SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999       Commission File Number 0-24520



                            IMSCO TECHNOLOGIES, INC.

           (Name of small business issuer as specified in its charter)



              DELAWARE                                  04-3021770
   (State or other jurisdiction of       (I.R.S. Employer Identification Number)
   incorporation or organization)

  865 First Avenue, New York, New York                       10017
  ------------------------------------                       -----
(Address of principal executive offices)                   (Zip Code)

Issuer's telephone number, including area code: (212) 978-8454

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

                Common Stock, $.0001 par value

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

YES  X   NO
   -----   -----

     Check  if  disclosure  of  delinquent  filers  in  response  to Item 405 of
Regulation  S-B is not  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 [X].

State Issuer's revenues for its most recent fiscal year: $0.

     As of December 31, l999: (a) 8,928,174 Common Shares,  $.0001 par value, of
the registrant were outstanding;  (b) approximately 8,722,260 Common Shares were
held by non-affiliates;  and (c) the aggregate market value of the Common Shares
held by non-affiliates  was $7,904,984 based on the closing bid price of $0.9063
per  share on March 30,  2000.  Shares of  Common  Stock  held by each  officer,
director  and  holder of 5% or more of the  outstanding  Common  Stock have been
excluded in that such persons may be deemed  affiliates.  The  determination  of
affiliate  status  is not  necessarily  a  conclusive  determination  for  other
purposes.


<PAGE>

                                     PART I

     This  Annual  Report on Form  10-KSB  contains  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,  or
Section 21 E of the Securities  Exchange Act of 1934, as amended,  or subsequent
expansions or replacements of such sections,  including information with respect
to the  Company's  plans and strategy for its business.  For this  purpose,  any
statements  contained  herein that are not statements of historical  fact may be
deemed to be  forward-looking  statements.  Without limiting the foregoing,  the
words "believes",  "anticipates",  "plans", "estimates",  "feels", "expects" and
similar expressions are intended to identify forward-looking  statements.  There
are a number  of  important  factors  that  could  cause  actual  events  or the
Company's  actual  results to differ  materially  from those  indicated  by such
forward-looking statements. These factors include, without limitation, those set
forth below under the caption "Factors That May Affect Future Results"  included
under  "Management's  Discussion and Analysis of Financial Condition and Results
of Operations" in Part II of this Annual Report on Form 10-KSB.

     In this Annual Report,  the terms  "company","IMSCO",  "we", "us" and "our"
refer to IMSCO  Technologies,  Inc.,  a  Delaware  corporation,  and  unless the
context otherwise requires,  "common stock" refers to the common stock,  $0.0001
par value per share of IMSCO.

ITEM 1.  DESCRIPTION OF BUSINESS

General
-------

     IMSCO is a development stage company.  We have developed and are attempting
to license or sell our electrostatic  separation  technologies for incorporation
into  commercial  products  by a third  party.  Electrostatic  separation  takes
advantage of the fundamental electrical properties of attraction, wherein unlike
or opposite charges attract each other, and repulsion,  wherein like or the same
charges repel each other,  and uses charged  materials to  selectively  separate
other substances.  In the last six years, we have developed  several  separation
technologies based on electrostatics  combined with mechanical separation.  This
technology was originally developed by us for the specific purpose of separating
viruses  and  viral  particles  from  human  plasma.  In 1993,  we  designed  an
electrostatic separation technology which removes on demand caffeine from brewed
liquids,  such as coffee  and tea.  We call our  decaffeination  technology  the
"DECAFFOMATIC" . We call our plasma separation technology the "PLASMA PURE".

     Because of our limited financial resources, we are attempting to license or
sell our DECAFFOMATIC and PLASMA PURE technology to a third party for completion
of development of a commercial  product.  In this regard,  we have negotiated an
agreement with ElectroStatic Products, Inc., a New York corporation ("ESPI") for
the  transfer of our  electrostatic  separation  technology  and related  patent
rights (the "ESPI Agreement") for  consideration in the amount of  approximately
$578,000  which shall be paid by a combination of cash and assumption of certain
of our indebtedness and liabilities,  and the delivery of releases to IMSCO from
the  holders of our  specified  debts and  liabilities.  The ESPI  Agreement  is
subject to a number of  conditions,  including  the delivery to the IMSCO of the
consideration.  In the event that ESPI is unable to deliver the consideration by
April 28, 2000, the ESPI Agreement is null and void.  Accordingly,  there can be
no  assurance  that ESPI will  perform  under  the  agreement.  If ESPI does not
perform, we will seek other licensees or purchasers of our technology.

     On September 20, 1996, we entered into a media purchase  agreement  ("Media
Purchase  Agreement") and agreed to sell an aggregate of 1,136,363 shares of our
common stock, par value $.0001, to Proxhill Marketing, Ltd., a private media and
advertising company based in Colorado ("PML"),  for the sales price of $1.32 per
share and we received in exchange  prepaid  media in the amount of $1,500,000 to
be used at our direction. We originally planned to use the media for advertising
our own commercial  brew basket  product.  However,  because  development of our
commercial  brew  basket  decaffeinator  has not yet been  fully  developed,  at
December  31,  1999 we  possessed  approximately  $1,285,773  of  prepaid  media
credits,  net of amounts  allocated  to  warrants,  in our  inventory to use for
future public relations, marketing and advertising. Since we currently


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<PAGE>


plan  to  license  or  sell  our  DECAFFOMATIC  technology  for  the  commercial
marketplace,   we  may  attempt  to  use  our  media  in  conjunction  with  our
decaffeination  technology  licensee in a cooperative  marketing campaign or for
other products or services that the Company may have in the future.

     We were originally formed in 1986 under the laws of the State of Nevada. In
1987 we changed our corporate  domicile from Nevada to  Massachusetts  since the
corporate  operations  were  located in  Massachusetts,  which was  accomplished
through action by the  shareholders and the Board of Directors in 1987. Our name
at that time was IMSCO,  Inc.  In July 1996,  we  reincorporated  in Delaware as
IMSCO  Technologies,  Inc. In order to effectuate  this change,  we proposed the
implementation  of the following  plan.  In May 1996, we filed a Certificate  of
Incorporation  in Delaware  incorporating a new wholly-owned  subsidiary,  IMSCO
Technologies,  Inc.  The Board of  Directors of the Company at a meeting held in
May 1996 voted,  subject to the adoption by the stockholders,  to merge into its
wholly-owned subsidiary,  IMSCO Technologies,  Inc., a Delaware corporation.  On
July 9, 1996, the  stockholders of IMSCO,  Inc.,  voted to approve the change of
corporate domicile from Massachusetts to Delaware.  Therefore, on July 18, 1996,
there  remained  one  surviving  corporation  and the  name  of  this  surviving
corporation  became IMSCO  Technologies,  Inc. As of the  effective  date of the
merger,  each  stockholder  of the company held one share of common  stock,  par
value $.0001 per share, of IMSCO Technologies, Inc. for each one share of common
stock, par value $.001 per share, of IMSCO, Inc. previously held by him.

PRODUCTS AND TECHNOLOGY

     In 1993, we filed  separate  patent  applications  with the U.S.  Office of
Patents  and  Trademarks  for  the  PLASMA  PURE  and  DECAFFOMATIC   separation
technologies.  On August 22, l995 we were granted a patent by the United  States
Patents  and  Trademarks  Office,   Patent  No.  5,443,709  for  "Apparatus  for
Separating Caffeine From a Liquid Containing the Same".

     Previously  in  late  1996  and  early  1997,  we   anticipated   that  the
decaffeinator would be incorporated into a commercial coffee brewer suitable for
the institutional  user marketplace  utilizing the coffee brewer electronics for
power to the decaffeinator.  In late 1998 and in 1999, however, we believed that
we could design the  decaffeination  device to be self contained within the brew
basket,  which is  removable  from the brewer,  with its own  independent  power
source.  Our  management  believed  that this  design is superior to the earlier
version, more universal and interchangeable with different  institutional coffee
brewer models and will be easier for the consumer to use and, hopefully, lead to
increased sales once the product is  commercialized.  Consequently,  during 1998
and 1999,  we  continued  to develop and test a  DECAFFOMATIC  device  contained
within  a  detachable  coffee  brew  basket  for  the  institutional  commercial
marketplace containing the IMSCO decaffeination technology.  Originally we hoped
to be able to develop and  incorporate  our technology  into our own brew basket
decaffeination  product for the commercial  institutional  coffee brewer market.
However,  we have very  limited  financial  resources  and  consequently  we are
attempting to license or sell our technology to a third party who would complete
the development of a commerical brew basket decaffenation  product. To this end,
we have  entered  into  the ESPI  Agreement,  which is  subject  to a number  of
conditions,  for the transfer of certain of our  technology  and related  patent
rights.  If ESPI does not perform under the ESPI  Agreement,  we will seek other
licensees and purchasers of our separation technology.

STRATEGY

Separation Technology
---------------------

     Our  strategy  for the  separation  technology  is to focus on  selling  or
licensing  our  technology.  We have entered into the ESPI  Agreement,  which is
subject to a number of conditions, for the transfer of certain of our technology
and related patent rights. If ESPI does not perform under the ESPI Agreement, we
will seek other licensees and purchasers of our separation technology.


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<PAGE>


Potential Merger or Acquisition
-------------------------------

     Given our limited  financial and human resources and no operating  revenues
for the last five years,  the directors have  determined that the Company should
seek potential operating  businesses and business  opportunities with the intent
to acquire  or merge with such  businesses.  Because  of the  Company's  current
financial status,  in the event the Company does  successfully  acquire or merge
with an operating business opportunity,  it is likely that the Company's present
shareholders will experience  substantial  dilution and there will be a probable
change in control of the Company.

     Any target  acquisition  or merger  candidate  of the  Company  will become
subject to the same reporting  requirements as the Company upon  consummation of
any such business combination.  Thus, in the event that the Company successfully
locates and completes an acquisition or merger with another operating  business,
the resulting combined business must provide audited financial statements for at
least the two most  recent  fiscal  years or,  in the  event  that the  combined
operating  business has been in business less than two years,  audited financial
statements  will  be  required  from  the  period  of  inception  of the  target
acquisition or merger candidate.

     There can be no assurance,  however, that the Company will have the ability
to acquire or merge with an operating business, business opportunity or property
that will be of material value to the Company.  Management plans to investigate,
research  and,  if  justified,  potentially  acquire  or merge  with one or more
businesses  or  business   opportunities.   Although  the  Company  is  actively
negotiating with several potential merger targets,  the Company currently has no
commitment  or  arrangement,  written or oral,  to  participate  in any business
opportunity and management  cannot predict the nature of any potential  business
opportunity it may ultimately consider. Management will have broad discretion in
its  search  for and  negotiations  with  any  potential  business  or  business
opportunity.

     Sources of Business Opportunities
     ---------------------------------

     The  Company  intends to use  various  sources in its search for  potential
business  opportunities  including  its  officers  and  directors,  consultants,
special advisors, securities broker-dealers, venture capitalists, members of the
financial  community  and others who may  present  management  with  unsolicited
proposals.  Because  of the  Company's  lack of  capital,  it may not be able to
retain a fee- based professional firm specializing in business  acquisitions and
reorganizations.  Rather,  the Company  will most likely have to rely on outside
sources,  not  otherwise  associated  with the  Company,  that will accept their
compensation  only after the Company has finalized a successful  acquisition  or
merger. To date, the Company has not engaged nor any prospective consultants for
these  purposes.  The  Company  does not  intend to  restrict  its search to any
specific  entered into any definitive  agreements nor  understandings  regarding
retention  of any  consultant  to assist the Company in its search for  business
opportunities,  nor is  management  presently in a position to actively  seek or
retain kind of industry or business.  The Company may investigate and ultimately
acquire a venture that is in its preliminary or development stage, is already in
operation,  or in various  stages of its corporate  existence  and  development.
Management  cannot  predict at this time the status or nature of any  venture in
which the Company may  participate.  A potential  venture might need  additional
capital or merely  desire to have its shares  publicly  traded.  The most likely
scenario for a possible  business  arrangement would involve the acquisition of,
or merger with, an operating business that does not need additional capital, but
which  merely  desires to  establish  a public  trading  market for its  shares.
Management  believes that the Company could provide a potential  public  vehicle
for a private entity interested in becoming a publicly held corporation  without
the time and expense typically associated with an initial public offering.

     Evaluation
     ----------

     Once  the  Company  has  identified  a  particular  entity  as a  potential
acquisition  or merger  candidate,  management  will seek to  determine  whether
acquisition  or  merger  is  warranted  or  whether  further   investigation  is
necessary. Such determination will generally be based on management's


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<PAGE>


knowledge  and  experience,  or with the  assistance  of  outside  advisors  and
consultants evaluating the preliminary information available to them. Management
may elect to engage  outside  independent  consultants  to  perform  preliminary
analysis of potential business opportunities.  However, because of the Company's
lack of  capital  it may  not  have  the  necessary  funds  for a  complete  and
exhaustive  investigation  of any  particular  opportunity.  In evaluating  such
potential  business  opportunities,  the Company  will  consider,  to the extent
relevant  to the  specific  opportunity,  several  factors  including  potential
benefits  to the  Company  and  its  shareholders;  working  capital,  financial
requirements and availability of additional financing;  history of operation, if
any;  nature of present and  expected  competition;  quality and  experience  of
management; need for further research, development or exploration; potential for
growth and expansion;  potential for profits;  and other factors deemed relevant
to the specific  opportunity.  Because the Company has not located or identified
any  specific  business  opportunity  as of the date  hereof,  there are certain
unidentified   risks  that  cannot  be   adequately   expressed   prior  to  the
identification  of a specific  business  opportunity.  There can be no assurance
following  consummation of any  acquisition or merger that the business  venture
will develop into a going concern or, if the business is already operating, that
it  will  continue  to  operate  successfully.  Many of the  potential  business
opportunities  available to the Company may involve new and  untested  products,
processes or market strategies which may not ultimately prove successful.

     Form of Potential Acquisition or Merger
     ---------------------------------------

     Presently,  the  Company  cannot  predict  the  manner  in  which  it might
participate  in a prospective  business  opportunity.  Each  separate  potential
opportunity  will be reviewed  and,  upon the basis of that  review,  a suitable
legal structure or method of participation will be chosen. The particular manner
in which the Company participates in a specific business opportunity will depend
upon the nature of that  opportunity,  the  respective  needs and desires of the
Company and management of the opportunity, and the relative negotiating strength
of the parties involved. Actual participation in a business venture may take the
form  of  an  asset  purchase,   stock  purchase,   reorganization,   merger  or
consolidation.  The Company may act directly or indirectly  through a subsidiary
corporation, or other form of organization, however, the Company does not intend
to  participate  in  opportunities   through  the  purchase  of  minority  stock
positions.

     Because of the  Company's  current  financial  status  and its  concomitant
limited assets and no operating revenue,  it is likely that any potential merger
or acquisition with another operating business will require substantial dilution
of the  Company's  existing  shareholders.  There will  probably  be a change in
control of the  Company,  with the  incoming  owners of the  targeted  merger or
acquisition  candidate  taking over control of the Company.  Management  has not
established  any  guidelines  as to the  amount  of  control  it will  offer  to
prospective business opportunity  candidates,  since this issue will depend to a
large degree on the economic  strength and  desirability of each candidate,  and
correspondent  ending  relative  bargaining  power  of  the  parties.   However,
management will endeavor to negotiate the best possible terms for the benefit of
the Company's shareholders as the case arises.

     Management  does not  have any  plans to  borrow  funds to  compensate  any
persons,  consultants,  promoters, or affiliates in conjunction with its efforts
to find and acquire or merge with another business opportunity.  Management does
not have any  plans to  borrow  funds  to pay  compensation  to any  prospective
business opportunity, or shareholders, management, creditors, or other potential
parties to the  acquisition  or merger.  In either case, it is unlikely that the
Company  would be able to borrow  significant  funds for such  purposes from any
conventional lending sources. In all probability, a public sale of the Company's
securities  would also be unfeasible,  and management  does not  contemplate any
form of new public  offering at this time.  In the event that the  Company  does
need to raise capital,  it would most likely have to rely on the private sale of
its  securities.  However,  no private sales are  contemplated  by the Company's
management at this time. If a private sale of the Company's securities is deemed
appropriate in the future, management will endeavor to acquire funds on the best
terms  available to the  Company.  However,  there can be no assurance  that the
Company will be able to obtain funding when and if needed, or that such funding,
if available, can be obtained on terms


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reasonable or acceptable to the Company.  Although not presently  anticipated by
management,  there  is a remote  possibility  that the  Company  might  sell its
securities to its management or affiliates.

     Management  does not  contemplate  that the Company  would acquire or merge
with a business  entity in which any affiliates of the Company have an interest.
Any such related  party  transaction,  however  remote,  would be submitted  for
approval by an  independent  quorum of the Board of  Directors  and the proposed
transaction would be submitted to the shareholders for prior  ratification in an
appropriate manner.

     It is presently  anticipated  by management  that prior to  consummating  a
possible  acquisition or merger,  the Company will seek to have the  transaction
ratified by  shareholders  in the appropriate  manner.  Most likely,  this would
require a general  or special  shareholder's  meeting  called for such  purpose,
wherein all  shareholder's  would be entitled to vote in person or by proxy.  In
the notice of such a shareholder's meeting and proxy statement, the Company will
provide shareholders  complete disclosure  documentation  concerning a potential
acquisition  of merger  candidate,  including  financial  information  about the
target and all material terms of the acquisition or merger transaction.

MARKETING

     Our  current  marketing  strategy  is to  license  or sell  our  separation
technologies  to other companies which have  pre-existing  industry  presence in
their respective  fields and the financial  resources  necessary to complete the
commercialization and marketing of these technologies and products.  Although we
are currently  negotiating with a purchaser for the technology,  there can be no
assurance  that we will be able to  enter  into  additional  agreement  on terms
favorable to us if at all, or that current or future  agreements will ultimately
be beneficial to us.

     Media Purchase Agreement
     ------------------------

     Under the Media Purchase  Agreement,  PML  contractually  agreed to provide
$1.5 million of media for our public relations and advertising  campaign through
Grow Marketing  Services  ("GROW"),  an  independent  media agency and marketing
company.  In exchange  for our  issuing  1,136,363  shares of our common  stock,
representing  a price of $1.32 per share,  we acquired  $1.5 million of prepaid,
dedicated media credits receivable and certain media services.

     The media advertising  services provided by GROW include  conducting market
research  services for the purpose of  formulating  a media plan to optimize the
benefits  of the  media  advertising  campaign.  Then,  based  on a  media  plan
developed by us, GROW secures suitable advertising time on television, radio, or
cable  systems,  or  advertising  space  in  newspapers,   magazines,  or  other
publications of mass appeal.

     At the closing of a media  purchase  transaction  PML has agreed to deliver
cash, media, media credit and/or other  media-related  assets to GROW as payment
for media  extended  to us. PML then  delivers to us a pre-paid  purchase  order
acknowledging  our payment of the media cost from GROW under the terms set forth
in the agreement.

     When we originally intended to directly market our DECAFFOMATIC products in
North  America,  we planned to use the  remaining  approximately  $1,285,773  of
media,  net of amounts  allocated to warrants,  to finance the  introduction and
initial product advertising and marketing support for the DECAFFOMATIC products.
However,  since we do not presently intend to pursue the direct marketing of our
decaffeination  products, we may use the media in conjunction with a cooperative
marketing campaign with our licensee or we may use the Media in conjunction with
other products or services to be offered by the Company in the future.

     To the extent  that we choose  not to or are  unable to enter  into  future
agreements,  we would experience substantially increased capital requirements to
undertake the  commercial  development,  marketing or sale of current and future
products  incorporating our technology.  There can be no assurance that we would
be able to  market or sell our  current  or future  products  incorporating  our
technology independently in the absence of such licensing agreements.


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<PAGE>


MANUFACTURING

     We currently do not own or operate manufacturing  facilities for commercial
production  of any products.  In addition,  we have no intention of acquiring or
developing any manufacturing facilities, nor do we have any financial capability
to acquire any such facilities.

GOVERNMENT REGULATIONS

     The   production   and  marketing  of  some  of  the   potential   products
incorporating  our  separation  technology,  including the PLASMA PURE,  will be
subject to  regulation  for safety and efficacy by numerous  federal,  state and
local agencies,  and comparable  agencies in foreign countries.  Our PLASMA PURE
system will be considered a medical device.  Since we are seeking to license our
PLASMA PURE system to a third party,  it would be the licensee's  responsibility
to comply with all applicable FDA regulations.

PATENTS AND LICENSE RIGHTS

     Our separation  technology  success depends in large part on our ability to
obtain patents,  maintain trade secret protection and operate without infringing
on the proprietary rights of third parties. We applied for U.S. patents covering
our DECAFFOMATIC separation technology and its PLASMA PURE separation technology
in 1993. On August 22, l995, we were issued a patent by the U.S. Commissioner of
Patents  and  Trademarks,  Patent  Number  5,443,709,  for  its  "Apparatus  For
Separating Caffeine From A Liquid Containing the Same." On December 11, 1996, we
received notice from the U.S. Patent Office that its core patent application for
the electrostatic separation technology for removing substances from a fluid had
been allowed.  That patent was subsequent  issued as Patent No. 5,503,724 for "A
Process For Decaffeinating Caffeine Containing Liquid"

     We believe  that  patent  protection  of our  technologies,  processes  and
products  are very  important  to our  future  operations.  The  success  of our
proposed  products may  significantly  depend upon our ability to obtain  patent
protection.  No  assurance  can be given that any  patents  will be issued or if
issued that they will have commercial  value to us. If a patent is granted,  the
cost  of  enforcing  our  patent  rights  in  lawsuits,  if  necessary,  may  be
significant and could materially interfere with our operations.

     Although we intend to file  additional  patent  applications  as management
believes   appropriate   with   respect  to  any  new   products   technological
developments,  or  licensing  agreements,  no  assurance  can be given  that any
additional patents will be issued, or if issued, that they will be of commercial
benefit to us. In addition,  to  anticipate  the breadth or degree of protection
that any such  patents may afford is  impossible.  To the extent that we rely on
unpatented trade secrets and proprietary  technology,  no assurance can be given
that others will not independently develop or obtain substantially equivalent or
superior  technology  or otherwise  gain access to our trade  secrets,  that any
obligation  of  confidentiality  will  be  honored  or  that  we will be able to
effectively protect our rights to proprietary technology.  Further, no assurance
can be given that any products developed by us will not infringe patents held by
third parties or that,  in such case,  licenses form such third parties would be
available on commercially acceptable terms, if at all.

COMPETITION

     We and our potential  technology  licensees and/or purchasers  compete with
numerous  firms,  many of which are  large,  multi-national  organizations  with
worldwide   distribution.   These  firms  have  substantially   greater  capital
resources,  research  and  development  and  technical  staffs,  facilities  and
experience in obtaining regulatory  approvals,  as well as in the manufacturing,
marketing  and  distribution  of products,  than we do.  Academic  institutions,
hospitals,   governmental   agencies  and  other  public  and  private  research
organizations are also conducting research and seeking patent protection and may
develop  competing  products  or  technologies  on their  own or  through  joint
ventures or other arrangements.  In addition, recently developed technologies or
technologies  that may be  developed in the future are or could be the basis for
competitive  products.  No assurance can be given that our competitors  will not
succeed in developing  technologies and products that are more effective or less
costly than any that are being developed by us.


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<PAGE>


PRODUCT LIABILITY

     The  development,  manufacture  and  sale  of  products  incorporating  our
separation  technology  involve an inherent risk of product liability claims and
associated adverse publicity.  We currently do not maintain liability  insurance
and may  need  to  acquire  such  insurance  coverage  prior  to the  commercial
introduction  of  some  of the  products  incorporating  our  technology  by our
licensees.  No  assurance  can be given  that we will be able to obtain  product
liability insurance or, if obtainable, that it will be on financially reasonable
terms. It is anticipated that the liability  insurance for the types of products
to be marketed by our licensees,  if available,  will be very expensive. If such
insurance  is not obtained  and  maintained  at  sufficient  levels,  and if any
product  liability  claim  were  brought  against  us and were  sustained  for a
sufficient  amount,  it could have a material adverse affect on our business and
financial condition, which could cause us to curtail or discontinue operations.

EMPLOYEES

     As of the date hereof, we have two part-time  employees,  one in management
and one in  administration.  None of our  employees  is  represented  by a labor
union. We consider our relations with our current employees to be satisfactory.

ENVIRONMENTAL QUALITY

     We believe that we are now in compliance with all Federal,  State and local
laws relating to the protection of the environment.  We do not generate,  store,
transport or dispose of any hazardous waste,  and that management  believes that
none of our  products  is regarded  as a  hazardous  material by the  applicable
regulations for the protection of the environment.  We do not anticipate  making
any  capital   expenditures  in  the  current  or  succeeding  fiscal  year  for
environmental control efforts regarding our products.

ITEM 2.  DESCRIPTION OF PROPERTY

     Our principal offices are currently located at 865 First Avenue,  New York,
New York,  in a shared  office  arrangement  provided  for no charge  through an
affiliate of one of our directors on an oral,  month-to-month  rental basis.  We
believe that our property and equipment are in good operating  condition and are
adequate for existing and immediately foreseeable needs.

ITEM 3.  LEGAL PROCEEDINGS

     We are not currently involved in any material legal proceedings.

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

     There were no matters  submitted to a vote of the  security  holders in the
fourth quarter of 1999.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

   (a)  Market Information

     There is currently a limited  public  trading  market for our Common Stock.
There are currently eleven  market-makers for our Common Stock. Our Common Stock
has traded on a limited basis on the OTC Bulletin  Board under the symbol "IMSO"
since November 15, 1994.  Our stock  registrar and transfer agent is Progressive
Transfer Company, Salt Lake City, Utah.

     The following table sets forth the high and low closing  quotations for the
Common  Stock,  as reported by NASDAQ for each fiscal  quarterly  period  during
1999. The quotations as reported reflect inter-dealer


                                       7
<PAGE>


quotations without retail markup,  markdown or commission and do not necessarily
represent actual transactions.

                                                              High       Low
                                                              ----       ---
January 1, 1999 - March 31, 1999                             $1.156     $0.375
April 1, 1999 - June 30, 1999                                 0.500      0.200
July 1, 1999 - September 30, 1999                             0.300      0.125
October 1, 1999 - December 31, 1999                           0.220      0.070

January 1, 1998 - March 31, 1998                             $2.687     $1.375
April 1, 1998 - June 30, 1998                                 2.062      1.312
July 1, 1998 - September 30, 1998                             1.656      0.906
October 1, 1998 - December 31, 1998                           1.468      0.625


   (b) Holders of Common Stock

                                            Approximate Number of Record Holders
      Title of Class                              (as of December 31, l999)
      --------------                        ------------------------------------
Common Stock, $.0001 par value                               272

A number of shares  are held of record  in street  name by  brokerage  and other
institutional firms for their customers.

   (c) Dividends

     We have never declared or paid a cash dividend on its common stock,  and it
is anticipated  that we will retain any future  earnings for use in our business
and not pay cash dividends.  Declaration and payment of dividends are within the
discretion  of our Board of Directors,  which will review such  dividend  policy
from time to time.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

General
-------

     We are in the  development  stage and our operations are subject to all the
problems,  expenses,  delays and other risks inherent in the  establishment of a
new business  enterprise,  as well as the problems  inherent in  developing  and
marketing  a new  product/service  and  in  establishing  a  name  and  business
reputation.  The likelihood of our success must also be considered in connection
with  the  rapidly  and  continually  changing  technology  and the  competitive
environment  in  which  we will  operate.  There  can be no  assurance  that our
operations  will  result  in our  becoming  or  remaining  economically  viable.
Potential investors in our common stock should be aware of the problems, delays,
expenses and difficulties  encountered by any company in a developmental  stage,
many of which may be beyond our control.  These include, but are not limited to,
unanticipated regulatory compliance,  marketing problems and intense competition
that may exceed current  estimates.  We have had no revenues from  operations to
date and,  because we are just beginning to enter the commercial  stage, we will
likely sustain operating losses for an indeterminate time period. Since entering
the  development  phase in July 1992, we have devoted  substantially  all of our
resources to the research and  development  of our products and  technology  and
general and  administrative  expenses.  Since entering the development  stage in
July 1992, we have generated an  accumulated  deficit of $10,181,714 at December
31, 1999 and have a total accumulated deficit of $10,802,622.

     We had no revenues from continuing  operations in years ending December 31,
1998,  and December 31, 1999. We have incurred net losses in each year since our
inception  in 1986.  Given the  dormant  level of  business  activity  from 1988
through 1991, we realized that we could not continue with our earlier


                                       8
<PAGE>


luminator  technology product,  we discontinued  operations and were reactivated
and entered into a new development stage in July 1992.

     Our  losses  incurred  since  inception  have  resulted   principally  from
expenditures  under  our  research  and  development  programs.  There can be no
assurance of when and whether we will generate any revenues or become profitable
on a sustained basis, if at all.

     Our ability to achieve  revenue  will depend upon our ability to license or
sell our technology. There can be no assurance that our operations will generate
revenue or will ever be profitable. The following discussion and analysis should
be read in conjunction with the Financial Statements and notes thereto appearing
elsewhere in this report.

RESULTS OF OPERATIONS

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

     Net losses  decreased from  $2,881,162 for the year ended December 31, 1998
to $1,380,235 for the year ending  December 31, 1999, a 52% decrease.  We had no
revenues or operating  income for years ended December 31, 1999 and December 31,
1998 from continuing operations. For the year ended December 31, 1999, we had no
interest income.

     Total general,  administrative  and development  expenses were $841,333 for
1999 in comparison  to  $2,656,431  for 1998, a decrease of 68%. The decrease in
these costs from 1998 to 1999 was  primarily  due to a  significant  decrease in
administrative,  advertising and research and development expenses. All research
and development costs were expensed currently in the year incurred,  rather than
capitalized.  This  resulted  in a loss per share of $(.39)  for the year  ended
December  31,  1998,  in  comparison  to a loss per share of $(.17) for the year
ended December 31, 1999.

     At December  31,  l999,  the Company had no assets.  Total  liabilities  of
$1,474,522 and total stockholders' deficit of $(1,474,522).

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

     Net losses  decreased from  $3,631,105 for the year ended December 31, 1997
to $2,881,162 for the year ending December 31, 1998, a 20.6% decrease. We had no
revenues or operating  income for years ended December 31, 1997 and December 31,
1998 from continuing operations. For the year ended December 31, 1998, we had no
interest  income.  $5,541 in interest  was earned for the  comparable  period in
1997.

     Total general,  administrative and development expenses were $2,656,431 for
1998 in comparison  to  $3,592,574  for 1997, a decrease of 26%. The decrease in
these costs from 1997 to 1998 was  primarily  due to a  significant  decrease in
litigation  settlement costs, as well as decreased  advertising and research and
development expenses. All research and development costs were expensed currently
in the year incurred, rather than capitalized. This resulted in a loss per share
of $(.39) for the year ended  December 31,  1998,  in  comparison  to a loss per
share of $(.57) for the year ended December 31, 1997.

     At December  31,  l998,  the Company had total  assets of  $140,061, total
liabilities of $911,405 and total stockholders' deficit of $(771,344).

                         LIQUIDITY AND CAPITAL RESOURCES

     We had negative  working  capital as of December 31, l999, of $1,474,522 in
comparison  to a negative  working  capital  position as of December 31, l998 of
$887,413.  We had an  accumulated  deficit of  $1,474,522  at the  period  ended
December 31, l999, in comparison to an accumulated deficit of $771,344 at


                                       9
<PAGE>


the period ended December 31, l998. The increase in the  accumulated  deficit is
primarily  related to continuing  operating costs during the  development  phase
without any operating income.

     We have financed  operations  from entering the  development  phase in July
1992 (through  December 31, 1998) primarily through the private placement of its
stock and, to a lesser extent,  through  borrowings from notes payable.  For the
year ended December 31, l998,  our cash  requirements  were satisfied  primarily
from the cash  reserves  in its  operating  accounts,  a  private  placement  of
$225,000 shares of our Series A convertible preferred stock to one purchaser and
$390,000  of total  borrowings  from  private  lenders  evidenced  by 10% Senior
Convertible  Notes. At March 31, 2000, the  approximately  $143,355  outstanding
principal  balance,  plus accrued interest theron, of the 10% Senior Convertible
Notes was  converted by their holders into our Common  Stock.  Additionally,  in
February 1999, the Company  completed a $600,000  Convertible  Debenture private
placement  to one  accredited  investor,  which  resulted in net proceeds to the
Company of $522,000 after payment of placement  fees and expenses.  At March 31,
2000, the entire  $600,000,  plus accrued interest  thereon,  of the Convertible
Debenture  was  converted  into our Common  Stock.  The  $390,000  of 10% Senior
Convertible  Notes  and the  $600,000  Convertible  Debentures  all were sold as
non-public  offerings  and all of the  purchasers  represented  that  they  were
"Accredited  Investors" as defined under SEC  Regulation  D.  Additionally,  the
Company had approximately  $1,285,773 of remaining prepaid media credits, net of
amounts allocated to warrants,  available for execution of its public relations,
advertising  and  marketing  campaign  for its  decaffeination  technology.  The
prepaid Media  Credits were obtained by the Company on September 20, 1996,  when
it entered into the Media Purchase  Agreement with PML, which received 1,136,364
shares in  consideration  for  $1,500,000 in prepaid Media Credits to be used at
our  direction.  PML also  received  127,262  Class D Warrants  entitling  it to
acquire  Common Stock for the price of $1.32 per share for a period  ending July
31,  2001.  In  the  Media  Purchase  Agreement  the  purchaser  of  the  shares
represented  that it was an "Accredited  Investor" as that term is defined under
Regulation D promulgated by the Commission pursuant to the Securities Act.

     We do not  currently  possess a bank  source  of  financing.  Our  negative
working capital  (current assets less current  liabilities) at December 31, 1999
was  $1,474,522.  Our  management  believes  that unless we are able to sell the
approximately  $1,285,773,  net of  amounts  allocated  to  warrants,  of  Media
Credits,  obtain additional capital financing or license or sell our products or
technology,  none of which can be assured, we cannot be certain that our current
capital  will be adequate to continue as a going  concern.  Should  insufficient
funds from these  potential  sources be available,  reducing our present rate of
expenditures  further  might  materially  adversely  affect  the  ability of the
Company to complete our research and development on the commercial  DECAFFOMATIC
product,  to produce  competitive  products  and  services,  and to market  them
effectively. Our ability to continue in business as a going concern depends upon
our ability to generate revenues and royalties from the sale or licensing of our
technology,  to sell the Media, to conserve  liquidity by setting  marketing and
other priorities and reducing  expenditures,  to obtain additional funds through
the placement of our securities.

     We believe that we will be able to meet our de minimis  operating  expenses
for the next 3 months. Our future capital requirements,  however, will depend on
numerous factors,  including (i) our ability to sell our technology or establish
new licensing and marketing  agreements,  (ii) the costs  involved in preparing,
filing,  prosecuting,  defending and enforcing  intellectual property rights and
complying  with  regulatory  requirements,  and  (iii) the  effect of  competing
technological and market developments. However, if operating expenses are higher
than expected or if cash flow from operations is lower than  anticipated,  there
can be no assurance that the Company will have sufficient  capital  resources to
be able to continue as a going concern.

YEAR 2000 EFFECT ON COMPUTER SYSTEMS

       We did not have any computer systems operational as of December 31, 1999.


                                       10
<PAGE>


     To date we have spent  immaterial  amounts to comply  with  accounting  and
statutory  requirements  regarding  the year 2000. We believe that we will spend
minimal additional amounts for year 2000 issues in the foreseeable future. These
assessments have not been independently verified.

                     FACTORS THAT MAY AFFECT FUTURE RESULTS
                     --------------------------------------

Statements  included in this "Management's  Discussion and Analysis of Financial
Condition and Results of Operations"  Section,  in other sections of this Annual
Report  on  Form  10-KSB  including,  without  limitation  the  "Description  of
Business"  Section  in Part I, and in prior and  future  filings  by us with the
Securities and Exchange Commission, in our press releases and in oral statements
made with the approval of an authorized  executive  which are not  historical or
current facts are "forward-looking  statements" made pursuant to the safe harbor
provisions  of the  Private  Securities  Litigation  Reform  Act of 1995 and are
subject to certain risks and  uncertainties  that could cause actual  results to
differ  materially  from those  presently  anticipated or projected.  We wish to
caution  readers  not  to  place  undue  reliance  on any  such  forward-looking
statements,  which  speak  only as of the date  made.  The  following  important
factors,  among  others,  in some cases have  affected  and in the future  could
affect our actual  results and could cause our actual  financial  and  operating
performance  to differ  materially  from that  expressed in any  forward-looking
statement:

We are a  Development  Stage  Company and Our  Business is Difficult to Evaluate
--------------------------------------------------------------------------------
Because our Operating History is Limited
----------------------------------------

     We are in the  development  stage and our operations are subject to all the
problems,  expenses,  delays and other risks inherent in the  establishment of a
new business  enterprise,  as well as the problems  inherent in  developing  and
marketing  a new  product/service  and  in  establishing  a  name  and  business
reputation.  It is difficult to evaluate our business and our prospects  because
our revenue and income potential is unproven. The likelihood of our success must
also be  considered  in  connection  with the rapidly and  continually  changing
technology and the competitive  environment in which we will operate.  We cannot
assure  you  that  our  operations  will  result  in us  becoming  or  remaining
economically  viable.  Potential  investors  should  be aware  of the  problems,
delays, expenses and difficulties  encountered by any company in a developmental
stage,  many of which may be beyond  our  control.  These  include,  but are not
limited to, unanticipated regulatory compliance,  marketing problems and intense
competition  that may exceed  current  estimates.  We have had no revenues  from
operations to date and,  because we are just  beginning to enter the  commercial
stage, we will likely sustain operating losses for an indeterminate time period.

We Have  Incurred  Losses  Since  Inception  and We May  Not Be Able to  Achieve
--------------------------------------------------------------------------------
Profitability
-------------

     We have  incurred net losses in each year since  inception  and for each of
the years ended  December 31, 1997,  December 31, 1998 and December 31, 1999. As
of  December  31,  1999  we  had  an   accumulated   deficit  of   approximately
$10,800,000.  These losses have resulted  primarily from expenses  associated
with  our  research  and  development   activities  and  general  administrative
expenses. Since inception we have funded our business primarily from the sale of
our stock and by  borrowing  funds.  We expect to continue to incur  significant
research and development, marketing and general and administrative expenses as a
result, we may experience  further losses and negative cash flows. The amount of
future expenses, corresponding further potential net losses and time required by
us to reach profitability, if ever, are uncertain. We cannot assure you that our
operations will generate significant revenue or will ever be profitable.

We Have Immediate Capital Requirements and Our Future Funding is Uncertain.
---------------------------------------------------------------------------

     Our  operations  to date have  consumed  substantial  amounts  of cash.  At
December  31, 1999,  our current  liabilities  consisting  primarily of accounts
payable,  notes payable and accrued  expenses were  $1,474,522.  At December 31,
1999 we had a negative  working capital  position of $1,474,522.  Therefore,  we
need to raise substantial  additional funds through the licensing or sale of our
technologies or through  additional equity or debt financings.  We cannot assure
you that any such  additional  funding  will be available to us. In the event we
have insufficient  working capital,  and are unable to locate additional capital
on acceptable terms, we may be required to curtail  operations  substantially or
entirely, including our


                                       11
<PAGE>


research and development activities. Such lack of funds could seriously harm our
business,  financial  condition  and  results of  operation.  See  "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Early Stage of Product Commercialization; Technological Uncertainties.
----------------------------------------------------------------------

     We are in the development  stage, and our separation  technologies  require
additional  development for  commercialization.  The development of any products
will require significant further research,  development,  testing and regulatory
approvals and additional investment prior to commercialization. Consequently, we
are  negotiating  with  prospective  purchasers or licensees for our  separation
technology.

We Will Be  Substantially  Dependent  on Third  Party  Licensees  or  Technology
--------------------------------------------------------------------------------
Purchasers
----------

     We will be  dependent  for  revenues  upon the  success of such third party
licensees or technology  purchasers in performing  their  responsibilities.  The
amount and timing of resources  which may be devoted to the performance of their
contractual  responsibilities  by such  parties are not within our  control.  We
cannot assure you that such parties will perform their  obligations as expected,
pay any additional  revenue or license fees beyond the stated  minimums to us or
market any products,  or that we will derive any revenue from such arrangements.
There can be no assurance  that our  interests  will  continue to coincide  with
those  parties.  To the extent that we choose not to or are unable to enter into
such  technology  sales or  licensing  agreements,  we would need  substantially
additional  capital to undertake the marketing or sale of our current and future
products.

Lack of Manufacturing and Sales and Marketing Experience.
---------------------------------------------------------

     We have no experience  in, and currently  lack the resources and capability
to,  manufacture  any  of  our  proposed  products  on a  commercial  basis.  We
anticipate  that we will be  dependent  to a  significant  extent on third party
manufacturers.

Our Market May Undergo  Rapid  Technological  Change and Our Products May Become
--------------------------------------------------------------------------------
Obsolete.
---------

     We expect  technological  developments  to  continue at a rapid pace in the
electrostatic  separation  and  biotechnology  industries,  and  there can be no
assurance that  technological  developments  will not cause our technology to be
rendered obsolete.

We Rely  Heavily on Our  Intellectual  Property  Rights Which Offer Only Limited
--------------------------------------------------------------------------------
Protection Against Potential Infringers
---------------------------------------

     Our success will be heavily  dependent upon whether we can obtain  patents,
maintain  trade  secret  protection  and  operate  without   infringing  on  the
proprietary  rights of third  parties.  Patents have been granted to us for both
method and devise in the technology for the separation of caffeine from a brewed
beverage.  No other  patents  have,  as yet, been issued but it is expected that
patents will be issued.  We believe that patent  protection of our technologies,
processes and products is very important to our future  operations.  The success
of our  proposed  products may  significantly  depend upon our ability to obtain
patent  protection.  When a patent is granted,  the cost of enforcing our patent
rights in lawsuits,  if necessary,  may be significant  and could interfere with
our operations.

     Although we intend to file  additional  patent  applications  as we believe
appropriate with respect to any new products or technological  developments,  we
cannot assure you that any additional patents will be issued, or if issued, that
they will be of  commercial  benefit to us.  Further,  our  ability to file such
additional  patent   applications  may  be  reduced  by  our  limited  financial
resources.  In addition,  to anticipate the breadth or degree of protection that
any such  patents  may  afford  is  impossible.  To the  extent  that we rely on
unpatented  proprietary  technology,  we cannot assure you that that others will
not  independently  develop  or  obtain  substantially  equivalent  or  superior
technology or otherwise gain access to our trade secrets, that any obligation of
confidentiality  will be honored or that we will be able to effectively  protect
our rights to  proprietary  technology.  Further,  we cannot assure you that any
products  developed  by us will not infringe  patents  held by third  parties or
that,  in such case,  licenses  from such third  parties  would be  available on
commercially  acceptable  terms,  if at all. Our ability to compete  effectively
with other  companies  will  depend,  in part,  on our ability to  maintain  the
proprietary nature of its technologies. We intend to license


                                       12
<PAGE>


and market our products internationally,  and the laws of some foreign countries
may not protect our  proprietary  rights to as great an extent as do the laws of
the  United  States.  We  cannot  assure  you  that  our  competitors  will  not
independently develop comparable or superior technologies.

Limited Market for the Common Stock
-----------------------------------

     There has only been a limited public market for our Common Stock on the OTC
Bulletin Board. We cannot assure you that an active public market for the Common
Stock will  develop or continue at any time in the future.  At December 31, 1999
we had approximately  8,928,174 shares  outstanding.  Substantially all of these
shares are freely tradable without  restriction or are eligible for resale under
Rule 144, subject to the limitations on sales by "affiliates" under Rule 144. As
long  as  there  is a  limited  public  market  for  our  Common  Stock,  if our
stockholders  sell or  attempt  to sell a  significant  number  of shares in the
public  market at any one time,  it could be  difficult to make the sale at then
current  market  prices,  and the market  price of our Common  Stock  could fall
materially.

Our Stock Will Likely Be Subject to  Substantial  Price and Volume  Fluctuations
--------------------------------------------------------------------------------
Due to a Number of Factors, Certain of Which Are Beyond Our Control
-------------------------------------------------------------------

     The market price and trading  volume of our Common Stock,  like that of the
common stock of many other  technology  companies,  has been and is likely to be
highly  volatile and fluctuate  widely for reasons which may be unrelated to our
business prospects or results of operations, such as:

     - the results  of  announcements   of  technological   innovations  or  new
       commercial products by our competitors;

     - announcements relating to our  technology  sales,  licenses or  strategic
       relationships;

     - developments   in   our   patent  or  other  proprietary  rights  or  our
       competitors;

     - fluctuations in our operating results;

     - sales of large amounts of stock by shareholders;

     - trading being conducted by limited, undercapitalized and less experienced
       market makers.

     - actions taken by our competitors, including new product introductions;

     - our ability to control costs;

     - our ability to obtain financing;

     - general economic and market factors.

     Any of these reasons could have a significant  adverse effect on the market
price of our Common Stock.  In addition,  the stock market has  experienced  and
continues  to  experience  extreme  price and  volume  fluctuations  which  have
affected the market price of many technology and biotechnology companies.

The Reliability of Our Products is Uncertain.
---------------------------------------------

     Most applications  incorporating our technologies are being still developed
or have  only  begun to be  introduced  to  potential  licensees  or  technology
purchasers.  As a  result  of the  limited  period  of use  and  the  controlled
environment  in which  most of our  technologies  have been  tested to date,  we
cannot assure you that they will meet their performance specifications under all
conditions or for all applications.  Any significant  reliability problems could
have a material adverse effect on our business.

We Face Intense  Competition  and If We Are Unable to Compete  Successfully  Our
--------------------------------------------------------------------------------
Business Will Be Seriously Harmed.
----------------------------------

     We compete with  numerous  firms,  many of which are large,  multi-national
organizations  with  worldwide  distribution.  These  firms  have  substantially
greater capital resources, research and development


                                       13
<PAGE>


and  technical  staffs,   facilities  and  experience  in  obtaining  regulatory
approvals,  as well  as in the  manufacturing,  marketing  and  distribution  of
products,  than we do. Academic institutions,  hospitals,  governmental agencies
and other public and private research organizations are also conducting research
and seeking patent protection and may develop competing products or technologies
on their own or through  joint  ventures  or other  arrangements.  In  addition,
recently  developed  technologies or  technologies  that may be developed in the
future are or could be the basis for competitive  products. We cannot assure you
that our competitors  will not succeed in developing  technologies  and products
that are more effective or less costly than any that are being developed by us.

We Can Potentially Issue Additional Shares Without Shareholder Approval.
------------------------------------------------------------------------

     We are currently  authorized to issue up to a total of 15,000,000 shares of
Common Stock,  $.0001 par value, and 1,000,000 shares of preferred stock, $.0001
par value per share (the "Preferred  Stock").  At December 31, 1999,  there were
8,928,174  shares of Common  Stock  outstanding  and  45,000  shares of Series A
convertible preferred stock outstanding.

     Our Board of Directors is  authorized,  without  stockholder  approval,  to
issue Preferred Stock in one or more series and to fix the voting powers and the
designations,  preferences and relative, participating, optional or other rights
and  restrictions  thereof.  Accordingly,  we may  further  issue  a  series  of
Preferred  Stock in the future that will have  preference  over our Common Stock
with respect to the payment of  dividends  and  proceeds  from our  liquidation,
dissolution  or winding  up or have  voting or  conversion  rights  which  could
adversely affect the voting power and percentage ownership of the holders of the
Common Stock.

There Are a  Substantial  Number of Shares  Eligible  for  Future  Sale That May
--------------------------------------------------------------------------------
Adversely Affect the Market Price for Our Common Stock.
-------------------------------------------------------

     Sales of  substantial  amounts of our Common Stock in the public  market by
shareholders  could  adversely  affect the market  price of the Common Stock and
adversely  affect our ability to raise capital at a time and on terms  favorable
to us. Although there are approximately  eleven securities  broker-dealers  that
are making a market in our common  stock as of the date  hereof,  our shares are
thinly traded on a limited basis. Consequently, if substantial amounts of Common
Stock are sold into the public market by  shareholders,  the  prevailing  market
price will likely  drop.  As of December 31, 1999,  we had  8,928,174  shares of
Common Stock outstanding.  Substantially all of these shares are freely tradable
without  restriction  or are  eligible  for  resale  under  Rule 144  under  the
Securities  Act, except for any shares held by an "affiliate" of the company (as
defined in the Securities Act and the rules and  regulations  thereunder)  which
will be subject to the limitations of Rule 144.

     In  general,  under  Rule  144  as  currently  in  effect,  subject  to the
satisfaction of certain other conditions,  a person (or persons whose shares are
aggregated under the terms of Rule 144),  including an affiliate of the company,
who has owned  restricted  shares of Common Stock  beneficially for at least one
year, is entitled to sell,  within any  three-month  period,  a number of shares
that does not exceed the greater of 1% of the total number of outstanding shares
of the same class,  or the average  weekly  trading  volume of the Common  Stock
during the four calendar  weeks  preceding the sale, as reported by all national
securities  exchanges on which the Common Stock is traded  and/or the  automated
quotation  system  of  a  registered  securities  association,  or  an  approved
consolidated  transaction  reporting  system.  A  person  who  has  not  been an
affiliate of the company for at least the three months immediately preceding the
sale and who has  beneficially  owned  shares of  Common  Stock for at least two
years is  entitled  to sell such  shares  under Rule 144  without  regard to the
volume limitations  described above. No prediction can be made as to the effect,
if any, that sales of shares of Common Stock or the  availability  of shares for
sale will have on the market prices prevailing from time to time.

Our Stock is a Low Priced  Securities  Which  Imposes  Certain  Requirements  on
--------------------------------------------------------------------------------
Broker-Dealers Effecting a Trade in Our Shares.
-----------------------------------------------

     If the price per share of our common stock is below  $5.00,  then unless we
satisfy certain net asset tests,  our securities would become subject to certain
"penny stock" rules promulgated by the Commission. The penny stock rules require
a  broker-dealer,  prior to a transaction in a penny stock not otherwise  exempt
from


                                       14
<PAGE>


the rules, to deliver a standardized  risk disclosure  document  prepared by the
Commission that provides information about penny stocks and the nature and level
of risks in the penny stock  market.  The  broker-dealer  also must  provide the
customer  with  current  bid and  offer  quotations  for the  penny  stock,  the
compensation  of the  broker-dealer  and its  salesperson in the transaction and
monthly account  statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that prior to
a  transaction  in a penny  stock not  otherwise  exempt  from such  rules,  the
broker-dealer must make a special written  determination that the penny stock is
a suitable  investment  for the  purchaser and receive the  purchaser's  written
agreement to the transaction.  These disclosure requirements may have the effect
of reducing the level of trading  activity in the  secondary  market for a stock
that  becomes  subject  to the  penny  stock  rules.  Based on our  most  recent
financial  statement for the year ended  December 31, 1999,  our Common Stock is
subject to the "penny stock" rules. Consequently, owners of our common stock may
find it more difficult to sell their shares.

We Do Not  Intend  to Pay  Dividends  and You May Not  Experience  a  Return  on
--------------------------------------------------------------------------------
Investment Without Selling Shares.
----------------------------------

     We have never  declared or paid cash  dividends  on our Common Stock and do
not anticipate paying cash dividends in the foreseeable future.  Therefore,  you
will not  experience a return on your  investment  in our Common  Stock  without
selling your shares since we currently intend to retain future earnings, if any,
to fund the development, operations and growth of our business.

The Exercise of Our Outstanding Warrants Could Have a Dilutive Effect
---------------------------------------------------------------------

     As of December 31,  1999,  there were  outstanding  options and warrants to
purchase  approximately  3,079,645  shares of our common stock.  The exercise of
warrants or options and the sale of the  underlying  shares of common  stock (or
even the potential of such exercise or sale) could have a negative effect on the
market  price of our  common  stock,  and will have a  dilutive  impact on other
shareholders.  Moreover,  the  terms  upon  which  we will  be  able  to  obtain
additional  equity  capital  may be  negatively  affected  since the  holders of
outstanding warrants and options can be expected to exercise them, to the extent
they are able, at a time when we would, in all likelihood, be able to obtain any
needed  capital on terms more  favorable than those provided in such warrants or
options.

You Should Not Rely on Forward-Looking Statements.
--------------------------------------------------

      You should not rely on  forward-looking  statements in this annual report,
or in any  other  documents  filed  by us with  the  Commission,  or in any oral
statements of our officers, directors and authorized representatives or in press
releases made by us. This annual report contains forward-looking statements that
involve  risks  and   uncertainities.   We  use  words  such  as  "anticipates",
"believes",  "hopes",  "plans",  "expects",  "future",  "intends",   "estimates"
"projects" and similar expressions to identify forward-looking  statements.  You
should not place undue reliance on these forward-looking statements, which apply
only as of the date of this report.  Our actual results could differ  materially
from those  anticipated  in these  forward-looking  statements for many reasons,
including the risks described by us above and elsewhere in this report.

ITEM 7.  FINANCIAL STATEMENTS

     The Company's financial statements for the fiscal years ending December 31,
1999, and 1998 are included herein and consist of:

     Independent Auditor's Report                                     F-1
     Consolidated Balance Sheet                                   F-2-F-3
     Consolidated Statements of Operations                            F-4
     Consolidated Statements of Stockholders'
       Equity (Deficit)                                           F-5-F-7
     Consolidated Statements of Cash Flows                        F-8-F-9
     Notes to Consolidated Financial Statements                 F-10-F-22


                                       15
<PAGE>


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

     The  Company's  accountants  are Moore  Stephens,  P.C.  There have been no
disagreements  with the  accountants  on any  matter of  accounting  principles,
practices or financial statement disclosure.

                                    PART III

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

     The  following  table  sets  forth  information  concerning  the  executive
officers, directors and key employees of the Company:

(a)  The current directors of the Company are set forth in the following table:

                                  YEAR FIRST
                                  ELECTED AS              OFFICE WITH
NAME                     AGE       DIRECTOR                 COMPANY
----                     ---      ----------              -----------
Timothy J. Keating       36          1999            Chairman & Chief Executive
                                                        Officer
Gary J. Graham           50          1997            Director & Secretary


     Each  Director  is elected for a period of one year and  thereafter  serves
until his successor is duly elected by the stockholders.

     The  Directors of the Company are not currently  compensated  as Directors,
but the Board of Directors may in the future  determine to pay  directors'  fees
and reimburse directors for expenses related to their activities.

(b)  The  current  executive  officers  of the  Company  are  set  forth  in the
     following table:

                                  YEAR FIRST
                                  ELECTED AS                OFFICE WITH
NAME                     AGE       DIRECTOR                   COMPANY
----                     ---      ----------                -----------
Timothy J. Keating       36          1999              Chief Executive Officer
Gary J. Graham           50          1997              Secretary

There are no other employment contracts with the executive officers. The Company
had an  employment  agreement  with  Alexander  T.  Hoffmann,  its former  Chief
Executive  Officer who  resigned  in August  1999,  and Sol L. Berg,  its former
President,  who was terminated in March 1999.  Officers serve at the will of the
Board of Directors.

(c)  There are no other significant employees of the Company:

(d)  Family Relationships

     There are no family relationships.

(e)  Business Experience

     Timothy J. Keating (age 36)
     ------------------

     Mr.  Keating  became a Director of the  Company in March 1999,  when he was
elected to fill a vacancy on the Board of Directors.  He became Chief  Executive
Officer in August 1999. Mr. Keating  operates his own investment  firm , Keating
Investments,  LLC, based in San Francisco,  California. Prior to forming his own
firm,  he  was a  principal  and  portfolio  manager  in a  private  partnership
investing in microcap companies. Prior to that time, Mr. Keating founded and ran
the Euopean Equity Derivative Products Department for Nomura  International plc,
in London, England. Prior thereto he was a proprietary arbitrage



                                       16
<PAGE>


trader  and  head  of  European  equity  Trading   Department  at  Bear  Stearns
International Limited, London. Mr. Keating is a graduate of Harvard College.

     Gary J. Graham (age 50)
     --------------

     Mr.  Graham  became a Director  of the  Company in October  1997 and became
Secretary in September  1999.  He is the  president of First  Capital  Financial
Services  Corporation,  which is an investment advisor to the Company,  Proxhill
Marketing, Ltd., and First Capital Investments, Inc., a registered broker dealer
and member of the National  Association  of  Securities  Dealers,  Inc. In 1996,
First Capital Investments,  Inc., served as a placement agent for the Company in
connection  with its private  placement  of $1.5 million of common stock and its
purchase of $1.5 million of Prepaid Media Credits from Proxhill Marketing,  Ltd.
Mr.  Graham  also  serves  as a member  of the Board of  Directors  of  Proxhill
Marketing,  Ltd., First Capital Financial Services Corporation and First Capital
Investments,  Inc. He received a Bachelor of Science in Business  administration
from Meyers College.

     Directors do not receive any compensation for services as directors. During
fiscal year 1999, the Company's Board of Directors  performed the functions of a
compensation  committee  of the  Board in  reviewing  the  compensation  paid to
employees,  and  of  an  audit  committee  in  reviewing  financial  statements,
management  and internal  audits.  IMSCO does not have a separate  Nominating or
Compensation Committee.

ITEM 10.  EXECUTIVE COMPENSATION

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

     The following table set forth the annual and long-term  compensation of the
chief  executive  officer  and other  executive  officers  for  services  in all
capacities  for the fiscal years ended December 31, 1999,  1998 and 1997,  whose
total annual salary and bonus exceeded $100,000 in any of those fiscal years.

<TABLE>
                           SUMMARY COMPENSATION TABLE

<CAPTION>
                                                                                       Additional
Name of Individual               Capacity              Year           Salary          Compensation
------------------               --------              ----           ------          ------------
<S>                         <C>                        <C>           <C>                <C>
Timothy J. Keating          Chief Executive            1999(1)             $0                 $0
                            Officer

Alexander Hoffmann          Former Chief Executive     1999
                            Officer                    1998          $150,000           $275,000(2)
                                                       1997          $ 25,962           $105,600

Sol L. Berg                 Former President           1999
                                                       1998          $125,000            $86,070(3)
                                                       1997          $115,625
</TABLE>


(1)  Mr. Keating  became an executive  officer of the Company in August 1999. On
     October 1, 1999, Mr. Keating was granted  700,000 5-year stock options with
     an exercise price of $0.17 per share. The stock options expire on September
     30, 2004. At the date of grant,  the stock had a fair market value of $0.17
     per share based on the prior 90-day average closing bid price.

(2)  Amounts for 1998 represents  accrual of entire salary due under  employment
     agreement  and grant of 250,000  options to acquire  the  Company's  common
     stock at $1.50 per share.  At the date of grant the stock had a fair market
     value of $2.00 per share,  and 100,000  shares of common  stock  issued for
     past services.  In connection with the signing of his employment  agreement
     in October 1997,  Mr.  Hoffmann was granted  80,000 shares of  unregistered
     common stock of the  Company.  The value of shares shown



                                       17
<PAGE>


     use the same $1.32 price per share that  shares  were sold to Hampton  Tech
     Partners II, LLC in October 1996.

(3)  Amounts for 1998 represents  accrual of entire salary due under  employment
     agreement  and  issuance of 57,380  shares of common  stock issued for past
     services.  Consist of 150,000  shares of the  Company  received by Mr. Berg
     pursuant to the general  exchange of the Company's shares for shares of DPI
     conducted in May 1996. In November of 1995,  Mr. Berg had received  250,000
     shares of DPI for assigning his patent to the decaffeination technology and
     for other services rendered. When all of the shares of DPI not owned by the
     Company were exchanged by the respective DPI  shareholders  in May 1996 for
     Company shares on a 0.6 Company shares to DPI share basis, Mr.Berg received
     the 150,000 shares of the Company.

     There are no  arrangements  known to the Company  which may at a subsequent
date result in a change in control of the Company.

     The Company currently  provides no fringe benefit or insurance programs for
its employees.

Employment Arrangements
-----------------------

     The Company  currently  has no employment  agreements  with any officers or
employees.  It had two employment  agreements in effect for two former executive
officers in 1999:

     Effective as of October 1, 1997,  the Company  entered  into an  employment
agreement with Alexander T. Hoffmann providing for Mr. Hoffmann's  employment as
the Company's  Chief  Executive  Officer and Chairman for a three year term. Mr.
Hoffmann's  salary under this agreement is $150,000 per year. The agreement also
provides  that Mr.  Hoffmann  shall be provided with a car by the Company and be
reimbursed  for  automobile  insurance.  Mr.  Hoffmann shall also be entitled to
medical  insurance,  vacation  and  other  benefits  provided  to the  Company's
employees  generally.  In the  event  that Mr.  Hoffmann's  employment  with the
Company is terminated by the Company other than for cause,  Mr.  Hoffmann  shall
receive one year's base salary.  Mr Hoffmann  resigned in August 1999 and waived
any severance payment from the Company.

     Effective as of October 1, 1997,  the Company  entered  into an  employment
agreement with Sol L. Berg providing for Mr. Berg's  employment as the Company's
President  for a three year term.  Mr.  Berg's  salary  under this  agreement is
$125,000 per year.  The agreement  also provides that Mr. Berg shall be provided
with a car by the Company and be reimbursed for automobile  insurance.  Mr. Berg
shall  also be  entitled  to  medical  insurance,  vacation  and other  benefits
provided to the Company's employees  generally.  Mr. Berg's Employment Agreement
was terminated by the Company in March 1999.

     Except as described above, there are presently no pension or other plans or
arrangements pursuant to which remuneration is proposed to be paid in the future
to any of the  officers  or  directors  of the  Company  other than as set forth
above.  At the present time,  the directors do not receive  compensation  of any
form.  The Company does not provide  life,  health or medical  plans to officers
that are not available to all employees.  Except as provided above,  the Company
has  no  other  employment  contracts  with  any  executive  officers  or  other
employees.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table  identifies each person known to the Company to be the
beneficial owner of more than five percent of the Company's  Common Stock,  each
director  of the  Company  and all  directors  and  officers of the Company as a
group, and sets forth the number of shares of the Company's Common Stock


                                       18
<PAGE>



     beneficially owned by each such person and such group and the percentage of
the shares of the Company's  outstanding  Common Stock owned by each such person
and such group. In all cases, the named person individually or together with his
spouse has sole voting power and sole investment power over the securities.

     (a) As of the December  31, l999,  one person owned of record or were known
by the Company to own  beneficially  more than five  percent  (5%) of the Common
Stock outstanding.

     (b) The  following  table  sets forth  certain  information  regarding  the
beneficial  ownership  (determined  in accordance  with  Securities and Exchange
Commission  Rule 13d-3  Securities  Exchange Act of 1934) of common stock of the
Company as of December 31, 1999, by: (i) each person who is known by the Company
to own beneficially more than 5% of the outstanding shares of common stock; (ii)
each of the  Company's  directors;  and (iii) all officers and  directors of the
Company as a group:


                                       19
<PAGE>


Name and Address of                   Amount and Nature of
Beneficial Owner                      Beneficial Ownership      Percent of Class
-------------------                   --------------------      ----------------

Limpos, S.A.                              1,000,000                  11.2%


Proxhill Marketing, Inc. (1)                399,635                   4.5%
5460 S. Quebec St., #220
Englewood, CO 80111

Gary J. Graham (2)                          399,635                   4.5%
5460 S. Quebec St., #220
Englewood, CO 80111

Timothy J. Keating(2)                        25,000                    *
220 Montgomery Street
San Francisco, CA 94104

Sands Brothers & Co., Ltd (3)                 --(3)                    *
90 Park Avenue
New York, NY  10016

AMRO International, SA(4)                     --(5)
c/o Ultra Finance
Grossmunesterplatz
Zurich CH 8022
Switzerland

All Officers and Directors                  424,635                   4.8%
as a group (2 persons)
------------


(1)  Does not include 127,272 Shares issuable to Proxhill Marketing,  Ltd., upon
     exercise of the Class D Warrants for the exercise  price of $1.32 per Share
     or the 225,000 shares  issuable upon conversion of the Series A convertible
     preferred stock. All of Proxhill Marketing, Ltd.'s common stock is owned by
     Julie A. Graham,  the wife of Gary J. Graham,  a Director and  Secretary of
     the Company.

(2)  Denotes a director of the Company.

(3)  Does not include  600,000  shares  issuable  upon  exercise of common stock
     warrants.

(4)  AMRO is  beneficially  owned and controlled by Mark Perkins,  an individual
     residing in Monte Carlo, Monaco.

(5)  Does  not  include   2,520,000   shares   issuable  upon  exercise  of  the
     Convertivble  Debenture  dated  February 9, 1999,  which was exercised into
     2,520,000 shares of the Comppany's common stock in March 2000.

*    Less than 1%

     There are no  arrangements  known to the Company which may, at a subsequent
date, result in a further change in control of the Company.



                                       20
<PAGE>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTION

     (a) Except as described  below,  since January 1, l998,  there have been no
transactions   with  any  officer,   director  or  five  percent  (5%)  or  more
shareholders of the Company in which the amount involved exceeded $60,000.

     On  September  20,  1996,  the  Company  entered  into the  Media  Purchase
Agreement  with PML,  wherein PML agreed to sell  $1,500,000 of media credits to
the Company in consideration  for the Company issuing 1,136,363 shares of Common
Stock,  representing a price of $1.32 per share.  In connection with the private
placement of the Shares to HTP, HTP-II and PML, First Capital Investments, Inc.,
a  broker-dealer  which is a member of the National  Association  of  Securities
Dealers,  Inc.  ("NASD"),  received the 242,273 Class A Warrants entitling it to
acquire Common Stock for the price of $1.45 per Share  exercisable over a period
ending July 31, 2001. First Capital Investments, Inc., also received a placement
fee  equal  to 10%  of the  $1.5  million  received  under  the  Stock  Purchase
Agreement, a non-accountable  expense allowance equal to 3% of the amount raised
under the Stock  Purchase  Agreement.  As Media  Credits are used by under Media
Purchase  Agreement,  First  Capital  Investments,  Inc.,  shall also  receive a
placement  fee of 10% of the amount of Media Credit used.  For  advertising  and
marketing  services  rendered to the Company in 1996 and 1997, PML also received
the 127,272 Class D Warrants, entitling it to acquire Common Stock for the price
of $1.32 per Share for a period ending July 31, 2001. Mr. Gary J. Graham who was
elected a Director of the Company in October  1997 is also the  President  and a
Director of PML and First Capital  Investments, Inc. In 1998,  Gary Graham was
issued  136,000  shares of Common Stock for expense  reimbursement  and services
rendered to the  Company.  Additionally,  PML received  48,727  shares of Common
Stock for expense  reimbursement and services rendered to the Company.  PML also
invested  $225,000 in the Company for 45,000  shares of  preferred  stock of the
Company which are convertible into 225,000 shares of common stock,  representing
a conversion price of $1.00 per share of common stock.

     In 1998,  Mr.  Alexander T.  Hoffmann,  a former  Director and former Chief
Executive  Officer of the Company,  was issued 100,000 shares of common stock of
the  Company for  services  rendered.  Additionally,  Mr.  Hoffmann  was granted
250,000  stock  options  exercisable  at $1.50  per  share for a period of three
years.

     In 1998,  Mr. Sol L. Berg, a former  director  and former  president of the
Company,  was issued  57,380  shares of Common Stock for  services  rendered and
reimbursement of expenses.

     On October 1, 1999, Timothy A. Keating,  the Company's current Chairman and
Chief  Executive  Officer was  granted  700,000  5-year  stock  options  with an
exercise  price of $.17 per share,  which was based on the prior 90-day  average
closing bid price of the Company's common stock.

     (b) Except as above  described,  there have been no business  relationships
with directors or nominees for director of the Company since January 1, l998.

     (c) At December 31, l999,  no officers or  directors  were  indebted to the
Company.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) List of Exhibits.

     The  Exhibits  listed  below are either  filed or are deemed to be filed as
part of this Report.

    2.0    --  Agreement and Plan of Reorganization dated August 11, 1986 (filed
               as  Exhibit  C-1  to  Form  8-K,   File  Number   2-98084-D   and
               incorporated herein by reference).

    3.0    --  Articles of Incorporation  and By-Laws (filed as Exhibits 4 and 5
               to the Company's Registration Statement on Form S-18, File Number
               2- 98084-D and incorporated herein by reference).

    3.1    --  Amended  and  Restated  Certificate  of  Incorporation  (filed as
               Exhibit 3.1 to the Company's Registration Statement on Form SB-2,
               File Number 333-19707 and incorporated herein by reference.)

    3.2    --  Bylaws of the  Company  (filed as  Exhibit  3.2 to the  Company's
               Registration  Statement on Form SB-2,  File Number  333-19707 and
               incorporated herein by reference.)



                                       21
<PAGE>



    4.1    --  Form of Common  Stock  Certificate  (filed as Exhibit  4.1 to the
               Company's  Registration  Statement  on  Form  SB-2,  File  Number
               333-19707 and incorporated herein by reference.)

    4.2    --  Form of Class A Common Stock  Purchase  Warrant (filed as Exhibit
               4.2 to the Company's  Registration  Statement on Form SB-2,  File
               Number 333-19707 and incorporated herein by reference.)

    4.3    --  Form of Class B Common Stock  Purchase  Warrant (filed as Exhibit
               4.3 to the Company's  Registration  Statement on Form SB-2,  File
               Number 333-19707 and incorporated herein by reference.)

    4.4    --  Form of Class C Common Stock  Purchase  Warrant (filed as Exhibit
               4.4 to the Company's  Registration  Statement on Form SB-2,  File
               Number 333-19707 and incorporated herein by reference.)

    4.5    --  Form of Class D Common Stock  Purchase  Warrant (filed as Exhibit
               4.51 to the Company's  Registration  Statement on Form SB-2, File
               Number 333-19707 and incorporated herein by reference.)

    (6)(A) --  Note and Security Agreement dated October 3, 1986 between Company
               and Naper Bank,  N.A. (filed as Exhibit 10(A) to Annual Report on
               Form 10-K,  File  Number  2-98084-D  and  incorporated  herein by
               reference).

    (6)(B) --  Agreement   dated  October  22,  1986  between  Company  and  LKB
               Diagnostics,  Inc.  regarding  exclusive  right and  authority to
               market,  sell and  distribute  certain  LKB  products  (filed  as
               Exhibit  10(B)  to  Annual  Report  on  Form  10-K,  File  Number
               2-98084-D and incorporated herein by reference).

    (6)(C) --  Outside Director's Stock Option Plan dated May 21, 1987 (filed as
               Exhibit  (10)(c)  to Annual  Report  on Form  10-K,  File  Number
               2-98084-D and incorporated herein by reference).

    (6)(D) --  Placement    Letter   dated   April   11,   1994   between   D.H.
               Vermogensverwaltungs-und  Beteiligungsgesellschaft  mbH  and  the
               Company.(1)

    (6)(E) --  Promissory  Note dated  April 12, 1994 made by the Company to the
               order  of  D.H.Vermogensverwaltungs-und  Beteiligungsgesellschaft
               mbH.(1)

    (6)(F) --  Common Stock Purchase  Warrant dated April 12, 1994 issued by the
               Company to D.H. Vermogensverwaltungs-und Beteiligungsgesellschaft
               mbH.(1)

    (6)(G) --  Amendment  Dated August 29, 1994 to Placement  Letter dated April
               11,    1994     between    D.H.     Vermogensverwaltungs-     und
               Beteiligungsgesellschaft mbH. and the Company.(1)

    (6)(H) --  Consulting  Agreement dated July 1, 1992 between IMSCO,  Inc. and
               Waldman  Biomedical,  Inc.,  and Addendum  thereto  Dated July 1,
               1994.(1)

    (6)(I) --  Escrowed  Common Stock  Agreement  made as of September  30, l995
               between Decaf Products, Inc. and James G. Yurak.(2)

    (6)(J) --  Employment  Agreement  effective  as of January  1, 1996  between
               Decaf Products, Inc. and James G. Yurak.(2)

    (6)(K) --  License Agreement dated February 23, 1996 between IMSCO, Inc. and
               Decaf Products.(2)

     10.1. --  Stock  Purchase  Agreement  between the Company and Hampton  Tech
               Partners  II, LLC dated  September  20,  1996  (Filed on Form 8-K
               dated October 1, 1996 -- Commission No. 0-24520).

     10.2. --  Media  Purchase   Agreement  between  the  Company  and  Proxhill
               Marketing,  Ltd.,  dated  September  20,  1996 (Filed on Form 8-K
               dated October 1, 1996-- Commission No. 0-24520).



                                       22
<PAGE>


     10.3. --  Manufacturing and Distribution  Agreement between the Company and
               NEWCO Enterprises,  Inc., dated September 20, 1996 (Filed on Form
               8-K dated October 1, 1996-- Commission No. 0-24520).

     10.4. --  Marketing  Agreement  between  the  Company  and Huhes  Edwards &
               Price,  Inc.,  dated  September 20, 1996 (Filed on Form 8-K dated
               October 1, 1996-- Commission No. 0- 24520).

     10.5. --  Consulting  Agreement  between the  Company  and Edmund  Abramson
               dated August 13, 1996.(3)

     10.6. --  Consulting  Agreement  between the  Company  and WRA  Consulting,
               Inc., dated August 13, 1996.(3)

     10.7  --  Agreement  between the Company  and  Universal  Sales dated as of
               September 1, 1996.(3)

     10.8  --  Employment   Agreement  dated  as  of  October  1,  1997  between
               Alexander T. Hoffmann and the Company.(4)

    10.9(5)--  Form of 8% Convertible  Debenture  issued to Amro  International,
               Ltd.

   10.10(5)--  Note and  Warrant  Purchase  Agreement  dated  February  9,  1999
               between the Company and AMRO International, Ltd.

   10.11(6)--  Registration  Rights Agreement dated February 9, 1999 between the
               Company and AMRO International, Ltd.

   10.12(6)--  Warrant  dated  February  9, 1999  issued by the  Company to AMRO
               International, Ltd.

   10.13(6)--  Agreement  between  the Company  and Sands  Brothers & Co.,  Ltd.
               dated July 31, 1998

(b)  Reports on Form 8-K.

     The Company  filed three  reports on Form 8-K for the year ending  December
31, l998.

Footnotes
---------

(1)  Filed as Exhibits to the  Company's  Form 10-KSB dated July 14, 1994,  File
     Number 0-24520, and incorporated herein by reference.

(2)  Filed as Exhibits to the Company's  Form 10-KSB for the year ended December
     31, 1995, File Number 0-24520, and incorporated by reference herein.

(3)  Filed as Exhibits to the Company's  Form 10-KSB for the year ended December
     31, 1996, File Number 0-24520, and incorporated by reference herein.

(4)  Filed as Exhibit to the Company's  Form 10-KSB for the year ended  December
     31, 1997, File Number 0-24520, and incorporated by reference herein.

(5)  Filed as Exhibits to the Company's Form 8-K dated  February 19, 1999,  File
     Number 0-25420, and incorporated by reference herein.

(6)  Filed herewith.


                                       23
<PAGE>


                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------


To the Board of Directors and Stockholders of
   IMSCO Technologies, Inc.
   New York, New York



          We have audited the accompanying  consolidated  balance sheet of IMSCO
Technologies, Inc. and Subsidiaries [a development stage company] as of December
31, 1999, and the related consolidated  statements of operations,  stockholders'
deficit,  and cash flows for each of the years ended December 31, 1999 and 1998.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
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  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

          In our opinion,  the  consolidated  financial  statements  referred to
above present  fairly,  in all material  respects,  the  consolidated  financial
position of IMSCO  Technologies,  Inc. and  Subsidiaries  [a  development  stage
company] as of December 31, 1999, the results of their operations and their cash
flows for each of the years ended December 31, 1999 and 1998, in conformity with
generally accepted accounting principles.

          The accompanying  consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
9 to the consolidated financial statements,  the Company has suffered recurring
losses since its inception primarily resulting from no revenues, has accumulated
deficits at December 31, 1999 of $10,802,622  has utilized  $424,097 in cash for
operations  for the year ended  December 31, 1999,  and is in default on certain
promissory  notes.  These conditions raise substantial doubt about the Company's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also described in Note 9. The consolidated  financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

          The  statement of  stockholders'  deficit prior to January 1, 1997 and
the  cumulative  amounts from inception to that date were not audited by us and,
accordingly, we do not express an opinion on them. Those statements were audited
by other auditors.


                                         MOORE STEPHENS, P.C.
                                         Certified Public Accountants.

Cranford, New Jersey
April 12, 2000


                                      F-1
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
<TABLE>
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999.
--------------------------------------------------------------------------------
<S>                                                                           <C>
Assets:
-------
Current Assets .....................................................          $       --
                                                                              ------------

   Total Assets ....................................................          $       --
                                                                              ============

Liabilities and Stockholders' [Deficit]:
----------------------------------------
Current Liabilities:
   Notes Payable ...................................................          $    143,355
   Convertible Notes Payable .......................................               561,806
   Accounts Payable ................................................                82,896
   Accrued Expenses ................................................                18,042
   Accrued Interest ................................................               130,022
   Accounts Payable to be Assumed ..................................               528,351
   Due to Stockholders .............................................                10,050
                                                                              ------------

   Total Current Liabilities .......................................             1,474,522
                                                                              ------------

Commitments and Contingencies ......................................                  --
                                                                              ------------

Stockholders' [Deficit]:
------------------------
   Series A Preferred Stock - Authorized 1,000,0000 Shares
     at $.0001 Par Value; 45,000 Convertible Shares, Issued and
     Outstanding ...................................................                     5

   Common Stock - Authorized 15,000,000 Shares at $.0001 Par Value;
     8,928,174 Shares Issued and Outstanding .......................                   893

   Additional Paid-in Capital - Series A Convertible Preferred Stock               224,995

   Additional Paid-in Capital - Common Stock .......................            10,480,703

   Less:  Prepaid Advertising Credits ..............................            (1,378,496)

   Deficit Accumulated During Development Stage ....................           (10,181,714)

   Accumulated Deficit - Discontinued Operations ...................              (620,908)
                                                                              ------------

   Total Stockholders' [Deficit] ...................................            (1,474,522)
                                                                              ------------

   Total Liabilities and Stockholders' [Deficit] ...................          $       --
                                                                              ============
</TABLE>


See Notes to Consolidated Financial Statements.


                                      F-2
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
<CAPTION>
                                                                                          Cumulative
                                                                                          ----------
                                                                                            Amounts
                                                                                            -------
                                                                                             from
                                                                                             ----
                                                                                         July 9, 1992
                                                                                         ------------
                                                                                         [Inception of
                                                                                         -------------
                                                                                          the Current
                                                                                          -----------
                                                                                          Development
                                                                                          -----------
                                                               Years ended                 Stage] to
                                                               -----------                 ---------
                                                               December 31,               December 31,
                                                               ------------               ------------
                                                        1 9 9 9           1 9 9 8           1 9 9 9
                                                     ------------      ------------      ------------
<S>                                                  <C>               <C>               <C>
General, Administrative and Development Expense:
------------------------------------------------
   Research and Development Expense ............     $      8,911      $     29,900      $    301,925
   Salaries and Wages ..........................          117,691           266,511           933,005
   Officer Salaries ............................           30,807           661,070         1,102,500
   Payroll Taxes ...............................           13,931            55,846           154,803
   Outside Labor ...............................             --              36,596           191,136
   Professional and Consulting Fees ............          332,640           161,490         1,240,660
   Professional and Consulting Fees - Non-Cash .          112,570         1,126,158         2,187,539
   Rent ........................................            9,269            17,804           165,288
   Rent - Related Party ........................            1,750             3,750             5,500
   Insurance ...................................           27,636            73,642           190,879
   Travel and Business Meeting .................           11,321            59,390           189,250
   Auto Expense ................................            5,448            20,230            66,217
   Telephone and Utilities .....................            6,014            11,329            67,416
   Office Expense ..............................           12,321            10,366           143,164
   Equipment Rental ............................            2,781             8,474            36,080
   Corporate Fees ..............................             --               9,808            69,981
   Advertising .................................           12,000            92,942           330,703
   Depreciation and Amortization ...............           29,993            10,669            53,920
   Litigation Settlement .......................          106,250              --           1,644,642
   Franchise Tax ...............................             --                 456             1,987
                                                     ------------      ------------      ------------

   General, Administrative and Development
     Expense ...................................          841,333         2,656,431         9,076,595
                                                     ------------      ------------      ------------

Other Income [Expense]:
-----------------------
   Dividend and Interest Income ................             --                --              11,633
   Interest Expense ............................         (538,902)         (224,731)       (1,072,680)
   Loss on Sale of Fixed Assets ................             --                --             (44,072)
                                                     ------------      ------------      ------------

   Other [Expense] - Net .......................         (538,902)         (224,731)       (1,105,119)
                                                     ------------      ------------      ------------

   [Loss] Before Income Taxes ..................       (1,380,235)       (2,881,162)      (10,181,714)

Provision for Income Tax .......................             --                --                --
                                                     ------------      ------------      ------------

   Net [Loss] ..................................     $ (1,380,235)       (2,881,162)     $(10,181,714)
                                                     ============      ------------      ============

   Basic and Diluted [Loss] Per Share of Common
     Stock                                           $         (.17)           $     (.39)
                                                     ===============           ===========

   Basic and Diluted Weighted Average Shares
     of Common Stock Outstanding                        7,969,986         7,370,026
                                                     ============      ============
</TABLE>

See Notes to Consolidated Financial Statements.


                                      F-3
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]


<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY [DEFICIT]
<CAPTION>

                                                                                   Deficit
                                                                                   -------
                         Series A Convertible                Paid-in             Accumulated  Accumulated                 Total
                         ------------------------------------------------------------------------------------------------------
                         Preferred Stock     Common Stock    Capital               During       Deficit      Prepaid   Stockholders'
                         -----------------------------------------------------------------------------------------------------------
                       Number of         Number of          Preferred   Paid-in  Development  Discontinued  Advertising   Equity
                       ---------------------------------------------------------------------------------------------------------
                       Shares    Amount   Shares    Amount    Stock     Capital     Stage      Operations      Credit   [Deficit]
                      --------------------------------------------------------------------------------------------------------------
<S>                      <C>   <C>      <C>        <C>      <C>       <C>        <C>           <C>          <C>         <C>
Balance at
----------
December 31, 1995        --    $   --   2,995,425  $   299  $   --    $1,796,700 $(1,226,454)  $ (620,908)   $   --     $(50,363)
-----------------
Private Placement        --        --      10,000        1      --        19,999          --          --         --       20,000

Issuance of
Subsidiary Stock         --        --         --        --      --        10,000          --          --         --       10,000

Issuance of
Shares                   --        --      47,000        5      --            (5)         --          --         --           --

Issuance of
Shares for
Consulting
Services                 --        --     284,000       28      --       213,534          --          --         --      213,562

Issuance of
Shares in
Payment of
Loan                     --        --     227,000       23      --       299,977          --          --         --      300,000

Issuance of
Shares for
Advertising
Credits                  --        --   1,136,000      114      --     1,499,886          --          --    (1,500,000)       --

Issuance of
Shares for
Settlement
of Debt                  --        --     775,000       77      --       943,543          --          --         --      943,620

Issuance of
Shares for
Subsidiary
Stock                    --        --     468,000       47      --           (47)         --          --         --           --

Private
Placement                --        --     150,000       15      --       299,985          --          --         --      300,000

Net [Loss]               --        --          --       --      --            --  (1,062,758)         --         --   (1,062,758)
                         ---------------------------------------------------------------------------------------------------------

  Balance at
  ----------
  December 31, 1996      --        --   6,092,425      609      --     5,083,572   (2,289,212)   (620,908)  (1,500,000)  674,061
  -----------------

Warrants Issued for
  Cost of
  Advertising
  Credits -
  Restatement            --        --         --       --       --       108,170          --          --      (108,170)       --
                         ---------------------------------------------------------------------------------------------------------

  Adjusted Balance at
   December 31, 1996 -
   Forward               -- $      --  6,092,425  $   609  $    --   $ 5,191,742 $ (2,289,212) $ (620,908) $(1,608,170) $674,061
                         =========================================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.


                                      F-4
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY [DEFICIT]
--------------------------------------------------------------------------------
<CAPTION>

                                                                                   Deficit
                                                                                   -------
                         Series A Convertible                Paid-in             Accumulated  Accumulated                 Total
                         ------------------------------------------------------------------------------------------------------
                         Preferred Stock     Common Stock    Capital               During       Deficit      Prepaid   Stockholders'
                         -----------------------------------------------------------------------------------------------------------
                       Number of         Number of          Preferred   Paid-in  Development  Discontinued  Advertising   Equity
                       ---------------------------------------------------------------------------------------------------------
                       Shares    Amount   Shares    Amount    Stock     Capital     Stage      Operations      Credit   [Deficit]
                      -------------------------------------------------------------------------------------------------------------

<S>                      <C>    <C>     <C>          <C>      <C>     <C>         <C>           <C>          <C>           <C>
Adjusted Balance at
-------------------
December 31, 1996 -
-------------------
Forwarded                --     $  --   6,092,425    $ 609    $ --    $5,191,742  $(2,289,212)  $(620,908)   $(1,608,170)  $674,061
---------

Issuance of
Shares for
Consulting
Services                 --        --     100,000       10      --       274,990          --          --         --         275,000

Issuance of
Shares on Consulting
Services                 --        --      75,000        8      --       196,867          --          --         --         196,875

Private
Placement                --        --      23,000        2      --        34,498          --          --         --          34,500

Issuance of
Shares for
Professional
Services                 --        --      18,500        2      --        27,747          --          --         --          27,749

Private
Placement                --        --      15,000        2      --        33,748          --          --         --          33,750

Issuance of
Shares for
Consulting
Services                 --        --     130,000       13      --       235,612          --          --         --         235,625

Private
Placement                --        --      62,611        6      --       122,994          --          --         --         123,000

Advertising
Credits Used             --        --          --       --      --            --          --          --        213,732     213,732

Net [Loss]               --        --          --       --      --            --   (3,631,105)        --         --      (3,631,105)
                         ----------------------------------------------------------------------------------------------------------

  Balance at
  ----------
  December 31, 1997 -
  -------------------
  Forward                --     $  --   6,516,536      652      --     6,118,198  $(5,920,317)    $(620,908) (1,394,438) (1,816,813)
  -------                ===========================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.


                                      F-5
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY [DEFICIT]
--------------------------------------------------------------------------------
<CAPTION>

                                                                                   Deficit
                                                                                   -------
                         Series A Convertible                Paid-in             Accumulated  Accumulated                 Total
                         ------------------------------------------------------------------------------------------------------
                         Preferred Stock     Common Stock    Capital               During       Deficit      Prepaid   Stockholders'
                         -----------------------------------------------------------------------------------------------------------
                       Number of         Number of          Preferred   Paid-in  Development  Discontinued  Advertising   Equity
                       ---------------------------------------------------------------------------------------------------------
                       Shares    Amount   Shares    Amount    Stock     Capital     Stage      Operations      Credit   [Deficit]
                      --------------------------------------------------------------------------------------------------------------

<S>                      <C>    <C>     <C>          <C>      <C>     <C>         <C>           <C>          <C>           <C>
Balance at
----------
December 31, 1997 -
-------------------
Forwarded                --      $ --  $6,516,536    $ 652    $ --   $6,118,198  $(5,920,317)  $(620,908)  $(1,394,438) $(1,816,813)
---------

Exercise of
Stock Warrants
[5A][11]                 --        --      66,000        7      --       59,393          --          --         --           59,400

Issuance of
Shares in Settlement
of Litigation [5B]       --        --     399,081       39      --    1,538,353          --          --         --        1,538,392

Issuance of
Shares for
Services [5C]            --        --     612,911       62      --      903,838          --          --         --          903,900

Issuance of
Stock Warrants
for 600,000 Shares
of Common Stock
for Consulting
Services [11]            --        --          --       --      --      656,284          --          --         --          656,284

Granting of Stock
Options for 266,750
Shares of Common
Stock to Employees [11]  --        --          --       --      --      133,375          --          --         --          133,375

Private Placement of
Common Stock [5D]        --        --      70,000        7      --       69,993          --          --         --           70,000

Exercise of
Stock Options [5E][11]   --        --      16,750        2      --       24,998          --          --         --           25,000

Issuance of Stock
Warrants for
390,000 Shares of
Common Stock for Notes
Payable [15][11]         --        --          --       --      --      299,085          --          --         --          299,085

Private Placement of
Series A Convertible
Preferred Stock [5F]     45,000     5          --       --   224,995         --          --          --         --          225,000

Shares Issuable
Pursuant to Financing
Penalty [5F]             --        --          --       --      --          253          --          --         --              253

Advertising Credits
Used                     --        --          --       --      --           --          --          --         15,942       15,942

Net [Loss]               --        --          --       --      --           --   (2,881,162)        --         --       (2,881,162)
                         ---------------------------------------------------------------------------------------------------------

  Balance at
  ----------
  December 31, 1998      45,000  $  5  $7,681,278     $769  $224,995 $9,803,770  $(8,801,479)  $(620,908)   (1,378,496)   $(771,344)
  -----------------     ==========================================================================================================

</TABLE>
See Notes to Consolidated Financial Statements.


                                      F-6
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY [DEFICIT]
--------------------------------------------------------------------------------
<CAPTION>
                                                                                  Deficit
                                                                                  -------
                        Series A Convertible             Paid-in                Accumulated  Accumulated                  Total
                        -------------------------------------------------------------------------------------------------------
                          Preferred Stock Common Stock   Capital                  During       Deficit      Prepaid    Stockholders'
                          ----------------------------------------------------------------------------------------------------------
                          Number of      Number of      Preferred    Paid-in    Development  Discontinued Advertising     Equity
                          ------------------------------------------------------------------------------------------------------
                           Shares Amount  Shares  Amount  Stock      Capital       Stage      Operations    Credits      [Deficit]
                           -------------------------------------------------------------------------------------------------------
<S>                        <C>     <C> <C>        <C>   <C>       <C>          <C>            <C>         <C>           <C>
Balance - December
------------------
31, 1998 -
----------
Forwarded                  45,000  $5  7,681,278  $769  $224,995  $ 9,803,770  $ (8,801,479)  $(620,908)  $(1,378,496)  $  (771,344)
---------

Issuance of
Warrants -
Consultant                   --     -       --     --       --         52,000          --          --            --          52,000

Issuance of Shares
for Cancelled
Liabilities                  --     -     80,000     8      --         74,992          --          --            --          75,000

Issuance of Shares
for Cancelled
Liabilities                  --     -     25,230     2      --         22,959          --          --            --          22,961

Issuance of Warrant
 - Loan Extension            --     -       --     --       --         21,000          --          --            --          21,000

Issuance of Warrants
for Notes Payable            --     -       --     --       --         55,000          --          --            --          55,000

Issuance of
Director Warrants            --     -       --     --       --         56,000          --          --            --          56,000

Issuance of Shares
for Services                 --     -     20,000     2      --          3,398          --          --            --           3,400

Issuance of Shares
upon Conversion
of Notes                     --     -    416,666    42      --         49,958          --          --            --          50,000

Issuance of Shares
for Services                 --     -     15,000     1      --          1,169          --          --            --           1,170

Issuance of Shares
for Litigation
Settlement                   --     -    550,000    55      --        106,195          --          --            --         106,250

Issuance of Shares
Upon Conversion
of Shareholder Note ..       --     -    140,000    14      --         17,486          --          --            --          17,500

27,000 Shares
Issuable Pursuant to
Financing Penalty            --     -       --     --       --         16,776          --          --            --          16,776

Rights to Receive
Additional
Shares Under
Beneficial
Conversion Feature           --     -       --     --       --        200,000          --          --            --         200,000

Net [Loss]                   --     -       --     --       --           --      (1,380,235)       --            --      (1,380,235)
                           ------  --  ---------  ----  --------  -----------  ------------   ---------   -----------   -----------

Balance -
December 31, 1999          45,000  $5  8,928,174  $893  $224,995  $10,480,703  $(10,181,714)  $(620,908)  $(1,378,496)  $(1,474,522)
                           ======  ==  =========  ====  ========  ===========  ============   =========   ===========   ===========
</TABLE>


See Notes to Consolidated Financial Statements.


                                      F-7
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<CAPTION>
                                                                                              Cumulative
                                                                                              ----------
                                                                                                Amounts
                                                                                                -------
                                                                                                 from
                                                                                                 ----
                                                                                             July 9, 1992
                                                                                             ------------
                                                                                             [Inception of
                                                                                             -------------
                                                                                              the Current
                                                                                              -----------
                                                                                              Development
                                                                                              -----------
                                                                    Years ended                Stage] to
                                                                    -----------                ---------
                                                                    December 31,              December 31,
                                                                    ------------              ------------
                                                             1 9 9 9           1 9 9 8           1 9 9 9
                                                          ------------      ------------      ------------

<S>                                                       <C>               <C>               <C>
Operating Activities:
   Net [Loss] .......................................     $ (1,380,235)     $ (2,881,162)     $(10,181,714)
                                                          ------------      ------------      ------------
   Adjustments to Reconcile Net [Loss] to Net Cash
     [Used for] Operating Activities:
     Decrease [Increase] in Due from Officers .......             --                --                (120)
     Depreciation ...................................           29,993            10,668            56,532
     Contract Services Paid with Common Stock .......          102,531           903,900         2,173,446
     Interest Paid with Common Stock ................           16,776               253           317,029
     Interest Expense - Deferred Finance Costs ......           82,577           216,508           299,085
     Grant of Stock Options and Warrants for
       Past Services ................................          108,000           789,659           897,659
     Amortization of Prepaid Advertising Credits ....             --              15,942           229,674
     Loss on Disposal of Property and Equipment .....             --                --              44,072
     Amortization - Discount Note Payable ...........           16,806              --              16,806
     Interest Expense - Beneficial Conversion Feature          200,000              --             200,000
     Interest Expense - Warrant Discount ............           21,000              --              21,000
     Stock Issued to Settle Litigation ..............           56,250              --              56,250
     Note Issued to Settle Litigation ...............           50,000              --              50,000

   Changes in Assets and Liabilities:
     [Increase] Decrease in:
       Other Current Assets .........................            1,000              --              20,200
Miscellaneous Receivables ...........................             --                --                --
       Other Assets .................................             --                --                --
       Security Deposits ............................            3,499              --               4,675
       Accounts Receivable ..........................             --                --               2,998

     Increase [Decrease] in:
       Accounts Payable .............................          (79,086)           (3,973)           18,445
       Accrued Expenses .............................           (6,430)          (59,748)        1,556,434
       Accrued Salaries .............................         (153,190)          104,504              --
       Accrued Payroll Taxes ........................          (48,006)           31,310              --
       Accrued Marketing Fees .......................          (53,000)           53,000              --
       Accrued Legal Fees ...........................          (50,955)           50,955              --
       Accounts Payable Subject to Transfer .........          528,351              --             528,351
       Accrued Interest Expense .....................          130,022              --             130,022
                                                          ------------      ------------      ------------

     Total Adjustments ..............................          956,138         2,112,978         6,622,558
                                                          ------------      ------------      ------------

   Net Cash - Operating Activities - Forward ........     $   (424,097)     $   (768,184)     $  3,559,156
</TABLE>


See Notes to Consolidated Financial Statements.


                                      F-8
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<CAPTION>
                                                                                         Cumulative
                                                                                         ----------
                                                                                           Amounts
                                                                                           -------
                                                                                            from
                                                                                            ----
                                                                                        July 9, 1992
                                                                                        ------------
                                                                                        [Inception of
                                                                                        -------------
                                                                                         the Current
                                                                                         -----------
                                                                                         Development
                                                                                         -----------
                                                                Years ended               Stage] to
                                                                -----------               ---------
                                                                December 31,             December 31,
                                                                ------------             ------------
                                                         1 9 9 9          1 9 9 8          1 9 9 9
                                                       -----------      -----------      -----------

<S>                                                    <C>              <C>              <C>
     Net Cash - Operating Activities - Forwarded..     $  (424,097)     $  (768,184)     $(3,559,156)
                                                       -----------      -----------      -----------

Investing Activities:
---------------------
   Purchase of Fixed Assets ......................            --               --             (7,734)
   Prepaid Research Testing ......................            --               --           (118,212)
   Proceeds from Sale of Fixed Assets ............            --               --             21,000
                                                       -----------      -----------      -----------

   Net Cash - Investing Activities ...............            --               --           (104,946)
                                                       -----------      -----------      -----------

Financing Activities:
---------------------
   Convertible Notes Payable .....................         545,000             --            545,000
   Cash Overdraft ................................            --            (18,804)            --
   Proceeds from Notes Payable ...................            --            390,000          775,000
   Proceeds from Issuance of Common Stock ........            --            154,400        2,247,304
   Proceeds from Preferred Stock Subscriptions ...            --            225,000          225,000
   Loans from Stockholders .......................          10,750           38,300           52,050
   Payment on Loans from Stockholders ............         (13,000)         (11,500)         (24,500)
   Bond Discount .................................          55,000             --             55,000
   Payment of Notes Payable ......................        (196,645)            --           (196,645)
                                                       -----------      -----------      -----------

   Net Cash - Financing Activities ...............         401,105          777,396        3,678,209
                                                       -----------      -----------      -----------

   Net [Decrease] Increase in Cash ...............         (22,992)           9,212           14,107
Cash - Beginning of Periods ......................          22,992           13,780           22,665
                                                       -----------      -----------      -----------
   Cash - End of Periods .........................     $      --        $    22,992      $    36,772
                                                       ===========      ===========      ===========

Supplemental Disclosures of Cash Flow Information:
--------------------------------------------------
   Cash paid during the periods for:
     Interest ....................................     $      --        $      --        $     9,047
     Income Taxes ................................     $      --        $      --        $      --
</TABLE>

Supplemental Schedule of Non-Cash Investing and Financing Activities:
---------------------------------------------------------------------

     During 1999, the Company  entered into a financing  transaction by settling
an accrued expense of $63,000 and a current expense of $12,000 with the issuance
of 80,000 shares of common stock.

     During  1999,  the  Company  issued  a note  payable  for  $600,000  with a
beneficial  conversion  feature of $200,000 and granted  stock  warrants  with a
value of $55,000.

     During 1999, $117,500 of notes payable were converted into 806,66 shares of
common stock.

     Also in 1999, the Company issued  900,000  options and 455,000  warrants to
purchase  Company  common  stock which  resulted in a charge to  operations  and
additional paid-in capital.


See Notes to Consolidated Financial Statements.


                                      F-9
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

[1] ORGANIZATION

In July 1996, IMSCO, Inc. was reincorporated in Delaware as IMSCO  Technologies,
Inc. The Company filed a Certificate of Incorporation in Delaware  incorporating
a new wholly-owned subsidiary,  IMSCO Technologies,  Inc. The Board of Directors
of the Company at a meeting  held in May 1996 voted,  subject to the adoption by
the stockholders, to merge into its wholly-owned subsidiary, IMSCO Technologies,
Inc., a Delaware corporation.  On July 9, 1996, the stockholders of IMSCO, Inc.,
voted to  approve  the  change  of  corporate  domicile  from  Massachusetts  to
Delaware.  Therefore, on July 18, 1996, there remained one surviving corporation
and the name surviving  corporation  became IMSCO  Technologies,  Inc. As of the
effective date of the merger,  each stockholder of the Company held one share of
common stock, par value $.0001 per share, of IMSCO  Technologies,  Inc. for each
one share of common stock, par value $.001 per share, of IMSCO, Inc.  previously
held by him.

Imsco  Technologies,  Inc., a Delaware  corporation,  is currently a development
stage enterprise  which has developed a core technology that achieves  molecular
separation with innovative  applications of electrostatics.  Until July 7, 1992,
the  Company  was  engaged  in  the  sale  of an  automated  luminometer  and an
accompanying  reagent  system that  measures raw  material  for  microbiological
contamination.  The Company discontinued operations and liquidated the remaining
inventory  of  reagents  on April  16,  1993.  Due to a lack of  demand  for the
technology  developed,  the  Company  changed its focus and began  applying  its
engineering and medical talents to the  development of a separation  system.  No
revenue  has  been  received  from  current  products  to date.  The  technology
developed has two prototypes.  Tests of the Company's decaffeination  technology
have successfully removed caffeine from coffee. In addition, The Plasma Pure has
been tested and can remove viruses from plasma.

In February  2000,  the Company  entered  into an agreement  with a  corporation
controlled by a former  officer and director to sell the  Company's  patents and
technology  in exchange for  approximately  $578,000  consisting of cash and the
assumption of substantially all of the Company's accounts payables.

The  Company's  subsidiaries,  Decaf  Products,  Inc.  ["DPI"]  and  BioElectric
Separation and Testing,  Inc. ["BEST"] [the  subsidiaries]  were formed in 1995.
DPI was  formed  to market a unique  proprietary  technologies  to  decaffeinate
coffee.  BEST was  founded  to create  systems  to  improve  human  therapy,  by
developing new diagnostics and improved methods for production and use of drugs,
biologics, and extracorporeal devices. As of December 31, 1999, the subsidiaries
had  minimal  activity,  did not  own any  assets  and  are not  liable  for any
liabilities.

[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION - The consolidated  financial statements include the
accounts of the Company and its  subsidiaries  Decaf Products,  Inc. ["DPI"] and
BioElectric Separation and Testing, Inc. ["BEST"]. All significant inter-company
accounts and transactions have been eliminated in consolidation.

PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.  Significant
additions  or  improvements  extending  asset  lives  are  capitalized;   normal
maintenance and repair costs are expensed as incurred.  Depreciation is provided
on the  straight-line  method  over the  estimated  useful  lives of the  assets
ranging from three to five years.

CASH EQUIVALENTS - The Company  considers all highly liquid  investments with an
original maturity of less than three months to be cash equivalents.  At December
31, 1999, the Company had no cash equivalents.

INCOME  TAXES - The  Company  accounts  for  income  taxes  under  Statement  of
Financial  Accounting Standards ["SFAS"] No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, the asset and liability method is used to determine deferred
tax assets and liabilities based on differences  between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.


                                      F-10
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2
--------------------------------------------------------------------------------

[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]

EARNINGS [LOSS] PER SHARE - The Financial  Accounting  Standards Board ["FASB"],
has issued  Statement  of  Financial  Accounting  Standards  ["SFAS"]  No.  128,
"Earning Per Share",  which is effective  for  financial  statements  issued for
periods ending after December 15, 1997. Accordingly,  earnings per share data in
the financial statements have been calculated in accordance with SFAS No. 128.

SFAS No. 128 supercedes Accounting Principles Board Opinion No. 15, "Earning Per
Share," and replaces its primary earnings per share with a new basic earning per
share representing the amount of earnings for the period available to each share
of common  stock  outstanding  during the  reporting  period.  SFAS No. 128 also
requires a dual presentation of basic and diluted earnings per share on the face
of  the  statement  of  operations  for  all  companies  with  complex   capital
structures.  Diluted  earnings per share reflects the amount of earnings for the
period available to each share of common stock outstanding  during the reporting
period,  while giving effect to all dilutive  potential  common shares that were
outstanding during the period,  such as common shares that could result from the
potential exercise or conversion of securities into common stock.

The  computation  of diluted  earnings  per share  does not  assume  conversion,
exercise or contingent  issuance of securities  that would have an  antidulutive
effect on earnings  per share [i.e.,  increasing  earnings per share or reducing
loss per share].  The dilutive  effect of  outstanding  options and warrants and
their   equivalents  are  reflected  in  dilutive  earnings  per  share  by  the
application  of the treasury  stock method which  recognizes the use of proceeds
that could be obtained  upon the  exercise of options and  warrants in computing
diluted  earnings  per share.  It  assumes  that any  proceeds  would be used to
purchase common stock at the average market price during the period. Options and
warrants will have a dilutive  effect only when the average  market price of the
common  stock  during the period  exceeds the  exercise  price of the options or
warrants.  At December 31, 1999, the Company had 1,250,000 options and 1,829,645
warrants to purchase common stock that could  potentially  dilute basic earnings
per share in the future.

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

STOCK OPTIONS AND SIMILAR  EQUITY  INSTRUMENTS - On January 1, 1996, the Company
adopted  the  disclosure  requirements  of  Statement  of  Financial  Accounting
Standards ["SFAS"] No. 123, "Accounting for Stock-Based Compensation," for stock
options  and  similar  equity  instruments  [collectively  "Options"]  issued to
employees  and  directors,  however,  the  Company  will  continue  to apply the
intrinsic  value based  method of  accounting  for options  issued to  employees
prescribed by Accounting  Principles  Board ["APB"] Opinion No. 25,  "Accounting
for Stock  Issued to  Employees"  rather  than the fair  value  based  method of
accounting prescribed by SFAS No. 123. SFAS No. 123 also applies to transactions
in which an entity issues its equity  instruments  to acquire goods and services
from  non-employees.  Those transactions must be accounted for based on the fair
value of the consideration  received or the fair value of the equity instruments
issued, whichever is more reliably measurable.


                                      F-11
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3
--------------------------------------------------------------------------------

[3] INCOME TAXES

Income  taxes have been  recorded  under SFAS No.  109,  "Accounting  for Income
Taxes."  Deferred income taxes reflect the net tax effects of (i) operating loss
carryforwards,  and (ii) temporary  differences  between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income  tax  purposes.  The tax  effects of  significant  items  comprising  the
Company's net deferred tax asset as of December 31, 1999 is as follows:

Deferred Tax Asset:
   Net Operating Loss Carryforward                            $     4,320,000
   Valuation Allowance for Deferred Tax Asset                       4,320,000
                                                              ---------------

   Net Deferred Tax Asset                                     $            --
   ----------------------                                     ===============

The  valuation  allowance of  $4,320,000  at December 31,  1999,  represents  an
increase of $552,000 over the preceding year.

The Company has approximately $10,801,000 of net operating losses as of December
31, 1999 which may reduce taxable  income and income taxes in future years.  The
utilization  of these  losses to  reduce  future  income  taxes  will  depend on
generating  sufficient taxable income prior to their expiration through the year
2019. In addition,  the Internal Revenue Code of 1986 includes  provisions which
may limit the net operating loss  carryforwards  available for uses in any given
year if certain events occur including significant changes in stock ownership.

The Company has net operating loss  carryforwards of  approximately  $10,801,000
which expire as follows:

     Years ended
     -----------
     December 31,                       Amount
     ------------                       ------

        2001                         $     4,000
        2002                             181,000
        2003                             233,000
        2004                              88,000
        2005                              71,000
        2009                             863,000
        2010                             406,000
        2011                           1,063,000
        2012                           3,631,000
        2018                           2,881,000
        2019                           1,380,000
                                     -----------

       Total                         $10,801,000
       -----                         ===========

A  reconciliation  of the  federal  statutory  income tax rate to the  Company's
effective  income  tax rate  for the  years  ended  December  31,  1999 and 1998
follows:

                                                 1 9 9 9             1 9 9 8
                                                 -------             -------

Federal Statutory Income Tax Rate                      (34)%               (34)%
Change in Valuation Allowance                           34                  34
                                              ------------        ------------

   Effective Income Tax Rate                            --                  --
   -------------------------                  ============        ============


                                      F-12
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4
--------------------------------------------------------------------------------

[4] RELATED PARTY TRANSACTIONS

The balance of $10,050 Due to  Stockholders  relates to short-term  loans to the
Company in 1999. The loans are non-interesting bearing and are due on demand.

The  Company  leased  office  space on a  month-to-month  basis  from one of the
stockholders  of the  Company.  The Company  incurred  $1,750 and $3,750 of rent
expense  under  this  lease  for the years  ended  December  31,  1999 and 1998,
respectively. The lease terminated in 1999.

[5] NOTES PAYABLE

The  Company is  currently  in default on all notes  payable  for failure to pay
interest when due,  failure to redeem the notes at maturity and violation of the
note covenants.

The senior  secured  convertible  promissory  notes payable of $143,355  matured
January 31, 1999 including  interest at 10% and are  convertible  into shares of
the  Company's  common stock.  Management  has extended the  conversion  feature
related to this debt.  The notes may be converted  into shares of the  Company's
common  stock at the rate  equal to the  lessor of (a) $1.00 per share of common
stock, or (b) eighty percent at the average closing "bid" price of the Company's
publicly traded common stock for the five trading days immediately preceding the
conversion.  Additionally,  the notes when issued, included warrants to purchase
390,000  shares of the  Company's  common stock at $1.00 per share.  The Company
recorded  paid-in capital and deferred finance costs of $218,580 to be amortized
over three and a half months.  During the year ended December 31, 1999,  $62,451
was amortized as interest expense. The warrants expire in October 2003.

On February 9, 1999, the Company  completed a private offering of $600,000 of 8%
convertible  debentures due January 31, 2002 and 120,000 detachable  warrants to
purchase the  Company's  common stock at $1.50 per share until January 31, 2002.
Interest  is  payable  quarterly  in cash or common  stock at the  option of the
Company.  The debentures are convertible in $5,000  multiples into shares of the
Company's  common  stock at a  conversion  price for each share of common  stock
equal to 75% of the market price at the conversion  date, but no more than $1.00
per share.  The 25% fair  market  value  adjustment  of  $200,000 at the date of
issuance was recorded as additional interest expense.

The debenture was recorded at $545,000, net of $55,000 for the fair market value
of 120,000 warrants.  The value allocated to the warrants was recorded as a note
discount and are  amortized  over three years.  The expense for 1999 was $16,806
and was added to the carrying value of the debenture.  The Company has failed to
file a registration  statement as required by the terms of the private placement
and has recorded penalty interest expense of $58,500.


                                      F-13
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5
--------------------------------------------------------------------------------

[6] EQUITY TRANSACTIONS

Equity transactions during the year ended December 31, 1999 are as follows:

[A] Common stock issued pursuant to settlement of litigation.

                        Price     Number                   Paid-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

December 2            $   .19     550,000     $     55     $106,195     $106,250
                                  =======     ========     ========     ========

[B] Common stock issued upon conversion of notes was as follows:

                       Price      Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

September 1           $   .12     416,666     $     42    $ 49,958     $ 50,000
December 30           $   .13     140,000           14      17,486       17,500
                                  -------     --------    --------     --------

   Totals                         556,666     $     56    $ 67,444     $ 67,500
                                  =======     ========    ========     ========

[C] Common stock issued for services was as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

January 15            $   .94      80,000     $      8    $ 74,992     $ 75,000
January 29            $   .91      25,230            2      22,959       22,961
September 9           $   .17      20,000            2       3,398        3,400
December 22           $   .08      15,000            1       1,169        1,170
                                  -------     --------    --------     --------

   Totals                         140,230     $     13    $102,518     $102,531
                                  =======     ========    ========     ========

The Series A, $.0001 par value,  convertible  preferred  stock is convertible at
the option of the holder  into five  shares of the  Company's  common  stock for
every share of convertible  preferred  stock  commencing  three months after the
date subscribed.  The Series A convertible  preferred stock pays no dividend and
is not  redeemable.  A  registration  statement  was to be  filed  and  declared
effective by November 30, 1998,  registering  the common  shares  available  for
conversion, or incur a penalty at the rate of 3% per month for the common shares
to be  registered.  The  registration  statement  was  not  declared  effective.
Therefore,  paid-in capital  includes $16,776 for the obligation to issue 27,000
shares of the  Company's  common stock as of December 31, 1999. On May 26, 1999,
the holder of the Series A convertible  preferred  stock agreed that the penalty
for the related  registration  rights  shall apply and accrue up and until April
30, 1999,  however,  thereafter  the penalty for failure to achieve the required
registration would cease.

Equity transactions during the year ended December 31, 1998 are as follows:

[D] Common  stock  issued  pursuant  to the  exercise of stock  warrants  was as
    follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

January 8             $   .90      66,000      $     7     $59,393      $59,400
                                  =======      =======     =======      =======



                                      F-14
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
--------------------------------------------------------------------------------

[6] EQUITY TRANSACTIONS [Continued]

[E] Common stock issued in settlement of litigation was as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

January 13,           $  3.94     150,000      $    15   $  591,674   $  591,689
March 30              $  3.80     249,081           24      946,679      946,703
                                 --------      -------   ----------   ----------

   Totals                         399,081      $    39   $1,538,353   $1,538,392
                                 ========      =======   ==========   ==========

[F] Common stock issued for services was as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

February 25           $  1.62     125,000      $   13     $203,111     $203,124
March 31              $  1.38      48,727           5       66,995       67,000
May 7                 $  1.50     339,184          34      508,742      508,776
August 1              $  1.25     100,000          10      124,990      125,000
                                 --------     --------    --------     --------

   Totals                         612,911     $    62     $903,838     $903,900
                                 ========    ========     ========     ========

[G] Common stock issued in private placement was as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

May 26                $  1.00      70,000      $     7     $69,993      $70,000
                                  =======      =======     =======      =======

[H] Common stock issued pursuant to the exercise of stock options as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

May 28                $  1.49      16,750      $     2     $24,998      $25,000
                                  =======      =======     =======      =======

[I] Series A convertible preferred stock issued in private placement as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

August 25             $  5.00      45,000     $      5    $224,995     $225,000
                                 ========     ========    ========     ========

At December 31, 1998,  the  registration  statement was not declared  effective.
Therefore,  paid-in capital  includes $253 of the obligation to issue 270 shares
of the Company's common stock as of December 31, 1998.

Equity transactions during the year ended December 31, 1997 are as follows:

[J] Common stock issued for services was as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

January 2             $  2.75     100,000      $    10     $274,990    $275,000
April 21              $  2.63      75,000            8      196,867     196,875
August 11             $  1.50      18,500            2       27,747      27,749
                                 --------      -------     --------    --------

   Totals                         193,500      $    20     $499,604    $499,624
                                 ========      =======     ========    ========



                                      F-15
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6
--------------------------------------------------------------------------------

[6] EQUITY TRANSACTIONS [Continued]

[K] Common stock issued in private placement was as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

July 14               $   1.50     23,000      $    2     $ 34,498     $ 34,500
October 11            $   2.25     15,000           2       33,748       33,750
October 16            $   1.81    130,000          13      235,612      235,625
December 2            $   2.25     11,111           1       24,999       25,000
December 11           $   2.25     16,000           2       35,998       36,000
December 15           $   2.25      4,000        --          4,000        4,000
December 22           $   2.25      4,000        --          4,000        4,000
December 22           $   1.60     27,500           3       43,997       44,000
                                  -------     -------     --------     --------

   Totals                         230,611     $    23     $416,852     $416,875
                                  =======     =======     ========     ========

Equity transactions during the year ended December 31, 1996 are as follows:

[L] Common stock issued pursuant to the  acquisition of advertising  credits was
    as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares   Par Value     Capital      Total
    ----             ----------  ---------   ---------     -------     -------

December 6            $  1.32    1,136,000    $    114   $1,499,886   $1,500,000
December 6            $   --          --          --        108,170      108,170
                                 ---------    --------   ----------   ----------

   Totals                        1,136,000    $    114   $1,608,056   $1,608,170
                                 =========    ========   ==========   ==========

[M] Common stock issued in settlement of debt was as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares   Par Value     Capital       Total
    ----             ----------  ---------   ---------     -------      -------

December 31           $  1.22     775,000     $    77    $  943,543   $  943,620
December 31           $  1.32     227,000          23       299,977      300,000
                                ---------     -------    ----------   ----------

   Totals                       1,002,000     $   100    $1,243,520   $1,243,620
                                =========     =======    ==========   ==========

[N] Common stock issued for services was as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares   Par Value     Capital       Total
    ----             ----------  ---------   ---------     -------      -------

September 9           $   .75     284,000      $   28      $213,534     $213,562
                                  =======      ======      ========     ========

[O] Common stock issued in private placement was as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

June 7                $  1.00       5,000      $     1    $  4,999     $  5,000
December 17           $  1.00       5,000         --         5,000        5,000
December 31           $  2.00     150,000           15     299,985      300,000
                                  -------     --------    --------     --------

   Totals                         160,000      $    16    $300,984     $310,000
                                  =======      =======    ========     ========



                                      F-16
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8
--------------------------------------------------------------------------------

[6] EQUITY TRANSACTIONS [Continued]

[P] Common stock issued pursuant to the exercise of stock options as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

October 10            $  .0001    47,000       $    5       $  (5)       $  --
                                  ======       ======       =====        =======

[Q] Common stock issued for acquisition as follows:

                        Price     Number                   Pain-in
    Date             Per Share   of Shares    Par Value    Capital       Total
    ----             ----------  ---------    ---------    -------      -------

October 9             $   .0001   468,000      $   47      $   (47)    $   --
October 9             $  --         --           --         10,000       10,000
                                  -------      ------      -------     --------

   Totals                         468,000      $   47      $ 9,953     $ 10,000
                                  =======      ======      =======     ========

[7] FAIR VALUE OF FINANCIAL INSTRUMENTS

In  assessing  the fair value of financial  instruments,  the Company has used a
variety of methods  and  assumptions,  which were based on  estimates  of market
conditions  and risks  existing  at that time.  For all  financial  instruments,
including  cash, due to  stockholders  and debt maturing within one year, it was
estimated that the carrying amount  approximated  fair value for these financial
instruments because of their short maturities.

[8] COMMITMENTS

LEASES - The Company leased office space under an operating  lease which was due
to expire in March of 2000.  The lease was assigned to a corporation  controlled
by a former shareholder as of October 1, 1999.

Total  rental  expense was $11,019 and $17,804 for the years ended  December 31,
1999 and 1998, respectively.

PREPAID  ADVERTISING  CREDITS - Under a media  Purchase  Agreement with Proxhill
Marketing Ltd., it contractually agreed to finance $1.5 million of media for the
Company's  public  relations and  advertising  campaign  through Grow  Marketing
Services ["GROW"], an independent marketing company. In exchange for the Company
issuing approximately 1,136,000 shares of its common stock, representing a price
of $1.32 per share, the Company acquired the $1.5 million of prepaid,  dedicated
media credits [the "Media  Credits"] and certain media services.  The Company is
required to pay a 10%  placement  fee as the Media  Credits are used.  The media
Purchase Agreement expires at the end of sixty [60] months or upon the depletion
of the prepaid media credits.

EMPLOYMENT AGREEMENTS - The Company had two employment agreements in effect with
two former  executive  officers in 1999.  Both  agreements  were  terminated  by
December 31, 1999.


                                      F-17
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9
--------------------------------------------------------------------------------

[9] GOING CONCERN

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles, which contemplates continuation of the
Company  as a  going  concern  and  realization  of  assets  and  settlement  of
liabilities and commitments in the normal course of business.

The Company ceased  development  efforts and terminated all employees March 1999
because it was unable to secure debt or equity financing. The Company incurred a
net  loss of  $1,380,235  primarily  resulting  from no  revenues  and  utilized
$424,097  in cash for  operations  during  the year  ended  December  31,  1999.
Management  of the  Company  has  developed  a  business  plan to  exchange  the
Company's  common stock for  substantially  all of its note  obligations  and to
finance the Company  through the sale of its technology  and  individual  patent
rights and is seeking  the  acquisition  of a business  that would want to merge
with a nonoperating public company.  The financial statements do not include any
adjustments  that might be  necessary  if the Company is unable to continue as a
going concern.

The continuation of the Company as a going concern is dependent upon the success
of these plans.

[10] ADVERTISING

The Company expenses advertising costs as incurred. For the years ended December
31, 1999 and 1998, advertising expense was $12,000 and $92,942, respectively.

[11] STOCK BASED COMPENSATION

On May 21, 1996,  the Board of Directors  adopted the Employee  Incentive  Stock
Option Program [the "Option Program"],  which provides for the issuance of up to
the lesser of 24% of the issued and outstanding Common Stock or 1,500,000 shares
of Common Stock through the grant of incentive and non-qualified  stock options.
Stock  options  will be  issued  by  action  of the  Board of  Directors  or its
Compensation  Committee [the "Administrator"] to key employees of the Company as
a long-term incentive.  Key employees will be designated by the Administrator in
its sole discretion.  Stock Options under the Option Program will provide for an
exercise price per share determined by the Administrator  [but not less than the
par value of $.0001],  subject to tax  requirements in connection with incentive
stock options.  No payment will be required from participants in connection with
grants.  The options will be execisable as specified by the Administrator at the
time of grant,  although the tax benefits of incentive  stock options  described
below will be  unavailable  if the option is exercised  less than one year after
grant.  Options will be exercisable for a period determined by the Administrator
but not in excess of 10 years after grant.  As of December  31, 1999,  1,250,000
options were  outstanding of which 950,000 options were outstanding to employees
and former employees.


                                      F-18
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10
--------------------------------------------------------------------------------

[11] STOCK BASED COMPENSATION [Continued]

The following table summarizes the activity in common shares subject to options.
<TABLE>
<CAPTION>
                                                   1 9 9 9               1 9 9 8
                                           ----------------------  ---------------------
                                                        Weighted                Weighted
                                                        Average                 Average
                                                        Exercise                Exercise
                                              Shares     Price      Shares        Price

<S>                                        <C>          <C>         <C>        <C>
Outstanding - Beginning of Years ......      360,000    $   1.48    110,000    $   1.45
Granted or Sold During the Years ......      900,000    $    .72    266,750    $   1.50
Canceled During the Years .............         --      $     --      --
Expired During the Years ..............      (10,000)   $    .90      --       $  --
Exercised During the Years ............         --      $     --    (16,750)   $   1.50
                                           ---------               --------

   Outstanding - End of Years .........    1,250,000    $    .94    360,000    $   1.48
                                           =========               ========

   Exercisable - End of Years .........    1,250,000    $    .94    360,000    $   1.48
                                           =========               ========
</TABLE>

The following  table  summarizes  stock options  information  as of December 31,
1999:

                                            Options Outstanding
                                 -------------------------------------------
                                                                  Weighted-
                                                                  ---------
                                                    Weighted-      Average
                                                    ---------      -------
                                                     Average      Remaining
                                                     -------      ---------
                                     Number         Exercise     Contractual
                                     ------         --------     -----------
Exercise Price                    Outstanding         Price         Life
--------------                    -----------         -----         ----

$.17                                  700,000        $   .17         4.7
$1.32 to $1.50                        350,000           1.50         4.0
$2.63                                 200,000           2.63         2.8
                                  -----------

   Totals                           1,250,000        $   .94         3.9
   ------                         ===========

The exercise  prices of the options  outstanding  at December  31,  1999,  range
between $.17 and $2.63 with a weighted average contractual life of 4 years.

The  following  table  summarizes  the  activity  in common  shares  subject  to
warrants:
<TABLE>
<CAPTION>
                                                   1 9 9 9               1 9 9 8
                                           ----------------------  ---------------------
                                                        Weighted                Weighted
                                                        --------                --------
                                                        Average                 Average
                                                        -------                 -------
                                                        Exercise                Exercise
                                                        --------                --------
                                             Shares      Price      Shares       Price
                                             ------      -----      ------       -----

<S>                                        <C>          <C>       <C>           <C>
Outstanding - Beginning of Years ......    1,459,645    $   1.35    785,645     $   1.59
Granted or Sold During the Years ......      455,000    $   1.45    990,000     $   1.30
Canceled During the Years .............      (35,000)   $   1.00   (250,000)    $   2.00
Expired During the Years ..............      (50,000)   $    .90       --       $   --
Exercised During the Years ............         --      $   --      (66,000)    $    .90
                                           ---------              ---------

   Outstanding - End of Years .........    1,829,645    $   1.40  1,459,645     $   1.35
                                           =========              =========

   Exercisable - End of Years .........    1,829,645    $   1.40  1,459,645     $   1.35
                                           =========              =========
</TABLE>


                                      F-19
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11
--------------------------------------------------------------------------------

[11] STOCK BASED COMPENSATION [CONTINUED]

The following  table  summarizes  stock warrants  information as of December 31,
1999:

                                                     Weighted-
                                                     ---------
                                                      Average      Weighted-
                                                      -------      ---------
                                                     Remaining      Average
                                                     ---------      -------
                                      Number        Contractual    Exercise
                                      ------        -----------    --------
Exercise Prices                     Outstanding        Life          Price
---------------                     -----------        ----          -----

$.40                                    35,000          3.2         $  .40
$1.00                                  355,000          3.2         $ 1.00
$1.32 to $1.50                       1,289,534          2.3         $ 1.47
$2.00                                  100,000          1.0         $ 2.00
$2.50                                   50,111          3.0         $ 2.50
                                    ----------

   Totals                            1,829,645          2.6         $ 1.40
   ------                           ==========

The Company applies  Accounting  Principles Board Opinion No. 25 ["APB No. 25"],
Accounting for Stock Issued to Employees, and related interpretations, for stock
options issued to employees in accounting  for its stock options plans.  For the
year ended December 31, 1999,  stock  compensation of $56,000 was recognized for
stock-based employee amounts.

The  exercise  prices of the  warrants  outstanding  at December  31, 1999 range
between $.40 and $2.50 with a weighted average contractual life of 2.6 years.

Had  compensation  cost been  determined on the basis of fair value  pursuant to
FASB  Statement No. 123, net loss and loss per share would have been recorded as
follows:

                                                       December 31,
                                                       ------------
                                                 1 9 9 9           1 9 9 8
                                                 -------           -------

Net Loss as Reported                         $    (1,380,235)  $   (2,881,162)
                                             ===============   ==============

Pro Forma Net Loss                           $    (1,475,235)  $   (3,014,537)
                                             ===============   ==============

Net Loss Per Share as Reported               $          (.17)  $        (0.39)
                                             ===============   ==============

Pro Forma Net Loss Per Share                 $          (.19)  $        (0.39)
                                             ===============   ==============

The weighted  average  grant date fair value of options and warrants  granted in
1999 and 1998 was $.96 and $1.37, respectively.

The fair value of each option and warrant granted is estimated on the grant date
using an option  pricing model which takes into  account,  as of the grant date,
the exercise  price and the expected life of the option or warrant,  the current
price of the underlying stock and its expected volatility, expected dividends on
the stock and the risk-free interest rate for the expected term of the option or
warrant. The following is the average of the data used for the following items:

                                          1 9 9 9            1 9 9 8
                                          -------            -------

Expected Life [Years]                        5                  5
Risk-Free Interest Rate                      6%                 5%
Expected Dividends                          --                 --
Expected Volatility                        115%                76%



                                      F-20
<PAGE>


IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #12
--------------------------------------------------------------------------------

[12] LITIGATION

On December 2, 1999, the Company entered into a settlement  agreement and mutual
release with BPV  Enterprises,  Inc. and Victor Bauer  relating to prior actions
and claims against the Company.  In full settlement,  the Company issued 300,000
shares of the  Company's  common stock and a $50,000  promissory  note which was
subsequently converted into 250,000 shares of the Company's common stock.

[13] RECENT ACCOUNTING PRONOUNCEMENTS

The  Company  does  not  expect  the  adoption  of  recently  issued  accounting
pronouncements  to  have a  significant  impact  on  the  Company's  results  of
operations, financial position or cash flows.

[14] SUBSEQUENT EVENTS

In addition to the sale and  assumption of liabilities as disclosed in Note 1 to
these financial statements,  the Company had the following transactions in March
2000:

In March 2000, a complaint  and summons was filed against the Company by Kutchin
& Rufo, PC in Suffolk County Superior Court in  Massachusetts.  The plaintiff is
seeking  recovery of  approximately  $11,800  plus  damages  for legal  services
rendered during the period April 1, 1997 through  December 31, 1999. The Company
acknowledges that it owes Kutchin & Rufo, PC $9,893.

In March 2000, the Company issued  2,400,000 shares of its common stock upon the
conversion  of the $600,000  notes  payable.  Also,  the  exercise  price of the
warrants  issued  to the  holder  of the  notes  were  reduced  to  $.0001.  The
conversion  of the note and price  reduction  of the  warrants  will result in a
charge to operations in 2000 of approximately $835,000.

In March 2000, the Company converted a note payable with an outstanding  balance
of $25,000 into 104,635 shares of Company  common stock.  This  conversion  will
result in a charge to operations of approximately $60,000 in 2000.


                     .   .   .   .   .   .   .   .   .   .



                                      F-21
<PAGE>





                                   SIGNATURES

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

                                       IMSCO TECHNOLOGIES, INC.

                                       By: /s/ Timothy A. Keating
                                           -----------------------------
                                           Timothy A. Keating,
                                           Chief Executive Officer

                                       Date: April 14, 2000

     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.


/s/ Timothy A. Keating
------------------------------------
Timothy A. Keating, Chairman
and Chief Executive Officer
Date: April 14, 2000


/s/ Gary J. Graham
------------------------------------
Gary J. Graham, Director & Secretary
Date: April 14, 2000