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

                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the fiscal year ended         December 31, 1999
                              ----------------------------------

                               OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from _________________ to ________________

                        Commission file number 000-29662

                         ROLLERBALL INTERNATIONAL, INC.
                 ----------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

              Delaware                                         95-4478767
  ------------------------------                           ------------------
  (State or Other Jurisdiction of                           (I.R.S. Employer
   Incorporation or Organization)                           Identification No.)

           Los Angeles, CA                                        90069
----------------------------------------                    ------------------
(Address of Principal Executive Offices)                        (Zip Code)

                                 (310) 275-5313
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

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


                                                         Name of Each Exchange
 Title of Each Class                                      on Which Registered
 -------------------                                     ----------------------
        None                                                      None

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

        None                                                      None
 -------------------                                     ----------------------

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

                          Common Stock, $.001 Par Value
                          -----------------------------

                                       1
<PAGE>


         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(D) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No ___

         Check if there is no 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-K
or any amendment to this Form 10-K. [ ]

         The Company's gross revenues for its fiscal year ended December 31,
1999 were $1,657,977 and its net revenues were $1,588,177. See "Management
Discussion and Analysis".

         On April 3, 2000, the aggregate market value of the Common Stock of
Registrant held by non-affiliates of Registrant computed by reference to the
closing bid price $0.75 at which the stock was sold on such date was
approximately $3,200,000.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

         On April 3, 2000, there were 6,106,695 shares of Common Stock, $.01 par
value, issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         None.

                                       2
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<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

                                     PART I
                                                                            PAGE
                                                                            ----
<S>        <C>                                                            <C>

Item 1.    Business .......................................................    4

Item 2.    Description of Property ........................................   15

Item 3.    Legal Proceedings ..............................................   15

Item 4.    Submission of Matters to a Vote of Security Holders ............   15

                                     PART II

Item 5.    Market For Common Equity and Related Stockholder Matters .......   16

Item 6.    Management's Discussion and Analysis ...........................   17

Item 7.    Financial Statements ...........................................   26

Item 8.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure .......................................   26

                                     PART III

Item 9.    Executive Officers and Directors of the Company ................   28

Item 10.   Executive Compensation .........................................   31

Item 11.   Security Ownership of Certain Beneficial Owners and Management .   36

Item 12.   Certain Relationships and Related Transactions .................   38

Item 13.   Exhibits, Financial Statement Schedules and Reports on Form 10-K   42
</TABLE>

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<PAGE>

         This annual report on Form 10-KSB, including Item 1 ("Business") and
Item 6 ("Management's Discussion and Analysis"), contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in
this report, the words, "believe," "anticipate," "think," "intend," "plan,"
"will be," "expect," and similar expressions identify such forward-looking
statements. Such statements regarding future events and/or the future financial
performance of the Company are subject to certain risks and uncertainties, which
could cause actual events or the actual future results of the Company to differ
materially from any forward-looking statement. Such risks and uncertainties
include among other things, the availability of any needed financing, the
Company's ability to implement its business plan, the impact of competition, the
management of growth, and other risks and uncertainties that may be detailed
from time to time in the Company's reports filed with the Securities and
Exchange Commission. In light of the significant risks and uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such statements should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.

                                     PART I
Item 1.
BUSINESS

         The Company develops, manufactures, distributes and markets an
innovative, patented design of inline skates under the registered trademark
RollerBall(R). The RollerBall skate differs from traditional inline skates (e.g.
Rollerblades(R), Bauer(R), Ultra-Wheels(R), etc.) by offering the consumer a
skate that has spherical-shaped wheels instead of the flat, disk-shaped wheels
of traditional inline skates, resulting in enhanced performance. The Company has
been granted several United States and foreign patents for its innovative
skateball designs and technology. Since its formation, the Company has expanded
its product line to presently include 18 models of inline skates that appeal to
a wide range of price and performance levels for use in recreational, fitness,
hockey and aggressive skating. RollerBall also offers related accessories
including helmets, safety pads and replacement parts.

         RollerBall's inline skates differ from traditional inline skates in
appearance and in performance. The Company believes that its proprietary
RollerBall skating system is the next generation of inline skates and the first
major product innovation in inline skating since the introduction of the
original Rollerblade(R) inline skate in the 1970's. RollerBall offers inline
skates with unique patented spherical wheels that are slightly smaller than a
tennis ball (70mm or 60mm in size) and are engineered to create support and
balance when in contact with the skating surface. The spherical cross section of
the Radial Skateball Technology(TM) provides a uniform, unchanging shape and a
greater area of contact with the skating surface. RollerBall's design allows a
skater to achieve levels of acceleration, balance and maneuverability greater
than that which can be achieved by comparably priced traditional inline skates.
Furthermore, because of these characteristics, the Company believes that its
RollerBall skates enhance the experience of inline skating while providing a
more stable, body-friendly platform which will appeal to all skaters from
beginner to advanced. The Company believes these product features provide
RollerBall with a skate superior to any other product commercially available and
will enable RollerBall to compete with the major inline skate manufacturers both
in the United States and worldwide.

                                       4
<PAGE>


         On April 1, 1998, the Company completed its initial public offering.
The Company sold 1,250,000 shares of common stock at an offering price of $5.00
per share. The Company received net proceeds of $5,051,373.

         The Company was incorporated in the State of Delaware on March 7, 1994.
The principal executive offices of the Company are located at 9255 Doheny Road,
Suite 2705, Los Angeles, California 90069 and its telephone number is (310)
275-5313.

STRATEGY

         The Company's primary goal is to become a leading developer and
marketer of inline skates and accessories to the recreational/fitness segment
through retail channels of distribution (specialty sporting goods stores,
sporting goods stores, mass merchandisers and direct mail catalogues), as well
as through direct response television (television home shopping
channels/services and infomercials) throughout the world. The Company's
secondary objective is to expand the distribution and sales of accessories and
replacement parts and to aggressively seek out and establish licensing
arrangements with third parties for the licensing of the RollerBall trademarks
and Radial Skateball technology. The attainment of this secondary goal will, in
management's opinion, support the Company's primary goal both by contributing
licensing revenue to the Company, and by building consumer awareness of the
RollerBall brand name. While the Company has had discussions with potential
licensees, no agreements have been consummated and there can be no assurance
that the Company's licensing efforts will be successful.

         The Company believes that a key factor in the Company's development is
the continual design improvement and refinement of its products. Management
expends significant time, effort and resources on the refinement of the
Company's existing product line based upon its observations and research of
market trends and competing products. The Company intends to continue to
emphasize the unique design of its skateballs and the enhanced performance
characteristics of its skates. The balance enhancement characteristics of the
Radial Skateball Technology(TM) will also be emphasized by the Company to
promote its products to inexperienced skaters, occasional recreational skaters,
and skaters who would ordinarily not attempt inline skating.

                                       5
<PAGE>

The Company's strategic business plan is to:

          1) Continue to penetrate the United States retail market through
    increased marketing and sales efforts aimed at generating distribution with
    the key sporting goods and mass merchandising distributors;

          2) Continue to expand upon its current international market base by
    engaging additional distributors and strategically expanding into the
    Canada, Mexico, South America, Australia, Japan and Eastern European
    countries;

          3) Successfully complete the development, engineering and tooling of
    RollerBall's next generation of skates positioned to mass merchandisers; and

          4) Provide marketing support to the expanding distribution and sales
    base of RollerBall inline skates and accessories by licensing the RollerBall
    trademarks and Radial Skateball technology to third parties.

     The Company is also considering establishing licensing arrangements with
third party specialty inline skate manufacturers and marketers whereby the
Company may sublicense the marketing and distribution of certain of its
products.

                                       6
<PAGE>


INDUSTRY BACKGROUND

         Roller skating first became popular in the United States in the 1930's,
and the most common skate in use at that time was the traditional four-wheel
roller skate. Skating as an outdoor activity dramatically increased in
popularity with the development of urethane wheels in the 1960's, which improved
the performance and made skates more enjoyable for outdoor use.

         The inline skate market was created in the 1970's with the introduction
of Rollerblade(R), one of the current dominant manufacturers (along with K2) of
inline skates. Inline skates were originally sold primarily through specialty
sporting goods retailers, at prices ranging from $100 up to $400, specifically
to cross-training athletes and as a summer training product for serious ice
hockey players. According to the Sporting Goods Manufacturing Association
("SGMA"), sales of inline skates were $430 million in 1999. SGMA has reported
that the sport now claims close to 32 million participants, and with respect to
the number of participants, inline skating has surpassed other sports such as
golf, baseball, tennis, bowling and downhill skiing in market size.
Approximately 22% to 25% of US households own inline skates, with 62% of the
participants between the ages of 7 - 17 years. It is estimated that
approximately 60% of 1999 purchases were by first time buyers.

         The development and success of inline skates has dramatically changed
the demographics of roller skating. Boys and girls, as well as men and women,
now skate in nearly equal numbers. The inline skate has substantially replaced
the four wheel skate throughout the marketplace. Management of the Company
believes that roller skating, dominated now by inline skates, will continue to
be a popular form of entertainment and exercise for many years to come, as
evidenced by the fast growing segments of Chidren's skates, the Women's skate
market, and Recreational and Roller Hockey.

         The inline skate market is composed of four distinct and key segments
with manufacturers strategically positioning their products to meet the
requirements of each segment. The market segments are: (1) recreational/fitness;
(2) roller hockey; (3) aggressive (stunt and extreme skating); and to a lesser
extent (4) speed skating. Based upon industry sales figures, the
recreational/fitness segment accounts for 73% of sales; the roller hockey
segment accounts for 10% of sales; the aggressive segment accounts for 15% of
sales; and the speed skating segment accounts for 2% of sales. According to
industry sales of inline skates, the recreational/fitness segment has the most
participants and also offers the widest selection of skates. Roller hockey has
demonstrated strong growth in recent years primarily as a function of the
increase of participants in "street" hockey and the proliferation of roller
hockey leagues and teams.

                                       7
<PAGE>

PRODUCT DESIGN, DEVELOPMENT AND ENGINEERING

         All the design, development and engineering of the Company's skate
models is performed by the Company in Southern California. The production
engineering of the skates is facilitated via a combination of in-house efforts
and also in association with unaffiliated third parties in both the United
States and in Asia. The Company does not yet design or manufacture the skate
boots, which it purchases from third party vendors in Thailand, Taiwan and the
People's Republic of China. The selection of the style, materials and quality of
the boots and liners for each model is, however, under the strict supervision of
the Company's management.

         The Company believes that the major performance advantages of the
patented RollerBall skates over the competition's standard three, four or five
wheel inline skates are enhanced stability, balance and control, combined with
special acceleration and maneuverability features. The enhanced features result
from the unique physical design of the RollerBall wheels, trade-named Radial
Skateballs. The standard inline skate is able to achieve high speed in straight
line skating, but requires a substantial adjustment in speed on curves to avoid
accidents caused by the loss of wheel traction at extreme excursion angles,
resulting in skidding and falling. RollerBall skates are not only able to
accelerate quickly and achieve high speed in a straight line; but, because of
the extended range of contact area available, RollerBall Radial Skateballs allow
the skater to maintain greater velocity on curves with a reduced risk of losing
control. Providing up to 300% more usable riding surface area than a typical
inline skate wheel, the spherical-shaped wheels are specifically designed to
provide high levels of balance and stability when contacting the skating
surface, even at combined lean angles 20 degrees greater than the typical inline
wheel. This greater lean angle capability provides the skater with maximum
maneuverability since the skater can approach curves with a high degree of
excursion -- almost a 45-degree angle -- which enables the skater to maintain
velocity and execute difficult acrobatic stunts. The RollerBall skate products
allow the skater to perform aggressive turning maneuvers more easily than that
of any other type of inline skate. During high angle maneuvering and extreme
bank angles, the RollerBall skate, due to the physics of its spherical wheel
design, maintains uniform traction and limits slipping and skidding which
enables a skater to make sharper turns under maximum control. Because of the
RollerBall skates' enhancements in acceleration, balance and maneuverability,
the Company believes it will appeal to all skaters.

         Safety testing of the Company's products is performed by the Company,
by independent testing laboratories and by the Company's third party
manufacturers. All of the Company's products meet United States, Canadian and
European safety regulations. The Company's third-party manufacturers are chosen
for their ability to produce quality products based on the company's standards,
and these manufacturers are required to monitor quality assurance.

         The Company has not experienced any significant product returns or
complaints based upon the design, performance or quality of its products.

                                       8
<PAGE>

PRODUCTS

         The RollerBall product line is comprised of five groups which
facilitates a tiered segmentation marketing approach. The product lines are
differentiated by price points, performance levels and target markets, retailer
and consumer markets.

         The skates are produced with either two, three or four Radial
Skateballs. The Radial Skateballs currently are manufactured in two size ranges
and types: type one-70MM diameter injection molded B.A.S.F. Elastollan(TM) TPU
(thermopolyurethane) over a nylon core, and type two-60MM diameter cold-cast
urethane over polyurethane cores. The Company's 18 different models are
differentiated by the number of Radial Skateballs (2, 3 or 4), appearance and
style, quality of bearings, and materials for the chassis and boots, and skating
performance.

The five RollerBall skate product groups are:

       RB(R) -- five models of 2-70mm ball skates priced to retail from $49 to
       $69;

       GFX(R)3 -- four models of 3-60mm ball skates with high-glass-content,
       carbon enhanced nylon chassis and ABEC-1 bearings and priced to retail at
       $59 to $69;

       GFX(R)4 - five models of 4-60mm ball skates with high-glass-content,
       carbon enhanced nylon chassis and ABEC-3 bearings and priced to retail
       from $89 to $119;

       CARBON - two full-featured soft-boot models of 4-60mm ball skates with
       high-glass-content, carbon enhanced nylon chassis and ABEC-3 bearings and
       priced to retail from $129 to $139; and

       AGGRESSIVE -- two models of 4-60mm ball skates aimed at the aggressive
       skate market with either high-glass content, carbon enhanced nylon
       chassis and ABEC-1 or 3 bearings or the 6000 series aircraft-quality
       aluminum chassis and ABEC-5 bearings, and priced to retail from $79 to
       $139.

MANUFACTURING AND ASSEMBLY

         The Company's current product lines and component parts are
manufactured for the Company by unaffiliated third party vendors located in the
United States, Taiwan, the People's Republic of China and Thailand. The skates
are composed of three subassemblies: (i) the boot assembly (boot shell, liner
and laces or buckles); (ii) the chassis (which is attached to the bottom of the
boot); and (iii) the wheel assembly (the skateball, bearings and required axles
and hardware for mounting the wheels to the chassis). The assembly of all two
ball skate models occurs in the People's Republic of China and Thailand.
Accessories are assembled in the People's Republic of China, Taiwan and/or
Thailand. All final assembly for four ball skates is conducted in either
Thailand or Taiwan. The graphic design of all packaging is controlled by the
Company in California and the printing of the packaging is performed in Hong
Kong, the People's Republic of China, Taiwan or in the United States. The
Company owns all the molds, dies and other tooling associated with manufacturing
the chassis (skate trucks), the skateballs (wheels), safety brakes and wheel
hardware components. The Company currently utilizes 8-10 different manufacturers
for component parts and assembly.

                                       9

<PAGE>

        After assembly, the products are shipped to various FOB ("free on
board") points: Hong Kong, Bangkok and/or the Company's Los Angeles warehouse.
If the products are sold on an FOB Hong Kong or Bangkok, letter of credit basis,
the merchandise for the specific customer is delivered to the customer's
consolidator in Hong Kong or Bangkok. If the goods are to be shipped to the
United States, the Company's Hong Kong agent assumes responsibility for all
freight forwarding and traffic to the United States.

         The Company has entered into an agency agreement with Lucky Yeh
International (LYI) pursuant to which LYI acts as the Company's agent for
purchasing from their known suppliers located in the People's Republic of China
and Taiwan. LYI also has been retained, on a non-exclusive basis, as a sales
representative for sales outside of America. For its services performed
beginning in 1999, the Company agreed to pay LYI a sales commission of 7%of net
sales for any sales outside of the United States (excluding Finland). LYI did
not receive a sales commission in 1999 as they did not generate any sales in the
above-mentioned territory. LYI did receive an agency fee that is incorporated
into the ex-factory cost of goods sold for each item sold and are therefore
accounted for as cost of sales. The agreement with LYI is terminable by either
party on 90 days prior written notice. During the fiscal years ended December
31, 1998 the Company separately paid approximately $36,000 to LYI. Of such
payments, agency fees constituted $35,000 during the fiscal year ended December
31, 1998 and the remaining fees were sales commissions. These fees were
accounted for as cost of goods sold for the fiscal year ended December 31, 1998.
See "Management Discussion and Analysis."

SALES AND MARKETING

         Sales to the United States market are made through a national network
of independent sales representative groups who sell through direct contact with
buyers and retail accounts, and work under the management of the Company. These
sales representative groups are paid on a standard, commission-only basis.
International sales are made through an international network of independent
distributors and agents, and in certain cases, directly by senior management to
the buyers and buying groups of certain retail accounts in the United States and
22 foreign countries. Three of the Company's largest customers represented 56.1%
of total sales for the fiscal year ended December 31, 1998, and three customers,
The Home Shopping Network, J.C. Penney and QVC, accounted for 48.7%, 24.4% and
6.8%, respectively, of total sales for the year ended December 31, 1999. To date
the Company has had approximately $4,574,000 of sales of its skates to HSN which
sales efforts are made directly with HSN by the Company's senior management
without the use of any independent distributors or agents.

         The Company is marketing its products to retail sporting goods chains,
specialty sporting goods shops and through HSN and QVC TV Home shopping networks
in the United States. The Company's four-ball skate models are being distributed
almost exclusively through retail sporting good chains and specialty sporting
goods shops. Sales of the two-ball lines have been made to catalog houses in
France, Germany and the United Kingdom and the product appeared in the J.C.
Penney 1999 Spring/Summer, Fall/Winter and Holiday catalogs. The Company's
marketing strategy emphasizes the unique design of the RollerBall skate, as well
as its superior performance features which enable the skater to have increased
control, balance, maneuverability with a strong price to value relationship. The
product line also affords retailers competitive profit margins which the Company
uses to promote its products to retail merchandisers.

                                       10
<PAGE>

         RollerBall offers retailers an integrated point of sale package
comprised of product displays, in-store identification, sales information and a
complete range of accessories and replacement parts, from helmets, pads and
guards to wheels, bearings, hardware sets and full replacement chassis
assemblies. The Company also provides to the trade educational and technical
support as well as teaching clinics on how to sell the RollerBall product line.

         The Company advertises and promotes its inline skates through various
marketing methods customary to the trade. RollerBall participates in all major
national and international trade shows and exhibitions, and provides in-store
merchandising videos, trade and consumer advertising, and inline skating
promotions. The Company has formed its own "Team RollerBall", a group of skaters
who demonstrate the product advantages of RollerBall skates as well as promote
the sport of inline skating. Team RollerBall has held exhibitions throughout the
world and several members of the team are seen regularly on HSN and QVC in its
advertising and sales activities.

         The Company's sales and marketing materials, including product
positioning and demonstration videos, have been translated from English into
several languages (several of which include: German, French, Italian, Spanish,
and Japanese to facilitate the presentation of the Company's product lines to
international buyers, buying groups, and to enhance public relations and
in-store presentations.

PATENTS AND TRADEMARKS

         The Company has devoted considerable effort to protecting its
RollerBall technology and trademarks throughout key world markets. The Company
received United States utility Patent (No. 5,590,890) on January 7, 1997
covering the core technology for its Radial Skateball. The Company also has a
United States design patent (D378115) on February 18, 1997 covering its GFX(R)
design. The Company has also filed numerous other utility and design patent
applications in the United States and certain other foreign countries. The
"RollerBall" brand name is a registered trademark in the United States, Canada
and several other countries with trademark applications under review in other
markets and the new European Union registrations for countries not already
covered by the current registrations. The RollerBall trademark cannot be
registered in the People's Republic of China, Sweden and Argentina due to
conflicting marks and has also been opposed in Chile. Trademark applications
have been allowed for the RollerBall name in other market/business segments such
as clothing, toys and entertainment (CD-ROM, comic books, video & broadcast
television). The Company has filed for a 3-D trademark in Germany to cover the
German market and has applied to extend this coverage to include all of the
European Union countries. This type of trademark protection extends to the
overall "shape" and "look" of the product(s) covered by the application.

                                       11

<PAGE>

         The Company has received correspondence from MGM, a motion picture
entity which alleged that the Company's use of the name "RollerBall" infringed
upon MGM's alleged rights in the name "RollerBall" which was the name of a 1975
film produced by MGM. The Company was granted a United States trademark for the
RollerBall name in 1995 with respect to, among other things, in-line skates and
related products. On May 3, 1999, the Company and MGM entered into a
non-monetary settlement agreement whereby MGM would for a limited time use the
RollerBall name in various areas unrelated to inline skating in exchange for
cross promotion opportunities through MGM's various distribution channels. As
part of the Company's May 1999 settlement agreement with MGM, the Company
granted MGM the limited rights to the www.rollerball.com web address. The
Company's web site address is currently www.rollerballskates.com, where its
skates and accessories can be purchased through the use of a secured web server.


         There can be no assurance that any application by the Company to
register any additional trade names and trademarks used by the Company will be
approved and/or that the right to the use of any such trademarks outside of
their respective current areas of usage will not be claimed by others. There can
be no assurance as to the extent of the protection that the Company will obtain
as a result of having such trademarks registered or that the Company will be
able to afford the expenses of any complex litigation which may be necessary to
enforce its trademark or license rights. Failure of the Company to successfully
enforce license and trademark rights may have a material adverse impact on the
Company's business.

                                       12
<PAGE>


ROYALTY AGREEMENTS

         The Company has certain contractual commitments to pay royalties to
four individuals who had assisted the Company in obtaining its Radial Skateball
Technology(TM). Under the current agreements, beginning on January 1, 1999, the
Company has agreed to pay Messr. Giuseppe Consarino a royalty of 0.5% of net
sales, except sales based on a letter of credit, and 0.3% of net sales based on
a letter of credit. Mr. Consarino's royalty payment can not exceed a maximum of
$350,000 in any fiscal year. During the fiscal years ended December 31, 1998 and
December 31, 1999, the Company incurred expenses of $29,308 and $14,898 with
respect to these royalty agreements. Mr. Steve Kimmel receives a royalty of 0.5%
of net sales, except sales based on a letter of credit, and 0.3% of net sales
based on a letter of credit. Messrs. Giusseppe Russo, Franco Rosso and Ettore
Carenni, the originators of the Radial Skateball, are entitled to an aggregate
royalty of 2.5% of the cost of goods sold, after certain deductions including
expenses for patent and trademarks. Mr. Franco Rosso also receives a consulting
fee of $4,000 per month. To date, no royalty payments have been paid to Messrs.
Giusseppe Rosso, Franco Rosso and Ettore Carenni, nor have any accrued, as a
result of these deductions which equaled approximately $2,500,000 as of December
31, 1999.

COMPETITION

         The market for the Company's products is highly competitive and the
Company anticipates competition to continue to be intense in the foreseeable
future. This competition is direct (i.e., companies that make similar products)
and indirect (i.e., companies that participate in the sporting goods and
accessories market, but are not direct competitors of the Company). The Company
competes with major inline skate manufacturers such as Rollerblade(R), Bauer(R)
First Team Sports(R), Roller Derby(R), Variflex(R), and K2(R).

         The Company is competing in the inline skate market by offering a
unique skate design that provides superior performance. The Company believes
that the RollerBall skates' enhanced capacity for acceleration, balance and
maneuverability will increase the fun of inline skating while providing a more
stable, body-friendly platform appealing to all skaters from the beginner to
advanced.

GOVERNMENT REGULATION

         Certain of the Company's products are subject to regulation by the
Consumer Product Safety Commission (CPSC), and may therefore be subject to
recall requested by the CPSC. In addition, the Company may be required to change
or modify its current or future products in order to comply with the CPSC's
rules or other rules and regulations related to the safety of its products or
any future rules or regulations. In the event the Company is required to modify
or change its products, it may incur substantial additional costs related to
design and manufacture, and may incur significant down-time in being able to
produce inventory for sale, all of which could have a material adverse effect
upon the Company. The Company is not aware of any current proceeding by the CPSC
which would result in the recall of the Company's products. A recall of the
Company's products could result in significant expenses to the Company. There
can be no assurance that the Company will have the necessary funds available to
it to conduct any recall or that if conducted, it will have funds available for
its continued operation.
                                       13

<PAGE>

EMPLOYEES

         At the present time, the Company has seven full-time employees which
include three officers and four warehouse personnel. The Company has several
independent contractors working on behalf of the Company in sales and marketing.
The Company believes its employee relations are good. No employees are
represented by unions.

                                       14
<PAGE>

Item 2.
DESCRIPTION OF PROPERTY

         The Company leases approximately 1,600 square feet for the Company's
principal office in Los Angeles, California pursuant to a two-year lease
agreement at an aggregate monthly rent of $3,950 per month. The Company also
leases warehouse and assembly space at a separate location in Los Angeles,
California on a month-to-month basis pursuant to an oral agreement. The
warehouse and assembly space constitutes approximately 11,000 square feet and
has a rental expense of approximately $6,000 per month. The Company will
consider, as its requirements dictate, moving to new executive and
administrative offices after the conclusion of this offering and also intends to
secure additional warehouse space. Although these new facilities have not been
identified as of the date hereof, the Company believes that suitable facilities
at reasonable rental costs will be available.

Item 3.
LEGAL PROCEEDINGS

         The Company is not presently a party to any material litigation, nor
does it have knowledge of any threatened or pending material litigation.

Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

         The company did not hold any meetings of shareholders during the fiscal
year ended December 31, 1999. The Company intends to hold an Annual Meeting
during the fiscal year ending December 31, 2000.

                                       15
<PAGE>
                                     PART II

Item 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company completed its initial public offering on April 1, 1998 and
the Company's common stock commenced trading on the Nasdaq SmallCap market under
the symbol "ROLL." The offering price of the Company's common stock in its
initial public offering was $5.00. Effective November 22, 1999, the Company's
common stock ceased being listed on the NASDAQ Small Cap Market and commenced
trading on the Over the Counter Bulletin Board. Set forth below is the high and
low bid price of the Company's common stock for each quarter since the date of
its initial public offering. The quotations reflect inter-dealer prices, without
retail markup, markdown or commission and may not necessarily represent actual
transactions.

                 QUARTER ENDED                     HIGH BID         LOW BID
     -----------------------------------------     --------        --------
     April 1 - June 30, 1998 .................      $5.688           $2.375
     July 1 - September 30, 1998 .............      $3.625            $1.50
     October 1 - December 31, 1998 ...........      $2.938           $0.625
     January 1 - March 31, 1999 ..............     $1.9375            $0.50
     April 1 - June 30, 1999 .................       $1.75          $1.3125
     July 1 - September 30, 1999 .............      $1.875           $0.625
     October 1 - December 31, 1999 ...........       $1.00            $0.25

On April 3, 2000, the high and low bid price was $0.75.

         The Company's trading symbol is now ROLL.OB. The Company has not paid
any dividends on its common stock since its inception and does not anticipate
paying any dividends on its common stock in the foreseeable future. Earnings, if
any, will be used to finance the development and expansion of the Company's
business.

                                       16
<PAGE>


Item 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

         The Company designs, manufactures and distributes inline skates using
its patented Radial Skateball Technology(R), which utilizes a ball instead of
the traditional wheel to provide skaters with better balance, maneuverability
and control. Inline skating has been one of the fastest-growing segments of the
sporting goods industry, and the Company's products target the entire spectrum
of skaters, ranging from beginner to advanced, including models for recreation,
fitness, hockey and aggressive skating.

         Rollerball was founded by Chairman, President and Chief Executive
Officer Jack Forcelledo in 1994. Prior to 1998, the Company has primarily
devoted its efforts to refining the patented Radial Skateball Technology(TM)
concept, testing new product prototypes, upgrading new component parts and test
marketing the performance features of the products in selected international
markets and on direct response television marketing channels (The Home Shopping
Network, Fit TV) in the United States. Additionally, management has expanded
significant efforts obtaining domestic and international patent and trademark
protection and sourcing, identifying and developing manufacturing and supplier
relationships. By the fourth quarter of 1997, the Company had completed the
design, testing and manufacturing processes for 18 different skate models in 2
ball (70MM), 3 and 4 ball (60MM) configurations at various price points covering
the recreation, fitness, hockey and aggressive segments of the inline skate
market and had established a nationwide network of sales representatives to
launch the distribution of the product through various channels.

         To facilitate the execution of the Company's plans to successfully
penetrate the United States market, the Company completed its initial public
offering on April 1, 1998 and received funds from the offering on April 9, 1998.
The Company then ordered approximately $1.2 million in inventory to penetrate
the domestic market. Due to lead times in the Orient, the Company did not
receive its products until June 1998 and has been shipping in limited amounts
domestically and internationally. From inception in March 1994 through the year
ended December 31, 1999, the Company has generated approximately $15 million in
revenue from a previously limited sales and marketing program. With a portion of
the funds from the offering, the Company has launched an extensive sales and
marketing program to help establish its brand name in the inline marketplace.
This program has placed the Company's products on various fitness, game and
variety shows, such as MTV's Real World vs. Road Rules Challenge, the Infinite
Power Workout and Fox Sports Net's Ultimate Fan League, during 1998. The Company
plans to continue its efforts in television and print media as well as expand
its marketing on the Internet. The Company launched its web sight,
www.rollerball.com, on June 1, 1998 and has continued to upgrade it to
accommodate the increase in web traffic and sales orders during 1998 and
throughout 1999. As part of the Company's May 1999 settlement agreement with
MGM, the company granted MGM the limited rights to the www.rollerball.com web
address. The Company's web site address is currently www.rollerballskates.com,
where its skates and accessories can be purchased through the use of a secured
web server.

                                       17

<PAGE>

FACTORS THAT MAY AFFECT FUTURE RESULTS

         This annual report contains certain "forward-looking statements,"
including, without limitation, statements containing the words "believes,"
"anticipates," "expects," "intends," "should," "seeks to," and similar words.
Actual results may differ materially from those in the forward-looking
statements as a result of various factors, including but not limited to, the
risk factors set forth in this annual report. The accompanying information
contained in this annual report identifies all material risk factors that could
cause such difference.

         ACCUMULATED DEFICIT; RECENT LOSSES; For the fiscal year ended December
31, 1999, the Company had a net loss of $1,967,958 as compared to a net loss of
$3,329,491 for the fiscal year ended December 31, 1998. For the year ended
December 31, 1999, the Company had working capital of $173,425. At December 31,
1998 and December 31, 1999, the Company had an accumulated deficit of $8,465,016
and $10,432,974, respectively. Inasmuch as the Company will continue to have
high levels of operating expenses and will be required to make significant
expenditures to market its products in a highly competitive industry, the
Company may experience significant operating losses that could continue until
such time, if ever, that the Company is able to generate sufficient additional
revenues to support its operations.

         LIMITED OPERATING HISTORY; RAPID GROWTH. The Company was incorporated
in 1994 and has not been in business long enough to enable an investor to make a
reasonable judgment as to its future performance. Since the commencement of
operations, the Company's operating expenses have grown rapidly and the Company
intends to continue to expand operations. From its inception through December
31, 1999, the Company has had approximately $14,954,000 in total sales, of which
$7,181,000 were in the international market and $7,773,000 were U.S. domestic
sales. For the fiscal year ended December 31, 1999 the Company had total sales
of approximately $1,588,000, of which $21,000 were in international markets and
the remainder were U.S. domestic sales. The likelihood of the success of the
Company must be considered in light of the problems, expenses, difficulties,
complications and delays frequently encountered in connection with a developing
business and the competitive environment in which the Company operates. There
can be no assurance the Company will be able to implement its business plans or
manage the growth of its operations. See "Business."

         NEED FOR ADDITIONAL FUNDS. The Company may need additional financing to
meet its plans for expansion and to expand its product lines. The Company
currently has an Accounts Receivable financing line available to it. The Company
has been discussing obtaining financing from other financial institutions. No
assurance can be given that the Company will be successful in obtaining
additional financing on favorable terms, if at all.

                                       18

<PAGE>

         RELIANCE ON MAJOR CUSTOMERS. Three of the Company's largest customers
represented 56.1% of total sales for the fiscal year ended December 31, 1998,
and 73.7% of total sales for the year ended December 31, 1999. For the year
ended December 31, 1999 these three customers accounted for 48.7%, 24.4% and
6.8% respectively, of total sales. In 1998, these three customers were The J.C.
Penney Company, Fit TV and Finnkekka Oy. In 1999, the three largest customers
were The Home Shopping Network, The J.C. Penney Company, and QVC. As is
customary in the industry, the Company does not have long-term contracts with
any of its customers. While management expects the Company's customer base to
expand, a limited number of large orders may continue to account for a
significant portion of the Company's sales during any given period for the
foreseeable future. The loss of, or a reduction in business from, any of its
major customers could have a material adverse effect on the Company's results of
operations. See "Business -- Sales and Marketing."

         DEPENDENCE ON ONE PRODUCT LINE. Substantially all of the Company's
revenues have been generated, and will continue to be generated, by sales of
inline skates and related athletic protective equipment. No assurance can be
given that consumer demand for these products in general or the Company's
products in particular will continue in the future. A reduction in the demand
for these products would have a material adverse effect on the Company's results
of operations. The Company's profitability and sales will also depend on the
strength of foreign and United States economies, which can dictate consumers'
spending habits on leisure-related goods, including the Company's products. No
prediction can be made about the future of the economy of the United States or
any foreign country in which the Company will offer its products for sale. As
the Company's products are leisure-related products, any prolonged downturn in
the economy, whether real or perceived, could adversely affect consumer demand
for the Company's products. See "Business."

         COMPETITION. The market for the Company's products, internationally and
in the United States, is highly competitive and the Company anticipates
competition to continue to be intense in the foreseeable future. This
competition is direct (i.e., companies that make similar products) and indirect
(i.e., companies that participate in the sporting goods and accessories market,
but are not direct competitors of the Company). The Company's products compete
with other sports related products, such as those products used in golf, tennis,
running and bicycling as well as numerous other activities. The Company competes
with major inline skate manufacturers such as Rollerblade(R), First Team
Sports(R), Variflex(R), Roller Derby(R), California Pro(R), Bauer(R) and K2(R).
Most of the Company's competitors have significantly greater financial,
technical, manufacturing and marketing resources, and broader name recognition,
than the Company. See "Business -- Competition."

                                       19

<PAGE>

         PRODUCT LIABILITY CLAIMS; INSURANCE. Although the Company has incurred
no product liability claims to date, the Company may become subject to product
liability claims, including claims for serious personal injury or death, due to
the nature of its products. The Company believes that it has adequate liability
insurance for risks arising in the normal course of business, including product
liability insurance with respect to all of its products. There can be no
assurance, however, that the Company will be able to maintain insurance at
reasonable cost, if at all, that insurance will be adequate to cover liabilities
resulting from product liability claims or that the Company will have funds
available to pay any claims over the limit of its insurance. As sales of the
Company's products increase, it will become potentially exposed to a larger
number of liability claims which could therefore exceed the amount of its
insurance policies. Successful assertion against the Company of one or a series
of large uninsured claims, or of one or a series of claims exceeding any
insurance coverage, could have a material adverse effect on the Company's
results of operations and financial condition. See "Business."

         DEPENDENCE UPON EXECUTIVE OFFICERS; LIMITED PERSONNEL. The success of
the Company is dependent upon the efforts and abilities of its founder,
Chairman, President and Chief Executive Officer, Jack Forcelledo. The loss of
the services of Mr. Forcelledo would have a material adverse affect on the
Company's operations. The Company has entered into a four-year employment
agreement with Mr. Forcelledo and has obtained "key man" life insurance in the
amount of $1,000,000 on the life of Mr. Forcelledo, of which the Company is a
beneficiary. It is unlikely that the proceeds of this insurance would be
adequate to compensate the Company for the loss of the services provided by Mr.
Forcelledo. See "Management."

         To date, the Company has relied additionally on the services of
independent technical, production, sales and marketing personnel to develop and
sell its products. In addition, the Company has used two independent agents
(Lucky Yeh International Ltd. ("LYI") and PCL International, Inc. ("PCL")) to
obtain foreign suppliers and manufacturing facilities. The Company has only nine
full-time employees. The Company anticipates that if it does increase its staff,
the additional employees will be hired for sales and marketing, product design
and administrative positions during the next 12 months. Although the Company
believes that necessary additional personnel to staff the Company are available,
there can be no assurance that the Company will be successful in assembling an
effective staff in a timely manner. See "Business -- Management."

         ABILITY TO MANAGE GROWTH. The Company anticipates a period of rapid
growth that is expected to place a strain on the Company's administrative,
financial and operational resources. The Company's ability to manage any staff
and facilities growth effectively will require it to improve its operational,
financial and management controls, to continue to improve its reporting systems
and procedures, to install new management information systems and to train,
motivate and manage its employees. There can be no assurance that the Company
will install such management information systems in an efficient and timely
manner or that the new systems will be adequate to support the Company's
operations. If the Company is unable to hire, train and retain qualified
personnel to implement the necessary services effectively, its ability to
attract repeat sales could be adversely affected, which could limit the
Company's growth opportunities. If the Company's management is unable to manage
growth effectively, such as if the Company's sales and marketing efforts exceed
its capacity to obtain inventory in a timely manner, the Company's business,
operating results and financial condition could be adversely affected. See
"Business" and "Management."
                                       20

<PAGE>

         CONTROL BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS. As of the date of
this annual report, current management of the Company will own, in the
aggregate, approximately 24.5% of the outstanding Common Stock (excluding
options held by management). The election of directors is by plurality vote and
there is no cumulative voting. Accordingly, the existing management may be able
to significantly influence the election of the Board of Directors of the Company
and to direct the affairs of the Company. In addition, under the 1994 Employee
Plan and the Director Plan, the Company has reserved for issuance an aggregate
of 850,000 shares (15.1% of Common Stock outstanding assuming the issuance of
all 850,000 options) which may be issued pursuant to options granted under these
plans to employees and directors. As of the date of this Prospectus, there were
594,826 options outstanding. Of the 594,826 outstanding options, 479,731 are
held by members of the Company's management. In the event that the 479,731
options were exercised, management would own an additional 9.1% of the
outstanding Common Stock. See "Management" and "Principal Stockholders."

         FACTORS INHIBITING TAKEOVER. Certain provisions of the Company's
Amended and Restated Certificate of Incorporation and Bylaws may be deemed to
have anti-takeover effects and may delay, defer or prevent a takeover attempt
that a stockholder might consider in the Company's or the stockholder's best
interest. The Company's Amended and Restated Certificate of Incorporation
authorizes the Board of Directors to determine the rights, preferences,
privileges and restrictions of unissued series of preferred stock and the
designation of any such series, without any vote or action by the Company's
stockholders. Thus, the Board of Directors can authorize and issue shares of
preferred stock with voting or conversion rights that could adversely affect the
voting or other rights of holders of the Company's Common Stock. In addition,
the issuance of preferred stock may have the effect of delaying, deferring or
preventing a change of control of the Company, since the terms of any preferred
stock which might be issued could contain terms which could contain special
voting rights or increase the costs of acquiring the Company. Other provisions
of the Company's Certificate of Incorporation and Bylaws divide the Company's
Board of Directors into three classes, each of which classes will serve for
different three-year periods which may have the effect of delaying, deferring or
preventing a change in control of the Company. These provisions may not be
amended without the affirmative vote of not less than 66 2/3% of the issued and
outstanding shares entitled to vote thereon.

         The Company is subject to Section 203 of the Delaware General
Corporation Law ("DGCL") which prevents transactions between the Company and an
"interested stockholder" unless certain conditions are satisfied. The
applicability of Section 203 may have the effect of delaying, deferring or
preventing "changes in control" of the Company, even if such event would be
beneficial to the then existing stockholders.

                                       21

<PAGE>

         PENNY STOCK REGULATION. The Company's common stock is currently listed
on the Over the Counter Bulletin Board. The Securities Enforcement and Penny
Stock Reform Act of 1990 requires additional disclosure relating to the market
for penny stocks in connection with trades in any stock defined as a penny
stock. Commission regulations generally define a penny stock to be an equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. Unless an exception is available, the regulations require
the delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
In addition, if the Company's securities do not meet an exception to the penny
stock regulations cited above, trading in the Company's securities would be
covered by Rule 15g-9 promulgated under the Exchange Act for non-Nasdaq and
non-national securities exchange listed securities. Under such rule,
broker/dealers who recommend such securities to persons other than established
customers and accredited investors (generally, individuals with net worth in
excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together
with their spouses) must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities are exempt from this rule if the market price is at
least $5.00 per share.

         LIMITATIONS ON DIRECTOR LIABILITY. The General Corporation law of
Delaware provides that a director of the Company shall not be personally liable
to the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director, with certain exceptions. These provisions may discourage
stockholders from bringing suit against a director for breach of fiduciary duty
and may reduce the likelihood of derivative litigation brought by stockholders
on behalf of the Company against a director. In addition, the Company's Amended
and Restated Certificate of Incorporation provides for mandatory indemnification
of directors and officers to the fullest extent permitted or not prohibited by
Delaware law.

         FUTURE ISSUANCES OF STOCK BY THE COMPANY; AUTHORIZED PREFERRED STOCK.
As of the date of this annual report, the Company has 50,000,000 shares of
Common Stock authorized, of which 6,106,695 shares are issued and outstanding.
An additional 554,088 shares have been reserved for issuance underlying
outstanding warrants and an aggregate of 850,000 shares for issuance under the
1994 Employee Plan and the Director Plan of which options to purchase 645,979
are issued and outstanding. The Company will also have 10,000,000 shares of
preferred stock, $.10 par value per share (the "Preferred Stock"), authorized,
none of which have been issued as of the date hereof.

                                       22

<PAGE>

         The Company's Amended and Restated Certificate of Incorporation
authorizes the issuance of the Preferred Stock with such designations, rights
and preferences as may be determined from time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue Preferred Stock with dividend, liquidation, conversion voting or other
rights which could adversely affect the voting power or other rights of the
holders of the Company's Common Stock. The balance of the Company's authorized
shares of Common Stock and all of the Preferred Stock are not reserved for any
purpose and may be issued without any action or approval by the Company's
stockholders. The Company will not offer or sell Preferred Stock to any officer,
director, 5% shareholder of the Company or affiliate or associate of such
persons without the approval by a majority of the Company's independent
directors who do not have an interest in the transaction and who have access, at
the Company's expense, to the Company's or independent counsel. The Company does
not have any present intention to issue any additional securities (other than in
connection with its option plans and the exercise of currently outstanding
options, warrants or other convertible securities) during the 12 months
following this offering. See "Description of Capital Stock."

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

         Net Sales. Net sales for the year ended December 31, 1999 were
$1,588,177, which represents an increase of $25,531, or 1.6%, as compared to the
year ended December 31, 1998. This increase was primarily attributable to the
Company's ability to maintain its sales base in an inline skate market that
continued its major decline in 1999 by strategic price decreases during the year
ended December 31, 1999 as compared to the year ended December 31, 1998. These
price reductions were possible because of the Company's ability to negotiate
decreases in its cost of sales during the same period, resulting in an increased
gross profit margin for the year ended December 31, 1999 as compared to the year
ended December 31, 1998.

         Gross Profit. Gross margin for the year ended December 31, 1999 was
37.3%, which represents an increase of 4.5% as compared to the year ended
December 31, 1998. This increase in profit margin resulted from negotiated
decreases in cost of sales obtained by the Company from its manufacturers and
components suppliers combined with the resulting consistent decreases in its
prices to its customers as well as an improvement in product mix of higher
margin to lower margin products during the year ended December 31, 1999 as
compared to the year ended December 31, 1998.

         Selling and Marketing Expenses. Selling and marketing expenses for the
year ended December 31, 1999 were $718,730, which represents a decrease of
$767,081, or 51.6%, as compared to the year ended December 31, 1998. The
decrease in selling and marketing expenses in 1999 reflected the company's
continued strategy of streamlining and making its marketing and sales efforts
more efficient. The decrease is primarily attributable to the decreased
advertising, promotional efforts, and selling consultants expense the Company
has in an attempt to reduce its overall selling and marketing costs. Also,
decreased warehousing costs were experienced due to decreased production and the
resulting decreased levels of inventory during the year ended December 31, 1999
as compared to the year ended December 31, 1998.

         General and Administrative Expenses. General and administrative
expenses for the year ended December 31, 1999 were $1,705,729, which represents
an increase of $140,353, or 9.0%, compared to the year ended December 31, 1998.
This increase was primarily due to an increase in outside professional and
consulting fees.

         Interest. The Company's interest expense for the year ended December
31, 1999 was $136,500 as compared to interest expense of $790,456 for the year
ended December 31, 1998. This decrease was attributable to the Company's
elimination of interest payable on debt repaid as well as debt issuance costs
from proceeds of the initial public offering in 1998.

                                       23

<PAGE>

         Net Loss. Net loss for the year ended December 31, 1999 was $1,967,958,
which represents a decrease of $1,361,533, compared to a $3,329,491 net loss for
the year ended December 31, 1998. The decrease in net loss resulted primarily
from the decrease in the Company's total operating expenses and interest expense
for the year ended December 31, 1999 as compared to the year ended December 31,
1998. These expenditure decreases were made in an attempt to streamline the
operations of the company in order to substantially reduce the net loss for the
year ended December 31, 1999 as compared to the year ended December 31, 1998.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

         Net Sales. Net sales for the year ended December 31, 1998 were
$1,562,664, which represents a decrease of $460,028, or 22.7%, as compared to
the year ended December 31, 1997. This decrease was primarily attributable to
continued excess inventory levels at retail sporting good chains as well as
continued heavy discounting of prices in the inline skate industry. In addition,
many sporting goods retail outlets have been plagued financially with the
overall decrease in the sporting goods industry. Therefore, many sporting goods
chains are carrying fewer lines of inline skates in their stores. Also, the
Company's initial public offering did not close until April 1998. Due to lengthy
lead times involved with ordering product from the Company's overseas
manufacturers, the Company did not enter the domestic inline skate buying season
until June 1998. Therefore, the Company did not have inventory to ship customers
from January 1998 through May 1998, which comprises approximately 50% of the
inline wholesale skate sales for the year. The Company did not decrease its
prices significantly during the year ended December 31, 1998 as compared to the
year ended December 31, 1997 and therefore was not materially affected by any
such changes.

         Gross Profit. Gross margin for the year ended December 31, 1998 was
32.8%, which represents a decrease of 0.8% as compared to the year ended
December 31, 1997. The decrease was primarily related to air freight bills for
inventory shipments from the Orient to meet several sales deadlines during the
year ended December 31, 1998. In addition, the Company participated in several
marketing programs during the year ended December 31, 1998 in which the Company
offered skates to various televised programs and games shows at no cost. This
approach was taken to continue to expand the recognition of the RollerBall(R)
brand name as well as educate the end consumer as to the Company's individuality
in the inline skate market. The Company negotiated with its overseas
manufacturers cost reductions in its product line that it intends to realize in
1999.

         Selling and Marketing Expenses. Selling and marketing expenses for the
year ended December 31, 1998 were $1,485,811, which represents an increase of
$255,868, or 20.8%, as compared to the year ended December 31, 1997. The
increase is primarily attributable to the increased advertising and promotional
efforts the Company has made to help establish brand awareness in its products.
In addition, the Company has added selling consultants who spent extensive time
traveling to various domestic accounts across the United States which directly
increased travel expense for the year ended December 31, 1998 as compared to the
year ended December 31, 1997. Lastly, increased warehousing costs were
experienced due to increased production and the resulting increased levels of
inventory during the year ended December 31, 1998 as compared to the year ended
December 31, 1997.

                                       24

<PAGE>

         General and Administrative Expenses. General and administrative
expenses for the year ended December 31, 1998 were $1,565,376, which represents
an increase of $389,303, or 33.1%, compared to the year ended December 31, 1997.
The dollar increase was primarily due to the increase in salaries, primarily the
addition of a Chief Financial Officer, the increased salaries for officers of
the Company, the addition of a Marketing Manager and consulting expenses for
public relations firms. In addition, the Company experienced an increase in
insurance expenses, primarily the addition of officer's life insurance and
Directors and Officers insurance. Several of these expenses are those associated
with being a publicly traded company.

         Interest. The Company's interest expense for the year ended December
31, 1998 was $790,456 as compared to interest expense of $1,417,841 for the year
ended December 31, 1997. This decrease was attributable to the Company's
decreased interest payable on debt repaid from proceeds of the initial public
offering. Also, amortization of debt issuance costs included in interest have
decreased in 1998 as the related notes have matured.

         Net Loss. Net loss for the year ended December 31, 1998 was $3,329,491
which represents an increase of $184,252, compared to a $3,145,239 net loss for
the year ended December 31, 1997. The increase in net loss resulted primarily
from the decrease in the Company's sales due to the current state of the inline
market, coupled with increased expenditures for selling and marketing as well as
increased general and administrative expenses for the year ended December 31,
1998 as compared to the year ended December 31, 1997. These expenditures were
based on anticipated sales levels that were not achieved during the year ended
December 31, 1998.

LIQUIDITY AND CAPITAL RESOURCES

         On April 8, 1998, the Company closed its initial public offering in
which it sold 1,250,000 shares of common stock at a price of $5.00 per share for
gross proceeds of $6,250,000. Net of underwriting commissions and offering
expenses, the Company received net proceeds of approximately $5,000,000. Upon
completion of the Company's initial public offering, $2,259,525 of notes were
automatically converted into equity.

         The Company has obtained an Accounts Receivable factoring line but is
currently in discussions with several banking institutions with respect to
obtaining an additional credit line facility for working capital and letter of
credit purposes. No assurance can be given that such discussions will result in
additional funding.

                                       25

<PAGE>

         At April 12, 2000, the Company had cash reserves of approximately
$39,000. Management has been discussing various financing proposals to obtain
either debt financing or equity capital in order to meet its capital and
operating needs. No formal agreements have been executed, and there can be no
assurance that the Company will be able to obtain necessary financing.
Management has also undertaken various cost saving steps in the last six months
to conserve its cash. Unless the Company can obtain necessary financing within a
short time period, or its sales increase, it may be unable to sustain
operations.

         Property and equipment expenditures totaled $14,103 and expenditures
for other assets totaled $12,221 for the year ended December 31, 1999.
Expenditures for other assets primarily include legal fees paid to develop
various patents and trademarks.

EFFECTS OF INFLATION/SEASONALITY

         The Company's sales have not been adversely affected by inflation and
does not believe inflation will be a material factor in its sales in the
foreseeable future.

         The Company's domestic sales have been somewhat affected by climate
changes in the United States, such as higher sales during warmer months of the
year and lower sales during the colder months, with the exception of the holiday
season. But the Company's international presence provides somewhat of a buffer
to the effects of seasonality on its total sales.

Item 7.
FINANCIAL STATEMENTS

See Financial Statements included as pages F-1 through F-18 annexed hereto as
follows:

         Independent Auditors' Report
         Balance Sheets as of December 31, 1999 and 1998
         Statements of Operations for the years ended December 31, 1999 and 1998
         Statements of Shareholders' Equity (Deficit) for the years ended
         December 31, 1999 and 1998 Statements of Cash Flows for the years ended
         December 31, 1999 and 1998 Notes to Financial Statements

                                       26

<PAGE>

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

         On February 28, 2000, Ernst & Young, LLP, which acted as the
independent accountants to the Company with respect to the fiscal years ended
December 31, 1997 and 1998, notified the Company that it was resigning as the
Company's independent accountants. The resignation of Ernst & Young was not
recommended by the Board of Directors of the Company or the audit committee of
the Board of Directors. Ernst & Young's resignation is not the result of any
disagreement with the Company on any matter of accounting principles or
practice, financial statement disclosure or auditing scope or procedure.
Management of the Company has accepted the resignation of Ernst & Young in order
to significantly reduce the Company's audit and income tax preparation costs.

         The reports of Ernst & Young on the Company's financial statements for
the two fiscal years ended December 31, 1997 and 1998 did not contain an adverse
opinion or a disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope, or accounting principles. In connection with the
audits of the Company's financial statements for each of the two fiscal years
and in the subsequent interim periods, there were no disagreements with Ernst &
Young on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures which, if not resolved to the
satisfaction of Ernst & Young would have caused Ernst & Young to make reference
to the matter in their report.

         Effective March 27, 2000, The Board of Directors of the Company
determined that it would be in the best interests of the Company to retain the
services of Merdinger, Fruchter, Rosen & Corso, P.C. to replace Ernst & Young,
LLP as its independent accountants and auditors. The firm will be auditing the
Company's financial statements to be included in the Company's Form 10-KSB for
its fiscal year ended December 31, 1999.

         During the last two fiscal years and subsequent periods, the Company
did not consult with Merdinger, Fruchter, Rosen & Corso, P.C. regarding
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure or accounting principles applicable to any specific
transaction.

                                       27
<PAGE>
                                    PART III

Item 9.

EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY

The officers and directors of the Company are as follows:

NAME                       AGE                    OFFICE
----                       ---                    ------
Jack Forcelledo            58          Chairman of the Board, Chief
                                       Executive Officer and President

Arthur Dale Baker          47          Vice President, Design and
                                       Development

James T. Hartnett          40          Vice President, Administration
                                       and Secretary

Elizabeth Forcelledo       55           Director

John T. Botti              35           Director

Michael Katz               57           Director

         Jack Forcelledo is the founder of RollerBall International Inc., and
has been Chairman, President and Chief Executive Officer of the Company since
its inception in 1994. Mr. Forcelledo has more than thirty of management
experience in both domestic and international consumer products with Fortune 500
companies and entrepreneurial ventures. From 1988 through 1994 Mr. Forcelledo
was a private investor and operated the Forcelledo Marketing Group, an
unincorporated entity. Forcelledo Marketing Group conducted limited business
activities and was involved with assisting other entrepreneurial ventures in
marketing their products, including pre-incorporation activities of the Company.
From 1981 to 1988, he was President of Matchbox International and Vice Chairman
of the Board of Universal Matchbox (Toys) Group, Ltd., a New York Stock Exchange
traded company. From 1969 to 1981, Mr. Forcelledo served in various marketing
capacities with Mattel Toys, Ralston Purina and Keebler Foods and was
responsible for the management, development and marketing of several
internationally recognized products including breakfast cereals, pet foods,
snack/cracker and toy products. Mr. Forcelledo holds Bachelor of Arts, Bachelor
of Journalism and a Masters of Arts degrees from the University of Missouri.

         Arthur Dale Baker has served as the Company's Vice President of Design
and Development since its inception. From June 1991 to March 1994 Mr. Baker was
the owner and President of Arthur Baker Design, a private design firm. Mr. Baker
has over twenty years of experience in industrial design and engineering,
specializing in transportation products, automotive products and sporting goods
such as skates, surfboards, boogie boards and skateboards. From May 1989 to June
1991, he was Director of Design and Engineering for Senter Engineering. Mr.
Baker holds a Bachelor of Fine Arts and Master of Arts degrees from the
University of Tulsa and is a graduate of the Art Center College of Design in
Pasadena, California.
                                       28

<PAGE>

         James T. Hartnett has been employed by the Company as a planning and
financial consultant since its inception and he has served as the Company's Vice
President of Administration and Secretary since March 1997. From 1988 to March
1997, Mr. Hartnett was the owner and president of Norstar Consulting Services.
Prior to such time, from 1981 through 1985, Mr. Hartnett was employed as a
senior consultant at Price Waterhouse. From 1986 through 1988, Mr. Hartnett was
employed as the Director of Finance at The Coulter Group. Mr. Hartnett is a
graduate of the University of Notre Dame where he received Bachelor of Business
Administration and the University of Southern California with a Master of
Business Administration degree.

         Elizabeth Forcelledo has been a director of the Company since its
inception in 1994. From 1988 to 1994 Ms. Forcelledo was a private consultant to
the television industry and involved in several entrepreneurial ventures. From
1986 to 1988 Mrs. Forcelledo was a creative consultant to the ABC Television
Network and the Lifetime Network. From 1981 to 1985, she served as Vice
President of Program Development for the ABC Television Network owned and
operated television stations. She has more than twenty-six years of experience
in producing, creating, writing, and consulting for various TV talk/information
programs including Live with Regis and Kathy Lee, AM Los Angeles, the
Entertainment Tonight Pilot, AM New York, and The Vidal Sassoon Show. Ms.
Forcelledo attended Notre Dame College and St. Louis University.

         John T. Botti, director, has served as President, Chief Executive
Officer and Director of Bitwise Designs, Inc., a Nasdaq SmallCap listed company,
since its formation in August 1985. Mr. Botti graduated from Rensselaer
Polytechnic Institute with a B.S. degree in electrical engineering with a
concentration in computer systems design and a Master of Business Administration
degree.

         Michael Katz, director, is an executive consultant to the interactive
software and multi-media industry. Since 1994 Mr. Katz has been President of
Michael Katz and Associates, a private consulting firm to the interactive
software and multimedia industry. Mr. Katz has been on the Board of Directors of
TimeSink Inc. since 1996. From 1996 to 1997 Mr. Katz was also the Non-Executive
Chairman of the Board of Directors of Entertainment On-line US, the privately
held United States division of a United Kingdom on-line game network company.
From 1990 to 1994 Mr. Katz was a private consultant to and investor in the video
game industry and the President of the consumer division of Triox Technologies,
Inc. From 1989 to 1990 Mr. Katz was President of Sega of America. From 1985
through 1989 Mr. Katz was President of the video game division of Atari, Inc.
From 1979 through 1983 Mr. Katz was a vice president of marketing at Coleco
Industries. Mr. Katz was marketing director of new product categories at Mattel
Toys from 1975 to 1979. Mr. Katz holds a Bachelor of Arts from Cornell
University and a Masters of Business Administration from Columbia Business
School.
                                       29

<PAGE>

         The number of directors comprising the entire Board of Directors is
such number as determined in accordance with the By-Laws of the Company. The
Company's By-Laws provide that the number of directors shall be not less than
three nor more than eleven. The Company's Amended and Restated Certificate of
Incorporation provides the Company with a classified or "staggered" Board of
Directors. The classified or "staggered" Board of Directors is comprised of
three classes of directors elected for initial terms expiring at the year 1998,
1999 and 2000 annual meetings of stockholders. Thereafter, each class will be
elected for a term of three years. By reason of the classified Board of
Directors, one class of the Board comes up for re-election each year. Any
further amendment to the Company's Certificate of Incorporation affecting the
classified Board may only be adopted upon the affirmative vote of not less than
66 2/3% of the issued and outstanding shares entitled to vote thereon. Officers
serve at the discretion of the Board of Directors of the Company. There are no
family relationships among any of the officers or directors except that
Elizabeth Forcelledo is the wife of Jack Forcelledo.

         The Board of Directors is currently comprised of four persons. Mr.
Forcelledo serves as the Class 1 Director to serve for a term of three years
until the 2000 annual meeting of stockholders; Mr. Botti and Mrs. Forcelledo
serve as Class 2 Directors; and Mr. Katz serves as the Class 3 Director. There
was no 1999 annual meeting. The Company intends to hold a shareholder meeting in
2000. Thereafter, each class of directors standing for re-election shall be
elected for a term of three years.
                                       30

<PAGE>


Item 10.
EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

         The following provides certain information concerning all plan and
non-plan compensation awarded to, or paid by the Company during the years ended
December 31, 1999, 1998 and 1997 for Mr. Jack Forcelledo, the sole executive
officer during such periods. No other officer or director received compensation
equal to or in excess of $100,000 during such periods.

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
                                                                                           LONG TERM COMPENSATION
                                                                                                    AWARDS
                                                                                            ----------------------
                                                                                                            NO. OF
                                                                                                          SECURITIES
                                                    ANNUAL COMPENSATION                      RESTRICTED   UNDERLYING
                                        FISCAL     --------------------      OTHER ANNUAL      STOCK       OPTIONS
NAME AND PRINCIPAL POSITION              YEAR       SALARY         BONUS     COMPENSATION      AWARD(S)     GRANTED
------------------------------------     ----       ------         -----     ------------      --------     -------
<S>                                     <C>       <C>              <C>      <C>              <C>           <C>
Jack Forcelledo Chairman, ..........     1999      $82,377 (2)      $0             $0             0               0
  President and Chief ..............     1998     $185,000          $0             $0             0          75,000
  Executive Officer ................     1997     $160,000          $0        $88,448(1)          0          75,000
</TABLE>

--------
(1)  Reflects royalty payments under Mr. Forcelledo's royalty agreement which
     has been terminated as of January 1, 1997.

(2)  Pursuant to Mr. Forcelledo's employment agreement, Mr. Forcelledo was
     entitled to a total salary of $216,000 for 1999. In light of the Company's
     financial condition, Mr. Forcelledo unilaterally and solely elected to
     receive only $82,377 in compensation. The balance in salary payable for
     1999 of $133,623 has been accounted for by the Company as accrued salaries
     that are payable to Mr. Forcelledo when and if the Company's financial
     condition allows for such payment.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>


                                  NUMBER OF          PERCENT OF TOTAL
                                 SECURITIES            OPTIONS/SARS
                                 UNDERLYING             GRANTED TO        EXERCISE OR
                                OPTIONS/SARS       EMPLOYEES IN FISCAL    BASE PRICE
           NAME                    GRANTED                 YEAR             ($/SH)       EXPIRATION DATE
---------------------------- --------------------- --------------------- -------------- ------------------
<S>                            <C>                <C>                     <C>           <C>
Jack Forcelledo, CEO (1)            75,000                  9%               $5.00           1/01/03
---------------------------- --------------------- --------------------- -------------- ------------------
</TABLE>

--------
(1) Pursuant to the terms of his employment agreement, Mr. Forcelledo was
    granted an aggregate of 300,000 options which vest at a rate of 75,000 per
    year each January 1.
                                       31

<PAGE>

Aggregated Option/SAR Exercises

     The following table contains information with respect to the named
    executive officer concerning options held as of the fiscal year ended
    December 31, 1998.
<TABLE>
<CAPTION>
                                                                                VALUE OF UNEXERCISED
                                                  NUMBER OF UNEXERCISED         IN-THE-MONEY OPTIONS
                       SHARES                         OPTIONS AS OF                AT DECEMBER 31,
                    ACQUIRED ON      VALUE          DECEMBER 31, 1999                  1999(1)
      NAME            EXERCISE      REALIZED    EXERCISABLE/UNEXERCISABLE     EXERCISABLE/UNEXERCISABLE
      ----          -----------     --------    -------------------------     -------------------------
<S>                <C>            <C>           <C>                            <C>
Jack Forcelledo          0             0            289,653/75,000 (2)                 0/0 (2)
</TABLE>


----------
(1) Assuming a market value of $5.00 per share.

(2) The options were granted in April 1994 and April 1998. The five-year options
    have exercise prices ranging from $1.125 to $5.00 per share. The options
    vest at the rate of 75,000 per year on January 1 of each year. The options
    include both incentive and non-incentive stock options. See "Stock Option
    Plans" and "Employment Agreements".

COMPENSATION OF DIRECTORS

         Directors who are employees of the Company do not receive any fee in
addition to their regular salary for serving on the Board of Directors.
Non-employee directors will not receive cash renumeration but are eligible to
participate in the Director Plan. Non-employee directors have received options
to purchase 10,000 shares exercisable at $5.00 per share. Additionally, on the
anniversary date of their service, each non-employee director will receive an
additional 10,000 options with an exercise price at the then current market
price of the Common Stock. Directors are reimbursed for travel expenses for
attendance at any meeting of the Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS

         The Board of Directors has established an audit committee ("Audit
Committee"), comprised of the two independent directors Messrs. Botti and Katz.
The Audit Committee is responsible for reviewing the Company's internal
accounting policies and procedures as well as the scope of the work performed by
the Company's independent auditors, including implementation of any
recommendations made by the Company's independent auditors.

         The Board of Directors has also established a compensation committee
("Compensation Committee") consisting of Messrs. Forcelledo, Botti and Katz. The
Compensation Committee is responsible for the negotiation, review and approval
of the compensation of senior executives of the Company. The Compensation
Committee is also responsible for administration of the 1994 Employee Plan and
the Director Plan.
                                       32

<PAGE>

EMPLOYMENT AGREEMENTS

         The Company has entered into a four-year employment agreement with Jack
Forcelledo commencing January 1, 1997, which will expire in December 31, 2000
pursuant to which Mr. Forcelledo shall serve as Chairman, President and Chief
Executive Officer. Pursuant to the terms of the agreement, Mr. Forcelledo will
receive a base salary of $185,000 for fiscal year 1998 with annual increases up
to a base salary of $235,000 in year 2000. Mr. Forcelledo is entitled to bonus
payments commencing in fiscal year 1998. In the event the Company has net income
after taxes of $1,650,000 during fiscal 1999, Mr. Forcelledo will be entitled to
a bonus of 7% of net income plus 10% of any amount above $1,650,000. In the
event the Company has net income after taxes of $2,400,000 during fiscal 2000,
Mr. Forcelledo will be entitled to a bonus of 7% of the net income plus 10% of
any amount above $2,400,000.

         Pursuant to Mr. Forcelledo's employment agreement, Mr. Forcelledo was
entitled to a total salary of $216,000 for 1999. In light of the Company's
financial condition, Mr. Forcelledo unilaterally and solely elected to receive
only $82,377 in compensation. The balance in salary payable for 1999 of $133,623
has been accounted for by the Company as accrued salaries that are payable to
Mr. Forcelledo when and if the Company's financial condition allows for such
payment.

         Mr. Forcelledo has also received five-year stock options to purchase
300,000 shares vesting in increments of 75,000 shares per year commencing
January 1, 1998. Only a portion of these options are qualified as incentive
stock options. In the event of Mr. Forcelledo's death or disability which
prevents him from performing his duties, all unvested options shall immediately
vest. The options have an exercise price equal to $5.00.

         In addition, Mr. Forcelledo is provided with the Company's standard
health and other benefits and a policy of life insurance in the amount of
$500,000 payable to a beneficiary to be named by Mr. Forcelledo. He also
receives an automobile allowance of $500 per month and reimbursement for
expenses incurred on behalf of the Corporation and in connection with the
performance of his duties.
                                       33

<PAGE>

         The agreement also contains certain provisions regarding severance
payments to Mr. Forcelledo in the event of the termination of his employment
prior to the expiration of the term for (i) a "Change in Control" or (ii)
termination without "cause" or (iii) in the event that the Company declines to
offer Mr. Forcelledo a new employment agreement upon terms at least equal to the
expired agreement at the end of his employment term. A "Change of Control" is
defined to mean any of the following events: (i)(x) any consolidation or merger
of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, or
(ii) the stockholders of the Company approved any plan or proposal for the
liquidation or dissolution of the Company, or (iii) any person (as such term is
used in Sections 13(d) and 13(d)(2) of the Exchange Act, who is not a beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of 20% or more
of the Company's outstanding Common Stock on the date of the Agreement, shall
become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act) of 20% or more of the Company's outstanding Common Stock, or (iv) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the entire Board of Directors shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period. A Change of Control shall not include
any sale of securities in this offering, the conversion of convertible
securities outstanding at the Effective Date, the exercise of any right to
designate a director arising under the underwriting agreement executed in
connection with this offering, or the expansion of the Board of Directors with
the consent of Mr. Forcelledo. Upon the occurrence of a "Change of Control", Mr.
Forcelledo will be entitled to receive a lump sum severance payment equal to
three times the annual salary for the previous year. Mr. Forcelledo may be
terminated "for cause" which includes theft or fraud and certain other acts and
in such event, in which event he will not be entitled to any severance payment.

                                       34
<PAGE>


STOCK OPTION PLANS

1994 Employee Plan

     In September 1994, the Company adopted the 1994 Employee Plan. The 1994
Employee Plan provides for the grant of options to purchase up to 750,000 shares
of the Company's Common Stock. Under the terms of the 1994 Employee Plan,
options granted thereunder may be designated as options which qualify for
incentive stock option treatment ("ISOs") under Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code"), or options which do not so
qualify ("NSOs"). As of December 31, 1999, the Company had reserved 594,826
shares for outstanding options under the 1994 Employee Plan. None of the
outstanding options have an exercise period exceeding five years.

     The 1994 Employee Plan is administered by the Compensation Committee which
has the discretion to determine the eligible employees to whom options will be
granted, the exercise period, exercise price and vesting schedule of each
option, the number of shares subject to each option, and whether an option will
be an ISOs or NSOs. The Compensation Committee has full authority to interpret
the Plan and to establish and amend rules and regulations relating thereto. The
Compensation Committee or the full Board of Directors may also grant bonuses or
authorize loans to or guarantee loans obtained by an optionee to enable such
optionee to pay any taxes that may arise in connection with the exercise or
cancellation of an option.

     Under the 1994 Employee Plan, and in order to qualify as an ISO under the
Code, the exercise price of an option designated as an ISO shall not be less
than the fair market value of the Common Stock on the date the option is
granted. However, in the event an option designated as an ISO is granted to a
ten percent stockholder (as defined in the 1994 Employee Plan) such exercise
price shall be at least 110% of such fair market value. Exercise prices of NSOs
options may be less than such fair market value but in no event shall the
exercise price of NSOs be less than 85% of the fair market price on the date of
grant. The aggregate fair market value of shares subject to options granted to a
participant which are designated as ISOs which become exercisable in any
calendar year, shall not exceed $100,000. The "fair market value" of a share of
Common Stock will be (i) the closing price if the Common Stock is traded on a
national securities exchange, or (ii) the closing Nasdaq SmallCap Market bid
price, or (iii) if the Company's Common Stock is not quoted on the Nasdaq
SmallCap Market, as reported by the National Quotation Bureau, Inc., or a market
maker of the Company's Common Stock, or (iv) if the Common Stock is not quoted
by any of the above, by the Board of Directors acting in good faith.

         Unless sooner terminated, the Plan will expire in September 2004.

DIRECTOR PLAN

     In December 1997, the Board of Directors adopted the Director Plan which
was approved by a majority of the Company's stockholders on December 31, 1997.
The Director Plan provides for issuance of a maximum of 100,000 shares of Common
Stock upon the exercise of stock options granted under the Director Plan.
Options may be granted under the Director Plan until July 2007 to (i)
non-executive directors as defined (ii) members of any advisory board
established by the Company who are not full-time employees of the Company or any
of its subsidiaries and (iii) consultants. The Director Plan provides that each
non-executive director will automatically be granted an option to purchase
10,000 shares of Common Stock, upon joining the Board of Directors, and on each
October 1st thereafter, provided such person has served as a director for the 12
months immediately prior to such October 1st. Similarly, each eligible member of
an advisory board has received, upon joining the advisory board, and on each
October 1st thereafter, an option to purchase 1,000 shares of the Company's
Common Stock, providing such person has served as a member of the advisory board
for the previous 12 month period. The Company has not established any advisory
board and has no present plans to create any advisory board. The Company has no
plans to issue options under the Director Plan to consultants at this time.

                                       35

<PAGE>

     The exercise price for options granted under the Director Plan is 100% of
the fair market value of the Common Stock on the date of grant. The "fair market
value" will be the (i) the closing price of a share of Common Stock if the
Common Stock is traded on a national securities exchange or (ii) the closing bid
price as reported by the Nasdaq SmallCap Market, or (iii) if the Company's
Common Stock is not quoted on the Nasdaq SmallCap Market, as reported by the
National Quotation Bureau, Inc., or a market maker of the Company's Common
Stock, or (iv) if the Common Stock is not listed on or quoted by any of the
above by the Board of Directors acting in good faith. Until otherwise provided
in the Director Plan the exercise price of options granted under the Director
Plan must be paid at the time of exercise, either in cash, by delivery of shares
of Common Stock of the Company or by a combination of each. The term of each
option commences on the date it is granted and unless terminated sooner as
provided in the Director Plan, expires five years from the date of grant. The
Director Plan will be administered by the Compensation Committee. The Committee
has no discretion to determine which non-executive director or advisory board
member will receive options or the number of shares subject to the option, the
term of the option or the exercisability of the option. However, the Committee
will make all determinations of the interpretation of the Director Plan. Options
granted under the Director Plan are not qualified for incentive stock option
treatment.

     As of December 31, 1999, 60,000 options have been granted under the
Director Plan to the three non-employee directors with an exercise price of
$5.00 per share. The Director Plan will expire in December 2007.

Item 11.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information, as of the date hereof with
respect to the Company's Common Stock owned by each person known to the Company
to be the beneficial owner of more than five percent (5%) of the Company's
Common Stock, each director, the named executive officer, and all other
executive officers and directors as a group. As of the March 24, 1999 there were
4,776,693 shares of Common Stock issued and outstanding.

                                       36

<PAGE>

<TABLE>
<CAPTION>

                                                                               AMOUNT AND
                                                                               NATURE OF         PERCENTAGE
                                                                               BENEFICIAL      AS OF MARCH 24,
 NAME AND ADDRESS OF BENEFICIAL OWNER             POSITION WITH COMPANY(1)    OWNERSHIP (2)        1999(3)
 ------------------------------------             ------------------------    -------------    ---------------
<S>                                               <C>                        <C>               <C>
Jack Forcelledo(4) .........................      Chairman of the Board,         1,383,971         28.9%
                                                     President, Chief
                                                     Executive Officer

James T. Hartnett(7) ........................      Vice-President                   53,481          1.1%

Arthur Dale Baker(8) ........................      Vice-President                   53,482          1.1%

Elizabeth Forcelledo(4) .....................      Director                      1,169,318         24.5%

John T. Botti(9) ............................      Director                         10,000           *
  c/o Bitwise Designs, Inc.
      Technology Center
      Schenectady, NY 12306

Michael Katz(9)..............................      Director                       10,000             *
  One San Rafael Avenue
      Tiburon, CA 94920

Sercap Holdings LLC(6).......................                                     226,667           4.7%
  c/o 3535 Piedmont Road N.E
       Suite 440
       Atlanta, GA 30305

All Officers and Directors as a Group........                                   1,540,934         32.3%
  (7 persons)(3)(4)(7)(8)(9)
</TABLE>

---------
* denotes less than 1%

(1)  Unless indicated, all addresses are c/o the Company at 9255 Doheny Road,
     Suite 2705, Los Angeles CA 90069.

(2)  Each person listed has sole voting and investment power over the shares
     listed as beneficially owned unless otherwise indicated.

(3)  Includes issuance of the Conversion Shares, Bridge Shares and 1997 Loan
     Shares.

(4)  Includes (i) 1,159,318 shares of Common Stock owned jointly by
     Mr. Forcelledo and Mrs. Forcelledo; (ii) options to purchase 10,000 shares
     issued to Mrs. Forcelledo under the Director Plan; (iii) five-year options
     to purchase 64,653 shares with an exercise price of $1.125 per share which
     were granted in April 1994 and (iv) 150,000 vested five-year options with
     an exercise price equal to $5.00. Does not include 150,000 nonvested
     options as with an exercise price equal to $5.00.

(5)  Not used.

(6)  Sercap Holdings LLC has 226,667 shares of Common Stock under the terms of
     the 1997 Loan. Does not include shares owned by Mr. Lawrence Stumbaugh, a
     controlling person of Holdings LLC. Mr. Lawrence Stumbaugh has 6,666
     Conversion Shares. Mr. Stumbaugh also owns 3,333 1996 Warrants which have
     an exercise price equal to $3.75.

(7)  Includes options to purchase 50,510 shares.

(8)  Includes options to purchase 44,568 shares.

(9)  Includes options to purchase 10,000 shares.

                                       37
<PAGE>


Item 12.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In March 1994, in connection with the founding of the Company, the
Company issued 2,351,158 shares of Common Stock to Jack Forcelledo, the
Company's Chairman of the Board and Chief Executive Officer, and Elizabeth
Forcelledo, his wife. During 1994, Mr. Forcelledo sold or gifted an aggregate of
591,840 shares to certain individuals including 178,271 shares of Common Stock
transferred to Anthony Forcelledo, a former director of the Company and the
brother of Jack Forcelledo, and 178,271 shares of Common Stock transferred to
Victoria and Walter Nelson. Victoria Nelson is the sister of Elizabeth
Forcelledo, a director of the Company. The foregoing shares were issued to Mr.
Jack Forcelledo for nominal consideration.

         In March 1995, April 1995 and March 1996 the Company received an
aggregate of $148,000 principal amount loans from Jack Forcelledo and his
spouse, Elizabeth Forcelledo. The loans bore interest at 12% per annum. Prior to
June 30, 1997, the loans had been repaid in full. In 1998, an additional loan
was received by the Company from Mr. Forcelledo in the amount of $33,557 and was
still outstanding at December 31, 1998.

         From December 1994 through May 1995 the Company received loans in the
total principal amount of $125,000 from Mr. Virgil Wenger, a former officer and
director of the Company. The loans bore interest at 12% per annum and were due
upon demand. The Company used a portion of the proceeds from its initial public
offering to repay the loans in full. In connection with the making of these
loans to the Company, Mr. Wenger received an aggregate of 18,570 five year
options at an exercise price of $3.37 per share. The options were granted as of
the date of the loans.

         The Company has received loans from Mr. Anthony Forcelledo in the
aggregate principal amount of $60,000 in the last three years. The loans bear
interest at 12% per annum and are payable upon demand. At December 31, 1998 the
total amount of principal and interest due Mr. Anthony Forcelledo was
approximately $9,000. In the making of these loans to the Company, Mr.
Forcelledo received an aggregate of 7,874 five year options at an exercise price
of $3.37 per share. The options were granted as of the date of the loans.

         In October 1997 the Company received the 1997 Loan in the principal
amount of $1,000,000 from Sercap Holdings LLC of which Mr. Lawrence Stumbaugh is
a principal and officer. The terms of the agreements governing the 1997 Loan
provided that Sercap Holdings LLC had the right to have a designee on the Board
of Directors of the Company. Mr. Stumbaugh was appointed to the Board of
Directors in October 1997 and resigned in March 1998. The 1997 Loan was
represented by two notes of $400,000 principal amount and of $600,000 principal
amount, respectively. The 1997 Loan bore interest at 12% per annum. Upon the
closing of the Company's initial public offering, $400,000 of the 1997 loan was
converted into equity and $600,000 was paid in full.

         During 1994 the Company utilized the services of Anthony Forcelledo for
which it had accrued an expense of $31,000. The accrued expense was paid in
fiscal 1997. In addition, the Company is currently utilizing the services of Mr.
Forcelledo as a Selling Consultant in which he is paid a monthly sum of $5,000.
Additionally, since 1994 the Company has utilized the services of Mrs. Nelson as
a consultant. This individual provides sales and marketing services to the
Company. Mrs. Nelson was paid $31,000 and $30,000 for her services during fiscal
1997 and 1998, respectively.

                                       38

<PAGE>

         Except as provided herein, the Company has not entered into any
material transactions or series of similar transactions with any director,
executive officer, any shareholder owning 5% or more of the Company's Common
Stock or any affiliates of any of the foregoing. It is the Company's policy that
all transactions in which an officer, director, a 5% shareholder or affiliate
has a personal interest (i) will be approved by the majority of independent and
disinterested directors and (ii) must be on terms no less favorable to the
Company that could be obtained in arms-length negotiation with non-affiliated
parties.

         For information concerning employment agreements with, and compensation
of, the Company's executive officers and directors, see "Management --
Employment Agreements."

                                       39
<PAGE>

CERTAIN CHARTER, BYLAW AND STATUTORY PROVISIONS

         The Company's Amended and Restated Certificate of Incorporation
contains certain provisions that could discourage potential takeover attempts
and make more difficult attempts by stockholders to change management. The
Amended and Restated Certificate of Incorporation provides for a classified
Board of Directors consisting of three classes (Class 1, Class 2 and Class 3) as
nearly equal in size as practicable. Each class holds office until the third
annual meeting for election of directors following the election of such class;
provided, however, that the initial terms of the directors in the first, second
and third classes of the Board of Directors will expire in 2000, 1999 and 1998,
respectively. The Company's Amended and Restated Certificate of Incorporation
provides that no director may be removed with or without cause by the vote of
less than 66 2/3% of the total outstanding voting power of the securities of the
Company which are then entitled to vote in the election of directors. The
Amended and Restated Certificate of Incorporation permits the Board of Directors
to create new directorships and the Company's Bylaws permit the Board of
Directors to elect new directors to serve the full terms of the class of
directors in which the new directorship was created. The Bylaws also provide
that the Board of Directors (or its remaining members, even if less than a
quorum) is empowered to fill vacancies on the Board of Directors occurring for
any reason for the remainder of the term of the class of directors in which the
vacancy occurred. A vote of not less than 66 2/3% of the total outstanding
voting power of the securities of the Company which are then entitled to vote in
the election of directors is required to amend the foregoing provisions of the
Amended and Restated Certificate of Incorporation.

CERTAIN PROVISIONS OF DELAWARE LAW

         Certain provisions in the Amended and Restated Certificate of
Incorporation, the Bylaws and the DGCL could have the effect of delaying,
deferring or preventing changes in control of the Company.

         The Company is a Delaware corporation and is subject to Section 203 of
the DGCL. In general, Section 203 prevents an "interested stockholder" (defined
generally as a person owning 15% or more of the Company's outstanding voting
stock) from engaging in a "business combination" (as defined in Section 203)
with the Company for three years following the date that person became an
interested stockholder unless: (i) before that person became an interested
stockholder, the Board of Directors approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon completion of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the Company outstanding at
the time the transaction commenced (excluding stock held by directors who are
also officers of the Company and by employee stock plans that do not provide
employees with the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer); or (iii) on or
following the date on which that person became an interested stockholder, the
business combination is approved by the Company's Board and authorized at a
meeting of stockholders by the affirmative vote of the holders of at least 66
2/3% of the outstanding voting stock of the Company not owned by the interested
stockholder.

                                       40

<PAGE>

         Under Section 203 of the DGCL, these restrictions also do not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of one of certain extraordinary transactions
involving the Company and a person who was not an interested stockholder during
the previous three years or who became an interested stockholder with the
approval of a majority of the Company's directors, if that extraordinary
transaction is approved or not opposed by a majority of the directors (but not
less than one) who were directors before any person became an interested
stockholder in the previous three years or who were recommended for election or
elected to succeed such directors by a majority of such directors then in
office.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

         Article Eight of the Company's Amended and Restated Certificate of
Incorporation provides that, to the full extent permitted by the DGCL, directors
shall not be personally liable to the Company or its stockholders for damages
for breach of any duty owed to the Company or its stockholders.

         The Amended and Restated Certificate of Incorporation and Bylaws of the
Company provide that the Company shall, to the fullest extent permitted by
applicable law, as amended from time to time, indemnify all directors of the
Company, as well as any officers or employees of the Company to whom the Company
has agreed to grant indemnification.

         The Company currently has directors' and officers' liability insurance
which is intended to provide the Company's Directors and officers protection
from personal liability in addition to the protection provided by the Company's
Amended and Restated Certificate of Incorporation and Bylaws as described above.

         Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
                                       41

<PAGE>



ITEM 13.

EXHIBITS, LIST AND REPORTS ON FORM 8-K (THIS NEEDS TO BE UPDATE WITH DEAN'S
HELP. WHAT ARE THE EXHIBITS AND THEIR NUMBERS??)

(a)  Exhibits required by Item 601 of Regulation SB

Those exhibits with a * have been filed herewith. Those exhibits without an *
have previously been filed with the Securities and Exchange Commission and are
incorporated by reference herein.

EXHIBIT NO.                         DESCRIPTION

3.1      Certificate of Incorporation (Filed as exhibit to the Company's
         registration statement of form SB-2, registration number 333-33567)

3.2      Amended and Restated Certificate of Incorporation of the Registrant
         (Filed as exhibit to the Company's registration statement of form SB-2,
         registration number 333-33567)

3.3      Bylaws (Filed as exhibit to the Company's registration statement of
         form SB-2, registration number 333-33567)

3.4      Amended and Restated Bylaws (Filed as exhibit to the Company's
         registration statement of form SB-2, registration number 333-33567)

4.1      Form of Common Stock Certificate (Filed as exhibit to the Company's
         registration statement of form SB-2, registration number 333-33567)

4.2      Form of Underwriter's Warrant issued to Auerbach, Pollak & Richardson,
         Inc. (Filed as exhibit to the Company's registration statement of form
         SB-2, registration number 333-33567)

4.3      Form of 1996 Warrant issuable to holders of 12% Debentures (Filed as
         exhibit to the Company's registration statement of form SB-2,
         registration number 333-33567)

4.4      Form of 12% Convertible Debenture in the aggregate principal amount of
         $1,775,000 (Filed as exhibit to the Company's registration statement of
         form SB-2, registration number 333-33567)

4.5      Form of 12% Bridge Note in the aggregate principal amount of $700,000
         (Filed as exhibit to the Company's registration statement of form SB-2,
         registration number 333-33567)

4.6      Form of $400,000 principal amount Note dated October 24, 1997 in favor
         of Sercap Holdings LLC. (Filed as exhibit to the Company's registration
         statement of form SB-2, registration number 333-33567)

4.7      Form of $600,000 principal amount Note dated October 24, 1997 in favor
         of Sercap Holdings LLC. (Filed as exhibit to the Company's registration
         statement of form SB-2, registration number 333-33567)

4.8      Form of $100,000 principal amount Loan Agreement dated September 22,
         1997 between Jack Forcelledo and David Field. (Filed as exhibit to the
         Company's registration statement of form SB-2, registration number
         333-33567)

4.9      Form of Agent Warrants issued to Auerbach, Pollak & Richardson Inc., in
         June 1994. (Filed as exhibit to the Company's registration statement of
         form SB-2, registration number 333-33567)

                                       42

<PAGE>

4.10     Form of Waiver Letter to holders of 12% Debentures extending maturity
         date to April 30, 1998 (Filed as exhibit to the Company's registration
         statement of form SB-2, registration number 333-33567)

4.11     Form of Lock-In Agreement between the Company and Jack and Elizabeth
         Forcelledo (Filed as exhibit to the Company's registration statement of
         form SB-2, registration number 333-33567)

10.1     Lease agreement for principal offices located at 9255 Doheny Road Suite
         2705 Los Angeles California 90069. (Filed as exhibit to the Company's
         registration statement of form SB-2, registration number 333-33567)

10.2     Lucky Yeh Distribution Agreement (Filed as exhibit to the Company's
         registration statement of form SB-2, registration number 333-33567)

10.3     Consarino Royalty Agreement, entered into in March 1995. (Filed as
         exhibit to the Company's registration statement of form SB-2,
         registration number 333-33567)

10.4     Franco Rosso Consulting Agreement dated as of March 25, 1995 and
         Royalty Agreement among the Company, Franco Rosso, Ettore Carenini and
         Guisseppe Rosso dated March 25, 1995 (Filed as exhibit to the Company's
         registration statement of form SB-2, registration number 333-33567)

10.5     Kimmel Royalty Agreement (Filed as exhibit to the Company's
         registration statement of form SB-2, registration number 333-33567)

10.6     Form of Employment Agreement dated as of January 1, 1997 between the
         Company and Jack Forcelledo (Filed as exhibit to the Company's
         registration statement of form SB-2, registration number 333-33567)

10.7     1994 Employee Stock Option Plan (Filed as exhibit to the Company's
         registration statement of form SB-2, registration number 333-33567)

10.8     1997 Non-Executive Director Option Plan (Filed as exhibit to the
         Company's registration statement of form SB-2, registration number
         333-33567)

10.9     Restated Royalty Agreement dated August 7, 1992 by and between Jack
         Forcelledo, Elizabeth Forcelledo and the Company (Filed as exhibit to
         the Company's registration statement of form SB-2, registration number
         333-33567)

10.10    Form of Employment Agreement dated August 18, 1997 between the Company
         and Kenneth Teasdale (Filed as exhibit to the Company's registration
         statement of form SB-2, registration number 333-33567)

                                       43

<PAGE>

10.11    Reinstatement of FMG Royalty Agreement dated March 20, 1995 between the
         Company and Jack and Beth Forcelledo (Filed as exhibit to the Company's
         registration statement of form SB-2, registration number 333-33567)

10.12    Form of Registration Rights Agreement among the Company and the holders
         of 12% Debentures dated as of September 1996 (Filed as exhibit to the
         Company's registration statement of form SB-2, registration number
         333-33567)

10.13    RollerBall Skate Agreement between Forcelledo Marketing Group and
         Guisseppe Rosso entered into in August 1992 (Filed as exhibit to the
         Company's registration statement of form SB-2, registration number
         333-33567)

21.      Subsidiaries. None

27.      * Financial Data Schedule

---------
(b)  Reports on Form 8-K
     None.

                                       44


                         ROLLERBALL INTERNATIONAL, INC.

                              FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 1998

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                              FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

                                      INDEX

INDEPENDENT AUDITORS' REPORT                                            1

BALANCE SHEETS                                                          2

STATEMENTS OF OPERATIONS                                                3

STATEMENT OF STOCKHOLDERS' EQUITY                                       4

STATEMENTS OF CASH FLOWS                                              5 - 6

NOTES TO FINANCIAL STATEMENTS                                         7 - 20


<PAGE>
                          INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
ROLLERBALL INTERNATIONAL, INC.

We have audited the accompanying balance sheet of Rollerball International, Inc.
as of December 31, 1999, and the related statements of operations, stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The accompanying
financial statements of Rollerball International, Inc. as of December 31, 1998,
were audited by other auditors, whose report dated March 3, 1999, expressed an
unqualified opinion on those statements.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rollerball International Inc.
as of December 31, 1999, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's recurring losses and negative cash flow from
operations as well as its default on its debt payable raise substantial doubt
about its ability to continue as a going concern. Management's plans concerning
these matters are also discussed in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

                                     MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
                                     Certified Public Accountants

Los Angeles, California
April 8, 2000

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                     ------------------------------------------
                                                                                            1999                   1998
                                                                                     -------------------    -------------------
<S>                                                                                  <C>                    <C>
         ASSETS
     CURRENT ASSETS
         Cash and cash equivalents                                                   $         10,029       $         132,099
         Accounts receivable, net of allowance for
         doubtful accounts of  $50,000 and $50,000                                            272,849                 212,770
         Inventory                                                                          1,165,588               1,468,022
         Prepaid expenses                                                                     177,399                 168,884
                                                                                     ----------------       -----------------
           Total Current Assets                                                             1,625,865               1,981,775

     FURNITURE AND EQUIPMENT, net of
          Accumulated depreciation of $515,357 and $383,832                                   265,536                 382,958

     INTANGIBLE ASSETS, net of accumulated amortization
        of $515,357 and $383,832                                                              510,162                 557,760
                                                                                     ----------------       -----------------
         TOTAL ASSETS                                                                $      2,401,563       $       2,922,493
                                                                                     ================       =================
          LIABILITIES AND STOCKHOLDERS' EQUITY
     CURRENT LIABILITIES
         Accounts payable and accrued expenses                                       $      1,449,949       $       1,142,282
         Due to factor                                                                          2,491                       -
         Notes payable to stockholders                                                         57,000                  57,000
         Advances from stockholders                                                            21,072                  49,129
         Debt Payable                                                                          90,000                 100,000
                                                                                     ----------------       -----------------
           Total Liabilities                                                                1,620,512               1,348,411
                                                                                     ----------------       -----------------
       COMMITMENTS AND CONTINGENCIES (Note 10)                                                      -                       -

     STOCKHOLDERS' EQUITY
         Common stock - $.001 par value; 50,000,000 shares authorized;
           6,384,474 and 4,756,693 shares issued and outstanding                                6,384                   4,757
         Additional paid-in-capital                                                        11,222,641              10,034,341
         Advances to stockholder                                                              (15,000)                      -
         Accumulated deficit                                                              (10,432,974)             (8,465,016)
                                                                                      ---------------       -----------------
           Total Stockholders' Equity                                                         781,051               1,574,082
                                                                                      ---------------       -----------------
           TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $     2,401,563       $       2,922,493
                                                                                      ===============       =================

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      - 2 -
<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                                  For the Year Ended
                                                                                                      December 31,
                                                                                       -----------------------------------------
                                                                                               1999                   1998
                                                                                       -------------------     -----------------
<S>                                                                                    <C>                     <C>
     NET SALES                                                                         $        1,588,177      $      1,562,664
                                                                                       ------------------      ----------------
     COST OF SALES                                                                                995,176             1,049,712
                                                                                       ------------------      ----------------
     GROSS PROFIT                                                                                 593,001               512,952
                                                                                       ------------------      ----------------
     OPERATING EXPENSES:
         Selling and marketing                                                                    718,730             1,485,811
         General and administrative                                                             1,705,729             1,566,176
                                                                                       ------------------      ----------------
           Total Operating Expenses                                                             2,424,459             3,051,987
                                                                                       ------------------      ----------------
     LOSS FROM OPERATIONS                                                                      (1,831,458)           (2,539,039)

     OTHER EXPENSE
         Interest Expense                                                                        (136,500)             (790,456)
                                                                                       ------------------      ----------------
     LOSS BEFORE PROVISION FOR INCOME TAXES                                                    (1,967,958)           (3,329,491)

     PROVISION FOR INCOME TAXES                                                                         -                     -
                                                                                       ------------------      ----------------
     NET LOSS                                                                          $       (1,967,958)     $     (3,329,491)
                                                                                       ==================      ================
     NET LOSS PER COMMON SHARE - basic and diluted                                     $            (0.37)     $          (0.76)
                                                                                       ==================      ================
     WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - basic and diluted                             5,347,916             4,398,210
                                                                                       ==================      ================
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      - 3 -


<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                        STATEMENT OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                    Common Stock          Additional                                       Total
                                              --------------------------    Paid-in      Advances to      Accumulated  Stockholders
                                                 Shares      Amount        Capital      Stockholder       Deficit          Equity
                                              ----------- ------------   -----------  ---------------  ------------    ------------
<S>                                            <C>         <C>           <C>          <C>              <C>             <C>
Balance at December 31, 1997                   2,683,568   $     2,684   $ 2,718,152  $             -  $ (5,135,525)   $(2,414,689)
   Exercise of warrants                           82,127            82       137,901                -             -        137,983
   Net proceeds from issuance of stock         1,250,000         1,250     5,215,529                -             -      5,216,779
   Debt converted to common shares               740,998           741     1,856,759                -             -      1,857,500
   Capital contribution from officer                   -             -       106,000                -             -        106,000
   Net loss                                                                        -                -    (3,329,491)    (3,329,491)
                                               ---------   -----------   -----------  ---------------  ------------    -----------
Balance at December 31, 1998                   4,756,693         4,757    10,034,341                     (8,465,016)     1,574,082
   Proceeds from issuance of stock             1,411,301         1,411     1,141,645                -             -      1,143,056
   Offering costs                                      -             -      (234,141)               -             -       (234,141)
   Issuance of stock for services                216,480           216       280,796                -             -        281,012
   Advances to stockholders                            -             -             -          (15,000)            -        (15,000)
   Net loss                                                                                         -    (1,967,958)    (1,967,958)
                                               ---------   -----------   -----------  ---------------  ------------    -----------
Balance at December 31, 1999                   6,384,474   $     6,384   $11,222,641  $       (15,000) $(10,432,974)   $   781,051
                                              ==========   ===========   ===========  ===============  ============    ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      - 4 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                  For the Year Ended
                                                                                                     December 31,
                                                                                       -----------------------------------------
                                                                                              1999                   1998
                                                                                       -------------------     -----------------
<S>                                                                                    <C>                     <C>
     CASH FLOWS FROM OPERATING ACTIVITIES
          Net loss                                                                     $       (1,967,958)     $      (3,329,491)
         Adjustments to reconcile net loss to net cash used in operating
          Activities
         Bad debt expense                                                                               -                 50,000
         Equity securities issued for services                                                     93,513                      -
         Depreciation and amortization                                                            176,344                181,309
         Amortization of debt issuance costs                                                            -                620,760
           Changes in assets and liabilities:
           (Increase) Decrease
              Accounts Receivable                                                                 (60,079)              (219,262)
              Inventory                                                                           302,434               (988,504)
              Prepaid expenses                                                                    178,985                (39,372)
           Increase (Decrease)
              Accounts payable and accrued expenses                                               307,667                (36,104)
                                                                                       ------------------      -----------------
     NET CASH USED IN OPERATING ACTIVITIES                                                       (969,094)            (3,760,664)
                                                                                       ------------------      -----------------
     CASH FLOWS FROM INVESTING ACTIVITIES
         Purchase of furniture and equipment                                                      (14,103)               (87,525)
         Increase in intangible assets                                                            (12,221)               (88,746)
                                                                                       ------------------      -----------------
     NET CASH USED IN INVESTING ACTIVITIES                                                        (26,324)              (176,271)
                                                                                       ------------------      -----------------
     CASH FLOWS FROM FINANCING ACTIVITIES
         Net proceeds from issuance of common stock                                               908,914              5,051,373
         Advances from factor                                                                     243,000                      -
         Repayments to factor                                                                    (240,509)                     -
         Payment on debt                                                                                -             (1,300,000)
         Proceeds from debt                                                                       (10,000)                     -
         Proceeds from notes and loans payable to stockholders                                          -               (193,000)
         Proceeds from loan to stockholders                                                             -                 33,970
         Payments on loans to stockholders                                                              -                 (5,500)
         Net payable on advances to stockholders                                                  (28,057)                     -
         Exercise of warrants                                                                           -                137,983
                                                                                       ------------------      -----------------
     NET CASH PROVIDED BY FINANCING ACTIVITIES                                                    873,348              3,724,826
                                                                                       ------------------      -----------------
     NET DECREASE IN CASH AND CASH EQUIVALENTS                                                   (122,070)              (212,109)
     CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                                132,099                344,208
                                                                                       ------------------      -----------------
     CASH AND CASH EQUIVALENTS - END OF YEAR                                           $           10,029      $         132,099
                                                                                       ==================      =================
     SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     Cash Paid During the Period for
         Interest                                                                      $           13,000      $         275,476
                                                                                       ==================      =================
         Income taxes                                                                  $                -      $             800
                                                                                       ==================      =================

</TABLE>

   The accompanying notes are an integral part of these financial statement.

                                      - 5 -
<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                            STATEMENTS OF CASH FLOWS
                  FOR THE YEAR ENDED DECEMBER 31, 1999 AND 1998

NON-CASH INVESTING AND FINANCING TRANSACTION

         During the year ended December 31, 1999, the Company issued 216,480
         shares of its common stock for services rendered. The shares were
         valued at the current market value of the Company's common stock on the
         dates of issuance for an aggregate amount of $281,012.

                                      - 6 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 1-         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                Organization and Business Activity

                Rollerball International, Inc. (the "Company"), was incorporated
                under the laws of the state of Delaware on March 7, 1994. The
                Company develops, manufactures, distributes and markets inline
                skates, and related accessories under the Rollerball trademark
                throughout Europe, Asia and North America through independent
                sales representatives and distributors.

                Basis of Presentation

                As reflected in the accompanying financial statements, the
                Company has had recurring losses and a negative cash flow from
                operations adn is in default on its debt payable. These matters
                raise substantial doubt about the Company's ability to continue
                as a going concern.

                In view of the matters described in the preceding paragraph,
                recoverability of a major portion of the recorded asset amounts
                shown in the accompanying balance sheet is dependent upon the
                continued operations of the Company, which in turn is dependent
                upon the Company's ability to continue to raise capital and
                generate positive cash flows from operations. The financial
                statements do not include any adjustments relating to the
                recoverability and classification of recorded asset amounts or
                amounts and classifications of liabilities that might be
                necessary should the Company be unable to continue its
                existence. Management plans to take the following steps that it
                believes will be sufficient to provide the Company with the
                ability to continue in existence:


                 *                The Company is continuing to reduce its
                                  operating overhead in order to reduce the
                                  amount of cash needed to fund operations.

                 *                Structure arrangements for the provision of
                                  services by outside consultants and third
                                  party providers in a manner which reserves the
                                  cash flow of the Company, such as through
                                  agreements which require those consultants or
                                  service provider to take a portion of any
                                  agreed-upon fee in stock or stock options.

                 *                Acquire capital financing in the amount of
                                  $2.5 million dollars or more through a
                                  long-term debt instruments, short-term
                                  convertible notes, private placements or other
                                  sales of the Company's securities, as may
                                  deemed appropriate by the Company's Board of
                                  Directors.

                Reclassification

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

                Use of Estimates and Assumptions

                The preparation of financial statements in accordance with
                generally accepted accounting principles requires management to
                make estimates and assumptions that affect the amounts reported
                in the financial statements and accompanying notes. Actual
                results could differ from those estimates.

                                      - 7 -




<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 1-         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                Fair Value of Financial Instruments

                The Company measures its financial assets and liabilities in
                accordance with generally accepted accounting principles. For
                certain of the Company's financial instruments, including cash
                and cash equivalents, accounts receivable, accounts payable and
                accrued expenses, the carrying amounts approximate fair value
                due to their short maturities. The amounts owed for notes
                payable to stockholders, advances from stockholder and debt also
                approximate fair value because current interest rates and terms
                offered to the Company for similar notes are substantially the
                same.

                Cash and Cash Equivalents

                The Company considers all highly liquid investments with
                maturity of three months or less when purchased to be cash
                equivalents.

                Concentration of Credit Risk and Significant Customers

                Financial instruments, which potentially subject the Company to
                concentrations of credit risk, consist of cash and trade
                receivables. The Company places its cash with high quality
                financial institutions and at times may exceed the FDIC $100,000
                insurance limit. The Company makes periodic evaluation of the
                credit worthiness of its customers and generally does not
                require collateral. Credit losses relating to the Company's
                customers, mainly mass merchant retailers, have consistently
                been within management's expectations and are provided for in
                the financial statements.

                The Company operates predominantly within one industry segment
                where certain customers represent a significant portion of the
                Company's business. During the years ended December 31, 1999 and
                1998, approximately 73% and 56%, respectively, of the Company's
                sales were made to two (1999) and three (1998) customers.

                The Company's products are primarily sourced through independent
                purchasing agents from suppliers located in Taiwan, the People's
                Republic of China and Thailand. The Company negotiates the cost
                of its products directly with its suppliers in United States
                Dollars and its purchases are primarily affected through letters
                of credit in United States Dollars. As a result, exchange rate
                fluctuations could have an effect upon the Company's ability to
                negotiate favorable price terms with suppliers, which may
                adversely affect the cost of goods sold and the resultant gross
                margins for the Company's products. Certain components of the
                Company's products are maintained at manufacturers' plants
                located in foreign countries, which could subject the Company to
                a risk of loss in the event of a dispute.

                                      - 8 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 1-         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                Inventory

                Inventory is valued at the lower of cost or market. Cost is
                determined by the first-in first-out ("FIFO") method.

                Impairment of Long-Lived Assets

                In accordance with Financial Accounting Standards Board ("FASB")
                Statement of Financial Accounting Standards (SFAS) No. 121,
                "Accounting for the Impairment of Long-Lived Assets and for
                Long-Lived Assets to be Disposed of", long-lived assets are
                reviewed for impairment whenever events or changes in
                circumstances indicate that the carrying amounts of such assets
                may not be recoverable. Impairment losses would be recognized if
                the carrying amounts of the assets exceed the fair value of the
                assets.

                Furniture and Equipment

                Furniture and equipment is stated at cost. Depreciation is
                provided on the straight-line method over the estimated useful
                lives of the related assets that range between five and seven
                years.

                Intangible Assets

                Intangible assets consist of patents and trademarks which are
                recorded at cost and are being amortized using the straight-line
                method over 15 years.

                Revenue Recognition

                The Company recognizes revenue from product sales to customers
                upon shipment. The Company provides a warranty of its products
                against defects for a specified period and has policies
                permitting customers to return products under certain
                circumstances.

                In addition, certain of the Company's distributors and agents
                are entitled to rebates upon attaining specified sales levels. A
                provision is made on the date of sale for the estimated amount
                of product returns and rebates that may occur under these
                programs. Amounts related to warranty, returns and rebates have
                not been significant.

                Advertising Costs

                Advertising costs are expensed as incurred. Advertising expense,
                including costs related to trade shows, amounted to $69,437 and
                $388,082 for the years ended December 31, 1999 and 1998,
                respectively.

                Research and Development Costs

                Research and development costs are expensed as incurred and
                amounted to $11,500 and $25,557 for the years ended December 31,
                1999 and 1998, respectively.
                                      - 9 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 1-  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  Offering Costs

                  Offering costs consist primarily of professional fees. These
                  costs are charged against the proceeds of the sale of common
                  stock in the periods in which they occur.

                  Stock-Based Compensation

                  The Company accounts for employee stock options in accordance
                  with Accounting Principles Board Opinion No. 25 ("APB 25"),
                  "Accounting for Stock Issued to Employees". Under APB 25, the
                  Company recognizes no compensation expense related to employee
                  stock options, as no options are granted at a price below
                  market price on the day of grant.

                  In 1996, FASB No. 123 "Accounting for Stock-Based
                  Compensation", became effective for the Company. FASB 123,
                  which prescribes the recognition of compensation expense based
                  on the fair value of options on the grant date, allows
                  companies to continue applying APB 25 if certain pro forma
                  disclosures are made assuming hypothetical fair value method,
                  for which the Company uses the Black-Scholes option-pricing
                  model. See Note 8 for pro forma disclosures required by FASB
                  123 plus additional information on the Company's stock
                  options.

                  For non-employee stock based compensation, the Company
                  recognizes an expense in accordance with FASB 123 and values
                  the equity securities base on the fair value of the security
                  on the date of grant. For Stock based awards, the value is
                  based on the market value for the stock on the date of grant
                  and if the stock has restrictions as to transferability a
                  discount is provided for lack of tradability. Stock option
                  awards are valued using the Black-Scholes option-pricing
                  model.

                  Income Taxes

                  The Company uses the asset and liability method of accounting
                  for income taxes. Under the asset and liability method,
                  deferred assets and liabilities are recognized for the
                  estimated future tax consequences attributable to differences
                  between the financial statement carrying amounts of existing
                  assets and liabilities and their respective tax bases. This
                  method also requires the recognition of future tax benefits
                  such as net operating loss carry-forwards, to the extent that
                  realization of such benefits is more likely than not.

                  Deferred taxes assets and liabilities are measured using
                  enacted tax rates expected to apply to taxable income in the
                  years in which those temporary differences are expected to be
                  recovered or settled. The effect on deferred tax assets and
                  liabilities for changes in tax rates is recognized in income
                  in the period that includes the enactment date.

                                     - 10 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 1-  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

                  Loss Per Common Share

                  The Company calculates net loss per share based on SFAS No.
                  128, "Earnings Per Share". Basic loss per share is computed by
                  dividing net loss attributable to common stockholders by the
                  weighted average number of common shares outstanding. Diluted
                  loss per share is computed similar to basic loss per share
                  except that the denominator is increased to include the number
                  of additional common shares that would have been outstanding
                  if the potential common shares had been issued and if the
                  additional common shares were dilutive. At December 31, 1999
                  and 1998, the weighted average shares outstanding would have
                  been increased by 675,979 and 594,826 shares of the Company's
                  common stock if the issued and exercisable stock options and
                  warrants would have been dilutive.

                  Comprehensive Income

                  In June 1998, the Financial Accounting Standards Board
                  ("FASB") issued SFAS No. 130, "Reporting Comprehensive
                  Income". SFAS No. 130 establishes standards for the reporting
                  and display of comprehensive income and its components in the
                  financial statements. As of December 31, 1999 and 1998, the
                  Company has no items that represent comprehensive income and,
                  therefore, has not included a schedule of comprehensive income
                  in the accompanying financial statements.

                  Impact of Year 2000 Issue

                  As of December 31, 1999, the Company does not have any
                  computer systems or customers and suppliers. Therefore, the
                  issue of the year 2000 has no effect on the Company's current
                  activities.

NOTE 2 -          INVENTORY

                  Inventory is summarized as follows as of:

                                                            December 31,
                                                   --------------------------
                                                      1999            1998
                                                   ----------      ----------
                  Parts                            $  296,400      $  296,400
                  Consigned inventory                 179,422               -
                  Finished goods                      689,766       1,171,622
                                                   ----------      ----------
                  Total inventory                  $1,165,588      $1,468,022
                                                   ==========      ==========

                                     - 11 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 3 -          FURNITURE AND EQUIPMENT

                  Furniture and equipment consisted of the following:

                                                            December 31,
                                                    --------------------------
                                                      1999              1998
                                                    ---------        ---------
                  Office and trade show equipment   $ 182,076        $ 181,473
                  Molds and tooling                   536,319          522,819
                  Machinery and equipment              62,498           62,498
                                                    ---------        ---------
                                                      780,893          766,790
                  Less accumulated depreciation      (515,357)        (383,832)
                                                    ---------        ---------
                  Furniture and equipment, net      $ 265,536        $ 382,958
                                                    =========        =========

                Depreciation expense for the years ended December 31, 1999 and
                1998 was $131,525 and $139,859, respectively.

NOTE 4 -          INTANGIBLE ASSETS

                  Intangible assets are summarized as follows as of:

                                                            December 31,
                                                    --------------------------
                                                      1999              1998
                                                    ---------        ---------
                  Patents                           $ 404,226        $ 403,431
                  Trademarks                          253,240          241,814
                                                    ---------        ---------
                                                      657,466          645,245
                  Less:  Accumulated amortization    (147,304)        (102,485)
                                                    ---------        ---------
                  Intangible assets                 $ 510,062        $ 542,760
                                                    =========        =========

                Amortization expense for the years ended December 31, 1999 and
                1998 was $44,819 and $41,450, respectively.

NOTE 5 -          ACCOUNTS PAYABLE AND ACCRUED EXPENSES

                  Accrued expenses consisted of the following:

                                                            December 31,
                                                    --------------------------
                                                      1999              1998
                                                    ---------        ---------
                  Trade payables                    $  709,841       $  681,478
                  Accrued officer salaries             342,806           61,197
                  Accrued consulting fees              246,730          224,279
                  Accrued interest                      14,418           10,328
                  Other accruals                       138,707          165,000
                                                    ----------       ----------
                                                    $1,452,440       $1,142,282
                                                    ==========       ==========

                                     - 12 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 6 -          DUE TO FACTOR

                  The Company has entered into a factoring agreement (the
                  "Agreement") with Alliance Financial Capital, Inc. Pursuant to
                  the agreement, the Company has assigned and sold to Alliance
                  its interest in its receivables on a
                  transaction-by-transaction basis and at each party's sole and
                  absolute discretion. Alliance has the right of recourse in its
                  sole discretion after 100 days to demand payment from the
                  Company of any unpaid invoices sold, assigned and transferred.

                  Alliance may advance to the Company up to 85% of the purchase
                  price of the receivables, less charges and reserves, with a
                  credit limit of $1,000,000. A gross discount of 15%, less any
                  applicable fees, shall be retained by Alliance from the
                  collection of each total transaction amount. The Company shall
                  be entitled to a rebate, regarding each transaction, which
                  shall be deducted from said gross discount, if each
                  transaction is paid within 100 days by said account debtor, as
                  follows:

                  o Prime plus 4.25% on the funds advanced
                  o 0.025% per day discount on the invoice amount
                  o 0.025% per day administrative fee on the invoice amount

                  The agreement is collateralized by the Company's present and
                  future accounts, instruments, contract rights, chattel paper,
                  documents, all goods, including but not limited to equipment,
                  machinery, furniture, furnishings and fixtures.

                  For the year ended December 31, 1999, the Company factored
                  gross accounts receivables of $364,309 and paid factor fees of
                  approximately $56,000. At December 31, 1999, the Company has
                  no open accounts receivable, and owes the factor $2,491.

NOTE 7-           NOTES PAYABLE TO STOCKHOLDERS

                  Notes payable to stockholders consisted of the following:

 <TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                           --------------------------
                                                                                              1999             1998
                                                                                           ---------        ---------
<S>                                                                                        <C>              <C>
                  Unsecured convertible note payable bearing interest at 12% per
                     annum, due on demand and convertible into common

                     stock at $3.37 per share.                                             $ 7,000          $ 7,000

                  Unsecured convertible notes payable bearing interest at 12%
                     per annum, due on demand and convertible into common

                     stock at $5.05 per share.                                              50,000           50,000
                                                                                           -------          -------
                                                                                           $57,000          $57,000
                                                                                           =======          =======
</TABLE>

                                     - 13 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 7-           NOTES PAYABLE TO STOCKHOLDERS (Continued)

                  The Company provided the stockholders with warrants to
                  purchase an additional 24,958 shares of common stock at $3.37
                  per share. The warrants do not expire during the period of
                  indebtedness. The notes were paid off in 1998 from proceeds of
                  the offering. No warrants have been exercised as of December
                  31, 1998.

                  The unsecured convertible notes payable to stockholders are
                  convertible into shares of common stock at $3.37 per share and
                  $5.05 per share, respectively, at the stockholder's
                  discretion.

NOTE 8 -          RELATED PARTY TRANSACTIONS

                  The Company has advances of $21,072 and $49,129 for December
                  31, 1999 and 1998, respectively, from stockholders that are
                  non-interest bearing and are due on demand.

                  Since 1994, the Company has utilized the services of a related
                  party of the principal stockholder/chief executive officer.
                  The individual was paid $30,000 for each of the two years
                  ended December 31, 1999 related to marketing services provided
                  to the Company.

NOTE 9 -          DEBT PAYABLE

                  In September 1997, the Company obtained an unsecured $100,000
                  loan from an individual. The loan bears interest at 12%, and
                  is due January 31, 1999. The Company has paid $10,000 of the
                  original balance and is in default as to the remaining $90,000
                  unpaid balance. In addition, the principal stockholder/officer
                  granted the individual the right to receive shares of common
                  stock equal to the principal amount of the note divided by the
                  initial public offering price. Such shares will come from the
                  principal officer/stockholder.

                  The holders of the 12% Debentures also received a warrant to
                  purchase one share of common stock for every two shares
                  received upon conversion of the 12% Debentures, an aggregate
                  of 247,936 warrants. The warrants are exercisable for three
                  years from issuance at an exercise price equal to 100% of the
                  per share offering price.

NOTE 10 -         COMMITMENTS

                  Leases

                  The Company leases its office space, warehouse space, and
                  sales office on a month-to-month basis, including utilities.
                  Rent expense for the years ended December 31, 1999 and 1998
                  was $126,537 and $112,186, respectively.

                                     - 14 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 10 -         COMMITMENTS (Continued)

                  Royalty Agreements

                  In addition to the royalty agreement with the principal
                  shareholder and officer, the Company has entered into royalty
                  agreements with two individuals which require the Company to
                  pay royalties based on a certain percentage of net sales less
                  certain deductions as defined. The royalties to one individual
                  are based on 0.5% of net sales, except for sales based on a
                  letter of credit, for which the royalty percentage is 0.3% of
                  net sales. The royalties to the other individual are based on
                  1% of net sales except for sales based on a letter of credit,
                  for which the royalty percentage is 0.6% of net sales. This
                  agreement was reduced by 50% effective January 1, 1999.
                  One of the agreements limits the royalty payment to $350,000
                  for any fiscal year. In addition, the Company has an agreement
                  with the originator of the Radial Skateball technology, which
                  provides for a monthly consulting fee of $4,000 per month
                  through March 24, 2002 and a royalty based on 2.5% of cost of
                  goods sold after certain deductions including expenses for
                  patents and trademarks. Royalty expense for the years ended
                  December 31, 1999 and 1998 was $60,700 and $29,308,
                  respectively. All royalty agreements provide for payment of
                  royalties in perpetuity.

                  Employment Agreements

                  The Company entered into a four-year employment agreement with
                  the principal stockholder/officer providing for a base
                  compensation of $160,000 for fiscal 1997 with annual increases
                  up to a base salary of $235,000 in the year 2000. In addition,
                  the principal stockholder/officer will be entitled to bonus
                  payments commencing in 1998 of 7% of net income plus 10% of
                  any amount above $750,000.

                  For 1999 and 2000 the bonus will be calculated based on net
                  income of $1,650,000 and $2,400,000, respectively, with the
                  principal stockholder/officer entitled to 7% of the base net
                  income and 10% of any amount above the base. The royalty
                  agreement with the principal stockholder/officer was
                  terminated upon entering into the employment agreement. During
                  1998 and in connection with the offering, the principal
                  stockholder/officer waived payment of $106,000 of accrued
                  salary. Such amount has been reflected as a capital
                  contribution.

                                     - 15 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 11 -         INCOME TAXES

                  The components of the provision for income taxes is as
follows:

                                                  For the year ended
                                                      December 31,
                                        ---------------------------------------
                                              1999                 1998
                                        -----------------    ------------------
Current Tax Expense
  U.S. Federal                          $             --     $              --
  State and Local                                     --                    --
                                        ----------------     -----------------
    Total Current                                     --                    --
                                        ----------------     -----------------
Deferred Tax Expense
  U.S. Federal                                        --                    --
  State and Local                                     --                    --
                                        ----------------     -----------------
    Total Deferred                                    --                    --
                                        ----------------     -----------------
Total Tax Provision from
Continuing Operations                   $             --     $              --
                                        ================     =================

                  The reconciliation of the effective income tax rate to the
Federal statutory rate is as follows:

                                                  For the year ended
                                                      December 31,
                                        ---------------------------------------
                                              1999                 1998
                                        -----------------    ------------------
     Federal Income Tax Rate                   (34.0)%             (34.0)%
     Effect of Valuation Allowance              34.0 %              34.0 %
                                        =================    ==================
     Effective Income Tax Rate                   0.0 %               0.0 %
                                        =================    ==================

                                     - 16 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 11 -         INCOME TAXES (Continued)

                  Significant components of the Company's deferred tax
liabilities and assets are as follows:

                                                            December 31,
                                                    --------------------------
                                                      1999            1998
                                                    -----------   ------------
                  Deferred tax liabilities:
                     Depreciation and amortization  $   (70,553)  $   (52,968)
                                                    -----------   -----------
                  Total deferred tax liabilities        (70,553)      (52,968)
                                                    -----------   -----------
                  Deferred tax assets:
                     Accrued expenses                   126,067       126,066
                  Pre-incorporation expenses            108,540        66,380
                  Net operating losses                3,497,204     3,457,100
                                                    -----------   -----------
                  Total deferred assets               3,731,811     3,649,546
                  Valuation allowance                (3,661,258)   (3,596,578)
                                                    -----------   -----------
                  Net deferred tax assets                70,553        52,968
                                                    -----------   -----------
                  Total deferred taxes              $         -   $         -
                                                    ===========   ===========

                  In assessing the realizability of deferred tax assets,
                  management considers whether it is more likely than not that
                  some portion or all of the deferred tax assets will not be
                  realized. The ultimate realization of deferred tax assets is
                  dependent upon the generation of future taxable income during
                  the periods in which those temporary differences become
                  deductible. Based on projections of future taxable income over
                  the periods, which the deferred tax assets are deductible, as
                  of December 31, 1999, management believes it is likely that
                  the Company will not realize the benefits of these deductible
                  differences, and therefore a full valuation allowance is
                  required. The net change in the valuation allowance for the
                  years ended December 31, 1999 and 1998 increased by
                  approximately $1,047,730 and $792,000, respectively.

                  The Company has available as of December 31, 1999,
                  approximately $10,285,894 of unused operating loss
                  carry-forwards that may be applied against future taxable
                  income and that expire in various years starting from 2017.
                  Certain ownership changes in the Company could result in an
                  annual limitation on the utilization of these operating loss
                  carry-forwards.

                                     - 17 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 12 -         STOCKHOLDERS' EQUITY

                  Common Stock

                  During 1998, the underwriter warrants issued in connection
                  with the 1994 Private Offering were exercised and 82,127
                  shares were issued. The Company received net proceeds of
                  approximately $138,000 from the exercise of these warrants.

                  On April 1, 1998, the Company completed an initial public
                  offering (the "Offering") of 1,250,000 shares of common stock
                  at a price of $5.00. The net proceeds to the Company, net of
                  underwriting discount and commissions and offering expenses,
                  were $5,051,373. In addition the principal stockholder/officer
                  surrendered for cancellation 600,000 shares of common stock of
                  the Company on the effective date of the Registration
                  Statement.

                  During 1999, the Company completed two private offering of
                  500,000 and 670,000 shares of its common stock. The proceeds
                  to the Company were $450,000 and $502,500, respectively. In
                  regards to the offerings, the Company paid commissions of
                  $150,000 (for the 500,000 shares) and $49,125 (for the 670,000
                  shares). Also, the company incurred offering cost of $35,016
                  related to professional fees. In total the offering cost were
                  $234,141. Also, during the year ended December 31, 1999, the
                  Company issued an additional 241,301 shares of its common
                  stock for cash proceeds of $190,556.

                  Also, during 1999, the Company incurred $281,012 of fees that
                  were paid by the issuance of 216,480 share of its common
                  stock. The shares were valued at the current market price as
                  of the date that the shares were issued.

                  The Company lent $15,000 to a stockholder of the Company. The
                  advances are non-interest bearing, secured by the common stock
                  of the stockholder and is due on demand.

                  Stock Options

                  In September 1994, the Company adopted the 1994 Employee Plan,
                  which provides for the grant of options to purchase 750,000
                  shares of the Company's common stock at not less than fair
                  value for incentive stock options ("ISOs"). A total of 244,826
                  were granted in 1994 and 1995 and all such options vested
                  immediately on the date of grant. During 1999 and 1998 an
                  additional 234,653 and 350,000, respectively, options were
                  granted pursuant to the Plan. The 1999 and 1998 grants were
                  granted at fair market value and the 1998 grants vest over
                  four years. No options have been exercised as of December 31,
                  1999. A total of 104,021 shares remain available for grant
                  pursuant to the 1994 Employee Plan.

                  Pro forma information regarding net income and earnings per
                  share is required by FASB No. 123, and has been determined as
                  if the Company had accounted for its employee stock options
                  under the fair value method of that Statement. The fair value
                  for these options was estimated at the date of grant using a
                  Black-Scholes option pricing model with the following
                  weighted-average assumptions for 1999 and 1998: weighted-
                  average risk-free interest rates of 6%; dividend yields of 0%;
                  weighted-average volatility factors of the expected market
                  price of the Company's common stock of 0.68 (1999) and 0.35
                  (1998); and a weighted average expected life of the option of
                  5 years.

                                     - 18 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 12 -         STOCKHOLDERS' EQUITY (Continued)

                  Stock Options (continued)

                  This option valuation model requires input of highly
                  subjective assumptions. Because the Company's employee stock
                  options have characteristics significantly different from
                  those of traded options, and because changes in the subjective
                  input assumptions can materially affect the fair value
                  estimate, in management's opinion, the existing model does not
                  necessarily provide a reliable single measure of the fair
                  value of its employee stock options.

                  The effects of applying Statement 123 in this pro forma
                  disclosure may not be indicative of future amounts. Additional
                  awards in future years are anticipated.

                  A summary of the Company's stock option activity and related
                  information follows:

<TABLE>
<CAPTION>
                                                                                                                 Weighted
                                                                                                                  Average
                                                                                      Stock Options               Exercise
                                                                                       Outstanding                Price
                                                                                       -----------              ----------
<S>                                                                                    <C>                      <C>
                    Options Outstanding, December 31, 1997                                 244,826              $  4.21
                    Granted                                                                350,000              $  5.00
                                                                                       -----------

                    Options Outstanding, December 31, 1998                                 599,826              $  4.42
                    Granted                                                                234,657              $  1.13
                    Expired                                                               (183,500)             $  3.37
                                                                                      ------------
                    Options Outstanding, December 31, 1999                                 645,979              $  4.72
                                                                                      ============

                    Options Exercisable, December 31, 1998                                 420,979              $  4.65
                                                                                      ============

                    Options Exercisable, December 31, 1999                                 495,979              $  4.63
                                                                                       ===========
</TABLE>

                  The following table summarizes the outstanding and exercisable
                  warrants grouped by range of exercise prices as of December
                  31, 1998:

<TABLE>
<CAPTION>
                                                                   Weighted                 Weighted
                                                                    Average                 Average
                                                                   Exercise                 Remaining
                  Range of Exercise Prices                           Price                    Life
                  ------------------------                         --------                -----------
<S>                                                                <C>                       <C>
                  $1.125                                           $1.125                    4.14
                  $3.37 to $5.05                                   $4.90                     1.74
</TABLE>
                                     - 19 -

<PAGE>
                         ROLLERBALL INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 12 -         STOCKHOLDERS' EQUITY (Continued)

                  Stock Options (Continued)

                  For purposes of pro forma disclosures, the estimated fair
                  value of the options is amortized to expense over the option's
                  vesting period. The Company's pro forma net loss is as
                  follows:
                                                        For the Year
                                                      Ended December 31,
                                              ---------------------------------
                                                  1999                 1998
                                              -------------       -------------
                  Net Loss:
                  As reports                   $(1,967,958)        $(3,329,491)
                                               ===========         ===========
                  Pro-forma                    $(2,607,830)        $(3,969,363)
                                               ===========         ===========

                  In July 1997, the Board of Directors adopted the Non-Executive
                  Director Stock Option Plan (the "Director Plan"), which was
                  approved by the Company's stockholders at the same time. The
                  Director Plan provides for issuance of a maximum of 200,000
                  shares of common stock upon the exercise of stock options
                  granted under the Director Plan. Options may be granted under
                  the Director Plan until July 2007 to (i) non-executive
                  directors as defined, (ii) members of any advisory board
                  established by the Company who are not full-time employees of
                  the Company or any of its subsidiaries, and (iii) consultants.
                  The exercise price for options granted pursuant to the
                  Director Plan shall be at 100% of fair value. No options have
                  been granted under the Director Plan.

NOTE 13 -         GEOGRAPHIC DATA

                  Sales by geographic location are as follows:

                                                        For the Year
                                                      Ended December 31,
                                              ---------------------------------
                                                  1999                 1998
                                              -------------       -------------
                  United States                $1,567,336         $ 1,410,999
                  Europe                           20,840             151,665
                                               ----------         -----------
                    Total net sales            $1,588,176         $ 1,562,664
                                               ==========         ===========

                                     - 20 -

<PAGE>
                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized the 31st day of March,
1999.

                                            ROLLERBALL INTERNATIONAL INC.

                                               By: /s/ JACK FORCELLEDO
                                                   -----------------------
                                                   Jack Forcelledo, Chairman,
                                                   President and Chief Executive
                                                   Officer

         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.
<TABLE>
<CAPTION>

Signature                                 Title                Date
---------                                 -----                ----
<S>                             <C>                           <C>
Elizabeth Forcelledo            Director                       4/14/00
John T. Botti                   Director                       4/14/00
Michael Katz                    Director                       4/14/00
Jack Forcelledo                 Chief Executive Officer        4/14/00
</TABLE>

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