<PAGE>   1

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

                                   FORM 10-KSB

(Mark One)

 X       Annual report under Section 13 or 15(d) of the Securities Exchange
---      Act of 1934.  For the fiscal year ended December 31, 1999.

                                       OR

         Transition report under Section 13 or 15(d) of the Securities Exchange
---      Act of 1934 for the transition period from           to           .
                                                    ---------    ----------

                         Commission File Number: 0-23897

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                    ----------------------------------------
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

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<S>                                                    <C>
                         Florida                                                 59-3462501
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             (STATE OR OTHER JURISDICTION OF                                    (IRS EMPLOYER
              INCORPORATION OR ORGANIZATION)                                 IDENTIFICATION NO.)

                  7887 Bryan Dairy Road
                        Suite 105
                      Largo, Florida                                              33777
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         (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                                (ZIP CODE)
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       Registrant's telephone number, including area code: (727) 548-0918

        Securities Registered Pursuant to Section 12(b) of the Act: None

           Securities Registered Pursuant to Section 12(g) of the Act:

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<S>                                                    <C>
                                                                           Name of Each Exchange
                  Title of Each Class:                                     on which Registered:
                  --------------------                                     --------------------
             Common Stock, $0.001 par value                                        None

</TABLE>

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         The issuer's revenues for its most recent fiscal year were $1,100,528.

         The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of May 2, 2000, is $.625.

         The number of shares of common stock outstanding as of May 2, 2000 was
38,362,117.


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                                     PART I

          The information set forth in this Report on Form 10-KSB including,
without limitation, that contained in Item 6, Management's Discussion and
Analysis and Plan of Operation, contains "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Actual results may
materially differ from those projected in the forward-looking statements as a
result of certain risks and uncertainties set forth in this report. Although
management believes that the assumptions made and expectations reflected in the
forward-looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual future
results will not be different from the expectations expressed in this report.

ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW

         Toups Technology Licensing, Incorporated is a corporation primarily
engaged in the commercialization of late-stage technologies primarily in the
energy, environmental, natural resources and healthcare markets. Historically,
we have acquired the rights to the technologies we utilize by purchasing them or
through licensing arrangements. Our operations are organized into three
divisions: Environmental Solutions, Manufactured Products and Health Care. See
"Our Business". Our objective is to enhance shareholder value through an asset
management and acquisition strategy that targets companies and technologies
where our management and resources can be successfully leveraged to enhance
strategic market position and to initiate, maintain and increase sales. The
principal sources of our revenues in 1999 were in our Manufactured Products and
Health Care divisions.

         The terms "we" and the "Company" in this document refer to Toups
Technology Licensing, Incorporated.

RECENT DEVELOPMENTS

RESTATEMENT OF FINANCIAL RESULTS

         We are revising our 1999 interim and 1998 annual financial statements
to reverse the revenue derived from the sale of certain quantities of the
Balanced Oil Recovery System ("BORS") Lift units. See "Our Business." During the
fourth quarter of fiscal 1998, we recorded $1,515,720 of revenue associated with
the sale of 102 of our then newly-developed BORS units. Prior to the sale of
these units, we had performed extensive product development and field testing
and believed that all significant product and design problems had been
satisfactorily resolved. However, subsequent to delivery and installation of
certain units, we became aware of certain performance concerns with the BORS
units sold in 1998. Upon further investigation, we determined that certain
modifications of the BORS units would be required. However, since we had limited
operating history with this equipment, we were unable at that time to determine
the


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magnitude of the required modifications or the cost thereof. Accordingly, we
were not able to reasonably estimate the amount of any accrued warranty
obligation that might have been required at December 31, 1998. Since the range
of possible loss was not determinable at the date of the issuance of the
financial statements for fiscal 1998, we determined that recognition of these
sales was not warranted until a reasonable estimate of the warranty obligation
could be determined. In light of this, the financial statements for fiscal 1998
have been adjusted to reverse the $1,515,720 of sales and $1,002,874 cost of
sales, accrued commissions and accrued royalties. These adjustments reduced
gross profits by $595,689, reduced selling, general and administrative expenses
by $82,843 and increased net loss by $512,846. We agreed to accept the return of
most of the BORS units sold in 1998 and have identified the related problems
with the BORS product so that it is able to function in its intended manner. We
modified and sold 33 units during 1999, the remainder of which are included in
inventory at December 31, 1999 at their net realizable value.

         We are also revising our 1999 interim financial statements to address
the following significant adjustments:

         (i) to reverse $4,125,000 of net license fee revenue payable to us by
Rancho La Regina Agropecuaria, S.A., Calle Monte Cristi, Dominican Republic for
the exclusive rights to our technologies throughout South and Central America.
Payment of the license fee is secured by a limited-use title to a planned urban
development consisting of 2,500 home sites. We originally realized 100% of the
net licensing fee as revenue in the second quarter ended June 30, 1999. Upon
further consideration, we believe that revenue should be recognized pro rata as
each of the 2,500 home sites are sold and as the proceeds are received. We have
not received any payments under this agreement.

         (ii) to properly reflect stock-based compensation for services and
license fees. We issued stock in the first, second and third quarters. The
valuation of these shares was not properly recorded during these periods. We
made a $2,502,411 adjustment in the fourth quarter of 1999 to recognize all
stock-based compensation at the fair value of the stock issued.

         (iii) to reflect the issuance of 500,000 shares of common stock issued
pursuant to a joint venture agreement in the second quarter of 1999 and the
subsequent write-off of that investment when it was determined that the pending
joint venture interest had no value.

SEC ENFORCEMENT INQUIRY

         By letter dated November 19, 1999, we were notified that the United
States Securities and Exchange Commission was conducting an informal inquiry in
connection with matters relating to our financial statements and periodic
reports, including matters addressed by our restatement of financial results.
The Commission has requested that we provide it with certain documents,
including documents concerning our accounting policies and practices, our
financial statements and our periodic reports. The Commission indicated that its
inquiry should not be construed as any indication by the Commission or its staff
that any violation of law has occurred, nor as an adverse reflection upon any
person, entity or security. We are cooperating with the Commission in connection
with this inquiry, and its outcome cannot be determined at this time.

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BACKGROUND

         We were incorporated in Florida on July 28, 1997. Following our
formation, we acquired all of the assets of Advanced Micro Welding, Inc., a
Florida corporation engaged in micro-welding and metal fabrication, in exchange
for 500,000 restricted shares of our common stock. The operations of Advanced
Micro Welding have been merged with those of the Company, and Advanced Micro
Welding, as a corporate entity, is inactive. This acquisition enabled us to
develop our Manufactured Products division, discussed below.

         In October 1998, we acquired all of the capital stock of Brounley
Associates, Inc., a Florida corporation engaged in the design, manufacture and
sale of radio-frequency generators throughout the United States and abroad in
exchange for 900,000 restricted shares of our common stock. Brounley's
activities were discontinued in August 1999.

         In November 1998, we acquired all of the capital stock of InterSource
Health Care, Inc., a Florida corporation engaged in (i) the acquisition and
refurbishing of used medical equipment, (ii) the sale of pharmaceutical products
and (iii) the providing of services for medical facility development in exchange
for 1,203,241 restricted shares of our common stock. We now operate InterSource
as a wholly-owned subsidiary.

OUR BUSINESS

         We were previously comprised of nine separate divisions. During the
second quarter of 1999, we consolidated our business activities into three
divisions: Environmental Solutions, Manufactured Products and Health Care.

         ENVIRONMENTAL SOLUTIONS DIVISION

         Our Environmental Solutions division is organized into two discrete
sectors. The first sector is responsible for creating, licensing and packaging
technologies that convert solid and liquid waste products into useable
alternative energy and other usable materials discussed herein. To date, we have
developed and licensed technologies that create a number of clean-burning
alternative fuels, including a collection of gases we refer to as Santilli
MagneGases. MagneGas is presently the focus of this sector. We have derived no
revenues to date from MagneGas. The second sector is responsible for the
creation of proprietary waste-to-energy equipment designed to treat
hydrocarbon-based waste in a closed, non-polluting environment. This equipment
includes our PlasmaArcFlow (TM) Reactor for liquid wastes and Starved Air
Combustor (TM) and Green Waste to Energy Processor (TM) for solid wastes. The
Starved Air Combustor and the Green Waste to Energy Processor are currently in
the development stage. Once designed and created by our Environmental Solutions
division, this equipment will be manufactured and assembled by our Manufactured
Products division.

         ENERGY

         MagneGas is derived through the operation of our PlasmaArcFlow Reactor.
It is a gas that we believe possesses superior combustion and exhaust properties
because it emits less than

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half of the carbon dioxide of natural gas and virtually no carbon monoxide (as
measured by percentage of emissions) or unburned hydrocarbons (as measured by
parts per million). In addition, MagneGas is lighter than air and has a distinct
odor, both of which are important safety features.

         We believe that MagneGas is one of the cleanest, most efficient and
safest renewable alternative fuel sources available. It has significantly fewer
pollutants, can be easily and safely produced, transported and stored and has
significant commercial potential.

         MagneGas can be made in a number of different formulations, depending
on the needs of the user. For example, MagneGas can be formulated to run
electric generators, for metal cutting and for automobile fuel. The selection of
the specific type of MagneGas is made on the basis of a customer's specific
needs regarding costs, energy content and combustion exhausts. For instance, for
indoor use, we can supply a filtered MagneGas that is rich in oxygen with no
toxic substances or carbon monoxide in the exhausts and a low CO2 content.

         The three main types of MagneGas have differing applications, but all
possess similar chemical structure, energy content and combustion exhaust
characteristics:

                  -        MagneGases produced from water with small percentages
                  of mineral or organic contaminants, a minimum of 500 BTU/cf,
                  high octane values and extremely clean exhaust. This type of
                  MagneGas may be used for a variety of indoor uses including
                  cooking, heating and other applications.

                  -        MagneGases produced from highly contaminated organic
                  liquids, such as automotive antifreeze and oil waste or heavy
                  farm waste are similar to natural gas for energy content, have
                  about 150 octane and produce large percentages of oxygen in
                  the exhausts (measured up to 14%) and may be used as a
                  replacement for virtually any solid, liquid or gaseous fossil
                  fuel.

                  -        MagneGases produced from liquid wastes with large
                  toxic content, such as industrial wastes, have a very high BTU
                  per cf but require significant processing time in order to
                  become ecologically acceptable fuels.

         Continuing internal and third party tests indicate that MagneGas makes
a better alternative to gaseous fuels as compared to acetylene, LPG, MAPP and
other gases used for metal cutting, to propane and to natural gas used for
everything from cooking to automobile fuel. We engineered two versions of the
process in 1999: (i) a closed system that produces MagneGas while consuming
liquid wastes such as oils, antifreeze, solvents and similar materials and (ii)
a flow-through system designed to treat liquid wastes such as sewage,
contaminated water and other similar high-volume waste streams while producing
MagneGas.

         MagneGas's first commercial application, which is its use in metal
cutting, was introduced for market testing in the first quarter of 2000.

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         EQUIPMENT

         Santilli's PlasmaArcFlow Reactor(TM). There are two configurations of
an underwater arc process called PlasmaArcFlow that force liquid waste through
an electrically generated plasma field: the MG Series, which is a closed system,
and the WR series, which is a flow-through system.

         Our MG Series PlasmaArcFlow Reactor treats contaminated liquid waste,
such as used motor oil, radiator anti-freeze and other consumer, commercial and
industrial non-radioactive liquid wastes, in a closed system without releasing
harmful emissions. The PlasmaArcFlow Reactor consists of an all-encompassing
metal chamber. Using a recirculation pump, the liquid waste is forced to flow
through an electric arc created by submerged electrodes. The electric arc,
created by a conventional electric generator, consumes the liquid waste by
decomposing its molecules and producing:

         -        MagneGas;

         -        solid precipitates useful as fertilizers or other
                  applications;

         -        carbon black, which can be used for the production of
                  electrodes; and

         -        heat which is usable as another source of energy.

         The flow-through, or linear configuration, is designed to treat larger
volumes of liquid waste such as municipal sewage, animal waste, biologically
contaminated fresh and salt water and similar liquids while producing:

         -        MagneGas;

         -        solid precipitates useful as fertilizers or other
                  applications; and

         -        water for irrigation.

         We believe that the PlasmaArcFlow Reactor process has numerous
advantages over conventional contaminated liquid waste treatment processes.
Because it does not produce emissions or landfill waste, it is environmentally
safe and clean. The solids that are a result of the waste conversion process
have commercial uses and, accordingly, afford additional revenue stream
opportunities. In addition, costs for operation make the process economically
viable and, in certain configurations and applications, economically superior.

         Starved Air Combustor. Our Starved Air Combustor is an advanced system
based on technology designed by Boeing Corporation to process large quantities
of solid waste in a continuous stream, including municipal waste, bark, tires,
automotive shredder residuals and coal. Through an innovative method using our
variable-pitch auger, which feeds waste into a starved-air combustion chamber,
the Starved Air Combustor heats waste to its gasification temperature producing
a combustible and usable gas that is employed in the process. Heat generated by
the process can be used for a number of purposes including electrical
generation, heat, steam and hot water.

         We believe that this process offers both mechanical and environmental
advantages over competing processes. Nitrogen and sulfur oxides in the primary
combustion chamber create a

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fuel gas by-product which is used for self-fueling operation. Thus, the unit is
efficient operationally and minimizes the release of nitrogen and sulfur oxides
into the environment. In addition, because flame and gas temperatures are
limited to approximately 2200o F, the life of the waste disposal equipment is
extended.

         Green Waste to Energy pyrolysis processor. Our Green Waste to Energy
pyrolysis processor, or GWE, is a promising development project to process solid
hydrocarbon-based waste and produces a multi-use fuel in the form of a
combustible gas. The by-products we obtain through our GWE process may then be
sold commercially. We believe that, because this process runs on its own
by-products, there are no emissions and, therefore, no residue from combustion.
In addition, the GWE is modular in its design and can handle a number of
different waste streams simultaneously.

         MANUFACTURED PRODUCTS DIVISION

         Our Manufactured Products division is the manufacturing source for the
Balanced Oil Recovery System Lift, prototyping and certain equipment developed
by our Environmental Solutions division. Our Outsource Solutions sector meets
the manufacturing production needs of third parties for various types of goods.

         BALANCED OIL RECOVERY SYSTEM LIFT

         Our Balanced Oil Recovery System Lift, or BORS Lift, is a device that
extracts oil from shallow, low-volume "stripper" wells, which are defined as
those wells which produce up to 10 barrels per day. By lifting oil rather than
pumping, the BORS Lift eliminates conventional rods, tubing, downhole pumps or
pumping units and related maintenance costs typically associated with
conventional methods. The operating concept is based on a balanced technology of
extracting oil at the same rate as its recovery through a collection tube and
discharging it into a collection tank without collecting water. Using the BORS
Lift, wells that have historically produced 25 barrels or more of salt water in
a day are now collecting only oil. This eliminates the need for salt water
disposal. Based on independent tests, we believe that the BORS Lift can increase
oil production in shallow, low-volume "stripper" wells by up to 400 percent,
while significantly decreasing operating costs.

         TUNNEL BAT CULVERT RECLAMATION VEHICLE

         Our Tunnel Bat Culvert Reclamation Vehicle is currently in the research
and development stage and is undergoing testing. It is a mobile vehicle
specifically designed to remove silt, debris, vegetation, soil, rock and other
types of blockage from inside a box culvert. A box culvert is the part of a
storm sewer or drain that runs under a road or embankment. The Tunnel Bat
represents an efficient solution to removing blockage from box culverts as
opposed to customary methods. The unit is driven by a person, moves both forward
and backward at low speeds and is equipped with front and rear attachments. The
Tunnel Bat is designed to turn an expensive and time consuming job into an
easier and more efficient task.

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         OUTSOURCE SOLUTIONS

         Our Manufactured Products division provides outsource solutions to
third parties with a wide range of industrial and business needs by allowing
them to utilize our state of the art custom metal fabrication, specialty welding
and machining facilities to meet their production needs. With our in-house
equipment, we can fabricate stainless and carbon steel, aluminum, copper,
titanium, incanel and other materials. Our machine shop is staffed and equipped
to do prototype, custom or production work. Our equipment includes vertical
mills, tooling lathes, drill presses and welding equipment offering a wide range
of welding capabilities, including inert gas or CO2, plasma, laser and electron
beam welding.

         By operating this manufacturing facility, we are able to maintain
quality control and manage timing of projects. New inventions often require
one-of-a-kind specialty parts. Given the unique nature of many manufactured
products, exact attention to specifications is assured while retaining
flexibility mindful of changing designs and invention. This flexibility coupled
with our ability to meet significant production demands makes us an attractive
choice as an outsource manufacturing solution for many third-parties while
serving to offset overhead costs.

HEALTH CARE DIVISION

         Our wholly-owned subsidiary, InterSource Health Care, Inc., has a core
business that seeks to match purchasers and sellers of new and refurbished
medical equipment and consumables. Commencing in 2000, sales will also be
generated through our Internet site located at www.isourcenet.com, which is
currently under development. This Internet model will include a wide range of
complementary services aimed at health care providers and consumers through a
secure Internet site with an in-house support staff. For the buyer or seller of
medical equipment and/or consumables, InterSource offers a one-stop means to
shop comparatively on the Internet.

         A planned feature will also allow patients to purchase both traditional
and alternative elective (typically non-insured) medical services from a network
of participating, certified providers through an auction format (by bidding for
available services).

         InterSource is also concentrating on building a much broader network of
health care providers and patients. In addition to offering equipment and
products through a secure Internet home page and through an in-house, buying
services program, we are building a network of suppliers and partners to deliver
a wide range of services and products that include staffing and recruitment,
arranging health care services in the United States for international clients,
pharmacy procurement and delivery services, health and wellness products and
other services. A licensed physician executive and former executive at two of
the nations' largest health care insurers leads InterSource's new program with
health care professionals in support.

DISTRIBUTION OF OUR PRODUCTS

         Current distribution is achieved through both direct sales and
distributors. We contemplate replacing the current distribution system with
licensing agreements to more

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experienced sales and marketing groups that have superior financial and
management resources. We will continue to seek such arrangements for all of our
products and applications.

COMPETITION

         BORS LIFT

         Because oil wells typically begin to produce salt water as the natural
drive mechanism in the reservoir is depleted, oil producers have long sought to
eliminate the production of salt water from oil wells. The BORS Lift is designed
to take advantage of the natural separation of oil and water in the well bore
and extracts only oil while leaving the salt water in place. Traditional pump
jacks, sucker rod methods and other above-ground pump systems are designed to
lift any fluid in the well bore without being able to separate the oil from the
water. We believe that the BORS Lift system is a very effective method of
eliminating salt water from oil production in low volume wells. We believe that
this system offers significant economic and environmental benefits over
traditional methods used to produce oil from shallow, low volume wells.
Management believes that if properly marketed, the BORS Lift system has the
potential to gain significant market share in this segment of the oil producing
market, which represents 26% of the domestic oil production according to the
United States Department of Energy. However, since we are competing with
traditional, established oil pump manufacturers that have greater financial and
operating resources than we do, our ability to gain market share is not assured.

         SPECIALTY MANUFACTURING

         There are many small shops in the geographical area providing
substantially the same services that the Specialty Manufacturing division
offers. We believe that our equipment is state of the art and is at least
comparable to manufacturing resources with which we compete. We also believe
that we are able to offer our customers a wide range of services at rates that
are very competitive. However, the barriers to entry in this area are relatively
low, and there can be no assurances that our competitors will not offer
comparable services at lower costs.

         MAGNEGAS

         The alternative fuel industry is a very competitive industry consisting
of potential competitors who may have superior financing, experienced
management, advantageous strategic relationships and more mature technologies
than our products in development. Despite the formidable competition in the
alternative fuel industry, we intend to continue to develop and market MagneGas,
which we believe is among the cleanest, most efficient and safest of the
alternative fuel sources available. We also believe that, because MagneGas is
the product of a versatile waste treatment process that can support or be the
primary income source, MagneGas may have significant inherent economic
advantages over competitive products. It has significantly fewer pollutants than
many traditional fuel sources and certain alternative fuel sources and can be
easily and safely produced, transported and stored. In addition, we have
identified numerous potential commercial applications for MagneGas and its
primary process, PlasmaArcFlow, which treats a wide variety of liquid wastes.
There can be no assurances that MagneGas will prove profitable when introduced
to the marketplace, if ever, and we

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acknowledge that more economical and/or more environmentally efficient
alternative fuels or waste treatment processes could be developed by other
players in the industry.

         INTERSOURCE HEALTH CARE

         Providing services to health care providers is highly competitive. We
are aware of other entities engaged in a business purpose similar to that of
InterSource. Given the size and scope of the medical industry, we expect to
encounter competition from companies with greater financial and marketing
resources than us and plan to concentrate business activities in underserved
areas and to partner or network with larger organizations.

INTELLECTUAL PROPERTY

         We have obtained the majority of the intellectual property rights to
our technologies either through license agreements or assignments, the most
significant of which are described below.

         BORS LIFT TECHNOLOGY

         Pursuant to a license agreement dated June 19, 1998, we have a
world-wide exclusive license with Lift-Pump LLC to undertake a joint effort at
designing, manufacturing, selling or otherwise commercializing the BORS Lift
technology. Pursuant to the license agreement, we pay Lift-Pump a royalty of six
percent (6%) of the gross proceeds we receive from selling, commercializing or
sub-licensing the BORS Lift technology.

         GREEN WASTE TO ENERGY

         Pursuant to the terms of a license agreement between John Rivera,
Tomorrows Innovative Technology Today and us dated December 15, 1999, we hold an
exclusive worldwide license to certain pyrolytic carbon extraction technology,
which is a technology used to convert solid hydrocarbon-based waste into a
multi-use fuel in the form of a combustible gas while significantly reducing the
waste volume. Pursuant to this license agreement, we pay the licensors 50% of
all profits derived from the technology (with a minimum annual royalty fee of
$150,000) plus 50% of all sublicense fees received by us.

         ASSIGNMENT OF PATENTS AND PATENT APPLICATIONS

         Pursuant to an Exclusive Assignment and Royalty Agreement dated as of
February 3, 2000, Dr. Ruggero Maria Santilli assigned to us (i) a patent
relating to new chemical species for gases and their new technologies and (ii)
three related U.S. patent applications. The patent applications that have been
assigned to us are for the following products and processes:

                  -        new method for recycling contaminated waters via the
                           plasma-arc-flow process;

                  -        durable and efficient equipment for the production of
                           a combustible and non-pollutant gas from underwater
                           arcs and methods; and

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<PAGE>   11

                  -        MagneGas.

Pursuant to this agreement, we were granted worldwide exclusive rights to the
technologies in exchange for a royalty fee equal to three percent (3%) of the
gross proceeds we receive from exploitation of these technologies. In addition
to the royalty payment, Dr. Santilli received 75,000 shares of our common stock,
plus options to purchase an additional 150,000 shares of our common stock at an
exercise price of $0.375 per share.

         We believe that we have taken appropriate steps to protect our
intellectual property rights. However, the steps we have taken may not prove
sufficient to prevent misappropriation of our technology or to deter independent
third-party development of similar technologies. The laws of certain foreign
countries may not protect our services or intellectual property rights to the
same extent as do the laws of the United States. We rely, in part, on certain
technologies that we license from third parties, including data feeds and
related software. These third-party technology licenses may not continue to be
available to us on commercially attractive terms. The loss of the ability to use
such technology could require us to obtain the rights to use substitute
technology, which could be more expensive or offer lower quality or performance,
and therefore have a material adverse effect on our business, financial
condition or results of operations.

         Third parties could claim infringement by us with respect to current or
future uses. As the number of entrants into our market increases, the
possibility of an infringement claim against us may increase, and the
possibility exists that we could, either now or in the future, inadvertently
infringe on a third-party's patent. In addition, because patent applications can
take many years to issue, it is possible that we could, now or in the future,
infringe upon a third-party's patent application now pending of which we are
unaware. Any infringement claim, whether meritorious or not, could consume a
significant amount of management's time and attention, could result in costly
litigation, cause service delays or require us to enter into royalty or
licensing agreements which may or may not be available on commercially
acceptable terms, if at all. As a result, any claim of infringement against us
could have a material adverse effect upon our business, financial condition or
results of operations.

RESEARCH AND DEVELOPMENT

         We license many of the technologies we exploit from the developers of
such technologies. Additional research and development of these technologies are
then funded internally. Notwithstanding our efforts in this regard, we are
uncertain whether any of the technologies will ever develop to the point of
commercial viability.

         Research and development costs incurred in 1999 and 1998 aggregated
$2,457,825 and $1,184,848, respectively, and centered around the following
technologies:

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<PAGE>   12

         MAGNEGAS

         We are actively developing certain applications and seeking outside
development and marketing partners for new applications for this process,
including salt water desalination and sewage treatment.

         GREEN WASTE TO ENERGY

         Green Waste to Energy technology is a solid waste treatment technology
using pyrolysis, or the process of burning without air. We are working with the
inventor of this technology toward testing and proving the process to achieve a
commercially salable product.

         OTHER RESEARCH AND DEVELOPMENT PROJECTS

         During 1998 and 1999, we performed research and development on AquaFuel
and Pyrolytic Carbon Extraction, or "PCE", liquid and solid waste treatment
processes, respectively, that produce combustible gases. As to AquaFuel and PCE,
we declined to renew the licenses under which we utilized the technology because
we believed that our resources were better spent pursuing the commercialization
of other technologies, primarily MagneGas.

EMPLOYEES

         As of December 31, 1999, we had 80 full-time employees and one
part-time employee. Approximately 8 employees are engaged in the Environmental
Solutions division, 62 employees are engaged in the Manufactured Products
division and 3 employees comprise our Health Care division. In addition, eight
employees are engaged in administrative and clerical activities. Management
considers its relations with its employees to be satisfactory. None of our
employees are represented by a union.

WHERE YOU CAN FIND MORE INFORMATION

         We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms.

ITEM 2.  DESCRIPTION OF PROPERTIES

         We operate out of three separate locations. On December 1, 1997 we
entered into a five (5) year lease at the 96-acre Pinellas Science Technology
and Research Center ("STAR Center") located at 7887 Bryan Dairy Road, Largo,
Florida. The 30,000 square feet of space serves as our headquarters and primary
manufacturing facility and contains laboratories, production area and office
space. The annual base rental is approximately $267,000, which includes
utilities.

                                      -10-
<PAGE>   13

         We also maintain a 10,000 square-foot facility in Largo, Florida from
which our MagneGas operations are run. We entered into a lease for this facility
beginning in November 1998 for two consecutive one-year terms. The annual base
rent is approximately $42,000.

         In addition, we maintain an engineering, installation and field service
office in Claremore, Oklahoma for which we pay a monthly rent of $400.

         We believe that our present space is adequate for current purposes and
offers the potential for moderate expansion should the need arise.

INVESTMENT POLICIES

         We do not have any limitations on the amounts which we may invest in
any one investment or type of investment. We have no holdings in real estate or
real estate mortgages and similar securities or publicly traded securities. We
do not have any investments in persons or companies primarily devoted to such
investments, and it is not our policy to make investments for the purpose of
capital gain or passive income. Presently, all available monies are being used
for day-to-day operations.

ITEM 3.  LEGAL PROCEEDINGS

         SEC ENFORCEMENT INQUIRY

         By letter dated November 19, 1999, we were notified that the Securities
and Exchange Commission was conducting an informal inquiry in connection with
matters relating to our financial statements and periodic reports, including
matters addressed by our restatement of financial results. The Commission has
requested that we provide it with certain documents, including documents
concerning our accounting policies and practices, our financial statements and
periodic reports. The Commission indicated that its inquiry should not be
construed as any indication by the Commission or its staff that any violation of
law has occurred, nor as an adverse reflection upon any person, entity or
security. We are cooperating with the Commission in connection with this inquiry
and its outcome cannot be determined at this time.

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

         None.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our shares trade on The National Association of Securities Dealers
("NASD") OTC Bulletin Board (the "Bulletin Board") under the trading symbol
"TOUP". Our shares commenced trading in June 1998, prior to which time there was
no public market for our securities. The following table sets forth, for the
periods indicated, the range of high and low closing bid quotations as reported
by the Bulletin Board for each quarter during the last two

                                      -11-
<PAGE>   14

fiscal years. The bid quotations set forth below reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.

<TABLE>
<CAPTION>
                                                                            HIGH                LOW
                                                                           ------              -----
<S>                                                                       <C>                 <C>
      Fiscal Year Ended December 31, 1998
           From June 16 to end of Second Quarter..................        $2.625              $2.00
           Third Quarter..........................................          3.00              1.875
           Fourth Quarter.........................................          3.00              1.375

      Fiscal Year Ended December 31, 1999
           First Quarter..........................................        $2.437             $1.375
           Second Quarter.........................................         2.437               .906
           Third Quarter..........................................         1.187               .375
           Fourth Quarter.........................................          .687                .35
</TABLE>

         On May 2, 2000, the last reported sales price for our shares on the
Bulletin Board was $0.64 per share. At April 28, 2000, we had 417 stockholders
of record. We estimate that there are approximately 2,430 beneficial owners of
our common stock.

         We have never paid cash dividends on our common stock and do not expect
to pay such dividends in the foreseeable future. We currently intend to retain
any future earnings for use in our business. The payment of any future dividends
on our common stock will be determined by our Board in light of the conditions
then existing, including our financial condition and requirements, future
prospects, restrictions in future financing agreements, business conditions and
other factors deemed relevant by the Board.

RECENT SALES OF UNREGISTERED SECURITIES

         The securities described below were issued by us during the period
covered by this report and were not registered under the Securities Act of 1933,
as amended. Each of the transactions is claimed to be exempt from registration
pursuant to Section 4(2) of the Securities Act as transactions not involving a
public offering. All of such securities are deemed to be restricted securities
for the purposes of the Securities Act. All certificates representing such
issued and outstanding restricted securities have been properly legended, and we
have issued "stop transfer" instructions to its transfer agent with respect to
such securities. Except as noted, no commissions were paid in connection with
any of these issuances.

         STOCK ISSUANCES FOR CASH

         In fiscal 1999, we issued an aggregate of 5,865,303 shares of our
common stock in various capital raising transactions. The aggregate amount of
funds raised by these issuances totaled $2,527,400. Included among these
transactions is the private placement we conducted from November 1998 through
March 1999, in which we offered and sold an aggregate of


                                      -12-
<PAGE>   15

1,747,500 shares of our common stock to 43 accredited investors at a per share
price of $1.00. As part of the transaction, we agreed to register the shares
purchased.

         In February 1999, we issued and sold $750,000 of Series 1999-A 8%
convertible notes due January 2002 to an accredited investor. Under the
securities purchase agreement, the investor was to purchase another $750,000 in
convertible notes within 30 days after we filed a Registration Statement or at
such time as the parties mutually agree. The notes are convertible into common
stock at a conversion price equal to the lesser of (1) 100% of the lowest
closing bid prices for our common stock for the five (5) trading days
immediately preceding the closing date; or (2) eighty percent (80%) of the
lowest of the closing bid prices for our common stock for the five (5) trading
days immediately preceding the conversion date as reported on the Bulletin
Board. Additionally, the investor was issued a warrant to purchase 75,000 shares
of common stock at an exercise price of $2.3375 per share through February 2002.
Subsequent to December 31, 1999, the investor completed the purchase of the
second installment ($700,000) of notes. During January and March 2000, the
investor converted an aggregate of $517,956 of notes, plus accrued interest,
into 1,037,784 shares of common stock.

       In March 1999, we raised $750,000 in connection with the sale and
issuance of 750 shares of our Series A 7% Preferred Stock to an accredited
investor in a transaction exempt under Section 4(2) of the Securities Act. The
Series A Preferred Stock is convertible into our common stock at 75% of the
common stock closing price anytime through March 30, 2004. Accordingly, we
recorded a dividend of $250,000 during fiscal 1999 to account for this
beneficial conversion feature. Dividends are cumulative and payable quarterly at
a per annum rate of 7% of the Series A Preferred Stock's liquidation value.
Additionally, the investor was issued a warrant to purchase 93,750 shares of
common stock at an exercise price of $2.40 per share, and we also issued a
warrant to purchase 50,000 shares of common stock at an exercise price of $2.40
per share through March 2004 as a finders fee. During April 2000, the holder of
the Series A Preferred Stock converted 100 shares into 357,143 shares of common
stock.

       Holders of the 8% convertible notes and the Series A Preferred Stock have
demand registration rights with respect to the common stock issuable upon
conversion of the notes and Series A Preferred Stock and with respect to the
common stock underlying the warrants.

       STOCK ISSUANCES FOR SERVICES

       In fiscal 1999, we issued an aggregate of 4,066,675 shares of our common
stock in consideration for various services provided to us, including (i)
pursuant to various license arrangements, (ii) issuances to employees and
consultants, and (iii) as payment for certain equipment purchases. This amount
includes an aggregate of 2,500,000 shares of our common stock issued in
connection with our arrangement with Compania Deluz Y Fuerza De Las Terrenas, C.
por A., a Dominican Republic utility company, to form the joint venture "Aqua
Fuel (a)-Dominicana, SA" and a finders fee in connection with that joint
venture. The utility failed to perform under the terms of the proposed joint
venture agreement, and the joint venture did not proceed. We wrote off the joint
venture investment in 1999. The cost of the 2,000,000 shares issued as a finders
fee was applied to the cost of acquiring a subsequently obtained license.

                                      -13-
<PAGE>   16

       In addition to the foregoing, we entered into a Warrant Agreement dated
October 29, 1999 with Sands Brothers & Co., Ltd. pursuant to which we issued to
each of Sands Brothers and Mark G. Hollo, its managing director, warrants to
purchase up to 1,800,000 shares of our common stock at an exercise price of $.40
per share. These warrants were issued in consideration of certain financial
advisory services provided to us. We granted the warrant holders demand
registration rights with respect to the common stock underlying the warrants.
The warrants also include anti-dilution provisions and dividend rights if
dividends are paid to other stockholders.

         In consideration for certain financial consulting services provided to
us in connection with the Sands Brothers transaction, we issued to Allen Lewin a
warrant to purchase 200,000 shares of common stock on terms substantially
similar to those contained in the warrants issued in the Sands Brothers
transaction.

         DEBT CONVERSIONS OF SHAREHOLDER ADVANCES

         In the third and fourth quarters of 1999, three individuals converted
an aggregate of $423,750 of shareholder advances into an aggregate of 1,141,581
shares of our common stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of our
results of operations and financial condition. The discussion should be read in
conjunction with our audited consolidated financial statements and notes
thereto.

         During the fiscal year ended December 31, 1999 revenues were
principally generated by sales of the BORS Lift system ($305,000), sales of our
Manufactured Products division ($471,035) and InterSource ($324,493). We are in
end-stage commercialization of our MagneGas product and are continuing to
develop our Starved Air Combustor, GWE and Tunnel Bat products. No revenues were
derived from these products during fiscal 1999. Although we believe that sales
of MagneGas will contribute to our revenues in the future, there can be no
assurances that revenues will be generated during fiscal 2000 without further
development.

         During the next 12 to 24 months, we plan to continue our expansion
goals by way of licensing our technologies through proven sales channels and
strategic alliances. This strategy allows us to expand our global presence by
entering rapidly industrializing and emerging markets. We will focus on the
continued development of commercializing market applications while exploring new
opportunities to license and acquire complementary technologies or companies
that provide important synergies with our existing operations. Present
operations are being streamlined in order to reduce costs while improving
product quality and productivity.

                                      -14-
<PAGE>   17


FISCAL 1999 COMPARED TO FISCAL 1998

         Net sales increased during the fiscal year ended December 31, 1999 to
over $1.1 million, up approximately 116% from $508,538 in the fiscal year ended
December 31, 1998. The increase in net sales reflects the inclusion of
InterSource results of operations for a full year and the recognition of BORS
Lift revenues during 1999.

         The cost of sales for fiscal 1999 represented 136% of net sales, or
$1,493,433, compared to 47% of net sales, or $239,151, in fiscal 1998. The
increase is attributable to the inventory retrofit and design modification work
associated with the sale of BORS Lift units which was required in 1999. The 1999
cost of sales includes a $561,684 inventory valuation write-down to net
realizable value since the historical BORS inventory costs, including the cost
of retrofit, exceeded the historical and expected future selling price of the
units.

         Operating, general and administrative expenses increased in fiscal 1999
to $7,749,386, or 704% of sales, compared to $4,468,369, or 879% of sales, in
fiscal 1998. The increased expense is attributable to significantly higher
operating costs to support our technology development, new product introductions
and future business expansion. These costs include higher salaries and related
costs, legal and accounting fees, bad debt write-offs and rent than we incurred
in fiscal 1998. Our direct research and development expenses increased 107% from
$1,184,848 in fiscal 1998 to $2,457,835 in fiscal 1999. We attribute $930,000 of
the $1,272,987 increase in research and development expenses during fiscal 1999
to increases in non-cash charges relating to research-related stock-based
compensation and licensing agreements.

         We experienced a net loss of $12,062,668 or ($0.43) per share for the
fiscal year ended December 31, 1999, a 112% increase over our net loss in fiscal
1998. Due to the increase in the weighted shares outstanding at the end of
fiscal 1999, however, the net loss per share was 12% lower than the net loss per
share in fiscal 1998. Total non-cash charges to us were $4,980,247 or 42% of the
net loss for fiscal 1999.

         Interest expense was up from $21,234 during fiscal 1998 to $290,618
during fiscal 1999 due to higher levels of borrowing during the year, primarily
from the convertible notes issued in February 1999.

         We wrote-off $375,706 of our investment in a joint venture in the
Domincian Republic. The joint venture was formed with a Dominican Republic
private utility to construct and operate an alternative fuel production
facility. Subsequently, the utility failed to perform under the terms of the
proposed joint venture agreement, and the joint venture did not proceed.

         We had a $772,019 loss from discontinued operations and loss on
disposal of our Brounley subsidiary during fiscal 1999. As a result of
significant declines in Brounley's sales during fiscal 1999 relative to (a)
prior year sales and (b) budget expectations, we discontinued this business unit
in August 1999 and transferred its equipment to our contract manufacturing
segment.

                                      -15-
<PAGE>   18


FISCAL 1998 COMPARED TO FISCAL 1997

         Net sales increased during fiscal 1998 to $508,538, up approximately
48% from $344,149 in fiscal 1997. The increase in sales reflects both the
inclusion of InterSource and the sale of alternative fuel demonstration
equipment and engineering services during the fourth quarter of fiscal 1998. We
experienced a net loss of $5,686,877 or ($0.49) per share for the fiscal year
ended December 31, 1998, a 102% decrease per share when compared to our net
income of $15,372 or $0.01 in fiscal 1997. Fiscal 1997 results primarily
consisted of the results of operations generated by Advanced Micro Welding since
we did not commence operations until November 1997. Among the significant items
impacting fiscal 1998 results were increased operating and development expenses,
including total stock-based compensation of $3,580,123, which did not occur in
fiscal 1997.

         The cost of sales for fiscal 1998 represented 47% of net sales, or
$239,151, a 26% decrease compared to 59% of net sales, or $202,689, in fiscal
1997. The decrease is attributable to the increased sales of higher margin
products and longer production runs for customers.

         Operating, general and administrative expenses increased in fiscal 1998
to $4,468,369, or 879% of sales, compared to $126,631, or approximately 37% of
sales, in fiscal 1997. The increased expense is attributable to significantly
higher operating costs to support our technology development, new product
introductions and future business expansion. We also incurred $1,184,848 in
connection with research and development activities in fiscal 1998, which were
not conducted in fiscal 1997. Approximately $920,000 of these costs were related
to non-cash stock-based compensation arrangements. We attribute 63%, or
$3,580,123, of total operating expenses during fiscal 1998 to non-cash charges
relating to stock-based compensation and licensing agreements. Total non-cash
charges were $3,752,654 or 69% of the net loss for fiscal 1998.

LIQUIDITY AND CAPITAL RESOURCES

         We have experienced recurring net losses since our inception and, as
such, have experienced negative operating cash flows in both fiscal 1999
($5,747,271) and fiscal 1998 ($2,418,348). We have continued to experience
negative operating cash flows during the first quarter ended March 31, 2000. We
have historically funded these negative operating cash flows with proceeds from
sales of common and preferred stock, notes and convertible debentures payable
and equipment sale/leaseback transactions. Total amount received from these
sources approximated $5,500,000 during fiscal 1999 and $1,250,000 from January 1
through May 5, 2000. Notwithstanding the proceeds of these financing sources, we
have negative working capital of approximately ($2,200,000) at both December 31,
1999 and March 31, 2000 (unaudited).

         We are also delinquent with respect to payment of certain 1999 payroll
taxes (approximately $611,000, including interest and penalties). We expect to
enter into a payment stipulation agreement with the Internal Revenue Service to
pay this liability on a monthly basis over an extended period of time. During
2000, we made a $50,000 good faith deposit toward

                                      -16-
<PAGE>   19

this liability, but an agreement has not yet been finalized. The Internal
Revenue Service has certain collateral rights, including the seizure of our bank
accounts and other property, if a satisfactory agreement is not reached.

         We are actively exploring various options to improve our working
capital position, including licensing and/or selling certain of our technology
rights and obtaining research and development contracts to develop commercially
marketable products subject to potentially licensed or sold technologies.
However, there can be no assurance that we will be successful in implementing
any of these plans. We also plan to implement cost reductions throughout the
balance of 2000.

         Notwithstanding the potential cash flow benefits contemplated by these
plans, we will continue to require additional equity or debt financing in order
to cover our cash requirements and continue as a going concern, and those
financing requirements are in the very near term if the plans discussed in the
preceding paragraph are not implemented. We believe that we will be successful
in these financing efforts, but there can be no assurance to that effect.

INCOME TAXES

         We currently have a net operating loss carryforward for federal income
tax purposes of approximately $9,300,000 which is available to offset federal
taxable income through fiscal 2019. We have provided a 100% valuation allowance
on deferred tax assets substantially resulting from the net operating loss
carryforwards discussed above.

EFFECTS OF INFLATION

         We do not believe that inflation has had a significant impact on our
financial position or results of operations in the past three years.

YEAR 2000 ISSUES

         In 1999, we undertook an assessment of our information technology
systems relating to Year 2000 issues which resulted in the development of a plan
to prepare us for Year 2000 readiness. The cost of implementation of our plan
was not material. Such costs were capitalized or expensed as appropriate. As of
the date of this filing, we have not experienced any disruption of our operation
due to the Year 2000 issues. No additional costs relating to Year 2000 readiness
are anticipated.

ITEM 7.  FINANCIAL STATEMENTS

         Our consolidated 1999 financial statements, including the notes
thereto, together with the report thereon of Aidman, Piser & Company, P.A. is
presented beginning at page F-1.

                                      -17-
<PAGE>   20

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

         On January 5, 2000, Harper, Van Scoik & Company, LLP, the independent
accountant who was previously engaged as the principal accountant to audit our
financial statements, resigned. Harper's reports on the financial statements for
the past two years did not contain an adverse opinion or a disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles. The decision to accept Harper's resignation was approved by our
Board of Directors. During our two most recent fiscal years and the subsequent
interim period preceding such resignation, there were disagreements with Harper
on (a) the amount and method of valuing certain unregistered and restricted
shares of our stock that were issued to attract and retain key employees, to
acquire various license agreements and to make acquisitions and for development
needs and (b) the appropriateness of the method of revenue recognition employed
with respect to a transaction involving related parties. Our Board of Directors
discussed the subject matter of these disagreements with Harper, and both
matters were subsequently resolved to the satisfaction of Harper in connection
with its audit of our financial statements for the fiscal year ended December
31, 1998. There were no other disagreements with Harper on any matter of
accounting principle or practice, financial statement disclosure or auditing
scope or procedure, which disagreement(s), if not resolved to the satisfaction
of Harper, would have caused it to make reference to the subject matter of the
disagreement(s) in connection with its report prior to its filing. We provided
Harper with a copy of the disclosures made in the Form 8-K we filed on February
15, 2000. We have since retained the services of Aidman, Piser & Company, P.A.
to audit our financial statements and have authorized Harper to respond fully to
any inquiries of Aidman, Piser & Company, P.A. concerning the subject matter of
the disagreements discussed herein.

                                    PART III

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

         Our executive officers, directors and other significant employees and
their ages and positions are as follows:

<TABLE>
<CAPTION>
Name of Individual                 Age         Position
------------------                 ---         --------

<S>                                <C>       <C>
Leon Toups                         61          President, Chief Executive Officer, Chairman of the Board  of
                                               Directors

Mark Clancy                        44          Secretary, Executive Vice President and Director


Michael P. Toups                   34          Vice President of Finance, Chief Financial Officer and Director

Phillip Rappa                      52          Vice President of Operations, General Manager and
                                               Director
</TABLE>

                                      -18-
<PAGE>   21

<TABLE>
<S>                                <C>       <C>
Errol J. Lasseigne (1)             58          Director

Leslie D. Reagin III(1)            56          Director
</TABLE>

-----------------------------
(1) Member of Audit Committee

The following is a brief description of the professional experience and
background of our directors and executive officers.

         Leon H. Toups has been our Chairman of the Board of Directors,
President and Chief Executive Officer since inception in November 1997. From
1980 to present, Mr. Toups has served as President and Chairman of the Board of
Directors of DMV, Inc., Clearwater, Florida, a real estate holding company. From
1973 to 1980, Mr. Toups served as President and Chief Operating Officer, as a
member of the Board of Directors and as a member of the Executive Committee of
Chromalloy American Corporation, a New York Stock Exchange traded company
located in St. Louis, Missouri, and as President of Chromalloy Natural Resources
Company, in Houma, Louisiana. Mr. Toups' other past associations include Boeing
Corporation from 1970 through 1973 and NASA from 1965 to 1970 as a test
conductor for the Mercury through Apollo space programs. Mr. Toups holds the
following degrees: M.S. Aerospace Engineering, University of Florida; M.S.
Mechanical Engineering, Georgia Tech; B.S. Mechanical Engineering, Georgia Tech
and E.A.A. from Massachusetts Institute of Technology. From 1968 to 1969 Mr.
Toups attended M.I.T. on a NASA Hugh Dryden Fellowship.

        Mark Clancy has been our Secretary, Executive Vice President and a
director since our inception in November 1997. From 1993 to 1997, Mr. Clancy
served as a Compliance Officer for DMV, Inc. From 1996 to present, he has been
President of Total Kids, Incorporated, located in Tampa, Florida. Prior thereto,
Mr. Clancy served as General Sales Manager of WRCC FM Radio, Cape Coral,
Florida, and as Sales Consultant to WIZD FM Radio, West Palm Beach, Florida. Mr.
Clancy served in the United States Marine Corps until 1982 and holds an AA
degree from Hillsborough Community College,Tampa, Florida.

        Michael P. Toups has been our Chief Financial Officer, Vice President of
Finance and a director since our inception in November 1997. From 1996 to
present, Mr. Toups has been a director and Vice-President of Finance for
InterSource Health Care, Inc., located in Clearwater, Florida. From 1992 to
present, he has been the Vice President of Finance and Operations at DMV, Inc.,
Clearwater, Florida. From 1989 to 1991, he served as a financial analyst and
lending officer in the Corporate Banking group of Bank of America in St.
Petersburg, Florida. Mr. Toups holds an MBA from University of Notre Dame with
concentrations in finance and marketing and a BA in business administration from
Texas Christian University. Michael P. Toups is the son of Leon H. Toups, our
Chairman, President and Chief Executive Officer.

                                      -19-
<PAGE>   22

         Phillip Rappa has served as Vice President of Operations, General
Manager and a director since September 1999. Prior to joining us, Mr. Rappa was
the President and Chief Executive Officer of SuperPower, Inc. located in St.
Paul, Minnesota from 1993 to 1996. He served as Vice President of
national/international sales and marketing of ABB CEAG Power Supplies, Inc., of
Palm Coast, Florida. In addition, Mr. Rappa served as manufacturing/test manager
at Applied Digital Data Systems in Hauppauge, New York and director of
manufacturing for Siemens Corporation, also in Hauppauge. Mr. Rappa has 26 years
of experience in the design, manufacture and marketing of high- and low-voltage
systems for the computer, industrial and telecommunication industries. He earned
a BA in Business from the University of Texas El Paso, an MBA from Central
Florida University and a BSEE from the New York Institute of Technology.

         Errol J. Lasseigne has served as a director since May 1999 and has
served as a consultant to us with respect to InterSource. He has over 25 years
of experience in the pharmaceutical industry, including serving for 24 years in
various retail and institutional pharmaceutical divisions with Eckerd
Corporation. Mr. Lasseigne is and has been an officer and part owner of Senior
Life Management, a New York company that provides psychological services since
1993. He also is and has been an officer and part owner of L&G Management, a
Florida company that provides health care consulting and management services
since 1995. Mr. Lasseigne is and has been an officer and part owner of Garden
State Hospice, a New Jersey company that provides hospice services and family
counseling. Mr. Lasseigne is currently affiliated with the American Society of
Consultant Pharmacist, American Pharmaceutical Association and the Florida State
Chapter. He is a licensed pharmacist.

         Leslie D. Reagin III has served as a director since May 1999. Mr.
Reagin is President and owner of the L.D.R. Group, an investment management
company established in 1993. Mr. Reagin was engaged by the Eckerd Corporation
for 32 years and served in various executive positions with Eckerd for 22 years.
Mr. Reagin currently serves on the boards of the following organizations: Webber
College, Career Options Inc., Abilities of Florida, Inc., the Florida Chamber
Foundation, the Morton Plant Mease Foundation and the YMCA of Clearwater,
Florida. Mr. Reagin's previous affiliations include serving as a board member of
the Florida Chamber of Commerce, vice president of finance and chairman of the
Chamber Management Corporation, member of the board of overseers for the
Southern College of Pharmaceutical Sciences of Miami, Florida, past board
chairman of the Pinellas Private Industry Council, and member of the National
Association of Chain Drug Stores.

         The directors serve for one year terms until the next annual meeting of
stockholders and until their respective successors are elected and qualified.
Officers serve at the discretion of the Board of Directors.

AUDIT COMMITTEE

         Our Audit Committee is comprised of Messrs. Lasseigne and Reagin. The
Audit Committee recommends the independent accountants appointed by the Board to
audit our the financial statements, which includes an inspection of our books
and accounts, and reviews with

                                      -20-
<PAGE>   23

such accountants the scope of their audit and their report thereon, including
any questions and recommendations that may arise relating to such audit and
report or our internal accounting and auditing system procedures.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         Section 16(a) of the Securities Exchange Act of 1934 requires a
company's officers, directors and persons who own more than ten percent of a
registered class of such company's equity securities to file reports of
ownership and changes in ownership with the SEC. Officers, directors and ten
percent stockholders are required by regulation to furnish us with copies of all
Section 16(a) forms they file. Based on our records, we believe that during
fiscal 1999, our officers, directors and ten percent beneficial owners complied
with all applicable filing requirements.

ITEM 10.  EXECUTIVE COMPENSATION.

         SUMMARY COMPENSATION TABLE

         The following table sets forth information for each of the fiscal years
ended December 31, 1999, 1998 and 1997 concerning the compensation paid and
awarded to our Chief Executive Officer. There were no other executive officers
or key employees whose total annual salary and bonus exceeded $100,000 for these
periods:

<TABLE>
<CAPTION>
                                          Annual compensation                 Long-term
                                                                            Compensation
                                                                   Restricted    Securities
                                                                       Stock     underlying                   Total
Name and principal position   Year       Salary         Bonus       Award ($)   options (#)               Compensation

<S>                           <C>          <C>                <C>     <C>            <C>                   <C>
Leon H. Toups                 1999         $112,000           $ 0              $ 0     650,000(1)            $112,000
President and Chief           1998         $ 63,666           $ 0      $415,350(1)                          $ 479,016
Executive Officer             1997           $6,000           $ 0       $ 3,200(2)                            $ 9,200
</TABLE>

1)       Represents shares of restricted stock issued to Mr. Toups during 1998,
         valued at $.638 per share, which was the average price of stock
         issuances during the period. These shares were rescinded in 1999 and in
         lieu thereof, Mr. Toups was granted an option to purchase a like number
         of shares at an exercise price of $1.10 per share.

2)       Represents stock issued pursuant to Mr. Toups' employment agreement
         valued at $.001 per share at inception.

         The following table sets forth, for the individual named in the Summary
Compensation Table above, certain information concerning stock options granted
to him during 1999. We have never issued stock appreciation rights. Options were
granted at an exercise price above the fair

                                      -21-

<PAGE>   24

market value of the common stock at the date of grant. The term of the option is
three years from the date of grant.

<TABLE>
<CAPTION>
                                                                                                 Potential realizable
                               % of total     Exercise         Market                           value at assumed rates
                                 options       or base        price on                            of stock price for
                  Options      granted in      price per      date of      Expiration           Appreciation for option
     Name         Granted         1999          share          grant          Date                     term (1)
     ----         -------         ----          ($/Sh)         -----          ----                5%            10%
                                                ------                                            --            ---

<S>               <C>            <C>             <C>           <C>          <C>             <C>            <C>
Leon H. Toups     650,000        33.33%          $1.10         $1.03         Dec. 2002       $ 112,702      $ 236,665

</TABLE>

(1)      The dollar amounts under this column are the result of calculations at
         the 5% and 10% rates set by the Commission and therefore are not
         intended to forecast possible future appreciation, if any, of the stock
         price of our common stock. If the price of our common stock were in
         fact to appreciate at the assumed 5% or 10% annual rate for the
         three-year term of this option, a $1,000 investment in the Common Stock
         would be worth $1,158 and $1,331, respectively, at the end of the term.

         The following table sets forth, for the individual named in the Summary
Compensation Table, certain information concerning options exercised during
fiscal 1999 and the number of shares subject to exercisable and unexercisable
stock options as of December 31, 1999. The values for "in-the-money" options are
calculated by determining the difference between the fair market value of the
securities underlying the options as of December 31, 1999 ($.406 per share) and
the exercise price of the options.

<TABLE>
<CAPTION>


                                               Number of securities underlying       Value of unexercised "in the
                       Number of               unexercised options at December               money" options
                        shares                            31, 1999                       at December 31, 1999
                       acquired       Value               --------                       --------------------
        Name          on exercise   realized   Exercisable      Unexercisable      Exercisable      Unexercisable



<S>                     <C>            <C>         <C>                <C>              <C>               <C>
                                                                                         (1)
Leon H. Toups            None          $0          650,000             None              N/A               N/A
</TABLE>

(1)      Options granted during 1999 were not "in the money" at December 31,
         1999.


DIRECTORS' COMPENSATION

        We do not pay compensation to directors for serving on the Board, but we
reimburse directors for out-of-pocket expenses incurred by them in connection
with attending meetings of the Board.

                                      -22-
<PAGE>   25

EMPLOYMENT AGREEMENTS

         We are party to employment agreements with Leon H. Toups, Mark Clancy
and Michael P. Toups. Except as noted, each of the employment agreements
contains substantially identical terms. Each agreement is dated as of July 28,
1997 and is for a term of five (5) years. Pursuant to the terms of these
agreements, each of the employees received a fixed monthly salary during the
calendar years 1997, 1998 and 1999, after which time each individual's salary
would be determined by the Board of Directors. Under the agreements, Leon H.
Toups received a salary of $10,000 per month during 1999, and Michael P. Toups
and Mark Clancy each received a salary of $8,333 per month during 1999. In
addition, Leon H. Toups received 3,200,000 shares of common stock at the
inception of the agreement and 650,000 shares of common stock during 1998. Mr.
Clancy and Michael P. Toups each received 1,600,000 shares of common stock at
the inception of the agreement and 650,000 shares of common stock during 1998.
The shares issued in 1998 were rescinded in 1999, and, in lieu thereof, each
employee was granted an option to purchase a like number of shares at $1.10 per
share. For all years remaining under the agreements after 1998, the employees
are entitled to receive stock compensation as determined by the Board of
Directors at terms no less favorable than options to purchase common stock at
80% of the then market value. During 1999, Leon H. Toups took a 20% decrease in
salary, and Michael P. Toups and Mark Clancy each took a 10% decrease in salary.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding ownership
of our common stock as of May 2, 2000 by each person known to us to own
beneficially more than 5% of our outstanding common stock, by each person who is
a director, by each person listed in the Summary Compensation Table and by all
directors and officers as a group.

         The information contained in the table was furnished by the persons
listed therein. The calculations of the percent of shares beneficially owned are
based on 38,362,117 shares of common stock outstanding on May 2, 2000 plus with
respect to each such person the number of additional shares that will be
outstanding upon exercise of the warrants and options exercisable within sixty
(60) days set forth herein.

<TABLE>
<CAPTION>
  Name and Address of
   Beneficial Owner                         Beneficial Ownership                  Percent of Class

<S>                                     <C>                                <C>
Leon H. Toups                                   4,006,680(1)                            10.3%
418 Harbor View Lane
Largo, Florida 33770

Mark Clancy                                     2,383,340(1)                            6.1%
417 Barrett Court
Tampa, Florida 33617
</TABLE>

                                      -23-
<PAGE>   26

<TABLE>
<CAPTION>
  Name and Address of
   Beneficial Owner                         Beneficial Ownership                  Percent of Class

<S>                                     <C>                                <C>
Michael P. Toups                                2,383,340(1)                            6.1%
400 Palm Drive
Largo, Florida 33770

Errol J. Lasseigne                                 271,877                              0.7%
2364 Violet Place
Palm Harbor, Florida 34685

Leslie D. Reagin, III                           1,917,901(2)                            5.0%
720 Bluffview Drive
Belleair, Florida 34640

Phillip Rappa                                   1,475,000 (3)                           3.7%
5333 Wellfield Road
Newport Richey, Florida 34655


John Rivera
4521 S.W. 133rd Avenue                            2,000,000                             5.2%
Ft. Lauderdale, Florida
33330

All Officers and Directors                       12,438,138                             29.8%
(six persons)
</TABLE>

         (1) Includes options to purchase 650,000 shares of Common Stock at an
         exercise price of $1.10 per share.

         (2) Includes options to purchase 25,000 shares of Common Stock at an
         exercise price of $.70 per share, granted in connection with a loan to
         the Company in the principal amount of $334,000, which was converted
         into Common Stock in April 2000. See "Certain Relationships and Related
         Transactions."

         (3) Includes options to purchase 1,400,000 shares of Common Stock at an
         exercise price of $.34 per share granted in January 2000.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         In June 1999, we borrowed $65,000 from DMV, Inc., a company 100% owned
by Leon H. Toups, our Chairman, President and Chief Executive Officer. This
indebtedness is evidenced

                                      -24-
<PAGE>   27

by a promissory note which bears interest at a rate of 12% per annum, is for a
term of two years and requires that we make 24 monthly principal and interest
payments of $3,060. The note is secured by our accounts receivable, inventory
and equipment. We have made all payments due under this note, and as of December
31, 1999, the remaining balance due was $55,215.

         In July 1999, we borrowed $75,000 from Leon H. Toups. This indebtedness
is evidenced by a promissory note which bears interest at a rate of 12% per
annum, is for a term of two years and requires that we make 24 monthly principal
and interest payments of $3,530.51. The note is secured by our accounts
receivable, inventory and equipment. We have made all payments due under this
note, and as of December 31, 1999, the remaining balance due was $66,575.

         In August 1999, we borrowed $282,000 from Leslie D. Reagin, one of our
directors. This indebtedness was evidenced by a promissory note which bears
interest at a rate of 12% per annum and was due and payable in full, with all
interest accrued thereon, on January 15, 2000. The note was secured by real
property in the Dominican Republic. In March 2000, we borrowed an additional
$52,000 from Mr. Reagin. This indebtedness was evidenced by an unsecured
promissory note which bears interest at a rate of 12% per annum. In April 2000,
all amounts due under these notes were converted into 1,336,000 shares of our
common stock at a conversion price of $.25 per share. In connection with the
August 1999 note, Mr. Reagin also received an option to purchase 25,000 shares
of common stock at an exercise price of $0.70 per share. This option expires in
August 2002.

         In December 1999, we borrowed $250,000 from Daniel Doyle, one of our
shareholders. This indebtedness is evidenced by a promissory note which bears
interest at a rate of 12% per annum and is due in September 2000. The note is
secured by substantially all of our assets.

         In August 1999, we borrowed $70,000 from Richard Hornstrom, one of our
shareholders. In October 1999, we borrowed an additional $12,500 from Leon H.
Toups. In November 1999, we borrowed $25,000 from Joseph Cerbone, one of our
shareholders. All of the foregoing advances are unsecured and are not evidenced
by promissory notes. Each advance bears interest at the rate of 12% per annum
and is payable upon demand. The purpose of these advances was to provide us with
needed working capital.

         The transactions described above are on terms no less favorable to us
than those that could have been obtained from independent third parties in
arms-length negotiations.

ITEM 13.  EXHIBITS, LIST AND REPORTS ON FORM 10-KSB.

         (a)      Exhibits

3.1*     Certificate of Incorporation of the Company.

3.2*     By-Laws of the Company.

3.3+     Articles of Amendment to Articles of Incorporation filed with the
         Florida Secretary of State on March 30, 1999.

                                      -25-
<PAGE>   28

3.4+     Articles of Amendment to Articles of Incorporation filed with the
         Florida Secretary of State on November 24, 1998.

4.1+     Warrant to Purchase Common Stock granted to The Augustine Fund, L.P.
         dated February 17, 1999.

4.2+     Series 1999-A Eight Percent (8%) Convertible Note Due January 1, 2002
         given to The Augustine Fund, L.P. by the Company, dated February 17,
         1999.

4.3+     Registration Rights Agreement by and between The Augustine Fund, L.P.
         and the Company, dated February 17, 1999.

4.4+     Warrant Agreement by and between Sands Brothers & Co., Ltd. and the
         Company, dated October 29, 1999.

10.1*    License Agreement by and between Robert Alan Jaeger (BPV) and the
         Company, dated November 3, 1997 (BP Valves).

10.2*    WAFT Agreement by and between Wm. H. Richardson, Jr. (WAFT Partners)
         and the Company, dated November 8, 1997 (AquaFuel).

10.3*    Manufacturing License Agreement by and between Gerold Allen and the
         Company, dated January 1, 1998.

10.4**   Sale of Corporation's Assets in Exchange for Stock of Purchasing
         Company by and between A.M.W. Metal Fabricators, Corporation and the
         Company, dated April 29, 1998.

10.5***  The Balanced Oil Recovery System Lift License Agreement by and between
         Lift-Pump, L.L.C. and the Company, dated July 29, 1998.

10.5(a)+ First Amendment to The Balanced Oil Recovery System Lift License
         Agreement by and between Lift-Pump, L.L.C. and the Company, dated July
         29, 1999.

10.5(b)+ Second Amendment to The Balanced Oil Recovery System Lift License
         Agreement by and between Lift-Pump, L.L.C. and the Company, dated March
         30, 2000.

10.6+    Electromagnetion Aquafuel Enhancement License Agreement by and among
         Lawrence Perovetz, Ruggero Maria Santilli and the Company, dated June
         8, 1998.

10.7+    Tunnel Bat License Agreement by and between David Richardson and the
         Company, dated July 1, 1998.

10.8+    Share Exchange Agreement by and among InterSource Health Care, Inc.,
         certain other persons listed therein and the Company, dated November
         30, 1998.

                                      -26-
<PAGE>   29

10.9+    Share Exchange Agreement by and among Brounley Associates, Inc.,
         certain other persons listed therein and the Company, dated November
         30, 1998.

10.10/\  Contract by and between the Company and Company De Luz Y Fuerza De
         Terrenas dated November 30, 1998.

10.11+   Exclusive Representative Agreement by and between the Company and
         Rancha La Regina Agropecuaria dated June 15, 1999.

10.12+   Exclusive License Agreement by and between Tomorrows Innovative
         Technology Today and the Company dated December 15, 1999.

10.13+   Santilli Technology Exclusive Assignment and Royalty Agreement by and
         among Hadronic Press, The Institute for Basic Research, Ruggero Maria
         Santilli and the Company, dated February 3, 2000.

10.14+   Scientific Consulting Agreement by and between Ruggero Maria Santilli
         and the Company, dated January 1999.

10.15+   Employment Agreement between Leon H. Toups and the Company dated July
         28, 1997.

10.16+   Employment Agreement between Michael P. Toups and the Company dated
         July 28, 1997.

10.17+   Employment Agreement between Mark Clancy and the Company dated July 28,
         1997.

21       List of Subsidiaries

23.1     Consent of Aidman, Piser & Company, P.A.  (included herein)

23.2     Consent of Harper, Van Scoik & Company, LLP (included herein)

24       Power of Attorney (included in the signature page to this report).

27       Financial Data Schedule.

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

     *   Previously filed as Exhibits to, and incorporated by reference from,
         the Company's Form 10-SB, on March 11, 1998.

    **   Previously filed as Exhibits to, and incorporated by reference from,
         the Company's Form 10-SB on May 19, 1998.

   ***   Previously filed as an Exhibit to, and incorporated by reference from,
         the Company's Form SB-2 on October 7, 1998.

                                      -27-
<PAGE>   30

/\       Previously filed as an Exhibit to, and incorporated by reference from,
         the Company's Form 8-K on December 28, 1998.

     +   Filed herewith.

         (b) The following reports on Form 8-K were filed during fiscal 1999:

         (i) On June 23, 1999, we filed a Form 8-K/A for the purpose of filing
         the audited balance sheets of Brounley Associates, Inc. as of December
         31, 1997 and 1996 together with the related statements of income,
         stockholders' equity and cash flows for the years then ended.

         (ii) On June 25, 1999, we filed a Form 8-K/A for the purpose of filing
         the independent auditors' report and accompanying balance sheet of
         InterSource Health Care, Inc. as of December 31, 1997 and the related
         statements of operations, stockholders' deficit, and cash flows for the
         year then ended.

         (iii) On July 13, 1999, we filed a Form 8-K/A for the purpose of filing
         the independent auditors' report and accompanying balance sheet of
         InterSource Health Care, Inc. as of December 31, 1997 and the related
         statements of operations, stockholders' deficit, and cash flows for the
         year then ended. This Form 8-K/A was filed in order to correct the Form
         8-K/A filed on June 25, 1999.

         (iv) On July 22, 1999, we filed a Form 8-K/A for the purpose of filing
         the audited balance sheet of Brounley as of December 31, 1997 and the
         related statements of income, stockholders' equity and cash flows for
         the year then ended.

         (v) On July 28, 1999, we filed a Form 8-K/A for the purpose of filing
         (1) our pro forma condensed consolidated balance sheet as of September
         30, 1998 and the pro forma condensed consolidated statements of
         operations for the nine month period ended September 30, 1998 and the
         period ended December 31, 1997, which give effect to the business
         combination with Brounley; (2) the unaudited balance sheet of Brounley
         and the accompanying statements of operations, stockholders' equity and
         cash-flows and notes thereto for the interim period ended September 30,
         1998; and (3) the independent auditors' report related to the audited
         balance sheet of Brounley as of December 31, 1997 and accompanying
         statements of operations, stockholders' equity and cash flows and notes
         thereto as of December 31, 1997, together with the related statements
         of earnings, stockholders' equity and cash flows for the year then
         ended.

         (vi) On August 27, 1999, we filed a Form 8-K/A for the purpose of
         filing (1) our pro forma condensed consolidated balance sheet at
         September 30, 1998 and the pro forma condensed consolidated statements
         of operations for the nine month period ended September 30, 1998 and
         the period ended December 31, 1997, which give effect to our business
         combination with Brounley; (2) the unaudited balance sheet of Brounley
         and the accompanying statements of operations, stockholders' equity and
         cash-flows and notes thereto for the interim period ended September 30,
         1998; and (3) the independent

                                      -28-
<PAGE>   31

         auditors' report related to the audited balance sheet of Brounley and
         accompanying statements of operations, stockholders' equity and
         cash-flows and notes thereto as of December 31, 1997, together with the
         related statements of earnings, stockholders' equity and cash flows for
         the year then ended. This Form 8-K/A was filed in order to correct the
         Form 8-K/A filed on July 28, 1999.

                                      -29-
<PAGE>   32

                          Independent Auditors' Report

Board of Directors
Toups Technology Licensing, Incorporated
Largo, Florida

We have audited the accompanying consolidated balance sheet of Toups Technology
Licensing, Incorporated and Subsidiaries (the "Company"), as of December 31,
1999, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Toups
Technology Licensing, Incorporated and Subsidiaries, as of December 31, 1999,
and the consolidated results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has a working capital and net capital deficiency which raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 3. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

                                     /s/ AIDMAN, PISER & COMPANY, P.A.

April 20, 2000, except for Notes 3 and 20 for which the date is May 5, 2000
Tampa, Florida

                                      F-1

<PAGE>   33
                          INDEPENDENT AUDITORS' REPORT




BOARD OF DIRECTORS AND STOCKHOLDERS
TOUPS TECHNOLOGY LICENSING, INCORPORATED
   AND SUBSIDIARIES
LARGO, FLORIDA

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Toups Technology Licensing, Incorporated
and subsidiaries (the Company) for the year 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 audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Toups Technology Licensing, Incorporated and subsidiaries for the
year ended December 31, 1998 in conformity with generally accepted accounting
principles.

As described in Note 2 to the financial statements, we recently became aware of
facts that existed prior to the issuance of our previous audit report which
would have affected our report had we been aware of such facts.

                                     HARPER, VAN SCOIK & COMPANY, LLP



February 2, 1999, except for Note
   2 as to which the date is May 12, 2000


                                  F-1-A
<PAGE>   34

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1999

                                     ASSETS
Current assets:
  Cash                                                             $     72,224
  Accounts receivable                                                    19,501
  Inventories                                                         1,072,280
  Prepaid royalties                                                      63,166
                                                                   ------------
   Total current assets                                               1,227,171

Property and equipment, net                                           1,970,334
Deferred charge, net of $31,041
 accumulated amortization                                               279,367
Other assets                                                             80,668
                                                                   ------------
                                                                   $  3,557,540
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Notes payable, bank                                              $    184,063
  Current maturities of notes payable, related parties                  719,803
  Current maturities of capital lease obligations                       250,733
  Accounts payable                                                    1,149,356
  Accrued expenses                                                      803,988
  Customer deposits                                                     288,148
  Dividends payable                                                      39,375
                                                                   ------------
   Total current liabilities                                          3,435,466

Notes payable, related parties, less current maturities                  41,487

Capital lease obligations, less current maturities                      622,538

Convertible debentures                                                  750,000
                                                                   ------------
  Total liabilities                                                   4,849,491
                                                                   ------------

Commitments and contingencies                                                --

Stockholders' deficit:
  Series A preferred stock, par value $1, 10,000,000
   shares authorized, 750 shares issued and outstanding                     750
  Common stock, par value $.001, 50,000,000
   shares authorized, 33,290,948 shares issued and outstanding
  Additional paid-in capital                                         17,988,553
  Accumulated deficit                                               (18,046,485)
                                                                   ------------
                                                                        (23,891)
  Less treasury stock (1,950,000 shares at cost)                     (1,268,060)
                                                                   ------------
   Total stockholders' deficit                                       (1,291,951)
                                                                   ------------
                                                                   $  3,557,540
                                                                   ============

                 See notes to consolidated financial statements.


                                      F-2
<PAGE>   35
                         TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                     AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF OPERATIONS
                          YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                       1998-Restated
                                                                           1999           (Note 2)
                                                                       ------------     ------------
<S>                                                                    <C>              <C>
Revenue                                                                $  1,100,528     $    508,538

Cost of sales, including inventory valuation
 allowances and write-downs of $561,684 in 1999                           1,493,433          239,151
                                                                       ------------     ------------
Gross profit (loss)                                                       (392,905)          269,387
Selling, general and administrative expenses                              7,749,386        4,468,369
Research and development expenses                                         2,457,835        1,184,848
                                                                       ------------     ------------

Loss from continuing operations before income taxes and other items     (10,600,126)      (5,383,830)
                                                                       ------------     ------------
Other income (expenses):
Interest expense                                                           (290,618)         (21,234)
Loss on sale of property and equipment                                      (41,826)              --
Write-off of investment in joint venture                                   (375,706)              --
Other income                                                                 17,627            6,621
                                                                       ------------     ------------
                                                                           (690,523)         (14,613)
                                                                       ------------     ------------

Loss from continuing operations before
income taxes                                                            (11,290,649)      (5,398,443)

Income taxes                                                                     --               --
                                                                       ------------     ------------

Loss from continuing operations                                         (11,290,649)      (5,398,443)

Discontinued operations:
   Loss from discontinued operations (no applicable
   income taxes)                                                           (468,816)        (288,434)
   Loss on disposal of discontinued business segment
   (no applicable income taxes)                                            (303,203)              --
                                                                       ------------     ------------

Net loss                                                                (12,062,668)      (5,686,877)
Preferred stock dividends                                                  (289,375)              --
                                                                       ------------     ------------
Net loss attributable to common stockholders                           ($12,352,043)    ($ 5,686,877)
                                                                       ============     ============
Loss per common share attributable to common stockholders:
   Continuing operations                                               ($       .40)    ($       .47)
   Discontinued operations                                             (         .3)    (         .2)
   Net loss                                                            ($       .43)    ($       .49)
                                                                       ------------     ------------

Weighted average shares outstanding                                      28,935,217       11,492,162
                                                                       ============     ============
</TABLE>

                       See notes to consolidated financial


                                       F-3
<PAGE>   36

            TOUPS TECHNOLOGY LICENSING, INCORPORATED AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                           Retained
                                  Common Stock         Preferred Stock     Additional      Earnings
                              ---------------------   -----------------      Paid-in     (Accumulated      Treasury
                                Shares      Amount    Shares     Amount      Capital        Deficit)         Stock         Total
                              ---------    --------  --------  ---------  ------------   ------------      ---------     ----------
<S>                           <C>          <C>       <C>       <C>         <C>            <C>              <C>           <C>
   Balances,
    January 1, 1998           9,130,000    $  9,130            $           $   146,537    $        27      $                155,694

   Common stock issued
    for cash                  5,381,361       5,381                          3,844,897                                    3,850,278

   Common stock issued
    for services              5,602,697       5,603                          3,574,520                                    3,580,123

   Common stock issued
    for acquisitions          2,103,241       2,103                          1,326,568                                    1,328,671

   Distributions to
    stockholders                                                                               (7,592)                       (7,592)

   Net loss for the year
    (restated-Note2)                                                                       (5,686,877)                   (5,686,877)
                             ----------    --------  --------  ---------  ------------    -----------      ----------    ----------

Balances, December 31,
 1998 (restated-Note 2)      22,217,299    $ 22,217            $                          $ 8,892,522     ($5,694,442)   $ 3,220,297
                             ==========    ========  ========  =========  ============    ===========      ==========    ===========
</TABLE>

                                   (Continued)


                                       F-4
<PAGE>   37

            TOUPS TECHNOLOGY LICENSING, INCORPORATED AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                            Retained
                                   Common Stock       Preferred Stock        Additional     Earnings
                               --------------------  ------------------       Paid-In     (Accumulated    Treasury
                                 Shares     Amount   Shares     Amount        Capital        Deficit)       Stock          Total
                               ----------  --------  ------    --------     -----------   -------------   ---------     -----------
<S>                            <C>          <C>        <C>     <C>          <C>           <C>             <C>           <C>
Balances, January 1,
  1999                         22,217,299   $22,217            $            $ 8,892,522   ($ 5,694,442)   $             $ 3,220,297
Preferred stock issued
  for cash                                              750         750         749,250                                     750,000
Common stock issued
  for cash                      5,865,303     5,865                           2,521,535                                   2,527,400
Common stock issued
  for services asset
  purchases:
  Employees and
  consultants                   1,466,765     1,467                             850,773                                     852,240
  Equipment purchases              25,000        25                               9,913                                       9,938
  License fees                  2,075,000     2,075                           1,512,866                                   1,514,941
  Investment in joint venture     500,000       500                             375,206                                     375,706
Warrants issued in
connection with:
  Preferred stock                                                                45,885                                      45,885
   Less stock issuance
   costs                                                                        (45,885)                                    (45,885)
  Financial advisory
    services                                                                    877,420                                     877,420
  Loan costs                                                                     70,900                                      70,900
Conversion of debt
  to equity                     1,141,581     1,142                             422,608                                     423,750
Stock recission                                                               1,268,060                    (1,268,060)
Preferred stock
  dividends                                                                                    (39,375)                     (39,375)
Preferred stock
  beneficial conversion
  feature (dividend)                                                            250,000       (250,000)
Convertible debenture
  beneficial conversion
  feature (interest expense)                                                    187,500                                     187,500
Net loss for the year                                                                      (12,062,668)                 (12,062,668)

                               ----------   -------     ---    --------     -----------   ------------   ------------   -----------
Balances,
  December 31, 1999            33,290,948   $33,291     750    $    750     $17,988,553   ($18,046,485)  ($ 1,268,060)  ($1,291,951)
                               ==========   =======     ===    ========     ===========   ============   ============   ===========
</TABLE>

                 See notes to consolidated financial statements.


                                       F-5
<PAGE>   38

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                              1998-Restated
                                                                  1999           (Note 2)
                                                               -----------    -------------
<S>                                                          <C>              <C>
Cash flows from operating activities:
 Net loss                                                    ($ 12,062,668)   ($ 5,686,877)
 Adjustments to reconcile net loss to
    net cash used in operating activities:
     Depreciation and amortization                                 577,316          76,622
     Amortization of goodwill                                       59,142          19,597
     Amortization of deferred loss on sale-leaseback                31,041              --
     Amortization of loan costs                                     28,300              --
     Stock based compensation                                    3,244,601       3,580,123
     Beneficial conversion feature of convertible debenture        187,500              --
     Loss on sale of property and equipment                         41,826              --
     Write-off of investment in joint venture                      375,706              --
     Write-off of goodwill                                         313,203              --
     Increase (decrease) in cash due to changes in:
      Accounts receivable                                          255,498          77,419
      Inventories                                                  240,406      (1,135,178)
      Prepaid royalties                                             65,834        (118,000)
      Other assets                                                  (3,360)        (23,813)
      Accounts payable                                             (92,470)        570,102
      Accrued expenses                                             763,426         200,218
      Customer deposits                                            227,428          60,720
      Other liabilities                                                 --         (39,281)
                                                               -----------     -----------
Net cash used in operating activities                           (5,747,271)     (2,418,348)
                                                               -----------     -----------

Cash flows from investing activities:
 Cash received in business acquisition                                  --          14,610
 Repayments from (loans to) related parties                         87,485         (18,428)
 Loans to subsidiary prior to acquisition                               --        (164,297)
 Acquisition of property and equipment                            (453,598)       (498,794)
                                                               -----------     -----------
Net cash used in investing activities                             (366,113)       (666,909)
                                                               -----------     -----------

Cash flows from financing activities:
 Proceeds from sale/leaseback of property and equipment            250,000              --
 Distributions to stockholders                                          --          (7,592)
 Proceeds from (repayments of) notes payable bank                  134,489          (4,600)
 Proceeds from sale of capital stock                             3,277,400       3,850,278
 Principal repayments on capital lease obligations                (183,401)        (55,385)
 Proceeds from convertible debentures                              750,000              --
 Proceeds from related party notes payable                       1,208,250              --
 Repayments on related party notes payable                         (23,210)             --
                                                               -----------     -----------
Net cash provided by financing activities                        5,413,528       3,782,701
                                                               -----------     -----------
Increase (decrease) in cash                                       (699,856)        697,444
Cash, beginning of year                                            772,080          74,636
                                                               -----------     -----------
Cash, end of year                                              $    72,224     $   772,080
                                                               ===========     ===========
</TABLE>

                                   (Continued)


                                      F-6
<PAGE>   39

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

                 Supplemental schedule of cash flow information

Cash paid during the year for:
                                                      1999                 1998
                                                    -------              -------

Interest                                            $31,769              $21,234
                                                    =======              =======
Income taxes                                        $    --              $ 3,198
                                                    =======              =======

      Supplemental schedule of non-cash financing and investing activities

During 1999, the Company:

o     Converted $423,750 of related party debt to equity through the issuance of
      1,141,581 shares of common stock
o     Incurred $70,900 of loan costs through the issuance of common stock
      warrants
o     Acquired equipment with a cost of $668,435 and $9,938 through capital
      lease obligations and the issuance of 25,000 shares of common stock,
      respectively
o     Incurred joint venture investment costs of $375,706 through the issuance
      of 500,000 shares of common stock

In 1998, the Company acquired assets of $369,846 under capital lease agreements.

In 1998, the Company issued 1,203,241 shares of unregistered common stock for
the acquisition of InterSource Health Care, Inc.

    Assets acquired                    $ 1,301,521
    Liabilities assumed                    611,850

In 1998, the Company issued 900,000 shares of unregistered common stock for the
acquisition of Brounley Associates, Inc.

   Assets acquired                     $   764,304
   Liabilities assumed                     125,304

In 1998, the Company issued 500,000 shares of unregistered common stock for the
acquisition of Advanced Micro Welding, Inc.

   Assets acquired                     $   301,834
   Liabilities assumed                     214,544

                 See notes to consolidated financial statements.


                                      F-7
<PAGE>   40

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

1.    Nature of business, basis of presentation and summary of significant
      accounting policies:

      Nature of business:

      Toups Technology Licensing, Incorporated (the "Company"), a Florida
      corporation, was formed on July 28, 1997, and activated its startup
      operations on November 1, 1997 to facilitate market applications through
      the licensing of late-stage technologies primarily in the energy and
      natural resources, environmental and health care market. The consolidated
      financial statements include the accounts of the Company and its
      wholly-owned subsidiaries, Brounley Associates, Inc. (Brounley), Advanced
      Micro Welding, Inc. (AMW) and InterSource Health Care, Inc. (InterSource).
      All material intercompany balances and transactions have been eliminated.

      The Company's reportable operating segments are strategic business units
      that offer different products and have separate management teams. During
      1999, these segments were 1) Contract Manufacturing, 2) manufacture and
      sale of the Balanced Oil Recovery System (BORS) Lift 3) sale of medical
      equipment (Health Care market) and 4) Technology Development for
      Environmental Solutions. During 1999, the Company also had the Brounley
      operating segment which was discontinued during the third quarter of 1999
      (see Note 5).

      Contract Manufacturing provides production, metal fabrication, machining
      and precision welding services for the Company's in-house needs such as
      BORS Lift production and prototyping for its applied technology
      development. The cost of this business activity is partially recovered by
      contract manufacturing services provided to outside customers.

      The BORS Lift is an oil extraction device that increases oil production
      while decreasing operating costs and virtually eliminating salt-water
      separation from depleted, relatively shallow "stripper" oil wells.

      The Health Care segment is operated by InterSource Health Care, Inc., a
      distributor of various medical equipment during 1999. The Company expects
      this segment will expand its operations during 2000 to become a medical
      sales and support services provider for capital equipment, health care
      products, medical and surgical supplies and nutritional products through
      the internet.


                                      F-8
<PAGE>   41

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

1.    Nature of business, basis of presentation and summary of significant
      accounting policies (continued):

      Nature of business (continued):

      The Technology Development for Environmental Solutions operating segment
      finalizes the development of late-stage technologies and applies the
      proven technology to market applications.

      Revenue recognition:

      Revenues are recognized as follows:

      BORS Lift -- sales of this equipment are recognized when units are
      shipped, the equipment functions substantially as intended, warranty
      obligations can be reasonably estimated and collection of receivables is
      reasonably assured.

      Contract manufacturing and medical equipment sales -- sales are recognized
      as manufactured items and equipment are shipped and collection of
      receivables is reasonably assured.

      Licensing Fee -- On June 15, 1999, the Company, entered into an Exclusive
      Representative Agreement with a corporation in the Dominican Republic in
      which the Company granted an exclusive license to commercialize and/or
      sell products associated with all of the Company's then owned intellectual
      property rights throughout Central and South American, Puerto Rico and the
      Dominican Republic. The Company is to receive a one-time $5,500,000
      license fee for these rights, and the payment of the fee was secured with
      a limited use title to a planned urban development consisting of a planned
      2,500 home site located in the Dominican Republic. The Company was to
      receive 10% of the sales price of each home as they were sold. The Company
      originally recognized the $5,500,000 licensing fee as revenue and a
      $1,375,000 allowance for potential undeveloped home sites as selling,
      general and administrative expenses during the quarter ended June 30,
      1999.

      Upon further consideration, the Company believes revenue should be
      recognized on the cash basis. Accordingly, the revenue and allowance for
      potential undeveloped home sites discussed in the preceding paragraph have
      been reversed in the fourth quarter of 1999 and no revenue was recorded
      relating to this license in the accompanying 1999 financial statements. As
      of April 20, 2000, the licensee has not paid any of the consideration due
      under the license agreement, and there can be no assurances that any
      amounts pursuant to the agreement will be received.


                                      F-9
<PAGE>   42

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

1.    Nature of business, basis of presentation and summary of significant
      accounting policies (continued):

      Inventories:

      Inventories are stated at the lower of cost or market. Cost is determined
      generally on a first-in, first-out method. As discussed in Note 2, the
      Company has inventory of its BORS Lifts, some of which require further
      modifications in order to bring the Lifts to a salable condition. This
      inventory is classified as work-in-progress inventory and has been written
      down to market (estimated sales price), less the estimated cost to modify
      and deliver the units.

      Property and equipment:

      Property and equipment are stated at cost. Depreciation is provided on the
      straight-line method over (1) the estimated useful lives of the assets,
      which range from 3 to 4 years for certain leasehold improvements, 5-7
      years for computers, office equipment and furniture and 20-30 years for
      other leasehold improvements or (2) the lease term for assets subject to
      capital lease if the lease term is shorter than the assets' estimated
      useful life.

      License fees:

      The Company has charged costs incurred for the acquisition of license
      rights (primarily resulting from the issuance of common stock) to
      operations as incurred (research and development expense) since the
      commercialization of the technologies is still in the development stage
      and such technologies have been purchased for a particular development
      project and have no current known alternative uses.

      Deferred charge:

      Deferred charge, consisting of the deferred loss on a sale/leaseback
      transaction, is being amortized in proportion to the amortization of the
      leased-back assets.

      Advertising costs:

      The costs associated with producing and communicating advertising are
      expensed in the period incurred. Advertising costs were approximately
      $35,000 and $67,000 during 1999 and 1998, respectively.


                                      F-10
<PAGE>   43

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

1.    Nature of business, basis of presentation and summary of significant
      accounting policies (continued):

      Use of estimates:

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

      Product Warranty:

      The Company provides warranties on the sales of its BORS units. The
      Company recognized an estimate of these warranty costs at December 31,
      1999 based on the performance history of this equipment and an estimate of
      the level of future claims.

      In connection with the Company's distribution of medical equipment, the
      original manufacturer's warranty is provided to the customer, and the
      Company does not otherwise warrant the equipment. Similarly, the Company
      does not provide a warranty on its contract manufactured items (such items
      consist primarily of fabricated metal items).

      Stock-based compensation:

      The Company accounts for compensation costs associated with stock options
      issued to employees under the provisions of Accounting Principles Board
      Opinion No. 25 ("APB 25") whereby compensation is recognized to the extent
      the market price of the underlying stock at the date of grant exceeds the
      exercise price of the option granted. The Company has adopted the
      disclosure provisions of Financial Accounting Standard No. 123 -
      Accounting for Stock-Based Compensation ("FAS 123"), which requires
      disclosure of compensation expense that would have been recognized if the
      fair-value based method of determining compensation had been used for all
      arrangements under which employees receive shares of stock or equity
      instruments. Stock-based compensation to non-employees is accounted for
      using the fair-value based method prescribed by FAS 123.


                                      F-11
<PAGE>   44

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

The Company accounts for unregistered common stock issued for services or asset
acquisitions at the estimated fair value of the stock issued. Fair value is
determined based substantially on the average cash price of recent sales of the
Company's unregistered common stock.


                                      F-12
<PAGE>   45

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

1.    Nature of business, basis of presentation and summary of significant
      accounting policies (continued):

      Income taxes:

      The Company uses the asset and liability method of accounting for income
      taxes. Under the asset and liability method, deferred tax assets and
      liabilities are recognized for the estimated future tax consequences
      attributable to differences between the financial statement carrying
      amounts of existing assets and liabilities and their respective tax bases.
      This method also requires the recognition of future tax benefits such as
      net operating loss carryforwards, to the extent that realization of such
      benefits is more likely than not. Deferred tax assets and liabilities are
      measured using enacted tax rates expected to apply to taxable income in
      the years in which those temporary differences are expected to be
      recovered or settled. The deferred tax assets are reviewed periodically
      for recoverability and valuation allowances are provided, as necessary.

      Net loss per share:

      Net loss per share was computed based on the weighted average number of
      shares outstanding during the periods presented.

      Diluted earnings per share is considered to be the same as basic earnings
      per share since the effect of common stock options and warrants and
      convertible debentures and preferred stock is anti-dilutive.

      New accounting pronouncements:

      During 1999, the Company adopted Statement of Financial Accounting
      Standards Number 131, "Disclosures about Segments of an Enterprise and
      Related Information." Statement No. 131 establishes standards for
      reporting information about operating segments in annual financial
      statements. Operating segments are defined as components of an enterprise
      about which separate financial information is available that is evaluated
      on a regular basis by the chief operating decision maker or
      decision-making group, in deciding how to allocate resources to an
      individual segment and in assessing performance of the segment. The
      Company has identified these segments based on the nature of business
      conducted by each. In management's opinion other recently issued
      pronouncements would have no significant impact on the Company's financial
      statements.


                                      F-13
<PAGE>   46

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

1.    Nature of business, basis of presentation and summary of significant
      accounting policies (continued):

      Reclassifications:

      Research and development expenses in 1998 have been classified from
      selling, general and administrative expenses to conform with the 1999
      presentation.

2.    Restatement of 1998 financial statements:

      During the fourth quarter of 1998 the Company recorded $1,515,720 of
      revenue associated with the sale of 102 of the Company's then newly
      developed BORS Lift. Prior to the sale of these units the Company had
      performed extensive product development and field testing and believed
      that all significant product and design problems had been satisfactorily
      resolved. However, subsequent to delivery and installation of certain
      units, management became aware of certain performance problems with the
      BORS units sold in 1998. Upon further investigation, management determined
      that certain repairs or modifications of the BORS units would be required.
      However, since the Company had limited operating history with this
      equipment, it was unable at that time to determine the magnitude of the
      required repairs or modifications or the cost thereof. Accordingly, the
      Company was not able to reasonably estimate the amount of any accrued
      warranty obligation that might have been required at December 31, 1998.
      Since the range of possible loss was not determinable at the date of the
      issuance of the 1998 financial statements, the Company has determined that
      recognition of these sales was not warranted until a reasonable estimate
      of the warranty obligation could be determined. The accompanying 1998
      financial statements have been adjusted to reverse the $1,515,720 of sales
      and $1,002,874 cost of sales, accrued commissions and accrued royalties
      associated therewith. The net effect of these adjustments on the 1998
      financial statements was to reduce gross profit by $595,689 and selling,
      general and administrative expenses by $82,843 (no applicable income
      taxes) and increase net loss and net loss per share by $512,846 and $.04,
      respectively.

      During the third quarter of 1999, the Company made the final determination
      of the BORS product and design modifications and/or repairs necessary for
      the equipment to reliably function as it was intended. Also, during 1999,
      the Company agreed to accept the return of most of the BORS units sold in
      1998. Modifications of many of the units were made in both 1999 and 2000,
      and 33 modified units were sold to other customers (recognized as revenue
      in 1999) without further performance problems. The balance of the returned
      units are included in inventory at December 31, 1999 at their estimated
      net realizable value.


                                      F-14
<PAGE>   47

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

3.    Management plans regarding liquidity and capital resources:

      The Company has experienced recurring net losses since its inception and,
      as such, has experienced negative operating cash flows in both 1999
      ($5,747,271) and 1998 ($2,418,348) and continued to experience negative
      operating cash flows during the first quarter ended March 31, 2000. The
      Company has historically funded these negative operating cash flows with
      proceeds from sales of common and preferred stock, notes and convertible
      debentures payable and equipment sale/leaseback transactions. The total
      amount received from these sources approximated $5,500,000 during 1999 and
      $1,250,000 from January 1 through May 5, 2000. Notwithstanding the
      proceeds of these financing sources, the Company has negative working
      capital of approximately ($2,200,000) at both December 31, 1999 and March
      31, 2000 (unaudited) and, at December 31, 1999, was delinquent with
      respect to payment of approximately $611,000 of 1999 payroll taxes,
      including interest and penalties (see Note 10).

      The Company is actively exploring various options to improve its working
      capital position, including licensing and/or selling certain of its
      technology rights and obtaining research and development contracts to
      develop commercially marketable products subject to potentially licensed
      or sold technologies. However, there can be no assurance that the Company
      will be successful in implementing any of these plans. The Company also
      plans to implement cost reductions throughout the balance of 2000.

      Notwithstanding the potential cash flow benefits contemplated by these
      plans, the Company will continue to require additional equity or debt
      financing in order to cover its cash requirements and continue as a going
      concern, and those financing requirements are in the very near term if the
      plans discussed in the preceding paragraph are not implemented. Management
      believes it will be successful in these financing efforts, but there can
      be no assurance to that effect.


                                      F-15
<PAGE>   48

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

4.    Business combinations:

      Advanced Micro Welding, Inc.

      On April 1, 1998, the Company acquired all the common stock of Advanced
      Micro Welding, Inc. (AMW) in exchange for 500,000 shares of the Company's
      unregistered common stock. AMW is engaged in micro welding and custom
      metal fabricating. The transaction has been accounted for as a pooling of
      interests and, accordingly, the consolidated financial statements for 1998
      include all accounts and operations of AMW as if the acquisition had
      occurred at the beginning of 1998.

      Unaudited net sales and net income of the separate companies for the
      period prior to the acquisition were:

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                March 31, 1998
                                                              ------------------
<S>                                                              <C>
      Net sales:
        Toups Technology Licensing, Incorporated                 $        --
        AMW                                                          109,154
                                                                 -----------
                                                                 $   109,154
                                                                 ===========

     Net income (loss):
       Toups Technology Licensing, Incorporated                  ($  215,096)
       AMW                                                             7,246
                                                                 -----------
                                                                 ($  207,850)
                                                                 ===========
</TABLE>

In 1999, AMW's manufacturing operations were merged with those of the Company.


                                      F-16
<PAGE>   49

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

4.    Business combinations (continued):

      Brounley Associates, Inc.:

      On October 1, 1998, the Company acquired all the common stock of Brounley
      Associates, Inc. (Brounley) in exchange for 900,000 shares of the
      Company's unregistered common stock. Brounley is engaged in the design,
      manufacture and sale of radio frequency generators throughout the United
      States and abroad. The transaction has been accounted for using the
      purchase method of accounting. Accordingly, the purchase price was
      allocated to the assets acquired and liabilities assumed based upon their
      estimated fair values, and the Company's consolidated 1998 results of
      operations include those of Brounley from the date of acquisition.

      The following is a summary of the assets purchased and liabilities assumed
      in the acquisition of Brounley:

<TABLE>
<S>                                                                     <C>
Assets acquired:
  Cash                                                                  $ 10,895
  Accounts receivable                                                    168,602
  Inventory                                                              163,577
  Property and equipment                                                  28,588
  Other                                                                      700
  Goodwill                                                               391,942
                                                                        --------
                                                                         764,304
                                                                        --------

Liabilities assumed:
  Accounts payable and accrued expenses                                   58,887
  Notes payable                                                            4,600
  Customer deposits                                                       18,057
  Income taxes payable                                                    43,760
                                                                        --------
                                                                         125,304
                                                                        --------

Purchase price                                                          $639,000
                                                                        ========
</TABLE>

The Company determined that there was no material difference between the
carrying values (on Brounley's financial records) and the fair value of the
assets acquired and liabilities assumed, except for equipment which was valued
at $28,588, or an increase from its carrying value of $13,500. The increase in
value was based on the Company's review of the equipment's age, condition,
replacement cost and remaining useful life. The excess of the purchase price
($639,000 fair market value of stock issued) over the historical cost of the net
assets acquired has been recorded as goodwill. The Company was amortizing


                                      F-17
<PAGE>   50

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

the goodwill on a straight-line basis over 5 years through the third quarter of
1999. See Note 5 for information regarding the discontinuance of this business.


                                      F-18
<PAGE>   51

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

4.    Business combinations (continued):

      InterSource Health Care, Inc.:

      On November 30, 1998, the Company purchased 100% of the stock of
      InterSource Health Care, Inc. (InterSource) by issuing 1,203,241 shares of
      unregistered common stock. InterSource acquires and refurbishes used
      medical equipment for resale, sells pharmaceutical products and provides
      services for medical facility development.

      The acquisition was accounted for using the purchase method of accounting.
      Accordingly, the purchase price was allocated to the assets acquired and
      liabilities assumed based upon their estimated fair market values, and the
      Company's 1998 consolidated results of operations include those of
      InterSource from the date of acquisition.

      The following is a summary of the assets purchased and the liabilities
      assumed in the InterSource acquisition:

<TABLE>
<S>                                                                   <C>
Assets acquired:
   Cash                                                               $    3,715
   Accounts receivable                                                   100,876
   Inventory                                                              13,931
   Property and equipment                                              1,113,941
   Other assets                                                           69,058
                                                                      ----------
                                                                       1,301,521
                                                                      ----------
  Liabilities assumed:
   Accounts payable and accrued expenses                                 366,479
   Notes payable                                                         213,871
   Customer deposits                                                      31,500
                                                                      ----------
                                                                         611,850
                                                                      ----------

Purchase price                                                        $  689,671
</TABLE>

The excess of the purchase price ($689,671 fair market value of stock issued)
over the historical cost of the net assets acquired has been recorded as
additional property and equipment based upon an independent valuation of the
property and equipment.


                                      F-19
<PAGE>   52

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

4.    Business combinations (continued):

      Pro-forma information:

      The following unaudited pro-forma summary combines the consolidated
      results of operations of the Company, InterSource and Brounley as if the
      acquisitions had occurred at the beginning of 1998, after giving effect to
      certain pro-forma adjustments, including, among other things, additional
      depreciation and amortization based on the fair value of equipment and
      goodwill acquired and the estimated related income tax effect:

<TABLE>
<CAPTION>
                                                                 1998
                                                              ----------
<S>                                                           <C>
       Net sales                                              $4,134,161
       Net loss                                              ($5,408,294)
</TABLE>

      This pro forma financial information is presented for informational
      purposes only and may not be indicative of the results of operations as
      they would have been if the Company, InterSource and Brounley had been a
      single entity during 1998.

      Joint Venture:

      Effective December 15, 1998, the Company entered into an agreement with
      Compania Deluz Y Fuerza De Las Terrenas, C. por A. (Utility), a Dominican
      Republic utility company, to form the joint venture "AquaFuel
      (a)-Dominicana, SA". The ownership of AquaFuel Dominicana was to be 49% to
      the Company and 51% to the Utility.

      The purpose of AquaFuel Dominicana was the construction and operation of
      an Aqua Fuel production facility which would be able to generate at least
      1,653 gigawatts of electric power during a twenty-year period.


                                      F-20
<PAGE>   53

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

4.    Business combinations (continued):

      Joint Venture (continued):

      The Company's capital contribution to AquaFuel Dominicana was to be the
      delivery of the AquaFuel technology and the equipment as required by the
      agreement. The Utility was required to fund all other capital needs of the
      joint venture. Additionally, the Utility was to find investors who were to
      invest at least $500,000 in the Company. The Company was to issue
      1,000,000 shares of its common stock to the Utility and 2,000,000 shares
      to an individual who introduced the parties to the joint venture and was
      also to serve as the President of AquaFuel-Dominicana. During 1999, the
      Company issued 500,000 shares of unregistered common stock to an
      individual on behalf of the Utility and recorded the fair value of these
      shares ($375,705) as an investment in the joint venture. Subsequently, the
      Utility failed to perform under the terms of the proposed joint venture
      agreement, and the joint venture did not proceed. Since the Company was
      not able to recover the 500,000 shares of stock issued and the proposed
      joint venture interest had no value, the Company subsequently (during
      1999) wrote off the investment. The Company also had advanced the
      2,000,000 shares in connection with the joint venture. These shares were
      subsequently applied toward the payment of GWE licensing rights discussed
      in Note 19.

5.    Discontinued operations:

      As discussed in Note 4 to the financial statements, the Company acquired
      its Brounley business segment (design, manufacture and sale of radio
      frequency generators) in 1998. The Company experienced declines in
      Brounley's sales during 1999 relative to prior year annual sales and
      budget expectations, principally due to the loss of expected orders from
      one customer in early 1999. On August 30, 1999, after an evaluation of
      this business unit's performance, management elected to discontinue
      further Brounley operations. Certain key sales, design and engineering
      personnel associated with this segment were terminated, the remainder were
      assigned to other business segments and its equipment was transferred to
      the Company's contract manufacturing segment. There were no liabilities
      with regard to the Brounley business segment at December 31, 1999. Results
      of operations of the discontinued business segment have been classified as
      discontinued operations for the year ended December 31, 1999 and from the
      date of acquisition on October 1, 1998 through December 31, 1998.


                                      F-21
<PAGE>   54

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

5.    Discontinued operations (continued):

      Components of loss from discontinued operations are as follows:

<TABLE>
<CAPTION>
                                                         1999            1998
                                                      ---------       ---------
<S>                                                   <C>             <C>
       Revenues                                       $ 184,273       $ 197,451
       Costs and expenses                              (653,089)        485,885
                                                      ---------       ---------
       Operating losses                                (468,816)       (288,434)
       Income taxes                                          --              --
                                                      ---------       ---------
      Loss from discontinued operations               ($468,816)      ($288,434)
                                                      =========       =========
</TABLE>

      Unamortized goodwill of $303,203 associated with the acquisition of
      Brounley was evaluated, deemed to have no continuing value and, therefore,
      written-off and recognized as loss on disposal of discontinued operations
      in the accompanying 1999 statement operations.

6.    Major customer information, fair value of financial instruments and
      concentrations of credit risk:

      Major customer information:

      During the year ended December 31, 1999 the Company derived revenues from
      two customers which individually exceeded 10% of total revenues (12% and
      11%, respectively).

      Fair value of financial instruments:

      All financial instruments are held or issued for purposes other than
      trading. The carrying amount of cash, accounts receivable, accounts
      payable and other current liabilities approximates fair value because of
      their short maturity. The carrying amount of notes payable, related party
      notes payable, convertible debentures and capital lease obligations
      approximates their fair value based on current market interest rates
      offered to the Company.


                                      F-22
<PAGE>   55

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

6.    Major customer information, fair value of financial instruments and
      concentrations of credit risk (continued):

      Concentrations of credit risk:

      Financial instruments that potentially subject the Company to significant
      concentrations of credit risk consist principally of trade accounts
      receivable.

      The Company sells its products principally to companies in the United
      States. Management assesses the financial stability of each of its major
      customers prior to contract negotiations and establishes credit limits for
      smaller customers to limit its risk. The Company does not require
      collateral or other security to support customer receivables. Because the
      Company sells a significant portion of its products and maintains
      individually significant receivables balances with major customers, if the
      financial condition and operations of these customers deteriorate below
      critical levels, the Company's operating results could be adversely
      affected.


                                      F-23
<PAGE>   56

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

7.    Segment reporting:

      As discussed in Note 1, the Company adopted FAS No. 131, "Disclosures
      about Segments of an Enterprise and Related Information

      The accounting policies of the segments are the same as those described in
      the summary of significant accounting policies. The Company evaluates
      performance based on gross profit.

      The following summarizes key segment information for 1999:

<TABLE>
<CAPTION>
                             Manufactured Products                    Technology
                         ------------------------------              Development/
                                            Contract                 Environmental             Intersegment
                              BORS        Manufacturing  Health Care   Solutions    Corporate  Eliminations  Consolidated
                         -------------    -------------  -----------   ---------    ---------  ------------  ------------
                                                                      1999
                         -------------------------------------------------------------------------------------------------
<S>                       <C>             <C>            <C>            <C>           <C>       <C>          <C>
Revenue from
  external
  customers               $   305,000     $   471,035    $   324,493    $             $         $            $ 1,100,528

Intersegment
  revenues                                    433,110                                             (433,110)

Cost of sales                 597,630         953,138        375,775                              (433,110)     1,493,433

Gross profit                 (192,630)         51,007        (51,282)                                            (192,905)

Research and
  development:
   Stock based                                                           1,854,711                              1,854,711
   Other                                                                   603,124                                603,124
                                                                                                                2,457,835

Depreciation (net
of discontinued
operations
depreciation of
$11,815)                        6,269         419,984         48,946        62,747       27,555         --        565,501
Segment Assets              1,058,387       1,696,910        158,688       330,140      313,415         --      3,557,540
</TABLE>


                                      F-24
<PAGE>   57

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

7.    Segment reporting (continued):

      The following summarizes key segment information for 1998:

<TABLE>
<CAPTION>
                             Manufactured Products                    Technology
                         ------------------------------              Development/
                                            Contract                 Environmental             Intersegment
                              BORS        Manufacturing  Health Care   Solutions    Corporate  Eliminations  Consolidated
                         -------------    -------------  -----------   ---------    ---------  ------------  ------------
                                                                      1998
                         -------------------------------------------------------------------------------------------------
<S>                       <C>             <C>            <C>            <C>           <C>       <C>          <C>
Revenue from
  external
  customers               $               $   457,073    $    51,465    $             $         $            $   508,538

Intersegment
  revenues                                    920,031                                             (920,031)

Cost of sales                               1,116,695         42,487                              (920,031)       239,151

Gross profit                                  260,409          8,978                                              269,387

Research and
  development:
   Stock based                                                             920,605                                920,605
   Other                                                                   264,243                                264,243
                                                                                                              -----------
                                                                                                                1,184,848
                                                                                                              -----------
Depreciation (net
of discontinued
operations
depreciation of
$6,683)                                        61,046          3,626         4,128       1,139                     69,939
</TABLE>

The Company accounts for intersegment sales at cost.


                                      F-25
<PAGE>   58

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

8.    Inventories:

      Inventories at December 31, 1999 consist of the following:

<TABLE>
<S>                                                                   <C>
Raw materials                                                         $  281,803
Work-in-progress                                                         382,452
Finished goods                                                           768,025
Inventory valuation allowance                                           (360,000)
                                                                      ----------
                                                                      $1,072,280
                                                                      ==========
</TABLE>

9.    Property and equipment:

      Property and equipment at December 31, 1999 consists of the following:

<TABLE>
<S>                                                                  <C>
Machinery and equipment                                              $1,083,890
Office furniture and equipment                                          183,912
Equipment under capital lease                                         1,116,524
Leasehold improvements                                                  169,108
                                                                     -----------
                                                                      2,553,434
Accumulated depreciation                                               (583,100)
                                                                     -----------
                                                                     $1,970,334
                                                                     ==========
</TABLE>

10.   Payroll tax liabilities:

      The Company is delinquent with respect to payment of certain 1999 payroll
      taxes (approximately $611,000, including interest and penalties, which are
      included in accrued expenses at December 31, 1999). Management expects to
      enter into a payment stipulation agreement with the Internal Revenue
      Service (IRS) whereby the Company would agree to pay this liability on a
      monthly basis over a yet-to-be determined period. During 2000, the Company
      made a $50,000 good-faith deposit toward this liability but, at April 20,
      2000, no agreement had been finalized. The IRS has certain collateral
      rights, including the seizure of the Company's bank accounts and other
      property, should a satisfactory payment stipulation agreement not be
      reached.


                                      F-26
<PAGE>   59

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

11.   Notes payable, bank:

      Notes payable, bank consists of borrowings under a demand $50,000 line of
      credit and a short-term note payable due on demand. The outstanding
      principal balance on the line of credit was $49,574 at December 31, 1999
      which bears interest at prime plus 2%. The line of credit is secured by
      inventory, accounts receivable, equipment and intangibles and the personal
      guarantee of certain stockholders. The short-term note payable is
      unsecured and non-interest bearing. The outstanding balance on this
      borrowing was $134,489 at December 31, 1999.

12.   Notes payable, related parties:

      Notes payable, related parties consists of the following:

<TABLE>
<S>                                                                   <C>
      Note payable, stockholder/director, interest at 6.6%; in
      connection with this note, warrants to acquire 25,000
      shares of common stock exercisable at $.70 per share
      (market price at date of grant) through August 2002;
      Converted to equity subsequent to December 31, 1999 (see
      Note 20)                                                         $ 282,000

      Note payable, stockholder, maturing September 2000
      including any unpaid interest at 12%; secured by a security
      interest in substantially all assets.                              250,000

      Unsecured stockholder advances, bearing interest at 12%;
      due on demand                                                      107,500

      Note payable to an officer and principal stockholder, due
      in monthly installments of $3,531, including interest at
      12%, through July 2001; secured by accounts receivable,
      inventory and equipment                                             66,575
</TABLE>


                              F-27
<PAGE>   60

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

12.   Notes payable, related parties (continued):

<TABLE>
<S>                                                                     <C>
      Note payable to an entity owned by an officer and principal
      stockholder, due in monthly installments of $3,060,
      including interest at 12%, through June 2001; secured by
      accounts receivable, inventory and equipment                        55,215
                                                                        --------
                                                                         761,290
      Less current maturities                                            719,803
                                                                        --------
                                                                        $ 41,487
                                                                        ========
</TABLE>

      The annual maturities of notes payable, related parties are
      as follows:

<TABLE>
<CAPTION>
           Year ending December 31,
           ------------------------
<S>                                                                   <C>
                    2000                                              $719,803
                    2001                                                41,487
                                                                      --------
                                                                      $761,290
                                                                      ========
</TABLE>

13.   Convertible debentures:

      In February 1999, the Company sold $750,000 of Series 1999-A 8%
      convertible notes due January 2002. Under the securities purchase
      agreement, the investor was to purchase a second installment of $750,000
      in convertible notes within 30 days after the Company filed a Registration
      Statement or at such time as the parties mutually agree.

      The notes can be converted to common stock of the Company at the
      conversion price for each share of common stock equal to the lesser of (1)
      the lowest closing bid prices for the common stock for the five trading
      days immediately preceding the Closing Date; or (2) 80% of the lowest
      closing bid prices for the common stock for the five trading days
      immediately preceding the Conversion Date.

      Additionally, the investor was issued a warrant to purchase 75,000 shares
      of the Company's common stock exercisable at $2.3375 per share through
      February 2002.

      The agreements contain demand registration rights with respect to the
      warrants and the stock subject to conversion and underlying the warrants.

      Since the investor did not convert the notes on the day of the Closing,
      the Company is required to recognize as interest expense the beneficial
      conversion terms of the notes. This additional interest of $187,500 was
      amortized over the period between the Closing Date (February 1999) and the
      first date (May 1999) on which the notes could be converted.


                                      F-28
<PAGE>   61

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

Subsequent to December 31, 1999, the investor completed the purchase of the
second installment ($700,000) of the 8% convertible notes (see Note 20).


                                      F-29
<PAGE>   62

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

14.   Stockholders' deficit:

      Common stock sold for cash:

      Of the 5,865,303 unregistered shares of common stock sold for cash in
      1999, approximately 992,300 shares were sold subject to registration
      rights.

      Series A preferred stock:

      On March 30, 1999, the Company executed a series of agreements and amended
      its articles of incorporation in order to complete the placement of
      $750,000 of its Series A 7% Preferred Stock ($1 par value; $1,000 stated
      value) with an investor. Under the terms of the Series A Preferred Stock,
      at December 31, 1999 the holder may convert the preferred stock into
      common stock at 75% of the common stock closing price anytime through
      March 30, 2004. In that regard, the Company recorded a dividend of
      $250,000 during 1999 to account for this beneficial conversion feature.
      The Company also issued 93,750 warrants exercisable at $2.40 per share to
      the investor in connection with the sale of the Preferred Stock. The
      Company also issued 50,000 warrants as a finders fee exercisable at $2.40
      per share through March 30, 2004.

      The agreements contain demand registration rights with respect the
      warrants and the stock subject to conversion and underlying the warrants.

      Holders of common stock are entitled to one vote per share. To the extent
      that holders of the Series A Preferred Stock are entitled under the
      Florida Business Corporation Act to vote on a matter with holders of
      common stock, voting together as one class, each share of Series A
      Preferred Stock shall be entitled to a number of votes equal to the number
      of shares of common stock into which it is then convertible.

      The Series A Preferred Stock has a liquidation preference of $1,300 per
      share plus accrued and unpaid dividends. Accrued and unpaid dividends were
      $39,375 (or $52.50 per share) at December 31, 1999.

      Recission of stock and stock option:

      During June 1999, certain officers of the Company offered to rescind the
      receipt of 1,950,000 shares of stock previously issued to them in 1998 as
      compensation. The Company has accepted the recission offer. Under the


                                      F-30
<PAGE>   63

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

terms of the recission, the officers were to receive three year stock options to
purchase


                                      F-31
<PAGE>   64

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

14.   Stockholders' deficit (continued):

      Recission of stock and stock option (continued):

      1,950,000 shares of the Company's stock at the 5-day trailing average of
      the market price at the date of grant. The Company completed the recission
      and option transactions in December 1999.

      The Company treated the reacquired (returned) shares as treasury stock,
      and recorded the shares at a cost of $1,246,050, the compensation cost
      attributed and recorded for the original issuance of the shares in 1998,
      as an increase in Paid-in Capital. The options were granted at an exercise
      price of $1.10 per share, (the 5-day trailing average high of the market
      price at the date the transaction was initially considered by the Board in
      June 1999), representing an exercise price considerably higher than the
      market price of the Company's common stock on the date the option was
      granted in December 1999 and were fully vested at December 31, 1999.
      Accordingly, no compensation expense was recognized in the financial
      statements for these options (the only options issued or outstanding at
      December 31, 1999 and the year then ended). Had the accounting provisions
      of FAS 123 been adopted, compensation of approximately $832,000 would have
      been recorded in 1999 based on the Black-Scholes option pricing model, and
      1999 net loss and net loss per share would have been ($12,694,668) and
      ($.44), respectively.

      Common stock warrants:

      The following table summarizes information for stock warrants outstanding
      and exercisable at December 31, 1999, all of which were granted in 1999.

<TABLE>
<CAPTION>
                        Warrants Outstanding and Exercisable
             ----------------------------------------------------------
            Range of                     Weighted Avg.      Weighted Avg.
             Prices        Number       Remaining Life     Exercise Price
           -----------   ----------     --------------     --------------
<S>                       <C>              <C>             <C>
           $ 2.34-2.40      218,750        42 months       $        2.38
           $       .70       25,000        31 months                 .70
                          3,800,000        58 months                 .40
           -----------   ----------       ----------       -------------
                          4,043,750        57 months       $         .51
                         ==========       ==========       =============
</TABLE>


                                      F-32
<PAGE>   65

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

14.   Stockholders' deficit (continued):

      Common stock warrants (continued):

      The weighted average grant-date fair value of warrants granted during 1999
      was $.53 per share.

      The fair value of these warrants, exclusive of 93,750 warrants which were
      issued with the Series A Preferred Stock, has been recorded at fair value
      in the 1999 financial statements as follows:

<TABLE>
<S>                                                          <C>        <C>
      Loan costs (capitalized and amortized
        over life of loan)                                   $ 70,900
       Financial advisory service compensation (1)            877,420
       Stock issuance costs                                              45,885
                                                                        -------

                                                             $994,205
                                                             ========
</TABLE>

      (1)   This warrant agreement contains demand registration rights with
            respect to the warrants and the common stock underlying the
            warrants.

      The fair value of the option and the warrants granted in 1999 were
      estimated on the date of grant using the Black-Scholes option pricing
      model with the following assumptions:

<TABLE>
<S>                                              <C>
       Expected life of options                     3-5 years
       Risk free interest rate                   5.458%
       Expected volatility                        50%
       Expected dividend yield                    0%
</TABLE>

      Stock issuances:

      During 1999 and 1998, the Company issued 4,066,765 and 5,602,697 shares of
      unregistered common stock to attract and retain key employees and for
      other business purposes. These shares have been valued at prices which
      approximate prices for cash sales of similar stock to others during the
      same periods. Cost recognized in 1999 and 1998 in connection with these
      stock issuances is as follows:

<TABLE>
<CAPTION>
                                                    1999         1998
                                                 ----------   ----------
<S>                                              <C>          <C>
     Employee compensation                       $  316,570   $1,756,419
      Consultant compensation                       535,670      524,175
      Licenses fees (expensed)                    1,514,941      571,178
      Equipment purchases                             9,938           --
      Investment in joint venture                   375,706           --
                                                 ----------   ----------


</TABLE>


                                      F-33
<PAGE>   66

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<S>                                             <C>            <C>
                                                $ 2,752,825    2,851,772
                                                ===========    =========
</TABLE>


                                      F-34
<PAGE>   67

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

15.   Income taxes:

     Deferred tax assets consist of the following at
       December 31, 1999:

<TABLE>
<S>                                                                  <C>
      Net operating loss carryover                                   $3,700,000
      Inventory valuation allowance                                      64,000
      Deferred tax asset valuation allowance                         (3,764,000)
                                                                     ----------
                                                                     $       --
                                                                     ==========
</TABLE>

      Income tax (expense) benefit consists of the following:

<TABLE>
<CAPTION>
                                                            1999         1998
                                                         ----------    --------
<S>                                                      <C>           <C>
        Current:
        Federal                                          $      --     $     --
                                                         ----------    --------
        Deferred:
        Deferred                                             64,000           --
        Benefit of net operating loss carryover           2,918,000      782,000
        Change in deferred tax asset valuation
          allowance                                      (2,982,000)   (782,000)
                                                         ----------    --------
                                                                 --          --
                                                         ----------    --------
                                                         $       --    $     --
                                                         ==========    ========
</TABLE>

      The expected income tax benefit at the statutory tax rate differed from
      income taxes in the accompanying statements of operations as follows:

<TABLE>
<CAPTION>
                                                      Percentage of loss before
                                                            income taxes
                                                      --------------------------
                                                          1999            1998
                                                      -----------       --------
<S>                                                       <C>             <C>
Statutory tax rate                                        34.0%           34.0%
State tax, net of federal benefit                          3.5%            3.5%
Change in deferred tax asset
 valuation allowance                                      (37.5%)         (37.5%)
                                                          -----           -----

Effective tax rate in accompanying
  statement of operations                                    0%              0%
                                                          =====           =====
</TABLE>

      The Company has net operating loss carryovers of approximately $9,300,000
      at December 31, 1999. The net operating loss carryover principally expires
      from 2018-2019.


                                      F-35
<PAGE>   68

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

16.   Related party transactions:

      During 1999, the Company obtained short-term, non-interest bearing loans
      from four existing minority shareholders aggregating $423,750, which were
      converted into 1,141,581 shares of common stock, principally in the third
      quarter.

      During 1998, prior to its acquisition of InterSource (see Note 4), the
      Company paid to InterSource $22,000 for payroll leasing, $102,000 for rent
      and $21,000 for consulting fees.

17.   Fourth quarter adjustments:

     During the fourth quarter of 1999, the Company made certain adjustments.
      These adjustments and a brief description of their impact on fourth
      quarter operations are as follows:

<TABLE>
<CAPTION>
                                                                     Effect of
                                                                    adjustment
                                                                 on fourth quarter
                                                                  1999 operations-
                                                                (Increase) Decrease
                                                                      net loss
                                                                -------------------
<S>                                                                 <C>
Record stock based compensation for services and
license fees, some of which occurred in first,
second and third quarters                                           ($2,502,411)

Write-off receivables and prepaid royalties                            (530,000)

Write-off investment in joint venture                                  (375,706)

Reverse license fee revenue recorded in second
quarter 1999                                                         (4,125,000)

 Inventory valuation allowances                                        (561,684)
                                                                    -----------
  Effect of adjustments on fourth quarter loss
   from continuing operations                                        (8,094,801)

Write-off goodwill associated with discontinued
  operations                                                           (313,203)
                                                                    -----------
Effect of adjustments on fourth quarter net loss                    ($8,408,004)
                                                                    ===========
</TABLE>


                                      F-36
<PAGE>   69

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

17.   Fourth quarter adjustments (continued):

      Net loss attributable to common stockholders and net loss per share as
      previously reported for the nine months ended September 30, 1999
      (unaudited) would have increased by approximately $5,700,000 and $.22,
      respectively, had the effect of the aforementioned fourth quarter
      adjustments, insofar as they related to the first through third quarters
      of 1999, been made in the proper quarter.

18.   Leases:

      Operating lease obligations:

      The Company leases its office and warehouse facilities under a five-year,
      non-cancelable operating lease for approximately $22,000 per month.
      Additionally, the Company leases other office space and other equipment
      under various non-cancelable operating leases for one to four year terms.
      Rent expense under all operating leases approximated $321,000 and $117,000
      for 1999 and 1998, respectively.

      Obligations under the non-cancelable operating leases are as follows:

<TABLE>
<CAPTION>
         Year ending September 30,
         -------------------------
<S>                                                  <C>
                    2000                             $   339,814
                    2001                                 302,014
                    2002                                 269,210
                                                     -----------
                                                     $   911,038
                                                     ===========
</TABLE>

      Capital lease obligations:

      The Company leases certain equipment, machinery and computer software
      under various capital lease agreements. The agreements provide for monthly
      payments of approximately $28,000, expiring through 2004, and are
      collateralized by the leased equipment.

     The capitalized asset cost and accumulated amortization at December
     31, 1999 was:

<TABLE>
<S>                                                       <C>
     Capitalized cost                                     $1,116,524
     Accumulated amortization                               (251,230)
                                                          ----------
      Net book value                                      $  865,294
                                                          ==========
</TABLE>


                                      F-37
<PAGE>   70

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


                                      F-38
<PAGE>   71

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

18.   Leases (continued):

      Capital lease obligations (continued):

      Total amortization of assets under capital leases was $198,227 and $50,753
      in 1999 and 1998, respectively.

      One of the Company's 1999 capital leases resulted from a sale/leaseback
      transaction in which the Company incurred a loss of $310,408 (asset net
      book value of $560,408 net of $250,000 proceeds). Since the fair value of
      the assets exceeded the net book value and since the Company retained
      substantially all of the remaining use of the property sold, this loss has
      been deferred and is being amortized in proportion to the amortization of
      the leased assets.

      Future minimum lease payments under capital leases are as follows:

<TABLE>
<CAPTION>
     Year ending December 31,
     ------------------------
<S>                                                     <C>
              2000                                      $339,249
              2001                                       328,121
              2002                                       223,373
              2003                                       159,275
              2004                                        12,210
          Imputed interest                              (188,957)
                                                        --------
                                                        $873,271
                                                        ========
</TABLE>

19.   Commitments and contingencies:

      License agreements and royalties:

      The Company has entered into the following licensing agreements granting
      the Company the use of certain proprietary information, technology and
      patents:

      o     License of electromagnetion(TM) technology, (liquid waste-to-energy
            technology). The agreement is effective through December 31, 2002,
            is renewable for one or more 3-year renewal periods and obligates
            the Company to pay a royalty of 6% of revenues generated involving
            the electromagnetion technology. There was no royalty expense
            resulting from this agreement in 1999 or 1998. The Company paid
            105,263 shares of its common stock in 1998 to acquire this license
            and


                                      F-39
<PAGE>   72

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

recognized the estimated fair value of these shares of $67,263 as a charge to
operations in 1998.


                                      F-40
<PAGE>   73

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

19.   Commitments and contingencies (continued):

      License agreements and royalties (continued):

      o     License of GWE technology (solid waste-to-energy technology). The
            agreement is effective from December 1999 for 20 years and obligates
            the Company to pay royalties equal to 50% of the profits associated
            with sublicenses of, or other revenues associated with, the
            technology, with minimum annual royalties of $150,000 commencing at
            the later of 2000 or the date on which the first product subject to
            the technology is first commercialized. There was no royalty expense
            associated with this agreement in 1999. The Company applied
            2,000,000 shares of previously issued common stock as payment for
            the license (see Note 4-- Joint Venture). The Company has recognized
            the estimated fair value of these shares ($1,502,820) as a charge to
            1999 operations.

      o     License of Tunnel Bat Vehicle (wheeled vehicle in development stage
            to clear box culverts under roadways); the agreement was effective
            July 1998, is renewable on an annual basis, and obligates the
            Company to pay royalties of 6% of sales of the Tunnel Bat Vehicle.
            There was no royalty expense incurred in 1999 or 1998. The Company
            paid 150,000 shares of the Company's common stock in 1998 for the
            license and recognized the estimated fair value of the shares
            ($95,850) as a charge to operations in 1998.

      o     License of BORS Lift commencing July 1998 and renewable annually
            through 2004; royalties of 6% of sales of BORS units are required
            ($18,300 in 1999 and $0 in 1998). The Company issued 500,000 shares
            of its common stock at contract inception in 1998 as a first year
            guaranteed performance payment. The fair market value of the shares
            at that date ($319,500) has been recorded as a license fee and
            charged to 1998 operations.

      Employment agreements:

      The Company has employment agreements with three executive officers. The
      agreements expire July 28, 2002 and provide for base salaries as
      established by the Board of Directors for 2000 through 2002 (ranging from
      approximately $100,000 to $120,000 each as of December 31, 1999). The
      agreements also permit the Company to grant the officers stock awards
      based on performance.


                                      F-41
<PAGE>   74

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

19.   Commitments and contingencies (continued):

      Legal proceedings:

      Litigation:

      The Company is involved in routine litigation incident to its business.
      The Company has accrued minimum estimated losses ($32,000) in connection
      with pending litigation at December 31, 1999. In the Company's opinion,
      none of these proceedings will have a material adverse effect on the
      Company's financial position or results of operations.

      SEC Enforcement Inquiry:

      On November 19, 1999, the Company was notified that the Securities and
      Exchange Commission was conducting an informal inquiry in connection with
      matters relating to the Company's restatement of financial results. The
      Securities and Exchange Commission has requested that the Company provide
      them with certain documents concerning the previous revision of its
      financial results and financial reporting documents. The Securities and
      Exchange Commission indicated that its inquiry should not be construed as
      any indication that any violation of law has occurred, nor as an adverse
      reflection upon any person, entity or security. The Company is cooperating
      with the Securities and Exchange Commission in connection with this
      inquiry and its outcome cannot be determined at this time.


                                      F-42
<PAGE>   75

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

20.   Subsequent events:

      License agreement:

      During January 2000, the Company acquired a license of certain
      patent-pending technologies (water-to-energy conversion technologies or
      "Santilli Technology"). The term of the agreement will coincide with the
      related patent periods, if ultimately granted. This agreement requires the
      payment of royalties equal to 3% of sales derived from licensed technology
      products and various percentages of any proceeds received from the
      sublicensing of the technology. The Company issued 75,000 shares of stock
      to the licensor in 1999 in contemplation of this agreement (recorded as a
      $12,121 charge to 1999 operations) and also, in 2000, granted a five year
      option to purchase 150,000 shares of common stock at $.375 per share, the
      fair market value at the date of grant. The Company is further obligated
      to grant options to acquire 50,000 shares of stock in the future as each
      new product subject to the technology becomes ready for commercialization.

      Finally, in connection with this agreement, the Company extended an
      existing consulting agreement with the licensor for a one year period
      expiring December 2000 (renewable annually). Compensation under the
      agreement is $72,000 for 2000 and a grant of a two year option to acquire
      100,000 shares of common stock (expires December 2002) at an exercise
      price of $1.00 per share (in excess of the fair market value of the stock
      at date of grant).

      Conversion of convertible debentures to equity/additional convertible
      debt:

      During January and March 2000, the investor in the Company's $750,000
      Series 1999-A 8% convertible notes (see Note 13) elected to convert an
      aggregate of $517,956 of the notes and accrued interest, into 1,037,781
      shares of the Company's common stock. Additionally, during March 2000, the
      investor loaned the Company an additional $700,000 through the purchase of
      the second installment of the 8% convertible notes. In connection
      therewith the Company granted the investor additional warrants to purchase
      75,000 shares of common stock under terms similar to those granted in 1999
      as discussed in Note 13.

      Conversion of preferred stock:


                                      F-43
<PAGE>   76

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

During April 2000, the holder the Company's Series A Preferred Stock converted
100 shares of the preferred stock ($100,000 stated value) into 357,143 shares of
common stock.


                                      F-44
<PAGE>   77

                    TOUPS TECHNOLOGY LICENSING, INCORPORATED
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

20.   Subsequent events (continued):

      Sales of common stock, proceeds from related party notes payable and
      conversion of related party debt to equity:

      From January 1 through May 5, 2000, the Company generated net proceeds of
      approximately $1,075,000 from the sale of common stock (private placements
      of unregistered stock at an average of $.33 per share) and $177,000 from
      short-term related party notes payable bearing interest at 12%.
      Furthermore, on April 24, 2000 related party debt aggregating $282,000 at
      December 31, 1999 (see Note 12) was converted into 1,128,000 shares of
      common stock, and $52,000 of the aforementioned 2000 short-term borrowings
      was converted to 208,000 shares of common stock.

      Stock options and stock grants:

      In January 2000, the Company granted 700,000 common stock options to key
      employees and 1,400,000 common stock options to an officer/employee. These
      three-year options are exercisable at $.34 per share (the stock price at
      the grant date) and vest immediately. Additionally, 60,000 shares of the
      Company's common stock were issued to an officer/employee as additional
      compensation.


                                      F-45
<PAGE>   78

                                   SIGNATURES

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

                        TOUPS TECHNOLOGY LICENSING, INC.

                        By /s/ Leon H. Toups
                           -------------------------------------------
                                 Leon H. Toups,
                                 President and Chief Executive Officer

         Each person whose signature appears below hereby constitutes and
appoints Leon H. Toups his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this report,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying all
that said attorney-in-fact and agent or his substitute or substitutes, or any of
them, may lawfully do or cause to be done by virtue hereof. In accordance with
the requirements of the Exchange Act, this report has been signed by the
following persons in the capacities and on the dates indicated.

<TABLE>

<CAPTION>

                Signature                                      Title                               Date

<S>                                     <C>                                               <C>
/s/Leon H. Toups                           President, Chief Executive Officer
---------------------------                (Principal Executive Officer) and Chairman of
Leon H. Toups                              the Board of Directors                          May 12, 2000

/s/ Michael P. Toups                       Chief Financial Officer (Principal Financial
---------------------------                Officer) and Director                           May 12, 2000
Michael P. Toups

/s/  Mark Clancy                           Executive Vice President, Secretary and
---------------------------                Director                                        May 12, 2000
Mark Clancy

/s/ Phillip Rappa                          Vice President of Operations, General Manager
---------------------------                and Director                                    May 12, 2000
Phillip Rappa

/s/  Errol J. Lasseigne                    Director                                        May 12, 2000
---------------------------
Errol J. Lasseigne

/s/ Leslie D. Reagin III                   Director                                        May 12, 2000
---------------------------
Leslie D. Reagin III
</TABLE>

                                      -31-