SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                   For the fiscal year ended December 31, 1999
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                        to
                              ------------------------   ----------------------
Commission file number                   1-7190
                      ----------------------------------------------------------

                            IMPERIAL INDUSTRIES, INC.
   ----------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                        65-0854631
------------------------------------------------------------------------------
   (State or other jurisdiction of                        (I.R.S. Employer
   incorporation or organization)                         Identification No.)

          1259 Northwest 21st Street, Pompano Beach, Florida    33069-1417
--------------------------------------------------------------------------------
           (Address of principal executive offices)             (Zip Code)

       Registrant's telephone number, including area code: (954) 917-4114
                                                           ---------------
           Securities registered pursuant to Section 12(b) of the Act:
  Title of each class                Name of each exchange on which registered
  -------------------                -----------------------------------------
        None                                            None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
                          ----------------------------
                                (Title of Class)
                           8% Subordinated Debentures
                           --------------------------
                                (Title of Class)

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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (S229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

         The aggregate market value of the voting stock of the Registrant held
by non-affiliates computed by reference to the average bid and asked price of
the registrant's Common Stock ($.01 par value) on March 15, 2000 is: $4,637,256

         Number of shares of Imperial Industries, Inc. Common Stock ($.01 par
value) outstanding on March 15, 2000: 8,505,434



<PAGE>


                                     PART I

Item 1.  Business
         --------

                  Imperial Industries, Inc., is a Delaware corporation which
         through its predecessor corporation has been in existence since 1968.
         The Company's executive offices are located at 1259 Northwest 21st
         Street, Pompano Beach, Florida 33069 and the telephone number at such
         offices is (954) 917-4114.

         Merger
         ------

                  On October 12, 1998, the Board of Directors approved a plan
         merging Imperial Industries, Inc. into Imperial Merger Corp., a newly-
         formed, wholly-owned subsidiary of the Company, (the "Merger"). The
         Merger was approved at a special meeting of the Company's Stockholders
         on December 17, 1998, with the Merger becoming effective December 31,
         1998. On the effective date of the Merger, Imperial Merger Corp.
         changed its name to Imperial Industries, Inc. (hereinafter referred to
         as (the "Company").

                  Upon consummation of the Merger, each share of common stock
         outstanding prior to the Merger was automatically converted to one
         share of common stock of the Company. Each share of preferred stock
         outstanding prior to the Merger was converted, at the holder's option,
         into either (a) $4.75 in cash and ten shares of the Company's common
         stock, or (b) $2.25 in cash, an 8% subordinated debenture, face value
         $8.00, and five shares of the Company's common stock. Holders
         representing 81,100 preferred shares have elected dissenters' rights,
         which, if perfected under Delaware law, would require the Company to
         pay to the holders the fair value of their stock in cash to be
         determined by the Delaware Chancery Court. Pursuant to Delaware law,
         the dissenting shareholders petitioned the Delaware Chancery Court to
         determine the fair value of their shares at the effective date of the
         Merger, exclusive of any element of value attributable to the Merger.

                  In accordance with the Merger, the Company issued $984,960 of
         8% Subordinated Debentures, 1,574,610 shares of common stock and paid
         $732,550 in cash to the former preferred shareholders who did not elect
         dissenters' rights. The Company does not know the amount which would be
         payable to dissenting holders who ultimately perfect their dissenters
         rights. Those dissenting stockholders who fail to perfect their
         dissenters' rights under Delaware law would ultimately receive the
         consideration in option (b) above. For a more complete description of
         the Merger, see Note (1) of Notes to Consolidated Financial statements.

         General
         -------

                  The Company, through its subsidiaries, is engaged in the
         manufacture and distribution of building materials to building
         materials dealers and others located primarily in Florida and Georgia,
         and to a lesser extent, other states in the Southeastern part of the
         United States as well as foreign countries. In addition, the Company
         presently has nine distribution outlets through which it markets
         certain of its manufactured products directly to end users. The
         Company's products are used in the construction industry by developers,
         builders, contractors, and sub-contractors.


                                       2
<PAGE>


 Item 1. Business (continued)
         --------
         General (continued)
         -------

                  The Company's business is directly related to the level of
         activity in the new and renovation construction market in Florida and
         Georgia, and to a lesser extent other states in the Southeastern part
         of the United States. The Company's products are used by developers,
         general contractors and subcontractors in the construction or
         renovation of residential, multi-family and commercial buildings and
         swimming pools. In Florida and Georgia, demand for new construction is
         related to, among other things, population growth. Population growth,
         in turn, is principally a function of migration of new residents to the
         state. When economic conditions reduce migration, demand for new
         construction decreases. Construction activity is also affected by the
         size of the inventory of available housing units, mortgage interest
         rates, availability of funds and local government growth management
         policies. The Company's operations are directly related to the general
         economic conditions existing in the Southeastern part of the United
         States.

                  The Company's manufacturing operations are conducted by its
         wholly owned subsidiaries, Premix-Marbletite Manufacturing Co.
         ("Premix") and Acrocrete, Inc. ("Acrocrete"). Effective January 1,
         2000, the Company's distribution operations are conducted through its
         other wholly owned subsidiary, Just-Rite Supply, Inc. ("Just- Rite).
         The manufacturing operations primarily produce stucco, roof tile mortar
         and plaster products. The distribution operations distribute products
         manufactured by the Company's manufacturing subsidiaries and other
         related products.

                  Stucco products are applied as a finishing coat to exterior
         surfaces and to swimming pools. Roof tile mortar is used to adhere
         cement roof tiles to the roof. Plaster customarily is used to finish
         interiors of structures.

         Premix
         ------

                  Premix, together with its predecessors, has been in business
         for approximately 40 years. The names "Premix" and "Premix-Marbletite"
         are among the registered trademarks of Premix. The Company believes the
         trade names of its manufactured products represent a substantial
         benefit to the Company because of industry recognition and brand
         preference. Premix manufactures stucco, roof tile mortar, plaster and
         swimming pool finishes. The products manufactured by Premix basically
         are a combination of portland (or masonry) cement, sand, lime, marble
         and a plasticizing agent and other chemicals, including color-
         impregnating materials.

                  Premix accounted for approximately 39%, 42% and 49% of the
         Company's consolidated annual revenues in the fiscal years ended
         December 31, 1999, 1998 and 1997, respectively.

                  In August 1994, the Company entered into a five year licensing
         agreement with an unaffiliated company to exclusively manufacture and
         sell a new roof tile mortar product throughout the State of Florida and
         certain foreign countries. In 1999, the Company exercised its option to
         renew the agreement for the first of two additional five



                                       3
<PAGE>



Item 1.  Business (continued)
         --------

         Premix (continued)
         ------

         year periods. Premix has also entered into agreements to manufacture
         this product on behalf of selected wholesalers who distribute this
         product under the wholesalers names through their existing established
         dealer networks to service the roofing contractor industry. To date, a
         majority of all roof tile mortar sales have been derived from South
         Florida. Until 1996, the Company's licensed roof tile mortar product
         was the only mortar product approved by Miami Dade County, Florida,
         building authorities for use to adhere all types of cement roof tiles
         to roofs. In 1997, the Company's roof tile mortar was approved by the
         Broward and Palm Beach County building authorities along with other
         competitive products. Other adhesive products used for similar purposes
         are also used by the industry. The manufacturing of this new product
         did not require any significant change to the current manufacturing
         facility. The Company has expanded its marketing efforts for this
         product to other areas of Florida based on product performance rather
         than only as required by building code requirements.

         Acrocrete
         ---------

                  Acrocrete, organized in 1988, manufactures synthetic acrylic
         stucco products. The Company's trade name "Acrocrete" and certain of
         its manufactured products are described by trade names protected by
         registered trademarks. Acrocrete's products, used principally for
         exterior wall coatings, broaden and complement the range of products
         produced and sold by Premix. Management believes acrylic stucco
         products have certain advantages over traditional cementitious stucco
         products for certain types of construction applications because
         synthetic acrylic products provide a hard durable finish with stronger
         color retention properties. Further, acrylic stucco products have
         improved flexibility characteristics, which minimizes the problems of
         cracking of cement coating. Acrocrete's product system provides for
         energy efficiency for both residential and commercial buildings.

                  For the fiscal years ended December 31, 1999, 1998 and 1997,
         Acrocrete's sales accounted for approximately 61%, 58% and 51%,
         respectively, of the Company's consolidated annual revenues. Prior to
         January 1, 2000, Acrocrete operated the Company's distribution
         operations.

         Just-Rite
         ---------

                  In January 2000, the Company established Just-Rite Supply, a
         wholly owned subsidiary to own and operate its five wholesale
         distribution outlets formerly operated by Acrocrete. The Company's
         Board of Directors determined to establish the Company's distribution
         operations as a separate business unit to maximize business
         efficiencies. In addition, effective January 1, 2000 and March 1, 2000,
         Just-Rite acquired four building material distribution outlets to
         diversify its product offering to the construction market to include
         gypsum, roofing, masonry, insulation products, as well as installation
         services beyond those supported by the Company's manufacturing
         operation. Management believes the acquired distribution outlets will
         position the Company to gain a greater


                                       4
<PAGE>

Item 1.  Business (continued)
         --------

         Just-Rite (continued)
         ---------

         market share for its manufactured products through more direct sales to
         the end-user and to expand operations by distributing a wider range of
         building materials to the construction industry that are complementary
         to its existing product lines.

         Acquisition Opportunities
         -------------------------

                  The Company believes the gypsum, masonry and stucco products
         distribution industries are fragmented and have the potential for
         consolidation in response to the competitive disadvantages faced by
         smaller distributors. Management believes that these industries are
         characterized by a significant number of relatively small privately-
         owned, local, relationship-based companies that emphasize service,
         delivery and reliability as well as competitive pricing and breadth of
         product line to their customers. The competitive environment for these
         distributors, in combination with the desire for owners of certain of
         these distributors to gain liquidity, provides an opportunity for
         expansion through acquisition. The Company believes that opportunities
         exist for a company which has the ability to source and distribute
         products effectively to serve the building materials industry and to
         effect cost savings through economics of scale which can be applied to
         companies that may be acquired in these industries. In February 2000,
         the Company entered into a non-binding letter of intent to acquire a
         building materials distributor in Tallahassee, Florida.

                  The Company intends to continue to seek prospective
         acquisition candidates in businesses that complement or are otherwise
         related to that of the Company. Although the primary focus of the
         Company's expansion and acquisition program will be on seeking suitable
         acquisition candidates who are engaged in the wholesale distribution of
         building materials, the Company will consider the purchase of
         manufacturers of products which may be distributed through its
         wholesale distribution business. Although the Company believes there
         may be a number of suitable acquisition candidates, there can be no
         assurance that the Company will be able to consummate the acquisition
         of any companies. Other than as stated above, the Company does not have
         any binding understanding, agreement or commitment regarding any
         potential acquisition.

         Suppliers
         ---------

                  Premix's raw materials and products are purchased from
         approximately 23 suppliers. While five suppliers account for
         approximately 56% of Premix's purchases, Premix is not dependent on any
         one supplier for its requirements. Equivalent materials are readily
         available from other sources at similar prices.

                  Acrocrete's raw materials are purchased from approximately 19
         suppliers, of which five account for approximately 69% of Acrocrete's
         raw material purchases. However, equivalent materials are available
         from several other sources at similar prices and Acrocrete is not
         dependent on any one supplier for its requirements.

                                       5
<PAGE>

Item 1.  Business (continued)
         ---------

         Suppliers (continued)
         ---------

                  The Company's Just-Rite distribution outlets sell products of
         many suppliers, none of which account for in excess of 5% of the
         Company's purchases.

         Marketing and Sales
         -------------------

                  The Company's marketing and sales strategy is to create a
         profit center for the products it manufactures, as well as enlarging
         its product offering to include certain complementary products
         manufactured by other companies. The complementary items are purchased
         by the Company and held in inventory, together with manufactured
         products, for sale to customers. Generally, sales orders are filled out
         of existing inventory within several days of receipt of the order. The
         total package sales approach to the new and renovation construction
         markets is targeted at both the end user of the Company's products,
         being primarily the contractor or subcontractor, and the distributor,
         principally building materials dealers who purchase products from the
         Company and sell to the end user, and in some instances, to retail
         customers.

                  While the Company's sales historically have been typically to
         distributors, the Company focuses marketing efforts on the
         contractor/subcontractor end user to create a brand preference for the
         Company's products. No one distributor has accounted for 10% or more of
         total sales during the past three years. The Company believes the loss
         of any one distributor would not cause a material loss in sales because
         the brand preference contractors and subcontractors have developed for
         the Company's products generally cause the user to seek a distributor
         who carries the Company's products. Although the Company markets its
         products to distributors through Company salesmen, located in the
         Southeastern United States who promote both Premix and Acrocrete
         products, direct sales to end users now account for over 42% of total
         revenues in 1999.

                  In April 1994, the Company started a pilot program in
         Savannah, Georgia to sell its Acrocrete products directly to the end
         user. The Company's products and certain complementary products
         manufactured by other companies were inventoried and sold from a leased
         warehouse distribution facility. In January 1995, the Company opened a
         second distribution facility in Jacksonville, Florida. In May 1995, the
         Company opened a third distribution facility in Norcross, Georgia. The
         Company closed the Savannah facility at March 31, 1997.

                  In February 1998, the Company acquired a facility in Tampa,
         Florida that was engaged primarily in the distribution of landscape
         stone products. The Company is utilizing this distribution facility in
         an attempt to gain market share for the sale of its products on the
         West Coast of Florida. The Company subsequently opened a fourth
         distribution facility in the third quarter of 1998 in Dallas, Georgia,
         and a fifth in Gadsden Alabama in April 1999. In January 2000, the
         Company acquired three additional outlets, one in Foley, Alabama, one
         in Pensacola, Florida and one in Destin, Florida. In March 2000, the
         Company acquired an additional distribution outlet in Panama City
         Beach, Florida. The Company presently is evaluating the feasibility of



                                       6
<PAGE>


Item 1.  Business (continued)
         --------

         Marketing and Sales (continued)
         -------------------

         of opening other warehouse distribution facilities in conjunction with
         its acquisition program.

                  Each facility contains between approximately 6,400 to 15,000
         square feet. The distribution facilities are designed to promote
         product brand preference to the contractor and sub-contractor, and also
         to improve service capabilities, increase market share, and to increase
         profit margins from the sale of the Company's products. The Company
         sells Acrocrete and complementary products of other manufacturers at
         such distribution facilities.

         Seasonality
         -----------

                  The sale of the Company's products in the construction market
         for the Southeastern United States is somewhat seasonal, with a
         slightly lower rate of sales historically occurring in the period
         December through February compared to the rest of the year.

         Competition
         -----------

                  The Company's business is highly competitive. Premix and
         Acrocrete encounter significant competition from local, independent
         firms, as well as regional and national manufacturers of acrylic,
         cement and plaster products, most of whom manufacture products similar
         to those of Premix and Acrocrete. The Company's distribution outlets
         encounter significant competition from local independent distributors
         as well as regional and national distributors who sell similar
         products. Many of these competitors are larger, more established and
         better financed than the Company. The Company believes it can compete
         with the other companies based upon product performance and quality,
         customer service and prices through maintaining lower overhead costs
         than larger national companies.

         Environmental Matters
         ---------------------

                  The Company is subject to various federal, state and local
         environmental laws and regulations in the normal course of its
         business. Although the Company believes that its manufacture, handling,
         use, sale and disposal of its raw materials and products are in accord
         with current environmental regulations, future developments could
         require the Company to make unforeseen expenditures relating to
         environmental matters. Increasingly strict environmental laws,
         standards and environmental policies may increase the risk of liability
         and compliance costs associated with the Company's operations. Capital
         expenditures for this purpose have not been material in past years, and
         expenditures for 2000 to comply with existing laws and regulations are
         also not expected to have a material effect on the Company's financial
         position, results of operations or liquidity.

         Employees
         ---------

                  The Company and its subsidiaries had 86 full time employees as
         of December 31, 1999. The Company considers its employee relations to
         be


                                       7
<PAGE>

Item 1.  Business (continued)
         --------

         Employees
         ---------

         satisfactory. The Company's employees are not subject to any collective
         bargaining agreement.

Item 2.  Properties
         -----------

                  The Company and its subsidiaries maintain a total of 13
         facilities in Florida, Georgia and Alabama. The location and size of
         the Company's facilities and the nature of the operations in which such
         facilities are used, are as follows:

                              Approximate  Owned/
         Location             Sq. Footage  Leased    Company Products
         --------             -----------  ------    ----------------
         Pompano Beach, Fl.     19,600     Leased     Premix (Manufacturing)
         Winter Springs, Fl.    26,000     Owned      Premix (Manufacturing)
         Kennesaw, Ga.          20,400     Leased     Acrocrete (Manufacturing)
         Tampa, Fl.              8,470     Owned      Just-Rite (Distribution)
         Jacksonville, Fl.      11,400     Leased     Just-Rite (Distribution)
         Norcross, Ga.          12,200     Leased     Just-Rite (Distribution)
         Dallas, Ga.             6,400     Leased     Just-Rite (Distribution)
         Gadsden, Al.           10,000     Leased     Just-Rite (Distribution)
         Pensacola, Fl.         15,250     Owned      Just-Rite (Distribution)
         Ft. Walton Beach, Fl    8,000     Leased     Just-Rite (Distribution)
         Destin, Fl.             7,680     Leased     Just-Rite (Distribution)
         Foley, Al.              9,000     Leased     Just-Rite (Distribution)
         Panama City Beach, Fl.  9,540     Leased     Just-Rite (Distribution)

                  The Just-Rite distribution outlets typically consist of a
         warehouse building and supply yard for the inventory and sale of
         products directly to the end user.

                  Except for the Destin, Florida and Panama City Beach, Florida
         locations, all leased properties are leased from unaffiliated third
         parties. The Destin, Florida facility is leased from an entity in which
         the former owner of A&R Supply, Inc. owns a minority interest. The
         former owner sold his business interest to the Company in January 2000
         and is currently a Vice President and general manager of Just- Rite.
         The Panama City Beach, Florida facility is leased from the former owner
         of Panhandle Drywall Supply, Inc., who sold his business interest to
         Just-Rite in March 2000 and is currently an employee of the Company.

                  Management believes that the Company's facilities and
         equipment are well-maintained, in good operating condition and
         sufficient for its present operating needs.

Item 3.  Legal Proceedings
         -----------------

                  As of March 28, 2000, Acrocrete and other parties have been
         named in 36 pending lawsuits in various Southeastern states, by
         homeowners, contractors and subcontractors, or their insurance
         companies, claiming moisture intrusion damages on single family
         residences. The Company's insurance carriers have accepted coverage for
         35 of these claims and


                                       8
<PAGE>

Item 3.  Legal Proceedings (continued)
         -----------------

         are providing a defense under a reservation of rights. The Company
         expects its insurance carriers to accept coverage for the other one
         recently filed lawsuit. Acrocrete is vigorously defending all of these
         cases and believes it has meritorious defenses, counter-claims and
         claims against third parties. Acrocrete is unable to determine the
         exact extent of its exposure or outcome of this litigation.

                  The allegations of defects in synthetic stucco wall systems
         are not restricted to Acrocrete products but rather are an
         industry-wide issue. There has never been any defect proven against the
         Company. The alleged failure of these products to perform has generally
         been linked to improper application and the failure of adjacent
         building materials such as windows, roof flashing, decking and the lack
         of caulking.

                  In response to the alleged defects and in compliance with
         modified building codes adopted in North Carolina, Acrocrete, together
         with many other manufacturers of synthetic stucco wall systems, has
         developed modified wall systems that allow the drainage of incidental
         moisture that may enter the wall system. Most manufacturers continue to
         produce the traditional (i.e., face-sealed) stucco systems and in
         commercial construction, estimated to account for more than 50% of
         product sales, the traditional system is still the product of choice.
         The alleged defects have generally occurred in the residential
         construction market. To the Company's knowledge, in the commercial
         market, where methods of construction and quality control are monitored
         more closely than in the residential market, the alleged drainage
         problem has been limited.

                  On June 15, 1999, Premix was served with a complaint captioned
         Mirage Condominium Association, Inc. v. Premix Marbletite Manufacturing
         Co., et al., in Miami-Dade County Florida. The lawsuit raises a number
         of allegations against 12 separate defendants involving alleged
         construction defects. Plaintiff has alleged only one count against
         Premix, which claims that certain materials, purportedly provided by
         Premix to the Developer/Contractor and used to anchor balcony railings
         to the structure were defective. The Company's insurance carriers have
         been placed on notice of this suit and the Company is awaiting their
         response regarding coverage, but fully expects that the insurance
         carriers will accept coverage and the defense. In the interim, the
         insurance carrier has retained defense counsel on the behalf of Premix.
         Premix intends to vigorously defend this claim and believes it has
         meritorious defenses. Premix is unable to determine the exact extent of
         its exposure or the outcome of this litigation.

                  Premix and Acrocrete are engaged in other legal actions and
         claims arising in the ordinary course of its business, none of which is
         believed to be material to the Company.

                  On April 23, 1999, certain Dissenting Shareholders owning
         shares of the Company's preferred stock filed a petition for appraisal
         in the Delaware Chancery Court to determine the fair value of the
         shares at December 31, 1998, the effective date of the Company's
         Merger. (See Note 1 of Notes to Consolidated Financial Statements).

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

                 None.


                                       9
<PAGE>

                                     PART II


Item 5.  Market for the Registrant's Common Equity and Related
         -----------------------------------------------------
         Stockholder Matters
         -------------------

                  The Company's Common Stock is traded in the over-the-counter
         market. The following table sets forth the high and low bid quotations
         of the Common Stock for the quarters indicated, as reported by the
         National Quotation Bureau, Inc. Such quotations represent prices
         between dealers and do not include retail mark-up, mark-down, or
         commission, and may not necessarily represent actual transactions.

                      Fiscal, 1998             High               Low
                      ------------             ----               ---
                      First Quarter            $.40                $.25
                      Second Quarter            .58                 .36
                      Third Quarter             .44                 .29
                      Fourth Quarter            .40                 .28

                      Fiscal, 1999             High               Low
                      ------------             ----               ---
                      First Quarter            $.41                $.28
                      Second Quarter            .44                 .31
                      Third Quarter             .63                 .44
                      Fourth Quarter            .72                 .45


                  The Company has not paid any cash dividends on its Common
         Stock since 1980.

                  On March 15, 2000, the Common Stock was held by 1,978
         stockholders of record.

                  As of March 15, 2000, the closing bid and asked prices of the
         Common Stock was $.78 and $.80, respectively.



                                       10
<PAGE>


Item 6.  Selected Financial Data
         -----------------------

                  The following is a summary of selected financial data (in
         thousands except as to per share amounts) for the five years ended
         December 31, 1999:


<TABLE>
<CAPTION>

Statements of Operations Data                                                      Year Ended December 31,
-----------------------------                                                      -----------------------
                                                                   1999            1998         1997        1996          1995
                                                                   ----            ----         ----        ----          ----

<S>                                                              <C>            <C>          <C>          <C>          <C>
Net sales                                                        $ 22,604       $ 18,739     $ 15,774     $ 13,742     $ 11,615
                                                                 --------       --------     --------     --------     --------
Cost of sales                                                      15,198         12,823       10,867        9,881        8,239
                                                                 --------       --------     --------     --------     --------
Selling, general and administrative
 expenses                                                           5,932          4,645        3,740        3,313        2,979
                                                                 --------       --------     --------     --------     --------
Interest expense                                                     (475)          (272)        (329)        (317)        (282)
                                                                 --------       --------     --------     --------     --------
Merger costs                                                           --           (456)        --           --           --
                                                                 --------       --------     --------     --------     --------
Miscellaneous income, net                                              34          1,218           54           43            7
                                                                 --------       --------     --------     --------     --------
Income before income taxes                                          1,033          1,761          892          274          122
                                                                 --------       --------     --------     --------     --------
Income tax benefit, net                                               187            296          753         --           --
                                                                 --------       --------     --------     --------     --------
Net income                                                          1,220          2,057        1,645          274          122
                                                                 --------       --------     --------     --------     --------
Less:  dividends on redeemable
  preferred stock                                                    --             (248)        (330)        (330)        (330)
                                                                 --------       --------     --------     --------     --------
Less:  net charge for elimination
  of preferred stock                                                 --             (975)        --           --           --
                                                                 --------       --------     --------     --------     --------
Net income (loss) applicable to
  common stockholders                                            $  1,220       $    834     $  1,315     $    (56)    $   (208)
                                                                 --------       --------     --------     --------     --------
Net income (loss) per share
  applicable to common stockholders
     Basic                                                       $    .15       $    .13     $    .22     $   (.01)    $   (.04)
                                                                 --------       --------     --------     --------     --------
     Diluted                                                     $    .15       $    .12     $    .21     $   (.01)    $   (.04)
                                                                 --------       --------     --------     --------     --------
Number of shares used in computation
 of income (loss) per share:  Basic                                 8,199          6,566        6,009        5,471        5,382
                                                                 --------       --------     --------     --------     --------
                              Diluted                               8,390          6,715        6,267        5,471        5,382
                                                                 --------       --------     --------     --------     --------
Balance Sheets Data
-------------------
                                                                                      As of December 31,
                                                                                      ------------------
                                                                     1999           1998         1997         1996         1995
                                                                     ----           ----         ----         ----         ----

Working capital                                                  $  3,447       $  2,439     $  1,995     $    872     $    733
                                                                 --------       --------     --------     --------     --------
Total assets                                                     $  8,768       $  7,561     $  5,128     $  4,116     $  3,747
                                                                 --------       --------     --------     --------     --------
Long-term debt,
 less current maturities                                         $  1,328       $  1,316     $    819     $    895     $  1,000
                                                                 --------       --------     --------     --------     --------
Obligation for appraisal rights                                  $    877       $    877     $      -     $      -     $      -
                                                                 --------       --------     --------     --------     --------
Redeemable preferred stock                                       $      -       $      -     $  3,001     $  3,001     $  3,001
                                                                 --------       --------     --------     --------     --------
Preferred dividends in arrears(1)                                $      -       $      -     $  4,044     $  3,714     $  3,384
                                                                 --------       --------     --------     --------     --------
Common stock and other
  stockholders' equity (deficit)                                 $  3,514       $  2,281     $ (4,441)    $ (5,879)    $ (5,846)
                                                                 --------       --------     --------     --------     --------

Current ratio                                                    2.1 to 1       1.8 to 1     2.2 to 1     1.4 to 1     1.3 to 1
                                                                 --------       --------     --------     --------     --------
</TABLE>


                                       11
<PAGE>


(1)      No cash dividends were paid on the cumulative redeemable preferred
         stock since 1985. The preferred stock and all accumulated accrued
         unpaid dividends were eliminated at December 31, 1998, upon the
         effective date of the Merger.


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations
         -------------

          General
          --------

                  The Company's business is related primarily to the level of
         construction activity in the Southeastern United States, particularly
         the states of Florida and Georgia. The majority of the Company's
         products are sold to building materials dealers located principally in
         Florida and Georgia who provide materials to contractors and
         subcontractors engaged in the construction of residential, commercial
         and industrial buildings and swimming pools. One indicator of the level
         and trend of construction activity is the amount of construction
         permits issued for the construction of buildings. The level of
         construction activity is subject to population growth, inventory of
         available housing units, government growth policies and construction
         funding, among other things.

                  This Form 10-K contains certain forward looking statements
         within the meaning of the Private Securities Litigation Reform Act of
         1995 with respect to the financial condition, results of operations and
         business of Imperial Industries, Inc., and its subsidiaries, including
         statements made under Management's Discussion and Analysis of Financial
         Condition and Results of Operations. These forward looking statements
         involve certain risks and uncertainties. No assurance can be given that
         any of such matters will be realized. Factors that may cause actual
         results to differ materially from those contemplated by such forward
         looking statements include, among others, the following: the
         competitive pressure in the industry; general economic and business
         conditions; the ability to implement and the effectiveness of business
         strategy and development plans; quality of management; business
         abilities and judgement of personnel; and availability of qualified
         personnel; labor and employee benefit costs.


         Results of Operations
         ---------------------

         Year Ended December 31, 1999 Compared to 1998
         ---------------------------------------------

                  Net sales in 1999 increased $3,865,000, or approximately 21%
         compared to 1998. The increase in sales was derived primarily from
         increased sales of Acrocrete products, together with certain
         complementary products manufactured by other companies, sold through
         the Company's distribution outlets. The sales of Acrocrete products
         derived from the Company's new distribution outlets in Tampa, Florida,
         (acquired February 1, 1998), Dallas, Georgia, (opened July 1, 1998),
         and Gadsden, Alabama, (opened April 1, 1999) accounted for $4,145,000
         of sales in 1999, compared to $2,137,000 of sales in 1998.

                  Effective January 1, 2000 and March 1, 2000, the Company
         acquired two building materials distributors that derived net sales of
         approximately $5,795,000 and $2,276,000, respectively, in 1999. As a
         result of these acquisitions, net sales in 2000 are expected to
         increase significantly over 1999 levels.

                  Gross profit as a percentage of net sales for 1999 was
         approximately 33%, compared to 32% in 1998. The increase in gross
         profit margins was principally due to a price increase for certain
         products instituted in the third quarter of 1999.

                  Selling, general and administrative expenses as a percentage
         of net sales for 1999 was approximately 26%, compared to 25% in 1998.
         Selling, general and administrative expenses increased $1,287,000, or
         approximately 28%, in 1999 compared to 1998. The increase in expenses
         was primarily due to additional sales expenses associated with
         servicing the increased volume of business, including a new senior
         marketing and sales manager, and operating costs related to the
         Company's new distribution facilities.

                  Interest expense increased from $272,000 in 1998 to $475,000
         in 1999. The increase in interest expense was due to the amount of
         $290,000 associated with the issuance of



                                       12
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition
        -----------------------------------------------------------
        and Results of Operations (continued)
        -------------------------------------

         Year Ended December 31, 1999 Compared to 1998 (continued)
         ---------------------------------------------------------

         Subordinated Debentures and obligations incurred in connection
         with the Company's merger at December 31, 1998. Miscellaneous income
         for 1998 includes a gain of $1,066,000 derived from the sale of its
         former manufacturing facility in Miami, Florida and $62,000 of
         reimbursements the Company received from the State of Florida
         environmental authorities insurance program for costs the Company
         incurred in prior years related to the removal of underground fuel
         tanks located at its facilities. Miscellaneous expenses includes
         approximately $456,000 in fees and expenses associated with the Merger
         and elimination of the preferred stock in 1998.

                  In 1999, the Company recognized a $574,000 tax benefit as a
         result of the release of a portion of the valuation allowance on the
         Company's deferred tax assets. For the fiscal year ended December 31,
         1999, the Company recognized a net income tax benefit of $213,000
         representing income before taxes at the statutory rate of 35% less the
         tax benefit described above. Based on the Company's net operating loss
         carryforwards, the Company is not expected to pay such federal income
         taxes for 1999.

                  As a result of the above factors, the Company derived net
         income applicable to common stockholders of $1,220,000 or $.15 per
         share for 1999, compared to net income of $834,000 or $.13 per share in
         1998. Net income applicable to common stockholders includes a charge of
         $248,000 in 1998 for unpaid cumulative dividends on preferred stock,
         which was retired in 1998. In addition, in connection with the Merger,
         1998 net income applicable to common stockholders was reduced by
         $975,000.

         Year Ended December 31, 1998 Compared to 1997
         ---------------------------------------------

                  Net sales in 1998 increased $2,965,000, or approximately 19%
         compared to 1997. The increase in sales was derived primarily from
         increased sales of Acrocrete products, together with certain
         complementary products manufactured by other companies, sold through
         the Company's distribution outlets. Sales derived from the Company's
         new distribution outlet in Tampa, Florida, acquired effective February
         1, 1998, accounted for approximately $1,790,000 of the increase in
         sales.

                  Gross profit as a percentage of net sales for 1998 was
         approximately 32%, compared to 31% in 1997. The increase in gross
         profit margins was principally due to savings realized from raw
         material purchases and modifications made to the Company's
         manufacturing process to gain greater production efficiency.

                  Selling, general and administrative expenses as a percentage
         of net sales for 1998, was approximately 25%, compared to 24% in 1997.
         Selling, general and administrative expenses increased $905,000, or
         approximately 24%, in 1998 compared to 1997. The increase in expenses
         was primarily due to additional sales and delivery expenses associated
         with servicing the increased volume of business and costs related to
         the Company's new distribution outlet


                                       13
<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition
         -----------------------------------------------------------
         and Results of Operations (continued)
         --------------------------

         Year Ended December 31, 1998 Compared to 1997 (continued)
         ----------------------------------------------

         in Tampa, Florida, which was acquired in February 1998. In addition,
         the Company estimates it incurred approximately $122,000 in costs in
         connection with relocating four of its facilities to new locations in
         1998.

                  Miscellaneous income for 1998 includes, a gain of $1,066,000
         derived from the sale of it former manufacturing facility in Miami,
         Florida and $62,000 of reimbursements the Company received from the
         State of Florida environmental authorities insurance program for costs
         the Company incurred in prior years related to the removal of
         underground fuel tanks located at its facilities. Miscellaneous
         expenses includes approximately $456,000 in fees and expenses
         associated with the Merger and elimination of the preferred stock in
         1998.

                  In 1998, the Company recognized a $927,000 tax benefit as a
         result of the releasing of a portion of the valuation allowance on the
         Company's deferred tax assets. For the fiscal year ended December 31,
         1998, the Company recognized a net income tax benefit of $320,000
         representing income before taxes at the statutory rate of 35% less the
         tax benefit described above. Based on the Company's net operating loss
         carryforwards, the Company did not pay such taxes on its federal income
         tax for 1998.

                  As a result of the above factors and after giving effect to
         the Merger and preferred stock dividends accrued, but not paid in 1998
         and 1997, the Company derived net income applicable to common
         stockholders of $834,000 or $.13 per share for 1998, compared to net
         income of $1,315,000or $.22 per share in 1997. Net income applicable to
         common stockholders includes charges of $248,000 in 1998 and $330,000
         in 1997 for unpaid cumulative dividends on preferred stock which was
         retired in 1998. In addition, in connection with the Merger, net income
         applicable to common stockholders has been reduced by $975,000.


         Liquidity and Capital Resources
         -------------------------------

                  At December 31, 1999, the Company had working capital of
         approximately $3,447,000 compared to working capital of $2,439,000 at
         December 31, 1998. As of December 31, 1999, the Company had cash and
         cash equivalents of $1,119,000.

                  The Company's principal source of short-term liquidity is
         existing cash on hand and the utilization of a $4,500,000 line of
         credit with a commercial lender scheduled to expire on June 19, 2001.
         Premix, Acrocrete and Just-Rite borrow on the line of credit, based
         upon and collateralized by, their eligible accounts receivable and
         inventory. Generally, accounts not collected within 120 days are not
         eligible accounts receivable under the Company's borrowing agreement
         with its commercial lender. At December 31, 1999, $1,526,000 had been
         borrowed against the line of credit. Based on eligible receivables and
         inventory, the Company had, under its line


                                       14
<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition
         -----------------------------------------------------------
         and Results of Operations (continued)
         --------------------------

         Liquidity and Capital Resources (continued)
         --------------------------------

         of credit, total available borrowing of approximately $2,670,000 at
         December 31, 1999.

                  Trade accounts receivable represent amounts due from sub-
         contractors, contractors and building materials dealers located
         principally in Florida and Georgia who have purchased products on an
         unsecured open account basis and through Company owned warehouse
         distribution outlets. As of December 31, 1999 the Company owned and
         operated five warehouse distribution outlets. Accounts receivable, net
         of allowance, at December 31, 1999 was $2,677,000 compared to
         $2,535,000 at December 31, 1998. The increase in receivables of
         $142,000, or approximately 6% was primarily related to higher sales
         levels prevalent in 1999 compared to 1998.

                  The Company's shareholders approved a plan of merger with a
         wholly owned subsidiary becoming effective December 31, 1998. The Plan
         satisfied the Company's redeemable preferred stock dividend arrearage
         and mandatory sinking fund requirements which aggregated $7,293,000 at
         December 31, 1998.

                  As a result of the consummation of the merger, the Company
         issued an aggregate of $984,960 face amount, 8% subordinated
         debentures, 1,574,610 shares of common stock and agreed to pay $732,550
         in cash to the former preferred shareholders. At December 31, 1999, the
         Company had paid $684,375 of such cash amount. Amounts payable to such
         shareholders at December 31, 1999 results from their non-compliance
         with the conditions for payments. Holders representing 81,100 preferred
         shares have elected dissenters' rights, which, under Delaware law,
         would require cash payments equal to the fair value of their stock, as
         of the date of the merger, to be determined in accordance with Section
         262 of the Delaware General Corporation Law. The Company is unable to
         determine the fair value of the preferred stock owned by such
         dissenting shareholders, but recorded a liability for each share based
         on the fair value of $2.25 in cash, an $8.00 subordinated debenture and
         five shares of the Company's common stock, since that is the
         consideration the dissenting holders would receive if they did not
         perfect their dissenters' rights under the law. Dissenting stockholders
         filed a petition for appraisal rights in the Delaware Chancery Court on
         April 23, 1999. Expenses associated with the merger aggregated
         approximately $456,000 and were expensed in 1998.

                  Effective January 1, 2000, the Company acquired certain assets
         and assumed certain liabilities of three building materials
         distributors held under common ownership in a single transaction
         accounted for as a purchase acquisition. The total consideration,
         exclusive of the issuance of Common Stock, was $1,420,000 consisting of
         $798,000 in cash, unsecured promissory notes of $150,000 due 90 days
         from closing and $100,000 due one year from closing. The Company also
         assumed $372,000 of the acquired companies' secured debt and issued
         225,000 shares of the Company's unregistered common stock valued at
         $.64 per share.


                                       15
<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition
         -----------------------------------------------------------
         and Results of Operations (continued)
         -------------------------

         Liquidity and Capital Resources (continued)
         -------------------------------

                  Effective March 1, 2000, the Company acquired certain assets
         of another unrelated building materials distributor accounted for as a
         purchase. The total consideration was $344,000, which includes 50,000
         shares of the Company's unregistered common stock valued at $42,000, or
         $.84 per share. The Company paid cash of $219,000 and issued an
         unsecured promissory note of $125,000 payable over two years from
         closing.

                  The consummation of these acquisitions and working capital
         required to fund operations required utilization of approximately
         $1,000,000 under its line of credit.

                  In February 2000, the Company entered into a non-binding
         letter of intent to acquire certain of the assets of a wholesale
         building material distribution facility located in Tallahassee,
         Florida. The closing, subject to normal contingencies, is anticipated
         to be effective April, 2000. The Company expects to utilize
         approximately $400,000 under its line of credit, issue notes in the
         approximate amount of $150,000, assume secured debt of approximately
         $100,000 and issue 130,000 shares of common stock to consummate the
         proposed acquisition and fund operations.

                  The Company presently is evaluating the feasibility of opening
         or acquiring other warehouse distribution facilities. In addition, the
         Company expects to incur capital expenditures during the next twelve
         months to upgrade certain Company facilities and maintain its equipment
         to support operations. Management does not expect the cash investment
         for the expenditures to upgrade facilities and maintain equipment to be
         material. Capital needs associated with opening or acquiring any
         additional facilities cannot be estimated at this time.

                  The Company believes its cash on hand, utilization of unused
         borrowings under its line of credit, and the maintenance of its
         borrowing arrangement with its commercial lender will provide
         sufficient cash to supplement cash shortfalls, if any, from operations
         and provide adequate liquidity for the next twelve months to satisfy
         the obligations arising from the merger and support the cash
         requirements of its capital expenditure programs.

                  The ability of the Company to maintain and improve its long
         term liquidity is dependent upon the Company's ability to successfully
         (i) maintain profitable operations; (ii) pay or otherwise satisfy
         obligations arising from the merger; and (iii) resolve current
         litigation on terms favorable to the Company.



                                       16
<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition
         -----------------------------------------------------------
         and Results of Operations (continued)
         -------------------------

         Liquidity and Capital Resources (continued)
         --------------------------------

         Year 2000 Issues
         ----------------

                  Management completed a company wide program to prepare the
         Company's computer systems and other applications for the year 2000.
         The year 2000 problem, which is common to most businesses, concerns the
         inability of such systems to properly recognize dates and date-
         sensitive information on and beyond January 1, 2000. Based on such
         assessment, the Company developed and completed a year 2000 compliance
         plan, under which all key information systems were tested, and
         non-compliant software replaced. All of the Company's systems are now
         2000 compliant. In addition, the Company has not experienced any
         material difficulties regarding compatibility of customers' and
         suppliers' systems which interface with the Company's systems or could
         otherwise impact the Company's operations.

                  The internal staff costs, replacement of systems and
         consulting expenses to prepare the systems for the year 2000 were not
         material to the Company's operating results, liquidity or financial
         position.


  Item 8. Financial Statement and Supplementary Data
          ------------------------------------------

                  See Item 14. Exhibits, Financial Statement Schedules and
         Reports on Form 8-K for the Index to Financial Statements contained
         herein.



                                       17
<PAGE>

               Report of Independent Certified Public Accountants


To the Board of Directors and Shareholders of
Imperial Industries, Inc.


In our opinion, the consolidated financial statements listed in the index

appearing under Item 14(a)(1) on page 46 present fairly, in all material

respects, the financial position of Imperial Industries, Inc. and its

subsidiaries at December 31, 1999 and 1998, and the results of their operations

and their cash flows for each of the three years in the period ended December

31, 1999, in conformity with accounting principles generally accepted in the

United States. In addition, in our opinion, the financial statement schedules

listed in the accompanying index under Item 14(a)(2) on page 46 present fairly

in all material respects, the information set forth therein when read in

conjunction with the related consolidated financial statements. 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 of these statements in accordance with

auditing standards generally accepted in the United States, which 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, assessing the accounting principles used and

significant estimates made by management, and evaluating the overall financial

statement presentation.  We believe that our audits provide a reasonable basis

for the opinion expressed above.



PRICEWATERHOUSECOOPERS LLP
Miami, Florida
March 28, 2000

                                       18
<PAGE>



                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>

                                                                               December 31,              December 31,
   Assets                                                                          1999                      1998
   ------                                                                          ----                      ----
<S>                                                                          <C>                         <C>
Current assets:
  Cash and cash equivalents                                                  $  1,119,000                $  1,097,000
  Trade accounts receivable (less
   allowance for doubtful accounts of
   $254,000 and $200,000 at December 31,
   1999 and 1998, respectively)                                                 2,677,000                   2,535,000
  Inventories                                                                   2,023,000                   1,374,000
  Deferred taxes                                                                  634,000                     505,000
  Other current assets                                                             43,000                      15,000
                                                                             ------------                ------------
     Total current assets                                                       6,496,000                   5,526,000
                                                                             ------------                ------------

Property, plant and equipment, at cost                                          2,653,000                   2,517,000
 Less accumulated depreciation                                                 (1,164,000)                 (1,182,000)
                                                                             ------------                ------------
     Net property, plant and equipment                                          1,489,000                   1,335,000
                                                                             ------------                ------------

Deferred taxes                                                                    699,000                     615,000
                                                                             ------------                ------------

Other assets                                                                       84,000                      85,000
                                                                             ------------                ------------
                                                                             $  8,768,000                $  7,561,000
                                                                             ------------                ------------

   LiabilitiesandStockholders'Equity
Current liabilities:
  Notes payable                                                              $  1,526,000                $    780,000
  Current portion of long-term debt                                               164,000                     123,000
  Accounts payable                                                                902,000                   1,300,000
  Payable to stockholders                                                          48,000                     733,000
  Accrued expenses and other liabilities                                          409,000                     151,000
                                                                             ------------                ------------
     Total current liabilities                                                  3,049,000                   3,087,000
                                                                             ------------                ------------

Long-term debt, less current maturities                                         1,328,000                   1,316,000
                                                                             ------------                ------------

Obligation for appraisal rights                                                   877,000                     877,000
                                                                             ------------                ------------


Commitments and contingencies                                                        --                          --
                                                                             ------------                ------------
Stockholders' equity:
 Common stock, $.01 par value at December 31,
  1999 and 1998; 20,000,000 shares authorized;
  8,230,434 and 8,182,571 issued at
  December 31, 1999 and 1998, respectively                                         82,000                      82,000
 Additional paid-in-capital                                                    13,414,000                  13,507,000
 Accumulated deficit                                                           (9,982,000)                (11,202,000)
                                                                             ------------                ------------
                                                                                3,514,000                   2,387,000
 Less cost of shares in treasury (none and
  47,863 shares at December 31, 1999 and
  1998, respectively                                                                 --                      (106,000)
                                                                             ------------                ------------
     Total stockholder's equity                                                 3,514,000                   2,281,000
                                                                             ------------                ------------
                                                                             $  8,768,000                $  7,561,000
                                                                             ------------                ------------

</TABLE>


          See accompanying notes to consolidated financial statements.


                                       19
<PAGE>


                      IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations


<TABLE>
<CAPTION>

                                                                                Year Ended December 31,
                                                                                -----------------------
                                                                   1999                    1998                     1997
                                                                   ----                    ----                     ----
<S>                                                           <C>                      <C>                      <C>
Net sales                                                     $ 22,604,000             $ 18,739,000             $ 15,774,000

Cost of sales                                                   15,198,000               12,823,000               10,867,000
                                                              ------------             ------------             ------------

     Gross profit                                                7,406,000                5,916,000                4,907,000

Selling, general and
 administrative expenses                                         5,932,000                4,645,000                3,740,000
                                                              ------------             ------------             ------------

     Operating income                                            1,474,000                1,271,000                1,167,000
                                                              ------------             ------------             ------------

Other income (expense):
   Interest expense                                               (475,000)                (272,000)                (329,000)
   Merger costs                                                       --                   (456,000)                    --
   Miscellaneous income                                             34,000                1,218,000                   54,000
                                                              ------------             ------------             ------------
                                                                  (441,000)                 490,000                 (275,000)
                                                              ------------             ------------             ------------

    Income before income taxes                                   1,033,000                1,761,000                  892,000
                                                              ------------             ------------             ------------

Income tax benefit (expense):
   Current                                                         (26,000)                 (24,000)                 (47,000)
   Deferred                                                        213,000                  320,000                  800,000
                                                              ------------             ------------             ------------
                                                                   187,000                  296,000                  753,000
                                                              ------------             ------------             ------------

Net income                                                       1,220,000                2,057,000                1,645,000

Less: Net charge for elimination
      of preferred stock                                              --                   (975,000)                    --

Less: Dividends on redeemable
        preferred stock                                               --                   (248,000)                (330,000)
                                                              ------------             ------------             ------------

      Net income applicable to
       common stockholders                                    $  1,220,000             $    834,000             $  1,315,000
                                                              ------------             ------------             ------------


Basic earnings per
  common share                                                $        .15             $        .13             $        .22
                                                              ------------             ------------             ------------

Diluted earnings per
  common share                                                $        .15             $        .12             $        .21
                                                              ------------             ------------             ------------
</TABLE>

                                       20
<PAGE>




                See accompanying notes to consolidated financial statements.



                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

              Consolidated Statement of Changes in Common Stock and
                      Other Stockholders' Equity

                  Years ended December 31, 1999, 1998 and 1997


<TABLE>
<CAPTION>
                                                                        Additional
                                               Common Stock              paid-in     Accumulated      Treasury
                                          Shares          Amount         capital       deficit          stock         Total
                                          ------          ------         -------       -------          -----         -----

<S>                                        <C>              <C>           <C>           <C>              <C>         <C>
Balance at December 31, 1996               5,562,561   $    571,000    $  7,229,000    $(13,351,000)   $(328,000)  $ (5,879,000)

Issuance of common stock                     921,500         92,000          31,000                                     123,000

Accrued dividends in arrears
  on preferred stock                                                                       (330,000)                   (330,000)

Net income                                                                                1,645,000                   1,645,000
                                           ---------   ------------    ------------    ------------    ---------   ------------


Balance at December 31, 1997               6,484,061        663,000       7,260,000     (12,036.000)    (328,000)    (4,441,000)

Issuance of common stock                     124,000          2,000        (187,000)                     222,000         37,000

Accrued dividends in arrears
  on preferred stock                                                                       (248,000)                   (248,000)

Recapitalization of par value of
  common stock from $.10 to
  $.01 per share                                           (599,000)        599,000

Issuance of common stock in
  preferred stock conversion               1,574,510         16,000       5,835,000        (975,000)                  4,876,000

Net income                                                                                2,057,000                   2,057,000
                                           ---------   ------------    ------------    ------------    ---------   ------------

Balance at December 31, 1998               8,182,571         82,000      13,507,000     (11,202,000)    (106,000)     2,281,000

Issuance of common stock                      47,863                        (93,000)                     106,000         13,000

Net income                                                                                1,220,000                   1,220,000
                                           ---------   ------------    ------------    ------------    ---------   ------------

Balance at December 31, 1999               8,230,434   $     82,000    $ 13,414,000    $ (9,982,000)   $    --     $  3,514,000
                                           ---------   ------------    ------------    ------------    ---------   ------------

</TABLE>








          See accompanying notes to consolidated financial statements.


                                       21
<PAGE>


                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                                                      Year Ended December 31,
                                                                                      -----------------------
                                                                               1999             1998            1997
                                                                               ----             ----            ----
<S>                                                                        <C>              <C>              <C>
Cash flows from operating activities:
    Net income                                                             $ 1,220,000      $ 2,057,000      $ 1,645,000
    Adjustments to reconcile net income
    to net cash provided by:
      Depreciation                                                             225,000          178,000          149,000
      Amortization                                                              21,000           31,000           19,000
      Debt issue discount                                                       59,000
      Provision for doubtful accounts                                          177,000          154,000          126,000
      Deferred taxes, net                                                     (213,000)        (320,000)        (800,000)
      Loss (gain) on disposal of fixed assets                                    5,000       (1,078,000)           1,000
      Compensation expense - issuance of stock                                  13,000           68,000           41,000
      (Increase) decrease in:
        Accounts receivable                                                   (319,000)      (1,155,000)        (152,000)
        Inventories                                                           (649,000)        (170,000)          68,000
        Prepaid expenses and other assets                                      (47,000)           1,000          (38,000)
      (Decrease) increase in:
        Accounts payable                                                      (398,000)         720,000          (80,000)
        Accrued expenses and other liabilities                                 257,000          (66,000)          77,000
                                                                           -----------      -----------      -----------
        Net cash provided by
         operating activities                                                  351,000          420,000        1,056,000
                                                                           -----------      -----------      -----------
Cash flows from investing activities
    Proceeds received from sale of property
     and equipment                                                              31,000        1,278,000            9,000
    Purchases of property, plant
     and equipment                                                            (415,000)        (839,000)        (263,000)
                                                                           -----------      -----------      -----------
    Net cash (used in) provided by investing
     activities                                                               (384,000)         439,000         (254,000)
                                                                           -----------      -----------      -----------
Cash flows from financing activities
    Increase (decrease) in notes payable
     banks - net                                                               746,000            2,000         (646,000)
    Proceeds from issuance of long-term debt                                   459,000          324,000           60,000
    Repayment of long-term debt                                               (465,000)        (642,000)        (167,000)
    Payable to stockholders                                                   (685,000)            -                 -
    Proceeds received from the exercise
     of stock options                                                             --              2,000           48,000
                                                                           -----------      -----------      -----------
     Net cash provided by (used in)
      financing activities                                                     55,000         (314,000)        (705,000)
Net increase in cash and cash
 equivalents                                                                    22,000          545,000           97,000
Cash and cash equivalents,
 beginning of year                                                           1,097,000          552,000          455,000
                                                                           -----------      -----------      -----------
Cash and cash equivalents, end of year                                     $ 1,119,000      $ 1,097,000      $   552,000
                                                                           -----------      -----------      -----------
Supplemental disclosure
  of cash flow information:

Cash paid during the year for interest                                     $   283,000      $   276,000      $   329,000
                                                                           -----------      -----------      -----------

</TABLE>

              See accompanying notes to consolidated financial statements


                                       22
<PAGE>


                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


(1)  Merger
     -------

                  On December 17, 1998, the Company's stockholders approved a
         Plan merging Imperial Industries, Inc. into Imperial Merger Corp., a
         newly- formed, wholly-owned subsidiary of the Company, (the "Merger"),
         with the Merger becoming effective December 31, 1998,, (the "Effective
         Date"). On the Effective Date, Imperial Merger Corp. changed its name
         to Imperial Industries, Inc., (the "Company").

                  At the Effective Date, each share of the Company's $.10 par
         value common stock outstanding before the Merger was converted into one
         share of $.01 par value common stock resulting in the recapitalization
         of $599,000 from common stock to additional paid-in-capital. Also at
         the Effective Date, 300,121 outstanding shares of preferred stock, with
         a carrying value of $3,001,000 were retired and $4,292,000 of accrued
         dividends on such shares, were eliminated as described in the following
         paragraphs.

                  Holders of 219,021 shares of the preferred stock (the
         "Exchanging Shareholders"), with a carrying value of $2,190,000,
         elected to convert their shares into either (a) $4.75 in cash and ten
         shares of the Company's common stock, or (b) $2.25 in cash, an 8%
         three-year $8.00 subordinated debenture and five shares of the
         Company's common stock. In connection with the Exchanging Shareholders'
         election, the Company was required to pay cash of $733,000 which was
         presented as payable to stockholders in the accompanying consolidated
         balance sheet at December 31, 1998. At December 31, 1999 cash payable
         to stockholders was reduced to $48,000 from $733,000 at December 31,
         1998, as a result of satisfying the cash requirements due to Exchanging
         Shareholders who had submitted their preferred stock to the Company for
         the merger consideration. The Company was also required to issue
         $985,000 face value of 8% subordinated debentures with a fair value of
         $808,000, and 1,574,610 shares of $.01 par common stock with a fair
         value of $630,000 based on the market price of $.40 per share of the
         Company's common stock at the Effective Date. The total fair value of
         the cash, debentures and common stock to be exchanged with the
         Exchanging Shareholders was $2,171,000. Had the Exchanging Shareholders
         elected to convert their shares under the provisions of the preferred
         stock's governing instrument, they would have received 251,655 shares
         of common stock with a fair value of $101,000. The excess of the total
         fair value of cash, debentures and common stock to be exchanged with
         the Exchanging Shareholders, over the fair value which the Exchanging
         Shareholders would have received under the preferred stock's original
         conversion provisions represented a conversion charge of $2,070,000 to
         accumulated deficit and a reduction in net income applicable to common
         stockholders in the accompanying consolidated statement of operations
         for the year ended December 31, 1998. In addition, conversion of the
         219,021 preferred shares resulted in a credit to additional paid-in
         capital of $5,835,000, for the year ended December 31, 1998.


                                       23
<PAGE>

                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   -continued-

(1)   Merger (continued)
      ------

                  Holders of 81,100 shares of preferred stock (the "Dissenting
         Shareholders"), with a carrying value of $811,000, elected to exercise
         their appraisal rights with respect to the stock. Pursuant to Delaware
         law, the Dissenting Shareholders petitioned the Delaware Chancery Court
         on April 23, 1999 to determine the fair value of their shares at the
         Effective Date, exclusive of any element of value attributable to the
         Merger. In the event that a Dissenting Shareholder did not perfect his
         appraisal rights, each share would be entitled to receive $2.25 in
         cash, an $8.00 subordinated debenture and five shares of common stock
         described under option (b) in the preceding paragraph. Based on these
         facts, and a valuation prepared by an independent financial advisor in
         connection with the Merger, the Company recorded $877,000 in the
         accompanying consolidated balance sheets at December 31, 1998 and 1999,
         as an estimate for the obligation for appraisal rights. The Chancery
         Court may determine fair value is less than, equal to, or greater than
         an aggregate of $877,000. Based on advice of counsel that there will be
         no final judicial determination requiring the Company to make payment
         to Dissenting Shareholders' in the year ended December 31, 2000, the
         obligation is classified as long-term debt. In addition, elimination of
         the 81,100 preferred shares and accrued dividends of $1,161,000 on such
         shares resulted in a redemption credit to accumulated deficit of
         $1,095,000 for the year ended December 31, 1998 representing the excess
         of the carrying value of the Dissenting Shareholders' preferred stock
         and accrued dividends over the obligation for appraisal rights.

                  In the calculation of earnings per share for the year ended
         December 31, 1998, $975,000 has been deducted from net income
         representing the conversion charge of $2,070,000, less the redemption
         credit of $1,095,000.

                  In connection with the Merger, all outstanding stock purchase
         warrants also converted into warrants with identical terms exerciseable
         for shares of the Company's common stock.

(2)   Description of Business and Summary of Significant Accounting Policies
      ----------------------------------------------------------------------

                  The Company and its subsidiaries are primarily involved in the
         manufacturing and sale of exterior and interior finishing wall coatings
         and mortar products for the construction industry. Sales of the
         Company's products are made to customers primarily in Florida and the
         Southeastern United States through distributors and company-owned
         distribution facilities.

      (a) Basis of presentation
          ---------------------

                  The Consolidated financial statements contain the accounts of
         the Company and its wholly-owned subsidiaries. All material
         intercompany accounts and transactions have been eliminated in
         consolidation.


                                       24
<PAGE>

                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   -continued-

(2)   Description of Business and Summary of Significant Accounting Policies
      ----------------------------------------------------------------------
        (continued)

      (b) Concentration of Credit Risk
          ----------------------------

                  Concentrations of credit risk with respect to trade accounts
         receivable are limited due to the number of entities comprising the
         Company's customer base. However, trade accounts receivable represent
         amounts due from building materials dealers located principally in
         Florida and Georgia who have purchased products on an unsecured open
         account basis. At December 31, 1999, accounts aggregating $146,000, or
         approximately 5% of total gross trade accounts receivable were deemed
         to be ineligible for borrowing purposes under the Company's borrowing
         agreement with its commercial lender. See Note (5). The allowance for
         doubtful accounts at December 31, 1999 of $254,000 is considered
         sufficient to absorb any losses which may arise from uncollectible
         accounts receivable.

                  The Company places its cash with commercial banks. At December
         31, 1999, the Company has cash balances with banks in excess of Federal
         Deposit Insurance Corporation insured limits. Management believes the
         credit risk related to these deposits is minimal.

      (c) Inventories
          -----------

                  Inventories are stated at the lower of cost or market (net
         realizable value), on a first-in, first-out basis. Finished goods
         include the cost of raw materials, freight in, direct labor and
         overhead.

      (d) Property, plant and equipment
          -----------------------------

                  Property, plant and equipment is stated at cost, less
         accumulated depreciation. Depreciation is computed on the straight-line
         basis over the estimated useful lives of the depreciable assets.
         Expenditures for maintenance and repairs are charged to expense as
         incurred, while expenditures which extend the useful life of assets are
         capitalized. Differences between the proceeds received on the sale of
         property, plant and equipment and the carrying value of the assets on
         the date of sale is credited or charged to net income.

      (e) Intangible Assets
          -----------------

                  Licenses, trademarks and deferred financing costs are
         amortized on straight-line basis over the estimated useful lives of the
         licenses and trademarks, or over the term of the related financing.

      (f) Income taxes
          ------------

                  The Company has adopted the liability method for determining
         its income taxes. Under this method, the Company records deferred taxes
         based on temporary taxable and deductible differences between the tax
         bases of the Company's assets and liabilities and their financial
         reporting bases.

                                       25
<PAGE>

                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   -continued-

(2)  Description of Business and Summary of Significant Accounting Policies
     ----------------------------------------------------------------------
        (continued)


     (f)  Income taxes (continued)
          ------------

         Deferred tax assets and liabilities are measured using the enacted tax
         rates expected to apply to taxable income in the years in which
         temporary differences are expected to be realized or settled; valuation
         allowances are provided against assets that are not likely to be
         realized.

     (g) Earnings per share of common stock
         -----------------------------------

                  Basic earnings per common share is computed by dividing net
         income, after deducting preferred stock dividends accumulated during
         the year ("net income applicable to common stockholders"), by the
         weighted average number of shares of common stock outstanding each
         year. Diluted earnings per common share is computed by dividing net
         income applicable to common stockholders by the weighted-average number
         of shares of common stock and common stock equivalents outstanding
         during each year. The Company has retroactively restated earnings per
         common share, to give effect to the Merger. (See Note (11) - Earnings
         Per Common Share).

     (h)  Cash and cash equivalents
          -------------------------

                  The Company has defined cash and cash equivalents as those
         highly liquid investments with a maturity of three months or less, when
         purchased. Included in cash and cash equivalents at December 31, 1999
         and 1998 are short term time deposits of $275,000 and $267,000,
         respectively.

     (i)  Revenue recognition policy
          --------------------------

                  Revenue from sales transactions is recorded upon shipment and
         delivery of inventory to the customer, net of discounts and allowances.

     (j)  Stock based compensation
          ------------------------

                  The Company measures compensation expense related to the grant
         of stock options and stock-based awards to employees in accordance with
         the provisions of Accounting Principles Board ("APB") Opinion No. 25,
         "Accounting for Stock Issued to Employees," under which compensation
         expense, if any, is generally based on the difference between the
         exercise price of an option, or the amount paid for an award, and the
         market price or fair value of the underlying common stock at the date
         of the award. The Company adopted the disclosure requirement provisions
         of Statement of Financial Accounting Standards (SFAS") No. 123,
         Accounting for Stock-Based Compensation ("SFAS No. 123"). Had the fair
         value based accounting provisions of SFAS No. 123 been adopted, the
         effect on the Company's net income and earnings per share information
         would not have been significant.


                                       26
<PAGE>

                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   -continued-

(2)   Description of Business and Summary of Significant Accounting Policies
      ----------------------------------------------------------------------
        (continued)


      (k)  Accounting estimates
           --------------------

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

      (l)  Fair Value of Financial Instruments
           -----------------------------------

                  The carrying amount of the Company's financial instruments
         principally notes payable, debentures and obligation for appraisal
         rights, approximates fair value based on discounted cash flows as well
         as other valuation techniques.

      (m)  Segment Reporting
           ------------------

                  The Company has adopted SFAS No. 131, Disclosures about
         Segments of an Enterprise and Related Information. For the years ended
         December 31, 1999 and 1998, the Company has determined that it operates
         in a single operating segment.

      (n) New Accounting Pronouncements
          -----------------------------

                  SFAS No. 133, Accounting for Derivatives and Hedging
         Activities, is effective for all fiscal quarters of fiscal years
         beginning after June 15, 2000 (January 1, 2001 for the Company) and
         requires that all derivative instruments be recorded on the balance
         sheet at their fair value. Changes in the fair value of derivatives are
         recorded each period in current earnings or other comprehensive income,
         depending on whether a derivative is designated as part of a hedge
         transaction and, if it is, the type of hedge transaction. The Company
         does not use derivative instruments and therefore anticipates that the
         adoption of SFAS No. 133 in 2001 will not have a material effect on the
         consolidated financial statements.

(3)   Inventories
      -----------

            At December 31, 1999 and 1998, inventories consist of:

                                            1999              1998
                                            ----              ----
            Raw materials               $  525,000        $  345,000
            Finished goods               1,276,000           810,000
            Packaging materials            222,000           219,000
                                           -------           -------
                                        $2,023,000        $1,374,000
                                        ----------        ----------

                                       27
<PAGE>



                    IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                    Notes to Consolidated Financial Statements
                                   -continued-


(4)   Property, Plant and Equipment
      -----------------------------

             A summary of the cost of property, plant and equipment at December
      31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
                                                                                   Estimated
                                                                                  useful life
                                                    1999             1998            (years)
                                                    ----             ----            -------
<S>                                            <C>                <C>              <C>
          Land                                 $  151,000         $  151,000           - - -
          Buildings and
           improvements                           585,000            560,000         10 - 40
          Machinery and equipment               1,272,000          1,141,000          3 - 10
          Vehicles                                446,000            487,000          2 -  8
          Furniture and Fixtures                  199,000            178,000          3 - 12
                                                  -------            -------          -   --
                                               $2,653,000         $2,517,000
                                               ----------         ----------

</TABLE>
             The net book value of property, plant and equipment pledged as
      collateral under notes payable and various long-term debt agreements
      aggregated $621,000 and $543,000 at December 31, 1999 and 1998,
      respectively. See "Note 7."

(5)   Notes Payable
      -------------

             At December 31, 1999 and 1998, notes payable represent amounts
      outstanding under a $4,500,000 line of credit from a commercial lender
      to two of the Company's subsidiaries. Aggregate lines of credit were
      increased from $3,000,000 to $4,500,000 on October 1, 1999. The line of
      credit is collateralized by the subsidiaries' accounts receivable and
      inventory, bears interest at prime rate plus 1% (9 1/2% at December 31,
      1999) expires June 19, 2001, and is subject to annual renewal. The
      weighted average effective interest rate on the line of credit was
      14.09%, 17.49%, and 17.04% during the years ended December 31, 1999,
      1998 and 1997, respectively.

             At December 31, 1999, the line of credit limit available for
      borrowing aggregated $2,670,000, of which $1,526,000 had been borrowed.
      The average month-end amounts outstanding during 1999 and 1998 were
      $1,312,000, and $957,000, respectively. The maximum amounts outstanding
      at any month-end during 1999 and 1998 were $2,017,000 and $1,253,000,
      respectively.

(6)   Accrued Expenses and Other Liabilities
      --------------------------------------

            Accrued expenses and other liabilities at December 31, 1999 and 1998
      are summarized as follows:

                                                       1999              1998
                                                       ----              ----
      Employee compensation related items            $ 94,000          $ 42,000
      Taxes, other than income taxes                   55,000            41,000
      Interest                                        137,000             4,000
      Other                                           123,000            64,000
                                                      -------            ------
                                                     $409,000          $151,000
                                                     --------          --------


                                       28
<PAGE>


                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   -continued-

(7)   Long-term Debt
      --------------

      Long-term debt of the Company is as follows:
                                                              1999        1998
                                                              ----        ----
      Adjustable rate mortgage note payable,
       interest at 12% at December 31, 1998,
       principal and interest payable monthly in
       the amount of approximately $3,600, with a
       balloon payment of approximately $292,000
       due September 1, 2000. This note was paid              -         304,000
       in October 1999.

      Mortgage note payable, interest at 7 1/2% per
       annum, principal and interest payable monthly
       through January 2002.                              116,000       170,000

      Subordinated Debentures due December 31, 2001,
       stated interest at 8% payable annually
       commencing July 1, 1999, principal payable
       in the amount of $984,960 at maturity.             867,000       808,000

      Mortgage note payable, interest at 8 3/4%,
       principal and interest payable monthly in
       the amount of approximately $3,760, with a
       balloon payment of approximately $187,000
       due October 4, 2004.                               297,000           -

      Equipment notes payable, interest at various
       rates ranging from 8.75% to 15.39%, per annum,
       principal and interest payable monthly
       expiring at various dates through
       January 2004.                                      212,000       157,000
                                                          -------       -------
                                                        1,492,000     1,439,000
                                                        ---------     ---------
      Less current maturities                            (164,000)     (123,000)
                                                         --------      --------
                                                       $1,328,000    $1,316,000
                                                       ----------    ----------

      As of December 31, 1999, long-term debt matures as follows:

                      Year ended
                      December 31,          Amount
                      ------------          ------
                        2001              $1,019,000
                        2002                  68,000
                        2003                  33,000
                        2004                 208,000
                        ----                 -------
                                          $1,328,000
                                          ----------



                                       29
<PAGE>




                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   -continued-

(7)   Long-term debt (continued)
      --------------

     In connection with the Merger, the Company issued 8% Subordinated
     Debentures with a face amount value of $985,000 effective December 31,
     1998. Each Debenture was discounted to a value of $6.56 ($8.00 face value)
     using an effective interest rate of 16%. The aggregate carrying value of
     the Debentures at December 31, 1999 is $867,000. The Debentures are
     general, unsecured obligations of the Company, subordinated in right of
     payment to all indebtedness to institutional and other lenders of the
     Company. The Debentures are subject to redemption, in whole or in part, at
     the option of the Company, at any time at a redemption price of 100% of the
     principal amount thereof, plus accrued and unpaid interest, if any, to the
     redemption date.

(8)   Income Taxes
      ------------

          At December 31, 1999 and 1998, deferred tax assets of $1,333,000 and
     $1,120,000, respectively, consist of the tax effects of net operating loss
     carryforwards of $2,966,000 and $3,320,000, respectively, less a valuation
     allowance of $1,633,000 and $2,207,000, respectively. Net operating losses
     of $5,713,000 expire through 2000, and the remaining balance of $2,761,000
     expires in varying amounts through 2009.

          During 1999 the Company recognized $574,000 of deferred tax benefit as
     a result of releasing a portion of the valuation allowance previously
     established due to the uncertainty of realizing net operating losses.
     Remaining deferred tax assets are fully reserved at December 31, 1999, and
     relate, primarily, to the net operating loss carryforwards expiring in 2000
     which the Company projects it will be unable to utilize. The ultimate
     realization of the remaining deferred tax assets is largely dependent on
     the Company's ability to generate sufficient future taxable income.
     Management believes that the valuation allowance at December 31, 1999 and
     1998 is appropriate, given the cyclical nature of the construction industry
     and other factors including but not limited to the uncertainty of future
     taxable income expectations beyond the Company's strategic planning
     horizon.

           The current income tax expense represents state taxes and alternative
      minimum taxes payable for the years ended December 31, 1999 and 1998.

           A reconciliation of the Federal statutory rate to the effective tax
      rate is as follows:
                                                   Year  Ended December 31,
                                                  1999       1998       1997
                                                  ----       ----       ----
              U.S. statutory rate                  35%        35%        35%
              Valuation allowance                 (56%)      (53%)     (124%)
              Other                                 3%         1%         5%
                                                  -----      -----     -----

                 Effective rate                   (18%)      (17%)      (84%)
                                                  -----      -----     -----

                                       30
<PAGE>



                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   -continued-


(9)  CapitalStock
     ------------

     (a)  Common Stock
          ------------

          At December 31, 1999, the Company had outstanding 8,230,434 shares of
     common stock (8,182,571 shares in 1998) with a $.01 par value per share
     ("Common Stock"). The holders of common stock are entitled to one vote per
     share on all matters, voting together with the holders of preferred stock,
     if any. In the event of liquidation, holders of common stock are entitled
     to share ratably in all the remaining assets of the Company, if any, after
     satisfaction of the liabilities of the Company and the preferential rights
     of the holders of outstanding preferred stock, if any.

          In 1999 and 1998, the Company issued 47,863 and 100,000, respectively,
     treasury shares to directors and an officer as compensation for services
     rendered. The Company recorded compensation expense in 1999 and 1998 of
     $13,000 and $20,000, respectively, representing fair value of the shares
     when issued.

          In 1997, the Company issued 242,000 restricted shares of common stock
     to two officers which were subject to vesting over a three year period.
     During 1998 the Company recorded compensation expense of $46,000
     representing the fair value of the stock upon the release of the
     restrictions and accelerated vesting of all the shares.

           In 1997, the Company issued 202,000 shares of common stock to
      directors and employees as compensation for services rendered. The Company
      recorded compensation expense of $41,000 representing the fair value of
      the shares when issued.

      (b)  Preferred Stock

          The authorized preferred stock of the Company consists of 5,000,000
     shares, $.01 par value per share. The preferred stock is issuable in
     series, each of which may vary, as determined by the Board of Directors, as
     to the designation and number of shares in such series, the voting power of
     the holders thereof, the dividend rate, redemption terms and prices, the
     voluntary and involuntary liquidation preferences, and the conversion
     rights and sinking fund requirements, if any, of such series. At December
     31, 1999 and 1998, there were no shares of preferred stock outstanding.

               Redeemable Preferred Stock-$1.10 Cumulative Convertible Series
               --------------------------------------------------------------

          Until December 31, 1998, the Company had issued and outstanding
     300,121 shares of $1.10 cumulative convertible redeemable preferred stock.
     The holders of preferred stock were entitled to one vote per share on all
     matters without regard to class, except that the holders of preferred stock
     were entitled to vote as a separate class with regard to the issuance of
     any equity securities which ranks senior or on parity with the preferred
     stock, or to change or repeal any of the express terms of the preferred
     stock in a manner substantially prejudicial to the holders thereof. Each
     share of the preferred stock was entitled to cumulative quarterly dividends


                                       31
<PAGE>

                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   -continued-
(9)   Capital Stock (continued)
      --------------

      (b)  Preferred Stock (continued)

      Redeemable Preferred Stock-$1.10 Cumulative Convertible Series
      --------------------------------------------------------------
       (continued)

      at the rate of $1.10 per annum and was convertible into 1.149 shares of
      common stock. The liquidation preference of the preferred stock was $10.00
      per share, plus accrued but unpaid dividends. The preferred stock was
      callable, in whole or in part, by the Company at its option at any time
      upon 30 days prior notice, at $11.00 per share, plus accrued and unpaid
      dividends.

          The Company had omitted dividends on its preferred stock since the
      fourth quarter of 1985 aggregating $4,044,000 through December 31, 1997.
      The omission of preferred stock dividends was a reduction of net income
      applicable to Common Stockholders and was recorded as a non-current
      liability in the accompanying consolidated balance sheets.

           The preferred stock was subject to redemption through a mandatory
      sinking fund at a redemption price of $10.00 per share, at the rate of
      approximately 66,000 preferred shares a year, starting in 1986, less any
      preferred shares converted into common stock. Through December 31, 1997,
      an aggregate of 359,879 shares of preferred stock were converted into
      1,199,557 shares of common stock. As a result of these conversions, the
      Company was required to redeem 36,121 shares in 1991 and 66,000 shares for
      each year thereafter through 1995, at which time the preferred stock was
      intended to be fully retired. The preferred stock was not been included in
      common stock and other stockholders' deficit because of its mandatory
      redemption feature.

            The Company did not redeem any shares of the preferred stock as
      required on April 1, 1991, or any year thereafter. Under the provisions of
      the sinking fund requirements, if an annual sinking fund requirement was
      not met, it is added to the requirements for the next year.

            The Company was prohibited from paying any cash dividends on common
      stock and from purchasing or otherwise acquiring for value, any shares of
      either preferred or common stock, at any time that the Company was in
      default in the payment of any dividends on the preferred stock or if the
      sinking fund requirements are in arrears.

            Effective December 31, 1998, all outstanding shares of the preferred
      stock were retired and all accumulated accrued dividends were eliminated
      as a result of the Merger. (See Note (1) - Merger).

      (c)  Warrants
          ---------

           At December 31, 1999 and 1998, the Company had warrants outstanding
      to purchase 350,000 and 200,000, respectively, of the Company's common
      stock. The 200,000 warrants outstanding at December 31, 1998 were issued
      to two directors in 1988 in connection with obtaining a loan which has
      since been repaid. The warrants entitle the holder to purchase one share
      at $.10 per


                                       32
<PAGE>


                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   -continued-

(9)   Capital Stock (continued)
      -------------

      (c)  Warrants (continued)
          ---------

     share until June 29, 2000. The Company issued 150,000 warrants in January
     1999 to its investment banker for financial advisory services in connection
     with the Merger (the "Investment Banker Warrants") which entitle the holder
     to purchase one share at $.38 per share until December 31, 2003. The
     Company estimated the fair value of the Invenstment Banker Warrants at
     $22,000 based on a Black-Scholes pricing model and the following
     assumptions: volatility of 45%, risk-free rate of 4.6%, expected life of
     four years and a dividend rate of 0%.

      (d)  Stock Options
           -------------

           In December 1999, the Board of Directors adopted the Director's Stock
      Option Plan and the 1999 Employee Stock Option Plan (collectively, the
      "1999 Plans"). The 1999 Plans provide for options to be granted at
      generally no less than the fair market value of the Company's stock at the
      grant date. Options granted under the 1999 Plans have a term of up to 10
      years and are exercisable six months from the grant date. The 1999 Plans
      are administered by the Compensation and Stock Option Committee. A total
      of 600,000 and 200,000 shares are reserved for issuance under the Employee
      and Director Plans, respectively. Adoption of the 1999 Plans is subject to
      stockholder approval.

           On December 16, 1999, the Company granted 215,000 options under the
      1999 Plans at an exercise price that will be equal to the fair value of
      the common stock on the date the Company's stockholders approve the 1999
      Plans. Each option has a term of five years from the date of grant and
      vesting will be determined at the time of stockholder approval. All
      options granted are outstanding at December 31, 1999.

(10)  Miscellaneous income
      --------------------

            A summary of miscellaneous income (expense) for the years ended
      December 31, 1999, 1998 and 1997 is as follows:

                                                 1999        1998       1997
                                                 ----        ----       ----
      Interest income                       $ 12,000    $   13,000     $10,000
      (Loss) gain on disposal of property,
       plant and equipment                     5,000)    1,078,000      (1,000)
      Other, net                              27,000       127,000      45,000
                                              ------       -------      ------
                                            $ 34,000    $1,218,000     $54,000
                                             -------    ----------     -------

            On October 2, 1998, the Company sold its Miami, Florida
      manufacturing facility for $1,406,000 and received net cash proceeds of
      $801,000 after satisfaction of the mortgage and payment of commissions and
      closing costs. A gain of $1,066,000 was recognized on this transaction.



                                       33
<PAGE>

                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   -continued-

(11)  Earnings Per Common Share
      -------------------------

            Below is a reconciliation between basic and diluted earnings per
      common share under FAS 128 for the years ended December 31, 1999, 1998 and
      1997 (in thousands except per share amounts):

<TABLE>
<CAPTION>
                                              1999                          1998                       1997
                                   -------------------------     -----------------------     -----------------------
                                                        Per                         Per                         Per
                                  Income     Shares    Share     Income    Shares  Share     Income   Shares   Share
          <S>                      <C>       <C>        <C>       <C>       <C>      <C>      <C>      <C>      <C>
           Net income             $1,220                         $2,057                      $1,675
            Less net charge
            for elimination of
            preferred stock                                        (975)
            Less dividends on
            redeemable
            preferred stock                                        (248)                       (330)
                                                                 ------                      ------
           Basic earnings
            per common share      $1,220      8,199     $.15     $  834     6,566    $.13    $1,315    6,009    $.22
                                  ------      -----     ----     ------     -----    ----    ------    -----    ----
           Effect of dilutive
            securities:
            Warrants                            191                           149                        167
                                  ------      -----     ----     ------     -----    ----    ------    -----    ----
           Diluted earnings
            per common share      $1,220      8,390     $.15     $  834     6,715    $.12    $  (56)   6,267    $.21
                                  ------      -----     ----     ------     -----    ----    ------    -----    ----
</TABLE>


(12)  Related Party Transactions
      --------------------------

            The Company and its subsidiaries paid legal fees of approximately
      $114,000, $86,000 and $37,000 in 1999, 1998 and 1997, respectively, to a
      law firm with which the Company's Chairman of the Board was affiliated.

(13)  Commitments and Contingencies
      -----------------------------

      (a)   Contingencies
            -------------

            As of March 28, 2000, the Company and other parties have been named
      in 36 lawsuits pending in various Southeastern states, by homeowners,
      contractors and subcontractors, or their insurance companies, claiming
      moisture intrusion damages on single family residences. The allegations of
      defects in synthetic stucco wall systems are not restricted to the
      Company's products but rather are an industry-wide issue. There has never
      been any defect proven against the Company. The alleged failure of these
      products to perform has generally been linked to improper application and
      the failure of adjacent building materials such as windows, roof flashing,
      decking and the lack of caulking. In response to the alleged defects and
      in compliance with modified building codes adopted in North Carolina, the
      Company, together with many other manufacturers of synthetic stucco wall
      systems, has developed modified wall systems that allow the drainage of
      incidental moisture that may enter the wall system. Most manufacturers
      continue to produce the traditional (i.e., face-sealed) stucco systems and
      in commercial construction, estimated to account for more than 50% of
      product sales, the traditional system is still the product of choice. The
      alleged defects have

                                       34
<PAGE>


                    IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                    Notes to Consolidated Financial Statements
                                   -continued-

(13)  Commitments and Contingencies  (continued)
      -----------------------------

      (a)   Contingencies (continued)
            -------------

      generally occurred in the residential construction market. To the
      Company's knowledge, in the commercial market, where methods of
      construction and quality control are monitored more closely than in the
      residential market, the alleged drainage problem has been limited. The
      Company's insurance carriers have accepted coverage for 35 of these claims
      and are providing a defense under a reservation of rights. The Company
      expects its insurance carriers to accept coverage for the other one
      recently filed lawsuit. The Company is vigorously defending all of these
      cases and believes it has meritorious defenses, counter-claims and claims
      against third parties. The Company is unable to determine the exact extent
      of its exposure or outcome of this litigation.

           On June 15, 1999, the Company was served with a complaint captioned
      Mirage Condominium Association, Inc. v. Premix Marbletite Manufacturing
      Co., et al., in Miami-Dade County Florida. The lawsuit raises a number of
      allegations against twelve separate defendants involving alleged
      construction defects. Plaintiff has alleged only one count against Premix,
      which claims that certain materials, purportedly provided by Premix to the
      Developer/ Contractor and used to anchor balcony railings to the structure
      were defective. The Company's insurance carriers have been placed on
      notice of this suit and the Company is awaiting their response regarding
      coverage, but fully expects that the insurance carriers will accept
      coverage and the defense. In the interim, the insurance carrier has
      retained defense counsel on behalf of the Company.

           The Company intends to vigorously defend this claim and believes it
      has meritorious defenses. The Company is unable to determine the exact
      extent of its exposure or the outcome of this litigation.

           The Company is engaged in other legal actions and claims arising in
      the ordinary course of its business, none of which are believed to be
      material to the Company.

      (b)   Lease Commitments
            -----------------

            At December 31, 1999 certain property, plant and equipment were
      leased by the Company under long-term leases. Certain of these leases
      provided for escalation in rent upon the lease anniversary date. Future
      minimum lease commitments as of December 31, 1999, for all noncancellable
      leases are as follows:

                          December 31,
                          ------------

                              2000                    $315,000
                              2001                     315,000
                              2002                     312,000
                              2003                     317,000
                              2004                     323,000


            Rental expenses incurred for operating leases were approximately
      $331,000, $153,000 and $128,000, for the years ended December 31, 1999,
      1998 and 1997, respectively.

                                       35
<PAGE>

                    IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES

                    Notes to Consolidated Financial Statements
                                   -continued-

(13)  Commitments and Contingencies (continued)
      -----------------------------

(14)  Subsequent Event
      ----------------

          Effective January 1, 2000, the Company acquired certain assets and
     assumed certain liabilities of three building materials distributors held
     under common ownership in a single transaction accounted for as a purchase
     acquisition. The total consideration was $1,420,000 which includes 225,000
     shares of the Company's unregistered common stock valued at $144,000 or
     $.64 per share. The Company paid $798,000 in cash, and issued unsecured
     promissory notes of $150,000 due 90 days from closing and $100,000 due one
     year from closing. The Company also assumed $372,000 of the acquired
     companies' secured debt.

          Effective March 1, 2000, the Company acquired certain assets of
     another unrelated building materials distributor accounted for as a
     purchase. The total consideration was $344,000 which includes 50,000 shares
     of the Company's unregistered common stock valued at $42,000, or $.84 per
     share. The Company paid cash of $219,000 and issued an unsecured promissory
     note of $125,000 payable over two years from the date of closing.


                           ****************************

                                       36
<PAGE>

                                    PART III

Item 9.     Changes in and Disagreements with Accountants on Accounting and
            ---------------------------------------------------------------
            Financial Disclosure
            --------------------

            None

Item 10.    Directors and Executive Officers of the Registrant
            --------------------------------------------------

                 The following table sets forth certain information with respect
            to the directors and executive officers of the Company:

            Name                   Age     PositionWithCompany
            ----                   ---     -------------------

            S. Daniel Ponce         51     Chairman of the Board - Class III
            Lisa M. Brock           41     Director - Class III
            Milton J. Wallace       64     Director - Class II
            Morton L. Weinberger    70     Director - Class II
            Fred H. Hansen          53     President, Premix and Acrocrete
            Howard L. Ehler, Jr.    56     Principal Executive Officer/Executive
                                            Vice President and Secretary
            Betty J. Murchison      60     Principal Accounting Officer/
                                           Assistant Vice President
            Gary J. Hasbach         55     President, Just-Rite

                 The Company's Board of Directors is divided into three classes.
            In accordance with the Company's Certificate of Incorporation, the
            members of each Class are designated to serve for three (3) year
            staggered terms. Class II directors were to serve until the 1999
            annual meeting or until their successors are elected, and Class III
            directors shall serve until the 2000 annual meeting or until their
            successors are elected. The Company did not have an annual meeting
            in 1999. Accordingly, Class II directors will serve until the next
            annual meeting to be held by the Company. The Company has no Class I
            directors. Mr. Wallace was appointed to fill a vacancy on the Board
            on February 17, 1999.

                 Subject to certain contractual rights, each officer serves at
            the discretion of the board of directors.

            S. Daniel Ponce. Mr. Ponce has been Chairman of the Board of the
               Company since 1988. Mr. Ponce has been engaged in the practice of
               law for over twenty five years and is currently a stockholder in
               the law firm of Wallace, Bauman, Legon, Fodiman, Ponce & Shannon,
               P.A. Ponce is a member of the Board of Directors of the
               University of Florida Foundation, Inc. and serves as Chairman of
               its audit committee. He is also a non-practicing certified public
               accountant.

            Lisa M. Brock. Mrs. Brock has been a director of the Company since
               1988. Mrs. Brock was employed by the Company and its
               subsidiaries, Premix and Acrocrete, as Vice President for over 5
               years until December, 1994 when she retired. Mrs. Brock continues
               to serve as a consultant to the Company.

                                       37
<PAGE>


Item 10.    Directors and Executive Officers of the Registrant (continued)
            --------------------------------------------------

            Milton J. Wallace. Mr. Wallace has been a director of the Company
               since February 1999. Mr. Wallace has been a practicing attorney
               in Miami for over 30 years and is currently a shareholder in the
               law firm of Wallace, Bauman, Legon, Fodiman, Ponce & Shannon,
               P.A. He was a co-founder and Chairman of the Board of Renex Corp,
               a provider of dialysis services, from 1993 through February 2000
               when Renex Corp. was acquired by National Nephrology Associates,
               Inc. Mr. Wallace is Chairman of the Board of Med/Waste, Inc., a
               provider of medical waste management services. He is a director
               of several private companies.

            Morton L. Weinberger, CPA. Mr. Weinberger has been a director of the
               Company since 1988. Mr. Weinberger, a certified public
               accountant, has been self-employed as a consultant to various
               professional organizations for the past twelve years. He provides
               consulting services for the Company. For the previous twenty-five
               years, he was engaged in the practice of public accounting.
               During such period, he was a partner with Peat Marwick Mitchell &
               Co., now known as KPMG Peat Marwick, and thereafter BDO Seidman,
               both public accounting firms.

            Fred H. Hansen. Mr. Hansen has been President of Premix and
               Acrocrete since September 1996. Prior thereto, from 1986 to 1996,
               he was employed by Dryvit Systems Canada Ltd., the last six years
               acting as Vice President and General Manager. From 1982 to 1986,
               Mr. Hansen was the National Sales Manager for W.R. Grace & Co. of
               Canada Ltd., a manufacturer and distributor of building
               materials.

            Howard L. Ehler, Jr. Mr. Ehler has been Principal Executive Officer
               of the Company since March 1990 and Executive Vice President,
               Chief Financial Officer and Secretary of the Company since April
               1988. Prior thereto he was Vice President, Chief Financial
               Officer and Assistant Secretary of the Company for over five
               years.

            Gary J. Hasbach. Mr. Hasbach became President of Just-Rite, on
               February 3, 2000. Prior thereto, he had been Executive Vice
               President of Sales and Marketing for Premix and Acrocrete since
               January 1, 1999. Mr. Hasbach was formerly President of Premix and
               Acrocrete from September 1990 to May 1996. From May 1996 to
               December 1997, Mr. Hasbach served as Executive Vice President of
               Marketing for Florida Tile Industries, Inc, a distributor of tile
               and flooring products. In addition, Mr. Hasbach was a director of
               the Company from 1993 to February 1997.

            Betty J. Murchison. Ms. Murchison has been the Principal Accounting
               Officer since June 1995. Prior thereto, from October, 1991 to
               June 1995, she was Principal Accounting Officer of Royce
               Laboratories, Inc., a manufacturer of generic pharmaceutical
               products. For over 25 years prior thereto, she was employed by
               the Company, the last three years acting as the Company's
               Principal Accounting Officer.


                                       38
<PAGE>


Item 10.    Directors and Executive Officers of the Registrant  (continued)
            --------------------------------------------------

            Board of Directors Meetings and Attendance
            ------------------------------------------

                 The Board of Directors met five (5) times in fiscal 1999.  Each
            director attended all  of the Board of Directors meetings in 1999,
            other than Leonard C. Ferri who attended no meetings.  Mr. Ferri
            resigned as a member of the Board of Directors in 1999.

            Compensation and Stock Option Committee
            ---------------------------------------

                 Messrs. Ponce, Weinberger and Ms. Brock serve on the
            Compensation and Stock Option Committee, with Mr. Ponce serving as
            Chairman. The Compensation and Stock Option Committee met six (6)
            times in fiscal 1999. Each member attended all of the meetings.

            Reports Pursuant to Section 16(a) of the Securities and Exchange Act
            --------------------------------------------------------------------
            of 1934
            -------

                 The Company's officers and directors are required to file Forms
            3, 4 and 5 with the Securities and Exchange Commission in accordance
            with Section 16(a) of the Securities Exchange Act of 1934, as
            amended, and the rules and regulations promulgated thereunder. Based
            solely on a review of such reports furnished to the Company as
            required by Rule 16a-3(e), in 1998 no officer or director failed to
            file any such report on a timely basis.

Item 11.    Executive Compensation
            ----------------------

            Summary Compensation Table
            --------------------------

                 The following table summarizes the compensation paid or accrued
            for each of the three fiscal years in the period ended December 31,
            1999 for the Company's chief executive officer and each other
            executive officer whose total annual salary and bonus exceeded
            $100,000 for any fiscal year, (the "Named Executive Officers").
<TABLE>
<CAPTION>
                                              AnnualCompensation
                                              ------------------
                                                                                    Long-Term Compensation
                                                                                    ----------------------
                                                                                                Securities
                                                                         Other                  Underlying
                                                                         Annual    Restricted   Options to
                        Name and                                         Compen-      Stock     Purchase
                   Principal Position      Year     Salary    Bonus(1)   sation(2)  Awards(3)   Shares(4)
                   ------------------      ----     ------    --------   ---------  ---------  ---------
<S>                                        <C>     <C>         <C>       <C>         <C>          <C>
                   Howard L. Ehler Jr.     1999    $130,000    $  -      $ 2,000     $  -         20,000
                    Principal Executive    1998    $120,000     35,000      -
                    Officer, Executive     1997    $100,000     40,000                18,750
                    Vice President and
                    Secretary

                   Fred H. Hansen          1999    $138,000    $  -      $  -        $  -         20,000
                    President, Premix      1998     150,000     75,000      -           -
                    and Acrocrete          1997     118,000     85,000      -         41,667

                   Gary Hasbach
                    President, Just-
                    Rite                   1999    $110,000    $  -      $  -        $  -         10,000
</TABLE>

                                       39
<PAGE>

Item 11.    Executive Compensation  (continued)
            ----------------------

            Summary Compensation Table (continued)
            --------------------------

            (1) Bonuses shown were earned in the year indicated even though
            actually paid in a subsequent year. Bonuses for 1999 have not yet
            been determined.

            (2) Except as indicated, none of the named individuals above have
            received personal benefits or perquisites that exceed the lesser of
            $50,000 or 10% of the total annual salary and bonus reported for the
            named executive officer in the above table. Mr. Ehler's other Annual
            Compensation in 1999 represents the market value at date of grant of
            7,863 shares of common stock.

            (3) The restricted stock included in the table in 1997 represents
            the market value of the entire stock award on the date of grant
            pursuant to the terms of the Company's Restricted Stock Plan, even
            though no shares were vested as of such date. The values indicated
            are not necessarily indicative of the actual values which may be
            realized by the Named Executive Officers. Mr. Ehler's restricted
            stock is scheduled to vest at the rate of 25,000 shares per year
            over a three year period ending December 31, 1999. Mr. Hansen's
            restricted stock is scheduled to vest as follows: 33,333 shares in
            1997, 66,667 shares in 1998, 33,333 shares in 1999, and 33,334
            shares in 2000. The restricted stock becomes vested when and if Plan
            vesting requirements are attained. Dividends are paid on the
            restricted stock at the same time and same rate as paid to all
            Common Stockholders and such shares may be voted. In 1998, the
            Company released all restricted stock from the Restricted Stock Plan
            and reissued the stock to the named executives.

            (4) Stock options are granted under the terms and provisions of the
            1999 Employee Stock Option Plan. For a description of the stock
            options see "Executive Compensation-Options Granted in Year Ended
            December 31, 1999".

            Compensation Agreements
            -----------------------

                 The Company is party to a one year renewable employment
            agreement, (the "Employment Agreement") with Howard L. Ehler, Jr.
            (the "Executive"). Mr. Ehler serves as Executive Vice President,
            Principal Executive Officer and Chief Financial Officer of the
            Company at a current base salary of $130,000. The Employment
            Agreement provides for automatic renewal for additional one year
            periods on July 1st of each year, unless the Company or Executive
            notifies the other party of such party's intent not to renew at
            least 90 days prior to each June 30 of the initial term and any
            extended term thereafter. The Executive receives a car allowance, as
            well as certain other benefits, such as health and disability
            insurance. The Executive is also entitled to receive incentive
            compensation based upon targets formulated by the Compensation
            Committee.

                 Prior to a Change in Control (as defined in the Employment
            Agreements), the Company has the right to terminate the Employment
            Agreement, without cause, at any time upon thirty days written
            notice, provided the Company pays to the Executive a severance
            payment equivalent to 50% of his then current annual base salary. As
            part of

                                       40
<PAGE>

Item 11.    Executive Compensation (continued)
            ----------------------

            Summary Compensation Table  (continued)
            --------------------------

            the Employment Agreement, the Executive has agreed not to disclose
            information and not to compete with the Company during his term of
            employment and, in certain cases, for a two (2) year period
            following his termination.
                 In the event of a Change in Control, the Employment Agreement
            is automatically extended to a three year period. Thereafter, the
            Executive will be entitled to terminate his employment with the
            Company for any reason at any time. In the event the Executive so
            terminates employment, the Executive will be entitled to receive the
            lesser of (i) a lump sum equal to the base salary payments and all
            other compensation and benefits the Executive would have received
            had the Employment Agreement continued for the full term; or (ii)
            three times the Executive's base salary then in effect on the
            effective date of termination. The Executive would also be entitled
            to such severance in the event the Company terminates the Executive
            without cause after a Change of Control.

                 In addition, Mr. Ehler was issued 75,000 shares of Common Stock
            of the Company on July 30, 1997 pursuant to the terms of the
            Company's Restricted Stock Plan.

                 During the third quarter of 1996, the Company entered into an
            employment arrangement with Fred H. Hansen to serve as President of
            the Company's subsidiaries, Premix and Acrocrete. Mr. Hansen
            presently receives an annual base salary of $150,000 and a bonus
            based upon earnings performance of the subsidiaries. Under this
            arrangement, Mr. Hansen received 33,333 shares of Common Stock of
            the Company in February 1997. In addition, Mr. Hansen was issued
            166,667 shares of Common Stock on July 31, 1997 pursuant to the
            terms of the Company's Restricted Stock Plan. Also, Mr. Hansen is
            entitled, at his election, to the use of a Company auto, or car
            allowance of $650 per month during his employment, as well as
            certain other benefits, such as health and disability insurance.

            Options Granted in Year Ended December 31, 1999
            -----------------------------------------------

                 The following table sets forth certain summary information
            concerning the number of stock options granted and the potential
            realizable value of the stock options granted to the Company's Named
            Executive Officers during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
                                        Number of                                                   Realizable Value
                                        Securities      % of Total                                  at Assumed Rates
                                        Underlying      Options                                     of Stock Price
                                        Options         Granted to      Exercise                    Appreciation
                                        Granted in      Employees in    Price         Expiration    for Option Term(3)
               Name                     1999(1)         Fiscal Year     ($/Share)(2)     Date       5%($)       10%($)
               ----                     -------         -----------     ------------     ----       -----       ------
          <S>                             <C>              <C>            <C>         <C>           <C>       <C>
        Howard L. Ehler, Jr.              20,000           14.8%           -          12/15/04     $3,600    $7,800
        Principal Executive Officer,
        Executive Vice President and
        Secretary
</TABLE>

                                       41
<PAGE>

Item 11.    Executive Compensation (continued)
            ----------------------

            Options Granted in Year Ended December 31, 1999 (continued)
            -----------------------------------------------
<TABLE>
<CAPTION>

       <S>                                <C>              <C>              <C>        <C>          <C>       <C>
       Fred H. Hansen                     20,000           14.8%            -          12/15/04     $3,600    $7,800
        President Premix and Acrocrete

       Gary J. Hasbach
        President Just-Rite               10,000            7.4%            -          12/15/04     $1,800    $3,900
</TABLE>

            (1) Options were granted pursuant to the terms and conditions of the
            Company's 1999 Employee Stock Option Plan adopted December 15, 1999.
            The options granted are not exercisable unless the Company obtains
            stockholder approval prior to December 14, 2000. The options shall
            become null and void if stockholder approval is not obtained by such
            date.

            (2) The exercise price will be equal to the fair market value of the
            Company's common stock at the date the 1999 Employee Stock Option
            Plan is approved by the Company's stockholders.

            (3) The amounts disclosed in the columns which noted appreciation of
            the Company's common stock price at the 5% and 10% rates dictated by
            the Securities and Exchange Commission, are not intended to be a
            forecast of the Company's common stock price and are not necessarily
            indicative of the actual value which my be realized by the named
            Executive Officers or the stockholders. These assumed rates of 5%
            and 10% would result in the Company's common stock price increasing
            from $.50 per share to approximately $.68 per share and $.89 per
            share, respectively. The assumed $.50 per share floor is based upon
            the fair market value of the common stock on the date of grant of
            such options. However, the actual exercise price shall be equal to
            the fair market value of the common stock on the date the 1999
            Employee Stock Option Plan is approved by the Company's
            stockholders. The fair market price of such common stock on such
            date may be lesser than or greater than $.50 per share.

            Aggregated Option Exercises in Year Ended December 31, 1999
            -----------------------------------------------------------

                 The following table provides certain summary information
            concerning the value of unexercised stock options held by the
            Company's Named Executive Officers as of December 31, 1999.

                                                        Value of Unexercised
                              Number of Securities         "In the Money"
                             Underlying Unexercised      Options at Fiscal
                           Options at Fiscal Year End     Year End ($) (1)
                           --------------------------  -----------------------
            Name           Exercisable  Unexercisable  Exercisable Unexercisable
            ----           -----------  -------------  -------------------------

      Howard L Ehler, Jr.       -          20,000           -           -
       Principal Executive
       Officer, Executive
       Vice President and
       Secretary

      Fred H. Hansen            -          20,000           -           -
       President, Premix
       and Acrocrete

                                       42
<PAGE>

Item 11.    Executive Compensation (continued)
            ----------------------

            Aggregated Option Exercises in Year Ended December 31, 1999
            -----------------------------------------------------------
            (continued)


      Gary J. Hasbach           -         10,000            -           -
       President Just-Rite

                 No options were exercised by the Named Executive Officers
            during the year ended December 31, 1999.

            (1) The options are not exercisable until the Company gains
            stockholder approval of the 1999 Employee Stock Option Plan. If the
            Company fails to obtain stockholder approval prior to December 14,
            2000, the options shall become null and void. The exercise price of
            such options will be equal to the fair market value of the common
            stock on the date of approval by the Company's stockholders of the
            1999 Employee Stock Option Plan. As the options are not yet
            exercisable and the exercise price is not fixed, the Company is
            unable to determine the fair value of such options.

                 In December 1999, the Board of Directors adopted the Director's
            Stock Option Plan and the 1999 Employee Stock Option Plan
            (collectively, the "1999 Plans"). The 1999 Plans provide for options
            to be granted at generally no less than the fair market value of the
            Company's stock at the grant date. The 1999 Plans are administered
            by the Company's Compensation and Stock Option Committee. Options
            granted under the 1999 Plans have a term up to 10 years and are
            exercisable six months from the grant date provided however, no
            options under the Director's Plan will be exercisable until the
            Company's stockholders approve the Director's Plan. A total of
            600,000 and 200,000 shares are reserved for issuance under the
            Employee and Director Plans. Adoption of the 1999 Plans is subject
            to stockholder approval. As of December 31, 1999 there were
            outstanding options to purchase 135,000 and 80,000 shares under the
            Employee and Director Plans, respectively. The exercise price for
            such options have not yet been fixed, but will be equal to the fair
            value of the common stock on the date the Company's stockholders
            approve the 1999 Plans.

            Director Compensation
            ---------------------

                 During the year ended December 31, 1999, each director received
            an annual retainer of $6,000, payable in quarterly installments.
            Effective June 1, 1994 and January 1, 1995, the Company entered into
            separate consulting agreements with Mr. Weinberger and Ms. Brock,
            respectively, to provide various management consulting services to
            the Company. Each Agreement initially provided for monthly fees of
            $833 and may be terminated upon 60 days notice by either party.
            During the year ended December 31, 1999 and thereafter, the Company
            initiated an acquisition program. In connection with such
            acquisition program, Mr. Weinberger was requested to expend
            additional time in consulting with the Company's management on
            acquisition possibilities, including performing due diligence,
            administrative, accounting and other services. As a result of the
            increased time and effort spent by Mr. Weinberger, Mr Weinberger's
            consulting fee was increased to $2,833 per month.

                                       43
<PAGE>

Item 11.    Executive Compensation (continued)
            ----------------------

            Director Compensation (continued)
            ---------------------

                 On September 1, 1999 each director, other than Mr. Wallace,
            received 10,000 shares of the Company's common stock. The average of
            the bid and asked market price on said date was $.57 per share.
            Since September 1994, Mr. Ponce was provided the use of a Company
            car at a current cost of approximately $786 per month.

                 On December 15, 1999, each director was granted stock options
            to purchase 20,000 shares of the Company's common stock. The
            exercise price of such options will be equal to the fair market
            value at the date of grant, for a period of five years. The options
            are not exercisable until the Company obtains stockholder approval
            of the Director's Stock Option Plan.

            Compensation Committee Interlocks and Insider Participation
            -----------------------------------------------------------

                 During the year ended December 31, 1999, the Compensation and
            Stock Option Committee consisted of Messrs. Ponce, Weinberger and
            Ms. Brock. None of these directors has been an officer or employee
            of the Company or its subsidiaries during the last ten years, except
            Ms. Brock, who was formerly Vice President of Premix and Acrocrete
            until December 31, 1994. There are no other relationships required
            to be disclosed pursuant to applicable Securities and Exchange
            Commission rules and regulations.

Item 12.    Security Ownership of Certain Beneficial Owners and Management
            --------------------------------------------------------------

                 The following table sets forth certain information as of March
            23, 2000 with respect to the beneficial ownership of the Company's
            common stock by (i) each director of the Company, (ii) each Named
            Executive Officer, (iii) each person known to the Company to own
            more than 5% of such shares, and (iv) all executive officers and
            directors as a group. (Except as otherwise provided herein, the
            information below is supplied by the holder):

                                                      Shares (1)      Percent
                                                Beneficially Owned  of Class (2)
                                                ------------------  ------------

            Maureen P. Ferri                         656,981            7.7%
              120 Simmons Road
              Statesboro, GA. 30458
            Lisa M. Brock                            306,506 (3)        3.6%
            Howard L. Ehler, Jr.                     276,108            3.2%
            Fred H. Hansen                           220,000            2.6%
            Gary J. Hasbach                          250,400            2.9%
            S. Daniel Ponce                          561,966 (4)        6.5%
            Milton J. Wallace                        100,000            1.2%
            Morton L. Weinberger                     209,210            2.5%

            All directors and officers
              as a group (8 persons)               1,930,308 (5)       22.2%

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

                                       44
<PAGE>

Item 12.    Security Ownership of Certain Beneficial Owners and Management
            --------------------------------------------------------------

            (1) Except as set forth herein, all securities are directly owned
            and the sole investment and voting power are held by the person
            named. Unless otherwise indicated, the address for each beneficial
            owner is the same as the Company.

            (2) The percent of class for common stockholders is based upon
            8,505,434 shares of common stock outstanding and such shares of
            common stock such individual has the right to acquire within 60 days
            upon exercise of options or warrants that are held by such person
            (but not those held by any other person).

            (3) Includes 50,000 shares of common stock issuable upon exercise of
            warrants.

            (4) Includes 150,000 shares of common stock issuable upon exercise
            of warrants.

            (5) Includes 200,000 shares of common stock issuable upon the
            exercise of warrants.


Item 13.    Certain Relationships and Related Transactions
            ----------------------------------------------

                 The law firm of Hanzman, Criden, Chaykin, Rolnick, P.A. in
            which Mr. Ponce, the Company's Chairman of the Board, was formerly a
            member, served as general counsel to the Company for which the firm
            received $114,000 in 1999.


                                       45
<PAGE>

                                     PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form-8-K
            ---------------------------------------------------------------

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

            1.  Financial Statements:                                      Page
                ---------------------                                      ----

              Imperial Industries, Inc. and Subsidiaries:

               Report of Independent Certified Public Accountants          18

               Consolidated Balance Sheets - December 31, 1999 and 1998    19

               Consolidated Statements of Operations - Years Ended
                December 31, 1999, 1998 and 1997.                          20

               Consolidated Statement of Changes of Common Stock and
                Other Stockholders' Equity  -  Three Years Ended
                December 31, 1999.                                         21

               Consolidated Statements of Cash Flows -
                Years ended December 31, 1999, 1998 and 1997               22

               Notes to Consolidated Financial Statements                  23

          2.  Financial Statement Schedules:
              ------------------------------

              II - Valuation and Qualifying Accounts and Reserves          47

          3.  Exhibits
              --------

              Incorporated by reference to the Exhibit Index at the
              end of this Report.                                          48

          (b) Reports on Form 8-K:
              No Form 8-K Reports were filed during the last quarter of the
              period covered by this Report.


                                       46
<PAGE>

                                                                     Schedule II


                   IMPERIAL INDUSTRIES, INC. AND SUBSIDIARIES
                 Valuation and Qualifying Accounts and Reserves
                  Years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                        Charged     Charged
                                             Balance    to cost    to other                  Balance at
                                           beginning      and      accounts-   Deductions-    end of
       Description                         of period    expenses   describe     describe      period
       -----------                         ---------    --------   --------     --------      ------
<S>                                        <C>         <C>         <C>         <C>          <C>
Year ended December 31, 1999:

  Reserves and allowances deducted
   from asset accounts:
  Allowance for doubtful accounts:
   Trade                                   $  200,000  $ 177,000   $  --       $123,000(A)  $  254,000
                                           ----------  ---------   ------      -----------  ----------
  Valuation allowance for deferred taxes   $2,207,000  $    --     $  --       $574,000(B)  $1,633,000
                                           ----------  ---------   ------      -----------  ----------

Year ended December 31, 1998:

  Reserves and allowances deducted
   from asset accounts:
  Allowance for doubtful accounts:
   Trade                                   $  176,000  $ 154,000   $  --       $130,000(A)  $  200,000
                                           ----------  ---------   ------      -----------  ----------
  Valuation allowance for deferred taxes   $3,134,000  $    --     $  --       $927,000(B)  $2,207,000
                                           ----------  ---------   ------      -----------  ----------

Year ended December 31, 1997:

  Reserves and allowances deducted
   from asset accounts:
  Allowance for doubtful accounts:
   Trade                                   $  145,000  $ 126,000   $  --       $ 95,000(A)  $  176,000
                                           ----------  ---------   ------      -----------  ----------
  Valuation allowance for deferred taxes   $3,934,000  $    --     $  --       $800,000(B)  $3,134,000
                                           ----------  ---------   ------      -----------  ----------
</TABLE>

(A) Uncollectible accounts written off, net of recoveries.

(B)  Deferred tax benefit


                                       47
<PAGE>

                                  EXHIBIT INDEX

     Certain of the following exhibits, designated with an asterisk (*), are
filed herewith. The exhibits not so designated have been filed previously with
the Commission, and are incorporated herein by reference to the documents
indicated in parentheses following the descriptions of such exhibits.


Exhibit No.                        Description
-----------                        -----------

   2.1         Agreement and Plan of Merger, by and between Imperial Industries,
                Inc. and Imperial Merger Corp. dated October 12, 1998 (Form S-4
                Registration Statement, Exhibit 2).

   2.2         Asset Purchase Agreement entered into as of December 31, 1999
                between Just-Rite Supply, Inc., Imperial Industries, Inc., A&R
                Supply, Inc., A&R Supply of Foley, Inc., A&R of Destin, Inc.,
                Ronald A. Johnson, Rita E. Ward and Jaime E. Granat (Form 8-K
                dated January 19, 2000, File No. 1-7190, Exhibit 2.1).

   3.1         Certificate of Incorporation of the Company, (Form S-4
                Registration Statement, Exhibit 3.1).

   3.2         By-Laws of the Company, (Form S-4 Registration Statement, Exhibit
                3.2).

   4.1         Form of Common Stock Purchase Warrant issued to Auerbach, Pollak
                & Richardson, Inc., (Form S-4 Registration Statement, Exhibit
                4.1).

   4.2         Form of 8% Subordinated Debenture, (Form S-4 Registration
                Statement, Exhibit 4.2).

   4.3         Warrant Agreements as of June 22, 1988 between the Company and
                two of its directors, S. Daniel Ponce and Lisa M. Brock,
                formerly Lisa M. Thompson. (Form 8-K dated June 29, 1988, File
                No. 1-7190, Exhibit 10.3)

 *10.1         Consolidating, Amended and Restated Financing Agreement by and
                between Congress Financial Corporation and Premix-Marbletite
                Manufacturing Co., Acrocrete, Inc. and Just-Rite Supply, Inc.
                dated January 28, 2000.

  10.2         Employment Agreement dated July 26, 1993 between Howard L. Ehler,
                Jr. and the Company. (Form 8-K dated July 26, 1993)

  10.3         Employment Agreement dated July 3, 1996 between Fred H. Hansen
                and the Company, (Form S-4 Registration Statement, Exhibit
                10.3).

  10.4         Restricted Stock Plan, (Form S-4 Registration Statement, Exhibit
                10.4).

  10.5         License Agreement between Bermuda Roof Company and Premix
                Marbletite Manufacturing Co., (Form S-4 Registration Statement,
                Exhibit 10.5).

  *11          Statement recomputation of earnings per share.

  *21          Subsidiaries of the Company

  *27          Financial Data Schedule


                                       48
<PAGE>

                                   SIGNATURES
                                   ----------

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

                                            IMPERIAL INDUSTRIES, INC.



March 29, 2000                By: /s/ Howard L. Ehler,Jr.
                                  ---------------------------------------------
                                 Howard L. Ehler, Jr., Executive Vice President/
                                         Principal Executive Officer


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


     /s/ S. Daniel Ponce          Chairman of the Board of        March 29, 2000
----------------------------      Directors
S. Daniel Ponce


     /s/ Lisa M. Brock            Director                        March 29, 2000
----------------------------
Lisa M. Brock


     /s/ Milton J. Wallace        Director                        March 29, 2000
----------------------------
Milton J. Wallace


     /s/ Morton L. Weinberger     Director                        March 29, 2000
----------------------------
Morton L. Weinberger


     /s/ Howard L. Ehler, Jr.     Executive Vice President,       March 29, 2000
----------------------------      Secretary, Principal
Howard L. Ehler, Jr.              Executive Officer and
                                  Chief Financial Officer


     /s/ Betty J.Murchison        Assistant Vice President        March 29, 2000
----------------------------      and Principal Accounting
Betty J. Murchison                Officer


                                       49