ANNUAL REPORT FOR YEAR ENDED DECEMBER 31, 2000

                       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, 2000       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)

8450 East Crescent Parkway, Ste. 100, Greenwood Village, CO             80111
-----------------------------------------------------------           ----------
         (Address of principal executive offices)                     (Zip Code)

Issuer's telephone number, including area code: (720) 889-0133

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, 2000: (a) 13,438,174 Common Shares, $.0001 par value, of
the registrant were outstanding; (b) approximately 9,393,539 Common Shares were
held by non-affiliates; and (c) the aggregate market value of the Common Shares
held by non-affiliates was $751,483 based on the closing bid price of $0.08 per
share on December 31, 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.

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                                     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 Technologies, Inc. (the "company"), a Delaware corporation, is
currently a development stage enterprise. Prior to February 2000, the company
developed a separation system to remove caffeine from coffee. In addition, a
second prototype had been tested to remove viruses from plasma. No revenue has
been received from current products to date. Because of our limited financial
resources, we are attempting to license or sell our electrostatic technologies
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 IMSCO of the consideration. 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 we abandoned our effort
to develop this product, at December 31, 2000, we possessed approximately
$700,000 (fair market value) of prepaid media credits in our inventory.

     Since we discontinued our operations in late 1999, we had no use whatsoever
for the media credits. In an attempt to liquefy this asset, we sold the
remaining $1.28 million of pre-paid media credits on our books to SonicPort.com,
Inc. ("SonicPort") in exchange for 694,440 shares of restricted SonicPort stock.

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Under the sale agreement, SonicPort will provide Imsco with a schedule of
advertising that it wishes to run. Imsco is then obligated to acquire the
designated advertising slots for SonicPort. The SonicPort stock is currently
held in escrow, and we will only receive the SonicPort shares once the media is
actually used, subject to a deadline of June 30, 2001. SonicPort trades on the
American Stock Exchange under the symbol "SPO". As of year-end, SonicPort had a
closing price of $1.00, giving our SPO shares a fair market value of just under
$700,000.

     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".

     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 commercial brew basket
decaffeination 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.

                                       3
<PAGE>

POTENTIAL MERGER OR ACQUISITION

     Given our limited financial and human resources and no operating revenues
for the last six 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 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 any prospective consultants
for these purposes. The Company does not intend to restrict its search to any
specific 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 needs additional
capital. 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.

                                       4
<PAGE>

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 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

                                       5
<PAGE>

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 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.

                                       6
<PAGE>

     When we originally intended to directly market our products, we planned to
use the remaining approximately $700,000 (fair market value) of media, to
finance the introduction and initial product advertising and marketing support
for the 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.

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

     Since we are seeking to license our electrostatic technology to a third
party, it would be the licensee's responsibility to comply with all applicable
FDA regulations.

COMPETITION

     We currently plan to license or sell our separation technologies to a third
party. Therefore, we cannot determine how our potential technology licensees
and/or purchasers will compete with others.

EMPLOYEES

     As of the date hereof, we have no full-time employees.

ITEM 2.  DESCRIPTION OF PROPERTY

     Our principal offices are currently located at 8450 East Crescent Parkway,
Suite 100, Greenwood Village, Colorado 80111, in a shared office arrangement
provided through an affiliate of one of our directors at a charge of $1,000 per
month.

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 2000.

                                     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 thirteen 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
Interwest Transfer Company, Salt Lake City, Utah.

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<PAGE>

     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 2000
and 1999. The quotations as reported reflect inter-dealer quotations without
retail markup, markdown or commission and do not necessarily represent actual
transactions.

                                                   High             Low
                                                   ----             ---
January 1, 2000 - March 31, 2000                $  1.000         $  0.090
April 1, 2000 - June 30, 2000                      0.938            0.375
July 1, 2000 - September 30, 2000                  0.406            0.100
October 1, 2000 - December 31, 2000                0.141            0.080

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


     (b) Holders of Common Stock

                                            Approximate Number of Record Holders
        Title of Class                              (as of December 31, 2000)
        --------------                      ------------------------------------
Common Stock, $.0001 par value                              923

     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.
Declaration and payment of dividends, including potential stock dividends from
the sale of the media credits, 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. 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.
We have had no revenues from operations to date and, 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 $11,638,185. At December
31, 2000, including discontinued operations, we have a total accumulated deficit
of $12,259,093.

     We had no revenues from continuing operations in years ending December 31,
2000, and December 31, 1999. We have incurred net losses in each year since our
inception in 1986.

     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.

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<PAGE>

     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.

     We ceased our operations in August 1999. We subsequently entered into an
Assignment and Assumption Agreement (the "Agreement") with ElectroStatic
Products, Inc. ("ESPI"), an entity controlled by Imsco's former Chief Executive
Officer. In consideration for an assignment of Imsco's patents to ESPI, ESPI
agreed: (1) to assume all of Imsco's existing payables; (2) to pay Imsco $50,000
in cash; and (3) to grant Imsco a 5% royalty on future sales resulting from
Imsco's patented technologies.

     When the Agreement was signed on February 7, 2000, Imsco had approximately
$550,000 in existing accounts payable due to a total of 48 creditors. By the end
of June, that number had been reduced to $178,573. As of year-end, Imsco now has
$97,602 of unassumed account payable and $21,766 outstanding of the assumed
accounts payable due to 13 creditors. We have accrued an additional $26,000 in
accounting, legal and rent expenses, bringing our year-end liabilities to
$145,368. The legal expenses are primarily attributable to our unsuccessful
merger transaction with an Internet equipment and services company as well as
our quarterly filing obligations with the SEC.

     Imsco has also received $50,000 from ESPI. However, we paid two creditors
directly a total of $13,111. After allowing for a valid counterclaim by ESPI, we
maintain that ESPI still owes the Company $9,591, which has been 100% reserved
on the financial statements. As of year-end, Imsco has a total of $6,688 in
cash.

     In 1996, Imsco had acquired $1.5 million worth of pre-paid media credits to
be used for advertising the Company's decaffeination technology. The Company
issued the media providers 1,136,364 million Imsco shares (worth $1,500,000) as
consideration for the credits. Since we ceased our operations in late 1999, we
had no use whatsoever for the media credits.

     In an attempt to liquefy this asset, we sold the remaining $1.28 million of
pre-paid media credits on our books to SonicPort.com, Inc. ("SonicPort") in
exchange for 694,440 shares of restricted SonicPort stock. Under the sale
agreement, SonicPort will provide Imsco with a schedule of advertising that it
wishes to run. Imsco is then obligated to acquire the designated advertising
slots for SonicPort. The SonicPort stock is currently held in escrow, and we
will only receive the SonicPort shares once the media is actually used, subject
to a deadline of June 30, 2001. SonicPort trades on the American Stock Exchange
under the symbol "SPO". As of year-end, SonicPort had a closing price of $1.00,
giving our SPO shares a fair market value of just under $700,000.

     We have neither recorded the sale of the media credits nor are carrying the
SonicPort shares on our books as an asset because the sale has not been
consummated. Under generally accepted accounting principles, the sale will be
completed when SonicPort uses the media and the restricted shares are released
from escrow to Imsco.

     Assuming that we complete the media credit sale successfully, we plan to
pay Imsco's lawyers approximately 100,000 shares of SonicPort stock in lieu of
cash for services rendered during the past 15 months. The balance of the
SonicPort shares would eventually be distributed to Imsco shareholders in the
form of a special dividend.

     Imsco now has a total of 13,438,174 shares of commons stock outstanding.
Additionally, we have a total of 2,339,645 options and warrants outstanding with
a weighted exercise price of $1.16 per share. Of this amount, 469,534 options
and warrants will expire by December 31, 2001, giving us 15.7 million fully
diluted shares.

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     As we reported to you in our letter to shareholders in August, Imsco's sole
business activity has been searching for a merger partner. Since the collapse of
our proposed merger with an Internet equipment and services company in May, we
have reviewed close to 25 different businesses in various stages of development.
Many of the best private companies seeking public shells are not interested in
Imsco for the simple reason that they desire a company trading either on the
Nasdaq National or Small Cap Market. (Imsco trades on the Over-the-Counter
Bulletin Board).

     For the most part, we have simply dismissed most early stage companies on
the grounds that the risk of failure is too high. Also, we have consciously
avoided most Internet enterprises for the same reason. The remainder have not
been good matches because either: (a) the proposed valuation of the private
company was unrealistically high, which would result in an excessive dilution of
Imsco share owners; (b) we never received enough information to perform any type
of reasonable due diligence; or (c) the private company required such a large
infusion of capital post-merger as to make the likelihood of success highly
doubtful.

     Our strategy, therefore, remains unchanged. We will continue to seek out
exciting private companies as merger partners. However, as we stated in August,
there can be no assurance that a merger transaction will ever be consummated, or
if one were, that such a transaction would generate any tangible value to Imsco
shareholders. On the positive side, Imsco is a very clean shell company, is
current with both its Federal and State tax returns, has an unqualified audit,
and remains fully reporting with the SEC. We will do our best to merge the
Company as soon as practicable.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999

     Net losses increased to $1,456,471 for the year ended December 31, 2000,
compared with net losses of $1,380,235 for the year ended December 31, 1999,
representing a 5.5% increase. We had no revenues or operating income for years
ended December 31, 2000 and December 31, 1999 from continuing operations. For
the year ended December 31, 2000, we had no interest income.

     Total general, administrative and development expenses were $911,769 for
2000, in comparison to $841,333 for 1999, an increase of 8.4%. The increase in
these costs from 1999 to 2000 was due mainly to the write-down of pre-paid media
credits. This resulted in a loss per share of $(.12) for the year ended December
31, 2000, in comparison with a loss per share of $(.17) for the year ended
December 31, 1999.

     At December 31, 2000, the Company had $6,688 in total assets, total
liabilities of $145,368 and total stockholders' deficit of $138,680.

LIQUIDITY AND CAPITAL RESOURCES

     We had negative working capital as of December 31, 2000, of $138,680 in
comparison to a negative working capital position as of December 31, l999 of
$1,474,522. We had an accumulated deficit of $12,259,093 at the period ended
December 31, 2000, in comparison to an accumulated deficit of $10,802,622 at the
period ended December 31, l999. The increase in the accumulated deficit is
primarily related to continuing operating costs during the development phase
without any operating income.

                                       10
<PAGE>

     We have financed operations from entering the development phase in July
1992 (through December 31, 2000) primarily through the private placement of our
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 thereon, 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 $700,000 (fair market value) of remaining prepaid
media credits. 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, 2000
was $138,680. Our management believes that unless we are able to sell the
approximately $700,000 (fair market value)], 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. 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
largely on our ability to sell our technology or establish new licensing and
marketing agreements. There can be no assurance that the Company will have
sufficient capital resources to be able to continue as a going concern.

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

                                       11
<PAGE>

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, 2000, December 31, 1999 and December 31, 1998. As
of December 31, 2000, we had an accumulated deficit of $12,259,093. 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. 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.

OUR FUTURE FUNDING IS UNCERTAIN.

     Our operations to date have consumed substantial amounts of cash. At
December 31, 2000, our current liabilities consisting primarily of accounts
payable and accrued expenses were $145,368. At December 31, 2000 we had a
negative working capital position of $138,680. 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 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."

                                       12
<PAGE>

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.

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.

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, 2000,
we had 13,438,174 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:

                                       13
<PAGE>

     -    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.

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, 2000, there were
13,438,174 shares of Common Stock outstanding and 0 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 thirteen 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

                                       14
<PAGE>

price will likely drop. As of December 31, 2000, we had 13,438,174 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 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, 2000, 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
may 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.

                                       15
<PAGE>

THE EXERCISE OF OUR OUTSTANDING WARRANTS COULD HAVE A DILUTIVE EFFECT

     As of December 31, 2000, there were outstanding options and warrants to
purchase approximately 2,339,645 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 uncertainties. 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,
2000, and 1999 are included herein and consist of:

     Independent Auditor's Report                                      F-1
     Consolidated Balance Sheet                                        F-2
     Consolidated Statements of Operations                       F-3 - F-4
     Consolidated Statements of Stockholders'
       Equity (Deficit)                                          F-5 - F-9
     Consolidated Statements of Cash Flows                     F-10  - F-12
     Notes to Consolidated Financial Statements                F-13  - F-24

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.

                                       16
<PAGE>

                                    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       37           1999            Chairman & Chief Executive
                                                        Officer
Gary J. Graham           51           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       37           1999            Chief Executive Officer
Gary J. Graham           51           1997            Secretary

     There are no other employment contracts with the executive officers.

     (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 37)

     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 that time, Mr.
Keating founded and ran the European Equity Derivative Products Department for
Nomura International plc, in London, England. Prior thereto he was a proprietary
arbitrage 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 51)

     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.

                                       17
<PAGE>

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
2000, 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 sets 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, 2000, 1999 and 1998, whose
total annual salary and bonus exceeded $100,000 in any of those fiscal years.


SUMMARY COMPENSATION TABLE

                                                                    Additional
Name of Individual      Capacity                Year       Salary   Compensation
------------------      --------                ----       ------   ------------

Timothy J. Keating      Chief Executive         2000       $0       $0 (1,2)
                        Officer                 1999       $0       $0

Alexander Hoffmann      Former Chief            2000        N/A      N/A
                        Executive Officer       1999       $0       $0

Sol L. Berg             Former President        2000        N/A      N/A
                                                1999       $0       $0

     1)   On October 13, 2000, Mr. Keating was granted 800,000 shares of Imsco
          stock. At the time of the grant, the stock had a fair market value of
          $75,000 in total.

     2)   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.

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

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
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, 2000, one person owned of record or was known by
the Company to own beneficially more than five percent (5%) of the Common Stock
outstanding.

                                       18
<PAGE>

     (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, 2000, 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:

Name and Address of               Amount and Nature of
Beneficial Owner                  Beneficial Ownership          Percent of Class
-------------------               --------------------          ----------------
AMRO International, SA(1)               2,520,000                     18.8%
c/o Ultra Finance
Grossmunesterplatz
Zurich CH 8022
Switzerland

Timothy J. Keating(2)                   1,125,000                      8.4%
8450 E. Crescent Pkwy., #100
Greenwood Village, CO  80111

Limpos, S.A.                            1,000,000                      7.4%

Gary J. Graham (2)                        399,635                      2.5%
8450 E. Crescent Pkwy., #100
Greenwood Village, CO  80111

Proxhill Marketing, Inc. (3)              399,635                      2.5%
8450 E. Crescent Pkwy., #100
Greenwood Village, CO  80111

All Officers and Directors              1,524,635                     11.3%
as a group (2 persons)
--------------------
     1)   AMRO is beneficially owned and controlled by Mark Perkins, an
          individual residing in Monte Carlo, Monaco.

     2)   Denotes a director of the Company.

     3)   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.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION There are no arrangements
known to the Company that may, at a subsequent date, result in a further change
in control of the Company.

     (a) Except as described below, since January 1, l999, 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.,

                                       19
<PAGE>
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.

     On October 1, 1999, Timothy J. 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.

     a)   On October 13, 2000, Mr. Keating was granted 800,000 shares of Imsco
          stock. At the date of the grant, the stock had a fair market value of
          $75,000 in total.

     b)   Except as above described, there have been no business relationships
          with directors or nominees for director of the Company since January
          1, l999.

     c)   At December 31, 2000, 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.)

     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.)

                                       20
<PAGE>
     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)

                                       21
<PAGE>
     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).

     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, 1998.

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.

                                       22
<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, 2000, and the related consolidated statements of operations,
stockholders' deficit, and cash flows for each of the years ended December 31,
2000 and 1999. 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, 2000, the results of their operations and their cash
flows for each of the years ended December 31, 2000 and 1999, 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 10 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, 2000 of $12,259,093 and has
utilized $25,262 in cash for operations for the year ended December 31, 2000.
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 10. 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
January 16, 2001

                                       F-1
<PAGE>

IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2000.
--------------------------------------------------------------------------------



CURRENT ASSETS:

   Cash                                                       $         6,688
                                                              ---------------

   TOTAL ASSETS                                               $         6,688
                                                              ===============

LIABILITIES AND STOCKHOLDERS' [DEFICIT]:

CURRENT LIABILITIES:

   Accounts Payable                                           $        97,602
   Accrued Expenses                                                    23,000
   Due to Related Party                                                 3,000
   Accounts Payable to be Assumed                                      21,766
                                                              ---------------

   TOTAL CURRENT LIABILITIES                                          145,368
                                                              ---------------

COMMITMENTS AND CONTINGENCIES                                              --
                                                              ---------------

STOCKHOLDERS' [DEFICIT]:

   Series A Preferred Stock - Authorized 1,000,0000 Shares

     at $.0001 Par Value; None Issued and Outstanding                      --

   Common Stock - Authorized 15,000,000 Shares at
   $.0001 Par Value; 13,438,174 Shares Issued and Outstanding           1,344

   Additional Paid-in Capital - Common Stock                       12,813,509

   Less:  Prepaid Advertising Credits                                (694,440)

   Deficit Accumulated During Development Stage                   (11,638,185)

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

   TOTAL STOCKHOLDERS' [DEFICIT]                                     (138,680)
                                                              ---------------

   TOTAL LIABILITIES AND STOCKHOLDERS' [DEFICIT]              $         6,688
                                                              ===============



See Notes to Consolidated Financial Statements.

                                       F-2
<PAGE>

IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
                                                                    CUMULATIVE
                                                                      AMOUNTS
                                                                       FROM
                                                                   JULY 9, 1992
                                                                  [INCEPTION OF
                                                                   THE CURRENT
                                                                   DEVELOPMENT
                                                  YEARS ENDED        STAGE] TO
                                                  DECEMBER 31,      DECEMBER 31,
                                             2 0 0 0      1 9 9 9     2 0 0 0

GENERAL, ADMINISTRATIVE AND
DEVELOPMENT EXPENSE:

   Research and Development Expense         $      --   $   8,911     $ 301,925
   Salaries and Wages                              --     117,691       933,005
   Officer Salaries                                --      30,807     1,102,500
   Payroll Taxes                                   --      13,931       154,803
   Outside Labor                                   --          --       191,136
   Write-down of Prepaid Advertising Costs    684,056          --       684,056
   Professional and Consulting Fees           137,506     332,640     1,378,166
   Professional and Consulting Fees
       - Non-Cash                              85,250     112,570     2,272,789
   Rent                                            --       9,269       165,288
   Rent - Related Party                         3,000       1,750         8,500
   Insurance                                       --      27,636       190,879
   Travel and Business Meeting                     --      11,321       189,250
   Auto Expense                                    --       5,448        66,217
   Telephone and Utilities                         --       6,014        67,416
   Office Expense                                  --      12,321       143,164
   Equipment Rental                                --       2,781        36,080
   Corporate Fees                                  --          --        69,981
   Advertising                                     --      12,000       330,703
   Depreciation and Amortization                   --      29,993        53,920
   Litigation Settlement                           --     106,250     1,644,642
   Franchise Tax                                1,957          --         3,944
                                          -----------  ----------   -----------

   GENERAL, ADMINISTRATIVE
   AND DEVELOPMENT
     EXPENSE                                  911,769     841,333     9,988,364
                                          -----------  ----------   -----------

OTHER INCOME [EXPENSE]:

   Dividend and Interest Income                    --          --        11,633
   Interest Expense                        (1,145,824)   (538,902)   (2,218,504)
   Loss on Sale of Fixed Assets                    --          --       (44,072)
                                          -----------  ----------   -----------

   OTHER [EXPENSE] - NET                   (1,145,824)   (538,902)   (2,250,943)
                                          -----------  ----------    ----------

   [LOSS] BEFORE INCOME TAXES              (2,057,593) (1,380,235)  (12,239,307)

BENEFIT FROM INCOME TAX                       204,400          --       204,400
                                          -----------  ----------   -----------

   [LOSS] BEFORE EXTRAORDINARY GAIN        (1,853,193) (1,380,235)  (12,034,907)

EXTRAORDINARY GAIN - NET OF INCOME

   TAXES OF $204,400                          396,722          --       396,722
                                          -----------  ----------    -----------

   NET [LOSS]                             $(1,456,471)$(1,380,235) $(11,638,185)
                                          ===========  ==========   ===========

See Notes to Consolidated Financial Statements.

                                       F-3
<PAGE>

IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------


                                                                  CUMULATIVE
                                                                    AMOUNTS

                                                                     FROM
                                                                 JULY 9, 1992

                                                                [INCEPTION OF
                                                                  THE CURRENT
                                                                  DEVELOPMENT

                                            YEARS ENDED            STAGE] TO
                                           DECEMBER 31,          DECEMBER 31,

                                     2 0 0 0         1 9 9 9        2 0 0 0
                                     -------         -------        -------
BASIC AND DILUTED [LOSS]
PER SHARE OF COMMON STOCK:


   [Loss] Before Extraordinary Gain     $  (.15)      $  (.17)
   Extraordinary Gain                       .03            --
                                   ------------  ------------

   NET [LOSS]                           $  (.12)      $  (.17)
                                   ============  ============

BASIC WEIGHTED AVERAGE SHARES OF

   COMMON STOCK OUTSTANDING          11,869,967     7,969,986
                                   ============  ============



See Notes to Consolidated Financial Statements.

                                       F-4
<PAGE>

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


                                 SERIES A CONVERTIBLE                    PAID-IN
                                   PREFERRED STOCK     COMMON STOCK      CAPITAL
                                   NUMBER OF         NUMBER OF         PREFERRED
                                    SHARES   AMOUNT    SHARES   AMOUNT     STOCK

   BALANCE AT DECEMBER 31, 1995       --   $   --  2,995,425     $ 299   $    --

Private Placement                     --       --     10,000         1        --
Issuance of Shares for Acquisition    --       --         --        --        --
Issuance of Shares                    --       --     47,000         5        --
Issuance of Shares for Consulting
   Services                           --       --    284,000        28        --
Issuance of Shares in Payment of
   Loan                               --       --    227,000        23        --
Issuance of Shares for Advertising
   Credits                            --       --  1,136,000       114        --
Issuance of Shares for Settlement
   of Debt                            --       --    775,000        77        --
Issuance of Shares for Acquisition    --       --    468,000        47        --
Private Placement                     --       --    150,000        15        --
Net [Loss]                            --       --         --        --        --
                                      --   ------  --------- ---------   -------

   BALANCE - DECEMBER 31, 1996        --    $  --  6,092,425       609        --

Warrants Issued for Cost of
   Advertising Credits -
   Restatement                        --       --         --        --        --
                                   -----   ------   --------   -------   -------

   ADJUSTED BALANCE - DECEMBER 31,
     1996 - FORWARD                $   --      --  6,092,425   $   609   $    --


<TABLE>
<CAPTION>

                                                   ACCUMULATED    ACCUMULATED                        TOTAL
                                                     DURING         DEFICIT          PREPAID      STOCKHOLDERS'
                                        PAID-IN    DEVELOPMENT    DISCONTINUED     ADVERTISING      EQUITY
                                        CAPITAL       STAGE        OPERATIONS        CREDITS       [DEFICIT]
<S>                                 <C>           <C>            <C>                 <C>      <C>
   BALANCE AT DECEMBER 31, 1995     $ 1,796,700   $(1,226,454)   $ (620,908)         $  --    $   (50,363)

Private Placement                        19,999            --            --             --         20,000
Issuance of Shares for Acquisition       10,000            --            --             --         10,000
Issuance of Shares                           (5)           --            --             --             --
Issuance of Shares for Consulting
   Services                             213,534            --            --             --        213,562
Issuance of Shares in Payment of
   Loan                                 299,977            --            --             --        300,000
Issuance of Shares for Advertising
   Credits                            1,499,886            --            --     (1,500,000)            --
Issuance of Shares for Settlement
   of Debt                              943,543            --            --             --        943,620
Issuance of Shares for Acquisition          (47)           --            --             --             --
Private Placement                       299,985            --            --             --        300,000
Net [Loss]                                   --    (1,062,758)           --             --     (1,062,758)
                                    -----------    ----------   -----------    -----------    -----------

   BALANCE - DECEMBER 31, 1996        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 - DECEMBER 31,
     1996 - FORWARD                 $ 5,191,742   $(2,289,212)   $(620,908) $   (1,608,170) $     674,061
</TABLE>


See Notes to Consolidated Financial Statements.

                                       F-5
<PAGE>

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

--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY [DEFICIT]
--------------------------------------------------------------------------------


                                      SERIES A CONVERTIBLE              PAID-IN
                                      PREFERRED STOCK    COMMON STOCK   CAPITAL
                                    NUMBER OF            NUMBER OF     PREFERRED
                                     SHARES     AMOUNT   SHARES  AMOUNT  STOCK

   ADJUSTED BALANCE - DECEMBER 31,

     1996 - FORWARDED                       --   $--  6,092,425  $  609   $ --

Issuance of Shares for Consulting

   Services                                 --    --    100,000      10     --
Issuance of Shares for Consulting
   Services                                 --    --     75,000       8     --
Private Placement                           --    --     23,000       2     --
Issuance of Shares for Professional
   Services                                 --    --     18,500       2     --
Private Placement                           --    --     15,000       2     --
Issuance of Shares for Consulting
   Services                                 --    --    130,000      13     --
Private Placement                           --    --     62,611       6     --
Advertising Credits Used                    --    --         --      --     --
Net [Loss]                                  --    --         --      --     --
                                    ----------  ---------------  ------   ----

   BALANCE - DECEMBER 31, 1997 -
     FORWARD                                --   $--  6,516,536  $  652   $ --

<TABLE>
<CAPTION>
<S>                                <C>              <C>           <C>             <C>
                                        DEFICIT
                                      ACCUMULATED    ACCUMULATED                        TOTAL
                                        DURING         DEFICIT        PREPAID      STOCKHOLDERS'
                                      DEVELOPMENT    DISCONTINUED     ADVERTISING      EQUITY
                                         STAGE        OPERATIONS        CREDITS       [DEFICIT]

   ADJUSTED BALANCE - DECEMBER 31,


     1996 - FORWARDED              $   (2,289,212)  $   (620,908) $   (1,608,170) $       674,061

Issuance of Shares for Consulting

   Services                                    --             --              --          275,000
Issuance of Shares for Consulting
   Services                                    --             --              --          196,875
Private Placement                              --             --              --           34,500
Issuance of Shares for Professional
   Services                                    --             --              --           27,749
Private Placement                              --             --              --           33,750
Issuance of Shares for Consulting
   Services                                    --             --              --          235,625
Private Placement                              --             --              --          123,000
Advertising Credits Used                       --             --         213,732          213,732
Net [Loss]                             (3,631,105)            --              --       (3,631,105)
                                   --------------   ------------  --------------  ---------------

   BALANCE - DECEMBER 31, 1997 -
     FORWARD                       $   (5,920,317)  $   (620,908) $   (1,394,438) $    (1,816,813)
</TABLE>

See Notes to Consolidated Financial Statements.

                                       F-6
<PAGE>

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

                                   SERIES A CONVERTIBLE                  PAID-IN
                                      REFERRED STOCK      COMMON STOCK   CAPITAL
                                    NUMBER OF          NUMBER OF       PREFERRED
                                     SHARES   AMOUNT   SHARES  AMOUNT      STOCK
   BALANCE AT DECEMBER 31,

     1997 - FORWARDED                   --  $  --    6,516,536  $652   $      --

Exercise of Stock Warrants              --     --       66,000     7          --
Issuance of Shares in Settlement of
   Litigation                           --     --      399,081    39          --
Issuance of Shares for Services         --     --      612,911    62          --
Issuance of Stock Warrants for
   600,000 Shares of Common

   Stock for Consulting Services        --     --           --    --          --
Granting of Stock Options for
   266,750 Shares of Common Stock

   to Employees                         --     --           --    --          --
Private Placement of Common
   Stock                                --     --       70,000     7          --
Exercise of Stock Options               --     --       16,750     2          --
Issuance of Stock Warrants for
   390,000 Shares of Common

   Stock for Notes Payable              --     --           --    --          --
Private Placement of Series A
   Convertible Preferred Stock      45,000      5           --    --     224,995
270 Shares Issuable Pursuant to
   Financing Penalty                    --     --           --    --          --
Advertising Credits Used                --     --           --    --          --
Net [Loss]                              --     --           --    --          --
                                    ------  -----  -----------  ----   ---------

   BALANCE - DECEMBER 31, 1998 -
     FORWARD                        45,000  $   5   7,681,278  $ 769   $ 224,995



<TABLE>
<CAPTION>

                                                       DEFICIT
                                                      ACCUMULATED  ACCUMULATED                     TOTAL
                                                        DURING       DEFICIT      PREPAID      STOCKHOLDERS'
                                          PAID-IN    DEVELOPMENT  DISCONTINUED   ADVERTISING      EQUITY
                                          CAPITAL       STAGE      OPERATIONS      CREDITS       [DEFICIT]
<S>                                 <C>           <C>           <C>            <C>             <C>
   BALANCE AT DECEMBER 31,
     1997 - FORWARDED                $  6,118,198  $(5,920,317)  $  (620,908)   (1,394,438)     $(1,816,813)

Exercise of Stock Warrants                 59,393           --          --              --           59,400
Issuance of Shares in Settlement of
   Litigation                           1,538,353           --          --              --        1,538,392
Issuance of Shares for Services           903,838           --          --              --          903,900
Issuance of Stock Warrants for
   600,000 Shares of Common

   Stock for Consulting Services          656,284           --          --              --          656,284
Granting of Stock Options for
   266,750 Shares of Common Stock

   to Employees                           133,375           --          --              --          133,375
Private Placement of Common
   Stock                                   69,993           --          --              --           70,000
Exercise of Stock Options                  24,998           --          --              --           25,000
Issuance of Stock Warrants for
   390,000 Shares of Common

   Stock for Notes Payable                299,085           --          --              --          299,085
Private Placement of Series A
   Convertible Preferred Stock                 --           --          --              --          225,000
270 Shares Issuable Pursuant to
   Financing Penalty                          253           --          --              --              253
Advertising Credits Used                       --           --          --          15,942           15,942
Net [Loss]                                     --   (2,881,162)         --              --       (2,881,162)
                                     ------------  -----------   ---------  --------------  ---------------

   BALANCE - DECEMBER 31, 1998 -
     FORWARD                         $ 9,803,770 $ (8,801,479)  $(620,908) $   (1,378,496) $      (771,344)
</TABLE>


See Notes to Consolidated Financial Statements.

                                       F-7
<PAGE>

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

                                        SERIES A CONVERTIBLE            PAID-IN
                                        PREFERRED STOCK  COMMON STOCK   CAPITAL
                                      NUMBER OF            NUMBER OF   PREFERRED
                                     SHARES AMOUNT     SHARES AMOUNT     STOCK

   BALANCE - DECEMBER 31, 1998 -

     FORWARDED                        45,000  $ 5   7,681,278   $769  $224,995

Issuance of Warrants -
   Consultant                             --   --          --     --        --
Issuance of Shares for Cancelled
   Liabilities                            --   --      80,000      8        --
Issuance of Shares for Cancelled
   Liabilities                            --   --      25,230      2        --
Issuance of Warrant - Loan Extension      --   --          --     --        --
Issuance of Warrants for Notes
   Payable                                --   --          --     --        --
Issuance of Director Warrants             --   --          --     --        --
Issuance of Shares for Services           --   --      20,000      2        --
Issuance of Shares upon Conversion
   of Notes                               --   --     416,666     42        --
Issuance of Shares for Services           --   --      15,000      1        --
Issuance of Shares for Litigation
   Settlement                             --   --     550,000     55        --
Issuance of Shares Upon Conversion
   of Shareholder Note                    --   --     140,000     14        --
27,000 Shares Issuable Pursuant to
   Financing Penalty                      --   --          --     --        --
Rights to Receive Additional
   Shares Under Beneficial

   Conversion Feature                     --   --          --     --        --
Net [Loss]                                --   --          --     --        --
                                    --------  ---  ----------   ----  --------

   BALANCE - DECEMBER 31,

     1999 - FORWARD                   45,000  $ 5   8,928,174   $893  $224,995


<TABLE>
<CAPTION>
                                                      DEFICIT
                                                    ACCUMULATED   ACCUMULATED                     TOTAL
                                                       DURING       DEFICIT       PREPAID     STOCKHOLDERS'
                                         PAID-IN    DEVELOPMENT  DISCONTINUED  ADVERTISING       EQUITY
                                         CAPITAL        STAGE      OPERATIONS     CREDITS       [DEFICIT]

   BALANCE - DECEMBER 31, 1998 -
<S>                                  <C>          <C>            <C>        <C>            <C>
     FORWARDED                       $ 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                            74,992            --          --              --       75,000
Issuance of Shares for Cancelled
   Liabilities                            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            3,398            --          --              --        3,400
Issuance of Shares upon Conversion
   of Notes                               49,958            --          --              --       50,000
Issuance of Shares for Services            1,169            --          --              --        1,170
Issuance of Shares for Litigation
   Settlement                            106,195            --          --              --      106,250
Issuance of Shares Upon Conversion
   of Shareholder Note                    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 - FORWARD                  $10,480,703  $(10,181,714)  $(620,908) $   (1,378,496) $(1,474,522)

</TABLE>

See Notes to Consolidated Financial Statements.

                                       F-8
<PAGE>

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

                               SERIES A CONVERTIBLE                    PAID-IN
                                  PREFERRED STOCK  COMMON STOCK        CAPITAL '
                                   NUMBER OF      NUMBER OF           PREFERRED
                                  SHARES  AMOUNT   SHARES    AMOUNT     STOCK

   BALANCE - DECEMBER 31, 1999 -
     FORWARDED                     45,000  $  5   8,928,174  $  893  $ 224,995

Issuance of Shares Upon

   Conversion of Notes                 --    --   2,520,000     252         --
Issuance of Shares Upon
   Conversion of Notes                 --    --     104,635      10         --
Issuance of Shares Upon
   Conversion of Notes                 --    --     495,365      50         --
Issuance of Shares for Services        --    --      25,000       2         --
Exercise of Stock Options              --    --     100,000      10         --
Exercise of Warrants                   --    --      20,000       2         --
Conversion of Preferred Stock     (45,000)   (5)    225,000      23   (224,995)
Exercise of Stock Options              --    --     200,000      20         --
Issuance of Shares for Services        --    --      10,000       1         --
Issuance of Shares for Services        --    --     800,000      80         --
Write-Down of Prepaid
   Advertising Credits                 --    --          --      --         --
Issuance of Shares for Services        --    --      10,000       1         --
Net [Loss]                             --    --          --      --         --
                                 --------  ----  ----------  ------  ---------

BALANCE - DECEMBER 31, 2000            --  $ --  13,438,174  $1,344  $      --
                                 ========  ====  ==========  ======  =========


<TABLE>
<CAPTION>
                                                  DEFICIT
                                                ACCUMULATED    ACCUMULATED                  TOTAL
                                                   DURING        DEFICIT       PREPAID   STOCKHOLDERS'
                                    PAID-IN     DEVELOPMENT    DISCONTINUED  ADVERTISING    EQUITY
                                    CAPITAL        STAGE        OPERATIONS     CREDITS     [DEFICIT]

   BALANCE - DECEMBER 31, 1999 -
<S>                               <C>          <C>            <C>         <C>          <C>
     FORWARDED                    $10,480,703  $(10,181,714)  $ (620,908) $(1,378,496) $ (1,474,522)

Issuance of Shares Upon

   Conversion of Notes              1,433,968            --           --           --     1,434,220
Issuance of Shares Upon
   Conversion of Notes                 84,745            --           --           --        84,755
Issuance of Shares Upon
   Conversion of Notes                450,732            --           --           --       450,782
Issuance of Shares for Services         4,998            --           --           --         5,000
Exercise of Stock Options              16,990            --           --           --        17,000
Exercise of Warrants                   16,248            --           --           --        16,250
Conversion of Preferred Stock         224,977            --           --           --            --
Exercise of Stock Options              19,980            --           --           --        20,000
Issuance of Shares for Services         3,749            --           --           --         3,750
Issuance of Shares for Services        74,920            --           --           --        75,000
Write-Down of Prepaid
   Advertising Credits                     --            --           --      684,056       684,056
Issuance of Shares for Services         1,499            --           --           --         1,500
Net [Loss]                                 --    (1,456,471)          --           --    (1,456,471)
                                  -----------  ------------   ----------  -----------  ------------

BALANCE - DECEMBER 31, 2000       $12,813,509  $(11,638,185)  $ (620,908) $  (694,440) $   (138,680)
                                  ===========  ============   ==========  ===========  ============
</TABLE>

See Notes to Consolidated Financial Statements.

                                                                     F-9
<PAGE>

IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                     CUMULATIVE
                                                                                       AMOUNTS
                                                                                        FROM
                                                                                     JULY 9, 1992
                                                                                     [INCEPTION OF
                                                                                     THE CURRENT
                                                                                     DEVELOPMENT
                                                               YEARS ENDED           STAGE] TO
                                                               DECEMBER 31,          DECEMBER 31,
                                                          2 0 0 0         1 9 9 9      2 0 0 0
OPERATING ACTIVITIES:                                ------------    ------------    -------------
Net [Loss]                                           $ (1,853,193)   $ (1,380,235)   $(12,034,907)
                                                     ------------    ------------    ------------
<S>                                                 <C>             <C>              <C>
Adjustments to Reconcile Net [Loss] to Net Cash
  [Used for] Operating Activities:
  Extraordinary Gain - Sale of Technology                 396,722              --         396,722
  [Increase] in Due from Officers                              --              --            (120)
  Depreciation                                                 --          29,993          56,532
  Contract Services Paid with Common Stock                 85,250         102,531       2,258,696
  Interest Paid with Common Stock                          11,584          16,776         328,613
  Interest Expense - Deferred Finance Costs                    --          82,577         299,085
  Grant of Stock Options and Warrants for
    Past Services                                              --         108,000         897,659
  Amortization of Prepaid Advertising Credits                  --              --         229,674
  Loss on Disposal of Property and Equipment                   --              --          44,072
  Amortization - Discount Note Payable                      3,056          16,806          19,862
  Interest Expense - Beneficial Conversion Feature      1,101,714         200,000       1,301,714
  Interest Expense - Warrant Discount                      29,470          21,000          50,470
  Stock Issued to Settle Litigation                            --          56,250          56,250
  Note Issued to Settle Litigation                             --          50,000          50,000
  Write-down of Prepaid Advertising Credits               684,056              --         684,056

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

  Increase [Decrease] in:
    Accounts Payable                                       14,706         (79,086)         33,151
    Accrued Expenses                                        7,958          (6,430)      1,564,392
    Accrued Salaries                                           --        (153,190)             --
    Accrued Payroll Taxes                                      --         (48,006)             --
    Accrued Marketing Fees                                     --         (53,000)             --
    Accrued Legal Fees                                         --         (50,955)             --
    Accounts Payable Subject to Transfer                 (506,585)        528,351          21,766
    Accrued Interest Expense                                   --         130,022         130,022
                                                     ------------    ------------    ------------

  Total Adjustments                                     1,827,931         956,138       8,450,489
                                                     ------------    ------------    ------------

NET CASH - OPERATING ACTIVITIES - FORWARD            $    (25,262)   $   (424,097)   $ (3,584,418)
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-10
<PAGE>

IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                      CUMULATIVE
                                                                                        AMOUNTS
                                                                                         FROM
                                                                                      JULY 9, 1992
                                                                                      [INCEPTION OF
                                                                                      THE CURRENT
                                                                                      DEVELOPMENT
                                                               YEARS ENDED            STAGE] TO
                                                               DECEMBER 31,           DECEMBER 31,
                                                          2 0 0 0        1 9 9 9       2 0 0 0

<S>                                                   <C>            <C>             <C>
   NET CASH - OPERATING ACTIVITIES - FORWARDED        $    (25,262)  $    (424,097)  $ (3,584,418)
                                                      ------------   -------------   ------------

INVESTING ACTIVITIES:

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

   NET CASH - INVESTING ACTIVITIES                              --              --       (104,946)
                                                      ------------   -------------   ------------

FINANCING ACTIVITIES:

   Convertible Notes Payable                                    --         545,000        545,000
   Proceeds from Exercise of Options and Warrants           42,000              --         42,000
   Proceeds from Notes Payable                                  --              --        775,000
   Proceeds from Issuance of Common Stock                       --              --      2,247,304
   Proceeds from Preferred Stock Subscriptions                  --              --        225,000
   Loans from Stockholders                                      --          10,750         52,050
   Payment on Loans from Stockholders                      (10,050)        (13,000)       (34,550)
   Bond Discount                                                --          55,000         55,000
   Payment of Notes Payable                                     --        (196,645)      (196,645)
                                                      ------------   -------------   ------------

   NET CASH - FINANCING ACTIVITIES                          31,950         401,105      3,710,159
                                                      ------------   -------------   ------------

   NET INCREASE [DECREASE] IN CASH                           6,688         (22,992)        20,795

CASH - BEGINNING OF PERIODS                                     --          22,992        (14,107)
                                                      ------------   -------------   ------------

   CASH - END OF PERIODS                              $      6,688   $          --   $      6,688
                                                      ============   =============   ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the periods for:
     Interest                                         $         --   $          --   $      9,047
     Income Taxes                                     $         --   $          --   $         --
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-11
<PAGE>

IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
   During the quarter ending March 31, 2000, the Company issued 3,120,000 shares
of Common Stock upon conversion of past due notes of $708,217, past due interest
of $130,022 and current interest of $11,584.

   During the quarter ending June 30, 2000, the Company issued 25,000 shares for
services rendered.

   During the quarter ending September 30, 2000, the Company issued 10,000
shares for services rendered.

   During the quarter ending December 31, 2000, the Company issued 810,000
shares for services rendered.

   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-12
<PAGE>

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

[1] ORGANIZATION

IMSCO, Technologies, Inc. ["the Company"], a Delaware corporation, is currently
a development stage enterprise. Prior to February 2000, the Company developed a
separation system to remove caffeine from coffee. In addition, a second
prototype has been tested to remove viruses from plasma.

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, 2000, the subsidiaries
had minimal activity, did not own any assets and are not liable for any
liabilities.

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 and the
delivery of releases to the Company from the holders of certain debts. The
agreement is subject to a number of conditions, including the delivery to IMSCO
of the consideration. If the former officer and director does not perform, the
Company can seek other licensees or purchasers for its technology.

[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.

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, 2000, 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.

EARNINGS [LOSS] PER SHARE - "Basic" earnings per share equals net income divided
by weighted average common shares outstanding during the period. "Diluted"
earnings per common share equals net income divided by the sum of weighted
average common shares outstanding during the period plus common stock
equivalents if dilutive. The Company's basic and diluted per share amounts are
the same since the assumed exercise of stock options, and warrants, and
preferred stock are all anti-dilutive. The amount of common stock equivalents
excluded from the calculation were 2,339,645 in 2000 and 3,079,645 in 1999.
These common stock equivalents could potentially dilute 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.

ADVERTISING - The Company expenses advertising costs as incurred. For the years
ended December 31, 2000 and 1999, advertising expense was $-0- and $12,000,
respectively.

                                      F-13
<PAGE>
IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #2
--------------------------------------------------------------------------------

[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]

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.

[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, 2000 is as follows:

Deferred Tax Asset:
   Net Operating Loss Carryforward                            $     3,619,000
   Valuation Allowance for Deferred Tax Asset                       3,619,000
                                                              ---------------

   NET DEFERRED TAX ASSET                                     $            --
   ----------------------                                     ===============

The valuation allowance of $3,619,000 at December 31, 2000, represents a
increase of $495,000 from the preceding year.

The Company has approximately $10,645,000 of net operating losses as of December
31, 2000 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
2020. 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 $10,645,000
which expire as follows:

      YEARS ENDED                                              AMOUNT
     DECEMBER 31,

        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                                                      2,085,000
        2013                                                      4,195,000
        2020                                                      1,456,000
                                                           ----------------

        TOTAL                                              $     10,645,000
        -----                                              ================
                                      F-14
<PAGE>

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

[3] INCOME TAXES [CONTINUED]

A reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate for the years ended December 31, 2000 and 1999
follows:

                                       2 0 0 0              1 9 9 9
                                       -------              -------

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

   EFFECTIVE INCOME TAX RATE                   --                 --
   -------------------------          ===========       ============

[4] RELATED PARTY TRANSACTIONS

The Company leased office space starting October 1, 2000 on a month-to-month
basis from an officer and director of the Company for $1,000 per month, totaling
$3,000 for the year ended December 31, 2000. The amount due to the officer was
$3,000 at December 31, 2000.

In 1999, the Company leased office space on a month-to-month basis from a former
officer of the Company. The lease terminated in 1999. The Company incurred
$1,750 of rent expense under this lease for the year ended December 31, 1999.

On October 1, 1999, the Company's current Chairman and Chief Executive Officer
["CEO"] 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. The CEO exercised 100,000 options during 2000 [See Note
11].

On October 13, 2000, the CEO was granted 800,000 shares of IMSCO stock. At the
date of the grant, the stock had a fair market value of approximately $75,000
[See Note 6].

[5] NOTES PAYABLE

In March 2000, the Company issued 3,120,000 shares of its common stock with a
market value of $1,969,757 in satisfaction of all past due notes and interest in
the amount of $849,823. Also, the exercise price of the warrants issued to the
holder of the notes were reduced $.0001. The conversion of the note and price
reduction of the warrants resulted in a charge to operations in 2000 of
$1,119,934.

The senior secured convertible promissory notes payable of $143,355 matured
January 31, 1999 including interest at 10% and were convertible into shares of
the Company's common stock. The notes were convertible 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 and the balance was amortized in 2000
when the notes were converted into common stock. 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.

                                      F-15
<PAGE>

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

[5] NOTES PAYABLE [CONTINUED]

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 is 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 in 1999. The remaining value of
the warrants was expensed in 2000 when the notes were converted into common
stock.

[6] EQUITY TRANSACTIONS

Equity transactions during the year ended December 31, 2000 are as follows:

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

    DATE  PRICE PER SHARE NUMBER OF SHARES PAR VALUE PAID-IN CAPITAL   TOTAL

March 9      $    .57           2,520,000  $     252 $   1,433,968   $ 1,434,220
March 28     $    .81             104,635         10        84,745        84,755
March 31     $    .91             495,365         50       450,732       450,782
                            -------------  --------- -------------   -----------

   TOTALS                       3,120,000  $     312 $   1,969,445   $ 1,969,757
   ------                   =============  ========= =============   ===========

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

    DATE  PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN CAPITAL  TOTAL

March 9      $    .20              25,000  $         2 $       4,998   $   5,000
July 13      $    .38              10,000            1         3,749       3,750
October 9    $    .15              10,000            1         1,499       1,500
October 13   $    .09             800,000           80        74,920      75,000
                            -------------  ----------- -------------   ---------

   TOTALS                         845,000  $        84 $      85,166   $  85,250
   ------                   =============  =========== =============   =========

[C] Common stock issued upon conversion of preferred stock.

    DATE PRICE PER SHARE NUMBER OF SHARES    PAR VALUE PAID-IN CAPITAL   TOTAL

June 6      $   1.00             225,000    $       23 $     224,977   $      --
                           =============    ========== =============   =========

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. The preferred stock was converted into common stock
June 6, 2000.

                                      F-16
<PAGE>
IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #5
--------------------------------------------------------------------------------

[6] EQUITY TRANSACTIONS [CONTINUED]

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN CAPITAL  TOTAL


March 27      $    .17             100,000  $        10 $      16,990   $ 17,000
November 29   $    .10             200,000           20        19,980     20,000
                             -------------  ----------- -------------   --------

   TOTALS                          300,000  $        30 $      36,970   $ 37,000

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN CAPITAL  TOTAL

April 17      $  .8125              20,000  $         2 $      16,248   $ 16,250
                              ============= =========== =============  =========

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

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN CAPITAL  TOTAL

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

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN 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:
    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN 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
                             =============  =========== ============= ==========

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

[A] Common stock issued pursuant to the exercise of stock warrants was as
follows:
    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN CAPITAL  TOTAL

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

                                      F-17
<PAGE>

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

[6] EQUITY TRANSACTIONS [CONTINUED]

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN 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
   ------                     =============  ========== =============  =========

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN 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
                              =============  ========== =============  ========

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN CAPITAL  TOTAL

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

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN CAPITAL  TOTAL

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

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN 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:

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN 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-18
<PAGE>

IMSCO TECHNOLOGIES, INC. AND SUBSIDIARIES
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, SHEET #7
--------------------------------------------------------------------------------

[6] EQUITY TRANSACTIONS [CONTINUED]

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN 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:

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN 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
                              =============  ==========  ============  =========

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN 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
                              =============  ==========  ============ ==========

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN CAPITAL  TOTAL

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

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN CAPITAL  TOTAL

June 7        $    1.00               5,000  $        1  $      9,999   $ 10,000
December 17   $    1.00               5,000          --        10,000     10,000
December 31   $    2.00             150,000          15       299,985    300,000
                              -------------  ----------  ------------   --------

   TOTALS                           160,000  $       16  $    319,984   $320,000
                              =============  ==========  ============   ========

                                      F-19
<PAGE>

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

[6] EQUITY TRANSACTIONS [CONTINUED]

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

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN CAPITAL  TOTAL

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

[F] Common stock issued for acquisition as follows:

    DATE   PRICE PER SHARE NUMBER OF SHARES   PAR VALUE PAID-IN 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 for the year ended December 31, 1999.

PREPAID ADVERTISING CREDITS - On July 17, 2000, the Company entered into an
agreement with SonicPort.Com, Inc. ["SonicPort"] to sell its Media Credits for
694,400 restricted shares of SonicPort common stock having an estimated fair
value of $750,000. SonicPort will pay for the Media Credits on a dollar for
dollar basis as the Media is used. If SonicPort has not used all of the Media
Credits by July 1, 2001 IMSCO shall be entitled to all the remaining shares. The
Company has written down its Media Credits to its fair value of $694,440 as of
December 31, 2000. Consummation of the transaction is dependent upon future
events.

[9] EXTRAORDINARY GAIN

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 $50,000 and the assumption of substantially all of
the Company's accounts payable. As of December 31, 2000, the former officer and
director had paid the Company $50,000 and discharged or assumed $506,585 of
liabilities. The Company recorded an extraordinary gain of $396,722 [net of
income tax of $204,400] for the year ending December 31, 2000.

                                      F-20
<PAGE>

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

[10] 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 in 1999. As shown in the accompanying
financial statements, the Company incurred a net loss before extraordinary items
of $1,853,193 for the year ended December 31, 2000. The Company also recorded a
gain from the sale of patents and technology to a former officer and director of
$601,122, net of income taxes of $204,400. The Company has suffered recurring
losses since its inception primarily resulting from no revenues, has accumulated
deficits at December 31, 2000 of $12,259,093 and has utilized $25,262 in cash
for operations for the year ended December 31, 2000. The significant operating
loss as well as the uncertain sources of financing, creates an uncertainty about
the Company's ability to continue as a going concern. Management of the Company
has developed a business plan to merge with a private company. The Company will
also seek financing through a public offering. The continuation of the Company
as a going concern is dependent upon the success of these plans. There can be no
assurance that management's plans to reduce operating losses and obtain
additional financing to fund operations will be successful. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and classification of
liabilities that might be necessary in the event the Company cannot continue in
existence.

[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 exercisable 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, 2000, 950,000
options were outstanding of which 650,000 options were outstanding to employees
and former employees.

                                      F-21
<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.

                                           2 0 0 0                 1 9 9 9
                                ------------------------- ----------------------
                                                WEIGHTED                WEIGHTED
                                                 AVERAGE                 AVERAGE

                                                EXERCISE                EXERCISE
                                   SHARES         PRICE    SHARES         PRICE

Outstanding - Beginning of Years   1,250,000   $     .94    360,000  $      1.48
Granted or Sold During the Years     600,000   $     .10    900,000  $       .72
Canceled During the Years           (600,000)  $     .17         --  $        --
Expired During the Years                  --   $      --    (10,000) $       .90
Exercised During the Years          (300,000)  $     .12         --  $        --
                                ------------              ---------

   Outstanding - End of Years        950,000   $    1.15  1,250,000  $       .94
                                ============              =========

   Exercisable - End of Years        950,000   $    1.15  1,250,000  $       .94
                                ============              =========

The following table summarizes stock options information as of December 31,
2000:

                                  OPTIONS OUTSTANDING
                     -----------------------------------------
                                                    WEIGHTED-
                                                    ---------
                                      WEIGHTED-      AVERAGE
                                       AVERAGE      REMAINING

                       NUMBER         EXERCISE     CONTRACTUAL

EXERCISE PRICE       OUTSTANDING        PRICE         LIFE

$.10                     400,000   $       .10           3.7
$1.50                    350,000          1.50           3.3
$2.63                    200,000          2.63           1.8
                     -----------

   TOTALS                950,000   $      1.15           3.2
   ------            ===========

The exercise prices of the options outstanding at December 31, 2000, range
between $.10 and $2.63 with a weighted average contractual life of 3.2 years.

The following table summarizes the activity in common shares subject to
warrants:

                                        2 0 0 0                    1 9 9 9
                                ------------------------   ---------------------
                                               WEIGHTED                 WEIGHTED
                                                AVERAGE                  AVERAGE

                                               EXERCISE                 EXERCISE
                                SHARES           PRICE       SHARES       PRICE

Outstanding - Beginning of Years1,829,645   $      1.40     1,459,645  $    1.35
Granted or Sold During the Years  140,000   $       .04       455,000  $    1.45
Canceled During the Years        (140,000)  $      1.43       (35,000) $    1.00
Expired During the Years         (300,000)  $      1.55       (50,000) $     .90
Exercised During the Years       (140,000)  $       .04            --  $      --
                                ---------                ------------

   Outstanding - End of Years   1,389,645   $      1.36     1,829,645  $    1.40
                                =========                ============

   Exercisable - End of Years   1,389,645   $      1.36     1,829,645  $    1.40
                                =========                ============

                                      F-22
<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,
2000:

                                              WEIGHTED-
                                               AVERAGE      WEIGHTED-

                                              REMAINING      AVERAGE
                               NUMBER        CONTRACTUAL    EXERCISE

EXERCISE PRICES              OUTSTANDING        LIFE          PRICE

$.40                              35,000           2.8   $       .40
$1.00                            335,000           2.8   $      1.00
$1.32 to $1.50                   969,534           1.8   $      1.46
$2.50                             50,111           2.0   $      2.50
                            ------------

   TOTALS                      1,389,645           1.8   $      1.36
                            ============

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
years ended December 31, 2000 and 1999, stock compensation of $-0- and $56,000
was recognized for stock-based employee amounts, respectively.

The exercise prices of the warrants outstanding at December 31, 2000 range
between $.40 and $2.50 with a weighted average contractual life of 1.8 years.

During the year, 600,000 options issued to the Company's CEO had been repriced
from $.17 per share to $.10 per share, the fair value at the time of
modification. Variable accounting is required for the 600,000 options from the
date of modification November 29, 2000 until the date the options are exercised,
forfeited or expired.

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

                                                 DECEMBER 31,
                                           2 0 0 0           1 9 9 9

Net Loss as Reported                   $    (1,456,471)  $   (1,380,235)
                                       ===============   ==============

Pro Forma Net Loss                     $    (1,542,171)  $   (1,475,235)
                                       ===============   ==============

Net Loss Per Share as Reported         $          (.12)  $         (.17)
                                       ===============   ==============

Pro Forma Net Loss Per Share           $          (.13)  $         (.19)
                                       ===============   ==============

The weighted average grant date fair value of options and warrants granted in
2000 and 1999 was $.04 and $.96, respectively.

                                      F-23
<PAGE>

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

[11] STOCK BASED COMPENSATION [CONTINUED]

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:

                                           2 0 0 0            1 9 9 9

Expected Life [Years]                          5                  5
Risk-Free Interest Rate                        5  %               6  %
Expected Dividends                            --                 --
Expected Volatility                           90  %             115  %

[12] 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.

                               . . . . . . . . . .

                                      F-24
<PAGE>
                                   SIGNATURES

     Pursuant to the requirements of the 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 J. KEATING
                                           ----------------------
                                           Timothy J. Keating
                                           Chief Executive Officer
                                           Date: (March  __, 2001)


     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 J. KEATING
----------------------
Timothy J. Keating, Chairman
and Chief Executive Officer
Date: (March __, 2001)


/s/ GARY J. GRAHAM
------------------
Gary J. Graham, Director & Secretary
Date: (March  __, 2001)