Nevada (State or other jurisdiction of incorporation or organization)

6 Thomas Irvine, CA 92618 (Address of principal executive offices) (Zip Code)

74-2234246 (IRS Employer Identification No.)

PART 1		FINANCIAL INFORMATION		Page
Item 1:		Financial Statements
		Consolidated Condensed Balance Sheets – June 30, 2002 and December 31, 2001		3
		Consolidated Condensed Statements of Operations – Three months and Six months ended June 30, 2002 and 2001		4
		Consolidated Condensed Statements of Cash Flows – Six months ended June 30, 2002 and 2001		5
		Notes to Consolidated Condensed Financial Statements		6
Item 2:		Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3:		Quantitative and Qualitative Disclosures About Market Risk		16
PART II		OTHER INFORMATION
Item 1:		Legal Proceedings		17
Item 2:		Changes in Securities and Use of Proceeds		17
Item 3:		Defaults upon Senior Securities		17
Item 4:		Submission of Matters to a Vote of Security Holders		18
Item 6:		Exhibits and Reports on Form 8-K		19
		Signatures		19

		June 30, 2002				December 31, 2001
		(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents		$	98,449			$	466,453
Accounts receivable, net of allowance for doubtful accounts of $331,389 and $461,731 in 2002 and 2001, respectively			2,275,409				2,485,191
Inventories, net			515,864				691,921
Prepaid expenses, net			146,442				145,107
Advances to employees, current portion			16,150				31,578
Deferred tax asset			877,455				877,455
Total current assets			3,929,769				4,697,705
Property and equipment, net (Note 4)			362,068				2,879,094
Patents, net			463,415				—
Intangible assets, net			6,058,007				6,558,007
Deferred tax asset, noncurrent			1,662,567				2,349,552
Investment in affiliate			274,995				224,997
Other assets, net			230,365				232,042
TOTAL ASSETS		$	12,981,186			$	16,941,397
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	1,110,748			$	2,647,266
Accrued expenses			486,454				416,203
Line of credit			1,397,608				1,728,868
Notes payable, current			60,147				53,974
Total current liabilities			3,054,957				4,846,311
Deposits under building sales contract (Note 7)			—				1,223,265
Notes payable, noncurrent			254,182				2,230,359
Total liabilities			3,309,139				8,299,935
COMMITMENTS AND CONTINGENCIES (Note 7 & 8)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.001 par value; 50,000,000 shares authorized; no shares issued or outstanding			—				—
Common stock, $0.001 par value; 150,000,000 shares authorized; 29,789,598 shares issued and outstanding in 2002 and 2001, respectively			29,789				29,789
Additional paid-in capital			15,137,105				15,137,105
Accumulated deficit			(5,494,847	)			(6,525,432	)
Total stockholders’ equity			9,672,047				8,641,462
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	12,981,186			$	16,941,397

		Three Months Ended June 30,								Six Months Ended June 30,
		2002				2001				2002				2001
NET REVENUES		$	2,487,312			$	3,929,116			$	5,373,237			$	8,081,061
COST OF GOODS SOLD			795,531				1,164,630				1,788,404				2,471,881
GROSS PROFIT			1,691,781				2,764,486				3,584,833				5,609,180
OPERATING EXPENSES:
Selling and marketing			982,722				1,759,720				2,007,866				3,329,647
General and administrative			673,131				914,033				1,431,538				1,891,189
Total operating expenses			1,655,853				2,673,753				3,439,404				5,220,836
OPERATING INCOME			35,928				90,733				145,429				388,344
OTHER INCOME (EXPENSE), net:
Interest (expense)			(98,085	)			(145,916	)			(199,116	)			(269,383	)
Interest income			41				2,928				1,524				9,485
Other income			55,270				—				108,871				—
Gain on sale of building			983,401				—				983,401				—
Total other income (expense), net			940,627				(142,988	)			894,680				(259,898	)
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND PROVISION FOR INCOME TAXES			976,555				(52,255	)			1,040,109				128,446
EXTRAORDINARY ITEM – gain from forgiveness of debt, net of income taxes of $202,585 and $270,985 for the three and six month period ended June 30, 2002 (Note 1)			311,552				—				406,476				—
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES			1,288,107				(52,255	)			1,446,585				128,446
PROVISION (BENEFIT) FOR INCOME TAXES			389,400				(32,685	)			416,000				103,456
NET INCOME (LOSS)		$	898,707			$	(19,570	)		$	1,030,585			$	24,990
NET INCOME (LOSS) PER SHARE
Basic		$	0.03			($	0.00	)		$	0.03			$	0.00
Diluted		$	0.03			($	0.00	)		$	0.03			$	0.00
WEIGHTED AVERAGE COMMON SHARES
Basic			29,789,598				28,438,903				29,789,598				28,438,903
Diluted options outstanding			0				0				0				0
Diluted			29,789,598				28,438,903				29,789,598				28,438,903

		Six Months Ended June 30,
		2002				2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	1,030,585			$	24,990
Adjustments to reconcile net income to net cash used in operating activities:
Gain from forgiveness of debt			(677,461	)			—
Gain from sale of building			(983,401	)			—
Sublease income from affiliate			(49,998	)			—
Depreciation and amortization