SEC Info - Petrone Worldwide, Inc. - ‘10-12G/A’ on 2/26/01

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Petrone Worldwide, Inc. – ‘10-12G/A’ on 2/26/01

On: Monday, 2/26/01, at 11:54am ET · Accession #: 1096132-1-500009 · File #: 0-30380

  As Of                Filer                Filing    For·On·As Docs:Size

 2/26/01  Petrone Worldwide, Inc.           10-12G/A               1:135K

Amendment to Registration of Securities (General Form) — Form 10
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-12G/A    Amendment 2/26/01                                     57±   234K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Certain Relationships and Related Transactions: Changes in and Disagreements With Accountants Description of Business: Description of Property: Description of Securities Diabetex Freedom Pump Directors, Executive Officers, Promoters and Control Persons Executive Compensation Legal Proceedings MANAGEMENT'S DECISIONS and ANALYSIS or PLAN of OPERATIONS Recent Sales of Unregistered Securities SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS (A) Security ownership of certain beneficial owners
1	1st Page - Filing Submission
"	Item 1. Description of Business:
"	Item 2. MANAGEMENT'S DECISIONS and ANALYSIS or PLAN of OPERATIONS
"	Diabetex Freedom Pump
"	Item 3. Description of Property:
"	Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS (A) Security ownership of certain beneficial owners
"	Item 5. Directors, Executive Officers, Promoters and Control Persons
"	Item 6. Executive Compensation
"	Item 7. Certain Relationships and Related Transactions:
"	Item 8. Description of Securities
"	Item 2. Legal Proceedings
"	Item 3. Changes in and Disagreements With Accountants
"	Item 4. Recent Sales of Unregistered Securities

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549

GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934

Amendment 9

DIABETEX INTERNATIONAL CORP.
(Name of Small Business Issuer in its charter)

NEVADA 87- 0652348
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)

142 Ferry Road Suites 1 & 2, Old Saybrook, CT 06475
(Address of Principal Office) (Zip Code)

Issuer's telephone number (860) 395-1933

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

Title of each class Name of each exchange on which
registered
Securities to be registered pursuant to Section 12(g) of the Act

Title of each class Name of each exchange on which registered

DBTX COMMON STOCK NASD OTC BB

Item 1. Description of Business:

HISTORY OF THE COMPANY

Diabetex International Corporation ("Diabetex" or the "Company") was founded on
September 14, 1983. The original name of the Companywas Sheridan Industries
Inc. The Company changed its name to Associated Healthcare, Inc. during 1991
but later rescinded the name change and reverted back to Sheridan Industries,
Inc. The Company has never had any operations up to December 31, 1998 and in
accordance with SFAS #7, is considered a development stage company. The
Company is now involved in the treatment and diagnosis of diabetes.

In 1998, the Company created, and later merged with, a Nevada subsidiary and
changed its name to Diabetex International Corporation to reflect its new
strategy. This new strategy was to focus on diabetes-related products and
services.

On June 30, 1999, Diabetex acquired the rights to a treatment program for
metabolic diseases called Metabolic Activation. This treatment program
was the property of Advanced Metabolic Systems, a Delaware corporation
("AMSys"). In addition to Metabolic Activation, AMSys provided and continues
to provide certain other products and services, which the Company did not
wish to acquire and AMSys did not wish to license. In order to provide an
avenue for the Company to acquire the rights to Metabolic Activation AMSys
spun a new corporation, Advanced Metabolic Technologies, Inc. ("AMTech").
All of the assets held by AMSys associated with metabolic disorders became
the assets of AMTech. Diabetex, in turn, acquired 100% of this new company.
AMTech is a wholly owned subsidiary of Diabetex International, Corporation.
This acquisition combined two complimentary technologies, diabetes metering
systems with diabetes treatment technology. In the trade of Diabetex's shares
for AMTech, no "tax free" exchange status was sought.

AMSys operates in Connecticut. Its principal line of business is to provide
consulting services to physicians in the area of metabolic disorder treatments.
Diabetex assumed no liabilities of AMSys other than those required by any
license now an asset of AMTech, its wholly owned subsidiary. No creditor of
AMSys was adversely affected by the acquisition of the assets transferred to
AMTech. The consideration for the acquisition of the AMSys diabetes related
assets is 1,232,261 shares of Common Stock valued at $10.00 per share
(c.f. 10 Financial Statements).

Following the acquisition of AMTech from AMSys, AMSys continued to perform
billing, collections and other administrative services for Diabetex for a
period of one year. AMSys has not performed any services for Diabetex since
June 30, 2000. These services are now performed by Diabetex personnel.

Diabetex believes it employs sufficient and appropriate personnel to operate
this new subsidiary and to promote its clinical treatment business. The
Company's personnel is addressed later in this registration statement,
and all material employment contracts are made an exhibit hereto by reference.

In June 1999, the Company acquired an exclusive license from Hamilton-May
Corporation ("Hamilton-May") for an insulin infusion pumping system.
Hamilton-May is awaiting patents for this device, which has been named the
"Fluid Micrometer". Hamilton-May, a Nevada corporation, has developed
prototype devices with the ability to modify the current infusion pump
systems with its fluid micrometer. This new technology is intended to
deliver metabolic disorder treatment as well as Continuous Subcutaneous
Insulin Infusion ("CSII") for individuals with diabetes while measuring
glucose levels.

THE PRODUCTS AND SERVICES

At present Diabetex is concentrating on three independent yet related product
lines:

* Non-invasive Glucose Meter and Blood Analyzer
* Metabolic Activation Clinics
* Infusion Pumps

Each of the Company's products in development has unique competitive
advantages for measuring and treating diabetes. The Company's primary
mission is to develop and commercialize clinically proven products and
treatments, which meter, contain, stabilize and reverse the effects of the
complications caused by diabetes (July 1999 Journal of Clinical
Endocrinology). These include heart disease, stroke, hypertension, kidney
disease, blindness and poor quality of life.

Diabetex holds its Metabolic Activation clinic business as a wholly owned
subsidiary, Advanced Metabolic Technologies (AMTech), which is the licensee
of the Metabolic Activation patent. The Company owns no manufacturing facilities
and holds no patents of its own related to its product lines. It controls these
patents through exclusive licensing agreements (the agreements are included by
reference in this Registration Statement). The Company has also established
various strategic partnerships, which will assure ongoing research, development
and manufacturing capabilities during the plan period and beyond.

Glucose Meters and Blood Analyzers

The Company is developing a non-invasive miniature radio frequency
glucose meter and blood analyzer. The Company believes that commercialization
can be completed within 18 months. In addition, Diabetex is developing new
patents to further enhance these activities. Sales assumptions are predicated
on a penetration into 16.7% of the U.S. market. Sales for the meter are
estimated to be more than $3.5 billion over five years. Pre-tax margins
are expected to approximate 60%. Currently, there are no approved non-invasive
glucose meters for the 4.6 million individuals with diabetes. Such meters
will eliminate the requirement for individuals with diabetes to puncture
their skin multiple times each day. The Company is also developing radio
frequency technology to create non-invasive readings of other blood
chemistry components such as cholesterol and hemoglobin.

Infusion Pumps

Diabetex has exclusive licensing rights to develop and market a line of pumps
that adjust the infusion of insulin for individuals with diabetes. The final
product should be more efficient, less expensive and more durable than the
competitors' current market offerings. Today, the $325 Million market for
these pumps is growing at a 50% annual rate. (Hoovers On-Line, June, 2000
"The Wall Street Transcript Publishes Money Manager Interview with David Kliff).
The Company believes that commercialization of the Company's pumps will be
completed within 12 months.

METABOLIC ACTIVATION CLINICS

Currently, the Company has licensed five active Metabolic Activation Clinics
(California, Texas, Colorado, Kansas, and Massachusetts). This patented process
enhances the individuals' with diabetes ability to metabolize glucose. Plans
are to open a Company-owned prototype clinic in New York City within six months.
The success of the prototype would enable Diabetex to open 12 to 20 clinics in
other major metropolitan areas within two years.

THE MARKET

Definition of the Market: The final or end user market includes all those
individuals in the U.S. who are afflicted with the disease called "diabetes."
Diabetes is a group of diseases characterized by high levels of blood glucose
resulting from defects in insulin secretion, insulin action, or both. Diabetes
can result in serious complications and premature death.

There are two major types of diabetes:

* Type I Diabetes, which is also know as Insulin Dependent Diabetes Mellitus
or IDDM, is characterized by low or absent levels of circulating endogenous
insulin so that the patient is dependent on injected insulin to sustain life.
Onset of IDDM is predominantly in young people. However, it can occur at any
age.

* Type II Diabetes, which is also known as Non-Insulin Dependent Diabetes
Mellitus or NIDDM, is characterized by levels of insulin, which may be
normal, elevated or depressed. Hyperinsulinemia and insulin resistance
characterize most patients. In the early stages of this disease insulin
injections are not part of treatment. However insulin injections may be
used as part of the treatment once diet and oral agents fail to control
blood glucose levels. It usually occurs in people over 40 years old.
But it can occur at any age.

There are other types of diabetes, however, they encompass a minute portion
of the population.

The dollars spent within the market are comprised of those afflicted with
diabetes ,and reflects the costs and expenses to provide and receive
treatment for complications caused by the disease. Such complications
include heart disease, stroke, high blood pressure, blindness, kidney
disease, nervous system disease, dental disease, difficulty during pregnancy,
and lower limb amputation. The costs related to these complications encompass
care in hospitals, clinics and nursing homes, outpatient visits, physicians'
fees, equipment, supplies and medicines.

THE SIZE OF THE MARKET IN TERMS OF PEOPLE

At present there are an estimated 16.2 million in the U.S. who have diabetes,
which is 5.9% of the population. It is also estimated that 5.6 million of those
individuals are as yet undiagnosed. Further, it is estimated that more than
800 thousand new cases are diagnosed each year. Table A below shows the
present size of the market by type of disease and age.

[Download Table]

Table A
Diabetes Market Size by Type and Age
(People in Thousands)

Type I Type II Total
----------------- -------------------- ------------------
Age Group People Percent People Percent People Percent

(18) 124 8% - 0% 124 1%
18-44 683 45% 1,762 12% 2,445 15%
45-64 367 24% 5,580 38% 5,947 37%
65+ 342 23% 7,342 50% 7,684 47%

Total 1,516 100% 14,684 100% 16,200 100%

Sources: National Center of Health Statistics (NCHS); U. S. Census Bureau.

Table A shows that those with Type I diabetes tend to be young while those
with Type II tend to be older. This is further seen in Table B, in which the
age distribution of individuals with diabetes by type is compared to the general
U.S. population.

[Download Table]

Table B
Index of Diabetes Market Size by Type and Age
Type I Type II
------------------------- ----------------------
Percent of Percent of Percent of Percent of
Age Group Diabetics Population Index Diabetics Population Index

(18) 8% 25% 0.33 0% 25% -
18-44 45% 40% 1.13 12% 40% 0.29
45-64 24% 23% 1.05 39% 23% 1.68
65+ 23% 12% 1.88 49% 12% 4.14

Total 100% 100% 1.00 100% 100% 1.00

Sources: National Center of Health Statistics (NCHS); U.S. Census Bureau.

Both Tables A and B show that although Type I diabetes affects youths more
than Type II, the incidence of diabetes is more prevalent in older people,
especially Type II. It is also important to note that while virtually all
individuals with Type I diabetes are users of insulin injections, there are
individuals with Type II diabetes who also use insulin injections. According
to NCHS, about 43% of all diagnosed individuals with diabetes in the U.S.
are treated with insulin. This means that of the total 10.6 million diagnosed
individuals with diabetes, 4.6 million are treated with insulin. Virtually
all 1.5 million individuals with Type I diabetes use insulin treatment.
Three million people diagnosed with Type II diabetes also use insulin.
This amounts to about 33% of individuals diagnosed with Type II diabetes
who use insulin. A summary in Table C follows.

[Download Table]
Table C
Diabetics by Insulin Usage
(People in Thousands)

Type People Percent of Total

Diagnosed Type I (Use Insulin) 1,516 9.3%
Diagnosed Type II (Use Insulin) 3,042 18.8
Subtotal 4,558 28.1%
Diagnosed Type II (No Insulin Usage) 6,042 37.3
Subtotal 10,600 65.4%
Undiagnosed Diabetics (No Usage) 5,600 34.6
Total 16,200 100.0%

Sources: NCHS; U.S. Census Bureau.

Although the total U.S. population with diabetes is 16.2 million
(see Table C above), the Company's target market is the 4.6 million
individuals with diabetes who use insulin, and especially the 1.5 million
who have Type I diabetes.

Size of the Market in Terms of Healthcare Costs:

The nation's estimated totalannual healthcare cost related to
diabetes in the year 2000 is forecasted to be $115 billion. It
is segmented approximately as shown in Table D.

[Download Table]
Table D
Estimated Diabetes Healthcare Costs
Years 1997 and 2000
(Dollars in Billions)

Cost Type 1997 2000

Inpatient Hospital Care $ 27.5 $ 32.3
Nursing Home Care 5.5 6.5
Outpatient Visits 11.0 12.9
Subtotal Direct Healthcare $ 44.0 $ 51.7
Disability Costs 37.1 43.5
Mortality Costs 16.9 19.8
Total $ 98.0 $115.0

Sources: America Diabetes Association; U.S. Census Bureau

This amounts to nearly $11,000 per year (or $30 per day) for every person
diagnosed with diabetes in the U.S. By comparison, total annual expenditures
on diabetes treatment and diabetes related disability and death is equivalent
to the entire U.S. soft drink market. This is ten times the amount consumers
spend going to the movies, which includes ticket price and concession
expenditures.

PRODUCT LINES

* NON-INVASIVE GLUCOSE METER AND BLOOD ANALYZER

Individuals with diabetes who receive insulin treatment must measure their
blood sugar level several times a day. Individuals with insulin dependent
diabetes test their blood glucose level using glucose meters, which are
about the size of a cassette tape. After first lancing their finger with a
lancet, they apply a drop of blood onto a calibrated test strip. The chemical
reaction indicated by the strip is then analyzed by the meter, which determines
blood glucose levels. This method is painful, and often results in individuals
with diabetes not testing their blood as frequently as is medically desirable.

Individuals with diabetes want to test their blood without pain, and as
frequently as needed. Diabetex has obtained the licenses to a patented,
non-invasive technology for analyzing blood chemistry using radio frequency,
including, but not limited to blood glucose. Diabetex has obtained the
prototype models and an exclusive license to the patented technology from
Solid State Farms, Inc. The Company is also developing its own patents for
this technology.

* METABOLIC ACTIVATION CLINICS

Metabolic Activation stimulates the liver to function properly. The liver is
the primary chemical manufacturing and processing organ for the body. It
provides enzymes needed for body-wide metabolism. In individuals with
diabetes, it is the absence or lower levels of certain enzyme functions
that result in body-wide metabolic dysfunction. Not only does this contribute
to the fact that individuals with diabetes often feel sickly and enervated,
but also to the development of the complications of the disease.

The problem of managing diabetes is not simply that of improper blood sugar
levels. Rather, it is improper metabolism. This causes many of the
complications of the disease such as heart disease, stroke, high blood
pressure, nerve damage and blindness.

Diabetes is a metabolic disorder caused by the lack of, or poor utilization of,
insulin. In individuals without diabetes, insulin secreted by the pancreas in
response to carbohydrates (sugar) in food first goes to the liver by way of the
portal vein. Food is digested and absorbed by the stomach and small intestine.
The liver is the primary "target organ" of insulin. Insulin and sugar arriving
at the liver at the same time cause it to "turn on" and to manufacture enzymes.
Half of the incoming glucose is used by the liver for energy or stored for
later use as glycogen or fat.

In the case of Type I diabetes, insulin is not manufactured by the pancreas and,
therefore, is not released into the liver. Sugar, which is not efficiently used,
continues to circulate, raising blood sugar levels and being used less
efficiently by the liver and by other body tissues. In Type II diabetes,
insulin is manufactured. But, it is released late from the pancreas and is
not used efficiently. Therefore, diabetes is not a disease of blood sugar,
but rather a disease of metabolism.

The Company's Metabolic Activation treatment acts to reestablish proper
body-wide metabolism by restoring carbohydrate metabolism, reducing high
lipid metabolism and restoring certain other metabolic functions. The
primary effect is the restoration of the ability to both store and release
glucose as individuals without diabetes do. It also activates metabolism
needed to properly feed the heart and other tissues both directly and
indirectly through complicated hormone-fuel metabolism processes. It
is critical to note that only Metabolic Activation has been able to
achieve this broad body-wide result, which stabilizes and even, in
some cases, reverses the complications caused by the disease. [July
1999 issue of Journal of Clinical Endocrinology]

To deliver Metabolic Activation, an insulin algorithm is programmed into the
Company's proprietary pump, which delivers a series of intravenous insulin
pulses administered concomitantly with the ingestion of oral glucose. This
gives to the liver and the rest of the body the same signals an individual
without diabetes receives during a meal. These signals cause the liver to
"activate" and to begin metabolizing the incoming glucose in a more normal
way. Once the liver is "activated," the effects persist for a period of some
time after the treatment. For maximum benefit, patients are typically
treated once a week.

* MEDICAL INFUSION PUMPS

The Company is the exclusive licensee of Hamilton-May's "Fluid Micrometer"
pumping system. There are four pumps in this product line. The Company
anticipates that the first will replace the existing pump for the Company's
Metabolic Activation treatment program. The second is a general use infusion
pump (similar to the Metabolic Activation pump). The third is a wearable
insulin pump (used as a replacement for daily multiple injections). The
fourth, an automatic treatment pump, is the next generation of the first
and second products mentioned above. It is bi-directional, in that it will
withdraw a very precise amount of blood and test it using in-line probes.
Once the blood is analyzed the pump will infuse based on the results of
the test. This pump will use a conventional blood test circuit built into
the pump itself. The Company believes that this pump can be fitted to use
any probe and any medicine.

Market Size and Growth: Table E summarizes the present size and forecasted
growth of the market segments of the Industry.

[Download Table]

Table E
Market and Growth Forecast
(Dollars in Millions)

Existing Disposable Potential
Insulin Insulin Activation Glucose Total
Year Pumps Pumps* Clinics Meters* Market

2000 $ 349 $ - $ 24 $ 3,245 $ 3,618
2001 523 23 77 3,430 4,053
2002 759 79 163 3,626 4,627
2003 1,062 183 716 3,833 5,794
2004 1,434 368 3,027 4,051 8,844
2005 $ 1,864 $ 796 $ 8,000 $ 4,282 $14,942

* Includes disposable supplies and materials.

Sources: NCHS, ADA, CVS, MiniMed, U.S. Census Bureau and Management Forecasts.

Diabetex operates in a market characterized by rapid technological change,
innovation and advancement. It holds out vast potential for growth (c.f.
Table E above). As insulin pumps become much more user friendly and
accurate, the Company believes that they will rapidly replace the syringe
method of injection. Disposable pumps are less expensive and easier to use.
Glucose meters will increasingly be non-invasive through radio frequency
and other technology. Metabolic Activation treatment substantially improves
the treatment of diabetes and its related complications. The forecast assumes
that in the year 2005 only 10% of individuals with Type I diabetes will
qualify to receive Metabolic Activation treatment.

COMPETITIVE ASSESSMENT

Competitors and competitive characteristics vary widely by the Company's
three product lines. Therefore, each one must be addressed separately.

Data provided by the NCHS and the U.S. Census Bureau indicate that the
market for Infusion Pumps in the year 2000 is about $350 million and is
expected to increase to about $2.7 billion (including non-disposable and
disposable) by 2005. The dominant competitor is MiniMed Inc., which
currently controls about 80% of the insulin pump market. During the past
five years its annual revenues have grown from $57 million to $212 million,
an average annual compound growth rate (AACGR) of 39%. Its domestic sales
of pumps have been growing at an AACGR of 56%. During the past 18 months its
total annual revenue growth rate has accelerated to more than 50%. Its net
margin exceeds 10% and the company is essentially debt-free. Its working
capital exceeds $250 million and it has cash on hand of $92 million.
MiniMed's ultimate objective is to create a total solution for diabetes
through the development of an artificial pancreas.

MiniMed is a powerful competitor in its segment. The Company, however,
believes that MiniMed's power and driving force present opportunities for
Diabetex to become a primary competitor. The total market is expected to
grow from $350 million to $2.7 billion. If it is assumed that MiniMed will
continue to maintain an 80% market share, $540 million will remain
for other competitors including Diabetex.

The market for Metabolic Activation clinics is more difficult to assess in
terms of competition because there is no direct competition. There
are many clinics where patients can go for treatment of diabetes. Most of
these are associated with hospitals or physicians' group practices. There
are, however, no competitive organizations that operate on a significant
regional or national scale, and none offer Metabolic Activation. There
are some clinics, which are noted for their research, such as Joslin
Diabetes Center in Massachusetts. It is expected that none of the existing
clinics will present significant competition for Diabetex. In fact, these
clinics may actually present opportunities for strategic alliances through
licensing in the future.

The market for glucose meters is rapidly changing. Historically, the process of
using glucose meters has involved patients pricking their fingertip several
times a day in order to draw blood, which is then applied to a strip and
analyzed for blood sugar level by a meter. As Table E shows, in its present
configuration, the cost of the meter compares favorably with the ongoing cost
of daily supplies.

Major competitors, who are also potential strategic partners, include well-known
companies in the healthcare field such as Abbott Laboratories (MediSense,
ExacTech, Precision QID); Bayer Corporation (Glucometer Elite); Roche Group
(Accu-CheckComplete); and Johnson & Johnson, which leads the competitive
field with LifeScan. The Company believes that is about to change. Technology
is moving the product away from painful finger pricking and blood smearing
toward minimally invasive or non-invasive glucose meters. Minimally invasive
are worn and inserted into the subcutaneous tissue where this fluid is drawn
rather than blood samples. Although it is not completely non-invasive, it is
less painful than finger pricking. A number of these products have been, and
continue to be developed and tested with varying degrees of success in terms
of accuracy.

A primary case in point is the GlucoWatch Biographer ("GlucoWatch"), produced by
Cygnus, Inc. of Redwood, CA ("Cygnus"). The GlucoWatch, which has yet to come
to market, has received its pre-market approval (PMA) from the FDA. It expects
final FDA approval in time for commercial introduction in early 2001. Cygnus
promotes the device as a "non-invasive glucose meter". In fact, it is not. It
also does not monitor blood chemistry in real time. The device utilizes an
"electro-osmosis" system, which extracts glucose from fluid between skin
tissue rather than blood. The glucose molecules are collected in gel collection
discs that are part of a single-use AutoSensor. The gel collection discs contain
the enzyme glucose oxidase. As glucose enters the discs, it reacts with glucose
oxidase in the gel to form hydrogen peroxide. A biosensor in contact with each
gel collection disc detects the hydrogen peroxide, generating an electronic
signal. The GlucoWatch uses the calibration value previously entered by the
patient to convert the signal into a glucose measurement. The glucose
measurement is then displayed on the biographer and stored in memory. The
device is capable of providing up to three glucose readings per hour for 12
hours after a single point calibration with the results from a standard
finger-stick meter. The GlucoWatch can cause mild skin irritation that can
take up to several days to heal. The GlucoWatch has been tentatively priced
for retail sale at $300.00, with the disposable AutoSensor priced at about
$4.00. At two uses per day, the cost to the consumer of the AutoSensor would
be about $2,900 per year. In addition, according to the FDA, the GlucoWatch
is intended to supplement finger-stick blood glucose testing, not to replace
it.

Other competitors products are also being developed and tested, which include
minimally invasive meters that extract glucose from subcutaneous tissues and
those that operate on infrared technology. Most of those now in progress tend
to be experiencing challenges of convenience or accuracy. For example, one
subcutaneous continuous glucose metering system, which records and stores
glucose values in memory, was approved by the FDA for use by physicians. This
device, which is inserted into the skin (the sensor remains in the subcutaneous
tissue once the needle is removed), does not provide measurements to the
patient. Reportedly, those metering systems using infrared technology tend to
be slow and are not accurate. Laser technology, used to boost the power of
infrared metering systems, is very expensive.

The Company is not aware of a successful non-invasive glucose meter and blood
analyzer.

DIABETEX'S COMPETITIVE POSITION

The Company is in the process of designing, developing pumps and meters,
while planning to expand its Metabolic Activation clinics. It has several
patent license agreements, and its own research team has the potential to
create proprietary patents. Diabetex continues to seek to establish
strategic partnerships with organizations that provide ongoing research,
manufacturing and distribution capabilities. It has generated only minimal
revenues from licensing its Metabolic Activation process. The Company must
be considered an "developmental stage" enterprise. The following assesses
the Company's positioning in terms of its "distinctive product
characteristics" and its "ongoing challenges" in relation to the
market and to existing competitors.

NON-INVASIVE GLUCOSE METER AND BLOOD ANALYSER

The completed non-invasive glucose meter and blood analyzer is
based on radio frequency technology. The following are the completed
meter's distinct qualities and competitive advantages, particularly in
relation to the traditional lancet method:

* Non-invasive and painless.
* Greater accuracy than existing products.
* Allows measurement at any time.
* No expensive supplies.
* Priced competitively.
* Protected by strong patents.
* Continuous readings more accurately and faster than current lancet
procedures.

Although the Company believes these distinctive product characteristics
suggest that its non-invasive glucose meter and blood analyzer will have a
competitive advantage over any existing or potential competitors, the Company
still faces significant challenges before it can successfully bring it to
market.

* Design and testing must be completed.
* FDA approval must be sought and received.
* Distribution channels may be achieved internally or through strategic
alliances.
* Effective brand-oriented marketing programs must be prepared.

METABOLIC ACTIVATION CLINICS

The Company believes that Metabolic Activation treatment through both
Company-owned and licensed clinics is the business line from which the
Company has the greatest opportunity to initially expand its revenues
nd add substantial profits. This treatment uses a pump that has been tested
and has received 510(k) market-clearance from the FDA. Its distinctive
product characteristics and advantages are clear:

* It addresses the core issue of metabolic dysfunction.
* It is beyond the experimental stage with five (5) licensed clinics/hospitals.
* It has been proved to be highly effective in stabilizing and reversing the
debilitating complications caused by diabetes.
* Patented equipment exists and can be made available for use in clinics.

Along with these positive factors, there are some challenges:

* A Company-owned and operated prototype clinic must be successful.
* The prototype must be replicated in several markets.
* Arrangements must be made to equip clinics.
* Physicians, administrators and technicians must be recruited and trained.
* Effective brand-oriented marketing programs must be prepared.
* Acceptance and simplification of third party payments.

INFUSION PUMPS

The Company's primary potential entry into the infusion pump market is the
Fluid Micrometer Pump. It has several highly distinctive characteristics:

* Greater accuracy with its disposable cartridges.
* A more efficient rate of insulin flow to the patient.
* Simplicity of design with no drip bags.
* Much lower price compared to the industry average of $5,000.
* The technology can be used in the Metabolic Activation pump.

As with the Company's other products, there are some challenges:

* Further development and testing is required.
* FDA approval must be sought and received.
* Distribution channels must be established.
* Effective brand-oriented marketing plans must be prepared.

REQUIRED FINANCING:

The Company is seeking $4.0 million of new financing. As discussed later in
this document, this financing will be used for working capital and for
product development during the eighteen months of the plan.

RELATIONSHIPS IN PROVIDING EQUIPMENT AND SERVICES

The Company has used the Aoki Diabetes Research Institute
("Research Institute") for treatment verification. The Research Institute,
as a non-profit entity, is able to conduct clinical trials and work with
other entities to conduct studies at a lower cost than would otherwise be
required of the Company.

The Company currently has a location in Sacramento, California in a
shared-space arrangement with licensor Hamilton-May. The Company anticipates
assembling the new pump under an original equipment manufacturer (OEM)agreement
at the Sacramento site. The Company has acquired a complete boxing and shipping
system through its co-location with the Hamilton-May companies. This shared
location is on a month-to-month rental. It was offered to the Company to help
centralize the manufacture, shipping and handling facilities. No long term
agreements or leases are in effect, and the Company can re-locate at will.

CONSUMER BASE

Diabetex operates in a market, which consists of 16.2 million individuals
with diabetes, (c.f. Table C above), whose annual medical, disability and
mortality cost in the United States is $115 billion (c.f. Table D above).
During the past 2 years, the Company has addressed three areas critical to
the care and treatment of individuals with diabetes, namely: a) measuring
blood sugar levels; b) providing infusions of insulin; and c) correcting
metabolic dysfunction. The Company's specific market niche in the year 2000
is $3.6 billion. During the next five (5) years, this market is expected to
increase at an annual rate of 33% and to reach a level of $15 billion. Much
of the growth will be driven by new product introductions and product growth
will be driven by new product introductions and product substitution as a
result of technological advancement.

COMPETITION

There will be strong competition for market leadership. Competition in the
largest segment (glucose meters and supplies) is evident among the major
pharmaceutical companies, including Johnson & Johnson, Abbott Laboratories,
Bayer Corporation, and The Roche Group. Specialty companies such as MiniMed
currently dominate a smaller segment of the market. This infusion pump market
is growing at 50% annually. To date, the Company believes that no company has
come up with a successful glucose meter based on radio frequency technology.

LICENSES

a.) An exclusive worldwide license from Solid State Farms, Inc. to develop,
manufacture and market a patented device to non-invasively determine blood
glucose levels. This device is under development and has not been approved
by the FDA.

b.) An exclusive license with Thomas Aoki and his Research Institute to
use and market a patented treatment for diabetes patients known as
Metabolic Activation. All drugs used in Metabolic Activation therapy have
met all FDA requirements for use on human patients, and the delivery device
currently in use has received market-clearance pursuant to section 510(k)
of the Food and Drug Act. The market-clearance number is K875316.

c.) When a commercially viable unit is developed, an exclusive worldwide
license from Hamilton-May Corporation to exploit, manufacture and market a
proprietary pump and in-line measurement system for delivery of insulin and
insulin-related products.

(B) 8. As has been stated, the Company owns the following licenses and does
require governmental approval from the FDA:

a.) An exclusive worldwide license to develop, manufacture and market a
patented device to non-invasively determine blood glucose levels. This
device is under development and has not been approved by the FDA.

b.) An exclusive license to develop and market a patented treatment for
diabetes patients known as Metabolic Activation. All drugs and devices
used in Metabolic Activation have met FDA requirements for use on human
patients.

(B) 9. At the present time the Company has six (6) full time employees.

(C) The Company shall voluntarily provide its shareholders with an annual
report that will include audited financial statements.

The public may read and copy any materials the Company files with the SEC
at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC
20549. Information regarding the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330.

Item 2. MANAGEMENT'S DECISIONS and ANALYSIS or PLAN of OPERATIONS

PLAN of OPERATION

Mission and Strategy: The Company views its marketing mission to exploit its
business opportunities. It plans is to introduce commercially viable
solutions, which have been under development by the Company. The Company
believes that its products and services will offer proven significant
enhancement of the quality of life to sufferers of this disease.

The Company will serve individuals with diabetes in three ways:
* Clinically improve metabolism of glucose in the individual with diabetes:
* The Company plans to open company-owned and managed clinics for its
treatments.
* Its patent protected and licensed Metabolism Activation treatment has
17 years of documented success in substantially controlling the
complications of diabetes, and in some cases, reversing their effects;
* Painlessly measuring blood glucose:
* The Company plans to introduce a non-invasive meter to measure
blood glucose.
* Currently, in its final evaluative stages, the Company's patented
product is a real-time blood analyzer, which when completed will
eliminate pain, fear of infection and the need for skin piercing
paraphernalia for individuals with diabetes.
* Efficiently and automatically infuse insulin:
* The Company plans to introduce a highly efficient and portable,
state-of-the-art insulin infusion pump.
* The Company's patented-design pumps are in the final stages of
development. The pumps, designed to be worn by patients on insulin
therapy, create a controlled flow of insulin, eliminating the need
to carry needles and other injection paraphernalia.

Marketing Programs: For all product lines, the Company plans to deploy an
aggressive consumer-oriented, integrated direct marketing strategy.

The Company has chosen the following media mix, on a localized target market
basis:
* Direct mail.
* Direct response print advertising.
* Direct response cable television.
* Direct response local radio.
* Direct selling (or professional referral) by independent pharmacies,
diabetes educators and dietitians.
* Interactive e-commerce and informational web site.
* E-mail relationship marketing and informational exchange.
* In-store (pharmacy) or in-facility (doctor's office or hospital reception
areas) interactive counter top displays of Company products, services or
informational relationships.
* In-bound telemarketing with toll-free numbers.

In addition to the above media mix, the Company will design its public
relations efforts to promote its brand names and testimonials. It plans to
produce a video of its products and processes that will be used as giveaway
promotions to its customers, and retail distribution outlets. It is the
Company's expectation that such nationally televised shows as Good Morning
America (ABC) and the Today Show (NBC) will be prime targets for public
relations efforts along with nationally syndicated or local market radio
talk shows.

Through initial marketing efforts, the intent of the Company is to develop a
Company-owned database of clients, and to create consumer and market
awareness of the Company's products and services. Additionally, the Company
hopes to gain the confidence of its clientele through education regarding the
management of this very debilitating disease.

MARKETING TARGETES

Based on its assessment of the marketplace, management's targets are
reflected in the projected revenue and gross profit targets shown in Table A.
In determining this projection the Company relied on information it obtained
from the US Census Bureau regarding the number of individuals with diabetes
in the United States, CVS Pharmacy, and MiniMed marketing information.
CVS is among the largest retail pharmacy chains in the United States
and has made data regarding its prescription of insulin, pumps and other
paraphenalia used by individuals with diabetes available to the public.
MiniMed is a major competitor of the Company, and management has used
information regarding market size and pricing from their public documents.
Management has taken a conservative assumption that its marketing plan to
use local influencers like CVS will result in the market penetration numbers
found in Table A below. Revenues are projected based on the pricing policy
described later in this Registration Statement. These projections comply with
Item 10 of Regulation S-B and with sections 210 and 316 of the AICPA Guide
for prospective Financial Statements.

[Download Table]

Table A
Diabetex' Marketing Targets
(Dollars in Thousands)

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Market Share

M. A.(Penetration) 0.04% 0.15% 0.33% 0.50% 0.72% 1.00%
Medical Infusion
Pumps 0.00% 1.00% 2.00% 3.00% 4.00% 5.00%
Pump Cartridges NA NA NA NA NA NA
Non-invasive Glucose
Meters 0.00% 0.00% 0.10% 0.27% 0.52% 0.82%

Revenues

Metabolic
Activation $ 6,429 $ 27,244 $ 71,990 $ 133,476 $ 210,238 $320,161
Medical Infusion
Pumps - 5,460 16,760 37,350 72,080 133,000
Pump Cartridges - 2,457 9,521 25,820 61,699 146,270
Non-invasive
Glucose Meters - - 35,000 140,000 350,000 700,000
Total Revenues $ 6,429 $ 35,161 $133,271 $ 336,646 $694,017 $1,299,431

Direct Profit

Metabolic
Activation $ 4,746 $20,039 $ 53,139 $ 98,478 $ 155,060 $ 236,065
Medical Infusion
Pumps - 3,549 11,474 26,654 49,255 91,200
Pump Cartridges - 2,359 9,140 24,787 59,231 140,418
Non-invasive Glucose
Meters - - (13,750) 72,500 241,250 562,500

Total Direct
Profit $ 4,746 $25,947 $ 60,003 $222,419 $504,796 $1,030,183

Direct Margin 73.8% 73.8% 45.0% 66.1% 72.7% 79.3%

Sources: NCHS; U.S. Census Bureau; CVS; MiniMed; Management Estimates and
Forecasts.

NOTE: THE INFORMATION CONTAINED IN THE TABLE ABOVE IS FORWARD LOOKING,
ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY. THE COMPANY RELIES ON US CENSUS
DATA FOR ITS MARKETING ASSUMPTIONS AND THE CURRENT PRICING POLICY USING
THOSE PRICES CHARGED FOR SIMILAR SERVICES BY THE COMPANY'S COMPETITIORS.
MANAGEMENT ESTIMATES ON MARKET SHARE ASSUME THE SUCCESS OF ITS MARKETING
PLAN AND RELIES ON INFORMATION OBTAINED FROM CVS AND OTHER PHARMACUETICAL
CHAINS.

THE MARKETING PLAN

The Company is now prepared to expand the research and development
of its patented Metabolic Activation process. While the Company
has defined its introduction strategy for the non-invasive glucose
meter and blood analyzer and the pump, these products are not yet
market -ready. The following discussion by management includes anticipated
timetables for the introduction of these products.

STRATEGIC ALLIANCES

The Company plans to rely heavily on strategic alliances with independent
"neighborhood" pharmacies. Management believes its strategic competitive
advantage is best served by utilizing these relationships rather than relying
solely on direct marketing to the diabetic. The Company's competitors,
particularly in the infusion pump business, have tended to eliminate
pharmaceutical wholesalers and retail pharmacies. Instead they have chosen to
deal directly with their target customers. By having the pharmacy act as a
"Diabetex Service Station", the Company intends to reinforce its brand message,
build its societal message and maintain a close relationship with its customer
(1). The independent pharmacy should appreciate the advantage of being a
strategic partner.(2) The Company intends to utilize the additional referral
business for its other products, its Metabolic Activation clinics, infusion
pumps, non-invasive glucose meters and blood analyzers. The pharmacies will also
be able to share in the Company's success by being a part of the Company's
brand message to its consumers. More often than not, the independent pharmacy
is able to establish a personal relationship with the consumer. As a result,
the customer trusts the pharmacist and allows the pharmacist to be a respected
part of a sphere-of-influence in health care maintenance. Consequently, the
Company plans to have these neighborhood pharmacies function as a local direct
selling customer training and service organization.

The Company will explore opportunities to co-brand or co-market its
non-invasive glucose meter and blood analyzer with well-established
pharmaceutical companies. Some of these companies include Johnson & Johnson,
Bayer Corporation, The Roche Group and Abbott Laboratories.

METABOLIC ACTIVATION CLINICS

By the Spring of 2001, the Company plans to open its first company-operated
clinic in Manhattan, New York. The Company has licensed five clinics now in
operation, along with the Aoki Clinic, in the following locations:

[Download Table]
METABOLIC ACTIVATION CLINICS
Metabolic Activation Clinic
Licensees Location Number of Patients
-------------------------- ---------------------- ----------------------

Via Christi Medical Center Wichita, KS 7
Presbyterian/St. Luke's Denver, CO 4
Diabetes Center of the
Southwest Midland, TX 9
Endocrine Associates Santa Rosa, CA 10
New Bedford Clinic New Bedford, MA 0
AOKI Clinic Sacramento, CA 50
-------------------------- ----------------------- ---------------------
Total Patients 80
------------------------ ------------------------ ---------------------

The Company believes that the Manhattan market may best serve its objectives.
* New York Metro Market has a large base of individuals with insulin dependent
diabetes who will benefit from the clinic's services.

* It provides the Company with a large enough available market to test its
marketing strategies.

* The per capita income in New York is relatively high. Should the Company
experience any difficulties with insurance reimbursement, it believes it will
be successful in attracting affluent self-paying patients.

* The market is conducive to integrated direct marketing strategies.

The tri-state New York Metro market (New York, Connecticut, New Jersey)
offers a substantial base for the introduction of its products (3) and
clearly demonstrates a need.

[Download Table]
TRI- STATE DEMOGRAPHICS

State Connecticut New Jersey New York Tri State Area

-------------- -------------- --------------- -------- -----------
Adults Diagnosed 117,210 312,195 664,721 1,094,126
Percent of Population 4.7% 5.1% 4.8% 4.9%
Age:18-44 18,575 36,486 85,138 140,199
Age:45-64 47,047 108,474 311,159 466,680
Age:65-74 29,411 109,274 167,708 306,393
Age: >75 21,816 53,071 99,098 173,985
---------------- ------------- --------------- ------- ------------
New Cases
----------- -------------- ---------------- ---------- ------------
Blindness 196 553 1,096 1,845
Lower Extremity
Amputation 1,172 3,173 6,523 10,868
End Stage Renal
Disease 401 1,147 2,307 3,855
Hospitalizations 52,439 139,959 85,127 477,525
% Persons w/ diabetes
had at least one day poor
health & could not
function 21% 27% 32% 27%
Costs
(billions of dollars)$ 1.5 $ 4.1 $ 8.7 $ 14.3
----------------- ----------- --------------- ------------ --------

In the Greater New York Metropolitan Area, the estimated population of
diagnosed individuals with diabetes is a large enough to establish
relationships and acquire patients for its products and services. The
estimated total of persons diagnosed with diabetes in the tri -state
this area is 1,094,126 (see chart above). (4)

[Download Table]
ESTIMATED POPULATION OF INDIVIDUALS WITH DIABETES
IN COUNTIES OF THE TRI-STATE AREA KNOWN AS THE "METROPOLITAN AREA" OF NEW YORK

State By County
----------------------- -----------------------

CT 126.000
NJ 134.000
NY 389.000
Total Est. 649.000

On a national basis, there are 9.7 million households with incomes of
$100,000 or more. Of the 270 million population of the United States in
1999, 3.6% were in that category. 5 The New York Metro market exceeds national
income averages by an estimated 20%. The Company estimates that
approximately 4.3% of this market segment earns incomes of $200,000 or
more. Due to this affluence, it is likely that a significant number of
individuals with diabetes within this market would be able to afford the
Company's Metabolic Activation treatment without the need for insurance
reimbursement. Additionally, the New York City market provides the Company
with a statistically significant segment to test the Company's market strategy
in a controlled environment.

The Company, while continuing to examine various alternatives for location of
its Metabolic Activation clinics, has chosen New York City in view of a wide
range of factors, such as, proximity to the targeted demographic, ease of
transportation and relationships with physicians, hospitals and other such
health care providers.

The Company's pricing structure for services performed in the clinics is
based on licensee experience and the various medical procedures that make
up Metabolic Activation. There is no designated CPT code (the standard coding
system recognized by third party payers, insurance companies and HMO's for
medical procedures) for Metabolic Activation therapy. A number of the medical
procedures that make up this therapy do have CPT codes. Among these are
measurement of respiratory function, infusion therapy, and glucose
measurement. Company licensees have been charging $600-$700 as an aggregate
amount submitted on their insurance forms.

The Company's charges for such services will be $800 per patient visit. The
prescribed regimen for this treatment is usually a weekly Metabolic Activation.

Licensees offer Metabolic Activation to selected patients with diabetes, and
have been billing their insurance plans since 1990. These patients are
subscribers to or beneficiaries of various insurance plans, both public and
private. Medicare is the single most common coverage. Medicare neither
verifies patient eligibility nor pre-authorizes any services. Therefore,
providers are unable to pre-determine if services are to be reimbursed.
Reimbursement by Medicare to hospitals has been reliable at 80% of allowable
rates. Medicare reimbursement to physicians' offices has been less reliable.
However, hen challenged, Administrative Law Judges have found the treatment
to have been medically necessary, and payments have been made.

Private insurance often requires and denies pre-authorization for treatment.
As with Medicare, when challenged, state insurance commissions have found the
treatment to be medically necessitated.

LOCAL MARKET INFLUENCERS: "Diabetex Freedom Service Centers"

The Company will use local market resources to influence the sale of the
Company's products and services. As a result, the Company will have available
to it, by market,
relevant statistics of :

* Insulin taking individuals with diabetes.
* Diabetes educators.
* Independent pharmacists who are willing to participate in the Company's
program.

The Company anticipates providing training for these participants regarding the
Company's mission and product lines. As a part of its participation, the Company
will provide instruction and support to train their customers in the use of the
Company's products, as well as to the benefits of its clinics. The Company is in
the process of securing these relationships in the greater New York metropolitan
area as well as in other markets.

Marketing the Company's service and products involves targeting individuals with
diabetes and convincing them to choose the Company as the preferred alternative
or supplement to conventional diabetes management.

Markets and Marketing

* The Company plans to establish its clinics in affiliation with hospital
centers within the target market.

* Traditional "area" or mapping marketing strategies will be employed in site
acquisitions.(6) Clinics will be opened within a geographical area which is
closest to the greatest diabetes need.

* Therefore, each targeted metro market will be segmented into regions and
local neighborhoods. The Company does not have to be limited to opening
only one Metabolic Activation clinic per market. Should the Company be
successful in opening its first Metabolic Activation clinic in the targeted
metro market, other neighborhood clusters will be identified and the local
marketing effort will be implemented there.

* The Company will conduct primary and secondary market research.

The development of the local market strategy is to attract individuals with
diabetes to the Company's referral sources. These resources should enhance a
personal selling and trust building relationship with the individual with
diabetes. This should increase registration at the Metabolic Activation
clinics.

THE MARKET

Individuals with diabetes should measure their blood glucose levels, whether or
not they are taking insulin as part of a treatment regimen to avoid the
disastrous complications of the disease(7). About 70% of individuals with
diabetes do not test their blood because it is painful and bothersome.
Approximately 43% of total individuals diagnosed with diabetes take insulin
(about 4.8 million people). About 30% of individuals with Type II diabetes
take insulin. Nearly 15% take only insulin and 15% take insulin and other
diabetic drug therapies. Insulin users monitor their blood glucose levels.
Roughly 85% of individuals with Type II diabetes measure their own blood with
some invasive metering devise that forces them to prick their skin, draw
blood or interstitial fluid to measure their blood glucose levels. Insulin
users dislike invasive procedures because scar tissue builds up, fingers
become extra sensitive to the touch, they are prone to infection and the
process is painful.(8)

The Company estimates that the market for meters and meter supplies is $3.3
billion in 2000 and will grow to $4.3 billion by 2005.9 The Company is
positioned to exploit this market situation.

COMPETITION

The major competitors in this market segment are:
* Abbott Laboratories (Medisense Company: Exac, Precision brands)
* Bayer Corporation (Glucometer Elite brand)
* Roche Group (Boehringer Mannheim Company: Accu-check)
* Johnson & Johnson (Lifescan Company)

There are no meters on the market that are 100% non-invasive. To some degree,
the competitive models measure glucose through skin invasive means. All are
painful to use and require the user to purchase paraphernalia for taking
blood samples that could cost the average user between $600 and $1,000 a year.

The latest development, the GlucoWatch, manufactured by Cygnus, Inc., claims
to be "non-invasive". However, according to the FDA panel recommendations 10
the GlucoWatch measures intracellular fluid, not blood, and it "extracts
fluid through the skin and then measures the glucose in the fluid." The
GlucoWatch has not yet received FDA approval for consumer use. Other clinical
studies demonstrate that some patients using the GlucoWatch experience skin
irritation.(11)

[Download Table]
Glucose Meters in Use by People Using Insulin Pumps (12)

BRAND NAME PERCENT OF MARKET
______________________________________ ___________________________

Accu-Chek Complete 24%
Advantage 10%
Bayer Dex 6%
Glucometer Elite 7%
Lifescan Fast Take 12%
Lifescan One Touch II 3%
Lifescan One Touch Profile 20%
Lifescan Original One Touch 6%
Lifescan Sure Step 1%
MediSense Precision QID 3%
Miscellaneous 8%
------------------------------------ ------------------------------
Total 100%

DESCRIPTION OF THE PRODUCT

The Company's non-invasive meter measures blood glucose using radio frequency
technology. The Company holds license to eight patents relevant to this
technology. The Company believes it will be ready for FDA filing in mid 2002.

Advantages of the Company's product are:
* Non-invasive.
* Portable
* Measures blood (not body fluids).
* Measures in real time (not delayed as in measuring intercellular tissue
fluid).
* Has no need for disposable supplies or paraphernalia.
* Can continuously monitor blood glucose levels in real time.

PRICING

* The Company plans to produce a basic model that can be adapted to
institutional and professional use once it successfully launches as a
consumer product.
* Individuals with diabetes spend between $600 to $1,000 per year on today's
disposables. The average is $700. The life of an average meter is five years,
based on the Company's testing. For the life of a meter, an
individual with diabetes will spend approximately $3,000 to $5,000 for
supplies. The present meters are discounted heavily so that insulin users will
buy the supplies from the meter manufacturer. Supplies are unique to each meter.
Since the Diabetex meter is being designed to be non-invasive, not only will it
be painless, but it also will not require ancillary supplies. The Company's
price of $3500 has been predicated on market research and is competitively
positioned.

INFUSION PUMPS

The Company intends to have its infusion pump ready for
commercialization by the Fall of 2001. Market research has proven that the
infusion pump market is a growing market.

The Market

The insulin pump, small and compact, is designed to function almost like the
human pancreas, delivering insulin in small amounts throughout the day. The
benefits of insulin pump therapy include improved blood sugar control during
play, work or sleep, increased lifestyle flexibility and a lower risk of long
term complications normally associated with diabetes including blindness and
neuropathy, often resulting in amputation. The pump allows tight glycemic
control for individuals with diabetes.

Intensive diabetes management is defined as three or more injections of
insulin per day or use of an insulin pump. Less than 25% of individuals with
Type I diabetes practice intensive therapy. However, more than 60 % of the
professionals treating patients with diabetes, doctors and nurses, who
themselves have diabetes, reported using insulin pumps rather than
traditional syringe therapy.(13)

The market for insulin pumps is growing at a greater than a 50% annual rate.
(14) It is the Company's estimates that the market in 1999 was $225
million, in 2000 $349 million and by 2005 will be $1.9 billion.15
It will be driven by the increased availability of products by existing
competitors and the market demand for products and services that will give
the individual with diabetes greater control over the state of such person's
disease management.

The leading competitor in this market is MiniMed, with an 80% market share.
The other major competitor is Disetronic, which is the leading marketer of pumps
in Europe. During the first quarter of 2000, Animas Corporation received FDA
approval for a wearable pump, which it is in the process of commercializing.

The Company's consumer marketing strategy will be to create a pump based on the
patents licensed to the Company. The completed pump will offer consumers
improved benefits at better prices than the most popular pumps on the market.

THE PUMP PRODUCT LINE

The Fluid Micrometer Pumping System

Diabetex is licensed to market the Hamilton-May Fluid Micrometer Pump.
This disposable cartridge pump with ultra high accuracy offers significantly
improved benefits with fewer disadvantages than pumps currently on the market.

This pump is designed to precisely deliver insulin, reducing harmful side
effects for the individual with diabetes. The Fluid Micrometer Pump is
extremely accurate and is not limited by averaging accuracy error calculations.
It holds its accuracy at all logical pressures and speeds and in all
concentrations of the liquids.

GENERAL DESCRIPTION OF THE PUMP

The Fluid Micrometer has many features that are the basis for its
application to fluid delivery needs:

a. The device has only one moving part that rotates to deliver the fluid. By
having only one moving part, the unit can be controlled much more easily, and
the fluids are subjected to many fewer stresses, shearing forces and
polarization forces.
b. It can be made in many different sizes and shapes, giving different ranges
and capacities to match different energy sources.
c. It is production manufactured to be accurate to 1 micro-liter with
plus-or-minus 1-2 percent accuracy.
d. It is capable of very high pressure (in steel or ceramics) and economical
operation in plastic or glass.
e. It is a positive displacement system capable of pumping both very high
viscosity (thick) and very low viscosity (thin) fluids.
f. Either the reservoir (cartridge) or the entire pump, when made out of
plastic or other inexpensive materials, becomes an inexpensive disposable
unit.
g. The reservoir can be pre-filled, thereby enabling the seller to market
pre-filled cartridges. Also, expensive residues (leftovers) are not lost
as occurs with a transportation bottle. (This happens when fluid is drawn
from a bottle, and then used to fill a cartridge or bag.)
h. In operation, it can avoid slip-stick or chatter in delivery, a problem
found in most other pumping systems.
i. It will accurately both infuse or withdraw measured amounts, reversing
directions or starting and stopping without measurable lag (hysteresis).
This allows it to take in and then re-dispense the same amount accurately,
and without need for complicated compensating software.
j. Due to its accuracy, it can be made in truly miniaturized equipment form.
Most non-miniaturization is related to the inability to accurately and
economically pump low volumes.)
k. The size or dimensions of the pumping cartridge is not a limitation to the
basic benefit, and as such, the pump can be integrated into different
systems.
l. By directly translating digital data into fluid motion, and by using a
pump which has no measurable slip-stick or hysteresis, the highly
complicated correcting software associated with positioners is not
necessary, and the software is thus simplified.
m. By eliminating the correction software, it can accurately sense
"occlusions" in the set.
n. One highly unusual aspect of the pump is the ability to start and stop
fluid delivery at relatively high delivery speeds while maintaining
accuracy. This gives the system great utility, and is ideal for pulsatile
infusion.
o. The cartridge will not siphon out of the pump, or accidentally deliver
fluid when dropped or pushed against by accident or mishandling.
p. Optical reading of the bar code on the cartridge will allow mistakes to be
minimized, as the maximum allowable dose or delivery can be set by each
cartridge, and based upon weight.
q. Time and motion is greatly simplified and reduced when:
(1) There is no unpacking of the product to place in the storage area; the
cartridge is the storage item.
(2) There is no diluting to accommodate a less accurate pump.
(3) There is no loss of reagent in the bottle
(4) There is no measurement of fluids when there is no mixing.

MEDICAL INFUSION DEVICES

The customary way to handle both intravenous and CSII insulin is to dilute
medicine so as to accommodate less accurate infusion systems. Before pumps were
available, it was customary to use a continuous "drip". Next, drip counters
were used. Finally, a pump, which was little more than a drip-counter,
became the standard. The limitations of hanging medicines are a product of
old delivery systems and standards The therapeutic effect of non-diluted
medicine given at specific timing intervals has been under study and is
widely believed to be of significant benefit over conventional delivery
systems. The ability to deliver non-diluted medicines at specific times and
with high accuracy offers a greater benefit to the user.

THE PUMP FOR THE TREATMENT OF IMPROPER METABOLISM,
INCLUDING DIABETES

A major limitation of conventional infusion systems is the inability of
current pumps to deliver small doses accurately at a relatively high rate of
flow. Generally speaking, the current pumps can either achieve high flow
rates, or high accuracy, but not both. Some systems need to be able to start
and stop quickly, without follow-on flow. Such performance has historically
been limited to expensive laboratory devices. However, such needs are now
being seen as a modality of choice in certain therapies. The use of bags and
large amounts of fluid in medicine have come from the failure of equipment to
be exact. The change from a "hanging bag" or bottle has been slow since
there was no easy alternative.

New diabetes treatment is now delivered using a syringe pump which is not as
accurate as the clinical personnel would like. The treatment requires
starting and stopping the pump at specified short intervals, an action very
difficult to achieve with a conventional syringe, and impossible with a
peristaltic pump.

CONVENTIONAL PUMPING OPERATIONS COMPARED

There are many ways to pump, including peristaltic, displacement,
syringe/piston, vacuum, bellows, rotary, capillary, centrifugal, osmotic,
siphon, gear, and others. However, in the infusion business, the ground
glass or polished metal syringe systems have dominated the high precision
delivery market. The problem with these syringe pumps is that as force is
applied to the plunger, there is a measurable slip-stick, chatter or shutter.
Another limitation to many systems is that they often create shear forces on the
fluid as valves open and close. The Company believes this limitation does not
exist for the Company's technology, thus making it suitable for many new
purposes.

THE PRODUCT MIX

The line of pumps will consist of two general use infusion pumps and one
specifically designed for Metabolic Activation.
* The wearable Insulin Infusion Pump: the Consumer product " Diabetex Freedom
Pump."
* Market launch Fall, 2001
* The Professional Infusion Pump: for institutions and doctors' offices.
* Market launch Summer, 2001.
* The Metabolic Activation Pump: for use in the Company's and Metabolic
Activation Clinics.
* Market launch Summer, 2001.

DIABETEX FREEDOM PUMP

This is similar to non-patented features of market leaders:
* More accurate dosing because of the Company's patented processes.
* Waterproof.
* Greater memory.
* Remote activation with vibrating activator to alert diabetic.
* Docking station to download information to own records or to the physician.
* Lifetime warrantee.
* Pre-filled insulin cartridges.
* "Tack-on" sales of insulin cartridges and prescription medications.
* Patented micrometer screw.

The Professional Infusion Pump( PIP) and The Metabolic Activation Pump (MAP)

Both pumps are intended for the professional marketplace. The Metabolic
Activation Pump is intended for use in Metabolic Activation Clinics, while
the PIP is for nursing homes, hospitals and all-purpose medical applications.
* There are 7,000 hospitals, 2,048 nursing homes, 1,230 infusion/home
healthcare facilities and 685 HMO facilities that are proposed targets
for these products.(16)
* The Company will engage in a direct sales effort to target these facilities

EIGHTEEN MONTH OPERATIONAL PLAN

Over the course of the next eighteen months, the Company needs to determine the
viability of its Metabolic Activation Clinics. As discussed earlier in this
document it anticipates opening its first company-owned facility in the New
York metropolitan area within the next six-month period.

Published data exists documenting the effectiveness the of Metabolic Activation
treatment. To date, corresponding revenues from this business segment have been
limited. The Company believes this to be true due the treatment's expense, the
unwillingness of both private and public insurers to cover the cost and a lack
of marketing by the licensee physicians . The Company believes that when the
treatment becomes more widely accepted and prescribed by the medical community
both public and private insurers will more readily reimburse patients for this
treatment. To that end the Company will direct its promotional efforts to
enhancing the acceptance of this treatment among the medical profession.

While the Company currently uses standard infusion pumps already cleared for
market use by the FDA, most notably the Bionica Pump, it intends to center
its efforts on the pump. While the patent for this pump is still pending,
the Company is adapting its present pumps to enhance its Metabolic Activation
process. This adaptation should allow the Company access to the larger
infusion market with improved performance, and safety. It has established the
following schedule for this business segment:
* Design and develop a replacement pump by the end of Spring, 2001
* Submit this product for FDA approval by Summer, 2001

In addition, to the pump business segment, the Company has plans to complete its
development of the non-invasive glucose meter and blood analyzer. The Company
has successfully tested its meter in the laboratory, and plans to complete the
design and manufacture of a prototype by the Spring of 2002. If the
prototype exhibits the same success as the laboratory model, the Company will
seek to complete its clinical trials in time to apply for FDA approval by the
late mid-2002.

RESEARCH and DEVELOPMENT

The ongoing research effort for both the infusion pump and the non-invasive
glucose meter and blood analyzer will be under the direction of David Walsh,
Chief Operating Officer. Dr. Anatoly Tsaliovich, Vice President of Research
& Development for Diabetex, will concentrate his efforts on the development
of the non-invasive glucose meter and blood analyzer.

Research on the infusion pump consists of designing and developing the
Company's own patented infusion unit with its unique pumping system. In
some respects the Company's pump will mimic those of its most successful
competitors. It will, however, have added critical features of enhanced
levels of dosage accuracy and fluid flow rates. This should make the
Diabetex pump superior to diabetes-related pumps currently on the market.

In terms of the non-invasive glucose meter and blood analyzer, the Company
is currently conducting basic research to determine the interaction and
correlation of the return signals from electromagnetic radio waves when
directed toward in vivo human blood. Particular attention is being paid to
identifying internal blood components, then measuring and tracking any
changes in these blood components. This is ongoing research. It is expected to
continue through mid-2001, at which point the Company should have developed the
correlations, which will enable Diabetex to produce an accurate and FDA accepted
non-invasive glucose meter and blood analyzer. Once this is accomplished,
further work will be required to improve the current measurement system. In
addition, basic R&D will be conducted to identify and measure other blood
analysis. The Company will also develop its own patents.

The anticipated research and development costs associated with the
products above is $ 125,000 over a twelve-month period.

MANGEMENT and PERSONNEL NEEDS

As a developing enterprise, a senior management team has been put in place.
At present, senior management consists of six (6) people.

In order to successfully complete this operational plan the Company must
immediately seek to secure a major injection of new capital.

The Company is seeking $4.0 million dollars of new capital. This financing
will be used as working capital and for product development during the first
eighteen months of the operational plan.

Use of Proceeds (Dollars in Thousands):

Launch the Non-invasive Glucose Meter R&D to Launch $ 1,500
Establish One Metabolic Activation clinic 300
Complete Development/Testing of Infusion Pump 200
Cover 18 Months Overhead 2,000
------------------
Total Use of Proceeds $ 4,000
===================
The Company forecasts overall financial results are based on its assessment
of the marketplace, management's projected revenues and gross profit targets
shown in Table B are based on market penetration data first mentioned above
in Table A in this section.

In determining this projection the Company relied on information it obtained
from the US Census Bureau regarding the number of individuals with diabetes
in the United States, CVS Pharmacy, and MiniMed marketing information.
CVS is among the largest retail pharmacy chains in the United States
and has made data regarding its prescription of insulin, pumps and other
paraphernalia used by individuals with diabetes available to the public.
MiniMed is a major competitor of the Company, and management has used
information regarding market size and pricing from their public documents.
Management has taken a conservative assumption that its marketing plan to
use local influencers like CVS will result in the market penetration numbers
found in Table A above. Revenues projected are based on the pricing policy
described later in this Registration Statement. These projections comply with
Item 10 of Regulation S-B and with sections 210 and 316 of the AICPA Guide
for prospective Financial Statements.

as follows:

[Download Table]
Table B
Diabetex Summary Forecast
(Dollars in Millions)

Financial Forecast Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Revenues $ 6.4 $ 35.0 $ 133.3 $ 336.6 $ 694.0 $1,299.4
Direct Profit $ 4.7 $ 25.9 $ 60.0 $ 222.4 $ 504.8 $ 269.2
Direct Margin 73.8% 74.1% 45.0% 66.1% 72.7% 79.3%

Pretax Profit $ (.3) $ 17.7 $ 43.7 $ 193.8 $ 457.9 $ 960.5
Pretax Margin (4.4)% 50.6% 32.8% 57.6% 66.0% 73.9%

Investment $ 17.9 $ 28.4 $ 54.6 $ 170.9 $ 445.7 $ 1022.0
Net ROI (0.9)% 37.4% 48.0% 68.0% 61.6% 56.4%

NOTE: THESE FORECASTS ARE FORWARD LOOKING AND ASSUME THE EXPERIMENTAL
PRODUCTS OF THE COMPANY ARE SUCCESSFUL. ACTUAL RESULTS MAY VARY SIGNIFICANTLY.
COMPARISON OF RESULTS OF OPERATIONS, YEARS ENDING DEC. 31, 1999 AND 1998

There were no revenues for 1998 as compared to revenues of $40,605 in 1999. All
revenues in 1999 resulted from the Metabolic Activation treatment clinics.

Prior to and until December 31, 1998, the Company had no operations.
Beginning with January, 1999 the Company began an aggressive program to
meet the requirements of its new focus: the treatment and diagnosis of
diabetes.

During 1999, the Company issued stock for services and the purchase
of a subsidiary and other intellectual properties that advance the
treatment and diagnosis of diabetes. During the first six (6) months of
1999, the Company acquired the rights to 44 patents (8 of which are still
active) related to technology designed to provide non-invasive blood
glucose monitoring. Additionally, in June, 1999, the Company acquired
Advanced Metabolic Technologies, Inc. at a purchase price of $12,322,610
all of which was purchased with 1,232,261 shares of the Company's common
stock valued at $10.00 per share (private placement price). This subsidiary
held rights and patents to Advanced Metabolic treatment and five (5)
operating clinics. All of the revenues earned in 1999 are attributable to
these operations. In June, 1999, the Company also acquired a license for all
intellectual properties related to an insulin pump developed by Hamilton-May
Corporation.

Each of these acquisitions and purchases were completed by the transfer of
common shares of Diabetex's stock. This resulted in an increase in the
average number of shares issued and outstanding to 12,288,901 shares as
compared to 42,511 shares in 1998. The Net Loss increased from $650 or
$0.02 per share in 1998 to $1,746,616 or $0.14 per share in 1999.
This increase in Net Loss is attributable to the fact that the Company
had no operations in 1998 and a total expense for professional services
of $650, while the acquisitions of 1999 increased the total expense items
of the Company to $1,805,221. These expenses include the amortization
and depreciation of its licenses and equipment, consulting services,
legal and accounting, public relations and administrative costs.

RISKS:

With the exception of Metabolic Activation procedure, the Company's products
are still very experimental. While the Company is encouraged and
enthusiastic about its laboratory results both in regard to the pumps and
to the non-invasive glucose meter and blood analyzer, it should be noted that
the possibility exists that the technology may fail to work sufficiently well
so as to obtain licensing from the appropriate agencies, or the feasibility of
manufacture may be limited by expense, process or technology.

The Metabolic Activation clinics can generate sufficient revenues to make the
Company profitable, provided this treatment obtains wider acceptance by the
medical community.

COMPANY SENIOR MANAGEMENT

Benjamin B. Weisman, PhD
Chairman and CEO

An accomplished executive, entrepreneur, financial consultant, educator and
academic administrator, Dr. Weisman has established or assisted in the
creation of more than 80 businesses and business plans. He has served as a
consultant to IBM, General Foods, Philip Morris, Cellular One and other
major firms. As a financial advisor, he has supervised over one dozen
investment portfolios. He partnered with Financial World Magazine in the
creation and distribution of Weisman Stock Selections. He was recognized by
Forbes Magazine as having the best performing model portfolio. In a
distinguished academic career, he has acted as Chairman and/or Dean of the
graduate and undergraduate departments at Long Island University,
Iona College and Mercy College.

David E. Walsh
Chief Operating Officer

A senior executive with extensive experience directing global initiatives of
international companies, Mr. Walsh managed start-up manufacturing operations in
Europe and China for United Production, Inc. As Group Engineering Manager for
Johnson & Johnson, he oversaw large-scale projects with budgets up to $75
million.

Sebastian J Paguni
Executive Vice President

Mr. Paguni is an executive and entrepreneur specializing in financial
analysis, investor relations and guiding firms through periods of rapid
growth. He has broad experience in the management of people and projects and
has expertise in providing development project analysis, in financing
acquisitions and in investor consulting services. He has successfully managed
businesses from start-up to ongoing profitability through creative approaches
to marketing, sales, distribution and administration.

Anatoly Tsaliovitch, PhD
Vice President of Research and Development

Dr. Tsaliovitch is an acknowledged expert in the fields of electrical,
electronic and electromagnetic engineering R&D management. He specializes in
radio frequency (RF) and microwave design, telecommunications and
PCS/Wireless, electromagnetic compatibility (EMC), broadband networking and
applied electromagnetic research. He served as a Technology Consultant and
manager at AT&T Bell Labs and Thomas & Betts Corporation. Dr. Tsaliovitch is
author and editor of numerous technical books, handbooks, textbooks, scientific
papers, and holds numerous patents in his name. He is a frequently sought after
lecturer at institutions, conferences, and engineering meetings in the U.S. and
abroad. He received the IEEE Society's prestigious "Richard H. Stoddard Award"
for his contributions to EMC research and development.

Katherine Bennett, JD, RN
Director Reimbursement

Ms. Bennett's career in healthcare spans 30 years, and includes direct patient
care and clinical consultation at the Medical University of South Carolina,
staff and reimbursement management at Caremark, Inc., and VP Regulatory Affairs
at Reimbursement Dynamics, Inc. Most recently, she was Director of
Reimbursement at Advanced Metabolic Systems, Inc., where she assisted and
advised client accounts on billing and collections, and managed successful
hearings before Administrative Law Judges challenging denials of coverage by
Medicare.

Michael A. Arcangeli, MS
Director, Clinical Affairs

Mr. Arcangeli has over 20 years of medical research and development
experience in both academic and commercial environments. As Vice President
of Advanced Metabolic Systems, Inc., he was responsible for managing clinical
trials and the design, training, installation and operation of Metabolic
Activation centers throughout the country. As a faculty member at the
University of California School of Medicine, he created and managed the
Metabolic Procedure Laboratory for the Division of Endocrinology and worked
on the development of Metabolic Activation therapy. He holds a BA in Biology
from the University of Massachusetts and an MS in Health Care Administration
from St. Mary's College.

In addition to the key employees above, the Company has entered into various
consulting agreements with experts in engineering, medicine (in particular
metabolic disorders such as diabetes) and marketing. The following represent
the key outside consultants of the Company (the contracts of each have been
made a part of this document by reference):

Thomas T. Aoki, MD
Director of Research and Development
Aoki Diabetes Research Institute (ADRI) A Not-For-Profit Organization
Sacramento, CA.

Dr. Aoki conceived and patented Metabolic Activation as a method of treating
diabetes. He is the co-founder of Advanced Metabolic Systems, which is now
the Company's wholly owned subsidiary, called AMTech. He received his
doctorate at Yale University, where he was also was presented with the Mosby
Award for scholastic excellence. In 1972, he became a Senior Investigator of
the Research Division at the Joslin Diabetes Center. He was an investigator
at Harvard's Howard Hughes Medical Institute. An internationally recognized
expert in hormone-fuel metabolism and diabetes, he is Professor of Medicine
and former Chief of the Endocrinology Division at the University of
California, Davis.
He is widely published in peer-reviewed journals.

Sami A. Hashim, M.D.
Senior Consulting Research Physician

A recognized expert in the fields of metabolism and nutrition, Dr. Hashim's
work on dietary factors controlling metabolism has been extremely
influential. Associated with Columbia University College of Physicians and
Surgeons since the late 1970's, he has published widely in peer-reviewed
journals. Dr. Hashim served on research review committees of the National
Institutes for Health. He received his postdoctoral training at the Brigham
Young Hospital and Harvard Medical School.

George Hashim, Ph.D
Advisory Board

Dr. Hashim is an accomplished research director, scientist, academic and
leader, with experience in cutting edge research. He co-directed the funding
for the Council for Tobacco Research, disseminating $140 million in grants in
the last decade. He is an internationally known leader in the research and
research funding community, a worldwide lecturer, and a renowned author of
165 scholarly papers and six books. Dr. Hashim was awarded the Andre Bello
Orden Medal for Culture by the government of Venezuela. He is past President
and Treasurer of the American Society of Neurochemistry.

Harvey Markovitz, MS
President, HBM Associates

Mr. Markovitz is highly skilled in strategy development , marketing planning,
new product introduction, direct marketing, advertising, promotion and sales
management. He has line experience as President and COO of Broadcast Marketing
Corp. a $300 Million advertising and marketing firm as well as serving as a
merchandiser at J.C. Penney Company. He has held key positions in various
marketing and sales capacities at CBS, Inc. He teaches Marketing and
Strategic Planning as a member of the adjunct graduate faculties at Mercy and
Baruch College. He has been a marketing consulting since 1981.

Item 3. DESCRIPTION OF PROPERTY:

(A) The Company does not own any real property. All of its equipment is in good
working order. Its principal location at 142 Ferry Road, Suites 1 & 2, Old
Saybrook, CT 06475 is rented.

In addition, Diabetex shares a 37,000 square foot combination manufacturing,
electronic development, warehouse and office facility in Sacramento, CA. The
Company cohabits with Hamilton-May and AMTech at this Sacramento, CA location.

This property is located near the site of the continuing clinical trials
where additional information on Metabolic Activation is being developed, and
where there is sufficient space for the inspection and packaging of devices to
be made by the OEM suppliers. The property is rented on a month to month basis
whereby the cost of the facilities is borne solely by the equipment suppliers.

No contracts exist requiring the Company to use any particular manufacturing
supplier or facilities. The only facilities being shared are the facilities
of Hamilton-May, which is engaged in the final development of the production
design criteria.

(B) At the present time, the Company has no investment policy with respect to
any real estate transactions. Pursuant to the By-laws the Board of Directors
has the sole discretion for any such investment without limitation. Any change
in this regard would require the vote of the shareholders.

Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
(A) Security ownership of certain beneficial owners.

[Download Table]
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
(1) (2) (3) (4)
----------- --------------- ------------------ -----------------
Title NAME AND AMOUNT AND PERCENT OF
of Class ADDRESS OFBENEFICIAL NATURE OF BENEFICIAL CLASS
OWNER OWNER
---------- ---------------- ----------------- ----------------

Common Voting Henry Cartwright 2,000,000 15.5%
13 Dovetail
Henderson, NV 89014 Individual
----------- --------------------- --------------------- --------------
Common Voting Advanced Metabolic 1,232,261 9.50%
Systems, Inc.
Attn: Richard Sandberg
33 Beaver Dam Drive
Seaford, DE 19973 Corporation
------------ ---------------------- --------------------- ------------
Common Voting Dominion Investment Ltd.
Attn: Martin Tremblay 1,021,070 7.9%
Bahamas Financial Center
P.O. Box SS-6827
Nassau, Bahamas Corporation
--------- --------------------- ------------------ -------------

[Download Table]
(B) SECURITY OWNERSHIP OF MANAGEMENT
(1) (2) (3) (4)
------------ --------------------- -------------------- -----------
Title of Name and Amount and Percent of
Class Address of Beneficial Nature of Beneficial Class
Owner Owner

------------- ---------------------- --------------------- -------------
Common Voting Philip Bloomquist 150,000 1.15%
142 Ferry Road
Suite 1 & 2 Director
Old Saybrook, CT
------- --------------------- --------------------- --------------
Common Voting Sebastian Paguni 32,820 0.025%
142 Ferry Road Ex. VP
Suite 1 & 2 Director
Old Saybrook, CT
----------- ----------------------- --------------------- ----------------

C) There are no arrangements that would result in a change of control of the
Company.

Item 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

(A) The following are the Directors and Executive Officers of the Company:

Benjamin B. Weisman, PhD
Chairman and CEO (1 year term beginning April, 2000)

An accomplished executive, entrepreneur, financial consultant, educator
and academic administrator, Dr. Weisman has established or assisted in the
creation of more than 80 businesses and business plans. He has served as a
consultant to IBM, General Foods, Philip Morris, Cellular One and other
major firms. As a financial advisor, he supervised one dozen investment
portfolios. He partnered with Financial World Magazine in the creation and
distribution of Weisman Stock Selections. He was recognized by Forbes
Magazine as having the best performing model portfolio. In a distinguished
academic career, he has acted as Chairman and/or Dean of the graduate and
undergraduate departments at Long Island University, Iona College and
Mercy College.

Phillip R. Blomquist
Director.

Prior to his association with the Company, Mr. Blomquist was involved
in a number of venture capital situations from real estate development
and construction to automotive sales, leasing and rental. From 1967
to 1973, Mr. Blomquist served as Salt Lake County Commissioner for Salt
Lake City, Utah. As Salt Lake County Commissioner, he was responsible
for the construction of the Salt Palace, a large convention center and
sports arena. He was also responsible for the Salt Lake County Hospital
and served on the Salt Lake County Board of Health. He administered
all governmental medical services dispensed in the County. Under
his direction, medical services for the indigent and elderly
were expanded substantially and new programs were implemented.

David E. Walsh
Chief Operating Officer (1 year term beginning May, 2000)

A senior executive with extensive experience directing global initiatives
of international companies, Mr. Walsh managed start-up manufacturing operations
in Europe and China for United Production, Inc. As Group Engineering Manager for
Johnson & Johnson, he oversaw large-scale projects with budgets up to $75
million.

Sebastian J Paguni
Executive Vice President and Director (2 year term beginning June, 2000)

Mr. Paguni is an executive and entrepreneur specializing in financial
analysis, investor relations and guiding firms through periods of rapid
growth. He has broad experience in the management of people and projects
and has expertise in providing development project analysis, in financing
acquisitions and in investor consulting services. He has successfully managed
businesses from start-up to ongoing profitability through creative approaches
to marketing, sales, distribution and administration.

Anatoly Tsaliovitch, PhD
Vice President of Research and Development (2 year term beginning May 1, 2000)
Dr. Tsaliovitch is an acknowledged expert in the fields of electrical,
electronic and electromagnetic engineering R&D management. He specializes in
radio frequency (RF) and microwave design, telecommunications and
PCS/Wireless, electromagnetic compatibility (EMC), broadband networking and
applied electromagnetic research. He served as a Technology Consultant and
manager at AT&T Bell Labs, and Thomas & Betts Corporation. Dr. Tsaliovitch is
author and editor of numerous technical books, handbooks, textbooks,
scientific papers, and holds numerous patents in his name. He is a frequently
sought after lecturer at institutions, conferences, and engineering meetings
in the U.S. and abroad. He received the IEEE Society's prestigious
"Richard H. Stoddard Award" for his contributions to EMC research and
development.

(B) There are no family relationships among any of the directors, executive
officers, or any person nominated or chosen to be a director or executive
officer.

(C) 1. There are no legal proceedings, pending or completed against the
Company, its directors, executive officers, or of any business that any such
person was a general partner or executive officer.

2. None of the directors or executive officers has been convicted of any
criminal offense (excluding traffic violations and other minor offenses) nor
are any such proceedings pending in any court of competent jurisdiction.

3. No executive officer or director has been the subject of any judgment or
decree by any court of competent jurisdiction revoking, suspending or
enjoining any such executive officer or director of the Company or otherwise
limiting in any way the participation of such person in the total involvement
of business, securities or banking activities.

4. No executive officer or director has been found by any court of competent
jurisdiction to have violated a federal securities or commodities law,
including any such finding by the Commission or Commodity Futures Trading
Commission.

Item 6. EXECUTIVE COMPENSATION

[Download Table]
SUMMARY COMPENSATION TABLE

---------------------------------------------------------------------------
LONG TERM COMPENSATION
--------------------------------------- ------- --------------------------
ANNUAL COMPENSATION AWARDS PAY-OUTS
----------------- -------------- ----------------------- ------- ---------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
------- ------- ----- -------- -------- --------- ------ -------- --------

NAME & YEAR SALARY BONUS OTHER RESTRICTED SECURITIES LTIP OTHER
POSITION ANNUAL STOCK UNDERLYING
COMP AWARDS OPTIONS/SAR
$ $ $ $
------------- ----- ------- ------ ------- ----------- ------- ------
Benjamin 2000 120,000 0 0 none 600,000 none none
Weisman
CEO

David 2000 0 0 0 0 40,000 none none
Walsh
COO

Sebastian2000 120,000 0 0 0 600,000 none none
Paguni, Jr.
Ex. VP

Anatoli 2000 66,000 0 0 0 25,000 none none
Tsaliovitch
VP R&D
--------------------------------------------------------------------------

Item 7. Certain Relationships and Related Transactions:

(A) There have been no transactions or proposed transactions to which the
Company was or is to be a party, in which any of its officers, directors,
nominees had a direct or indirect material interest.

(B) The Company has not issued, either directly or indirectly, anything of
value to any promoter, including money, shares, property, assets, contracts
or options of any kind.

(C) The Company has not granted any material underwriting discounts or
commissions upon the sale of securities to any party who was or is to be a
principal underwriter or is controlling person or member of a firm that was to
be a principal underwriter.

(D) There have been no transactions either to purchase or sell assets of the
Company extraordinary to the normal business operations of the Company.

Item 8. Description of Securities

1. The Company's common equity shares have no dividend or preemption rights and
voting rights of one vote per share.

The Board of Directors of the Company may from time to time declare, and
the Company may pay, dividends on its outstanding shares in the manner and
upon the terms and conditions set forth by law and its Articles of
Incorporation. The Company to date has not declared any dividends.

(A) The Company has no debt securities.

PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder's Matters

The Company's stock began trading on the NASD OTC Bulletin Board on
December 30, 1998. The following represents the high and low prices for each
quarter there from. As of September 30, 1999, the Company had 337 record
holders of its Common Stock.

[Download Table]

High/Low Performance by Quarter

-------------- -------------- ----------- ---------- -------------
(1) (2) (3) (4) (5)
-------------- --------------- ----------- ---------- ------------
Quarter March June September
Quarter Ending 1999 1999 1999

High 13.50 22.50 15.00
-------------- -------------- ----------- ---------- ------------
Low 12.75 22.00 13
-------------- -------------- ----------- ---------- ------------

Item 2. LEGAL PROCEEDINGS

There are no legal proceedings, judicial or administrative, pending against the
Company.

Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

Jones, Jensen & Company ("Jones") were previously the principal accountants of
Diabetex International Corp. (formerly Sheridan Industries). On February 1,
1999, the Board of Directors approved the engagement of the firm of Crouch,
Bierwolf & Chisholm ("Crouch") to replace Jones, which change was made at the
election of the new Board of Directors of the Company. In connection with
the audit of the previous fiscal years ended December 31, 1996,and throughout
the subsequent interim period throughout the effective date of their
replacement, there were no disagreements with Jones on any matter of
accounting principal or practices, financial statement disclosure or auditing
scope or procedures. These disagreements, if any, if not resolved to their
satisfaction would have caused them to make reference in connection with
their opinion to the subject matter of the disagreement.

Furthermore, said firm has not advised the registrant of any reportable
events. The accountant's report of Jones on the financial statements of the
Company as of and for the year ended December 31, 1996 did not contain any
adverse opinion or disclaimer, nor were they qualified as to the uncertainty,
audit scope or accounting principles except as to the issue of a going concern.

Item 4. RECENT SALES OF UNREGISTERED SECURITIES

On January 4, 1999, the Company filed a Form D Notice of Sale of Securities
Pursuant to Regulation D with the Securities and Exchange Commission under
Rule 504 adopted under the Securities Act of 1933 (the "Act") as amended. The
securities sold were common shares and the aggregate dollars raised were
$100,000 to two accredited investors, Colonial National, Ltd. and Hamilton,
Ltd. No officer, director or affiliate received any payment from these
funds.

On January 4, 1999 through January 15, 1999, the Company sold 950,000 common
shares at an offering price of $.05 per share. All sales were made pursuant
to an exemption under Rule 506 of Regulation D adopted under the Act as
amended. Investors received information required by Rule 506 of Regulation
D the Act and other requirements of Regulation D were met. The shares were
issued to investors as follows:

[Download Table]
SHARES ISSUED

---------------------------------------- --------------------------
(1) (2)
---------------------------------------- --------------------------
NAMES OF PURCHASERS NUMBER OF SHARES PURCHASED

Ingrid P. Abbey 41,000
Anne Ainsworth 5,000
Betty and Darl Atlman 1,000
Craig E. Anderson 1,000
Mary Lou Anderson 1,000
B&A Trading 1,000
Eliot Bauer 4,000
Shawn Burke 3,500
Deverlee Bradin 10,000
Jennifer Burke 3,500
Margaret Sue Carn 500
Dana Cartwright 20,000
Terry Cartwright 4,000
Terry Cartwright 16,000
Richard A Chudley 19,200
Arlene Churchill 5,000
James Drake 11,000
Gurinder S Garch 1,000
Theodore Georgoff 500
Tim J. Gephardt 5,000
GLS Property Management 10,000
Robert E. Gomer 1,000
Walter Grady 500
Richard Hooton 15,000
JMT3T Holdings 500
Ajit Khanuja 1,000
Ajit Khanuja 1,000

[Download Table]
SHARES ISSUED - CONTINUED

---------------------------------------- --------------------------
(1) (2)
---------------------------------------- --------------------------
NAMES OF PURCHASERS NUMBER OF SHARES PURCHASED

Benjamin Kirach 14,000
Godel Kirschenbaum 14,000
Paul Kramer 1,200
Hans Liebig 5,000
Elayne Fann 1,000
Robert Klor 400
Blake Kenne Taylor 5,500
Angel S. Luca 1,000
Patricia McKone 16,000
Spencer McOscar 40,000
Henry Merce, Jr. 5,000
Louis Meyers 5,000
Mark Montefiore 10,000
James Nunn 11,000
John Parnes 6,000
Carol Pfeifer 70,000
Robert Pfeifer 50,000
Micael Pizza 5,000
Kerm Rudolph 40,000
Beverlee Robinson 5,000
Thomas Rudolph 5,000
Stephen Rudolph 4,000
John Sampson 8,500
Kenneth Schatz 37,500
Sandra Smith Trus 3,000
Taylor Press Prodts Co 1,000
Thomas Taylor 28,500
Edward Taylor 12,500
John Unger 5,000
Blaine Wagner 2,500
David Wagner 2,000
John Walker 12,500
Lancer Weinrich, Sr. 1,000
Robert Wiley 90,000
Irvin Wisniewski 500
Holdon-Russel Wood 1,600

PART III
Diabetex International Corporation and Subsidiary
(Formerly Sheridan Industries, Inc.)
Consolidated Financial Statements

INDEPENDENT AUDITOR'S REPORT

Stockholders and Directors
Diabetex International Corporation and subsidiary
Sacramento, CA

We have audited the accompanying consolidated balance sheets of Diabetex
International Corporation (a Nevada Corporation) (a development stage
enterprise) and subsidiary as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the years 1999, 1998 and 1997. These consolidated financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit. The financial statements of Diabetex International Corporation for
the period September 14, 1983 to December 31, 1996 were audited by other
accountants whose report is dated January 15, 1997 expressed an unqualified
opinion on those statements.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Diabetex
International Corporation at December 31, 1999 and 1998, and the results of its
operations and cash flows for the years 1999 , 1998 and 1997, and for the
period from September 14, 1983 (inception) to December 31, 1999 in conformity
with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 12, the
Company's recurring operating losses and lack of working capital raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to those matters are also described in Note 12. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, UT
April 12, 2000

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Sheridan Industries, Inc
New York, NY

We have audited the accompanying balance sheets of Sheridan Industries, Inc.
(a development stage company) as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the years ended December 31, 1996, 1995 and
1994 and from the date of inception on September 14, 1983 through December
31,1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall 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 Sheridan Industries, Inc. as of
December 31, 1996 and 1995, and the results of its operations and cash flows
for the years ended December 31, 1996, 1995 and 1994 and from the date of
inception on September 14, 1983 through December 31, 1996 in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company is a development stage company with no
operations to date. Since the Company has had no operations to date, there
is substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 4.
The financial statements do not include any adjustments that might result
from this uncertainty.

/s/ Jones, Jensen & Company
January 15, 1997

Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheets

[Download Table]
BALANCE SHEET

ASSETS
December 31,
1999 1998
-------------- -------------------------- ----------------- ---------

--------------- ------------------------ ------------------ ----------
CURRENT ASSETS
Cash (Note 1) $ 351 $ -
Account Receivable (Net of allowance of $0) 23,418 -
Total Current Assets 23,769 -

Property, Plant & Equipment (Note 4)(Net) 2,408 -

Other Assets
Intangible Assets (Note 3) (Net) 14,770,772 -
Prepaid expenses (Note 7) 249,703 -
$ 15,046,652 $ -

LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)

CURRENT LIABILITIES
Accounts payable & accrued expenses $ 152,952 $ 4,050
Accounts payable-related party (Note 6) 182,813 -
Total Current Liabilities 335,765 4,050

CONTINGENCIES AND
COMMITMENTS (Note 8) - -

STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; $.002 par value;
50,000,000 shares authorized,
13,110,929 and 42,511 shares
issued and outstanding (Note 2) 26,222 85
Additional paid-in capital 16,606,914 53,499
Deficit accumulated during the
development stage (1,922,250) (157,634)

Total Stockholders' Equity(Deficit) 14,710,886 ( 4,050)
$ 15,046,652 $ -

Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Operations

[Enlarge/Download Table]
STATEMENT OF OPERATIONS
From
Inception on
September 14,
For the Year Ended 1983 to
December 31, December 31,
Statement of Operations 1999 1998 1999
------------------------- -------------- ----------- ---------------

REVENUES $ 40,605 $ - $ 40,605

EXPENSES
Amortization and Depreciation 778,008 - 778,008
Professional Services 2,140,509 650 2,176,359
Legal 81,231 - 81,232
Public Relations 13,794 - 13,794
Administrative 29,179 - 150,462

Total Expenses 3,042,721 650 3,199,855

NET LOSS BEFORE
INCOME TAXES (3,002,116) ( 650) ( 3,159,750)

PROVISION FOR
TAXES (Note 1) - - ( 500)

NET LOSS $ ( 3,002,116) $ ( 650) $ (3,159,750)

LOSS PER SHARE
(Note 1) $ ( .24) $ ( .02)

AVERAGE SHARES
OUTSTANDING 12,288,901 42,511

Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity

[Enlarge/Download Table]
STOCKHOLDERS' EQUITY
Accumulated
Capital in Deficit During
Common Common Excess of Retained
Stockholders' Equity Shares Stock Par Value Deficit
--------------------------- ------- ------ ------------- -------------

Activity from 9/14/83 thru
December 31, 1989 862 $ 2 $ 94,173 $ (96,973)

Loss for 1990 - - - ( 130)
Balance, December 31, 1990 862 2 94,173 (97,103)

Issues 225 shares to an
officer in cancellation of debt
at $16.77 per share 225 1 3,772 -

Loss for the Year - - - ( 3,333)
Balance, December 31, 1991 1,087 3 97,945 (100,436)

Expenses paid on the Company's
behalf contributed to capital - - 2,666 -

March 5, 1992, issued 1,250
shares for services rendered
for $8 per share 1,250 2 9,998 -

Loss for the Year - - - ( 10,278)
Balance, December 31, 1992 2,337 5 110,609 ( 110,714)

Loss for the Year - - - ( 136)
Balance, December 31, 1993 2,337 5 110,609 ( 110,850)

October 17, 1994, issued
25,000 shares for expenses paid
on the Company's behalf for
$.84 per share 25,000 50 20,950 -
Expenses paid on the Company's
behalf contributed to capital - - 612 -

Loss for the Year - - - ( 22,903)
Balance, December 31, 1994 27,337 55 132,171 ( 133,753)

Expenses paid on the Company's
behalf contributed to capital - - 1,227 -

Loss for the Year - - - ( 100)
Balance, December 31, 1995 27,337 55 133,398 ( 133,853)

Loss for the Year - - - ( 100)
Balance, December 31, 1996 27,337 55 133,398 ( 133,953)

Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity

[Download Table]
(continued)
STOCKHOLDERS' EQUITY -CONTINUED

Accumulated
Capital in Deficit During
Common Common Excess of Retained
Stockholders' Equity Shares Stock Par Value Deficit
-------------------- --------- ---------- -------------- --------------

Balance, December 31, 1996 27,337 $ 55 $ 133,398 $ (133,953)
Shares issued for asset
of Aladdin Transportation,
Landmark, Inc. and Over 100,
Inc. for $0 per share 82,500 165 (165) -
Shares issued for
incentives for loans
to Aladdin Transportation,
Landmark, Inc. and
Over 100, Inc. for
$.80 per share 25,163 50 20,081 -
Shares canceled by
various shareholders (10,000) (20) 20 -
Shares canceled for
acquisition of
Aladdin Transportation,
Landmark,
Inc. and Over 100,
Inc. (82,500) (165) 165 -
Shares issued for
Presidential and
Regal Limousine
Service for $0
per share 4,000 8 (8) -
Shares canceled
for Presidential
and Regal Limousine
Service (4,000) (8) 8 -
Net Loss for the Year - - - (23,031)
Balance, December 31,1997 42,500 85 153,499 (156,984)
Rounding due to reverse
stock split (Note 2) 11 - - -
Net Loss for the Year - - - ( 650)
Balance, December 31, 1998 42,511 85 153,499 (157,634)

Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
(continued)

[Download Table]
STOCKHOLDERS' EQUITY -CONTINUED-
Accumulated
Capital in Deficit During
Common Common Excess of Retained
Stockholders' Equity Shares Stock Par Value Deficit
---------------------- --------- ------ ---------- -----------

Balance, December 31, 1998 42,511 $ 85 $ 153,499 $ (157,634)

Shares issued for cash at $.002
per share 8,387,800 16,775 530 -

Shares issued for services at $.05
per share (Note 2) 2,000,00 4,000 96,000 -

Shares issued for cash at $.05
per share 875,100 1,750 45,767 -

Shares issued for services at $3
per share (Note 2) 50,000 100 149,900 -

Shares issued for cash at
$3 per share 1,000 2 2,998 -

Shares issued for cash at
$10 per share 21,307 43 213,027 -

Shares issued for 100% of
shares of Advanced
Metabolic Technology
at $10 per share (Note 3) 1,232,261 2,465 12,320,145 -

Shares issued for intellectual
properties Hamilton-May, Inc.
at $10 per share (Note 3) 300,000 600 2,999,400 -

Expenses paid by shareholder in
Company behalf - - 4,050 -

Shares issued to Phoenix Energy
(Note 3) 35,000 7 349,930 -

Shares issued for services at
$10. (Note 2) 12,500 25 124,975 -

Shares issued for cash at $10 3,450 7 34,493 -

Shares issued for services at
$9.00 (Note 2) 150,000 300 1,349,700 -

Net Loss for the Year - - - (3,002,116)

Balance, December 31, 1999 13,110,929 $ 26,222 $17,844,414 $(3,159,750)

Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flows

[Enlarge/Download Table]
CONOLIDATED STATEMENT OF CASH FLOWS
From
Inception on
September 14,
For the Year Ended 1983 to
December 31, December 31,
1999 1998 1999
CASH FLOWS FROM
------------------ -------------- ------------- ---------------

------------------ -------------- ------------- ---------------
OPERATING ACTIVITIES
Net loss $ ( 3,002,116 ) $ ( 650) $( 3,159,750)
Adjustments to net cash
used by operating activities:
Depreciation &
Amortization 778,008 - 778,008
Stock issued for
services/expenses 1,950,000 - 2,001,131
Expenses paid by
a shareholder on the
Company's behalf 4,050 - 8,555
Increase (Decrease)
in accrued expenses 331,715 650 335,765
Increase (Decrease)
in prepaids ( 124,702) - ( 124,702)
Increase (Decrease)
in accounts receivable( 23,418) - ( 23,418)
Net Cash Used by
Operating Activities ( 86,463) - ( 184,411)

CASH FLOWS FROM
INVESTING ACTIVITIES
Cash paid for acquisition
of intangibles ( 225,570) - ( 25,570)
Cash paid for fixed
assets ( 3,008) - ( 3,008)
Net Cash Provided by
Investing Activities ( 228,578) - ( 228,578)

CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of common stock 315,392 - 429,165
Stock offering costs - - ( 15,825)
Net Cash Provided by
Financing Activities 315,392 - 413,340

NET INCREASE
(DECREASE)IN CASH 351 - 351

CASH, BEGINNING
OF PERIOD - - -

CASH, END OF PERIOD $ 351 $ - $ 351

Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Continued)

[Download Table]
CONSOLIDATED STATEMENTS OF CASH FLOWS -CONTINUED

From
Inception on
September 14,
For the Year Ended 1983 to
December 31, December 31,
1999 1998 1999
CASH FLOWS FROM
---------------- ------------ ------------- ---------------

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

CASH PAID FOR:
Interest $ - $ - $ -
Income taxes $ - $ - $ -

Non Cash Transactions
Stock Issuance for
Services $ 1,950,000 $ - $ 2,001,131
Acquisition of
Intangibles $ 15,322,610 $ - $ 15,322,610
Prepaid expenses $ 125,000 $ - $ 125,000

Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998

NOTE 1 - ORGANIZATION AND HISTORY

A. Organization

The financial statements presented are those of Diabetex International
Corporation (formerly Sheridan Industries, Inc.) ( a development stage
company). The Company was incorporated under the laws of the State of Utah on
September 14, 1983. The Company changed its name to Associated
Healthcare, Inc. during 1991 but later rescinded the name change and
reverted back to Sheridan Industries, Inc. The Company has never had
any operations up to December 31, 1998 and in accordance with SFAS #7,
is considered a development stage company. The Company is now involved
in the treatment and diagnosis of diabetes.

In 1998, the Company created, and later merged with, a Nevada subsidiary
and changed its name to Diabetex International Corporation.

In June 1999, the Company purchased all of the shares of Advanced Metabolic
Technologies, a Nevada corporation (AMT) (See Note 3 for discussion of AMT
and its activity). AMT was formed on May 19, 1999 as a wholly owned subsidiary
of Advanced Metabolic Systems (AMS) which transferred an exclusive license to
patented proprietary technology for the treatment of diabetes known as Metabolic
Activation.

b. Accounting Method

The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year end.

c. Loss Per Share

The computations of loss per share of common stock are based on the weighted
average number of shares outstanding at the date of the financial statements.
Fully diluted loss per share and basic loss per share at December 31, 1999 is
the same since any outstanding stock equivalents at December 31, 1999
(335,243 shares) would be antidilutive. There were no outstanding stock
equivalents for all other periods; therefore, basic and fully diluted shares
are the same.

Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998

NOTE 1 - ORGANIZATION AND HISTORY (continued)

d. Provision for Taxes

The Company adopted Statement of Financial Standards No. 109 "Accounting for
Income taxes" in the fiscal year ended December 31, 1998 and was applied
retroactively.

Statement of Financial Accounting Standards No. 109 " Accounting for Income
Taxes" requires an asset and liability approach for financial accounting and
reporting for income tax purposes. This statement recognizes (a) the amount
of taxes payable or refundable for the current year and (b) deferred tax
liabilities and assets for future tax consequences of events that have been
recognized in the financial statements or tax returns.

Deferred income taxes result from temporary differences in the recognition of
accounting transactions for tax and financial reporting purposes. There were
no temporary differences at December 31, 1999 and earlier years; accordingly,
no deferred tax liabilities have been recognized for all years.

The Company has cumulative net operating loss carryforwards of over
$1,850,000 at December 31, 1999. No effect has been shown in the financial
statements for the net operating loss carryforwards as the likelihood of
future tax benefit from such net operating loss carryforwards is highly
improbable. Accordingly, the potential tax benefits of the net operating
loss carryforwards, estimated based upon current tax rates at December 31, 1999
have been offset by valuation reserves of the same amount. The net
operating losses begin to expire in the year 2003.

e. Cash or Cash Equivalents

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

f. Consolidated Financial Statements

The consolidated financial statements include the accounts of Diabetex
International Corporation and its subsidiary, Advanced Metabolic Technology.
Collectively, these entities are referred to as the Company. All significant
intercompany transactions and accounts have been eliminated.

g. Impairment of Long Lived Assets

All long-lived assets (including intangible assets) are evaluated for
are evaluated for impairment wherever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
An impaired asset is written down to its estimated fair market value based
on the best information available. The Company determines whether an
impairment has occurred by comparing the estimated undiscounted future cash
flows expected to result from the use of the asset and its eventual disposal
to the asset's carrying amount. If the carrying amount exceeds the
undiscounted future cash flows, then the impairment charge is calculated as
the excess of the carrying amount of the asset over the fair market value.

Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998

NOTE 1 - ORGANIZATION AND HISTORY (continued)

h. Stock compensation awards and other non cash transactions

The Company entered into several transactions that involved stock or stock
options for goods or services and acquisitions of subsidiaries and medical
technologies. These transactions were recorded at estimated fair market
value of the stock being offered at private placement prices to the general
public, publicly traded prices, or some other fair value as best determined
by the board of directors with the facts and circumstances present at the
time of the sale to the general public, publicly traded prices, or some other
fair value as best determined by the board of directors with the facts and
circumstances present at the time of the transaction. (See Note 2 regarding
specific transactions).

NOTE 2 - NON CASH TRANSACTIONS

During 1999, the Company issued stock for services and the purchase of a
subsidiary and other intellectual properties related to the medical field,
specifically technology that advances the treatment and diagnosis of diabetes.

The transactions were recorded at estimated fair market value of the stock,
specifically the price of stock being offered at private placement prices to
the general public, or some other negotiated arms length transaction as best
determined at the time by the board of directors. The following transactions
occurred in the first six months of 1999:

-In January, 1999, 2,000,000 shares were issued for services rendered for
assistance in obtaining the Company's license to 8 patents covering
technology related to non invasive blood glucose monitoring. These shares
were valued at $.05 per share or total value of $100,000.

-In March, 1999, 50,000 shares were issued for services rendered related to
the acquisition of Advanced Metabolic Technologies. The shares were valued
at $3 per share or $150,000.

- In June, 1999, 1,232,261 shares were issued for acquisition of all of the
stock of Advanced Metabolic Technologies (see note 3). The purchase price
was $10 per share or a total value of $12,322,610. The fair market value
of the stock was $10 (private placement purchase price). The Company had
an appraisal completed on Advanced Metabolic Technologies intellectual
properties which substantiated a value greater than the purchase price
(Note 3).

In June, 1999, 300,000 shares were issued for acquisition of a license for
all the intellectual properties related to an insulin pump developed by
Hamilton May, Inc. The purchase price was $10 per share or a total value
of $3,000,000. The fair market value of the stock was $10 (private placement
purchase price).

In July, 1999, 35,000 shares were issued to Phoenix Energy for consulting
services. The fair market value of the stock was $10 (Private Placement
purchase price).

Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998

NOTE 2 - NON CASH TRANSACTIONS - (continued)

In September, 1999, 12,500 shares were issued to Anatoli Tsaliovich for
services to be rendered in connection with the miniaturization and perfection
of the non-invasive blood glucose monitors and hyper/hypo glycemic warning
devices. The fair market value of the stock was $10. (Private Placement
purchase price). These expenses were expenses of Solid State Farms and
credited as a prepaid royalty. (Note 8).

In December, 1999, 50,000 shares of stock were issued to Nathan Drage for
services performed for the Company early in the year and not previously
compensated. The shares are further restricted than normal Rule 144
restrictions and have required revenue platforms before sales of the shares
can occur. Due to these additional restrictions, the shares were valued at
$9.00 per share.

In December, 1999, 100,000 shares of stock were issued to Philip Blomquist
for services performed early in the year for the Company and not previously
compensated. The shares are further restricted than normal Rule 144
restrictions and have required revenue platforms before sales of the
shares can occur. Due to these additional restrictions, the shares were
valued at $9.00 per share.

In October, November and December, 1999, Dominion purchased 3,450 shares of
restricted stock at $10 per share from a purchase agreement obtained in March
1999. (Note 9).

NOTE 3 - ACQUISITION OF INTANGIBLE ASSETS

Advanced Metabolic Technologies (AMT)
-----------------------------------------
AMT owns an exclusive license to market, and otherwise exploit, that certain
therapy known as hepatic activation or metabolic activation (the therapy).
A patent has been granted covering the therapy (May 1988) and the patent is a
subject of the license. The license includes any and all improvements to the
therapy, the subject patent or any related subsequent patents. The therapy has
been developed at the Aoki Diabetes Research Institute (ADRI) under the
direction of Dr. Thomas Aoki. ADRI maintains its offices and clinic 3100 O
Street, in Sacramento, California.

This treatment is delivered by special intravenous infusion devise (pump)
with the treatment programmed into the devise. The devise (Bionica Microdose)
with the Company's treatment embedded in the devise has been FDA approved and
in use since 1988. The treatment has been refined over the years including
clinical use on human subjects, and clinical trials for over ten years with
constant following of patients to demonstrate the ability of the treatment
to prevent, stop and in some ways reverse the common complications of diabetes.

Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998

NOTE 3 - ACQUISITION OF INTANGIBLE ASSETS (continued)

Patients that have undergone regular treatments have reported improvements in
diabetes related health complications such as restoration of kidney function or
cessation of kidney degeneration, restoration of eyesight or cessation of
eyesight degeneration, improved heart metabolism, cessation of diabetic
hyper/hypo glycemic blackouts, and improved sense of general health and well
diabetic hyper/hypo glycemic blackouts, and improved sense of general health
and well being and other benefits. Presently, ADRI and five private clinics
administer the therapy to patients on a fee basis. The Company carries this
asset on its books at a cost of $ 12,548,180 paid in stock and cash.

The Company issued 1,232,261 shares of common stock for all the outstanding
shares of AMT (800,000 shares). The only asset of AMT was the license to market
a therapy known as hepatic activation or metabolic activation. As part of the
acquisition, the Company agreed to pay a $50,000 outstanding debt of AMT, pay
all legal costs of the acquisition, and pay directly to the stockholder of AMT,
cash in the amount of $150,000 over a period of 10 months.

Hamilton May
-----------------
Hamilton May Corporation has sold the Company a license to market, and
otherwise exploit, that certain mechanical device known as the Hamilton May Pump
(the pump). The license includes any and all improvements to the pump and
rights to patent protection if a patent, covering the pump, is ever granted.
The pump has been developed under the direction of Dr. Nardo Zaias of Miami,
Florida. The pump has been shown to have the ability to deliver pulses of
insulin and insulin related products to patients with tremendous precision and
without shear. The pump has the feature of being a two-way system in that it
has the capacity to both deliver and draw when attached to a patient.

The Company issued 300,000 shares of common stock for the Hamilton/May pump.

Herein is a summary of the purchase of Advanced Metabolic Technology (AMT)
and Hamilton/May pump:

AMT

Purchase of AMT intellectual properties:
Stock (1,232,261 shares @ $10 per share) $ 12,322,610
Cash paid for legal services on transaction 25,570
Cash paid over time ($15,000 over 10 months)(note 6) 150,000
Assumption of debt (note 6) 50,000
----------------
12,548,180
50,000
----------------
12,548,180
Hamilton/May

Purchase of Hamilton/May pump
Stock (300,000 shares @ $10 per share) 3,000,000
-----------------
Total $ 15,548,180

Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998

NOTE 3 - ACQUISITION OF INTANGIBLE ASSETS (continued)

The amortization of the intellectual properties of AMT and Hamilton/May began
June 30, 1999. Amortization expense for 1999 is $777,408.

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

Property and equipment are recorded at cost. Repairs and maintenance are
charged to operations, and renewals and additions are capitalized.

Property and equipment consists of the following:
December 31,
1999 1998
----------- ---------------
Computer Equipment $ 3,008 $ -
Less: Accumulated Depreciation (600) -
----------- ---------------
$ 2,408 $ -
============ ===============
Depreciation is based on the estimated useful life of the asset either
on a straight line basis over 5 years.

Depreciation expense for 1999 and 1998 was $600 and $0, respectively.

NOTE 5 - USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. In these
financial statements, assets, liabilities and earnings involve extensive
reliance on management's estimates. Actual results could differ from
those estimates.

NOTE 6 - RELATED PARTY TRANSACTIONS

At the time of the purchase of American Metabolic Technology (Note 3), the
Company agreed to pay $150,000 in closing and other costs over a period of
time and another $50,000 for research performed by another research
development firm for AMT before the purchase. These payments were part of
the negotiated purchase price of AMT and were included in the basis of the
cost of AMT. $17,187 was paid in 1999.

Solid State Farms and the Company have several common shareholders with the
Company and has entered into a 7% royalty agreement for any sale of its products
or services. The Company has advanced $249,703 towards those
royalties. (See Note 7 and 8).

Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998

NOTE 7 - PREPAID EXPENSES

As part of the licensing agreement with Solid State Farms, Inc. (Note 8), the
Company has agreed to pay a royalty of 7% of all sales of products or
services of the Solid State technology. The contract calls for advances
to be paid against the royalties to assist Solid State in the development
of its current and future products and other ongoing general overhead of
Solid State. In 1999, the Company advanced $249,703 towards these expenses.

Prepaid expenses consists of the following:

Advances to affiliate for advance royalties (Note 8) $ 249,703
--------------
$ 249,703
==============

NOTE 8 - COMMITMENTS AND CONTINGENCIES

As part of the purchase of AMT, the Company agreed to pay $200,000 to
Advanced Metabolic Systems (AMS), former parent of AMT, in closing costs
and other expenses related to the previous licensing agreement between AMS
and Aoki Diabetes Research Institute (ADRI) to fund the continuing research
of ADRI into advancing the metabolic activation process through a 5%
royalty on all revenues of the metabolic activation technology developed
by AMT. The Company also agreed to pay AMS $75,000 for services related to
the insurance billing of AMT for its metabolic activation therapy. $12,500
of unpaid consulting fees was accrued for the six months ended
December 31, 1999.

The Company signed an agreement effective June 30, 1999 to fund two
consulting contracts for a total cost of $220,000 per year ($18,334 per
month). Of this amount, $7,500 is accrued per month until such time as
the Company can determine that it can pay the additional compensation.
The consulting contracts are for a period of two years and is renewable
for another year upon approval of both parties. The consulting agreement
for $10,000 per month is payable in cash or restricted stock which will
be valued at one half of the average bid price for a period of 30 days
before the payment of services. Total compensation paid through
December 31, 1999 was $7,000. Accrued compensation at December 31, 1999
was $103,000

In 1999, The Company entered into a licensing agreement with Solid State
Farms, Inc. for their 44 international patents covering proprietary
technology to monitor blood glucose levels non-invasively. The agreement
calls for a payment of a 7% of the adjusted gross sales price on all
licensed products. The Company has made advance royalty payments of
$249,703 on this royalty as of December 31, 1999.

NOTE 9 - STOCK OPTIONS/PRIVATE PLACEMENT OF RESTRICTED STOCK

In March, 1999, the board of directors set the price of restricted stock
sales at $10 per share and offered a foreign corporation an extended
agreement for a period of one year to purchase 50,000 restricted shares
for the $10 price. 25,243 options remain unpurchased at December 31, 1999.

Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998

NOTE 9 - STOCK OPTIONS/PRIVATE PLACEMENT OF RESTRICTED STOCK (continued)

In August, 1999, the Company issued a one year option to Hank Bagly to
purchase up to 10,000 shares at a price of $6.00 each. No options were
exercised in 1999.

In November, 1999, the Company issued a five year option to M. H. Meyerson
and Co., Inc. to purchase up to 300,000 shares at a price of $10 each in
exchange for investment banking services during the five year term. No
options were exercised in 1999.

NOTE 10 - REVERSE STOCK SPLIT

In 1998, the Company shareholders approved a 1 for 400 reverse stock split of
its common shares. The financial statements have been restated retroactively
to show the effects of the split.

NOTE 11 - MARKET SEGMENT INFORMATION

The company is in the business of providing equipment for the monitoring and
treatment of diseases of improper metabolism including its first major
market, Diabetes. The company has three independent but related lines of
products and services; a) non-invasive biological monitoring; b) metabolic
activation equipment and treatment, and c) new high accuracy infusion devices
for the automatic delivery of its treatments.

Non-invasive Biological Monitoring

An exclusive worldwide license to exploit, manufacture and market patented
devices to non-invasively determine blood glucose, hemoglobin A1C, and other
blood levels to help treat diabetes and potentially other diseases. These
device prototypes are in development, are being tested and refined, and
have not been submitted for approval by the US Food and Drug Administration
("FDA").

Metabolic Activation

An exclusive license to exploit and market a patented metabolism treatment
called Metabolic Activation (also known as hepatic activation of Continuous
Intermittent Insulin Therapy, CIIIT in some medical publications). This
treatment is delivered by a special infusion device with the treatment
programmed into the device, and is FDA approved since 1988. The treatment
has been in development for over ten years by Advanced Metabolic Systems, Inc.,
and has been used for the last ten years, with constant following to demonstrate
the stopping of complications of diabetes, and certain other metabolism related
disease states. The Company acquired this treatment, business, licenses,
special infusion devices and know-how by exchange of its shares with Advanced.
Metabolic Systems, Inc. (AMS).

Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998

NOTE 11 - MARKET SEGMENT INFORMATION (continued)

Infusion Devices

An exclusive worldwide license to finish development, exploit, manufacture
and sell an ultra accurate pumping system which will replace the current
FDA approved device, and provide for automatic delivery of the treatment,
and any insulin or insulin related products. This technology was acquired
from Hamilton/May, Inc.

As of December 31, 1999, the Company has not realized significant income
from any of the three distinct technologies. Other selected financial
information regarding each segment as follows:

[Download Table]
INCOME STATEMENT INFORMATION

Biological Metabolic Infusion
Monitoring Activation Devices Corp. Total
Income Statement
Information
------------------------- ------------ ------- ---------- -------------

Sales $ - $ 40,605 $ - $ - $ 40,605
Expenses - 422,594 45,000 1,365,127 1,832,721
Profit/loss from
operations $ - $( 381,989)$ (45,00)$(1,240,12)$ 1,667,116)

Balance Sheet Information

Assets $ - $11,920,771 $2,850,000 $ 275,881 $ 15,046,652
Liabilities $ - $ 310,248 $ - $ 25,517 $ 335,765

NOTE 12 - GOING CONCERN

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has negative working
capital and has had recurring operating losses and is dependent upon financing
to continue operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Management intends to fund its subsidiaries' activities, according to the
business plan, and emerge profitable sometime in the future.

EXHIBIT INDEX

2.1(a) Agreement and Plan of Reorganization between Diabetex International
Corp. and Advanced Metabolic Systems dated June 30, 1999

(b) Asset Sale Agreement Dated May 26, 1999

3.1(a) Articles of Incorporation of Sheridan Industries, Inc. (issuer -- UT)

(a) Article of Incorporation of Sheridan Ind. (NV)

3.1(b) Articles of Incorporation of Advanced Metabolic Tech. (subsidiary)

3.2(a) Bylaws of Sheridan Ind.

3.2(b) Bylaws of Hamilton May Corporation (Licensor)

10(a) Consulting Agreement for Thomas Aoki dated June 30, 1999

10(b) Consulting Agreement for Gregory Gilbert dated June 30, 1999

10(c) License Agreement between Hamilton May Corp., Gregory Gilbert and
Diabetex International Corp. dated June 30, 1999
10(d) Consulting Agreement Harvey Markowitz
10(e) Consulting Agreement Dr. Hashim

99.1 Aoki Patent

FOOTNOTES

1 Mike Gleit. President, Elm Drugs, a leading New York City (Manhattan,
Brooklyn, Queens counties) neighborhood pharmacy chain.
2 Boris Mantell. President, The New York Pharmacists Society. In depth
interview.
3 Center for Disease Control. 1997 study: "The Burden of Diabetes"
4 American Diabetes Association. "Eastern Region Diabetes Demographics." Aug,
2000.
5 US Census Annual Demographic study.
6 Similar to what is used by national or regional retail store operations
when opening branch, neighborhood stores.
7 American Diabetes Association; Center for Disease Control; American
Association of Diabetes Educators
8 Interview with Bill Augustine of Market Measure Inc who conducted a survey
of 400 Type II individuals with diabetes, Oct, 1999.
9 Refer to Exhibit V in this plan.
10 www.fda.gov/cdrh/meetings/glucosetest.html
11 http://biz.yahoo.com/prnews/00612/tx_cygnus_.html
12 "Statistics about adults and children with Diabetes".
www.inulin-pumpers.org/about.shtml
13 Study surveying practices of 802 professional diabetic educators and
physicians who have diabetes, focused on the therapy that they practiced
for themselves. Business Wire. May 22, 2000 & Diabetes Educator. May/June 2000.
14 David Kliff, Publisher of Diabetic Investor. The Wall Street Transcript.
June 6,2000. http//www.twst.com/info/info108.htm
15 Refer to exhibit II in this plan.
16 SKA information Services, Inc.

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