,550.

         In the year ended September 30, 1999, the Company committed 14,911
         shares of common stock for $5,517 in debt cancellation and 103,135
         shares of common stock for $27,280 in consulting fees. The 103,135
         shares for consulting fees were then issued in fiscal 2000. The 14,911
         shares of common stock for debt cancellation were issued in fiscal
         2001.

         FY 2000

         In October 1999, the Company issued 127,844 shares of stock for the
         conversion of $66,500 in debt.

         On May 1, 2000, the Company issued shares to exercise 958,521 Class A
         Warrants for $175,000 in cash and in lieu of $51,569 owed for expenses.

         On May 4, 2000, the Company sold 400,000 shares of common stock to a
         third party for cash. In conjunction with this sale, warrants to
         purchase 400,000 shares of the Company's common stock were granted to
         this third party as an incentive to purchase the stock.

         In September 2000, the Company committed 36,000 shares in payment of
         consulting fees of $9,000 and 45,000 shares for payment of directors'
         fees of $11,250. These shares were then issued in fiscal 2001.

         FY 2001

         The Company issued 257,630 shares of common stock for services valued
         at $105,548 during the year ended September 30, 2001.

                                       6
<PAGE>

         During the year ended September 30, 2001, the Company defaulted on
         $150,000 of stockholder notes and accrued interest payable. According
         to the note agreement, the holder of the note had the right upon
         default to convert all unpaid principal and accrued interest into
         common stock of the Company at a conversion price of $0.125 per share.
         As a result, the Company issued 1,200,000 shares of common stock at
         $0.125 per share.

         In addition, during the year ended September 30, 2001, the Company
         issued 51,912 shares of common stock to convert another note payable
         totaling $12,978 at $0.25 per share. There was no beneficial conversion
         associated with this note payable.

         The Company issued 11,510,370 shares (including 189,370 shares issued
         to finders) and committed to issue an additional 400,000 shares for
         cash proceeds to the Company of $2,699,350 (net of issuance costs of
         $297,271) during the year ended September 30, 2001. The 400,000
         committed shares were then issued in fiscal 2002.

         All of the foregoing shares issued in the last three fiscal years were
         issued in reliance upon the exemption from registration pursuant to
         Section 4(2) of the Securities Act of 1933 and or Regulation D
         promulgated under the Securities Act of 1933.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

         MANAGEMENT AGREEMENTS
         ---------------------

         We entered into a management agreement in 1999. This Agreement (the
         "Agreement") was effective as of July 14, 1999 (the "Effective Date")
         by and among One World Network Integrated Technologies, Inc., a Nevada
         corporation (or any affiliate thereof) (collectively "OWN"), and the
         Company. OWN was engaged by the Company to exclusively provide and
         perform for and on behalf of the Company all management services
         reasonably necessary for the proper and efficient operation of the
         Company for a five-year period. OWN was in charge of marketing and
         distribution activities on behalf of the Company. OWN was responsible
         for all sales activities including determining which products to
         market, selling prices, target customers, selecting distribution
         methods and procedures and advertising activities. OWN was entitled to
         a reimbursement of expenses for its services and a management fee of
         40% of pre-tax net income, if any, for each year during the five-year
         term.

         On the closing date and continuing thereafter, we issued to OWN
         warrants which contained cashless exercise provisions and protection
         against stock split/reverses and had a term of five years from their
         respective dates of issuance. The Warrants were to be issued as
         follows:

                  (i)      1,000,000 Class A Warrants to purchase one share of
                           Company's common stock at an exercise price of $.70
                           or the average of the closing price as quoted on the
                           principal exchange for which the Company's shares
                           trade for the five (5) day period immediately
                           preceding the date of the execution of the agreement;

                  (ii)     For each $400,000 in cumulative Pre-Tax Net Income
                           that was generated by the Company during the term,
                           OWN was to receive 500,000 Class B Warrants to
                           purchase one share of the Company's common stock at
                           an exercise price of $1.00 per share, up to a maximum
                           of 22,000,000 Class B Warrants;

                  (iii)    1,000,000 Class C Warrants to purchase one share of
                           the Company's common stock at an exercise price of
                           $1.00 upon the completion during the term of a
                           strategic alliance, endorsement deal or product
                           acquisition, the result of which, in combination with
                           other activities of the Company, increase the market
                           capitalization of the Company by at least
                           $10,000,000, such determination to be based upon a
                           six (6) month average before and after said
                           transaction of the daily closing prices as quoted on
                           the principal exchange for which the Company's shares
                           trade;

                                       7
<PAGE>

                  (iv)     1,000,000 Class D Warrants to purchase one share of
                           the Company's common stock at an exercise price of
                           $1.00 upon the attainment during the term of the
                           first two consecutive quarters of Pre-Tax Net Income
                           of more than $60,000 per quarter; and

                  (v)      1,000,000 Class E Warrants to purchase one share of
                           the Company's common stock at an exercise price of
                           $1.50 per share if the Company, during any
                           consecutive six (6) month period (or less) attains
                           gross revenues of at least $8,000,000, provided that
                           no Class E Warrants shall be issued if the Company
                           does not have after tax net income from operations
                           during such period; and provided further, a maximum
                           of 3,000,000 Class E Warrants shall be issued under
                           this subparagraph.

         As of September 30, 1999, we issued 1,000,000 Class A Warrants to
         purchase shares of the Company's common stock at $0.56 per share. No
         additional warrants were earned by the OWN under the Agreement.

         Upon closing of the transaction, OWN made available to us a loan of up
         to $50,000 to cover operational cash flow problems. The loan had an
         interest rate of 10% for a one-year period. If the note was not repaid
         at maturity it could be repaid with common stock of the Company valued
         at $.37 per share, with piggyback registration rights. In addition, OWN
         agreed to assist us and our advisors, on a best efforts basis and on
         terms mutually agreed upon, in arranging for $200,000 in new equity.
         The balance on the note was $42,177 at September 30, 1999.

         Concurrently with the closing of the transaction on July 14, 1999, Mr.
         Hernand and Mr. Reyff, Sr. resigned from the Board of Directors of the
         Company. The vacancies created thereby were to be filled, as soon as
         practicable, by two new outside directors acceptable to OWN and the
         remaining directors. At any subsequent time, OWN would have had the
         right to designate two (2) additional nominees, and the Company would
         be obligated to cause the directors to increase the size of the Board
         to seven members and appoint the two persons designated by OWN to fill
         the vacancies so created, and such directors would serve until the next
         meeting of shareholders of the Company at which directors are elected.
         Upon termination of the Agreement, all directors elected by or through
         OWN, if any, would resign effective immediately.

         In October 1999, we amended the Agreement. As part of the amendment,
         OWN agreed to increase its loan available to the Company to $100,000
         and to purchase 127,844 shares common stock for $66,500. The Company
         opted thereafter to cancel its debt to OWN rather than collect the
         $66,500 from OWN. In consideration for these transactions, the Company
         agreed to lower the exercise price of 888,666 of the Class A Warrants
         from $0.56 to $0.15 per share.

         On May 1, 2000, we terminated its Agreement with OWN because of
         negligent management and an inadequate product inventory. In connection
         with the termination, OWN agreed to exercise 958,521 shares of Class A
         Warrants for $175,000 in cash and $51,569 in expense reimbursements and
         cancel the remaining 41,479 warrants. OWN also agreed to acquire
         co-ownership of the Company's pre-termination customer list for a
         guaranteed royalty of $40,000.

         On September 22, 2000, we entered into a management agreement with
         Beauty Resource, Inc., a Nevada corporation ("BR"). We engaged BR to
         provide and perform for the Company all management services reasonably
         necessary for the proper and efficient operation of the Company for a
         five-year period. BR personnel currently assigned to manage the
         day-to-day activities of the Company include individuals designated as
         the Company's CEO and COO.

         BR was to supervise the bookkeeping and accounting services for and on
         behalf of the Company. BR was to be responsible for all marketing,
         distribution activities on behalf of the Company including, but not
         limited to, determining which products to market, sales prices, target
         markets and customers, selecting distribution methods and procedures
         and advertising activities. Additionally, BR was responsible for all
         other administrative functions of the Company including, without
         limitation, hiring and personnel matters, compensation arrangements
         with employees of the Company, selecting outside advisors and
         consultants to the Company, choosing vendors and suppliers, selecting
         and negotiating banking relationships and all other normal and
         customary activities associated with operating a business.

                                       8
<PAGE>

         BR was entitled to a payment of $15,000 per month. In addition,
         commencing April 1, 2001 and continuing on the first day of each
         quarter thereafter during the remaining term of the agreement, we
         agreed to pay BR a fee in the amount of 0.5% of the sales (net of
         returns and allowances) of the Company for the preceding quarter.

         Upon signing of the agreement, we awarded the new CEO options to
         purchase 100,000 shares of the Company common stock at an exercise
         price of $0.25 per share, to be exercised on or before September 30,
         2003.

         In addition, as defined in the agreement, BR was entitled to
         performance options of up to 2,000,000 shares through March 31, 2006 at
         $0.25 per share based on achieving certain sales targets and 3,000,000
         shares through March 31, 2006 at $0.25 per share based on achieving
         certain pre-tax net income levels. BR could have earned cash bonuses of
         up to 5% of pre-tax net income based on achieving certain ratios of
         pre-tax net income to sales.

         On May 24, 2001, the Board of Directors determined that BR was not
         adequately managing the business and decided that it was necessary to
         assume all functions and duties of BR under the Agreement. On August
         13, 2001, the Company and BR agreed to cancel the agreement and the
         Company agreed to pay BR the sum of $100,000 and to issue BR 337,500
         shares of Biozhem common stock.

         LIQUIDITY AND CAPITAL RESOURCES
         -------------------------------

         On September 30, 2001, the Company had cash of $556,179 and net working
         capital of $753,556. The Company's primary source of liquidity has been
         cash provided through equity financing.

         Cash used in operating activities was $1,991,602 for the year ended
         September 30, 2001 and $418,613 for the year ended September 30, 2000.
         As a result of these negative cash flows and the Company's recurring
         losses, the Company's independent certified public accountants have
         stated in their report included in this Form 10-KSB, that these
         conditions raise substantial doubt about the Company's ability to
         continue as a going concern.

         In October 1999, the Company amended its contract with OWN and issued
         127,844 shares of stock for the conversion of $66,500 in debt. OWN
         agreed to increase its loan available to the Company to $100,000. In
         consideration for these transactions, the Company agreed to lower the
         exercise price of 888,666 of the Class A Warrants from $.56 to $.15. On
         May 1, 2000, the Company terminated its contract with OWN. In
         connection with the cancellation, OWN agreed to exercise 958,521 Class
         A Warrants for $175,000 and $51,569 in expense reimbursement and cancel
         the remaining 41,479 warrants. OWN also agreed to acquire co-ownership
         of the Company's pre-termination customer list for $40,000.

         On May 4, 2000, the Company sold 400,000 shares of common stock to a
         third party for cash of $50,000. In conjunction with this sale,
         warrants to purchase 400,000 shares of the Company's common stock were
         granted to this third party as an incentive to purchase the stock.
         Therefore, the granting of the warrants had no net impact on operations
         or equity.

         In September 2000, the Company committed 36,000 shares in payment of
         consulting fees of $9,000 and 45,000 shares for payment of directors'
         fees of $11,250.

         In fiscal 2000, the Company granted 1,608,000 options to consultants,
         valued at $368,000. The fair value of each non-Plan option granted was
         estimated using the Black-Scholes option-pricing model.

         Pursuant to private placement memorandums, the Company issued
         11,510,370 shares (including 189,370 shares issued to finders) and
         committed to issue an additional 400,000 shares for proceeds to the
         Company of $2,699,350 (net of issuance costs of $297,271) during the
         year ended September 30, 2001.

                                       9
<PAGE>

         During the years ended September 30, 2001 and 2000, the Company issued
         95,911 and 103,135 shares of stock, respectively, for transactions that
         were recorded in the Company's fiscal 2000 and 1999 financial
         statements. The value of such shares was previously recorded as shares
         subscribed; therefore, the issuances had no net impact on operations or
         equity.

         The Company issued 534,500 shares of common stock for services valued
         at $243,928 during the year ended September 30, 2001. Shares were
         valued at the estimated market value at date of issuance (based on the
         closing price of the Company's common stock).

         During the year ended September 30, 2001, the Company defaulted on
         $150,000 of stockholder notes and accrued interest payable. According
         to the note agreement, the holder of the note had the right upon
         default to convert all unpaid principal and accrued interest into
         common stock of the Company at a conversion price of $0.125 per share.
         Further, upon conversion, the note holder would also be granted
         warrants to purchase additional shares (equal to the number shares
         converted) at an exercise price of $0.25 per share for a period of
         three years. The Company has recorded the value of the beneficial
         conversion feature and the related warrants in fiscal 2001 when the
         conversion feature was no longer contingent on a future event. The
         combined value of the beneficial conversion feature and the related
         warrants was $150,000 which was recorded to additional paid-in capital
         and interest expense. As a result, the Company issued 1,200,000 shares
         of common stock at $0.125 per share and warrants to acquire an
         additional 1,200,000 shares of common stock at $0.25 per share. This
         default did not effect the repayment terms of any other notes payable.

         In addition, during the year ended September 30, 2001, the Company
         issued 51,912 shares of common stock to convert another note payable
         totaling $12,978 at $0.25 per share. There was no beneficial conversion
         associated with this note payable.

         During 2001, under the 1998 Stock Option Plan, the Company granted
         options to purchase 125,000 shares at an exercise price of $0.42 to an
         employee. The options vest over a period of three years and expire in
         ten years.

         During the year ended September 30, 2001, the Company granted non-Plan
         options to purchase 1,000,000 shares at an exercise price of $0.25 to
         its directors, which was recorded as compensation expense of $260,000
         as the option price was less than market fair value on the date of
         grant.

         In fiscal 2000, the Company granted 1,608,000 non-Plan options at an
         exercise price of $0.25 per share to consultants, valued at $368,000.
         In fiscal 2001, the Company granted 1,850,000 non-Plan options at an
         exercise price of $0.25 per share to consultants, valued at $809,000.
         The fair value of each option or warrant granted is estimated on the
         date of grant using the Black-Scholes option-pricing model.

         In January 2001, the Company issued 25,000 warrants with an exercise
         price of $0.25 per share to an unrelated third party for interest on a
         note payable. The estimated fair value of these warrants totaled $6,250
         and has been expensed during the year.

         During the year ended September 30, 2001, the Company granted 245,000
         warrants with an exercise price of $0.25 per share for services
         rendered, valued at $99,300.

         The Company must still rely primarily on operating cash flow and cash
         management to sustain its operations. The Company's 2002 operating plan
         contemplates improved operating results and cash flow. If management
         cannot achieve its 2002 operating plan because of sales shortfalls or
         other unfavorable events, the Company may find it necessary to further
         reduce expenses or undertake other actions as may be appropriate.

         The Company's continued existence is dependent upon its ability to
         achieve its 2002 operating plan, which contemplates significantly
         improved operating results and cash flow and its ability to obtain
         additional financing. These results are dependent upon a financially
         viable infomercial. There can be no assurances that the Company will be
         successful in these regards. The Company believes that it has
         sufficient cash to fund operations through September 30, 2002.

                                       10
<PAGE>

         OPERATIONS - 2001 COMPARED TO 2000
         ----------------------------------

         Biozhem incurred a net loss of $3,423,690 in 2001 compared to a net
         loss of $1,010,356 in 2000.

         Due primarily to decreasing customer base for the Biozhem skin care
         line, net sales in 2001 decreased $90,150 or 12% compared to sales in
         2000. One Company-owned store was closed in March 2000. Average monthly
         sales per Company-owned store in operation during the entire fiscal
         year dropped to $10,977 in 2001 compared to $11,236 in 2000.

         Gross profit in 2001 decreased by $43,806 or 8% as compared to the
         corresponding amount for 2000. Gross profit as a percentage of net
         sales increased to 76% in 2001 from 73% in 2000 due to a small decrease
         in product costs.

         Selling, general and administrative expenses increased by $1,918,204,
         or 130%, in 2001 as compared to 2000. These increased costs were
         primarily associated with the addition of the RevitaCel line, increased
         management expenses required by the infomercial planning and
         production, and the $972,000 increase in fiscal 2001 over 2000 for the
         options and shares provided to consultants and employees. Advertising
         expense increased by $117,330 to $145,187 in 2001 due to costs incurred
         introducing the new RevitaCel line.

         Depreciation decreased in 2001 by $3,211 as compared to 2000 and
         amortization decreased by $6,832 primarily due to the increasing age of
         the stores.

         Interest expense increased by $151,331 in 2001 as compared to 2000 due
         primarily to the non-cash expense of $150,000 which was recorded on the
         beneficial conversion of notes payable.

         At September 30, 2001, the Company had federal and state net operating
         loss carryforwards of approximately $8,100,000 and $4,080,000,
         respectively. If not used to offset future taxable income, these loss
         carryforwards will expire between 2002 and 2021. Pursuant to the Tax
         Reform Act of 1986, use of the Company's net operating loss
         carryforwards may be substantially limited if a cumulative change in
         ownership of more than 50% occurs within a prescribed testing period.
         Equity transactions in the past may have resulted in such a change and
         would likely result in a limitation of the amount of net operating loss
         that may be used annually. Further, the limitation may render a
         substantial portion of the Company's net operating loss carryforwards
         unusable. Based on numerous factors but not limited to the Company's
         historical losses, management believes that it cannot demonstrate that
         it is more likely than not that it will fully realize all of the
         benefits of deferred tax assets existing at September 30, 2001.
         Accordingly, a valuation allowance has been provided for the full
         amount of the Company's deferred tax assets.

         As of September 30, 2001, due to continuing losses, the board of
         directors of the Company entered into a plan to restructure its
         operations by phasing out retail stores and servicing its clientele
         through direct sales. As a result, the Company recognized a
         restructuring charge of $279,312, consisting of the write-down of
         goodwill on acquired retail stores to be closed ($216,922) and the
         present value of non-cancelable future retail store lease payments
         ($62,390).

         UNCERTAINTIES AND RISK FACTORS
         ------------------------------

         In addition to the other information and financial data set forth
         elsewhere in this report, the following risk factors should be
         carefully considered in evaluating the Company. The uncertainties and
         risks described below are not the only ones we face. Additional risks
         and uncertainties not presently known to us or that we currently deem
         immaterial may also cause a reduction in our business operations and
         reduce our ability to obtain additional financing.

         OUR FINANCIAL STATEMENTS HAVE A GOING CONCERN OPINION. Our financial
         statements for the years ended September 30, 2001 and 2000 have been
         prepared on a going concern basis, which contemplates the realization
         of assets and the satisfaction of liabilities in the normal course of
         business. Our independent auditors have issued a "going concern"

                                       11
<PAGE>

         opinion in their report to our financial statements for such years
         citing recurring losses and negative cash flows from operations for
         each of the last two fiscal years. Accordingly, those conditions raise
         substantial doubt about our ability to continue as a going concern.
         This going concern qualification may also adversely affect the
         perception of prospective investors and suppliers of our Company.

         WE HAVE REPORTED CONTINUING NET LOSSES. We reported net losses of
         approximately $3,420,000 and $1,010,000 and net cash used in operating
         activities of approximately $1,992,000 and $419,000 in fiscal 2001 and
         2000, respectively. There can be no assurance that we will be able to
         generate sufficient revenue to achieve profitability on a sustained
         basis.

         WE MAY NOT HAVE THE ABILITY TO MEET OUR CAPITAL NEEDS. We need
         additional capital to fund our operations and we are seeking to obtain
         additional capital through equity and/or debt financing. If additional
         funds are raised by issuing equity securities and/or debt convertible
         into equity, further dilution to existing stockholders will result, and
         future investors may be granted rights superior to those of existing
         stockholders. There can be no assurance, however, that additional
         financing will be available when needed, or if available, will be
         available on acceptable terms.

         WE RELY ON SALES OF CERTAIN PRODUCTS. Our financial success depends
         almost entirely on marketing our skin care products. Although we plan
         to diversify our product line and our methods of distribution in the
         future, there is no assurance we will be able to do so. Any significant
         diminished consumer interest in our products would adversely affect our
         business. We may not be able to develop successful new products or
         implement successful enhancements to existing products. Any products
         that we do develop or enhance may not generate sufficient sales to
         justify the cost of developing and marketing these products.

         WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR EXISTING OPERATIONS AND ANY
         GROWTH. In order to manage our operations successfully, we believe that
         we must: maintain a high level of manufacturing quality and efficiency;
         continue to enhance our operational, financial and management systems
         and controls; effectively expand, train and manage our employee base;
         and maintain an effective and efficient customer call center and
         inventory control and distribution system through third parties. Our
         failure to properly manage any of these or other growth-related
         challenges could adversely affect our business. We cannot assure you
         that we will succeed in effectively managing our existing operations or
         our any growth.

         OUR INFOMERCIAL MAY NOT BE SUCCESSFUL. Our continued existence is
         dependent upon our ability to achieve our 2002 operating plan, which
         contemplates significantly improved operating results and cash flows.
         The 2002 operating plan is based on the successful launch of the
         RevitaCel System infomercial. There can be no assurances that the
         infomercial will generate sufficient revenues and margins to pay
         advertising costs, product expenses, royalty and promotion fees and to
         provide funds for working capital and profit.

         WE HAVE ESTABLISHED COMPETITION. We compete with a large number of
         companies and product lines in the markets in which our products are
         sold. Many competitive companies are well established and have
         research, financial and manufacturing capabilities and other resources
         substantially greater than ours. Retail competition consists of major
         cosmetic companies such as Estee Lauder, Clinique and Lancome and
         national retailers such as Body Shop. We will compete with several
         companies in the infomercial market that have much more experience and
         more proven successes than we do. These companies are larger and have
         significantly greater financial resources than us. In addition, we will
         compete directly with Gunthy Renker and their beauty product
         infomercials.

         WE HAVE TO MEET GOVERNMENT REGULATIONS. Certain federal agencies
         regulate, among other things, the purity and packaging of cosmetic
         products. Similar regulations are in effect in various states.
         Manufacturers and distributors of cosmetic products are also subject to
         the jurisdiction of the Federal Trade Commission with respect to such
         matters as advertising content and other trade practices. Our
         formulations are manufactured and packaged by non-affiliated companies
         that manufacture products in compliance with such regulations and
         submit their products periodically to independent laboratories for

                                       12
<PAGE>

         testing. However, the extent of potentially adverse governmental
         regulations, which might arise from future legislation or
         administrative action, cannot be predicted.

         IF WE LOSE OUR KEY PERSONNEL OR CANNOT RECRUIT ADDITIONAL PERSONNEL,
         OUR BUSINESS MAY SUFFER. We depend on the continued services and
         performance of our executive officers and other key personnel. None of
         such individuals are employed pursuant to employment agreements. In
         addition, we do not have "key person" life insurance policies. If we do
         not succeed in attracting new employees or retaining and motivating
         current and future employees or executive officers, our business could
         suffer.

         WE FACE PRODUCT LIABILITY RISKS. We are subject to potential product
         liability claims if our products injure or allegedly injure our
         customers or other users. We believe that our insurance coverage
         adequately covers potential product liability claims. However, we may
         have inaccurately assessed our product liability risk. In addition, we
         may be unable to purchase sufficient insurance coverage at an
         affordable price, or our insurers may fail to satisfy their
         obligations. If our insurance coverage is inadequate to cover future
         product liability claims, our business may be adversely affected.

         INCREASES IN ADVERTISING RATES MAY REDUCE OUR PROFITABILITY. We depend
         primarily on television infomercials to market our products.
         Consequently, the price we must pay for our preferred media time
         significantly affects our financial performance. If the cost of our
         preferred media time increases, it may increase our selling and
         marketing expenses and decrease any profitability.

         OTC MARKET FOR COMMON STOCK. Our Common Stock currently trades on the
         OTC Bulletin Board. Therefore, no assurances can be given that a liquid
         trading market will exist at the time any investor desires to dispose
         of any shares of the Company's Common Stock.

         POSSIBLE VOLATILITY OF STOCK PRICE. The price of our Common Stock has
         fluctuated substantially and the market price of the shares of Common
         Stock is likely to continue to be highly volatile. Factors such as
         approximately 17,000,000 shares of our issued and outstanding stock
         being subject to Rule 144, terms of any equity and/or debt financing,
         fluctuations in our operating results and market conditions could have
         a significant impact on the future price of our Common Stock and could
         have a depressive effect on the then market price of the Common Stock.
         In addition, the market for the Common Stock may be influenced by many
         other factors, including the depth and liquidity of the market for the
         Company's Common Stock, investor perceptions of the Company, and
         general economic and similar conditions.

         BECAUSE OUR COMMON STOCK IS A "PENNY STOCK", TRADING IN IT IS SUBJECT
         TO THE PENNY STOCK RULES WHICH COULD AFFECT YOUR ABILITY TO RESELL THE
         STOCK IN THE MARKET. The Securities Enforcement and Penny Stock Reform
         Act of 1990 imposes restrictions when making trades in any stock, such
         as our Common Stock, which is defined as a "penny stock". The SEC's
         regulations generally define a penny stock as an equity security that
         has a price of less than $5.00 per share, other than securities which
         are traded on markets such as the New York Stock Exchange, the American
         Stock Exchange or the NASDAQ Stock Market. As a result of being a penny
         stock, the market liquidity for our Common Stock may be adversely
         affected since the regulations on penny stocks could limit the ability
         of broker-dealers to sell our Common Stock and thus your ability to
         sell our Common Stock in the secondary market. The regulations
         restricting trades in penny stock include: a requirement that
         stockbrokers deliver to their customers, prior to any transaction
         involving a penny stock, a disclosure schedule explaining the penny
         stock market and the risks associated with the penny stock market; and
         a requirement that broker-dealers who recommend penny stocks to persons
         other than their established customers and a limited class of a
         accredited investors must make a special written suitability
         determination for the purchaser and receive the purchaser's written
         agreement to the transaction prior to the sale of the securities.

         OUR STOCK DOES NOT HAVE CUMULATIVE VOTING OR PRE-EMPTIVE RIGHTS. There
         are no pre-emptive rights in connection with the Company's Common
         Stock. Therefore, in the event we issue shares of stock in connection
         with any financing activities or other transactions, current
         shareholders of the Company will be diluted in their percentage
         ownership of the Company. Cumulative voting in the election of
         directors is not allowed. Accordingly, the holders of a majority of the
         shares of Common Stock will be able to elect all of the Company's Board
         of Directors and control the Company's policies.

                                       13
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

Reports of Independent Auditors..............................................16

Financial Statements
--------------------

Balance Sheet as of September 30, 2001.......................................17
Statements of Operations - Years ended September 30, 2001 and 2000...........18
Statements of Stockholders' Equity - Years ended
    September 30, 2001 and 2000...........................................19-20
Statements of Cash Flows - Years ended September 30, 2001 and 2000...........21
Notes to Financial Statements.............................................22-39

                                       14
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                            FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

                                                                            WITH

                                            INDEPENDENT AUDITORS' REPORT THEREON

================================================================================

                                       15
<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



To the Board of Directors and Stockholders
Biozhem Cosmeceuticals, Inc.


We have audited the accompanying balance sheet of Biozhem Cosmeceuticals, Inc.
(the "Company") as of September 30, 2001, and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
two-year period then ended. These financial statements are the responsibility of
the management of the Company. Our responsibility is to express an opinion on
the financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the 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 Biozhem Cosmeceuticals, Inc. as
of September 30, 2001, and the results of its operations and its cash flows for
the each of the years in the two-year period then ended in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully disclosed in Note 2 to
the financial statements, the Company has recurring losses and has negative cash
flow from operations for each of the last two fiscal years. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans as to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.




                                                     CORBIN & WERTZ
Irvine, California
December 14, 2001

                                       16
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                                   BALANCE SHEET

                                                        AS OF SEPTEMBER 30, 2001

================================================================================

ASSETS

Current assets:
   Cash                                                            $    556,179
   Inventory                                                             57,572
   Prepaid expenses and other current assets                            124,565
   Capitalized television productions costs                             369,967
                                                                   -------------

         Total current assets                                         1,108,283

Property and equipment, net                                              39,613

Deposits and other                                                       26,538
                                                                   -------------

                                                                   $  1,174,434
                                                                   =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued liabilities                        $    344,566
   Note payable                                                          10,161
                                                                   -------------

         Total current liabilities                                      354,727
                                                                   -------------

Commitments and contingencies

Stockholders' equity:
   Preferred stock, $1.00 par value; 10,000,000 shares
     authorized; no shares issued and outstanding                             -
   Common stock, $.001 par value; 100,000,000 shares
     authorized; 22,967,741 shares issued and outstanding
     as  of September 30, 2001                                           22,968
   Common stock subscribed, $.001 par value; 400,000
     shares committed as of September 30, 2001                              400
   Additional paid-in capital                                        10,487,781
   Accumulated deficit                                               (9,691,442)
                                                                   -------------
         Total stockholders' equity                                     819,707
                                                                   -------------

                                                                   $  1,174,434
                                                                   =============

--------------------------------------------------------------------------------
                                            SEE INDEPENDENT AUDITORS' REPORT AND
                                      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       17
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                        STATEMENTS OF OPERATIONS

================================================================================

                                                     YEARS ENDED SEPTEMBER 30,
                                                  ------------------------------
                                                       2001             2000
                                                  -------------    -------------

Net sales                                         $    636,586     $    726,736

Cost of sales                                          148,767          195,111
                                                  -------------    -------------

         Gross profit                                  487,819          531,625
                                                  -------------    -------------

Expenses:
   Selling, general and administrative               3,398,292        1,480,088
   Depreciation and amortization                        62,057           72,100
   Restructuring charges                               279,312                -
                                                  -------------    -------------

         Total expenses                              3,739,661        1,552,188
                                                  -------------    -------------

Loss from operations                                (3,251,842)      (1,020,563)

Interest expense                                      (185,345)         (34,014)

Other income                                            13,497           44,221
                                                  -------------    -------------

         Net loss                                 $ (3,423,690)    $ (1,010,356)
                                                  =============    =============

Net loss per common and equivalent share -
   basic and diluted                              $      (0.22)    $      (0.12)
                                                  =============    =============

Weighted average number of common
   shares outstanding                               15,779,337        8,711,648
                                                  =============    =============

--------------------------------------------------------------------------------
                                            SEE INDEPENDENT AUDITORS' REPORT AND
                                      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       18
<PAGE>

<TABLE>
                                                                                                        BIOZHEM COSMECEUTICALS, INC.

                                                                                                  STATEMENTS OF STOCKHOLDERS' EQUITY

                                                                                     FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

====================================================================================================================================
<CAPTION>

                                          COMMON STOCK           COMMITTED COMMON STOCK     ADDITIONAL
                                   --------------------------  -------------------------     PAID-IN     ACCUMULATED
                                      SHARES        AMOUNT        SHARES        AMOUNT       CAPITAL       DEFICIT        TOTAL
                                   ------------  ------------  ------------  ------------  ------------  ------------  ------------
<S>                                  <C>         <C>              <C>        <C>           <C>           <C>           <C>
Balances at October 1, 1999          7,985,548   $     7,985       118,046   $       118   $ 5,340,081   $(5,257,396)  $    90,788

Shares committed for services                -             -        81,000            81        20,169             -        20,250

Shares sold for cash                   400,000           400             -             -        49,600             -        50,000

Issuance of shares upon
  conversion of debt                   127,844           128             -             -        66,372             -        66,500

Exercise of warrants for cash
  and services                         958,521           959             -             -       225,610             -       226,569

Subscribed shares issued               103,135           103      (103,135)         (103)            -             -             -

Options issued for services                  -             -             -             -       368,840             -       368,840

Net loss                                     -             -             -             -             -    (1,010,356)   (1,010,356)
                                   ------------  ------------  ------------  ------------  ------------  ------------  ------------

Balances at September 30, 2000       9,575,048         9,575        95,911            96     6,070,672    (6,267,752)     (187,409)

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                SEE INDEPENDENT AUDITORS' REPORT AND
                                                                                          ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                                                 19
</TABLE>
<PAGE>

<TABLE>
                                                                                                        BIOZHEM COSMECEUTICALS, INC.

                                                                                      STATEMENTS OF STOCKHOLDERS' EQUITY - CONTINUED

                                                                                     FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

====================================================================================================================================
<CAPTION>
                                        COMMON STOCK           COMMITTED COMMON STOCK       ADDITIONAL
                                 --------------------------  ---------------------------     PAID-IN     ACCUMULATED
                                    SHARES        AMOUNT        SHARES        AMOUNT         CAPITAL       DEFICIT         TOTAL
                                 ------------  ------------  ------------   ------------   ------------  ------------   ------------
<S>                               <C>          <C>               <C>        <C>            <C>           <C>            <C>
Shares committed for cash                  -             -       400,000            400         99,600             -        100,000

Shares sold for cash              11,510,370        11,510             -              -      2,587,840             -      2,599,350

Issuance of shares upon
   conversion of debt              1,251,912         1,252             -              -        161,726             -        162,978

Shares issued for services           534,500           535             -              -        243,393             -        243,928

Subscribed shares issued              95,911            96       (95,911)           (96)             -             -              -

Options and warrants issued
  for services                             -             -             -              -      1,324,550             -      1,324,550

Net loss                                   -             -             -              -              -    (3,423,690)    (3,423,690)
                                 ------------  ------------  ------------   ------------   ------------  ------------   ------------

Balances at September 30, 2001    22,967,741   $    22,968       400,000    $       400    $10,487,781   $(9,691,442)   $   819,707
                                 ===========   ===========   ===========    ===========    ===========   ===========    ===========

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                SEE INDEPENDENT AUDITORS' REPORT AND
                                                                                          ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                                                 20
</TABLE>
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                        STATEMENTS OF CASH FLOWS

================================================================================

                                                       YEARS ENDED SEPTEMBER 30,
                                                     ---------------------------
                                                         2001           2000
                                                     ------------   ------------

Cash flows from operating activities:
   Net loss                                          $(3,423,690)   $(1,010,356)
   Adjustments to reconcile net loss to net cash
     used in operating activities:
       Depreciation and amortization                      62,057         72,100
       Loss on disposal of assets                         11,261              -
       Non-cash portion of restructuring charges         216,922              -
       Common stock issued or committed for services     243,928         20,250
       Exercise of warrants for services                       -         51,569
       Warrants and options issued for services        1,324,550        368,840
       Changes in operating assets and liabilities:
          Accounts receivable                                  -          1,347
          Inventory                                      (31,931)        34,221
          Prepaid expenses and other current assets     (124,104)         2,807
          Capitalized television production costs       (369,967)             -
          Other assets                                   (14,283)        11,094
          Accounts payable and accrued liabilities       113,655         29,515
                                                     ------------   ------------

   Net cash used in operating activities              (1,991,602)      (418,613)
                                                     ------------   ------------

Cash flows used in investing activities:
   Purchases of property and equipment                   (37,754)             -
                                                     ------------   ------------

Cash flows from financing activities:
   Proceeds from sale of common shares
     and exercise of warrants                          2,699,350        225,000
   Proceeds from borrowings                                    -        338,506
   Repayment of debt                                    (175,030)       (83,678)
                                                     ------------   ------------

   Net cash provided by financing activities           2,524,320        479,828
                                                     ------------   ------------

Net increase in cash                                     494,964         61,215

Cash at beginning of year                                 61,215              -
                                                     ------------   ------------

Cash at end of year                                  $   556,179    $    61,215
                                                     ============   ============

Supplemental disclosure of cash flow information:
   Cash paid during the year for interest            $    18,819    $    17,125
                                                     ============   ============

Supplemental disclosure of non-cash investing and
   financing activities:
     Conversion of debt into common stock            $   162,978    $    66,500
                                                     ============   ============

--------------------------------------------------------------------------------
                                            SEE INDEPENDENT AUDITORS' REPORT AND
                                      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       21
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 1 - ORGANIZATION
---------------------

Description of the Company
--------------------------

Biozhem Cosmeceuticals, Inc. ("Biozhem" or "the Company") incorporated in Texas
in 1984 as Entourage International, Inc. Biozhem is currently a direct marketer
of premium quality bioengineered and botanically-based skin care products for
women and men. The Company markets its proprietary line of advanced skin care
products under its brand names BIOZHEM(TM) and the REVITACEL SYSTEM(TM) through
a national direct response television (infomercial) campaign, its customer care
center telemarketing operation, shopping channels, a web site, and planned print
advertising, catalog and direct mail campaigns. The Company also enters into
marketing and distribution agreements with manufacturers of specific products or
product lines for resale through its marketing channels (see Note 8).

As of September 30, 2001, Biozhem entered into a plan to restructure its
operations through the phasing out of its retail presence by closing the
Company's owned stores (see Note 2) and servicing its clientele through the
customer care center and its website. In the future, the Company will sell its
products primarily through its national infomercial and other direct response
television, shopping channels, and through its call center, website, and direct
advertising campaigns, and anticipates expanding into international markets in
mid-2002 through established direct response marketing channels.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

Basis of Presentation
---------------------

The Company's financial statements for the years ended September 30, 2001 and
2000 have been presented on the basis that it will continue as a going concern,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company reported net losses of $3,423,690
and $1,010,356 and net cash used in operating activities of $1,991,602 and
$418,613 in fiscal 2001 and 2000, respectively.

The Company's continued existence is dependent upon its ability to achieve its
2002 operating plan, which contemplates significantly increased revenues,
improved operating results and increased cash flows from operations and
obtaining additional financing. There can be no assurances that the Company will
be successful in these efforts.

--------------------------------------------------------------------------------

                                       22
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
--------------------------------------------------------------

If management cannot achieve the 2002 operating plan because of sales
shortfalls, reduced profit margins or other unfavorable events, the Company may
find it necessary to further reduce expenses or undertake other actions as may
be appropriate. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty (including any impairment
losses on long-lived assets).

Revenue Recognition
-------------------

Sales are recorded when a call center customer is shipped the goods or when a
retail customer takes possession of the goods. Provisions are made for estimated
returns and allowances at the time of sale.

The Company's policies comply with Staff Accounting Bulletin 101 ("SAB 101"),
"REVENUE RECOGNITION," issued by the Securities and Exchange Commission In
December 1999. SAB 101 outlines the basic criteria that must be met to recognize
revenue and provides guidance for presentation of revenue and for disclosure
related to revenue recognition policies in financial statements filed with the
Securities and Exchange Commission. The Company's adoption of SAB 101 did not
have a material impact on its financial position and results of operations.

Fair Value of Financial Instruments
-----------------------------------

The Company has financial instruments whereby the fair market value of the
financial instruments could be different than that recorded on a historical
basis. The Company's financial instruments consist of its cash, accounts payable
and accrued liabilities and note payable. Management believes the carrying
amounts of the Company's financial instruments approximate their fair values at
September 30, 2001 due to the short-term nature of these financial investments.

Inventory
---------

Inventory consists mainly of skin care products which are stated at the lower of
cost or market using the first-in, first-out method. The Company purchases a
majority of its inventory from several vendors. These items are readily
available from other vendors. However, a change in supplier could cause delays
in product delivery and possible losses in revenue which could adversely affect
operating results. Market is determined by comparison with recent purchases or
net realizable value. Such net realizable value is based on forecasts for the
sales of the Company's products in ensuing years. Should demand for the
Company's products prove to be significantly less than anticipated, the ultimate
realizable value of the Company's inventories could be substantially less than
the amount shown on the accompanying balance sheet.

--------------------------------------------------------------------------------

                                       23
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
--------------------------------------------------------------

Capitalized Television Production Costs
---------------------------------------

In March 2001, the Company entered into an infomercial consultation agreement
with a third party to produce a television commercial designed to sell certain
skin care products by means of direct response by the customer. As of September
30, 2001, production costs for the television commercial totaled $369,967 and
was recorded as other assets. In accordance with Statement of Position 93-7,
"REPORTING ON ADVERTISING COSTS," such costs are capitalized and expensed in
total the first time the commercial is aired, which occurred in November 2001.
Therefore, such amount will be expensed in the quarter ended December 31, 2001.

Property and Equipment
----------------------

Property and equipment are stated at cost. Expenditures for additions and major
improvements are capitalized. Repairs and maintenance costs are charged to
operations as incurred. When property and equipment are retired or otherwise
disposed of, the related cost and accumulated depreciation are removed from the
accounts, and gains or losses from retirements and dispositions are credited or
charged to income.

Depreciation and amortization are provided over the estimated useful lives of
the related assets, ranging from 3 to 5 years, using the straight-line method.
Leasehold improvements are amortized over the lesser of the estimated useful
life of the asset or the term of the lease. Depreciation expense totaled $15,714
and $18,925 for the years ended September 30, 2001 and 2000, respectively.

Management of the Company assesses the recoverability of property and equipment
by determining whether the net carrying value of such assets can be recovered
over their remaining lives through projected undiscounted cash flows. The amount
of impairment, if any, is measured based on fair value (projected discounted
cash flows) and is charged to operations in the period in which such impairment
is determined by management. Management has determined that there is no
impairment of property and equipment at September 30, 2001. However, there can
be no assurance that market conditions will not change or demand for the
Company's products will continue which could result in asset impairments in the
future.

--------------------------------------------------------------------------------

                                       24
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
--------------------------------------------------------------

Intangible Assets
-----------------

Intangible assets consist of covenants not to compete, customer lists and
goodwill arising from business combinations and are amortized on a straight-line
basis. The covenants are amortized over the contractual term of 3 years. The
customer lists are amortized over the expected benefit life of 3 years.
Goodwill, representing the excess of the purchase price over the estimated fair
market value of the net assets of the acquired business, is amortized over the
period of expected benefit of 10 years. Amortization expense totaled $46,090 and
$53,175 for the years ended September 30, 2001 and 2000, respectively.

The Company assesses the recoverability of these intangible assets by
determining whether the net carrying value of such assets can be recovered over
their remaining lives through projected undiscounted future cash flows. The
amount of impairment, if any, is measured based on fair value and charged to
operations in the period in which the impairment is determined by management.

As of September 30, 2001, the Company entered into a plan of reorganization to
close all of its acquired retail stores; as a result, at September 30, 2001, the
Company wrote-off intangible assets of $216,922, representing the remaining net
book value of the retail-related intangible assets at September 30, 2001 (see
below).

Advertising
-----------

Except as discussed above relating to television production costs, advertising
costs are expensed as incurred. Advertising costs expensed totaled $145,187 and
$27,857 in fiscal 2001 and 2000, respectively.

Restructuring Charges
---------------------

As of September 30, 2001, the board of directors of the Company entered into a
plan to restructure its operations by phasing out retail stores and servicing
its clientele through direct sales (see Note 1). As a result, the Company
recognized a restructuring charge of $279,312, consisting of the write-off of
intangibles related to acquired retail stores to be closed ($216,922) and the
present value of future non-cancelable retail store lease payments ($62,390)
(see Note 8).

--------------------------------------------------------------------------------

                                       25
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
--------------------------------------------------------------

Income Taxes
------------

The Company provides for income taxes under the liability method. Accordingly,
deferred tax assets and liabilities are computed for differences between the
financial statement carrying amounts and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to amounts which are more likely than
not to be realized. The provision for taxes represents the tax payable or
refundable for the period plus or minus the change during the period in deferred
assets and liabilities.

Earnings Per Share
------------------

Basic earnings per share ("EPS") is computed as net income divided by the
weighted average of common shares for the period (see Note 10). Diluted EPS
reflects the potential dilution that could occur from the common shares issued
through stock options, warrants and other convertible securities. All
potentially dilutive shares, 3,762,557 and 2,437,289 shares as of September 30,
2001 and 2000, respectively, have been excluded from dilutive EPS, as their
effect would be anti-dilutive for fiscal 2001 and 2000.

Stock-Based Compensation
------------------------

The FASB has issued Statement of Financial Accounting Standards No. 123 ("SFAS
123"), "ACCOUNTING FOR STOCK-BASED COMPENSATION," which defines a fair value
based method of accounting for stock-based compensation. However, SFAS 123
allows an entity to continue to measure compensation cost related to stock and
stock options issued to employees using the intrinsic method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), "ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES." Entities electing to remain with the accounting
method of APB 25 must provide pro forma disclosures of net income and earnings
per share, as if the fair value method of accounting defined in SFAS 123 had
been applied. The Company has elected to account for its stock-based
compensation to employees under APB 25 (see Note 7).

--------------------------------------------------------------------------------

                                       26
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
--------------------------------------------------------------

In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44") "ACCOUNTING
FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION, AN INTERPRETATION OF APB
OPINION 25." FIN 44 clarifies the application of APB 25 for (a) the definition
of employee for purposes of applying APB 25, (b) the criteria for determining
whether a plan qualifies as a non-compensatory plan, (c) the accounting
consequences for various modifications to the terms of a previously fixed stock
option or award, and (d) the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 is effective on July 1, 2000, but
certain provisions cover specific events that occur after either December 15,
1998, or January 12, 2000. The adoption of FIN 44 did not have a material effect
on the financial statements.

Comprehensive Income
--------------------

The Company has adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "REPORTING COMPREHENSIVE INCOME." Under SFAS 130, the Company
reports and displays all components of comprehensive income in a full set of
financial statements. For fiscal 2001 and 2000, the Company had no items of
comprehensive income.

Segments
--------

The FASB has issued Statement of Financial Accounting Standards No. 131 ("SFAS
131"), "DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION." As
the Company operates in one segment, the Company has not provided any additional
segment disclosures as required under SFAS 131.

Use of Estimates
----------------

In the normal course of preparing financial statements in conformity with
accounting principles generally accepted in the United States of America,
management is required 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. Significant estimates made
by management include the realizability of inventory and long-lived assets.
Actual results could differ from those estimates.

--------------------------------------------------------------------------------

                                       27
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
--------------------------------------------------------------

Recent Accounting Pronouncements
--------------------------------

In June 2001, the FASB approved two new pronouncements: Statement of Financial
Accounting Standards No. 141 ("SFAS 141"), "BUSINESS COMBINATIONS," and
Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "GOODWILL AND
OTHER INTANGIBLE ASSETS." SFAS 141 applies to all business combinations with a
closing date after June 30, 2001. This statement eliminates the
pooling-of-interests method of accounting and further clarifies the criteria for
recognition of intangible assets separately from goodwill. SFAS 142 eliminates
the amortization of goodwill and indefinite-lived intangible assets and
initiates an annual review for impairment. Identifiable intangible assets with a
determinable useful life will continue to be amortized. The amortization
provisions apply to goodwill and other intangible assets acquired after June 30,
2001. The Company does not expect SFAS 141 and SFAS 142 to have a material
impact on its financial statements because its intangible assets are either
fully amortized or written-off at September 30, 2001.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143 ("SFAS 143"), "ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS." SFAS 143
establishes standards associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. This statement is effective
for financial statements issued for fiscal years beginning after June 15, 2002.
The Company does not expect SFAS 143 to have a material impact on its financial
statements.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS 144"), "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED
ASSETS." SFAS 144 address financial accounting and reporting for the impairment
of long-lived assets and for long-lived assets to be disposed of. The provisions
of SFAS 144 are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within these fiscal
years, with early adoption encouraged. The Company does not expect SFAS 144 to
have a material impact on its financial statements.

--------------------------------------------------------------------------------

                                       28
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 3 - PROPERTY AND EQUIPMENT
-------------------------------

Property and equipment consist of the following at September 30, 2001:

                                      ESTIMATED USEFUL LIVES
                                            (IN YEARS)
                                      ------------------------

Equipment                                        3               $      64,841
Software                                         5                      25,219
                                                                 --------------
                                                                        90,060

Less accumulated depreciation                                          (50,447)
                                                                 --------------

                                                                 $      39,613
                                                                 ==============

NOTE 4 - NOTE PAYABLE
---------------------

Note payable consists of the following at September 30, 2001:

Note payable to former franchisee, interest at 8%, principal and
interest of $1,538 payable monthly from September 15, 1997 through
July 15, 2000. This note is currently in default.                   $   10,161
                                                                    ===========

Principal maturities are $10,161 for the year ending September 30, 2002.

NOTE 5 - RELATED PARTY TRANSACTIONS
-----------------------------------

The Company had interest expense on notes payable to JCR Advertising, a company
owned by a significant stockholder, of approximately $0 and $3,000 for fiscal
2001 and 2000, respectively. At September 30, 2001, the Company had no balance
owing to JCR Advertising.

During fiscal 2000, the Company borrowed funds from a shareholder. On June 30,
2001, stockholder notes totaling $150,000 were converted to equity with the
issuance of 1,200,000 shares of the Company's common stock (see Note 7). As of
September 30, 2001, all notes from stockholders were paid off. Interest expense
(including $150,000 of non-cash interest recorded in fiscal 2001 upon the
conversion of the notes - see Note 7) on these notes totaled approximately
$151,890 and $18,600 for fiscal 2001 and 2000, respectively.

A current board member received $89,480 in cash as consulting compensation for
his assistance in funding activities in fiscal 2001 prior to his appointment to
the board of directors.

--------------------------------------------------------------------------------

                                       29
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 6 - INCOME TAXES
---------------------

The following is a reconciliation of federal income taxes computed at the
statutory rate of 34% to income tax expense as reported for the years ended
September 30:

                                                         2001           2000
                                                     ------------   ------------

Expected income tax benefit at 34%                   $(1,164,000)   $  (344,000)
State taxes, net of federal income tax benefit          (200,000)       (59,000)
Change in valuation allowance                          1,364,000        403,000
                                                     ------------   ------------

Income tax expense                                   $         -    $         -
                                                     ============   ============


Deferred tax assets consist of the following as of September 30, 2001:

Net operating loss carryforwards                                    $ 2,975,000
Expenses recognized for granting warrants                               744,000
Other                                                                    14,000
                                                                    ------------
                                                                      3,733,000

Less valuation allowance                                             (3,733,000)
                                                                    ------------

Net deferred tax assets                                             $         -
                                                                    ============

During fiscal 2001 and 2000, the valuation allowance increased by approximately
$1,364,000 and $403,000, respectively.

At September 30, 2001, the Company had federal and state net operating loss
carryforwards of approximately $8,100,000 and $4,080,000, respectively. If not
used to offset future income, these loss carryforwards will expire between 2002
and 2021. Pursuant to the Tax Reform Act of 1986, use of the Company's net
operating loss carryforwards may be substantially limited if a cumulative change
in ownership of more than 50% occurs within a prescribed testing period. Equity
transactions may have resulted in such a change and would likely result in a
limitation of the amount of net operating loss that may be used annually.
Further, the limitation may render a substantial portion of the Company's net
operating loss carryforward unusable.

--------------------------------------------------------------------------------

                                       30
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 6 - INCOME TAXES, CONTINUED
--------------------------------

Based on numerous factors, including but not limited to the Company's historical
losses and the uncertainty regarding net operating loss carryforward limitation,
management believes that it cannot currently demonstrate that it is more likely
than not that it will fully realize all of the benefits of deferred tax assets
existing at September 30, 2001. Accordingly, a valuation allowance has been
provided for the full amount of the Company's deferred tax assets.

NOTE 7 - STOCKHOLDERS' EQUITY
-----------------------------

Stock Issuances
---------------

On December 14, 1999, the Company issued 127,844 shares of common stock in
exchange for $66,500 of indebtedness due to OWN (see Note 9).

On September 30, 2000, the Company committed to issue 36,000 shares of common
stock for consulting fees and 45,000 shares of common stock for directors' fees.
These shares were earned in fiscal 2000 and were valued at $0.25 per share for a
total of $20,250 based on an outstanding private placement offering at $0.25
(see below).

On May 4, 2000, the Company sold 400,000 shares of common stock to a third party
for $50,000. In conjunction with this sale, warrants to purchase 400,000 shares
of the Company's common stock at $0.125 per share were granted to this third
party as an incentive to purchase the stock. Therefore, the granting of the
warrants had no net impact on operations or equity.

On May 1, 2000, OWN exercised warrants to acquire 958,521 shares of common stock
for $175,000 in cash and $51,569 in services (see Note 9).

During the years ended September 30, 2001 and 2000, the Company issued 95,911
and 103,135 shares of stock, respectively, for transactions that were recorded
in the Company's fiscal 2000 and 1999 financial statements. The value of such
shares was previously recorded as shares subscribed; therefore, the issuances
had no net impact on operations or equity.

Pursuant to private placement memorandums, the Company issued 11,510,370 shares
(including 189,370 shares issued to finders) and committed to issue an
additional 400,000 shares for proceeds to the Company of $2,699,350 (net of
issuance costs of $297,271) during the year ended September 30, 2001.

--------------------------------------------------------------------------------

                                       31
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 7 - STOCKHOLDERS' EQUITY, CONTINUED
----------------------------------------

The Company issued 534,500 shares of common stock for services valued at
$243,928 during the year ended September 30, 2001. Shares were valued at the
estimated market value at date of issuance (based on the closing price of the
Company's common stock).

During the year ended September 30, 2001, the Company defaulted on $150,000 of
stockholder notes and accrued interest payable (see Note 5). According to the
note agreement, the holder of the note had the right upon default to convert all
unpaid principal and accrued interest into common stock of the Company at a
conversion price of $0.125 per share. Further, upon conversion, the note holder
would also be granted warrants to purchase additional shares (equal to the
number shares converted) at an exercise price of $0.25 per share for a period of
three years. Pursuant to APB 14, EITF 98-5 and EITF 00-27, the Company has
recorded the value of the beneficial conversion feature and the related warrants
in fiscal 2001 when the conversion feature was no longer contingent on a future
event. The combined value of the beneficial conversion feature and the related
warrants was $150,000 that was recorded to additional paid-in capital and
interest expense. As a result, the Company issued 1,200,000 shares of common
stock at $0.125 per share and warrants to acquire an additional 1,200,000 shares
of common stock at $0.25 per share.

In addition, during the year ended September 30, 2001, the Company issued 51,912
shares of common stock to convert another note payable totaling $12,978 at $0.25
per share. There was no beneficial conversion associated with this note payable.

Stock Options
-------------

The Company has adopted the 1998 Stock Option Plan of Biozhem Cosmeceuticals,
Inc. (the "Plan"). The purpose of the Plan is to provide officers and employees
of the Company and other eligible individuals an incentive through grant of
options to acquire stock in the Company and encourage them to remain in the
Company's service.

--------------------------------------------------------------------------------

                                       32
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 7 - STOCKHOLDERS' EQUITY, CONTINUED
----------------------------------------

Under the Plan, the Committee may, at any time prior to July 6, 2008, grant to
eligible persons either incentive stock options or non-qualified stock options
for an aggregate of 1,000,000 shares of the Company's Common Stock. Any
unexercised or canceled stock options may be re-optioned under the Plan.
Although not eligible to receive grants of incentive stock options, members of
the Board of Directors of the Company who are not full-time employees of the
Company are eligible to receive grants of non-qualified options. Directors who
are full-time employees of the Company are eligible to receive grants of either
incentive stock options or non-qualified options. The Committee may issue the
options to different optionees subject to varying vesting requirements.

The exercise price of any options granted under the Plan may not be less than
100% of the fair market value of the underlying shares of Common Stock on the
day the option is granted, except that, with respect to options granted to
persons owning more than 10% of the Common Stock on the date of the grant at
which time the price must be at least 110% of the fair market value. The Plan
was approved by a vote of the stockholders. No options were granted under the
Plan in fiscal 2000. During 2001, the Company granted Plan options to purchase
125,000 shares at an exercise price of $0.42 per share to an employee. The
options vest over a period of three years and expire in ten years.

During the year ended September 30, 2001, the Company granted non-Plan options
to purchase 1,000,000 shares at an exercise price of $0.25 per share to its
directors, valued under APB 25 at $260,000.

In fiscal 2000, the Company granted non-Plan options to purchase 1,608,000
shares at an exercise price of $0.25 per share to consultants, valued under SFAS
123 at $368,000. In fiscal 2001, the Company granted non-Plan options 1,850,000
shares at an exercise price of $0.25 per share to consultants, valued under SFAS
123 at $809,000.

The fair value of each option or warrant granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions:

                                                      2001            2000
                                                 -------------   --------------

      Expected dividend yield                               0%               0%
      Weighted average expected stock price
        volatility                                        129%             108%
      Risk free interest rate                             5.4%             6.0%
      Expected life of option                     1 to 3 years   3 to 3.5 years

--------------------------------------------------------------------------------

                                       33
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 7 - STOCKHOLDERS' EQUITY, CONTINUED
----------------------------------------

Stock Warrants
--------------

In October 1999, the Company amended its agreement with OWN (see Note 9). As
part of that amendment, the Company agreed to lower the exercise price of
888,666 of the 1,000,000 Class A Warrants from $0.56 to $0.15 per share. The
repricing of these warrants resulted in variable award accounting under FIN 44.
Because of the decline in the Company's stock price since the date of the
original warrant grant, no additional expense was required for the year ended
September 30, 2000 under variable award accounting. 958,521 of these warrants
were exercised on May 1, 2000 and the remaining 41,479 of the Class A Warrants
were cancelled as part of the Company's termination of its management agreement
with OWN (see Note 9).

In January 2001, the Company issued 25,000 warrants with an exercise price of
$0.25 per share to an unrelated third party for interest on a note payable. The
estimated fair value of these warrants under SFAS 123 totaled $6,250 and has
been expensed during the year.

In June 2001, the Company issued 1,200,000 warrants with an exercise price of
$0.25 per share to an unrelated third party in connection with the conversion of
the related note payable (see above).

During the year ended September 30, 2001, the Company granted 245,000 warrants
with an exercise price of $0.25 per share for services rendered, valued under
SFAS 123 at $99,300.

--------------------------------------------------------------------------------

                                       34
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 7 - STOCKHOLDERS' EQUITY, CONTINUED
----------------------------------------

The following is a summary of stock option and warrant activity during fiscal
2001 and 2000:

                                                                  WEIGHTED
                                                                  AVERAGE
                                                     SHARES        PRICE
                                                  -----------    ---------

         Outstanding at September 30, 1999         2,511,697     $   0.59
                  Granted                          2,008,000         0.23
                  Exercised                         (958,521)       (0.24)
                  Cancelled                          (61,479)       (0.50)
                                                  -----------    ---------

         Outstanding at September 30, 2000         3,499,697         0.39
                  Granted                          4,445,000         0.25
                  Exercised                                -            -
                  Cancelled                          (62,000)       (0.84)
                                                  -----------    ---------

         Outstanding at September 30, 2001         7,882,697     $   0.31
                                                  ===========    =========

         Exercisable at September 30, 2001         4,907,697     $   0.34
                                                  ===========    =========

         Weighted average fair market value of
            options and warrants granted:
                  Fiscal 2000                                    $   0.37
                                                                 =========
                  Fiscal 2001                                    $   0.47
                                                                 =========


The following table summarizes information about stock options and warrants
outstanding at September 30, 2001:

<TABLE>
<CAPTION>
                                           Outstanding                                     Exercisable
                      -------------------------------------------------------    --------------------------------
                                            Weighted
                                             Average
                                            Remaining           Weighted                           Weighted
    Range of                               Contractual           Average                           Average
 Exercise Price           Total               Life           Exercise Price         Total       Exercise Price
------------------    ---------------    ----------------    ----------------    ----------     ---------------
<S>                    <C>                 <C>               <C>                 <C>              <C>
$0.01 - $0.49          6,945,000           2.5 years         $   0.26            3,970,000        $     0.26
$0.50 - $1.00            937,697           1.4 years             0.68              937,697              0.68
                      -----------                            ---------          -----------       -----------
                       7,882,697                             $   0.31            4,907,697        $     0.34
                      ===========                            =========          ===========       ===========
</TABLE>

--------------------------------------------------------------------------------

                                       35
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 7 - STOCKHOLDERS' EQUITY, CONTINUED
----------------------------------------

SFAS 123 Pro Forma Information
------------------------------

Pro forma information regarding net income and earnings per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of SFAS 123. The fair value
for these options was estimated at the date of grant using the Black-Scholes
option pricing model with the assumptions listed above.

The Black Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro-forma disclosures, the estimated fair value of the options
is amortized to expense over the option vesting period. Adjustments are made for
options forfeited prior to vesting.

If the Company had elected to recognize compensation expense based on the fair
value of the options granted at grant date as prescribed by SFAS 123, net loss
and loss per share would have been increased to the pro forma amounts indicated
in the table below:

<TABLE>
<CAPTION>
                                                                    2001              2000
                                                               --------------    --------------
<S>                                                            <C>               <C>
Net loss attributable to common stockholders, as reported      $  (3,423,690)    $  (1,010,356)
Net loss attributable to common stockholders, pro forma        $  (3,529,940)    $  (1,010,356)
Loss per share, as reported                                    $       (0.22)    $      (0.12)
Loss per share, pro forma                                      $       (0.22)    $      (0.12)
</TABLE>

--------------------------------------------------------------------------------

                                       36
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 8 - COMMITMENTS
--------------------

Leases
------

The Company leases its facilities and equipment under non-cancelable operating
leases expiring in October 2004. Rent expense in fiscal 2001 and 2000 was
approximately $213,000 and $212,000, respectively, and future commitments are
approximately $60,000, $22,000, and $2,000 in fiscal 2002, 2003, and 2004,
respectively.

Marketing Agreement
-------------------

On September 22, 2000, Biozhem signed a License and Supply Agreement with
Advanced Tissue Sciences, Inc., a Delaware Corporation ("ATS"), which gives
Biozhem the exclusive right to market skin care products containing ATS'
Nutrient Solution in the direct response market for a period of ten years
providing that sales goals are reached. Biozhem will also pay to ATS a royalty
and periodic milestone payments that are dependent on achieving certain annual
and cumulative sales levels. For the years ended September 30, 2001 and 2000,
the Company has recorded no royalties to ATS under this agreement.

On August 31, 2001, Biozhem entered into a royalty agreement with the actress in
its commercial (see Note 2) requiring that Biozhem pay the actress royalties
equal to 1.5% of retail gross sales in connection with the sale of the product
advertised on the commercial. At September 30, 2001, no amounts are owing under
this agreement.

NOTE 9 - MANAGEMENT AGREEMENT
-----------------------------

The Company entered into a management agreement in fiscal 1999 with One World
Networks Integrated Technologies, Inc. ("OWN"). OWN was engaged by the Company
to exclusively provide and perform for and on behalf of the Company all
management services reasonably necessary for the proper and efficient operation
of the Company for a five-year period. For its services, OWN was to receive a
monthly management fee of 40% of pre-tax net income, 1,000,000 Class A warrants
and other contingent warrants (which were never earned). In addition, OWN agreed
to loan the Company up to $50,000 to cover operational cash flow needs.

In October 1999, the Company amended the Agreement. As part of the amendment,
OWN agreed to increase its loan available to the Company to $100,000 and to
purchase 127,844 shares common stock for $66,500. The Company opted thereafter
to cancel its debt to OWN rather than collect the $66,500 from OWN (see Note 7).
In consideration for these transactions, the Company agreed to lower the
exercise price of 888,666 of the Class A Warrants from $0.56 to $0.15 per share
(see Note 7).

--------------------------------------------------------------------------------

                                       37
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 9 - MANAGEMENT AGREEMENT, CONTINUED
----------------------------------------

On May 1, 2000, the Company terminated its Agreement with OWN. In connection
with the termination, OWN agreed to exercise 958,521 shares of Class A Warrants
for $175,000 in cash and $51,569 in expense reimbursements and cancel the
remaining 41,479 warrants. OWN also agreed to acquire co-ownership of the
Company's pre-termination customer list for a guaranteed royalty of $40,000,
which has been recorded as other income.

On September 22, 2000, the Company entered into a management agreement with
Beauty Resource, Inc. ("BR"). BR was engaged by the Company to provide and
perform for the Company all management services reasonably necessary for the
proper and efficient operation of the Company for a five-year period. BR
personnel assigned to manage the day-to-day activities of the Company included
individuals designated as the Company's CEO and COO.

BR was entitled to a reimbursement, which was to be a payment of $15,000 per
month. In addition, commencing April 1, 2001 and continuing on the first day of
each quarter thereafter during the remaining term of the agreement, the Company
was to pay BR a fee in the amount of 0.5% of the sales (net of returns and
allowances) of the Company for the preceding quarter.

Upon signing of the agreement, the Company awarded the new CEO options to
purchase 100,000 shares of the Company common stock at an exercise price of
$0.25 per share, to be exercised on or before September 30, 2003.

In addition, as defined in the agreement, BR was entitled to performance options
up to 2,000,000 shares through March 31, 2006 at $0.25 per share based on
achieving certain sales targets, 3,000,000 shares through March 31, 2006 at
$0.25 per share based on achieving certain pre-tax net income levels, and cash
bonuses of up to 5% of pre-tax net income based on achieving certain ratios of
pre-tax net income to sales. As of September 30, 2000 and 2001, no such options
or cash awards had been earned by BR.

During the year ended September 30, 2001, the Company terminated the agreement
with BR and assumed all functions and duties of BR as set forth in the
agreement. For the year ended September 30, 2001, the Company recorded $302,500
(including 337,500 shares of common stock granted to BR, valued at $0.60 per
share - see Note 7) as compensation for services rendered by BR.

--------------------------------------------------------------------------------

                                       38
<PAGE>

                                                    BIOZHEM COSMECEUTICALS, INC.

                                                   NOTES TO FINANCIAL STATEMENTS

                                 FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000

================================================================================


NOTE 10 - EARNINGS PER SHARE
----------------------------

The following is a reconciliation of the numerators and denominators of the
basic and diluted loss per share computations for the years ended September 30,
2001 and 2000:

<TABLE>
<CAPTION>
                                                               2001               2000
                                                          --------------     --------------
<S>                                                       <C>                <C>
Numerator for basic and diluted loss per share:
    Net loss charged to common stockholders               $  (3,423,690)     $  (1,010,356)

Denominator for basic and diluted loss per share:
    Weighted average shares                                  15,779,337          8,711,648
                                                          --------------     --------------

      Basic and diluted loss per share                    $       (0.22)     $       (0.12)
                                                          ==============     ==============
</TABLE>

NOTE 11 - SUBSEQUENT EVENTS
---------------------------

In November 2001, the Company launched its television commercial recognizing
expense of $369,967 relating to capitalized television production costs recorded
at September 30, 2001 (see Note 2). Management has indicated that it is too
early to tell the impact of the new television commercial on future operations
of the Company.

Subsequent to September 30, 2001, the Company issued the 400,000 shares, which
were previously recorded as committed shares. As the cash receipt related to the
issuance of these shares was recorded in fiscal 2001, these issuances had no net
impact on operations or equity. In addition, the Company sold 200,000 shares of
common stock for $50,000 in cash pursuant to a private placement memorandum.

--------------------------------------------------------------------------------

                                       39
<PAGE>

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

         None


                                    PART III

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

                                                                        Director
              Name                  Age      Position                    Since
              ----                  ---      --------                    -----

         James S. Chapin            44       Chairman                     2001

         Stan R. Wylie              59       Director and Chief           1995
                                             Financial Officer

         Lawrence A. Rheins         48       Director                     2001

         David M. Lewis             48       Director                     2001

         Dean J. Hastas             48       Director                     2001

         Marti Wolf                 59       President

JAMES S. CHAPIN was co-founder of SierraSilicon, a corporate financial
consulting firm headquartered in Northern California. He has been a principal in
that business since June, 1998. The mission of SierraSilicon is to assist early
and second stage companies with a wide-range of business services that include
business plan preparation, corporate strategy refinement and fund raising. Mr.
Chapin spent five years with International Business Machines in Farmington,
Connecticut in various executive positions, followed by ten years in the
investment securities industry with Smith Barney and Tucker Anthony in Hartford,
Connecticut. In 1994, he was recruited by publicly traded, Brush Creek Mining
and Development Co., Inc., Grass Valley, California, and served as its CEO and
Chairman until May 1998. During his tenure, Mr. Chapin raised approximately $15
million of equity financing, negotiated a joint-venture agreement and steered
the company through a variety of hurdles. Mr. Chapin graduated from Trinity
College in Hartford, Connecticut and attended MBA courses at the University of
Hartford and the University of Connecticut. He also attended the Executive MBA
Program at the Tuck School at Dartmouth.

                                       40
<PAGE>

STAN R. WYLIE has been a director of Biozhem since December 1995. On September
28, 2000, he was named Chief Financial Officer. Since March 1995 he has been a
self employed financial consultant. Several related technology companies located
in the Houston and Dallas areas employed Mr. Wylie from 1992 to 1995. Mr. Wylie
was Chief Financial Officer of the Company from 1986 to 1991 and was formerly a
Certified Public Accountant. He holds an MBA Degree from Michigan State
University

LAWRENCE A. RHEINS is founder and Executive Vice President of Dermtech
International, a comprehensive skin testing laboratory that focuses on testing
dermatology, cosmetic and personal care products. He has been Executive Vice
President since 1999 and served as President and CEO from 1996 to 1999. He has
over two decades of experience in clinical toxicology, immunology, dermatology
and in vitro toxicology alternatives. Among his previous appointments, Dr.
Rheins served as Executive director of In Vitro technology at Advanced Tissue
Sciences and as Manager of Proctor & Gamble's Professional and Regulatory
Services Skin Care Division. He was also Director of Clinical Safety and
Toxicology at Hill Top Research, Inc. He received his Ph.D., M.S. and B.S. from
the University of Cincinnati.

DAVID M. LEWIS was the co-founder served as CEO of Jupiter Power International
Inc. from 1996 to 2000. Jupiter, a publicly traded company that specialized in
the production of electricity, concluded a number of joint ventures to install
and operate power projects in Asia, the largest of which stemmed from the
formation of a 50% owned subsidiary in Cambodia with Caterpillar Power Ventures
Inc. Jupiter Power International recently merged with Maxim Power Corp., a
Canadian Venture Exchange corporation.

DEAN J. HASTAS has been employed since 1992 at Adelphia Communications (one of
the world's largest cable companies), where he is currently a Senior Systems
Analyst. In addition, he is the CFO of Investrak LLC(TM) where he designed and
developed a software application that tracks stocks, bonds and mutual funds.
Investrak is used by brokerage houses, accountants and day traders, and has
received several industry awards.

MARTI WOLF was elected President of the Company on July 14, 1999. From 1997 to
1999 Ms. Wolf was president of MW Consulting Group, a marketing strategies and
development firm. From 1990 to 1997, Ms. Wolf served as senior vice president
for Los Angeles-based Kent & Spiegel Direct, a national marketing firm
specializing in direct response television.

Board of Directors Compensation
-------------------------------

         Director compensation has been $3,000 per year. Each year this amount
         was paid in stock valued at the market price in lieu of cash. On
         September 1, 2001, the Board of Directors changed this policy and the
         new outside directors, appointed on August 28, 2001, each received a
         one-time award of 200,000 options to purchase common stock at $0.25 per
         share, expiring September 17, 2006, resulting in a total compensation
         expense of $260,000 ($52,000 per director) for financial statement
         purposes. The two directors who resigned in August, 2001, received a
         total of 11,000 shares valued at $0.25 per share.

                                       41
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

         As of September 30, 2001, aggregate annual cash remuneration paid by
         the Company to the persons who are officers of the Company and all such
         officers and directors of the Company as a group is as follows:

<TABLE>
                                              Summary Compensation Table
<CAPTION>

                                                             Annual                                 Long-Term
                                                          Compensation                            Compensation

------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
                                                                                           Restricted   Shares
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
Name and Principal                          Fiscal                             Other       Stock        Underlying
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
Position                                     Year    Salary      Bonus    Compensation**   Awards       Options
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
<S>                                         <C>      <C>           <C>       <C>              <C>          <C>
James S. Chapin (1)                         2001     $ 0           $ 0       $ 0              $ 0          500,000
Chairman of the
Board
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
John C. Riemann  (2)                        2001     $ 0           $ 0       $2,750           $ 0          125,000
Chief Executive
Officer
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
Marti Wolf                                  2001     $100,000      $ 0       $ 0              $ 0          125,000
President
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
Stan Wylie                                  2001     $ 0           $ 0       $ 0              $ 0          125,000
Chief Financial
Officer
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
John C. Riemann                             2000     $ 0           $ 0       $3,750           $ 0          250,000
Chairman of the Board and Chief
Executive Officer
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
Marti Wolf                                  2000     $100,000      $ 0       $ 0              $ 0          0
President
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
Stan Wylie                                  2000     $ 0           $ 0       $3,750           $ 0          200,000
Chief Financial
Officer
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
John C. Riemann                             1999     $79,167       $ 0       $2,375           $ 0          0
Chairman of the Board and Chief
Executive
------------------------------------------- -------- ----------- -------- ---------------- ------------ -------------
</TABLE>

(1)      Received an additional 1,000,000 options for consulting services prior
         to becoming Chairman of the Board on August 28, 2001.
(2)      Resigned as CEO and Chairman of the Board on August 28, 2001.

** On August 28, 2001, 11,000 shares of the Company's common stock valued at
$0.25 per share were issued in lieu of cash payment for director's fees. On
September 30, 2000, 15,000 shares of the Company's common stock valued at $0.25
per share were committed to be issued in lieu of cash payment for director's
fees.

                                       42
<PAGE>

Stock Options Granted in Fiscal 2001

          The following tables set forth certain information with respect to
stock options granted to the persons named in the Summary Compensation Table
during the fiscal year ended September 30, 2001.

                                 Options Granted

                                Individual Grants

------------------  ------------- ------------------- ------------- ------------
                    Number of     Percent of Total
                    Securities    Options Granted
                    Underlying    To                  Exercise or
                    Options       Employees in        Base Price    Expiration
Name                Granted       Fiscal Year         ($/Sh)        Date
------------------  ------------- ------------------- ------------- ------------
John C. Riemann          125,000               11.1%         $0.25      6/30/04
------------------  ------------- ------------------- ------------- ------------
Stan Wylie               125,000               11.1%         $0.25      6/30/04
------------------  ------------- ------------------- ------------- ------------
Marti Wolf               125,000               11.1%         $0.42      1/11/09
------------------  ------------- ------------------- ------------- ------------
James S. Chapin          500,000               44.6%         $0.25      9/17/06
------------------  ------------- ------------------- ------------- ------------

Stock Options Exercised in Fiscal 2001; Fiscal Year-End Values

         The following table sets forth certain information as to each exercise
of stock options during the year ended September 30, 2001, by the persons named
in the Summary Compensation Table and the fiscal year-end value of unexercised
options:

<TABLE>
                     Aggregated Options Exercises in Fiscal 2001 and Year-End Option Value
<CAPTION>

                          Number of Securities        Value of Unexercised
                          Underlying Unexercised      In-the-Money Options
---------------- ----------- ---------- ---------------- ---------------- ----------------- ------------------
                 Shares                 Options at                        at
                 Acquired               September                         September 30,
                                        30,2001                           2001
                 On          Value
Name             Exercise    Realized   Exercisable      Unexercisable    Exercisable       Unexercisable
---------------- ----------- ---------- ---------------- ---------------- ----------------- ------------------
<S>                 <C>         <C>           <C>            <C>                  <C>            <C>
John C. Riemann     -0-         -0-             600,000        -0-                $216,750         -0-
---------------- ----------- ---------- ---------------- ---------------- ----------------- ------------------
Stan Wylie          -0-         -0-             425,000        -0-                $166,000         -0-
---------------- ----------- ---------- ---------------- ---------------- ----------------- ------------------
Marti Wolf          -0-         -0-              50,000      75,000                $13,500       $20,250
---------------- ----------- ---------- ---------------- ---------------- ----------------- ------------------
James S             -0-         -0-           1,500,000        -0-                $660,000         -0-
Chapin
---------------- ----------- ---------- ---------------- ---------------- ----------------- ------------------
</TABLE>

                                       43
<PAGE>

COMPENSATION ARRANGEMENTS

         Mr. Riemann's annual salary as Chairman, CEO and President of the
         Company was $100,000. Concurrently with the signing of the Management
         Agreement with OWN, Mr. Riemann stepped down as president in July 1999.
         Mr. Riemann remained as CEO of the Company at a salary of $0 per year.
         The Company had no employment agreement with Mr. Riemann. When Mr.
         Riemann was elected CEO concurrent with the cancellation of the OWN
         agreement on May 1, 2000, he served at a salary of $0 per year.

         Biozhem has a group medical plan, which provides medical and hospital
         benefits and term life insurance to its employees, including its
         officers. This coverage is provided at no cost to the employee and
         Biozhem partially pays the dependent coverage.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following tables sets forth, as of September 30, 2001, the name,
number of shares of preferred stock, common stock, options, warrants and rights
owned of record by each person or entity who owns more than five percent (5%) of
the outstanding shares of any class of securities or is a director or officer of
the Company, and the number of shares owned by all officers and directors as a
group, together with percentage holdings of such shares.

                 NAME AND         NUMBER OF SHARES
TITLE OF        ADDRESS OF             OWNED                      PERCENT OF
 CLASS            OWNER             BENEFICIALLY                    CLASS
 -----            -----             ------------                    -----

         (1)      Each of the persons who are officers and directors:

Common     James S. Chapin          1,500,000 shares (a)             5.7%
           13000 Echo Glen Rd
           Grass Valley, CA 95945

Common     Stan R. Wylie              583,925 shares (b)             2.2%
           15306 Quiet Creek
           Houston, TX 77095

Common     Lawrence A. Rheins, PhD    200,000 shares (c)             0.8%
           165 Calle Del Rancho
           Escondido, CA 92025

Common     David M. Lewis             640,000 shares (d)             2.4%
           6719 Larch Ct. S.W.
           Calgary, Alberta
           Canada T3E6E9

Common     Dean J. Hastas             234,600 shares (e)             0.9%
           421 2nd Ave.
           Olean, NY 14760

Common     Marti Wolf                 125,000 shares (f)             0.5%
           25651 Atlantic Ocean Dr.
           Lake Forest, CA 92630

         (2)      All officers and directors as a group:

Common                              3,283,525 shares                12.4%

                                       44
<PAGE>

         (3) Each shareholder who owns more than 5% of any class of the
Company's stock including those shares subject to outstanding options:

Common     John C. Riemann          1,452,732 shares (g)             5.7%
           19641 Descartes
           Foothill Ranch, CA
           92610

Common     Clifford N. Fowler       2,592,856 shares (h)            10.3%
           3113 Professional Dr #5
           Auburn, CA 95603

Common     Ilse Rickert             1,900,000 shares                 7.5%
           Dorfstrasse 42
           Willingrande 24626, Germany

(a)      Includes 1,500,000 shares underlying options which are exercisable as
         of the date of this report
(b)      Includes 425,000 shares underlying options which are exercisable as of
         the date of this report
(c)      Includes 200,000 shares underlying options which are exercisable as of
         the date of this report
(d)      Includes 200,000 shares underlying options which are exercisable as of
         the date of this report
(e)      Includes 200,000 shares underlying options which are exercisable as of
         the date of this report
(f)      Includes 125,000 shares underlying options which are exercisable as of
         the date of this report
(g)      Includes 600,000 shares underlying options which are exercisable as of
         the date of this report
(h)      Includes 1,321,428 shares underlying warrants which are exercisable as
         of the date of this report

         (4) Options, warrants and rights: As of September 30, 2001, there were
7,882,697 shares of Common Stock granted as options and/or warrants to key
officers and employees, consultants and other service providers of the Company.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During the fiscal year ended September 30, 2001, the following were the
         only transactions or series of transactions with Biozhem in which the
         amount involved exceeded $60,000, and in which any of directors Chapin,
         Lewis, Hastas, Rheins, Riemann, Wylie, and Goldsberry or members of
         their immediate families, had a direct or indirect material interest
         (and any proposed transactions of a similar type).

         James S. Chapin, prior to his appointment to the Board of Directors on
         August 28, 2001, received $89,480 as consulting compensation for his
         assistance in funding activities.

         During the fiscal year ended September 30, 2000, there were no
         transactions or series of transactions with Biozhem in which the amount
         involved exceeded $60,000, and in which any of directors Riemann,
         Wylie, and Goldsberry or members of their immediate families, had a
         direct or indirect material interest (and any proposed transactions of
         a similar type).

                                       45
<PAGE>

ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K

         (a) Exhibits. The following documents required by Item 601 of
         Regulation S-B are filed as exhibits to this report.

EXHIBIT
  NO.    DESCRIPTION
  ---    -----------

3.1      Articles of Incorporation of Entourage International, Inc. and
         amendments thereto (1)

3.2      Bylaws of Entourage International, Inc. (1)

3.3      Articles of Incorporation and amendments thereto (1)

4.1      Specimen Common Stock Certificate of Entourage International, Inc., (1)

10.1     Amended Qualified Incentive Stock Option Plan for Entourage
         International, Inc. (1)

10.2     Amended Qualified Stock Option Plan for Entourage International, Inc.
         (1)

10.3     Amended Non-qualified Stock Option Plan for Entourage International,
         Inc., (1)

10.4     License Agreement between Entourage International, Inc. and Biogime
         Franchise Services (USA), Inc. dated May 2, 1994. (1)

10.5     Biogime Products Supply and Distribution Agreement between Entourage
         International, Inc. and Biogime Franchise Services (USA), Inc. dated
         May 2, 1994. (1)

10.6     Assignment and Assumption Agreement between Entourage International,
         Inc. and Biogime Franchise Services (USA), Inc. dated May 2, 1994. (1)

10.7     Services Agreement between Entourage International, Inc. and Gage
         Research & Development Institute, Inc. dated July 12, 1994. (1)

10.8     Settlement and Release Agreement between Entourage International, Inc.
         and John Southwell dated November 1, 1994. (1)

10.9     Asset Purchase Agreement between Entourage International, Inc. and
         Diamond Falcon Corporation dated December 29, 1994. (1)

10.10    Master Transaction Agreement (1)

10.11    Agreement and plan of merger with shareholders of Biogime Franchise
         Services USA, Inc. (1)

10.12    1998 Stock Option Plan for Biozhem Cosmeceuticals, Inc. (1)

10.13    Management Agreement between One World Networks Integrated
         Technologies, Inc. and Biozhem Cosmeceuticals, Inc. dated July 14, 1999
         (1)

10.14    Multi-Party Amendment No. 1 to Management Agreement dated July 14,
         1999, dated October 13, 1999 (1)

10.15    Termination Agreement dated May 1. 2000 terminating Management
         Agreement dated July 14, 1999 (1)

10.16    License and Supply Agreement dated September 22, 2000 between Advanced
         Tissue Sciences, Inc. and Biozhem Cosmeceuticals, Inc. (1)

10.17    Management Agreement dated September 22, 2000 between Beauty Resource,
         Inc. and Biozhem Cosmeceuticals, Inc. (1)

         (b) Reports on Form 8-K

             None

         Subsidiary of Registrant (1)

         (1) Previously Filed.

                                       46
<PAGE>

                                   SIGNATURES

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

                                     BIOZHEM COSMECEUTICALS, INC.


                                     BIOZHEM COSMECEUTICALS, INC.
                                     /s/ Marti Wolf

                                     MARTI WOLF
                                     President


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


Signature                          Title                             Date
---------                          -----                             ----

/s/ James Chapin              Chairman of the Board             January 14, 2002
JAMES CHAPIN              (Principal Executive Officer)

/s/ Stan R Wylie               Director and Chief               January 14, 2002
STAN R WYLIE                   Financial Officer
                         (Principal Financial Officer)

/s/ Lawrence Rheins                Director                     January 14, 2002
LAWRENCE RHEINS

/s/ David Lewis                    Director                     January 14, 2002
DAVID LEWIS

/s/ Dean Hastas                    Director                     January 14, 2002
DEAN HASTAS

/s/ Robert V. Hill, Jr.    Principal Accounting Officer         January 14, 2002
ROBERT V.HILL, JR


                                       47

</TEXT>
</DOCUMENT>
</SUBMISSION>
