<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, D.C 20459

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

                                  FORM 10-KSB/A

                   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

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

[X] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the four months ended: December 31, 1999

Commission File Number: 0-11419

ARMITEC, INC.
------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)

DELAWARE                                  22-2435595
-------------------------------           ------------------------------------
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

POST OFFICE BOX 21238, ST. SIMONS ISLAND, GEORGIA    31522-0738
-------------------------------------------------    ----------
Address of Principal executive offices of            Zip Code
         Incorporation or organization

912-634-2584
-------------------------------------------------
Registrants telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the last 90 days.

         YES [X]                                     NO [ ]

At December 31, 1999, 3,161,702 shares of the Registrant's Common Stock were
issued and 2,006,757 shares of the Registrant's Common Stock were outstanding
and the estimated aggregate market value of the Registrant's outstanding common
stock held by non-affiliates of the Registrant was approximately $165,000.

         Explanatory Note.

This Report on Form 10-KSB/A amends the disclosure contained in the Annual
Report on Form 10-K for the period ended December 31, 1999, filed by Armitec,
Inc. with the Securities and Exchange Commission on June 30, 2000. Armitec, Inc.
meets the requirements under Item 10(a) of Regulation S-B to enter and file
under the Small Business Disclosure System.

Part I

Item 1.  Description of Business

         (A)      General.



<PAGE>   2

                  Armitec, Inc. (Armitec or REGISTRANT), a Delaware
                  corporation, was incorporated on January 20, 1983. The
                  Registrant was formed to provide comprehensive business
                  services to physicians, dentists and professional corporations
                  operating full service dental centers and emergency/industrial
                  medical centers. Armitec found this activity to be
                  unprofitable and it exited the business service activity in
                  fiscal year 1987 and became engaged in the formation,
                  registration, distribution and sale of developmental stage
                  companies. Armitec has no activities at this time.

         (B)      Business of Issuer:

                  The Registrant is currently inactive, and is seeking a
                  merger or business combination for itself.

         (C)      Employees

                  The Company has only one employee, William S. Bryant, who is
                  the President, Chief Executive Officer and Treasurer of the
                  Company.

Item 2.  Properties

                  NONE

Item 3.  Legal Proceedings

                  The Company is not engaged in any litigation, and the
                  officers and directors presently know of no threatened or
                  pending litigation in which it is contemplated that the
                  Company will be made a party.

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

                  Not Applicable.

Part II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         (A)      Market information:

                  The Registrant's common stock trades in the over-the-counter
                  market. The Registrant's common stock was listed on the NASDAQ
                  National Market System, under the symbol FHSI until November
                  26, 1986, at which time such listing was suspended because
                  Armitec's assets and net worth fell below the minimum required
                  levels. Armitec was reinstated on NASDAQ on April 2, 1987, but
                  was again suspended on February 12, 1988 when its assets and
                  net worth fell below the NASDAQ minimum requirements. There
                  has not been any trading of Armitec common stock on any listed
                  exchange during calendar years 1995, 1996, 1997, 1998 and
                  1999.

         (B)      HOLDERS:

                  As of December 31, 1999, the approximate number of holders of
                  record of the Registrant's common stock was 568. In addition
                  to those who hold shares in their individual names, it is
                  reported to Registrant that there are 267 holder's in "street
                  names" for a total of 835 shareholders.

         (C)      DIVIDENDS:

                  Cash dividends have not been paid by the Registrant since it
                  was formed; however, Registrant has during past fiscal years
                  paid stock dividends in its wholly-owned subsidiaries from
                  1987-1988.



<PAGE>   3
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following is a discussion of Armitec's financial condition and results of
operations. This discussion should be read in conjunction with the Financial
Statements of Armitec appearing under Item 7 of this Report.

         (a) Results of Operations

                  The discontinuance in 1988 of the professional administrative
                  marketing business decreased revenues; however, it also
                  decreased liabilities and the risk of potential liabilities.
                  The only income presently is gains and losses from sales of
                  stock in the marketplace. Losses from sales of stocks for the
                  four months ending December 31, 1999 aggregated $(37,547).
                  For the years ended August 31, 1999 and 1998, the Company
                  recognized gains on the sale of securities of $75,596 and
                  losses of $(26,808), respectively.

         (b) Financial Condition, Liquidity and Capital Resources.

                  Management does not expect that the condition of Armitec can
                  be improved unless it can form a business relationship between
                  it and another going concern.

Item 7.  FINANCIAL STATEMENTS:

         The following data, insofar as it relates to the period September 1,
         1997 to December 31, 1999 has been derived from annual financial
         statements, including the balance sheets at December 31, 1999, August
         31, 1999 and 1998 and the related statements of operations and cash
         flows for four months ended December 31, 1999 and the years ended
         August 31, 1999 and 1998 and notes thereto appearing elsewhere herein.
         This financial data should be read in conjunction with the financial
         statements of the Company and the related notes thereto attached to
         this Annual Report.

<TABLE>
<CAPTION>
                                            Four months ended     Year ended August 31,
                                               December 31,     -------------------------
                                                   1999            1999            1998
                                               -----------      ---------        --------
         <S>                                <C>                 <C>             <C>
         Operating revenues                     $    Nil        $    Nil         $    Nil

         Net income (loss)                      $(57,505)       $ 60,821         $(57,333)

         Net income (loss) per share            $(0.0287)       $ 0.0303         $(0.0286)
</TABLE>




<TABLE>
<CAPTION>
                                                                      August 31,
                                              December 31,     -------------------------
                                                  1999           1999             1998
                                              -----------      --------         --------
         <S>                                  <C>              <C>              <C>
         Current assets                        $140,832        $169,451         $165,488

         Working Capital                       $ 78,599        $ 34,665         $163,495

         Total Assets                          $225,719        $300,749         $187,163

         Stockholders' equity                  $163,486        $220,991         $160,170
</TABLE>


         The following documents are filed as part of this report:
<TABLE>
         <S>                                                                       <C>
         (1) Report of Independent Certified Public Accountants                    F-1
         (2) Financial statements:
              Balance Sheets as of December 31, 1999, August 31, 1999 and 1998     F-2
              Statements of operations for the four months ended December
                31, 1999, and years ended August 31, 1999 and 1998                 F-3
              Statements of Stockholders' Equity for four months ended
                December 31, 1999, and years ended August 31, 1999 and 1998        F-4
              Statements of cash flows for the four months ended December 31,
                1999, and years ended August 31, 1999 and 1998                     F-5
              Notes to Financial Statements                                        F-6
</TABLE>

All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or other notes herein.



<PAGE>   4

Item 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL MATTERS

                       NONE

Part III

Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table sets forth all the directors, executive officers
         and significant employees of the Registrant as of December 31, 1999. In
         the years prior to December 31, 1999, various officers, directors and
         control persons have failed to timely report under section 16(a) of the
         Exchange Act

--------------------------------------------------------------------------------
            NAME                      AGE                     POSITION
--------------------------------------------------------------------------------
William S. Bryant                      79           President, CEO, Treasurer,
                                                    and Director

--------------------------------------------------------------------------------
Donald C. Carman                       70           Director

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

         William S. Bryant became a Director of the Company in 1988 and was
         elected President of the Company in 1991. He graduated from IAS in
         Chicago, Illinois, in 1948 with a B.A. in accounting and has served in
         various positions in the public and private sector.

         Donald C. Carman became a Director and was elected President, Treasurer
         and Chief Executive Officer of the Company in 1985. He served as
         President and Chief Executive Officer until 1991, when he was replaced
         by William S. Bryant. He graduated from West Liberty College in 1952
         with a degree in Pre-Law and from West Virginia College of Law in 1954
         with a J.D. He is a former Tax Commissioner of West Virginia and is an
         attorney and entrepreneur. He was President of White Ash Mining Corp.
         and has served in various executive positions.

         Directors hold office until the next annual meeting of shareholders.
         Officers are elected by the Board of Directors following the Annual
         meeting of stockholders.

Item 10. EXECUTIVE COMPENSATION

         Cash compensation. The following table sets forth the actual cash
         compensation of any officer or director of the Registrant who received
         in excess of $60,000 in the four months ended December 31, 1999 and the
         years ended August 31, 1999 and 1998, and the actual cash compensation
         of all officers and directors of the Registrant as a group for said
         fiscal year.

                  Officer or Director                                  NONE
                  All Officers or Directors as a group                 NONE

         Compensation of Directors:

         During the Registrant's fiscal year ended December 31, 1987, the
         Registrant passed a resolution that all officers and directors who
         attended meetings of the Board of Directors or Shareholders and who


<PAGE>   5

         were not on other salary with Armitec, would receive restricted shares
         of stock of Armitec, equal to $500 per day. The number of shares to be
         determined by the bid price of the stock on the meeting date. Directors
         were not paid any stock under the foregoing resolution during the
         previous fiscal year.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER AND MANAGEMENT

         The following table sets forth information regarding ownership of the
         Registrant's common stock by all persons who are known by the
         Registrant to own more than 5% of the total outstanding shares and by
         all officers and directors of the Company as of December 31, 1999.
         Except as otherwise indicated in the table, the address of the
         stockholders listed below is that of the Company's principal executive
         office. Directors not included in the table below do not hold Company
         securities.

<TABLE>
<CAPTION>
                                                   SHARES BENEFICIALLY OWNED
                                                    AS OF DECEMBER 31, 1999

NAME AND ADDRESS                                 NUMBER                PERCENT
<S>                                              <C>                   <C>
William S. Bryant, President                      30,000                  1.5

E.L. Carman                                      907,875                 45.1
110 St. Andrews
St. Simons Island, Georgia  31522

Donald C. Carman                                 204,000                 10.3
</TABLE>


Changes in Control:

         Registrant is not aware of any arrangement which may result in a change
         of control of Registrant at present.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Transactions with Management and Certain Business Relationships.

During the four months ended December 31, 1999, the Company advanced $5,000 to
Colonial Corporation, a company owned 100% by Donald C. Carmen.

         Indebtedness of Management

                                    NONE

Item 13. OTHER

         Exhibit 27 - Financial Data Schedule

                                   SIGNATURES

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

Date 11/27/00                        /s/ WILLIAM S. BRYANT
                                         --------------------------------------
                                         WILLIAM S. BRYANT, Director,
                                         Chairman of the Board, President,
                                         Chief Executive Officer,
                                         Chief Financial and Accounting Officer
                                         Treasurer
<PAGE>   6

                                    EXHIBITS


                              FINANCIAL INFORMATION







                REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors
Armitec, Inc.
St. Simons Island, Georgia

We have audited the accompanying balance sheets of Armitec, Inc. (formerly
Family Health Systems, Inc.) as of December 31, 1999 and August 31, 1999, and
the related statements of operations, stockholders' equity, and cash flows for
the four months ended December 31, 1999 and the years ended August 31, 1999 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with 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 overall accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Armitec, Inc. (formerly Family
Health Systems, Inc.) as of December 31, 1999 and August 31, 1999, and the
results of its operations and its cash flows for the four months ended December
31, 1999 and years ended August 31, 1999 and 1998 in conformity with generally
accepted accounting principles.




MOORE STEPHENS TILLER LLC

Brunswick, Georgia
May 23, 2000



<PAGE>   7

                                  ARMITEC,INC.
                      (FORMERLY FAMILY HEALTH SYSTEMS,INC.)

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,    AUGUST 31,
                                                                                 1999            1999
                                                                              -----------    -----------
<S>                                                                           <C>            <C>
                                     ASSETS

CURRENT:
  Cash                                                                        $    41,758    $     2,718
  Accounts receivable                                                                  --            688
  Marketable securities (Note 5)                                                   99,074        166,045
                                                                              -----------    -----------
         TOTAL CURRENT ASSETS                                                     140,832        169,451

Other receivables (Note 3)                                                         60,512        114,423
Investment in closely-held company, at cost (Note 5)                               24,375         16,875
                                                                              -----------    -----------
                                                                              $   225,719    $   300,749
                                                                              ===========    ===========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Cash overdraft - Investment margin account                                  $    23,333    $    54,758
  Accounts payable                                                                 13,900             --
  Amount payable to an individual (Note 8)                                         25,000         25,000
                                                                              -----------    -----------
         TOTAL CURRENT LIABILITIES                                                 62,233         79,758
                                                                              -----------    -----------
STOCKHOLDERS' EQUITY
  Common stock; no par value; 25,000,000 share authorized; 3,161,702 shares
    issued; 2,006,757 and 2,006,757 shares
    outstanding                                                                     3,351          3,351
  Paid in capital                                                               2,673,705      2,673,705
  Deficit                                                                      (2,513,570)    (2,456,065)
                                                                              -----------    -----------
         TOTAL STOCKHOLDERS' EQUITY                                               163,486        220,991
                                                                              -----------    -----------
                                                                              $   225,719    $   300,749
                                                                              ===========    ===========

</TABLE>





                       See Notes to Financial Statements.


<PAGE>   8

                                  ARMITEC,INC.
                      (FORMERLY FAMILY HEALTH SYSTEMS,INC.)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                          FOUR MONTHS
                                             ENDED        YEAR ENDED     YEAR ENDED
                                          DECEMBER 31,    AUGUST 31,     AUGUST 31,
                                             1999           1999           1998
                                          -----------    -----------    -----------
<S>                                       <C>            <C>            <C>
REVENUES                                  $        --    $        --    $        --
                                          -----------    -----------    -----------
EXPENSES:
  Bad debt expense                                 --             --         18,100
  Professional fees                            17,900          3,000          1,968
  Other administrative                          2,058         11,775          6,740
                                          -----------    -----------    -----------
                                               19,958         14,775         26,808
                                          -----------    -----------    -----------
OPERATING INCOME (LOSS)                       (19,958)       (14,775)       (26,808)

OTHER INCOME (EXPENSE)
  Dividends                                        --             --            826
  Gains (losses) on sales of securities       (37,547)        75,596        (31,351)
                                          -----------    -----------    -----------
NET INCOME (LOSS)                         $   (57,505)   $    60,821    $   (57,333)
                                          ===========    ===========    ===========
Net income (loss) per share:
    Basic and diluted                     $     (0.03)   $      0.03    $     (0.03)
                                          ===========    ===========    ===========
Weighted average shares outstanding         2,006,757      2,006,757      2,006,757
                                          ===========    ===========    ===========
</TABLE>





                       See Notes to Financial Statements.


<PAGE>   9

                                  ARMITEC,INC.
                      (FORMERLY FAMILY HEALTH SYSTEMS,INC.)

                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                        Common Stock      Additional
                                                     ------------------     Paid-In
                                                      Shares     Amount    Capital      (Deficit)        Total
                                                     ---------   ------   ----------   -----------    ---------
<S>                                                  <C>         <C>      <C>          <C>            <C>
Balance, August 31, 1997 as previously reported      2,006,757   $3,351   $2,673,705   $(2,434,553)   $ 242,503

  Adjustment applicable to re-establishment of
     note payable for liability written off                 --       --           --       (25,000)     (25,000)
                                                     ---------   ------   ----------   -----------    ---------
Balance, August 31, 1997, as restated                2,006,757    3,351    2,673,705    (2,459,553)     217,503

  Net loss for year ended August 31, 1998                   --       --           --       (57,333)     (57,333)
                                                     ---------   ------   ----------   -----------    ---------
Balance, August 31, 1998                             2,006,757    3,351    2,673,705    (2,516,886)     160,170

  Net income for year ended August 31, 1999                 --       --           --        60,821       60,821
                                                     ---------   ------   ----------   -----------    ---------
Balance, August 31, 1999                             2,006,757    3,351    2,673,705    (2,456,065)     220,991

  Net loss for four months ended December 31, 1999          --       --           --       (57,505)     (57,505)
                                                     ---------   ------   ----------   -----------    ---------
Balance, December 31, 1999                           2,006,757   $3,351   $2,673,705   $(2,513,570)   $ 163,486
                                                     =========   ======   ==========   ===========    =========
</TABLE>






                       See Notes to Financial Statements.


<PAGE>   10

                                 ARMITEC,INC.
                      (FORMERLY FAMILY HEALTH SYSTEMS,INC.)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                      FOUR MONTHS
                                                         ENDED     YEAR ENDED    YEAR ENDED
                                                      DECEMBER 31,  AUGUST 31,    AUGUST 31,
                                                         1999         1999           1998
                                                       ---------    ---------    -----------
<S>                                                    <C>          <C>          <C>
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:
  Net income (loss)                                    $ (57,505)   $  60,821    $   (57,333)
  Adjustments to reconcile net income (loss) to
    cash (used in) operating activities
      (Gain) loss on sale of investments                  37,547      (75,596)        31,351
  Cash provided by (used for):
       Increase (decrease) in accounts payable            13,900           --        (17,550)
      (Increase) decrease in trade receivables               688         (688)         6,500
                                                       ---------    ---------    -----------
  Cash (used in) operating activities                     (5,370)     (15,463)       (37,032)
                                                       ---------    ---------    -----------
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES:
  Proceeds from sale of investments                      124,979      514,325      1,346,849
  Purchase of investments                                (95,554)    (491,090)    (1,371,082)
  Advances (repayments) on investment margin account     (31,425)      52,765          1,993
  Advances made to drilling company                       (9,090)    (134,373)        (4,800)
  Repayment of advances by drilling company               63,000       24,750             --
  Advances on notes receivable                                --           --        (40,079)
  Repayment of note receivable                                --       34,155          5,924
  Investment in closely-held company                      (7,500)          --        (16,875)
                                                       ---------    ---------    -----------
  Cash (used in) provided by investing activities         44,410          532        (78,070)
                                                       ---------    ---------    -----------
Net increase (decrease) in cash and cash equivalents      39,040      (14,931)      (115,102)
Cash, beginning of period                                  2,718       17,649        132,751
                                                       ---------    ---------    -----------
Cash, end of period                                    $  41,758    $   2,718    $    17,649
                                                       =========    =========    ===========
</TABLE>




                       See Notes to Financial Statements.


<PAGE>   11

                                  ARMITEC,INC.
                      (FORMERLY FAMILY HEALTH SYSTEMS,INC.)

                          NOTES TO FINANCIAL STATEMENTS
                                December 31, 1999

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         NATURE OF BUSINESS - Armitec, Inc. (Company) was organized to provide
         comprehensive administrative, marketing and consulting services to
         group dental and medical practices and began operations on May 1, 1983.
         Effective in October 1987, all administrative and marketing agreements
         had been terminated and the Corporation has been inactive since that
         time.

         BASIS OF ACCOUNTING - The Company's policy is to prepare its financial
         statements on the accrual basis of accounting.

         NET INCOME (LOSS) PER SHARE - Basic and diluted net income (loss) per
         share has been computed using the weighted average number of shares of
         common stock outstanding during the applicable period. The Company does
         not have any stock option plans. There are no outstanding warrants or
         options and therefore no potential dilution to earnings per share for
         the periods presented.

         CASH AND CASH EQUIVALENTS - Cash and cash equivalents include all
         highly liquid investments with initial maturity dates of no more than
         three months.

         ESTIMATES - The process of preparing financial statements in conformity
         with generally accepted accounting principles requires the use of
         management's estimates and assumptions regarding certain types of
         assets, liabilities revenues and expenses. Such estimates primarily
         relate to unsettled transactions and events as of the date of the
         financial statements. Accordingly, upon settlement, actual results may
         differ from estimated amounts.

2.       CHANGE IN ACCOUNTING YEAR

         The Company has elected to change its accounting year from a fiscal
         year ending August 31 to a calendar year ending December 31. The change
         results in a short accounting year of four months ended December 31,
         1999.

3.       OTHER RECEIVABLES

         During 1999, the Company advanced funds to an entity involved in
         pumping water into otherwise non-productive or low production oil wells
         and extracting the raw crude oil. These advances are non-interest
         bearing with no stated method of repayment and are not evidenced by a
         note. Advances made during the four months ended December 31, 1999 and
         the year ended August 31, 1999 aggregated $2,800 and $112,323,
         respectively. Repayments of advances in the amount of $63,000 and
         $24,750 were made during the four months ended December 31, 1999 and
         the year ended August 31, 1999, respectively. At December 31, 1999 and
         August 31, 1999 the balance advanced was $29,372 and $92,372,
         respectively.

         In addition, the Company made advances during the year ending August
         31, 1999 in connection with a natural gas drilling operation in West
         Virginia. The drilling operations are on acreage adjoining a producing
         natural gas field. Advances made by the Company during the four months
         ended December 31, 1999 was $2,090. No repayments have been received.
         At December 31, 1999 and August 31, 1999 the balance advanced was
         $24,140 and $22,049, respectively.

         Advances were also made to a formerly dormant corporation during the
         four months ended December 31, 1999. This advance is not evidenced by a
         note and bears no rate of interest or method of repayment. The amount

<PAGE>   12

         advanced during the four months ended December 31, 1999 aggregated
         $5,000. At December 31, 1999 the balance advanced was $5,000.

         Additionally, advances of $2,000 were made to another going concern in
         the oil and gas industry. At December 31, 1999 the balance advanced was
         $2,000.

4.       NOTES RECEIVABLE

         An advance was made to the majority stockholder of the Company during
         1998. This advance was evidenced by a note receivable in the amount of
         $15,079. The balance outstanding at August 31, 1998 was $9,155. This
         note was repaid during the year ended August 31, 1999.

5.       INVESTMENTS

         The Company's investments in marketable equity securities are held for
         an indefinite period and thus are classified as available for sale.
         Available for sale securities are recorded at fair value in investments
         on the balance sheet, with the change in fair value during the period
         excluded from earnings and recorded in the equity section of the
         balance sheet. There were no unrealized holding gains or losses at
         December 31, 1999 or August 31, 1999 due to all unrealized losses being
         realized in the write-down to cost.

         At December 31, 1999 and August 31, 1999 investments were written down
         to their estimated realizable values, because in the opinion of
         management, the decline in market value of those securities is
         considered to be other than temporary.

         Investments in securities are summarized below:

<TABLE>
<CAPTION>
                                              Unrealized   Unrealized    Fair
                  Description                    Gain         Loss       Value
                  -----------                 ----------   ----------   ------
<S>                                           <C>          <C>          <C>
         December 31, 1999:
            Available-for-sale securities:
              Common Stock                    $    --      $    --      $ 99,074
                                              -------      -------      --------
         August 31, 1999:
            Available-for-sale securities:
              Common Stock                    $    --      $    --      $166,045
                                              -------      -------      --------
</TABLE>

         During the year ended August 31, 1999 and the four months ended
         December 31, 1999, the Company invested $16,875 and $7,500,
         respectively in a closely-held corporation. This corporation is
         involved in the waste management industry. The minority interest in
         this investment of $24,375 is carried at cost and management of the
         Company believes that the carrying value is recoverable.

6.       INCOME TAXES

         As of December 31, 1999, the Company has net operating loss
         carryforwards of approximately $1,350,000 which expire under current
         law from 2000 through 2013. These net operating losses expire as
         follows: $1,236,000 in 2001; $61,000 in 2002; and $53,000 thereafter.

         Temporary differences giving rise to the deferred tax accounts consist
         primarily of the net operating loss carryforwards, capital loss
         carryforwards and investment tax credit carryforwards.

         The deferred tax benefit and deferred tax liability comprised the
         following at December 31, 1999 and August 31, 1999:


<PAGE>   13

<TABLE>
<CAPTION>
                                                  December 31,   August 31,
                                                     1999           1999
                                                   ---------      ---------
<S>                                                <C>            <C>
         Deferred tax benefit:
           Net operating loss carryforwards        $ 579,848      $ 783,367
           Capital loss carryforwards                 17,070          4,304
           Write down of marketable securities            --             --
           Investment tax credit carryforwards        11,190         22,332
           Value allowance                          (608,108)      (810,003)
                                                   ---------      ---------
           Net deferred tax benefit                $      --      $      --
                                                   =========      =========
</TABLE>

         The change in valuation allowance for the four months ended December
         31, 1999 aggregated $201,895 largely due to expiration of tax
         carryforwards.

         During the year ended August 31, 1999, the company had taxable income
         of approximately $61,000. The income tax expense attributable to this
         income was approximately $12,200. The company offset this expense by
         utilizing $61,000 of its net operating loss carryforward and
         recognizing a $12,200 income tax benefit.

7.       CONCENTRATIONS OF CREDIT RISK

         The Company has outstanding receivables from companies in oil and gas
         exploration industry which are considered speculative industries.
         Therefore, the Company has an industry concentration of credit risk in
         the oil and gas industry. At December 31, 1999 the company considers
         these receivables to be valued at recoverable value and no valuation
         allowance is necessary.

8.       PRIOR PERIOD ADJUSTMENT

         The Company discovered during a review of old records a liability
         determined to be valid which had been written off in a prior year. The
         liability was re-established through a prior period adjustment charged
         to retained earnings at August 31, 1997. The amount of the liability
         was $25,000 and has been settled subsequent to December 31, 1999
         through the issuance of 18,000 shares of the Company's common stock and
         a cash payment of $5,000.

9.       SUBSEQUENT EVENT

         During the first quarter of 2000, the company invested in certain
         traded options and realized a loss of approximately $161,000 as the
         options expired in March 2000.

10.      CONTINGENCY

         As disclosed in Note 1, the Company has been inactive in its operating
         business since 1987. As a result, several Forms 10-K and 10-Q have not
         been filed. The Company has since filed a notification of late filing
         with the Securities and Exchange Commission for reports 10-K and 10-Q
         due to be filed for the period August 31, 1997 to December 31, 1999 and
         is currently filing all late filings. Any liability resulting from the
         late filing is undetermined and is not reflected in these financial
         statements.