<PAGE>
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                  FORM 10-KSB
                                        
(Mark One)

[x]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

      FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the transition period from                                  to
                                     --------------------------------
                                      .
      --------------------------------

      Commission File Number 1-9925

<TABLE>
<CAPTION>
                                                    COPE, Inc.
-------------------------------------------------------------------------------------------------------------------
                         (Exact name of small business issuer as specified in its charter)
<S>                                                          <C>
------------------------------------------------------    ---------------------------------------------------------
                    Delaware                                                     87-0427731
------------------------------------------------------    ---------------------------------------------------------
        (State or other jurisdiction of                               (IRS Employer Identification No.)
         incorporation or organization)
 
                                 Grundstrasse 14, 6343 Rotkreuz, Switzerland
-------------------------------------------------------------------------------------------------------------------
                                   (Address of principal executive offices)
</TABLE>

                               + 41 41 798 33 44
                          ---------------------------
                          (Issuer's telephone number)

Securities to be registered under Section 12(b) of the Exchange Act:

        Title of each class                 Name of each exchange on which
        to be so registered                 each class is to be registered
 
               None                                        N/A
-----------------------------------  ------------------------------------------
 
Securities to be registered under Section 12(g) of the Exchange Act:
 
                         Common Stock, $.001 par value
--------------------------------------------------------------------------------
                               (Title of class)

                                       1
<PAGE>
 
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

                      Yes                    No  X
                         -----                 -----           

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, 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-KSB or any amendment to
this Form 10-KSB.  [_]

The issuer's revenue for the fiscal year ended December 31, 1998 was
$29,059,150.

The aggregate market value of the voting stock held by non-affiliates of the
issuer as of April 20, 1999 was approximately $14,156,766.

The number of shares of the issuer's common stock outstanding as of April 20,
1999 was 3,573,361.

      Documents incorporated by reference:   None.

                                       2
<PAGE>
 
Part I.

Item 1.  Description of Business.

General

  COPE, Inc., a Delaware corporation (the "Company" or "COPE"), is a provider of
enterprise data storage and security consulting, services and solutions to
customers located primarily in Western Europe.  The Company's business consists
of the analysis, design and implementation of storage and security systems that
integrate the hardware and software products that best meet the identified
objective.  COPE generates revenue from three primary sources:

          .  providing consulting services in connection with the initial
             analysis of a client's data storage or security needs and designing
             of a system best suited to meet those needs;

          .  the sale and implementation of the desired solution; and

          .  providing installation, integration and maintenance of the system,
             including improving and adding to the system to keep pace with the
             clients' changing needs and improvements in technology.

  COPE generally provides its data storage and security systems on a turn-key
basis and purchases for resale the hardware and software components made part of
the systems solutions.  The Company resells hardware and software products
offered by the major vendors in the data storage and security industry,
including:

  .  Advanced Digital Information        .  LSC
  .  Ascend Communications               .  National Semiconductor
  .  Cisco Systems                       .  Oracle
  .  Compaq Computer                     .  Overland Data
  .  Data General                        .  Sony
  .  EMC Corp                            .  Storage Technology
  .  IBM                                 .  Sun Microsystems
  .  Legato Systems                      .  Veritas Software

  Following the Company's acquisition of Hicomp Software Systems GmbH on April
19,1999 the Company also offers its own proprietary storage software products,
Hiback and Hibars. COPE provides most of its information consulting services and
solutions to companies in the financial, insurance, pharmaceutical and
telecommunication industries located primarily in Germany, Switzerland, and
Austria.

Business Development

  The Company was formed under the laws of the State of Delaware in 1985 under
the name Harrier, Inc. and from 1985 until September 1998 was engaged in the
business of developing and marketing health, fitness and medical products.  In
September 1998, the Company completed a series of transactions (referred to
herein as the "COPE Reorganization") by which the Company discontinued all
operations and divested itself of substantially of its assets and liabilities
and, at the same time, acquired all of the outstanding capital shares of COPE
Holding AG, a Swiss stock corporation engaged in the business of enterprise data
storage.  It was at this time that the Company changed its name to COPE, Inc.

  COPE Holding AG.  The present business of the Company consists of the data 
  ---------------                                                             
storage and security operations of COPE Holding AG acquired by the Company in
September 1998 as part of the COPE Reorganization. COPE Holding AG commenced
operations in 1991 as a provider of data storage subsystems to the Swiss market.
In early 1993, COPE Holding AG began to study the RAID (redundant array of
inexpensive disk-drives) storage technologies and began designing corresponding
solutions for its clients.  In the fall of 1993, the first family of RAID
systems was introduced by COPE Holding AG to the Swiss market.  Some of these
systems are still in use today.  In 1994, COPE Holding AG signed a distribution
agreement with Data General providing for 

                                       3
<PAGE>
 
COPE Holding AG's distribution of Data General's Open CLARiiON systems. This
represented COPE Holding AG's first reseller agreement. In the following years,
COPE Holding AG entered into distribution agreements with additional vendors of
storage and security products. In December 1998, COPE Holding AG entered into a
distributor agreement with EMC Corp, the recognized world leader in the
development of software for the enterprise data storage and security industry.

  In 1994, COPE Holding AG began to market its services and systems in Austria.
In late 1995, COPE Holding AG commenced operations in Germany. In the same year,
COPE Holding AG became one of the first information technology companies in
Europe to obtain an ISO9001 certification. In 1998, COPE Holding AG expanded its
operations in Germany through the acquisition of Forum GmbH, a provider of data
storage and security consulting, services and solutions to the German market.

  The COPE Reorganization.  On September 25, 1998, the Company consummated a
  -----------------------                                                   
series of transactions (referred to as the "COPE Reorganization") undertaken
pursuant to an Amended and Restated Securities Purchase Agreement and Plan of
Reorganization dated July 24, 1998 ("Reorganization Agreement") by and among the
Company, COPE Holding AG, and the shareholders of COPE Holding AG ("COPE
Shareholders"), pursuant to which, among other things, (i) the Company effected
a one for 58 reverse split of its shares of common stock issued and outstanding
immediately prior to the close of the COPE Reorganization, thus reducing its
issued and outstanding shares of common stock to approximately 270,654; (ii) the
Company sold a controlling interest in its subsidiary, Glycosyn Pharmaceuticals,
Inc., a Delaware corporation ("Glycosyn"), and otherwise divested itself of
substantially all of its assets and liabilities on hand immediately prior to the
close of the COPE Reorganization; and (iii) the Company  issued 2,862,000 shares
(post-split) of its common stock in exchange for all of the outstanding capital
shares of COPE Holding AG.

  Since the COPE Shareholders owned approximately 91.4% of the outstanding
shares of the common stock of the Company after giving effect to the COPE
Reorganization, COPE Holding AG was deemed the accounting acquirer and the
Company's acquisition of COPE Holding AG has been accounted for as a reverse
merger under the purchase method. Accordingly, from an accounting standpoint,
the equity of COPE Holding AG is carried forward as the equity of the combined
entity. COPE Holding AG is assumed to have acquired the Company and therefore
the assets and liabilities of the Company as they existed immediately prior to
the consummation of the COPE Reorganization, after giving effect to the
consummation of the transactions under the Glycosyn Agreements, have been
recorded at fair value as required by the purchase method. This adjustment
reflects the elimination of the Company's equity and accumulated deficit.

  Forum Acquisition.  On June 25, 1998, COPE GmbH, a wholly-owned subsidiary of
  -----------------                                                            
COPE Holding AG, acquired all of the Capital shares of Forum GmbH ("Forum"), a
German data storage company, for $962,977.  The acquisition of Forum has been
accounted for by the purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16 "Business Combinations."  Accordingly, the
operating results of Forum have been  included in the consolidated operating
results of the Company from the date of acquisition. On or about March 30,
1999, Forum was merged into a wholly-owned subsidiary of COPE Holding AG, COPE
GmbH, a German stock corporation

  Hicomp Acquisition.  On April 19, 1999, the Company acquired Hicomp Software
  ------------------                                                        
Systems GmbH ("Hicomp"), a German software company. Pursuant to a Sale and
Assignment of Business Shares entered into on December 21, 1998 between the
Company and Mr. Uwe Hinrichs, the president and sole shareholder of Hicomp, the
Company issued 420,000 shares of common stock in exchange for all of the
outstanding capital shares of Hicomp. The Hicomp acquisition will be accounted
for as a pooling of interests. Hicomp, headquartered in Hamburg, Germany,
develops back-up and retrieval software products. Its leading products, Hiback
and Hibars, are multi-platform back-up solutions recognized for performance and
flexibility. The Company also granted Mr. Hinrichs certain securities
registration rights pursuant to which he is entitled to sell up to 200,000
shares of his common stock alongside the Company in any public offering of
securities by the Company on the New Market section of the Frankfurt Stock
Exchange taking place no less than 90 days from the date of the Company's
acquisition of Hicomp. Mr. Hinrichs granted the Company a purchase option,
expiring June 30, 2000, to acquire all of the capital shares of two US
corporations owned by Mr. Hinrichs which are engaged in the business of
distributing the Hiback and Hibars software in the US.

                                       4
<PAGE>
 
  Unless the context otherwise requires, the term "the Company" or "COPE" refers
to the Delaware corporation known as COPE, Inc., its wholly-owned subsidiary,
COPE Holding AG, a Swiss stock corporation, and the wholly-owned subsidiaries of
COPE Holding AG: COPE AG, a Swiss stock corporation, COPE GmbH, a German stock
corporation, COPE GesmbH, an Austrian stock corporation, and Hicomp Software
Systems GmbH, a German stock corporation. The executive offices of COPE are
located at Grundstrasse 14, 6343 Rotkreuz, Switzerland; telephone 
+41 41 798 3344.

Business of COPE

  General

  COPE is a provider of enterprise data storage and security consulting,
services and solutions to customers located primarily in Western Europe.  The
Company's business consists of the analysis, design and implementation of
storage and security systems that integrate the hardware and software products
that best meet the identified objective.  COPE generates revenue from three
primary sources:

             .  providing consulting services in connection with the initial
                analysis of a client's data storage or security needs and
                designing of a system best suited to meet those needs;

             .  the sale and implementation of the desired system; and

             .  providing installation, integration and maintenance of the
                system, including improving and adding to the system to keep
                pace with the clients' changing needs and improvements in
                technology.

  COPE generally provides its data storage and security systems on a turn-key
basis and purchases for resale the hardware and software components made part of
the systems solutions.  The Company resells hardware and software products
offered by the major vendors in the data storage and security industry,
including:

  .  Advanced Digital Information        .  LSC
  .  Ascend Communications               .  National Semiconductor
  .  Cisco Systems                       .  Oracle
  .  Compaq Computer                     .  Overland Data
  .  Data General                        .  Sony
  .  EMC Corp                            .  Storage Technology
  .  IBM                                 .  Sun Microsystems
  .  Legato Systems                      .  Veritas Software

  Following the Company's acquisition of Hicomp on April 19, 1999 the Company
also offers its own proprietary storage software products, Hiback and Hibars.
COPE provides most of its information consulting services and solutions to
companies in the financial, insurance, pharmaceutical and telecommunication
industries located primarily in Germany, Switzerland, and Austria.

  Industry Overview

  High availability of stored data is a critical factor in today's business
environment. To reduce costs, improve productivity and improve customer service,
large organizations are streamlining their processes by implementing strategic
software applications, such as databases, financial applications and electronic
mail systems, to manage their data. To be competitive, an organization needs
immediate access to necessary data, regardless of where it is stored.  Providing
reliable access to this data on an enterprise-wide basis presents a significant
challenge to large organizations.

  The difficulty of this challenge is compounded by a number of recent trends in
enterprise computing. In recent years, there has been a significant migration to
client/server and network computing.  Today's networks are much larger and more
complex than early networks, often consisting of multiple servers, including
application servers, file servers, database servers and communications servers,
and hundreds or even thousands of personal 

                                       5
<PAGE>
 
computers manufactured by a number of different vendors. These servers and
personal computers may utilize a number of different operating systems,
including Unix, Novell NetWare, IBM OS/2 Warp, Windows NT, Windows 98, Windows
95, Windows 3.1 and Macintosh OS. The distributed and heterogeneous nature of
these networks, together with the increased use of computers throughout
organizations to create and store files, has resulted in an increase in the
amount and dispersion of critical data across the servers and personal
computers.

  The increase in the size of networks has been accompanied by concurrent
increases in the size and complexity of computer data and files. Application
software developers continue to introduce software packages that increasingly
incorporate features which require large amounts of storage, such as graphics,
video and sound. For example, a minute of uncompressed full motion video and
sound could require approximately 1,100 megabytes of storage as compared to 300
kilobytes for the average 10 page document.  Similarly, the size and complexity
of images stored and manipulated using document imaging systems have intensified
network storage requirements. Further, the increasing popularity of the Internet
as a means of communication and a medium by which to access and distribute
information has contributed to the demand for increased storage, as users
download a wide variety of complex data from the Internet.

  To meet the challenges of managing the storage of increasing volumes of
enterprise data in increasingly heterogeneous systems with fewer resources, a
storage management system must incorporate a number of critical features
including:

         .  fully automated backup and restore capability;

         .  ready data availability in the event of system failures in order to
            avoid interruptions of day-to-day operations;

         .  scalability to automate rapid growth in the volume of on-line data
            and the complexity of the network;

         .  centralized and automated management to enable the administrator to
            manage the entire system, including local and remote systems, from a
            single central console;

         .  the ability to use a central consistent interface for applications
            that share data;

         .  support for heterogeneous environments.

  In response to the increased demand for cost-effective storage of different
types of information, a variety of storage media have been developed, including
magnetic tape, hard disk, RAID, CD-ROM and others.

  Magnetic tape is the least expensive storage medium, but has the slowest
access times.  Magnetic tape is ideal for backing up large amounts of
information that is only expected to be accessed infrequently.  This cost
effective technique is widely used in commercial and government organizations in
cases where it is desirable to archive large amounts of data in a secure offsite
location as a safeguard against on-site disasters.  Often times, the magnetic
tapes are arranged in automated tape libraries for purposes of providing for
multiple operating drives capable of conducting simultaneous functions,
including backup, data management and access.

  Hard disk storage is a popular means of storing and accessing large amounts of
information that is continually changing.  It also provides rapid access times
but is a relatively expensive storage medium and is easily erased.  RAID storage
systems have developed in response to demand for increased data storage,
performance, security, reliability, fault tolerance and availability, as well as
for constant access. RAID is a method for allocating data across several hard
disk drives and allowing a server microprocessor to access those drives
simultaneously, thus increasing system storage and input/output performance. In
addition, lost data on any drive can be recreated using special RAID algorithms,
thus ensuring the immediate availability of RAID protected data even in the
event of a disk drive failure.

                                       6
<PAGE>
 
  CD-ROM technology emerged in the early 1980s as a cost-effective method by
which to store and distribute large amounts of information.  Since CD-ROMs or
DVD-ROMs cannot be erased or written over, however, they are not suitable for
storage situations in which information must be continually updated and altered.
However, for organizations that require periodic distribution of written
material, such as reference books, parts lists, catalogues or manuals, CD-ROMs
and DVD-ROMs are much more cost-effective and practical than paper-based
documents.  The proliferation of network computing and the rapid increase in CD-
ROMs as a means of information distribution and storage have fueled demand for
CD-ROM systems that provide network wide access.

  The increase in the importance and volume of stored, complex data has
increased demand for secure and reliable methods of storage that allow for
efficient and cost-effective protection and management of such data.  These
factors have also increased demand for total storage solutions that can quickly
and efficiently provide access to large volumes of data resident on a variety of
personal computers and servers running different operating environments, as well
as data generated by a wide range of applications.  In addition, users are
increasingly demanding solutions comprised of not only hardware for cost-
effective storage of and access to large amounts of secure and reliable
information, but also software that manages information flow and reduces the
high costs of storage administration.

  The COPE Solution

  In today's business environment, the best storage or security solution most
often requires a combination of storage media and a mixture of hardware and
software products from multiple vendors.  The challenge to a system designer is
the ability to identify and then integrate the specific hardware and software
products best suited to meet the clients' needs.

  COPE believes that the major product vendors in the data storage industry are
naturally predisposed to selling the client a solution that is based on the
vendor's own product line. On the other hand, COPE endeavors to operate as an
independent provider of enterprise data storage and security systems and
solutions. Although COPE now offers a limited line of proprietary storage
software following its acquisition of Hicomp, the Company is committed to
offering its clients a storage solution based on a mix of the software and
hardware products that best meet the identified objectives regardless of
manufacturer. COPE believes that its willingness and ability to provide an
independent approach to its clients' storage problems provides its clients with
a better solution and COPE with a competitive advantage over the vendors with
whom it competes for the design and sale of storage solutions.

  In order to provide its customers with the best available solution, COPE has
divided its operations between (i) consulting; (ii) solution sales and (iii)
integration services. A client engagement begins with the appointment of a team
from COPE's consulting division. As of April 20, 1999, COPE employed 10
professionals in its consulting division, each of whom is a specialist with a
complete understanding of the products and technologies offered in the data
storage industry. COPE initially analyzes the client's storage needs and arrives
at certain conceptual solutions. COPE then works with the client to develop
performance-cost comparisons, feasibility studies and capital budgeting
calculations for each conceptual solution. Through this process a recommendation
is made to the client for the implementation of a storage and security solution.
Typically, the recommendation will involve a storage system sold and installed
by COPE. However, COPE's consultants are encouraged to offer the client the best
solution, even if it does not include the sale of a system by COPE.

  If the consulting division recommends a COPE storage or security system, COPE
will bring to the client a team from the solution sales department.  As of April
20, 1999, COPE's solution sales consisted of 41 professionals, including 23
sales representatives and 18 engineers, and a 5 person administration and
support staff.  A team typically consists of one or more sales representatives
and engineers.  A project manager will act as the liaison between the client and
COPE's production departments.

  Once the optimal solution is selected, COPE's integration services department
provides on-site integration.  The integration services department also offers
the client operations and maintenance support on an interim and long-term basis.
As of April 20, 1999, this department consisted of 16 employees.

  COPE's Strategy

                                       7
<PAGE>
 
  COPE's goal is to become the leading independent provider of enterprise data
storage and security consulting, services and solutions in Western Europe.  The
key elements of COPE's strategy are:

       .  Emphasize Consulting Service.  COPE intends to emphasize the provision
of its consulting services.  COPE believes that in the enterprise data storage
and security market the key is oftentimes the "solution" and not the product.
COPE believes that a significant amount of the client's cost in a storage and
security solution is spent on consulting services associated with the design and
implementation of the system, the remainder representing the costs of the
associated software and hardware products.  The consulting services often
involve higher margins than the sale of the products, even in the case of direct
sales to the client by the manufacturer/vendor.  By emphasizing the quality of
its consulting services, COPE believes that it can establish and foster a
reputation in Western Europe as a leading provider of enterprise data storage
and security consulting, services and solutions.

       . Foster a Reputation for Independence. COPE's major competitors are
either manufacturers of hardware and software products or large consulting firms
that offer a wide array of consulting and advisory services to business. COPE
intends to foster the reputation and image of an independent organization
dedicated exclusively to providing storage and security services and solutions
to the enterprise data storage market. Most of the customers for storage and
security systems are large corporations and institutions with sophisticated
information and technology (IT) operations. COPE believes that most IT officers
appreciate and value COPE's expertise and ability to offer solutions and
consulting services unhindered by any bias towards a particular product or
vendor.

       .  Expand Through Targeted Acquisitions.  COPE believes that the
enterprise data storage market consists of the manufacturers/developers of the
storage products and the international consulting firms, on the one hand, and a
number of smaller independent providers of consulting services and solutions,
including COPE, on the other hand. COPE intends to aggressively seek out and
acquire high quality independent consulting firms throughout Western Europe.
COPE believes that there are a number of smaller independent firms in strategic
European markets that share COPE's commitment to providing high quality
consulting and services to the enterprise data storage market. Through the
pursuit of strategic acquisitions, COPE hopes to acquire existing sales and
engineering staffs with established contacts and client bases in key markets.

  Products And Services

  COPE's principal operations consist of the design, implementation and
management of storage and security solutions that provide flexible and cost
effective data storage and security solutions on a turn-key basis.  In addition
to  providing turn-key data storage solutions, COPE also provides its clients
consulting, training and integration servicing.  In 1998, approximately
$3,647,174 (or 12.6%) of COPE's $29,059,150 in revenue represented consulting
fees unrelated to sales of data storage systems.  COPE intends to increase its
marketing efforts in the area of stand-alone consulting services and expects
that consulting revenues will in the future increase as a percentage of overall
revenue.

  COPE is a value added reseller of a number of software and hardware products
to its customers, including back-up and system management software, tape
libraries, data storage disk arrays, high-end servers, and numerous other
peripheral products related to the installation and utilization of data storage
and security technology. COPE sells data storage software under various
reselling arrangements with several software companies where COPE functions as a
value added reseller for different leading vendors. In keeping with industry
practice, the agreements between COPE and its product vendors are nonexclusive
and short term in nature. The following table sets forth the major vendors with
which COPE works in various selling partnerships, the vendor's products resold
by COPE and the amount of COPE's revenue from the sale of hardware and software
products during fiscal 1998 represented by each vendor:

<TABLE>
<CAPTION>
                    Vendor                                                 Product                           % of Product Revenue
-----------------------------------------------    ------------------------------------------------------    -----------------------

 
<S>                                                 <C>                                                       <C>
Advanced Digital Information Corp                   Tape Libraries                                                    8%
Compaq Computer/Digital Equipment.                  Tape Libraries                                                   15%
Hewlett Packard                                     Tape Libraries                                                    3%
Data General - CLARiiON Business Unit               CLARiiON Disk Arrays                                             10%
</TABLE> 

                                       8
<PAGE>
 
<TABLE> 
<S>                                                 <C>                                                          <C> 
IBM                                                 High End Servers                                                  8%
Legato Systems                                      Back-up and Archiving Software                                    6%
National Semiconductor Corp.                        CD Jukeboxes                                                      1%
Overland Data                                       Tape Libraries                                                    3%
Storage Technology Corp.                            Tape Libraries                                                   12%
Sun Microsystems                                    High End Servers                                                  7%
Veritas Software                                    Data Management, Failure, Backup and Archiving Software           2%
</TABLE>

In addition to the above, in December 1998 COPE was named by EMC Corp. as a
distributor of its line of enterprise data storage products.

  COPE generally contracts to deliver storage and security systems, including
all hardware and software, on a turn-key basis pursuant to fixed price
contracts. Consistent with industry practice, COPE generally is not able to
obtain significant up-front or progress payments on its contracts providing for
the design, implementation and sale of its storage and security systems.
Accordingly, COPE is required to finance its clients contracts, including the
purchase of the hardware and software components of the information systems.
COPE's principal sources of working capital are cash from operations and
operating lines of credit in the aggregate amount of $2,812,083 as of December
31, 1998. COPE has been successful to date in securing extensions on its lines
for purposes of financing certain client contracts as needed, however there can
be no assurance that COPE will continue to do so in the future.

  Consulting and Services Division.  COPE's consulting division offers services
such as analyses, conceptual solutions, target-performance comparisons, quantity
structures, feasibility studies and capital budgeting calculations, as well as
project management and user training.  In addition to training and education,
the COPE service division implements and maintains data management plans
recommended by the consulting division. COPE system engineers are certified
experts by strategic partners such as IBM, SUN, Microsoft and others. This
division  contracts directly with the end-user to maintain systems and manage
the plan.

  Hiback and Hibars.  In April 1999, COPE acquired Hicomp, a Hamburg,
Germany developer of enterprise data storage and backup software. Through its
acquisition of Hicomp, COPE is now able to offer a limited line of proprietary
software products designed to provide storage capabilities to multi-platform
enterprises. The products are Hiback, backup software which is installed on
servers and desktop clients, and Hibars, automated data management software
which is installed on the backup server. COPE believes that the Hiback and
Hibars products offer a superior storage solution to multi-platform enterprises
which require superior speed in performing backup storage.

  Sales and Marketing

  COPE markets its data storage and security consulting, services and solutions
primarily through its field sales organization complemented by other sales
channels, including systems integrators, product vendors and distributors.

  As of April 20, 1999, COPE's field sales force consisted of 23 sales
representatives and 18 engineers that provide technical assistance for systems
sales.  COPE currently has five sales offices, most of which are staffed with
both sales and technical personnel.  COPE uses a consultative sales approach for
selling to major accounts.  This model entails the collaboration of technical
and sales personnel, typically in a one-to-one ratio, to formulate proposals
that address the specific requirements of the customer.  COPE focuses its
initial sales efforts on senior IT department personnel, and works closely with
system and network administrators for evaluation and deployment.  COPE also
maintains comprehensive after-sales and customer care activities covering all
aspects of support, systems tuning and follow-up.

  Competition

  The information management market is intensely competitive, highly fragmented
and characterized by rapidly changing technology and evolving standards.
Competitors vary in size and in the scope and breadth of the products and
services offered.  COPE's major competitors are vendors of information
management software and 

                                       9
<PAGE>
 
hardware products, including Compaq Computer Corp., EMC Corp., Hewlett Packard,
Storage Tek, and Unisys Corp., some of whom are also significant suppliers of
COPE. In addition, COPE experiences significant competition from other
consulting and engineering firms.

        Many of COPE's current and potential competitors have significantly
greater financial, technical, marketing and other resources than COPE. As a
result, they may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or, in the case of vendors, to devote
greater resources to the development, promotion, sale and support of their
products than the Company. COPE also expects that competition will increase as a
result of future software industry consolidations, which have occurred in the
information management market in the past. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. There can be no assurance that COPE will be able to
compete successfully against current or future competitors or that competitive
pressures faced by the Company will not materially adversely affect its
business, operating results or financial condition.

        In addition to competition for client contracts, COPE also competes for
qualified technical engineers and consultants.  COPE's future success depends in
significant part upon the continued service of its key technical personnel and
its continuing ability to attract and retain highly qualified technical
engineers and consultants.  Competition for such personnel is intense, and there
can be no assurance that COPE can retain its key technical and managerial
employees  or that it can attract, assimilate or retain other highly qualified
technical personnel in the future.

        Employees

        As of April 20, 1999, COPE had a total of 102 employees. Of the total,
10 were in consulting, 41 were in solution sales, 16 in integration services and
35 were in marketing and back-office operations such as general management,
finance, human resources and administration. None of COPE's employees are
represented by a labor union or subject to a collective bargaining agreement.
COPE has not experienced any work stoppages and considers its relations with its
employees to be good.

Item 2. Properties

        COPE's executive offices are located in Rotkreuz, Switzerland and
consist of approximately 10,800 square feet of leased space. COPE leases this
space pursuant to a written agreement expiring in March 2001, with an option to
extend for another five years, at the rate of $11,200. COPE also maintains the
following sales offices:

<TABLE>
<CAPTION>
              Location                                     Size                               Monthly Rental Rate
------------------------------------    ---------------------------------------    ---------------------------------------
 
<S>                                               <C>                                            <C>
           Munich, Germany                         9,800 sq. ft.                                    $7,300
           Hamburg, Germany                        6,600 sq. ft.                                    $9,000
           Dresden, Germany                        1,600 sq. ft.                                    $2,700
           Vienna, Austria                         2,000 sq. ft.                                    $2,000
</TABLE>

                                       10
<PAGE>
 
Item 3.  Litigation.

  Except as set forth below, there have been no legal proceedings to which the
Company or any of its officers or directors have been a party or to which the
property of the Company has been subject over the last two years.

  On August 24, 1995, American Diagnostica, Inc. ("ADI"), a private company
located in Greenwich, Connecticut, filed a civil action against the Company for
money damages alleging the Company's wrongful termination of that certain R&D
Joint Venture Agreement entered into by the parties in May 1993. The
circumstances underlying the complaint occurred prior to the COPE Reorganization
and were undertaken by prior management of the Company at a time when the
Company was engaged in the business of research and development of certain
health and medical products. See, Item 1. Development of the Company - Business
Development for a description of the COPE Reorganization.

  In its complaint, ADI alleged that the Company was indebted to the plaintiff
for damages in an unspecified amount, plus punitive damages, attorneys fees and
interest. In December 1995, the Company moved the court for an order compelling
the plaintiff to submit the dispute to arbitration. In September 1996, the court
granted the Company's motion, staying all proceedings pending the conclusion of
mandatory arbitration in California, as the parties had provided in the research
and development agreement. As of the date of this report, no arbitration
proceeding has been commenced by either party. Management of the Company prior
to the COPE Reorganization has publicly announced its belief that the Company
has meritorious defenses to all of ADI's claims and that the claims are
substantially without merit. However, under current circumstances no
determination can be made as to the ultimate outcome of the litigation or as to
the necessity for any provision in the accompanying consolidated financial
statements for any liability that may result from an unfavorable outcome.

  In connection with the COPE Reorganization, the Company received from the New
Capital Investment Fund and New Capital AG an agreement to indemnify the
Company against any claims outstanding as of the close of the COPE
Reorganization, including attorneys fees and costs of arbitration or litigation
relating to the ADI matter. Kevin DeVito is a director of New Capital Investment
Fund and New Capital AG. Mr. DeVito was the Chief Executive Officer of the
Company prior to the COPE Reorganization and is currently a member of the board
of directors of the Company.

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

  There were no matters submitted to the security holders of the Company during
the fourth quarter of fiscal year 1998.

                                       11
<PAGE>
 
Part II

Item 5.  Market for Common Equity and Related Shareholder Matters.

  Market for Common Stock. The Company's common stock traded on the OTC Bulletin
Board under the symbol "COPE." The Company's common stock also trades on the
over-the-counter market (Freiverkehr) of the Berlin Stock Exchange under the
security number [WKN] 876 954. The following table shows the high and low bid
prices for the Company's common stock for the periods indicated as reported by
the OTC Bulletin Board. These quotations may not necessarily represent actual
transactions. All share prices are adjusted to reflect the one for 58 reverse
split of the common stock effected in August 1998.

<TABLE>
<CAPTION> 
                                                     High                    Low    
                                                 ------------           ------------                                   
            <S>                                  <C>                    <C>                                            
            1997:                                                                                                      
            First quarter                        $      10.88           $       3.63                                   
            Second quarter                       $       9.28           $       3.63                                   
            Third quarter                        $      10.88           $       3.48                                   
            Fourth quarter                       $      11.02           $       4.06                                   
                                                                                                                       
            1998:                                                                                                      
            First quarter                        $      10.88           $       4.64                                   
            Second quarter                       $      11.60           $       6.38                                   
            Third quarter                        $      12.63           $       7.25                                   
            Fourth quarter                       $      20.25           $      10.37                                    
</TABLE>

        As of April  20, 1999, the Company had approximately 358 record holders
of its common stock.

        Dividends.  The Company has not paid any cash dividends since its
inception and does not contemplate paying dividends in the foreseeable future.
It is anticipated that earnings, if any, will be retained for the operation of
the Company's business.

        Recent Sales of Unregistered Securities.  During the fiscal year ended
December 31, 1998, the Company sold unregistered shares of its common stock in
the following transactions:

        A.  From February 1998 to March 1998, the Company conducted a private
placement of shares of its common stock to two existing shareholders.  In the
private placement, the Company sold a total of 6,897 shares of common stock for
the gross proceeds of $40,000.  The issuance was conducted pursuant to
Regulation S under the 1933 Act.  There was no underwriter involved in this
issuance.

        B.  In August 1998, the Company granted to 39 of its officers and
employees options to purchase an aggregate of 59,300 shares of common stock at
an exercise price of $8.40 per share.  The options vest in four installments
commencing on March 1, 1999, March 1, 2000, March 1, 2001 and March 1, 2005.
The options were issued pursuant to Section 4(2) of  the 1933 Act.  There was no
underwriter involved in this issuance.

        C.  In September 1998, pursuant to an Amended and Restated  Securities
Purchase Agreement and Plan of Reorganization dated July 24, 1998,  the Company
issued 2,862,000 shares of its common stock to the stockholders of COPE Holding
AG in exchange for all of the issued and outstanding capital stock of COPE
Holding AG.  The issuance was conducted pursuant to Regulation S under the 1933
Act.  There was no underwriter involved in this issuance.

        D. In the fourth quarter of 1998, the Company issued 20,207 shares of
common stock upon the exercise of outstanding common stock purchase warrants.
The warrants were issued prior to the Company's reorganization with COPE Holding
AG. The issuances were conducted pursuant to Regulation S under the 1933 Act.
There was no underwriter involved in these issuances.

                                       12
<PAGE>
 
        E.  In November 1998, the Company granted to its officers and directors
and one consultant options to purchase a total of 108,200 shares of common 
stock at exercise prices ranging from $8.50 to $15.00 per share. The options
vest in installments commencing in 1999. The options were issued pursuant to
Section 4(2) under the 1933 Act. There was no underwriter involved in this
issuance.

                                       13
<PAGE>
 
Item 5.  Management's Discussion and Analysis or Plan of Operations.

Overview

  General

  COPE is a Swiss-based provider of data storage and security consulting
services and solutions.  The Company presently conducts business primarily in
Germany, Switzerland and Austria.  Unless the context otherwise requires, the
term "Company" or "COPE"  refers to the Delaware corporation known as COPE,
Inc., its wholly-owned subsidiary COPE Holding AG, a Swiss stock corporation,
and the wholly-owned subsidiaries of COPE Holding AG: COPE AG, a Swiss stock
corporation, COPE GmbH, a German stock corporation, COPE GesmbH, an Austrian
stock corporation.

  COPE Reorganization.  On September 25, 1998, the Company consummated a series
  -------------------                                                          
of transactions (referred to as the "COPE Reorganization") undertaken pursuant
to an Amended and Restated Securities Purchase Agreement and Plan of
Reorganization dated July 24, 1998 ("Reorganization Agreement") by and among the
Company, COPE Holding AG, a Swiss corporation, and the stockholders of COPE
Holding AG ("COPE Stockholders").  Pursuant to the Reorganization Agreement, the
Company, among other things, (i) effected a one for 58 reverse split of its
shares of common stock outstanding immediately prior to the close of the COPE
Reorganization, thus reducing its outstanding shares of common stock to
approximately 270,654; (ii) sold a controlling interest in its only subsidiary,
Glycosyn Pharmaceuticals, Inc., a Delaware corporation, and otherwise divested
itself of substantially all of its assets and liabilities on hand immediately
prior to the close of the COPE Reorganization; and (iii) issued 2,862,000 shares
(post-split) of its common stock in exchange for all of the outstanding capital
shares of COPE Holding AG.

  Since the COPE Stockholders owned approximately 91.4% of the outstanding
shares of the common stock of the Company after giving effect to the COPE
Reorganization, COPE Holding AG was deemed the accounting acquirer and the
Company's acquisition of COPE Holding AG has been accounted for as a reverse
merger under the purchase method.  Accordingly, from an accounting standpoint,
COPE Holding AG's equity is carried forward as the equity of the combined
entity. COPE Holding AG is assumed to have acquired the Company and therefore
the assets and liabilities of the Company as they existed immediately prior to
the consummation of the COPE Reorganization, after giving effect to the
consummation of the transactions under the Glycosyn Agreements, have been
recorded at fair value as required by the purchase method. This adjustment
reflects the elimination of the Company's equity and accumulated deficit.

  Forum Acquisition.  On June 25, 1998,  COPE Holding AG acquired all of the
  -----------------                                                         
capital shares of Forum GmbH ("Forum"), a German data storage company, for
$962,977. The acquisition of Forum has been accounted for by the purchase method
of accounting in accordance with Accounting Principles Board Opinion No. 16
"Business Combinations." Accordingly, the operating results of Forum have been
included in the consolidated operating results from the date of acquisition. On
or about March 30, 1999, Forum was merged into a wholly-owned subsidiary of COPE
Holding AG, COPE GmbH, a German stock corporation.

  Hicomp Acquisition.  On April 19, 1999, the Company acquired Hicomp Software
  ------------------                                                        
Systems GmbH ("Hicomp"), a German software company. Pursuant to a Sale and
Assignment of Business Shares entered into on December 21, 1998 between the
Company and Mr. Uwe Hinrichs, the president and sole shareholder of Hicomp, the
Company issued 420,000 shares of common stock in exchange for all of the
outstanding capital shares of Hicomp. The Hicomp acquisition will be accounted
for as a pooling of interests. Hicomp, headquartered in Hamburg, Germany,
develops back-up and retrieval software products. Its leading products, Hiback
and Hibars, are multi-platform back-up solutions recognized for performance and
flexibility. The Company also granted Mr. Hinrich certain securities
registration rights pursuant to which he is entitled to sell up to 200,000
shares of his common stock alongside the Company in any public offering of
securities by the Company on the New Market section of the Frankfurt Stock
Exchange taking place no less than 90 days from the date of the Company's
acquisition of Hicomp. Mr. Hinrich granted the Company a purchase option,
expiring June 30, 2000, to acquire all of the capital shares of two US
corporations owned by Mr. Hinrich which are engaged in the business of
distributing the Hiback and Hibars software in the US.

                                       14
<PAGE>
 
  Currency Exchange Rates.  The Company regularly enters into certain financial
  -----------------------                                                      
commitments payable in Swiss Francs, the unit of currency of Switzerland.  All
Swiss Franc based amounts are designated by the symbol SFr.  As of April 20,
1999, the Swiss Franc-Dollar exchange rate was 1.50 Swiss Franc to 1 U.S.
Dollar.

  Although COPE reports its results in US  dollars, virtually all of its sales
are denominated in other currencies, primarily, Swiss francs and Euros.  A
significant amount of COPE's cost of sales  (i.e., hardware and software
purchases) on the other hand, are denominated in  US dollars.  Consequently, the
Company's cost of doing business is directly affected by any changes in the
exchange rate between the US dollar, on the one hand, and the Swiss franc or
Euro, on the other hand.  The financial position and results of operations of
COPE and its foreign subsidiaries are measured using local currency as the
functional currency.  Assets and liabilities of COPE and its subsidiaries are
translated at the exchange rate in effect at each  year-end.  Income statement
accounts are translated at the average rate of exchange prevailing during the
year.  Translation adjustments arising from differences in exchange rates from
period to period are included in the cumulative translation adjustment account
in stockholders' equity.

  COPE typically enters into forward exchange contracts covering fifty percent
(50%) of its hardware and software purchases for its client contracts in order
to mitigate the adverse effects of currency exchange fluctuations. However,
these actions generally provide only a partial mitigation of the adverse effects
of changes in currency rates and there can be no assurance that changes in
currency rates in the future will not have a material adverse affect on the
Company's business, financial condition and results of operations.

Results of Operations

  Fiscal 1998 Compared to Fiscal 1997

  Net Revenue.  During the year ended December 31, 1998, COPE had net revenue of
  -----------                                                                 
$29,059,150, which amounts to an increase of 62% over the net revenue of
$17,916,171 during the prior year period. The increase in net revenue is due in
part to the acquisition of Forum, which was acquired by COPE on June 25, 1998
and has been included in the consolidated operating results of the Company for
the periods subsequent to June 25, 1998. Forum had net revenue of $9,040,477 for
the period June 25, 1998 through December 31, 1998. Without giving effect to the
acquisition of Forum, the Company had a 12% increase in net revenue during the
year ended December 31, 1998 over the prior year period.

  Sales of solutions (revenue from resale of hardware and software components
along with associated consulting services) increased 53% during the year ended
December 31, 1998 over the prior year period reaching $25,411,976 in 1998 as 
compared to $16,605,175 in 1997. The principal reason for the increase in sales
of solutions is the acquisition of Forum. Without giving effect to the
acquisition of Forum, the Company had a 3% increase in sales of solutions during
the year ended December 31, 1998 over the prior year period.

  Sales of services (revenue from stand-alone consulting services) increased
178% during the year ended December 31, 1998 reaching $3,647,174 as compared to
$1,310,996 for the prior year period. Without giving effect to the consolidation
of Forum, the Company had a 123% increase in sales of services during the year
ended December 31, 1998 over the prior year period. This increase is the result
of the Company's decision to emphasize sales of services because of its
potential for higher profit margins.

  Cost of Sales.  During the year ended December 31, 1998, cost of sales 
  -------------                                                             
increased by 58% to $20,281,131 compared to $12,817,738 for the prior period,
representing 69.8% and 71.5% of the total revenue, respectively. The cost of
sales as a percentage of net revenue (total of "sales solutions" and "sales
services") decreased during the year ended December 31, 1998 because sales of
services increased as a percentage of net revenue from 7.3% up to 12.6%. Cost of
sales consists exclusively of the Company's cost for the hardware acquired for
resale as part of its information systems solutions.

                                       15
<PAGE>
 
     Gross Profit.  The Company's gross profit margin for the year ended
     ------------                                                       
December 31, 1998 was 30.2% compared to 28.5% for the prior year period. The
increase in gross margin is due to  the Company's  strategy of emphasizing the
sale of higher margin stand alone consulting and integration services.

     Selling, General, Administrative and Consulting Expenses.  The Company's
     --------------------------------------------------------                 
selling, general, administrative and consulting expenses as a percentage of net
revenue increased between the year ended December 31, 1998 (25.0%) and the prior
year period (24.2%).  This trend is the consequence of the Company's strategy to
increase sales of services which required that the Company hire additional
service and consulting personnel.

     Fiscal 1997 Compared to Fiscal 1996

     Net Revenue. During the 12 months ended December 31, 1997, COPE had net 
     -----------     
revenue of $17,916,171, which amounts to an increase of 43% over the net revenue
of $12,515,123 during the prior year period as a result of further market share
increase. Sales of solutions increased 40% during 1997 reaching $16,605,175 as
compared to $11,834,701 during the prior year. This increase is primarily due to
a significant increase in market share in Germany and Austria. Net revenue in
these markets grew by approximately 83% in 1997 as compared to growth of
approximately 40% in 1996. Sales of services increased 92% during the year
reaching $1,310,996 as compared to $680,422 in 1996. This increase is due to
increased demand for consulting services as a result of greater market share.

     Cost Of Sales.  During fiscal year 1997, cost of sales increased by 45.2%
     -------------                                                         
to $12,817,738 compared to $8,829,711 for the prior year, representing 71.5% 
and 70.6% of the total revenue, respectively. Cost of sales consists
exclusively of COPE's cost for the hardware acquired for resale as part of its
information systems solutions.

     Gross Profit.  The Company's gross profit margin for fiscal 1997 was 28.5%
     ------------                                                              
compared to 29.4% for the prior year. The slight decrease in gross margin is due
in part to an increase in hardware costs. A portion of the increase in hardware
costs is due to a stronger US dollar during 1997 as compared to the Swiss franc
as almost all of the purchases of hardware are US dollar denominated. Gross
margins in Switzerland and Austria increased in 1997 over those of 1996.
However, Germany has not seen this same trend as consulting services have not
reached the same levels obtained in the other countries.

     Selling, General, Administrative and Consulting Expenses.  COPE's selling,
     --------------------------------------------------------                  
general, administrative and consulting expenses as a percentage of net revenue
were substantially unchanged between fiscal 1997 (24.2%) and fiscal 1996
(23.5%).

Liquidity And Financial Condition

     The Company's historical working capital requirements include the financing
of all costs involved in the design, implementation and sale of data storage and
security systems. The Company generally contracts to deliver such systems,
including all hardware and software, on a turn-key basis pursuant to fixed price
contracts. Consistent with industry practice, the Company generally is not able
to obtain significant up-front or progress payments on its contracts providing
for the design, implementation and sale of information systems. Accordingly, the
Company is generally required to finance its clients' contracts, including the
purchase of the hardware and software components of the systems. The Company's
principal sources of working capital are cash from operations and operating
lines of credit in the maximum amount of $2,812,083 as of December 31, 1998. The
Company has been successful to date in securing extensions on its lines for
purposes of financing certain client contracts as needed, however there can be
no assurance that the Company will continue to do so in the future.

     As of December 31, 1998, the Company had working capital of approximately
$155,663, compared to a working capital position of $860,761 as of December 31,
1997. The principal reasons for the decrease in working capital is the increase
in short-term borrowings which were used to accomplish the Forum acquisition and
to purchase additional equipment.

                                       16
<PAGE>
 
     While the Company believes that its available working capital, including
presently available credit lines, is adequate for its current working capital
requirements, the Company believes that it will require significant additional
working capital in order to finance continued growth.  However, if its capital
requirements vary materially from those currently planned, the Company may
require additional financing sooner than anticipated. In such case, additional
financing may not be available when needed on terms favorable to the Company or
at all.

Year 2000 Issue

     The Year 2000 issue is the result of computer programs, microprocessors,
and embedded date reliant systems using two digits rather than four to define
the applicable year. If such programs are not corrected, date data concerning
the Year 2000 could cause many systems to fail, lock up or generate erroneous
results. The Company considers a product to be "Year 2000 compliant" if the
product's performance and functionality are unaffected by processing of dates
prior to, during and after the Year 2000, but only if all products (for example
hardware, software and firmware) used with the product properly exchange
accurate date data with it.

     The Company believes that it may be possible that litigation may be brought
against vendors, including the Company, of all component products of systems
that are unable to properly manage data related to the Year 2000.  The Company's
agreements with customers and end users typically contain provisions designed to
limit the Company's liability for such claims.  It is possible, however, that
these measures will not provide protection from liability claims, as a result of
existing or future federal, state or local laws or ordinances or unfavorable
judicial decisions.  Any such claims, with or without merit, could result in a
material adverse effect on the Company's business, financial condition and
results of operations, customer satisfaction issues and potential lawsuits.

     The Company is identifying Year 2000 dependencies in its accounting
software in Germany and other systems, equipment, and processes and is
implementing changes to such systems, updating or replacing such equipment, and
modifying such processes to make them Year 2000 compliant. The Company is
continuing to assess its internal Year 2000 issues and is in the process of
remediation of the critical systems. While management believes the Company's
current accounting software systems in the other countries of operations appear
to be Year 2000 compliant, the Company intends to upgrade all those systems
during fiscal 1999, and will ensure that Year 2000 compliance is a major factor
in the selection of the appropriate accounting software package. The Company has
also initiated formal communications with many of its significant suppliers and
financial institutions to evaluate their Year 2000 compliance plans and state of
readiness and to determine whether any Year 2000 issues will impede the ability
of such suppliers to continue to provide goods and services to the Company. As a
general matter, the Company is vulnerable to any failure by its key suppliers to
remedy their own Year 2000 issues, which could delay shipments of essential
components, thereby disrupting or halting the Company's manufacturing
operations. Further, the Company also relies, both domestically and
internationally, upon governmental agencies, utility companies,
telecommunication service companies and other service providers outside of the
Company's control. There is no assurance that such suppliers, governmental
agencies, financial institutions, or other third parties will not suffer
business disruption caused by a Year 2000 issue, and there is little practical
opportunity for the Company to test or require Year 2000 compliance from many of
those large agencies, companies or providers. Such failures could have a
material adverse effect on the Company's business, financial condition and
results of operations. Additionally, the Company is communicating with its large
customers to determine the extent to which the Company is vulnerable to those
third parties' failure to remedy their own Year 2000 issues.
  
     The Company anticipates that its internal systems, equipment and processes
will be substantially Year 2000 compliant by the end of October 1999. A formal
budget has not been established, and the cost to the Company of achieving Year
2000 compliance is evolving; however, it is not currently expected to have a
material effect on the Company's financial condition or results of operations.
The Company has to date spent approximately $30,000 to upgrade computer software
and hardware to insure Year 2000 compliance. The Company anticipates that the
cost of Year 2000 compliant software (including the upgraded accounting software
noted above) is not likely to exceed $50,000, (excluding the costs of the Year
2000 compliance problems associated with the Company's vendors, customers,
financial institutions and government agencies noted above) although the Company
believes that a significant amount of the total expenditures relating to the
replacement of such computer hardware and software to keep pace with
technological advances would be capitalized and depreciated over the useful life
of the applicable asset. The Company estimates that Year 2000 compliance charges
will be paid from existing Company working capital, and

                                       17
<PAGE>
 
that the total Year 2000 compliance budget is approximately 50% of the Company's
total IT expenditures. While the Company currently expects that the Year 2000
issue will not pose significant internal operational problems, delays in the
Company's remediation efforts, or a failure to fully identify all Year 2000
dependencies in the systems, equipment or processes of the Company or its
vendors, customers or financial institutions could have material adverse
consequences, including delays in the manufacture, delivery or sale of products.
Therefore, the Company is considering the development of contingency plans along
with its remediation efforts for continuing operations in the event such
problems arise.

Euro Conversion

     On January 1, 1999, eleven of the fifteen member countries of the European
Union ("EU") established fixed conversion rates between their existing sovereign
currencies and the Euro, and adopted the Euro as their common legal currency. A
significant portion of the Company's transactions will be denominated in Euros.
The Company has successfully adapted its information systems and practices to
accommodate the Euro in those EU member countries in which it offers its
services.

     Euro conversion is expected to generally increase cross-border price 
transparency among the participating countries and result in a more competitive 
European market. The Company is uncertain as to the effect, if any, that Euro 
conversion will have on its ability to sell its products and services in the 
European market. Euro conversion could potentially impact pricing strategies and
demand for the Company's services in the European market, lead to increased
competition within the European market for the specific types of services sold
by the Company, or impact the Company's relationships with vendors and
licensors. There can be no assurance that Euro conversion will not have a
material, adverse effect on the Company's business, financial condition and
results of operation.

Forward Looking Statements

     This report contains certain forward-looking statements that are based on
the Company's beliefs as well as assumptions made by and information currently
available to the Company. When used herein, the words "believe," "expect,"
"anticipate," "estimate" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to those risks,
uncertainties and assumptions, including (i) the Company's lack of any long term
agreements with its hardware and software vendors to sell products to the
Company; (ii) the risks and uncertainties associated with the policy of growth
through acquisitions, including the risks associated with the integration of
acquired businesses; (iii) the availability of additional capital as and when
required; (iv) the Company's ability to keep up with technological changes; (v)
increased competition; and (vi) general economic conditions. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated, or projected. The Company cautions stockholders of the Company and
potential investors not to place undue reliance on any such forward-looking
statements, all of which speak only as of the date made.

                                       18
<PAGE>
 
<TABLE> 
<CAPTION> 
Item 7.  Financial Statements                                                                           PAGE
                                                                                                        ----
<S>                                                                                                      <C> 
Report of Independent Auditors.............................................................................

Consolidated Balance Sheets as of December 31, 1998 and 1997...............................................

Consolidated Statements of Operations for the years ended December 31, 1998 and 1997.......................

Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998 and 1997.............

Consolidated Statements of Cash Flows for the years ended December 31, 1998 and 1997.......................

Notes to Consolidated Financial Statements.................................................................

</TABLE> 

                                       19
<PAGE>
 
                         REPORT OF INDEPENDENT AUDITORS


The Board of Directors and Shareholders of COPE, Inc.

We have audited the accompanying consolidated balance sheets of COPE, Inc. as of
December 31, 1998 and 1997, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the two years in the period
ended December 31, 1998.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of COPE,
Inc. at December 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles 
in the U.S.

                                          ATAG Ernst & Young Ltd.



                               Kevin McCabe              Yves Vontobel
                               Chartered Accountant      Certified Accountant

Zurich, Switzerland

March 26, 1999
except as to Note 18 for which the date is April 19, 1999
<PAGE>



COPE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in U.S. Dollars)

<TABLE>
<CAPTION>

                                                               December 31,      December 31,
ASSETS                                                             1998              1997
                                                               ------------      ------------          
<S>                                               <C>          <C>               <C> 
Current assets
Cash and cash equivalents                                       $1,303,114          $678,936
Trade accounts receivable                                        5,418,777         3,622,485
Inventories (net of provision of $89,445 and $0)                 2,433,790         1,383,191
Other current assets                              Note 5           450,013           318,182
                                                               ------------      ------------          
                                                        
Total current assets                                             9,605,694         6,002,794
                                                               ------------      ------------          
                                                        
Property, plant and equipment, net                Note 6           751,235           570,475
Loans receivable                                                   662,050           394,406
Goodwill (net of amortization of $59,855 and $0)  Note 4           777,714                 0
Intangible assets                                                  249,459           125,631
Deferred income taxes                             Note 11          592,495           309,652
                                                               ------------      ------------          
                                                                 3,032,953         1,400,164

                                                               ------------      ------------          
TOTAL ASSETS                                                   $12,638,647        $7,402,958
                                                               ============      ============
</TABLE>

See notes to the consolidated financials statements
<PAGE>

COPE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in U.S. Dollars)

<TABLE>
<CAPTION>

LIABILITIES AND                                                December 31,      December 31,
SHAREHOLDERS' EQUITY                                               1998              1997
                                                               ------------      ------------
<S>                                            <C>             <C>               <C> 
Liabilities
Current liabilities
Short-term borrowings                           Note 8          $2,385,303          $661,982
Trade accounts payable                                           5,650,422         3,027,118
Amounts due to related parties                                           0            97,984
Customer advances                                                  216,558           704,915
Other current liabilities                       Note 10            802,384           389,639
Current income taxes payable                                       179,012            49,349
Deferred income taxes                           Note 11            216,352           211,046
                                                               ------------      ------------
Total current liabilities                                        9,450,031         5,142,033
                                                               ------------      ------------

Commitments and contingent liabilities          Note 15

Shareholders' equity
Share capital:                                                                               
 Common stock, $0.001 par value                                      3,153             2,862 
 Authorized shares 30,000,000 (2,862,000 in 1997)
 Issued and outstanding shares 3,152,861 (2,862,000 in 1997)
Additional paid in capital                                         506,031           767,785
Accumulated other comprehensive income
  Cumulative translation adjustment                                 31,852          (145,731)
Retained earnings                                                2,647,580         1,636,009
                                                               ------------      ------------

Total shareholders' equity                                       3,188,616         2,260,925
                                                               ------------      ------------

TOTAL LIABILITIES AND                                          ------------      ------------
SHAREHOLDERS' EQUITY                                           $12,638,647        $7,402,958
                                                               ============      ============
</TABLE>

See notes to the consolidated financials statements
<PAGE>
 
COPE, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS DECEMBER 31, 1998  AND 1997
(Amounts in U.S. Dollars, except share amounts)

<TABLE>
<CAPTION>
                                                                   1998              1997
                                                              -------------     -------------
<S>                                                          <C>                <C> 
Net Revenue
Sales of solutions                                             $25,411,976       $16,605,175
Sales of services                                                3,647,174         1,310,996
                                                              -------------     -------------
Total revenue                                                  29,059,150        17,916,171
Cost of sales                                                  (20,281,131)      (12,817,738)
                                                              -------------     -------------
Gross profit                                                     8,778,019         5,098,433
                                                              -------------     -------------

Operating expenses

  Selling, general and administrative expenses                  (6,992,971)       (4,205,093)
  Consultancy expenses                                            (292,689)         (131,723)
  Depreciation and amortization                                   (399,940)         (220,363)
                                                              -------------     -------------
Total operating expenses                                        (7,685,600)       (4,557,179)
                                                              -------------     -------------

Operating income                                                 1,092,419           541,254

Other income (expense):
  Interest expense                                                (127,028)          (76,197)
  Interest income                                                   26,698               704
  Other                                                             30,786              (270)
  Foreign exchange gain                                              3,326            38,716
                                                              -------------     -------------
                                                                   (66,218)          (37,047)
                                                              -------------     -------------
Earnings before taxes                                            1,026,201           504,207

Current income taxes                                              (158,141)          (34,076)
Deferred income taxes                                              143,511           162,766
                                                              -------------     -------------
                                                                   (14,630)          128,690
                                                              -------------     -------------
Net income                                                      $1,011,571          $632,897
                                                              =============     =============

Basic earnings per share                                             $0.34             $0.23
Diluted earnings per share                                           $0.34             $0.23

Weighted average shares outstanding                              2,936,589         2,740,833
Dilutive effect of stock options                                    12,120                 0
                                                              -------------     -------------
Diluted average shares outstanding                               2,948,709         2,740,833
                                                              -------------     -------------
</TABLE>

See notes to the consolidated financials statements
<PAGE>
 
COPE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS  ENDED DECEMBER 31, 1998 AND 1997
(Amounts in U.S. Dollars)

<TABLE>
<CAPTION>
                                                                   1998             1997
                                                              -------------    --------------
<S>                                                           <C>              <C> 
Cash flow provided by operating activities
Net income                                                      $1,011,571          $632,897

Adjustment to reconcile net income to net cash
  provided by operating activities

  Depreciation                                                     224,375           220,363
  Amortization                                                     175,565                 0
  Deferred income taxes                                           (143,511)         (162,766)
  Gain on disposal of fixed assets                                  (2,284)                0

Effects of changes in operating assets and liabilities
  excluding effects of business acquired
  Accounts receivable                                            1,050,835        (1,530,889)
  Inventories                                                      144,251          (488,492)
  Other current assets                                             160,857          (226,326)
  Accounts payable                                              (2,009,336)          736,413
  Customer advances                                                      0           704,915
  Other current liabilities                                        112,986           404,820
                                                              -------------    --------------

Net cash flow provided by operating activities                     725,309           290,935

Cash flow used in investing activities
  Purchase of property, plant and equipment                       (370,208)         (585,881)
  Loans receivables                                                (38,216)         (394,406)
  Purchase of intangible assets                                          0           (80,138)
  Proceeds from sale of property, plant and equipment                5,249             4,653
  Acquisition of business / net of cash acquired                  (187,322)                0
                                                              -------------    --------------

Net cash flow used in investing activities                        (590,497)       (1,055,772)

Cash flow provided by financing activities
  Issuance of capital stock                                        152,320           694,311
  Increase of short term borrowings                                648,515           502,770
  COPE reorganization                                             (371,112)                0
                                                              -------------    --------------

Net cash flow provided by financing activities                     429,723         1,197,081

Effect of exchange rate changes on cash                             59,643           (15,355)

Net increase of cash and cash equivalents                          624,178           416,889

Cash and cash equivalents at beginning of the period               678,936           262,047
                                                              -------------    --------------

Cash and cash equivalents at end of the period                  $1,303,114          $678,936
                                                              =============    ==============
Supplemental cash flow disclosure
   Interest paid                                                  $127,028           $76,197
   Income taxes paid                                                32,478            22,643

</TABLE>

<PAGE>
 
COPE, INC.  
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AS OF DECEMBER 31, 1998 AND 1997
(Amounts in U.S. Dollars)

<TABLE>
<CAPTION>
                                                                                                   Accumulated other      Total
                                                  Number     Share      Additional      Retained     comprehensive    shareholders'
                                                of shares   capital   paid in capital   earnings        income           equity
                                                ---------   -------   ---------------   --------   -----------------   ------------

<S>                                            <C>          <C>          <C>          <C>             <C>              <C>
Balance at January 1, 1997, as restated (1)     2,700,000    2,700         73,636       1,003,112        (74,420)        1,005,028
                                                                                                                   
Net income                                                                                632,897                          632,897
Foreign currency translation adjustments                                                                 (71,311)          (71,311)
                                                                                                                   ---------------
Total other comprehensive income                                                                                           561,586
                                                                                                                   ---------------
Issuance of share capital                         162,000      162        694,149                                          694,311
                                              -----------  -------  -------------  --------------  --------------  ---------------
Balance at December 31, 1997                    2,862,000    2,862        767,785       1,636,009       (145,731)        2,260,925
                                              -----------  -------  -------------  --------------  --------------  ---------------
                                                                                                                  
Net income                                                                              1,011,571                        1,011,571
Foreign currency translation adjustments                                                                 177,583           177,583
                                                                                                                   --------------- 
Total other comprehensive income                                                                                         1,189,154
                                                                                                                   ---------------
COPE Reorganization                               270,654      271       (414,054)                                        (413,783)
Issuance of share capital                          20,207       20        152,300                                          152,320
                                              -----------  -------  -------------  --------------  --------------  ---------------
Balance at December 31, 1998                    3,152,861    3,153        506,031       2,647,580          31,852        3,188,616
                                              -----------  -------  -------------  --------------  --------------  ---------------
</TABLE> 

(1) Share capital and additional paid in capital have been retroactively
restated to give effect to the COPE Reorganization (see Note 2 to the
consolidated financial statements)

<PAGE>
 
                                  COPE, INC.
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 1998 AND 1997
                                        

Note 1- Basis of Presentation

The accompanying consolidated financial statements present the consolidated
operations of COPE, Inc., a Delaware corporation formerly known as Harrier,
Inc., and its wholly-owned subsidiaries (collectively hereinafter referred to as
the "Company"). The accompanying consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP"). 

Nature of Operations

COPE Inc. is a Swiss-based provider of data storage consulting, services and
solutions. With its main corporate offices located in Rotkreuz, Switzerland,
this Delaware corporation also conducts business in Germany and Austria.

Note 2- Reorganization

On September 11, 1998, the shareholders of the Company approved a series of
transactions (referred to as the "COPE Reorganization") undertaken pursuant to
an Amended and Restated Securities Purchase Agreement and Plan of Reorganization
dated July 24, 1998 ("Reorganization Agreement") by and among the Company, COPE
Holding AG, a Swiss corporation and the shareholders of COPE Holding AG ("COPE
Shareholders"), as described below.

On September 11, 1998, the Company filed a Certificate of Amendment to its
Certificate of Incorporation in order to change its name from Harrier, Inc. to
COPE, Inc. and to affect a 1 for 58 reverse split of its outstanding common
stock.  As a result of the reverse split, the shares of common stock of the
Company outstanding immediately prior to the COPE Reorganization were reduced to
approximately 270,654 shares.

Pursuant to the Reorganization Agreement, on September 25, 1998, the Company
issued 2,862,000 shares (post-split) of its common stock in exchange for all of
the outstanding capital shares of COPE Holding AG. At the completion of the
COPE Reorganization, the Company had approximately 3,132,634 shares (post-split)
of its common stock outstanding, approximately 91.4% of which were held by the
former COPE shareholders.

Also on September 25, 1998, and immediately prior to the Company's issuance of
2,862,000 shares (post-split) of its common stock in exchange for all of the
outstanding capital shares of COPE Holding AG, the Company consummated the
transactions under that certain Common Stock Purchase Agreement dated September
11, 1998 between the Company and New Capital Investment Fund, a Cayman Islands
Investment Fund ("NCIF"), and that a certain Assignment and Assumption Agreement
dated September 11, 1998 between the Company and Glycosyn Pharmaceuticals, Inc.,
a Delaware corporation ("Glycosyn") (collectively, the "Glycosyn Agreements").
Pursuant to the terms of the Glycosyn Agreements, NCIF purchased from the
Company 2,850,000 shares of the common stock of the Company's subsidiary,
Glycosyn, in consideration of NCIF's cancellation of all of the indebtedness
owed to it by the Company ($610,167 as of March 31, 1998), and (ii) Glycosyn
acquired all of the assets and assumed all of the liabilities of the Company as
they existed immediately prior to the consummation of the COPE Reorganization on
September 25, 1998.

Since the COPE Shareholders owned approximately 91.4% of the outstanding shares
of the common stock of the Company after giving effect to the COPE
Reorganization, COPE Holding AG was deemed the accounting acquirer and the
Company's acquisition of COPE Holding AG has been accounted for as a reverse
merger under the purchase method. Accordingly, from an accounting standpoint,
COPE's equity is carried forward as the equity of the combined entity. COPE
Holding AG is assumed to have acquired the Company and therefore the assets and
liabilities of the Company as they existed immediately prior to the consummation
of the COPE Reorganization, after giving effect to the consummation of the
transactions under the Glycosyn Agreements, have been recorded at fair value as
required by the purchase method. This adjustment reflects the elimination of the
Company's equity and accumulated deficit.

Prior to the COPE Reorganization, COPE Holding AG had 1,060 shares of capital
stock issued and outstanding. As a result of the COPE Reorganization, the COPE
Shareholders were issued 2,862,000 shares of the Company's common
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997
                                
stock in exchange for all of the outstanding capital shares of COPE Holding AG.
In effect, for accounting purposes, the COPE Shareholders received a 2,700 to 1
split of their shares since COPE Holding AG was deemed to be the accounting
acquirer. Shareholders' equity and earnings per share amounts have been
retroactively restated for the equivalent number of shares received by COPE
Holding AG as a result of the COPE Reorganization. Differences between the par
value of capital stock of COPE Holding AG outstanding prior to the COPE
Reorganization and the par value of the Company's common stock subsequent to
completion of the COPE Reorganization have been recorded against paid-in
capital.

On October 1, 1998, the Company determined that it would change its fiscal year
end from June 30 to December 31, the fiscal year end of COPE Holding AG.



Note 3 - Summary of Significant Accounting Policies

Principles of Consolidation
The accompanying consolidated financial statements include the accounts of COPE,
Inc. and its wholly owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.

Significant Estimates
The preparation of financial statements in conformity with U.S. GAAP 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 revenue and
expenses during the periods. Actual results could differ from these estimates.

Revenue Recognition
Consulting revenue is recognized at the time of delivery of the service.

Revenue from the sale of hardware and related software is recognized at the time
of acceptance by the customer, generally after installation at a customer's
site. Revenue from certain customer-installable products is recognized at the
time of shipment.

End users of equipment sold by the Company generally contract with the Company
for equipment service and software support, which includes normal maintenance
and repair or replacement of product components. Revenue from these service and
support contracts is recognized ratably over the term of the contract and the
cost associated with these activities is expensed as incurred.


Warranty
Product warranty is provided by the original equipment manufacturer. The Company
only warrants the services provided. Costs associated with post-installation
warranty obligations are estimated and accrued at the time of revenue
recognition, if significant.

Customer Advances
Customer advances include advance payments on contracts in progress at year end.
These amounts will be recognized as income after acceptance by the customers.

Cash and Cash Equivalents
Cash and cash equivalents include cash deposited in demand deposits at banks and
highly liquid investments with original maturities of three months or less.

Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
the weighted average cost method. Inventories consist of finished products held
for resale.
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997


Property, Plant and Equipment
Property, plant and equipment are carried at cost and are generally depreciated
using the straight-line method over the estimated useful lives of the assets.
The useful lives utilized for this purpose are:

    Machinery and equipment.............................  3 - 5 years
    Leasehold improvements...........  10 years or shorter lease term

Goodwill
Goodwill represents the cost in excess of net assets acquired on business
acquisitions and is amortized on a straight-line basis over seven years. The
Company periodically evaluates the realizability of the carrying value of
goodwill by assessing current conditions and estimates of future cash flows.

Impairment of Long-lived Assets
The Company reviews long-lived assets and certain identifiable intangibles to be
held and used or disposed of for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. Where the undiscounted cash flows is less than the carrying amount
of the asset, the asset is written down to its net realizable value measured on
the basis of discounted expected cash flows.

Intangible Assets
Intangible assets are carried at cost and are generally depreciated using the
straight-line method over the estimated useful lives of the assets. The useful
lives utilized for this purpose are:

    Licenses............................................  3 - 5 years
    Startup costs for business operations ..............      5 years
    Trademarks..........................................      5 years

Foreign Currencies
The financial statements of each of the Company's subsidiaries are measured in
the currency in which that entity primarily conducts its business (the
functional currency). The functional currency of all the Company's non-United
States subsidiaries is the applicable local currency.

Assets and liabilities denominated in foreign functional currencies are
translated into United States dollars ("USD" or "$") at the exchange rate as of
the balance sheet date. Income statement accounts denominated in foreign
functional currencies are translated using the average exchange rate for the
period. Translation adjustments resulting from this process are recorded as a
component of other comprehensive income and are accumulated in a separate
component of shareholders' equity.

Foreign currency transaction gains and losses resulting from the settlement of
amounts receivable or payable denominated in a currency other than the
functional currency are credited or charged to income.

A certain amount of the Company's purchases are settled in USD and the Company
enters into forward exchange contracts for the purchase of USD. Since there are
no firm purchase commitments, such exchange contracts do not qualify as a hedge
under FAS 52 and, accordingly, the gains or losses are included in the income
statement in the period in which the exchange rates change occurred.

Income Taxes
The Company accounts for certain income and expense items differently for
financial reporting purposes than for tax purposes. Provisions for deferred
taxes are made in recognition of such temporary differences, following the
requirements of Statement of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes".


Other Comprehensive Income
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income"
which requires presentation of comprehensive income and its components in the
financial statements.  Comprehensive income consists of net income and foreign
currency translation adjustments and is presented in the Consolidated Statements
of 
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997

Shareholders' Equity. The adoption of SFAS No. 130 had no impact on net income
or total shareholders' equity. Prior year financial statements have been
reclassified to conform to the SFAS No. 130 requirements.

Earnings per Share

In 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings
Per Share".  SFAS No. 128 replaced the calculation of primary and fully diluted
earnings per share with basic and diluted earnings per share. Basic earnings per
share is calculated by dividing net income by the weighted average shares
outstanding. The computation of diluted earnings per share is similar to basic
earnings per share except that it assumes that the weighted average shares
outstanding is increased by shares issuable upon exercise of those stock options
for which market price exceeds exercise price. Weighted average shares have been
retroactively restated for the equivalent number of shares received by COPE
Holding AG as a result of the COPE Reorganization (See Note 2).

Derivatives and Hedging Activities

In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is required 
to be adopted in years beginning after June 15, 1999. Because of the Company's 
minimal use of derivatives, management does not anticipate that the adoption of 
the new Statement will have a significant effect on earnings or the financial 
position of the Company.

Reclassifications

Certain prior year amounts have been reclassified in order to conform to the
current year presentation.


Note 4 - Business Acquisition

On June 25, 1998, COPE Holding AG acquired all of the capital shares of Forum
GmbH ("Forum"), a German data storage company, for $962,977. The acquisition of
Forum has been accounted for by the purchase method of accounting. Accordingly,
the operating results of Forum have been included in the consolidated operating
results from the date of acquisition. The excess of the purchase price over the
fair value of net assets acquired was $837,569 and has been recorded as
goodwill, which is being amortized on a straight line basis over seven years.
The acquisition was financed through available cash on hand and short term
borrowings.

The following unaudited pro forma information presents a summary of the
consolidated results of operations of the Company as if the acquisition had
taken place on January 1, 1997.

<TABLE> 
<CAPTION> 
                                                  Year ended December 31,
                                               ---------------------------------
                                                    1998                1997
                                               -------------       -------------
<S>                                            <C>                 <C>   
Revenues                                       $  36,744,704       $  28,321,655
Net income                                         1,023,002             422,595
Basic earnings per share                                0.35                0.15
Diluted earnings per share                              0.35                0.15
</TABLE>

These unaudited pro forma results have been prepared for comparative purposes
only and include certain adjustments such as additional amortization expense as
a result of goodwill.  They do not purport to be indicative of the results of
operations which actually would have resulted had the acquisition occurred on
January 1, 1997, or which may result in the future.
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997

Note 5 - Other Current Assets

   Other current assets consist of the following:
<TABLE>
<CAPTION>
                                                                                                       December 31,
                                                                                         -----------------------------------
                                                                                                1998                 1997
                                                                                         ---------------       -------------
<S>                                                                                   <C>                  <C>
Deferred costs                                                                          $              0       $     138,821
Prepaid expenses                                                                                 358,170             108,398
Value Added Taxes                                                                                 37,977              43,485
Other                                                                                             53,866              27,478
                                                                                        ----------------       -------------
Total other current assets                                                              $        450,013       $     318,182
                                                                                         ===============       =============
</TABLE>


Note 6 - Property, Plant and Equipment

<TABLE>
<CAPTION>
Property, plant and equipment consist of the following:
                                                                                                       December 31,
                                                                                          ------------------------------------
                                                                                                 1998                  1997
                                                                                          --------------        --------------
<S>                                                                                     <C>                   <C>
Leasehold improvements                                                                  $        210,529        $       35,347
Machinery and equipment                                                                        1,402,887             1,138,946
Accumulated depreciation                                                                        (862,181)             (603,818)
                                                                                        ----------------        --------------
Total property, plant and equipment, net                                                $        751,235        $      570,475
                                                                                          ==============        ==============
</TABLE>


Note 7 - Loans Receivable

Loans receivable bear interest at market rates ranging from 5.0 to 6.5 %.
Approximately $ 26,000 and $ 39,000 of the balance is due from employees as of
December 31, 1998 and 1997, respectively.


Note 8 - Short-term Borrowings

As of December 31, 1998, the Company had established short-term overdraft
facilities under which the Company and its subsidiaries could borrow up to
$2,812,083. Amounts drawn down under these facilities are due on demand and
collateralized by accounts receivable of the Company and life insurance policies
on the major shareholders, Mr. A. Knapp and Mr. S. Isenschmid, for $342,700
each.

Amounts outstanding at December 31, 1998 and 1997 total $2,385,303 and 
$661,982 respectively. As of December 31, 1998, the Company had approximately 
$426,780 available under these facilities. The weighted average interest rate
on amounts outstanding was 5.0 and 7.0 % at December 31, 1998 and 1997,
respectively. Interest paid for the years ending December 31, 1998 and 1997,
amounted to $127,028 and $76,197, respectively.


Note 9 - Pension plans

Substantially all of the Company's employees are covered by government pension
plans administered by the respective countries' governmental authorities. The
employees' contributions are based on a percentage of gross salary. The Company
generally contributes an amount equal to that contributed by the employees. The
cost of
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997

these plans, charged to operations,  for the years ended December 31,
1998 and 1997 was $ 446,528 and $ 226,904, respectively.  The Company provides
no additional pension or post-retirement benefits.

Note 10 - Other Current Liabilities

   Other current liabilities consist of the following:
<TABLE>
<CAPTION>
                                                                                                   December  31,
                                                                                          ----------------------------------
                                                                                                1998                1997
                                                                                         --------------      --------------
<S>                                                                                      <C>                 <C>
Value Added Taxes                                                                         $      363,297      $       87,691 
Legal, professional and other  fees                                                               61,140              67,190
Personnel and social security expenses                                                           314,138             176,170
Other                                                                                             63,809              58,588
                                                                                          --------------      --------------
                                                                                          $      802,384      $      389,639
                                                                                          ==============      ==============
</TABLE>
<PAGE>
        
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997

Note 11 - Income Taxes

Pretax income for the years ended December 31, 1998 and 1997 was taxed in
the following jurisdictions:

<TABLE>
<CAPTION>

                                                                                                 Years ended December 31,
                                                                                         ----------------------------------------
                                                                                                1998                1997
                                                                                         ---------------       ------------------
<S>                                                                                      <C>                   <C>
Switzerland                                                                              $     1,242,682       $        994,782
Other                                                                                           (216,481)              (490,575)
                                                                                         ---------------       ------------------
                                                                                         $     1,026,201       $        504,207
                                                                                         ===============       ==================
</TABLE>


Components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                                                                   Years ended December 31,
                                                                                         ----------------------------------------
                                                                                                1998                1997
                                                                                         -------------         ------------------
<S>                                                                                      <C>                  <C>
Current:
   Switzerland                                                                           $       154,113       $         34,688
   Other                                                                                           4,028                   (612)
                                                                                         ---------------       ------------------
Total current                                                                                    158,141                 34,076
                                                                                         ---------------       ------------------

Deferred:
   Switzerland                                                                                    (6,973)                39,074
   Other                                                                                        (136,538)              (201,840)
                                                                                         ---------------       ------------------
Total deferred                                                                                  (143,511)              (162,766)
                                                                                         ---------------       ------------------
                                                                                         $        14,630       $       (128,690)
                                                                                         ===============       ==================
</TABLE>



The Company has net deferred tax assets (liabilities) as of December 31, 1998
and 1997 as follows:

<TABLE>
<CAPTION>

                                                                                                          December 31,
                                                                                         ----------------------------------------
                                                                                                1998                     1997
                                                                                         ----------------------------------------
<S>                                                                                      <C>                  <C>
Non-current deferred tax assets:
   Net operating losses                                                                  $       592,495       $        309,652
                                                                                         ---------------       ----------------
                                                                                                 592,495                309,652
                                                                                         ---------------       ----------------
Deferred tax liabilities:
   Inventories                                                                                  (100,265)               (94,629)
   Trade accounts receivable                                                                     (23,529)               (22,207)
   Deductible provisions eliminated on consolidation                                             (69,029)               (65,150)
   Warranty accrual                                                                              (23,529)               (18,814)
   Other                                                                                               0                (10,246)
                                                                                         ---------------       ----------------
                                                                                                (216,352)              (211,046)
                                                                                         ---------------       ----------------
Net deferred tax assets                                                                  $       376,143       $         98,606
                                                                                         ===============       ================

Management believes it is  more likely than not  that all deferred tax assets are realizable.

</TABLE>
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997


A reconciliation of income taxes determined using the applicable rate to actual
income taxes provided, is as follows:

<TABLE>
<CAPTION>
                                                                                                     Years ended December 31,
                                                                                             ------------------------------------
                                                                                                    1998                  1997
                                                                                             ---------------       --------------
<S>                                                                                          <C>                   <C>
Income tax expense at the applicable rate                                                    $        57,391       $      (26,374)
of 5.59% (-5.23% in 1997)
Tax rate change on opening deferred taxes                                                            (18,021)             (65,400)
Release of overprovision in prior year                                                                     0              (13,833)
Permanent differences                                                                                (34,684)             (25,091)
Losses with no tax benefit                                                                             9,326                    0
Other                                                                                                    618                2,008  
                                                                                             ---------------       --------------
                                                                                             $        14,630       $     (128,690)
                                                                                             ===============       ==============
</TABLE>

The applicable tax rate is obtained by aggregating the separate reconciliations
prepared using the domestic rate in each individual jurisdiction in which the
Company operates. The negative applicable rate obtained in 1997 results from
losses incurred in jurisdictions with high domestic tax rates. In 1998, fewer 
net losses were incurred in such jurisdictions.

At December 31, 1998, the Company had German and Austrian net loss carryforwards
for tax purposes of approximately $ 955,441 and $ 237,160 respectively. Under
applicable German and Austrian tax laws, the net operating losses can be carried
forward for an indefinite period of time.
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997

Note 12 - Stock Options and Stock Purchase Warrants

During 1998, the Company adopted the 1998 Stock Option Plan ("1998 Plan")
provides for the granting of either incentive stock options or non-qualified
stock options to employees, officers, directors, consultants and independent
contractors of the Company. Under the 1998 Plan, the Company is authorized to
grant a maximum of 400,000 stock options for terms of up to ten years (five
years in the case of incentive stock options granted to greater than 10%
stockholders).  Options are subject to forfeiture upon termination of employment
or other relationship with the Company and the 1998 Plan terminates in August
2008.  During 1998, options to purchase 167,500 shares of the Company's common
stock were issued to employees and non-employee directors of the Company, all of
which remain outstanding as of December 31, 1998.

Summary information about the Company's stock options outstanding as of December
31, 1998:

<TABLE>
<CAPTION>

                                                     Weighted
                                                     Average            Weighted                             Weighted
Range of exercise prices          Options         Remaining Life        Average            Options            Average
                                Outstanding          in Years        Exercise Price      Exercisable      Exercise Price
-------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                  <C>              <C>                <C>                <C>
$8.40 - $8.50                        59,500              1.44             $ 8.40                  -                 -
$13.00 - $15.00                     108,000              5.01              13.46                  -                 -
-------------------------------------------------------------------------------------------------------------------------
$8.40 - $15.00                      167,500              3.74             $11.66                  -                 -
-------------------------------------------------------------------------------------------------------------------------
</TABLE>


The Company applies Accounting Principles Board Opinion No. 25 in accounting for
its stock options. All options outstanding were granted at prices which were
above market price as of the date of grant and, accordingly, no compensation
expense has been recognized.  Had compensation expense for the Company's stock-
based compensation plans been determined consistent with SFAS 123 "Accounting
for Stock-Based Compensation", the impact on the Company's net earnings and
earnings per share would have been as follows:

<TABLE>
<CAPTION>
                                                                                                               Years ended
                                                                                                              December 31,
                                                                                                                  1998
                                                                                                          ------------------
<S>                                                                                                      <C>
Net income as reported                                                                                    $        1,011,571
Pro forma net income                                                                                                 948,934
Basic earnings per share:
   As reported                                                                                            $             0.34
   Pro forma                                                                                                            0.32
Diluted earnings per share:
   As reported                                                                                            $             0.34
   Pro forma                                                                                                            0.32
</TABLE>

The pro forma results reflect amortization of the fair value of stock options
over the vesting period. The weighted average fair value of options granted in
1998 was $5.44. The fair value of each option grant was estimated on the date of
grant using a Black-Scholes option pricing model, assuming a dividend yield of
0% for all years, a weighted average risk free interest rate of 4.7% and a
volatility factor of 60% to 75%.

Additionally, as of December 31, 1998, there were 29,793 stock purchase warrants
outstanding which were exercisable at $7.54 per share.  The warrants expire
from April 1 to  October 14, 2000.
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997

Note 13 - Related Party Transactions

Adrian Knapp, Chairman of the Board of Directors, has been an employee of the
Company since July 1, 1997. For the year ended December 31, 1998 and the six
months from July to December 31, 1997, he earned a salary of $ 108,787 and 
$53,461, respectively. Prior to July 1, 1997, his services were charged to the
Company by Adrian Knapp Consulting, a sole proprietorship owned by Mr. Knapp.
Mr. Knapp is a major shareholder, holding approximately 41.1% of the issued
share capital.

Mr. Isenschmid, Chief Executive Officer of the Company, has been an employee of
the Company since July 1, 1997. For the year ended December 31, 1998 and the six
months from July to December 31 1997, he earned a salary of $ 135,983 and 
$53,461, respectively. Prior to July 1, 1997, his services were charged to the
Company by STI Marketing- und Organisationsberatung, a sole proprietorship owned
by Mr. Isenschmid. Mr. Isenschmid is a major shareholder, holding approximately
41.1% of the issued share capital.

As of December 31, 1998 and 1997, the financial statements included the
following balances due from (to) related parties:

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                              ---------------------------
                                                                                    1998         1997
                                                                              ------------   ------------
<S>                                                                          <C>             <C>
A. Knapp                                                                      $         0    $  (118,874)
S. Isenschmid                                                                           0         20,890
                                                                              -----------    -----------
Net amount due to related parties                                             $         0    $   (97,984)
                                                                              ===========    ===========
</TABLE>


Note 14 - Leases

The Company has operating leases primarily for office space and equipment which
expire at various dates through the year 2002 with, in some instances, renewal
privileges. Certain leases provide for escalation of the rentals based on the
increase in the consumer price index and base mortgage rates. Operating lease
costs are charged to income as incurred.

The minimum annual rental commitments under long-term non-cancelable operating
leases as of December 31, 1998, were as follows:
<TABLE>
<CAPTION>
                                                                                         1998
                                                                                     ------------
      <S>                                                                            <C>
          1999                                                                       $  188,648
          2000                                                                          159,038
          2001                                                                          144,983
          2002                                                                           86,202
                                                                                     ----------
          Total future minimum lease payments                                        $  578,871
                                                                                     ==========
</TABLE>

Total rent expense for operating leases was approximately $168,970 and $120,484
for the years ended December 31, 1998 and 1997, respectively.

Note 15 - Commitments and Contingent Liabilities

Management is not aware of any matters that could give rise to any liability to
the Company that would have a material adverse effect on the Company's business,
financial condition or results of operations.
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997

Note 16 - Segment and Geographic Data

In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which superceded SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise".  SFAS No. 131 established
standards for the way that public business enterprises report information about
operating segments in annual financial statements. SFAS No. 131 also established
standards for related disclosures about products and services, geographic areas,
and major customers.  The adoption of SFAS 131 did not effect results of
operations or financial position, but did effect the disclosure of segment
information.

Management, via country managing directors, controls operations on a geographic
basis with subsidiaries located in Switzerland, Germany and Austria and uses
earnings before interest and taxes as its measure of segment profit or loss.
Each geographic area's operations comprise the following products and services:
(1) Solutions which consist of the design, implementation and management of
storage and security solutions including the sale of related software and
hardware; and (2) Services which consist of consulting, training and integration
services including operations and maintenance support. The enterprise-wide
disclosures regarding products and services are contained in the income
statement.

Information concerning the Company's reportable segments is summarized as
follows by location of operations (Intercompany sales are generally at purchase
cost):

<TABLE>
<CAPTION>
                                                                                Years ended December 31,
                                                                                 1998                1997
Total revenue:
<S>                                                                       <C>                 <C>
          Switzerland                                                     $   15,391,521      $   12,133,274
          Germany                                                             11,997,975           4,759,643
          Austria                                                              1,768,674           1,182,198
          Other                                                                        0             692,076
                                                                          --------------      --------------
                                                                              29,158,170          18,767,191
                                                                          --------------      --------------

Sales between geographic areas:
          Switzerland                                                            (37,743)           (182,757)
          Germany                                                                (31,974)            (76,220)
          Austria                                                                (29,303)            (49,789)
          Other                                                                        0            (542,254)
                                                                          --------------      --------------
                                                                                 (99,020)           (851,020)
                                                                          --------------      --------------
Total revenue from external customers:
          Switzerland                                                         15,353,778          11,950,517
          Germany                                                             11,966,001           4,683,423
          Austria                                                              1,739,371           1,132,409
          Other                                                                        0             149,822
                                                                          --------------      --------------
                                                                          $   29,059,150      $   17,916,171
                                                                          ==============      ==============

Depreciation and amortization
          Switzerland                                                     $      289,685      $      182,937
          Germany                                                                 91,124              31,579
          Austria                                                                 19,131               5,847
          Other                                                                        0                   0
                                                                          --------------      --------------
                                                                          $      399,940      $      220,363
                                                                          ==============      ==============
</TABLE>
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
                                                                                     Years ended December 31,
                                                                                  1998                      1997
Earnings before interest and taxes
<S>                                                                       <C>                       <C>
          Switzerland                                                      $    1,290,792            $    1,036,864
          Germany                                                                (184,280)                 (346,364) 
          Austria                                                                  47,447                  (117,797) 
          Other                                                                   (27,428)                    6,997
                                                                           --------------            --------------
                                                                           $    1,126,531            $      579,700
                                                                           ==============            ==============

Total Assets:
          Switzerland                                                      $    5,681,247            $    5,493,536
          Germany                                                               5,722,295                 1,544,735
          Austria                                                               1,125,184                   364,687
          Other                                                                   109,921                         0
                                                                           --------------            --------------
                                                                           $   12,638,647            $    7,402,958
                                                                           ==============            ==============
</TABLE> 

Note 17 - Financial Instruments

Fair Value

The carrying value of financial instruments such as cash and cash equivalents,
accounts receivable, accounts payable approximate their fair value due to the
short-term maturities of these instruments.
<PAGE>
 
                                  COPE, INC.
         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          DECEMBER 31, 1998 AND 1997

Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash and accounts receivable. The Company's
cash is principally denominated in Swiss Francs and is maintained principally
with one financial institution in Switzerland. The Company provides credit in
its normal course of business to a wide variety of customers and, generally,
requires no collateral from its customers. The allowance for non-collection of
accounts receivable ($ 0 in both, 1998 and 1997) is based upon management's
expectations of collectibility. In the years ended December 31, 1998 and 1997,
sales to the five biggest customers of the Company amounted to 36% and 29% of
consolidated net sales, respectively. Sales to one customer accounted for 14%
and 11% of consolidated sales in the years ended December 31, 1998 and 1997 .
The Company performs ongoing credit evaluations of its customers.

The Company enters into forward exchange contracts for significant U.S. Dollar
purchase transactions. At December 31, 1998, no such contracts were open. At
December 31, 1997, seven forward exchange contracts were open with settlement
dates from January to June 1998.

Note 18 - Subsequent Event

On April 19, 1999, COPE acquired Hicomp Software Systems GmbH ("Hicomp"), a
German software company, in a stock transaction accounted for as a pooling-of-
interest. COPE issued 420,000 new shares in exchange for all outstanding Hicomp
shares. Hicomp, headquartered in Hamburg, Germany, develops back-up and
retrieval software products. Its leading products, Hiback and Hibars, are multi-
platform back-up solutions recognized for performance and flexibility.
<PAGE>
 
Item 8.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure.

           None.

Part III

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

    The executive officers and directors of COPE, Inc., the positions held by
them and their ages as of April 20, 1999 are as follows:

<TABLE>
<CAPTION>
                    Name                              Age                                 Position
---------------------------------------------      -----------      -----------------------------------------------------
<S>                                                   <C>              <C>
Adrian Knapp                                           36              Chairman of the Board and Executive Vice President
Stephan Isenschmid                                     37              President, Chief Executive Officer and Director
Markus Bernhard                                        35              Chief Financial Officer
Peter Koch                                             73              Director
Markus Stalder                                         46              Director
Kevin DeVito                                           38              Director
</TABLE>

     Mr. Knapp has served as Chairman of the Board and Executive Vice President
of COPE, Inc. since September 25, 1998. Mr. Knapp co-founded COPE Holding AG in
1991 and has served as Chairman of the Board of that company since its
inception.

     Mr. Isenschmid has served as President, Chief Executive Officer and a
director of COPE, Inc. since September 25, 1998. Mr. Isenschmid co-founded COPE
Holding AG in 1991 and has served as President, Chief Executive Officer and a
director of that company since its inception.

     Mr. Bernhard has served as Chief Financial Officer of COPE, Inc. since
September 25,1998.  Mr. Bernhard has also served as Chief Financial Officer of
COPE Holding AG since September 1997.  From 1991 to September 1997, Mr. Bernhard
was employed as a Swiss certified accountant at Revisuisse Price Waterhouse.

     Mr. Koch has served as a director of COPE, Inc. since September 25, 1998.
Mr. Koch has served as General Manager of acp GmbH, a German-based distributor
of computer products and peripherals since 1991.

     Mr. Stalder has served as a director of COPE, Inc. since September 25,1998.
Mr. Stalder has been a partner in the law firm, Stalder & Murer, located in
Sihlbrugg, Switzerland, since 1991.  Stalder & Murer has acted as general
counsel to COPE Holding AG since 1991.


     Mr. DeVito has served as a director of COPE, Inc. since June 1992. From
1992 to September 25, 1998, Mr. DeVito served as Chief Executive Officer and
President of COPE, Inc., which during that period was known as Harrier, Inc.
Since 1996, Mr. DeVito has served as a principal of New Capital AG, a Zurich
based financial and management consulting firm.

     Each director holds office until his successor is elected and qualified or
until his earlier resignation in the manner provided in the Bylaws of the
Company. The Board of Directors has established an Audit Committee consisting of
Markus Stalder, Adrian Knapp and Kevin DeVito, with Mr. Stalder as Chairman.
The Audit Committee reviews the Company's independent auditors, the scope and
timing of their audit services and other services they are asked to perform, 
their report on the Company's financial statements following completion of the
their audit, and the Company's policies and procedures with respect to internal
accounting and financial controls. In addition, the Audit Committee makes annual
recommendations to the Board of Directors for the appointment of independent
auditors for the ensuing year. The Board of Directors has also established a
Compensation Committee consisting of Kevin DeVito, Markus Stalder and Adrian
Knapp, with Mr. DeVito as

                                       20
<PAGE>
 
Chairman. The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all officers of the Company and
reviews general policy matters relating to compensation benefits of employees of
the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the officers and directors of the Company and those persons who beneficially own
more than 10% of the outstanding shares of common stock of the Company to file
reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission (the "SEC"). Officers, directors and greater
than 10% beneficial owners are also required by rules promulgated by the SEC to
furnish the Company with copies of all Section 16(a) forms they file.

     Based solely upon a review of the copies of such forms furnished to the
Company, or written representations that no Form 5 filings were required, the
Company believes that during 1998 all Section 16(a) filing requirements
applicable to the officers, directors and greater than 10% beneficial owners of
the Company were complied with.

                                       21
<PAGE>
 
Item 10.  Executive Compensation And Other Information.



  Cash Compensation of Executive Officers

     The following table sets forth the cash compensation paid to the executive
officers of the Company for services rendered during the fiscal years ended
December 31, 1998, 1997 and 1996.

<TABLE>
<CAPTION>
                                                                                                          
                                    Annual Compensation                        Long-Term  Compensation
                          -------------------------------------------   --------------------------------------
                                                                                               Common Shares     
                                                              Other     Restricted Stock     Underlying Options  
                                                             Annual          Awards                Granted             All Other
Name and Position         Year      Salary      Bonus     Compensation        ($)                (# Shares)         Compensation(1)
-----------------       -------    --------    ------    -------------  ----------------     -------------------    ----------------

<S>                      <C>        <C>         <C>          <C>               <C>               <C>                    <C>
Stephan Isenschmid,       1998      139,000       -0-         -0-               -0-               56,000               12,000
 CEO                      1997          -0-       -0-         -0-               -0-                  -0-                  -0-
                          1996          -0-       -0-         -0-               -0-                  -0-                  -0-
Adrian Knapp, Vice        1998      108,000                                                       56,000               12,000
 President                1997          -0-       -0-         -0-               -0-                  -0-                  -0-
                          1996          -0-       -0-         -0-               -0-                  -0-                  -0-
</TABLE>
___________________
(1) Represents a car allowance of $1,000 per month.

                                       22
<PAGE>
 
<TABLE>
<CAPTION>
                                               Option/SAR Grants in Last Fiscal Year
                                                         Individual Grants
----------------------------------------------------------------------------------------------------------------------------------- 

                                  Number of Securities        % of Total Options/SARs
                                 Underlying Options/SARs      Granted to Employees in      Exercise or Base
          Name                         Granted (#)              Fiscal Year 1998              Price ($/Sh)    Expiration Date
-------------------             ------------------------      -----------------------      ---------------    ---------------
<S>                             <C>                           <C>                          <C>                 <C>
Stephan Isenschmid,                      3,000  (11)                   1.8%                       8.40              4/30/99
CEO,  and Adrian                         4,000  (2)                    2.4%                       8.40              3/31/00
Knapp, Chairman                          1,000  (3)                     (4)                       8.40              3/31/01
and Vice President(1)                    1,000  (5)                     (4)                       8.40              3/31/05
                                         3,000  (6)                    1.8%                      13.00             12/31/00
                                         7,000  (7)                    4.2%                      13.00             12/31/01
                                         6,000  (8)                    3.6%                      13.00             12/31/03
                                         8,000  (9)                    4.8%                      13.00             12/31/05
                                         4,000  (10)                   2.4%                      13.00             12/31/08
                                         1,000  (11)                    (4)                      13.00             12/31/99
                                         1,000  (6)                     (4)                      13.00             12/31/00
                                         1,000  (7)                     (4)                      13.00             12/31/01
                                         2,000  (8)                    1.2%                      13.00             12/31/03
                                         5,000  (9)                    3.6%                      13.00             12/31/05
                                         1,000  (11)                    (4)                      15.00             12/31/99
                                         1,000  (6)                     (4)                      15.00             12/31/00
                                         2,000  (7)                    1.2%                      15.00             12/31/01
                                         5,000  (8)                    3.6%                      15.00             12/31/03
____________________
</TABLE>

(1)  Mr. Isenschmid and Mr. Knapp each received options in the amounts and on
     the terms and conditions as set forth in table presented.
(2)  Options vest and first become exercisable on March 1, 2000.
(3)  Options vest and first become exercisable on March 1, 2001.
(4)  Less than one percent.
(5)  Options vest and first become exercisable on March 1, 2005.
(6)  Options vest and first become exercisable on March 1, 2000.
(7)  Options vest and first become exercisable on March 1, 2001.
(8)  Options vest and first become exercisable on March 1, 2003.
(9)  Options vest and first become exercisable on March 1, 2005.
(10) Options vest and first become exercisable on March 1, 2008.
(11) Options vest and first become exercisable on March 1, 1999.

                                       23
<PAGE>
 
   Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values

<TABLE>
<CAPTION>
                                                                    Number of Securities Underlying        Value of Unexercised
                                                                      Unexercised Options/SARs at      In-the-Money Options/SARs at
                                      Shares                                   FY-End (#)                       FY-End ($)
                                    Acquired on     Value Realized                                   
                Name               Exercise (#)          ($)           Exercisable/ Unexercisable       Exercisable/ Unexercisable
-------------------------------   -------------     --------------    ---------------------------       ----------------------------
<S>                                <C>                  <C>              <C>                              <C>
Stephan Isenschmid, CEO                -0-               -0-                     0/56,000                         $0/$338,120
Adrian Knapp, Chairman and Vice        -0-               -0-                     0/56,000                         $0/$338,120
 President
</TABLE>


     Compensation of Directors

     All directors receive reimbursement for out-of-pocket expenses incurred in
attending board of directors meetings. From time to time, the Company may engage
certain members of the board of directors to perform services on its behalf. In
such cases, the Company compensates the members for their services at rates no
more favorable than could be obtained from unaffiliated parties.

     Indemnification of Directors

     As permitted by Section 145 of the Delaware General Corporation Law, the
Company's Certificate of Incorporation includes a provision that eliminates the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duty as directors. In addition, as permitted by
Section 145 of the Delaware General Corporation Law, the Company's Bylaws
provide that it may, in its discretion: (i) indemnify its directors, officers,
employees and agents and persons serving in such capacities in other business
enterprises (including, for example, its subsidiaries) at its request, to the
fullest extent permitted by Delaware law; and (ii) advance expenses, as
incurred, to its directors and officers in connection with defending a
proceeding.

     The Company's policy is to enter into indemnification agreements with each
of its directors and officers that provide the maximum indemnity allowed to
directors and officers by Section 145 of the Delaware General Corporation Law
and the Bylaws as well as certain additional procedural protections.

     The indemnification provisions in the Bylaws and the indemnification
agreements COPE enters into with its directors and officers may be sufficiently
broad to permit indemnification of its directors and officers for liabilities
arising under the 1933 Act. However, COPE is aware that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the 1933 Act and is therefore unenforceable.

                                       24
<PAGE>
 
Item 11. Security Ownership of Certain Beneficial Owners and Management

    The following table sets forth certain information regarding the beneficial
ownership of the shares of common stock as of April 20, 1999 by (1) each person
known by the Company to be the beneficial owner of more than five percent (5%)
of the common stock, (2) each of the Company's directors and executive officers
and (3) all directors and executive officers as a group.

<TABLE>
<CAPTION>
                 Name and Address                                      Number                               Percent
---------------------------------------------------    ---------------------------------       ------------------------------
<S>                                                       <C>                                     <C>
Adrian Knapp(1)(2)                                                   1,301,000(2)                              36.4%

Stephan Isenschmid(1)(2)                                             1,301,000(2)                              36.4%

Markus Bernhard(1)(3)                                                    6,500(3)                                (4)

Markus Stalder (1)(5)                                                     --                                     --

Peter Koch (1)(5)                                                       16,000                                   (4)

Kevin DeVito(6)(7)                                                         870                                   (4)

Uwe Hinrichs(8)(9)                                                     420,000                                 11.8%

All officers and directors as a group                                2,625,370                                 73.1%
</TABLE>
____________________
(1) Address is Grundstrasse 14, 6343 Rotkreuz, Switzerland.

(2) Includes 5,000 shares of common stock underlying presently exercisable
    options.  Does not include 51,000 shares of common stock underlying options
    that are subject to vesting.

(3) Represents 6,500 shares of common stock underlying presently exercisable
    options. Does not include 12,000 shares of common stock underlying options
    that are subject to vesting.

(4) Less than one percent.

(5) Does not include 1,000 shares of common stock underlying options that are
    subject to vesting.

(6) Address is 2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California
    90254.

(7) Does not include 3,000 shares of common stock underlying options that are
    subject to vesting.

(8) Address is Gruendgenstrasse 16D-22309 Hamburg, Germany.

(9) Does not include 60,000 shares of common stock underlying options subject to
    vesting.

                                       25
<PAGE>
 
Item 12.  Certain Relationships and Related Transactions

     Markus Stalder, a member of the Company's board of directors, is also a
member of the law firm of Stalder & Murer, general counsel to the COPE Holding
AG since 1991. In 1998 and 1997, COPE Holding AG paid legal fees to Stalder &
Murer in the amount of approximately $50,000 and $30,000, respectively.

     In September 1998, the Company completed a series of transactions (referred
to herein as the "COPE Reorganization") by which the Company discontinued all
operations and divested itself of all of its assets and substantially all of its
liabilities and, at the same time, acquired all of the outstanding capital
shares of COPE Holding AG. As part of the COPE Reorganization, the Company
issued to Adrian Knapp and Stephan Isenschmid 1,296,000 shares each of common
stock of the Company in exchange for their shares of COPE Holding AG.

     As of September 25, 1998, the Company was indebted to New Capital
Investment Fund ("NCIF") in the principal amount of $590,000 plus interest
thereon, from June 30, 1996, at the rate of 12% per annum. NCIF is an investment
fund controlled by Mr. Jurg Kehrli and Mr. Kevin DeVito, the Chairman of the
Board and Chief Executive Officer of the Company, respectively, immediately
prior to the COPE Reorganization. In connection with the COPE Reorganization,
the Company sold to NCIF a controlling interest in its former subsidiary,
Glycosyn Pharmaceuticals, Inc., in consideration of NCIF's cancellation of all
of the indebtedness and certain indemnification agreements described below. The
Company's sale of the controlling interest in Glycosyn was subject to the
approval of the Company's shareholders and the Company's receipt of an opinion
from an independent business appraiser that the terms of the transaction were
fair to the Company's shareholders.

     In connection with the COPE Reorganization, the Company received from 
NCIF and New Capital AG, an agreement to indemnify the Company against any
claims outstanding as of the close of the COPE Reorganization. Kevin DeVito and
Jurg Kehrli are directors of both NCIF and New Capital AG. Mr. Jurg Kehrli and
Mr. Kevin DeVito served as the Chairman of the Board and Chief Executive Officer
of the Company, respectively, immediately prior to the COPE Reorganization. Mr.
DeVito is currently a member of the board of directors of the Company.

                                       26
<PAGE>
 
Item 13.  Exhibits and Reports on Form 8-K.

(a)  Index to Exhibits


     2.1            Amended and Restated Securities Purchase Agreement and
                    Plan of Reorganization dated July 24, 1998 between the
                    Registrant and COPE Holding AG (14)

     2.2            Common Stock Purchase Agreement dated September 11, 1998
                    between the Registrant and New Capital Investment Fund (15)

     3.1            Articles of Incorporation (1)

     3.2            Certificate of Amendment dated September 11, 1998 to
                    Certificate of Incorporation (15)

     3.3            Certificate of Correction dated September 15, 1998 to
                    Certificate of Amendment of Certificate of Incorporation
                    (15)

     3(ii)          Bylaws (1)

     10.1           Agreement with Licensia Export Trading Co. dated December
                    12, 1986 (2)

     10.2           Agreement with Erich Klemke dated June 6, 1988 (3)

     10.3           Amendment to agreement with European Investment and Equity
                    Trading dated March 30, 1989 (5)

     10.4           Distribution agreement with Mobal AG, dated January 17,
                    1989 (4)

     10.5           1989 Stock Option and Stock Award Plan (1)

     10.6           Warrant Agreement dated as of November 13, 1989 among the
                    Registrant, ASFAG AG and Martin S. Wohnlich (5)

     10.7           Agreement dated November 10, 1989 between Tibech AG and
                    Bioptron AG (5)

     10.8           Agreement dated February 7, 1990 between Tibech AG and
                    Bioptron AG (5)

     10.9           Sales Agreement for HDC AG stock between Dr. Carl Odermatt
                    and the Registrant (5)

     10.10          Distribution Agreement with Planeta, dated September 1,
                    1991 (with accompanying unofficial translation. (6)

     10.11          Univ. of Michigan Agreement dated October 17, 1992. (10)

     10.12          Univ. of Michigan Agreement dated March 18, 1992. (10)

     10.13          Sale of Assets Agreement by and between the Registrant and
                    a German Investor (8)

     10.14          Agreement to Dissolve Joint Research and Development
                    Project by and between the Registrant and Tecno-Bio CO.,
                    Ltd. (9)

     10.15          Purchase and License Agreement of HDC AG by and between
                    the Registrant and Tecno-Bio CO., Ltd. T (9)

     10.16          American Diagnostica Inc. R&D Joint Venture Agreement (11)

     10.17          Loan Agreement between New Capital Investment Fund and
                    Registrant (12)

     10.18          Asset Transfer and Plan of Liquidation and
                    Dissolution dated June 30, 1997 between the Registrant,
                    Naturade, Inc. and DermaRay, LLC (13)

                                       27
<PAGE>
 
     10.19          Amended and Restated Securities Purchase Agreement and
                    Plan of Reorganization dated July 24, 1998 between
                    Registrant and COPE Holding AG. (14)

     10.20          Agreement dated October 30, 1997 between Registrant and
                    New Concept Therapeutics, Inc. (13)

     10.21          Agreement dated September 25, 1998 between Registrant, COPE 
                    Holding AG, and New Capital Investment Fund

     10.22          Common Stock Purchase Agreement dated September 11, 1998 
                    between Registrant and New Capital Investment Fund

     10.23          Assumption and Assignment Agreement dated September 11, 1998
                    between Registrant and Glycosyn Pharmaceuticals, Inc.

     10.24          Indemnification Agreement dated September 28, 1998 by New 
                    Capital AG

     10.25          Sale and Transfer of Business Shares (Forum GmbH) dated 
                    July 25, 1998 between COPE GmbH and Peter Doelling (English 
                    translation of original German text)

     10.26          Sale and Transfer of Business Shares (Hicomp Software
                    Systems GmbH) dated December 21, 1998 between Registrant and
                    Uwe Hinrichs (English translation of original German text)

     21.1           Subsidiaries of the Company

     27.1           Financial Data Schedule

_____________________________________________________
(1) Filed as an exhibit to Proxy Statement dated May 14, 1990, filed on May 16,
    1990 (File No 1-9925), incorporated herein by reference.

(2) Filed as an exhibit to Report on Form 10-K for the year-ended June 30, 1987,
    filed on March 18, 1988 (File No 1-9925), incorporated by reference.

(3) Filed as an exhibit to Report on Form 10-K for the year-ended June 30, 1988,
    filed on November 3, 1988 (File No 1-9925), incorporated herein by
    reference.

(4) Filed as an exhibit to Report on Form 10-K for the year-ended June 30, 1989,
    filed on October 13, 1989 (File No 1-9925), incorporated herein by
    reference.

(5) Filed as an exhibit to Report on Form 10-K for the year-ended June 30, 1990,
    filed on October 13, 1990 (File No 1-9925), incorporated herein by
    reference.

(6) Filed as an exhibit to Report on Form 10-K for the year-ended June 30, 1991,
    filed on October 13, 1991 (File No 1-9925), incorporated herein by
    reference.

(7) Filed as an exhibit to Report on Form 8-K dated July 27, 1990,, filed on
    September 6, 1990 (File No 1-9925), incorporated herein by reference.

(8) Filed as an exhibit to Report on Form 8-K dated July 10, 1992, filed on July
    31, 1992 (File No 1-9925), incorporated herein by reference.

(9) Filed as an exhibit to Report on Form 8-K dated August 1, 1992, filed on
    August 26, 1992 (File No 1-9925), incorporated herein by reference.

(10) Filed as an exhibit to Report on form 10-K for the year-ended June 30,
     1992, filed on October 24, 1992 (File No. 1-9925), incorporated herein by
     reference.

(11) Filed as an exhibit to Report on Form 10-K for the year-ended June 30,
     1993, filed on November 25, 1993 (File No. 1-9925), incorporated herein by
     reference.

(12) Filed as an exhibit to Report on Form 10-K for the year-ended June 30,
     1996, filed on December 3, 1996 (File No. 1-9925), incorporated herein by
     reference.

(13) Filed as an exhibit to Report on Form 10-K for the year-ended June 30,
     1997, filed on December 10, 1997 (File No. 1-9925), incorporated herein by
     reference.

(14) Filed as an exhibit to Registrant's Proxy Statement/Prospectus dated August
     20, 1998 made part of the Registrant's Form S-4 Registration Statement
     (File No. 33-53223), incorporated herein by reference.

(15) Filed as an exhibit to Report on Form 8-K dated September 25, 1998, filed
     on October 13, 1998 (File No 1-9925), incorporated herein by reference.

(16) Filed as an exhibit to Report on Form 8-K dated March 18, 1999, filed on
     March 24, 1999 (File No 1-9925), incorporated herein by reference.

                                       28
<PAGE>
 
                                   SIGNATURES
                                        
     In accordance with Section 13(a) or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                           COPE, INC.                    
                                                                         
                                                                         
                                           By:  /s/ Adrian Knapp         
                                              ------------------         
                                              Adrian Knapp               
                                              Chairman and Vice President 


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

<TABLE>
<CAPTION>
             Signatures                                          Title                                      Date
------------------------------------    ----------------------------------------------------    --------------------------
<S>                                        <C>                                                     <C>
  /s/  Stephan Isenschmid                  President and Chief Executive Officer and                   April 27, 1999
------------------------------------       Director (principal executive officer)
     Stephan Isenschmid

  /s/  Markus Bernhard                     Chief Financial Officer (principal financial and            April 27, 1999
------------------------------------       accounting officer)
     Markus Bernhard
 
  /s/  Adrian Knapp                        Chairman of the Board                                       April 27, 1999
------------------------------------
     Adrian Knapp

  /s/  Markus Stalder                      Director                                                    April 27, 1999
------------------------------------
     Markus Stalder
 
  /s/  Peter Koch                          Director                                                    April 27, 1999
------------------------------------
     Peter Koch

  /s/  Kevin DeVito                        Director                                                    April 27, 1999
------------------------------------
     Kevin DeVito
</TABLE>



                                       29