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


                                   FORM 10-KSB


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


     For the year ended September 30, 1999

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

                         Commission File Number 0-21279


                          THERMACELL TECHNOLOGIES, INC.
                          ----------------------------
             (Exact name of registrant as specified in its charter)

             FLORIDA                                  59-3223708
             -------                                  ----------
 (State or other jurisdiction of                  (I.R.S. Employer
  incorporation or organization)                 Identification No.)


440 Fentress Blvd., Daytona Beach                       32115
---------------------------------                       -----
(Address of principal executive offices)              (Zip Code)


       Registrant's telephone number, including area code: (904) 253-6262

     Securities registered pursuant to Section 12(b) of the Act: NONE

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.

[ X ] Yes  [  ] No

Check  if no  disclosure  of  delinquent  filers  in  response  to  Item  405 of
Regulation S-B is contained in this form,  and no disclosure  will be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  of  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB [ X ]

State  issuer's   revenues  for  its  most  recent   reporting   period  (Fiscal
year)........$4,306,408.

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant  at  December  31, 1999 was  $4,987,394.  The bid price of the common
stock at that date was $0.69.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Company's  definitive proxy statement for the Annual Meeting of the
Company's  stockholders  to be  held on  March  15,  2000  are  incorporated  by
reference into part III of this Form.


<PAGE>



                          THERMACELL TECHNOLOGIES, INC.

                               FORM 10-KSB - Index

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999


PART I                                                                      Page
                                                                            ----
        Item 1.     Business                                                 1.

        Item 2.     Properties                                               8.

        Item 3.     Legal Proceedings                                        8.

        Item 4.     Submission of Matters to a
                     Vote of Security Holders                                9.

        PART II

        Item 5.     Market of the Registrant's Securities
                     and Related Stockholder Matters                         9.

        Item 6.     Selected Financial Data                                 11.

        Item 7.     Management's Discussion and Analysis of
                     Financial Condition and Results of Operations          11.

        Item 8.     Consolidated Financial Statements
                     and Supplementary Data                                 15.

        Item 9.     Changes in and Disagreements with
                     Accountants on Accounting and Financial Disclosures    16.

        PART III

        Item 10.     Directors and Executive Officers of the Registrant     16.

        Item 11.     Executive Compensation                                 16.

        Item 12.     Security Ownership of Certain Beneficial
                      Owners and Management                                 16.

        Item 13.     Certain Relationships and Related Transactions         16.

        Item 14.     Exhibits, Consolidated Financial Statements,
                      Schedules and Reports on Form 8-K                     17.

        Signatures                                                          19.


<PAGE>

This Form 10-KSB  contains  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,  regarding future events and the future performance of the
Company  involve risks and  uncertainties  which may cause the Company's  actual
results in future periods to be materially different from any future performance
suggested  herein.  The Company  believes  that the patents it is seeking on its
microshell technologies are unique in manufacture and application.  There can be
no assurance that such patents will be granted.  The patent approval  process is
both involved and time  dependent.  There can be no assurance that approval will
be granted in a manner that protects the Company's  technologies  or that others
have not claimed aspects of these technologies in patents or pending patents. As
to the Company's performance,  actual results could differ materially from those
projected in the forward looking statements contained herein.



                                     PART I

ITEM 1. BUSINESS.

GENERAL

The  Company  was  incorporated  in Florida in August  1993,  for the purpose of
developing,  manufacturing and marketing insulating materials and coatings using
partially evacuated glass microspheres (sometimes referred to as "shells").  The
process of  evacuation  removes  air and other gases from the sphere and thereby
creates a vacuum. A shell is a very small glass sphere  (generally the size of a
grain of salt) made by crushing  glass  particles.  The insertion of shells into
various materials and products ("shell  technology") can  substantially  improve
the thermal resistive  characteristics  of such materials and products resulting
in improved  insulation ("R") values. The more a shell is evacuated,  the higher
the thermal  resistive  characteristics  of the product or material to which the
shells are added.

Management of the Company  believes that there is a broad range of  applications
for  introduction in products of evacuated or partially  evacuated  shells,  the
effect of which is improved  energy  efficiency of such products  because of the
inherent insulating characteristics provided by the glass spheres. The Company's
strategy is to commercially  exploit the use of its shell  technology to improve
the "R"  values of a number  of  products.  In fiscal  year  1995,  the  Company
completed the development of its first product line that consisted of paints and
coatings  containing shells in order to reduce heat transmission and improve the
insulation  values  of  the  products.  The  products  are  marketed  under  the
ThermaCool(TM) label.

On November 30, 1995,  the Company  acquired the assets of C.F.  Darling Paint &
Chemicals,  Inc.,  a paint  manufacturing  company,  located in New Port Richey,
Florida ("Darling Paint") for approximately  $250,000. in cash. The Company also
assumed  the real  estate  lease for the  Darling  Paint  facility.  The Company
acquired  these  assets to have a facility  to produce  and  develop  paints and
coatings  for its  ThermaCool(TM)  product  line  which  incorporates  its shell
technology.  Prior to this  acquisition,  the Company  was  required to purchase
paints and coatings from independent paint and coating manufacturers.

                                       1
<PAGE>


On March 19, 1997, the Company  completed a public offering for 1,375,000 Units,
with each Unit  consisting of one share of Common Stock,  $.0001 par value,  and
one Series A Redeemable Common Stock Purchase  Warrant,  at a price of $4.00 per
Unit. In addition, the underwriter exercised its over-allotment  purchase option
and purchased  206,250  additional Units at the initial per Unit public offering
price, less the underwriting discounts and commissions.

On July 28,  1997,  the  Company  acquired  all the  outstanding  common  stock,
representing  100%  ownership of Atlas  Chemical Co., a paint  manufacturer  and
distributor,  located in Miami,  Florida. The Company acquired this firm so that
it would have a larger  manufacturing  facility  to both  expand  production  of
paints and  coatings and to obtain an  established  marketing  and  distribution
channel which included major accounts such as Home Depot,  Ace Hardware,  Lowes,
and others.

On  October  15,  1998,  the  Company  agreed to acquire  T-Coast  Pavers/Sealco
Systems, Inc. which had annual revenues of approximately $2 million.  ThermaCell
acquired  these  associated  businesses  effective  December 1, 1998 for 300,000
shares of its common  stock valued at $300,000  and in an  employment  agreement
with its founder and key  executive,  a payment of an additional  300,000 shares
over the three year employment period.  This company provides paver installation
and driveway sealant and coating services  primarily to contractors in Southeast
Florida.

The Company  acquired  American  Paints,  Inc., a Pompano  Beach,  Florida paint
manufacturer and distributor  with $2.5 million in annual revenues,  for 572,000
common  shares  on  December  1,  1998.  American  Paints'  operations  has been
consolidated into the Company's Atlas manufacturing facility to reduce duplicate
costs and increase future operating profits.

The Company has  sustained  significant  operating  losses since its  inception.
Management's strategy of expanding the ThermaCool(TM) product line, developing a
commercially  viable  manufacturing  process for shells,  and expansion into new
markets for its shell technology may result in the Company incurring  additional
losses due to the costs associated with these strategies. The Company expects to
incur losses until it is able to increase its sales, expand its product line and
increase its distribution  capabilities to a sufficient  revenue level to offset
ongoing  operating and expansion costs.  The Atlas Chemical  acquisition and the
other  acquisitions  should accelerate the Company's plan to achieve  profitable
operations.

The  Company's  long-term  business  strategy is to (i) expand the marketing and
distribution of ThermaCool(TM)  paints and coatings (ii) develop and manufacture
the  Company's  own  shells  and  (iii)  expand  the shell  technology  to other
products,  such as drywall,  gypsum board,  home siding materials and space foam
insulation.  Other  markets in which the  Company  may  utilize  its  technology
include  refrigeration  and  cooling  systems,   automotive  and  transportation
applications and cups and thermoses. There is no assurance that the Company will
continue to be  successful  in  penetrating  the market with its  ThermaCool(TM)
product  line,  developing  commercially  viable  manufacturing  techniques,  or
addressing other markets.

                                       2
<PAGE>

BUSINESS STRATEGY

The  Company's  business  strategy  is  to  become  profitable  by  commercially
exploiting its shell technologies along with the manufacture and distribution of
conventional  paint and coating products.  An important element in the Company's
present strategy  incorporates  acquisitions  within the paint industry of paint
manufacturers and distributors.  Within established  distribution  channels, the
Company   anticipates   marketing   ThermaCool(TM)   coatings  that   complement
established  paint and coating  products.  The  Company's  business  strategy is
dependent upon the successful implementation of the following:

(i) Expand the marketing and distribution of Thermacool(TM) paints and coatings.
The use of shells in paints and  coatings is the  Company's  initial  attempt to
commercially apply its shell technology.  Although the ultimate objective of the
Company  is to  commercially  exploit  fully  evacuated  shells in a variety  of
products,  management  believes  that  the  use of  partially  evacuated  shells
properly combined with paints and coatings can improve the insulating properties
of these  products.  Management  believes that the  acquisition of the assets of
Darling  Paint  and the  Atlas  Chemical  Co.  acquisition,  combined  with  the
implementation  of a  successful  marketing  program  will enable the Company to
generate  revenues  with  the  sale  of its  ThermaCool(TM)  paint  and  coating
products.

The initial ThermaCool(TM) product is a roof coating material which incorporates
the partially  evacuated shells into a roof coating mixture which the Company is
now able to  manufacture.  This product can be used to coat new roofs as well as
existing tiles,  shingles, and flat roofs and can be applied by manufacturers of
concrete  and  ceramic  tiles.  The Company is also  marketing a  ThermaCool(TM)
exterior wall coating which it believes can also reduce  emissivity  and thermal
conductivity.

Coatings are characterized as protective barriers that can be applied to various
surfaces for protection from the elements.  Paint is  characterized as a product
to change the color of a particular surface. By this definition, some paints may
be classified as coatings,  such as a semi-gloss  enamel,  while flat wall paint
would  not.  The  basic  difference  between  a roof and a wall  coating  is the
viscosity or thickness of the product.  A roof, being less vertical than a wall,
can accept a thicker coating  without the product running or sagging.  A thicker
coat for a roof is  preferable  because of its  exposure  to the  elements.  The
application  of shell  technology  to the  Company's  products is limited to the
ThermaCool(TM)  roof and exterior wall coatings  where the insulative and energy
efficiency  characteristics of the product are most beneficial.  Presently, more
than  90% of the  Company's  sales  of  ThermaCool(TM)  products  are  for  roof
application.

The Company has  recently  entered the auto racing  market with  several  racing
related products. The Company has filed for patent protection for those products
and plans to  vigorously  pursue  this  market.  The Company  has  developed  an
interior paint using its ThermaCool(TM)  process. There is no assurance that the
Company  will be able to  develop  products  other than roof and  exterior  wall
coatings utilizing its ThermaCool(TM) process.

(ii) Develop and manufacture the Company's own shells.

The Company has applied for a patent  involving  the  production  of  insulating
shells in a manner to enable  the  evacuation  of gases or the  addition  of low
conductive gas into the shells. Such evacuation results in lower gas pressure or
gases within the shells that can reduce  thermal  conductivity,  thus  providing

                                       3
<PAGE>


improved insulating qualities.  The manufacturing process involves the formation
of water vapor in the shells and then the subsequent evacuation of the shells by
heating the shells. This process causes out-permeation of the water vapor. Other
patents  have been  granted  relating to various  processes  to  evacuate  glass
shells.

To the  best of  management's  knowledge,  no one has  been  able to  develop  a
commercially  viable process for the production of fully evacuated glass shells,
due to, among other factors, manufacturing and technical restraints.  Currently,
the Company is aware of three large  multinational  companies  that  manufacture
shells. The essential difference between the manufacturing process for partially
evacuated shells, as compared to substantially or fully evacuated shells, is the
technique  employed to evacuate  gases from the shells which improve its thermal
conductivity  or insulating  value.  The Company  plans to market  non-evacuated
shells for several  uses and will compete  directly  with others in this market.
The Company will have non-evacuated shells available to also sell in the general
market  because  not  all  shells  during  the  manufacturing  process  will  be
evacuated. These non-evacuated shells will be separated and sold for general use
as fillers, but will be produced at a substantially reduced cost.

Management  believes that the Company's current  facilities and equipment can be
used to manufacture  partially  evacuated shells.  Presently the Company has had
limited success in manufacturing shells.

(iii) Expand the shell technology to other products.

Management of the Company believes the potential exists to commercially  exploit
other markets  suitable for the Company's  shell  technologies.  Since 1992, the
Company's  founders have been  investigating  the possibility of using evacuated
glass shells in a variety of products.  One of these  potential uses include the
aroma  therapy  applications  that the Company is  exploring  with Bath and Body
Works,  a national  retail chain.  Management has also  identified  construction
components such as drywall,  gypsum board,  home siding materials and space foam
insulation as potential markets.  Other potential markets include  refrigeration
and cooling systems,  automotive and transportation  applications,  and cups and
thermoses.  There is no assurance the Company will be successful in  penetrating
other  markets.  The Company will only be able to achieve this strategy if it is
able to economically manufacture its own highly or partially evacuated shells.

SHELL TECHNOLOGY

The Company has the rights to certain patent applications  relating to evacuated
shells. The first involves a technique for manufacturing  insulating shells in a
manner that enables the  evacuation  of retained  gases within the shells.  This
evacuation  results  in low gas  pressure  within  the shell that can reduce the
thermal conductivity,  thus improving insulation qualities. Evacuated shells are
capable of forming vacuums that limit heat transfer.

The  use of  evacuated  glass  shells  as an  important  component  of  improved
insulation  and the use of a  reflective  layer  within or outside of the shells
have also been referred to in prior patents.  The Company's  patent  application
describes  a  procedure  which  uses  water  vapor and heat,  combined  with the
introduction of certain gases, to cause the evacuation or substantial evacuation
of the gases contained in the interior of the shells.

                                       4
<PAGE>


The Company's other patent  application uses evacuated shells  introduced into a
coating. Such coatings may be used for roofs,  exterior paints,  interior paints
and other uses.  The addition of evacuated or  substantially  evacuated  shells,
into a coating  provides  the  following  characteristics:  (i) a  reduction  in
radiant heat transfer by use of reflective coatings,  (ii) the reduction of heat
transfer between shells by restricting the transfer to point contact,  and (iii)
a reduction in the heat transfer  across a shell by the use of a partial or full
vacuum.

Although  patent  counsel to the  Company  believes  that patent  protection  is
available for these inventions,  there is no assurance that such patents will be
granted. Although management believes that the processes described in the patent
applications are based upon sound scientific  principles,  and the machinery and
equipment  are  available to implement the  production  techniques  necessary to
manufacture  evacuated shells on a commercial  basis,  there is no assurance the
Company will be able to economically and profitably manufacture evacuated shells
or otherwise exploit these inventions. The ThermaCool(TM) product line currently
offered  by  the   Company   does  not  rely  upon  these   inventions   because
ThermaCool(TM)   paint  and  coatings  use  partially,   rather  than  fully  or
substantially, evacuated shells.

MANUFACTURING FACILITIES AND TECHNIQUES

Management has acquired machinery, tooling, a high temperature furnace and other
items  necessary to manufacture  evacuated  shells.  Production of quantities of
shells  sufficient for the Company's  immediate needs is now anticipated  during
fiscal year 2000.  Management  will utilize its limited  initial  production  to
provide  for  early  demand  expectations.  Within  the  next 12  months  a more
substantial  facility  will  need to be built to  provide  evacuated  shells  in
quantities  greater than  500,000  pounds  annually.  Internal  cost  estimates,
prepared  by  management,  indicate  that  the  Company  will  require  at least
$1,500,000  to  build a  shell  manufacturing  facility  sufficient  to  provide
commercial  quantities  of shells to  outside  parties  as a  separate  business
endeavor.

The basic process for manufacturing glass shells involves heating glass and then
partially drying and crushing the glass  composition.  The glass  composition is
then size separated for different applications. Glass shells are then formed and
blown at high  temperatures  with  the use of heat in a  vertical  furnace.  The
completed glass shells are then separated from the shell residue.

Management is aware of three other  companies that currently  manufacture  glass
shells.  These glass shells are primarily  used as filler  material for plastics
and ceramics.  The  non-evacuated  glass shells are used because they provide an
improved  "ball  bearing"  effect  for  better  flow,  and as a low cost  filler
material in compounding.  The manufacturing  techniques  proposed by the Company
would be similar to those currently utilized to manufacture shells,  except that
the  Company  would also  employ  procedures  which  evacuate  or  substantially
evacuate the shells in the final stages of the production process.

The Company  currently  produces  its  ThermaCool(TM)  product line at its Miami
facility.  The Company  also  continues  to produce and sell  general  paint and
coating  products  from  its  acquisition  of Atlas  Chemical  Co.  The  Company
presently has the  capability  for  production of 500,000  gallons per year. The
current plant  facilities  are capable of producing up to  $10,000,000  in gross
product sales.

                                       5
<PAGE>


COMPETITION

The Company's  ThermaCool(TM)  products  compete in the special purpose coatings
market that is an extremely  competitive  market  principally  composed of large
multinational   companies  which  have  significantly  greater  assets,  working
capital, and marketing personnel than the Company.  Special purpose coatings are
similar to  architectural  coatings such as normal house  paints,  but differ in
that they are formulated for special  applications or environmental  conditions,
such as extreme temperatures, chemicals or corrosive conditions.

Major producers of special  purpose  coatings  include PPG  Industries,  DuPont,
Sherwin-Williams,  RPM, Inc., Inmont,  Courtaulds,  PLC, Glidden,  Azkon.V.  and
Valspar  Corp.  The U.S.  Bureau of Census valued the special  purpose  coatings
market at approximately $3 billion in 1995. The roofing,  coating and industrial
construction  coating market segment  represents  approximately 15% of the total
"special purpose coatings" market, or 28 million gallons valued at approximately
$450,000,000.

Management believes that the primary competitive factors in the special coatings
product segment are quality, ease of use, service, warranty,  availability,  and
price.  The cost per  gallon of  ThermaCool(TM)  is at the high end of the price
spectrum  for  paints and  coatings  ($17.00  to $25.00  per  gallon).  Although
management   believes   that  the   improved   insulating   characteristics   of
ThermaCool(TM)  add significant  value and justify the higher cost,  there is no
assurance  that the Company's  products  will be accepted  because of the higher
cost.

The Company's  current  supply sources of shells could become  competitors.  The
Company expects that if its products become successful, competitors will be more
likely to develop and introduce  into the market place  comparable  products and
technologies.  There is no assurance that the Company will be able to compete in
the special purpose coatings or other similar markets.

MARKETING AND DISTRIBUTION

The Company intends to market its ThermaCool(TM) products to roofers,  painters,
distributors  and  manufacturers  of special  purpose  coatings.  The  Company's
initial  target  markets  include   industrial  and  residential   construction,
maintenance,  storage  tanks and roof  coatings.  The  Company  intends to place
advertisements  in trade  journals  for the  plastics,  glass  and  construction
industries.  In addition,  the Company intends to participate in trade shows and
intends  to  aggressively  promote  the  energy  saving  characteristics  of its
ThermaCool(TM) product lines.

Management  believes that contractors,  who purchase from distributors,  will be
the primary  customers for the Company's  products.  The Company also intends to
solicit established contractor distribution centers as a source of marketing its
ThermaCool(TM)  products.  Management's  strategy is to attract individuals that
have significant contacts in the special purpose coatings industry.  There is no
assurance  that the Company will be able to attract  these  individuals  or that
such individuals will be successful in their marketing efforts.  Currently,  the
Company  has a limited  sales  staff that is  concentrating  on direct  sales of
conventional  paint  products  until  such  time  as the  Company  has  adequate
production availability for its ThermaCool(TM) products.

The Company currently has retail locations in Miami, Florida and Pompano Beach ,
Florida.  The  Company's  manufacturing  facility  is located in Miami,  Florida
adjacent  to its  retail  facility.  Management  has  closed  its  other  retail
facilities  in  Mesa,  Arizona  and  Holiday,  Florida  to  concentrate  on  the
manufacture  and  distribution  of its  ThermaCool(TM)  and  conventional  paint

                                       6
<PAGE>


products.  The Miami retail location will continue for customer convenience.  In
addition,  the Company plans to market directly to specialty  industries such as
the RV motor home industry and manufactured  housing  industry.  The Company has
targeted  chains  such as Home  Depot and  Lowe's as point of sale  distribution
outlets. The Company believes that viable business opportunities for franchising
and distribution  relationships  with existing painting and coating  contractors
are additional marketing and distribution strategies that can expand the sale of
the  Company's  products.  The Company  also  believes  that its products may be
distributed through private label arrangements with other distributors. There is
no assurance  that any of these  marketing or  distribution  strategies  will be
successful.

NEW PRODUCT APPLICATIONS AND DEVELOPMENT

The Company is focused on the initial  production of evacuated  shells that will
prove   adequate   for  near  term  demand  of  its   ThermaCool(TM)   products.
Concentration  of its present  efforts  will  continue to focus on  applications
utilizing shell technologies for paints and coatings.  Management has identified
construction components such as drywall, gypsum board, home siding materials and
space foam  insulation as future  potential  markets.  Other  potential  markets
include  refrigeration  and  cooling  systems,   automotive  and  transportation
applications,  and cups and thermoses.  Research and development will eventually
focus on the  techniques and procedures  necessary to combine  evacuated  shells
into materials which can benefit from improved insulation ("R") values. There is
no  assurance  that  the  Company  will  be  successful  in  developing  any new
applications for evacuated shells.

PRODUCT LIABILITY INSURANCE AND WARRANTIES

The Company  currently has product  liability  insurance in force with limits of
$1,000,000  per  occurrence  and  a  $2,000,000  aggregate  limit.  There  is no
assurance that these limits will be adequate to protect the Company.

The Company  supplies  the  following  warranties  for its  Scientific  Coatings
products: (1) All ThermaCool(TM) products have eight year warranties; (2) #44000
Acrylic House Paint has a nine year warranty;  (3) #4000 Acrylic House Paint has
a seven year  warranty;  (4) #2400  Acrylic  Latex  House  Paint has a five year
warranty; (5) #2200 100% Vinyl Acrylic House Paint has a five year warranty. All
remedies as to warranty failures require only replacement for these products.

The Company  supplies its Atlas  Chemical  products with  warranties for varying
periods of five to twenty years.  Such  warranties  provide for  replacement  of
defective  product with new product of  equivalent  price.  The Company makes no
other warranties as to its products.

EMPLOYEES

As of September  30,  1999,  the Company had 49  employees,  of whom fifteen are
salaried and the balance are paid hourly. Of these employees, six are located at

                                       7
<PAGE>


the Daytona, Florida facility, eighteen are located at T-Coast Pavers in Stuart,
Florida,  seven are  located at  American  Paints in  Pompano,  Florida  and the
balance are employed at Atlas Chemical in Miami,  Florida. The Company considers
its relations with its employees to be excellent.

ITEM 2. PROPERTIES.

The  Company  currently  leases  and  occupies  12,230  sq.  ft. of space at 440
Fentress Blvd.,  Daytona Beach, Florida where it maintains its corporate offices
and where it is  developing  initial  production  facilities  for its  evacuated
shells.  This lease  expires in October  31,  2004.  Lease  payments  are $8,024
monthly.  The  facility  consists of  approximately  3,230 square feet of office
space  with the  balance  being used for  warehousing  and  manufacturing.  This
location has replaced the  Company's  Sarasota  facility that was vacated at the
expiration of its lease.

The  Company  rents on a month to month  basis  approximately  10,000 sq. ft. of
space at 1800  North  Powerline  Road,  Pompano  Beach  Florida.  Current  lease
payments  are  approximately   $6,874  per  month.  This  facility  consists  of
approximately  950 sq. ft. of office and retail  space with the balance used for
warehousing and distribution.

The Company leases and occupies 21,000 sq. ft. of space at 4801 N.W. 77th Avenue
in Miami,  Florida. A five-year lease commenced on August 1, 1997. Current lease
payments are  approximately  $6,650 per month.  This facility,  which houses the
Company's Atlas Chemical operations,  consists of approximately 5,000 sq. ft. of
office and retail space with the balance used for manufacturing, warehousing and
distribution.

ITEM 3.  LEGAL PROCEEDINGS.

PART II - OTHER INFORMATION

Item 1.           Legal Proceedings.
                  -----------------
During February 1999, the Company was notified that the Kevin Horrell litigation
against the  Company  and Mr.  John  Pidorenko,  the  Company's  president,  was
dismissed. A part of this settlement,  Mr. Pidorenko,  transferred 40,000 shares
of the Company's common stock, he personally owned, to Mr. Horrell.  The Company
did not make any payment in settlement of this matter.

On February 4, 1999, a complaint was filed in the United States  District Court,
Middle District of Florida by Mr. Russell Haraburda and Eden Group, Inc. against
John Pidorenko,  the Company's president, and the Company for monies purportedly
due for  arranging  financing for the Company prior to its IPO in March of 1997.
The Company does not believe any monies are due Mr.  Haraburda  or his firm.  In
addition,  the Company has been assigned two promissory notes of the Eden Group,
Inc., Mr.  Haraburda's firm, that are unpaid. The Company will vigorously defend
itself  in this  matter  and will  seek  full and  complete  payment  under  its
promissory notes from the Eden Group.

                                       8
<PAGE>


On March 1, 1999, the Company reached a settlement agreement with David Feingold
and his law firm of Feingold & Kam,  RAM  Capital  Partners,  Ltd.,  Diversified
Lending Company and RAF Enterprises  regarding  compensation and the issuance of
the Company's common stock, among other matters. As a result of this settlement,
the Company's obligations to the investor who held a convertible preferred stock
issue was satisfied.  Other than the common stock the Company issued in November
1998, no further consideration was paid.

During May 1999,  the Company and  Innovation  Associates,  Inc.  ("IA") reached
agreement  and settled  litigation  that was  initiated by IA for trade  secrets
misappropriation  among other  allegations.  As part of the  settlement  of this
litigation,   the  Company  agreed  to  license  certain  patents   relating  to
microspheres  that are owned by IA. The Company paid $25,000 and issued  470,544
shares of its common stock having a value at that time of $500,000.  This common
stock bears a  restrictive  legend as to  marketability  but  provides a penalty
should this stock not be registered by the Company  within 150 days.  This stock
was not  registered  as of this  filing but no claim for the  payment of $62,500
worth of the  Company's  common  stock has been  made.  With  licensing  of IA's
patents, this litigation has been dismissed. The Company intends to utilize IA's
patents with its own microsphere  technologies to strengthen its patent position
in this area.

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

None

                                     PART II


ITEM 5. MARKET VALUE

Before the Company's public offering,  which closed on March 19, 1997, there was
no market for the Company's Common Stock, Units, or Warrants.  Consequently, the
offering  prices of the Units and Warrant  Exercise  Price were both  determined
arbitrarily by negotiation  between the Company and the  Underwriter.  Among the
factors considered in such negotiations were estimates of the business potential
of the  Company,  the present  state of its  development  of new  products,  its
financial  condition,  an assessment of its management and the general condition
of the securities markets at the time of this offering.

On March 19,  1997,  1,581,250  Units of the  Company's  securities  (each  Unit
consisting of one share of Common Stock and one Redeemable  Warrant) were issued
to investors at $4.00 per Unit. Trading of such Units commenced  thereafter.  On
March 19,  1997,  the  Underwriter  commenced  trading of the  Common  Stock and
Warrants separately.

The  proceeds  of the  offering  that was  completed  on March 19,  1997 and the
related costs of its undertaking are summarized as follows:

                                       9
<PAGE>

             Gross Proceeds                                      $6,325,000
             Less: Underwriter commissions                          632,500
                   Underwriter expenses                             259,308
                   Company's expenses for offering                  689,259
                                                                    -------
             Net Proceeds to Company                             $4,743,933
                                                                 ==========

             Use of Proceeds:
                      Repayment of indebtedness                  $1,708,805
                      Purchase of fixed assets                      132,321
                      Interest expense and accruals                 383,906
                      Acquisition of Atlas Chemical Co.           1,059,325
                      Working capital                             1,459,576
                                                                  ---------
                                            Total                $4,743,933
                                                                 ==========



The Company's  Units,  Common Stock and Warrants are listed and traded on NASDAQ
under the symbols, VCLLU, VCLL and VCLLW, respectively.  See MD& A discussion of
continued  listing  situation.  The following table sets forth,  for the periods
indicated,  the  range  of  high  bid and low  bid  closing  quotations  for the
securities  indicated  as  reported  by NASDAQ.  These  quotations  are  between
dealers,  do  not  include  retail  mark-ups,   mark-downs,  or  other  fees  or
commissions, and may not represent actual trades.


                               Common                  Redeemable
                               Stock                    Warrants
     ------------------------------------------------------------------
                                Bid                       Bid
     1999 Fiscal Year   High    Low    Close     High     Low     Close
     ------------------------------------------------------------------


     First quarter     2 3/8   1 1/4    1 3/8    11/16   3/32     5/16

     Second quarter    1 5/8     5/8    1 5/16    9/16    1/8     5/16

     Third quarter     1 5/32   15/16    13/16    1/2    7/32     9/32

     Fourth quarter    1 27/32   1/2     11/16    1/4    1/32     5/32



     (1)  Prior to March  1997,  there was no active  trading  in the  Company's
securities.

As of September  30, 1999,  there were  approximately  135 holders of record for
common  stock and 22 holders of record of the  warrants.  However,  the Company'
management believes that approximately 300 of shareholder's beneficially own the
Company's Common Stock as of December 31, 1999.

UNDERWRITER'S SECURITIES

In  connection  with the public  offering,  the Company sold to the  Underwriter
Options to purchase 137,500 Units of the Company's securities,  identical to the
Units publicly sold, at an exercise price of 165% of the public  offering price.
The Underwriters'  Units are exercisable at a price per Unit of $6.00 subject to
certain adjustments, until they expire on March 12, 2001.

                                       10
<PAGE>

The Underwriters'  Warrants contained in the Underwriters'  Units underlying the
Underwriters'  Options contain  certain  registration  rights and  anti-dilution
provisions.  The holders of the Underwriters' Warrants have no voting,  dividend
or other  rights as  shareholders  of the  Company  with  respect  to the shares
underlying the Warrants.

DIVIDEND POLICY

The Company has not paid any  dividends  on its common stock and does not intend
to pay cash dividends on its common stock in the foreseeable future. The Company
intends  to  follow a policy of  retaining  earnings,  if any,  to  finance  the
development and expansion of its business.

TRANSFER AGENT AND WARRANT AGENT

Continental  Stock  Transfer & Trust  Company of New York,  New York acts as the
Company's Transfer Agent and Warrant Agent.

ITEM 6. SELECTED FINANCIAL DATA.

The following presents selected  financial  information of the Company as of and
for the periods ended September 30, 1999,  September 30, 1998, and September 30,
1997. The Company changed its fiscal year to end September 30 during 1997, which
for 1997 was a ten-month  period.  The  information set forth below is qualified
by,  and  should  be  read  in  conjunction  with,  the  consolidated  financial
statements and related notes thereto in their entirety.


                                           PERIODS ENDED

                               1999             1998               1997
                         ----------------------------------------------------

INCOME STATEMENT DATA

Total revenue            $  4,306,408       $  2,860,196      $  1,036,376

Net loss                 $ (3,677,068)      $   (614,486)     $ (1,037,730)

Net loss per share       $      (0.46)      $      (0.18)     $      (0.47)

Shares used in per
 share computation          7,924,910          3,677,183         2,217,106


BALANCE SHEET DATA,  as of ended  September  30, 1999,  September 30, 1998,  and
September 30, 1997.

Total assets             $  5,059,667       $  3,861,880      $  3,542,675
Working capital          $     20,430       $    616,709      $    334,911
Long-term debt           $  1,377,618       $    131,207      $     63,089
Stockholders' equity     $  2,398,737       $  3,167,528      $  2,428,090

                                       11
<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

GENERAL

The Company was a developmental  stage enterprise during its initial three years
of  operation  for the fiscal years  through  September  30,  1997.  During this
development  stage  period,  management  devoted the  majority of its efforts to
research  and  development,  financing,  marketing  and  activities  related  to
starting up production of its  proprietary  technology.  These  activities  were
funded by investments  from  stockholders  and borrowings  from unrelated  third
parties.  Since  fiscal  year 1998,  the  Company  has been an  operating  stage
enterprise based upon the several acquisitions that were completed.  As a result
of acquisitions,  particularly the Atlas Chemical  acquisition,  the Company has
evolved  from the  development  stage to that of an operating  enterprise  whose
principal  line of business is the sale of paints and coatings  within the paint
industry.

The Company has not been in a position to generate  sufficient  revenues  during
its operating history to fund its ongoing  operating  expenses or its continuing
product  development  activities.  The  successful  IPO  completed in March 1997
allowed  the Company to repay its then  outstanding  indebtedness  and  provided
working capital.  In fiscal year 1994, the Company  completed the development of
its first product line. The Company has sustained  significant  operating losses
since  its  inception  resulting  in an  accumulated  deficit  of  approximately
$6,919,000 at September 30, 1999.

Acquisition of T-Coast Pavers/Sealco Systems, Inc.
-------------------------------------------------
On  October  15,  1998,  the  Company  agreed to acquire  T-Coast  Pavers/Sealco
Systems,  Inc. of Stewart,  Florida  which for the calendar year 1997 had annual
revenues of  approximately  $2 million.  The Company  acquired these  associated
businesses  effective  December 1, 1998 for 300,000  shares of its common  stock
valued  at  $300,000  and an  employment  agreement  with  its  founder  and key
executive  that requires a payment of an additional  300,000 shares over a three
year employment  period.  This company provides paver  installation and driveway
sealant and coating services primarily to contractors in Southeast Florida.

Acquisition of  American Paints, Inc.
------------------------------------
The Company  acquired  American  Paints,  Inc., a Pompano  Beach,  Florida paint
manufacturer and distributor  with $2.5 million in annual revenues,  for 572,000
common shares on December 1, 1998.  American  Paints'  manufacturing  operations
have been consolidated into the Company's Atlas manufacturing facility to reduce
duplicate costs.

The Company has  sustained  significant  operating  losses since its  inception.
Management's strategy of expanding the ThermaCool(TM) product line, developing a
commercially viable manufacturing process for microshells and expansion into new
markets for its shell technology may result in the Company incurring  additional
losses due to the costs associated with these strategies. The Company expects to
incur losses until it is able to increase its sales, expand its product line and
increase its distribution  capabilities to a sufficient  revenue level to offset
ongoing operating and expansion costs.

                                       12
<PAGE>


Management's  previous strategies of expanding the ThermaCool(TM)  product line,
developing a commercially viable manufacturing process for shells, and expansion
into new markets for its shell  technology  would have  resulted in  substantial
additional losses due to the costs associated with these strategies.

With the Company's acquisition of Atlas Chemical in July 1997, that was followed
by the T-Coast  Pavers/Sealco  and American Paints in December 1999, the Company
has  established  an operating  business  base within the paint  industry.  As a
consequence  of this,  the  Company has taken a more  long-term  approach to the
development of its shell technologies.  This present strategy anticipates a more
systematic  introduction of new coating products utilizing its technologies as a
supplement to the  conventional  paint and coating products offered by its paint
operations to their distribution channels. Management believes this more prudent
approach to development  will further enhance the Company's  long-term  business
prospects.

Although  the  Company  has not  yet  generated  sufficient  revenues  from  its
operations to be profitable, management anticipates that its systematic approach
of introducing its  ThermaCool(TM)  product line,  coupled with the revenue base
and  established  marketing  and paint  distribution  channels will position the
Company for profitable future operations.

The Company will  continue to incur  losses until it is able to increase  sales,
expand  its  product   lines,   and  increase  its   distribution   capabilities
sufficiently to offset ongoing operating and expansion costs.


RESULTS OF OPERATIONS

FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998

Revenues
--------
Total  revenue for the fiscal year ended  September  30,  1999,  was  $4,306,408
compared  to  $2,860,196  for  fiscal  year  ended  September  30,  1998,  which
represents  an increase of  $1,446,212,  or 51%. The increase was  primarily the
result of the sales contribution of the company's acquisitions,  American Paints
and T-Coast  Pavers that were acquired  during  December  1998. The sales of its
Atlas Chemical subsidiary declined during the year because of aggressive pricing
of paint products within its competitive locality.

Cost of Sales
-------------
Cost of sales for the fiscal year ended  September  30, 1999,  increased  73% to
$3,293,952  from $1,900,043 in the fiscal 1998. Cost of sales as a percentage of
sales  increased  from  66.4% to 76.4 % from  1998 to  1999.  This  increase  is
attributed to higher costs associated with manufacture and sale of the Company's
paint  products  and the  higher  costs of the  T-Coast  Pavers  operation  as a
percentage of sales.

Selling, General and Administrative Expenses
--------------------------------------------
For the fiscal  year ended  September  30,  1999,  total  selling,  general  and
administrative expenses were $3,529,469 as compared to $1,822,741, for the prior
fiscal  year.,  a 94% increase.  This  increase is attributed to the  additional
selling,  general and  administrative  expenses of all the company's  operations
including the two  businesses,  American  Paints and T-Coast  Pavers,  that were
acquired during this fiscal year.

                                       13
<PAGE>


In an effort to streamline operations and further cut costs,  management closed
its Arizona operation in September 1999 just prior to the end of its fiscal year
and in November  1999 closed  down its retail  paint store in Holiday,  Florida.
These  endeavors had no impact upon fiscal year 1999 operating  results but will
further reduce future overhead  expenses.  A major effort  undertaken during the
final quarter of this fiscal year was the  establishment of new corporate office
and manufacturing facility in Daytona Beach, Florida. Previously the Company had
established  its corporate  offices in Sarasota,  Florida that was  subsequently
relocated to Daytona,  Florida.  This new Daytona facility has the capability to
house  the  extensive  manufacturing  operation  that  the  company  anticipates
establishing to meet its projected needs for microshell products.

Interest Expense
----------------
Interest  expense  increased  1022%, or $256,062 to $284,130 for the fiscal year
ended  September  30, 1999 from $25,068 in the previous  fiscal year ended 1998.
This  increase  is  attributed  to  the  interest   accrued  on  the  discounted
convertible  debentures  the company  issued during the fiscal year in the total
amount of $1,333,333.

Tax Benefit
-----------
As a result of current  management's year end review of the Company's  financial
status,  a  determination  has  been  made by  management  to  establish  a 100%
valuation allowance for deferred relating to the net operating losses.

Net Loss
--------
The net loss and the net loss per  share  were  $3,677,068  and  $0.46 per share
respectively, for the period ended September 30, 1999, as compared to a net loss
and net loss per share of $614,486 and $.18 per share  respectively,  for fiscal
year  1998.  The loss  was a 498%  increase  amounting  to  $3,062,582  over the
previous fiscal year, but the loss per share was a 155% increase  because of the
greater number of shares  outstanding.  On a weighted average basis,  there were
7,924,910  shares  outstanding  for fiscal  year  ended  September  30,  1999 as
compared to 3,677,183  shares  outstanding  for the previous fiscal year, a 115%
increase.


FISCAL YEAR 1998 COMPARED TO FISCAL PERIOD 1997

Revenues
--------
Total revenue for the year ended September 30, 1998, was $2,860,196  compared to
$1,036,376 for the same period ending of 1997, which  represented an increase of
$1,823,820,  or 176%.  The  increase  was a result  of  expanded  sales of paint
products and coatings  produced by the Company's  paint  manufacturing  facility
that included the business  obtained in the Atlas  Chemical  acquisition.  Atlas
Chemical was acquired on July 27, 1997,  therefore its contribution in the prior
fiscal period was minimal.

                                       14
<PAGE>


Cost of Sales
-------------
Cost of sales for the fiscal year ended  September 30, 1998,  increased  181% to
$1,900,043  from  $675,085 in the fiscal 1997.  Cost of sales as a percentage of
sales  increased  to 67.2%  from  65.1% for 1998 over  1997.  This  increase  is
attributed to a product mix  contributing to higher cost of sales on its present
production volume. Consequently,  the gross profit margin decreased to 33.6% for
fiscal  year 1998 over that of 34.9%  for the prior  fiscal  period.  Management
expects that the eventual  introduction  of its  ThermaCool(TM)  products to the
established  customer base of Atlas will stimulate new sales and thereby improve
gross profit margins.

Selling, General and Administrative Expenses
--------------------------------------------
For the year ended September 30, 1998, total selling, general and administrative
expenses were  $1,822,741,  as compared to $1,500,517 for the same period of the
previous year, an increase of $322,224,  or 22%. The increase was largely due to
additional  expenses  incurred with the  acquisition  of Atlas Chemical with its
existing S,G, & A burden as well as costs  associated  with increased  marketing
efforts,  staffing,  and other expenses  associated with the Company's  expanded
operations. Management has taken step during the recent fiscal year to eliminate
duplicate costs.

In June 1998, the Company relocated its corporate offices to 1125 Commerce Blvd,
Sarasota, Florida from its former location in Holiday, Florida.

Interest Expense
----------------
Interest  expense  decreased  85%,  or  $140,562  to $25,068 for the fiscal year
ending  September  30, 1998 from  $165,630 in the previous  fiscal period ending
September 30, 1997. The primary reason for this reduction in interest charges is
attributed  to the payoff of all the  Company's  indebtedness  that followed the
public  offering  that was  completed  on March 19,  1997.  The  Company did not
incurred any significant debt over the 1998 fiscal year.

Net Loss
--------
The net loss and the net loss per share were  $614,486 and $0.18,  respectively,
for the year ended  September  30, 1998,  as compared to a net loss and net loss
per share of $1,037,730 and $.47, respectively,  for the period ending September
30, 1997. The decrease in loss is, in part,  attributed to the Company's  higher
level of sales while both holding its selling,  general and administrative costs
to a 22%  increase  over the  prior  year and  benefiting  from the  substantial
reduction in its interest expense over that prior period.  On a weighted average
basis,  there were 3,677,183 shares outstanding for fiscal year ending September
30, 1998 as compared to 2,217,106  shares  outstanding  for fiscal period ending
September 30, 1997, a 66% increase.


LIQUIDITY AND CAPITAL RESOURCES

To date,  the  Company  has funded its  capital  requirements  and its  business
operations,  including product development activities with funds provided by the
sale of its securities and from borrowings. During this fiscal year, the Company
received  $250,000 from a unaffiliated  stockholder and completed  conversion of

                                       15
<PAGE>

all convertible  preferred stock for the issuance of 1,405,000  shares of common
stock. Also during this year, the Company  completed two acquisitions:  American
Paints, Inc. of a Pompano Beach,  Florida, a paint manufacturer and distributor;
and T-Coast Pavers/Sealco Systems,  Inc., a Stewart,  Florida, firm that provide
paving  installation  and seal coating  within the  residential  and  commercial
markets in Southeast Florida.

On September 1, 1999, the Company was notified by NASDAQ that its listing on the
NASDAQ  Small  Markets  was in  violation  of the stock price  requirements  for
continued listing.  This present  requirement was implemented on August 27, 1997
and required the Company to maintain a $1 bid price for its listed common stock.
Presently, the Company does not meet this requirement. The Company has filed for
a hearing to present  information for waiver of this present  deficiency subject
to the Company's compliance within the next thirty days.

During the fiscal  year ended  September  30,  1999,  the Company  arranged  the
placement of $1.3 million of 9% Redeemable  Convertible  Promissory notes with a
private funding source.  Within this financing,  the Company issued two warrants
to purchase 50,000 shares each of the Company's common stock at $0.50 per share.
This  placement  was  discounted  from face  value  with the  Company  receiving
approximately  $900,000  after  placement  costs and  expenses to complete  this
funding.  The  funds  from this  funding  were  used for the  relocation  of its
corporate  offices  to  Daytona,   Florida,   establishment  of  its  microshell
manufacturing facility at that location, and to supplement working capital.

The Company continues to experience  operating losses. The Company's net working
capital and  stockholders'  equity were $20,430 and  $2,398,737 at September 30,
1999 as compared to $616,709 and $3,167,528 at September 30, 1998, respectively.
The Company has not historically  generated  sufficient revenues from operations
to  self-fund  its capital  requirements.  With its present  business  strategy,
management  believes it is focusing on the key elements necessary to the Company
to be both profitable and successful over the long-term.  Management has adopted
this  present  strategy  and  is  focused  on  its  successful   implementation.
Management  expects  that it will be able to arrange  for  additional  financial
resources to properly  execute its strategic  plan although no assurances can be
given that it will be successful in such endeavors.

The Company does not have  sufficient  working capital to meet its planned needs
for the next twelve months without additional  funding.  Management is presently
seeking  funding to provide for the next twelve months of  operations.  One such
potential  funding  is that  provided  by Texas  Pharmaceutical  Inc.  that will
purchase  5,000,000  shares of preferred stock for  $1,000,000.  This funding is
subject to execution of a definitive  agreement,  approval of the transaction by
the  Company's  board of  directors  and  shareholder  approval  and is  further
dependent  upon the  Company  maintaining  its  listing  status  on  NASDAQ.  In
addition,  management  has  received a second  funding  proposal  from a foreign
financing  source for $1.5  million for a  convertible  preferred  stock  issue.
Management  is presently  evaluating  these  proposals  that are both subject to
finalizing  definitive  agreements.  Although  management  is  optimistic  about
obtaining  additional  capital,  it is not  certain  that  either  funding  will
eventually be finalized and,  should one be finalized,  it will not  necessarily
meet all the Company's financing needs over the next twelve months.

                                       16
<PAGE>


YEAR 2000

To the best of our knowledge  and belief,  the Company has not  experienced  any
significant  disruption  in  data  processing  on our  financial  reporting  and
operational  systems or malfunction in equipment  containing  microprocessors or
significant  delays in receiving  goods or services from key vendors and service
providers or delinquency in the receipt of payments from  significant  customers
for  services  provided by the  Company as a result of the year 2000  issue.  We
cannot be sure that some condition relating to the year 2000 exists, but has not
been identified.


PART II - OTHER INFORMATION

Item 1.           Legal Proceedings.
                  -----------------
During February 1999, the Company was notified that the Kevin Horrell litigation
against the  Company  and Mr.  John  Pidorenko,  the  Company's  president,  was
dismissed. A part of this settlement,  Mr. Pidorenko,  transferred 40,000 shares
of the Company's common stock, he personally owned, to Mr. Horrell.  The Company
did not make any payment in settlement of this matter.

On February 4, 1999, a complaint was filed in the United States  District Court,
Middle District of Florida by Mr. Russell Haraburda and Eden Group, Inc. against
John Pidorenko,  the Company's president, and the Company for monies purportedly
due for  arranging  financing for the Company prior to its IPO in March of 1997.
The Company does not believe any monies are due Mr.  Haraburda  or his firm.  In
addition,  the Company has been assigned two promissory notes of the Eden Group,
Inc., Mr.  Haraburda's firm, that are unpaid. The Company will vigorously defend
itself  in this  matter  and will  seek  full and  complete  payment  under  its
promissory notes from the Eden Group.

On January 5, 1998, NASD Regulation,  Inc. announced that a complaint was issued
on December 23, 1997 charging Monroe Parker Securities,  Inc. and certain of its
officers with price  manipulation and excessive markups in the trading of Steven
Madden,  Ltd. and fraud in the sales of  securities of United  Leisure.  Neither
firm is affiliated  with the Company.  The  complaint  asks for  restitution  to
defrauded investors and potential sanctions that may include a fine, suspension,
individual  bar, or firm  expulsion  from the NASD. To date,  there have been no
adverse effects upon the Company  relating to allegations  against Monroe Parker
Securities, Inc.

Monroe  Parker  Securities,   Inc.  was  the  Company's  investment  banker  and
underwriter  for the public  offering that was concluded on March 19, 1997.  The
underwriter  was granted an  appointee  to the board of directors as a condition
for this  undertaking.  During December 1997,  Monroe Parker ceased  substantive
market making  activities in the Company's  common stock.  On December 19, 1997,
Stephen  Drescher,  who was the Monroe Parker designee to the Company's board of
directors,  resigned  effective  that date.  Since  then,  the  Company  has not
suffered any further consequence of Monroe Parker ceasing operations.

                                       17
<PAGE>


On March 1, 1999, the Company reached a settlement agreement with David Feingold
and his law firm of Feingold & Kam,  RAM  Capital  Partners,  Ltd.,  Diversified
Lending Company and RAF Enterprises  regarding  compensation and the issuance of
the Company's common stock, among other matters. As a result of this settlement,
the Company's obligations to the investor who held a convertible preferred stock
issue was satisfied.  Other than the common stock the Company issued in November
1998, no further consideration was paid.

During May 1999,  the Company and  Innovation  Associates,  Inc.  ("IA") reached
agreement  and settled  litigation  that was  initiated by IA for trade  secrets
misappropriation  among other  allegations.  As part of the  settlement  of this
litigation,   the  Company  agreed  to  license  certain  patents   relating  to
microspheres  that are owned by IA. The Company paid $25,000 and issued  470,544
shares of its common stock having a at that time value of $500,000.  This common
stock bears a  restrictive  legend as to  marketability  but  provides a penalty
should this stock not be registered by the Company  within 150 days.  This stock
was not  registered  as of this  filing but no claim for the  payment of $62,500
worth of the  Company's  common  stock has been  made.  With  licensing  of IA's
patents, this litigation has been dismissed. The Company intends to utilize IA's
patents with its own microsphere  technologies to strengthen its patent position
in this field.


SEASONALITY AND FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company believes it will experience  stronger demand for its products in the
spring,  summer and fall of each year. By directing its marketing efforts to the
warmer states,  the Company feels that  fluctuations  resulting from seasonality
will be minimized.


INFLATION

Inflation  has not  proven to be a factor in the  Company's  business  since its
inception  and is not  expected  to  have a  material  impact  on the  Company's
business in the foreseeable future.


ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The information required by Item 8 appears at page F-1, which appears after
this page.


ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.

     None.

                                       18
<PAGE>




                                    PART III


  ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.


     The  information  required by this item is incorporated by reference to the
     definitive  proxy  statement  to be filed  by the  Company  for the  Annual
     Meeting of Stockholders to be held on March 30, 2000.


  ITEM 11: EXECUTIVE COMPENSATION

     The  information  required by this item is incorporated by reference to the
     definitive  proxy  statement  to be filed  by the  Company  for the  Annual
     Meeting of Stockholders to be held on March 30, 2000.


  ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The  information  required by this item is incorporated by reference to the
     definitive  proxy  statement  to be filed  by the  Company  for the  Annual
     Meeting of Stockholders to be held on March 30, 2000.


  ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  information  required by this item is incorporated by reference to the
     definitive  proxy  statement  to be filed  by the  Company  for the  Annual
     Meeting of Stockholders to be held on March 30, 2000.


  ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
  ON FORM 8-K.
     (a) The following documents are filed as part of this report:

         (1)(2) CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
         SCHEDULES.

     A list  of the  Consolidated  Financial  Statements  filed  as part of this
     Report is set forth in Item 8 and appears at Page F-1 of this Report; which
     list is incorporated herein by reference. The Financial Statement Schedules
     and the Report of Independent Auditors as to Schedules follow the Exhibits.

                                       19
<PAGE>

     (a)(3) EXHIBITS.


     1.1  Revised  Form  of   Underwriting   Agreement*
     1.2  Revised  Form  of   Underwriter's Warrants*
     1.3  Revised Form of Selected Dealers Agreement*
     1.4  [Reserved]
     1.5  [Reserved]
     1.6  Executed  Escrow  Agreement  and Amendment
          thereto entered into by First of America, Bank of Michigan, N.A.,
          the Company and the Underwriters*

     3.1 Certificate of Incorporation and Amendment to Certificate of
         Incorporation of the Company*

     3.1(a)   Certificate  of  Amendment to  Certificate  of  Incorporation  to
              reflect 1 for 10 reverse stock split*

     3.1(b)   Form of  Certificate  of  Amendment  to  Certificate  of  Rights,
              Designation and Preferences of Series A Preferred Stock*

     3.2  Bylaws of the Company*
     3.3  Amendment to Bylaws*
     4.1  Specimen  of  Common  Stock   Certificate*
     4.2  Specimen  of  Warrant Certificate*
     4.3  Revised Form of Warrant Agreement*
     4.4 Conversion Notice and Election Form for Convertible Note Holder*
     5.1 Opinion of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. as
         to legality of issuance of Units*

    10.0 Employment Agreement (4/4/96) John Pidorenko*

      10.0(a) Employment Agreement (4/4/96) John Trusty*

      10.0(b) Form of Convertible Note*

      10.0(c) Trademark Registration for ThermaCool(TM) *

      10.0(d) Published International Patent Application*

      10.0(e) Stock Option Plan*

      10.0(f) Asset Purchase Agreement for Darling Paint and Coatings
              effective November, 1995*

      10.0(g) Lease for Executive Offices*

      10.0(h) Lease for Darling Paint*

                                       20
<PAGE>


      10.0(i) Lease for Sarasota Store*

      10.0(j) Form of Promissory Note (3/6/96)*

      10.0(k) Stock Purchase Agreement between the stockholders of
              Atlas Chemical Co. and the Issuer effective August 1, 1997.

(b)   Reports on Form 8-K

         (i)      Form 8-K filed December 14, 1998 containing the Asset Purchase
                  Agreement between the Issuer and American Paints, Inc.

         (ii)     Form 8-K filed January 11, 1999  containing the Stock Purchase
                  Agreement  between  the  Issuer and  Shareholder's  of T-Coast
                  Pavers/Sealco Inc.


                                       21
<PAGE>

SIGNATURES

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



     Date:   January 17, 2000                    By:      /s/ John Pidorenko
                                                         -----------------------
                                                          John Pidorenko

         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.


        SIGNATURE                              TITLE                 DATE
        ---------                              -----                 ----
/s/ John Pidorenko             President and Chief Executive
----------------------------   Officer (Principal Executive     January 17, 2000
John Pidorenko                 Officer) and Chairman of
                               the Board

/s/ Gerald Couture             Vice President and Chief
----------------------------   Financial Officer (Principal     January 17, 2000
Gerald Couture                 Financial Officer)

/s/ Kevin Brennan              Controller, Principal            January 17, 2000
----------------------------   Accounting Officer
Kevin Brennan

/s/ Kendall B. Stiles
---------------------------    Director                         January 17, 2000
Kendall B. Stiles M.D.

/s/ Donald Huggins
---------------------------    Director                         January 17, 2000
Donald Huggins

/s/ Maurice Malacarne          Vice President
---------------------------    Director                         January 17, 2000
Maurice Malacarne


                                       22
<PAGE>



                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                        Consolidated Financial Statements
                              for the periods ended
                           September 30, 1999 and 1998



<PAGE>



                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES



                                    Contents



                                                                            Page
                                                                            ----
Independent Auditors' Report                                                 F-2


Consolidated Balance Sheets                                                  F-3


Consolidated Statements of Operations                                        F-4


Consolidated Statements of Changes in Stockholders' Equity                   F-5


Consolidated Statements of Cash Flows                                        F-6


Notes to Consolidated Financial Statements                            F-7 - F-23



<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
ThermaCell Technologies, Inc.
Daytona, Florida

We have  audited the  accompanying  consolidated  balance  sheets of  ThermaCell
Technologies,  Inc. and  subsidiaries  as of September 30, 1999 and 1998 and the
related consolidated statements of operations,  changes in stockholders' equity,
and  cash  flows  for the  periods  then  ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
ThermaCell  Technologies,  Inc.  as of  September  30,  1999  and  1998  and the
consolidated  results of their  operations  and their cash flows for the periods
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 16 to the
financial statements, the Company has suffered recurring losses from operations,
which raise  substantial doubt about its ability to continue as a going concern.
Management's  plans  regarding  those matters also are described in Note 16. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.



                                           /s/ Cherry, Bekaert & Holland, L.L.P.
                                           -------------------------------------
                                           Cherry, Bekaert & Holland, L.L.P.
                                           Certified Public Accountants

Atlanta, Georgia

December 2, 1999,  except for Notes 17 & 18, as to which the date is January 14,
2000.

                                       F-2
<PAGE>



                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets
                           September 30, 1999 and 1998


                                     Assets



                                                  September 30,  September 30,
                                                      1999           1998
                                                  ------------   ------------
Current assets
    Cash                                          $     60,173   $     67,405
    Accounts receivable
       Trade, net of allowance for uncollectible
        accounts of $194,125 for 1999 and
        $64,227 for 1998                               388,316        314,262
    Notes receivable - trade                            93,000         52,000
    Notes receivable - other                            11,510         76,622
    Officer advance                                    156,234              -
    Other assets                                             -         18,998
    Inventories                                        541,933        489,259
    Prepaid expenses and other                          52,576        161,308
                                                  ------------   ------------

           Total current assets                      1,303,742      1,179,854
                                                  ------------   ------------

           Net property and equipment                  949,202        892,972
                                                  ------------   ------------


Other assets
    Deposits                                            55,901         16,266
    Deferred income tax benefit, net                         -        795,309
    Prepaid expenses                                   164,242              -
    Goodwill, net of accumulated amortization
     of $206,453 for 1999 and $75,937 for 1998       1,865,174        815,010
    Other intangibles, net of accumulated
     amortization of $33,620 for 1999 and
     $16,471 for 1998                                  721,406        162,469
                                                  ------------   ------------

           Total other assets                        2,806,723      1,789,054
                                                  ------------   ------------

           Total assets                           $  5,059,667   $  3,861,880
                                                  ============   ============


See notes to consolidated financial statements.


<PAGE>


                      Liabilities and Stockholders' Equity


                                                  September 30,  September 30,
                                                      1999           1998
                                                  ------------   ------------

Current liabilities
    Accounts payable                             $     998,961   $    445,118
    Accrued expenses                                   129,290         45,396
    Accrued payroll and payroll taxes                   31,863         13,647
    Current maturities of long-term debt
       Notes payable                                    41,172         20,340
       Capital leases                                   82,026         38,644
                                                  ------------   ------------

           Total current liabilities                 1,283,312        563,145
                                                  ------------   ------------

Long-term debt, net of current maturities
    Notes payable                                    1,148,393         58,128
    Capital lease obligations                          229,225         73,079
                                                  ------------   ------------

           Total long-term debt, net of
               current maturities                    1,377,618        131,207
                                                  ------------   ------------

           Total liabilities                         2,660,930        694,352
                                                  ------------   ------------
Stockholders' equity
 Preferred stock, Series A, par value $.0001
    5,000,000 shares, authorized; 0 and
    5,000,000 shares issued and                          -                500
    outstanding at September 30, 1999 and 1998
 Preferred stock, Series B convertible, $1,000
    stated value, 8% dividend, authorized
    1,500 shares, 250 issued                             -            250,000
    and outstanding at September 30, 1998
 Common stock, par value $.0001, authorized
    20,000,000 shares, 9,433,653 and
    5,129,325 issued and                                  943             513
    outstanding, respectively
 Additional paid-in capital                         9,519,168       6,612,481
 Deduct notes receivable associated with
    stockholder loan                                 (147,035)       (453,695)
 Accumulated deficit                               (6,919,339)     (3,242,271)
 Treasury stock, 40,000 common shares                 (55,000)              -
                                                  ------------   ------------

           Total stockholders' equity               2,398,737       3,167,528
                                                  ------------   ------------

           Total liabilities
            and stockholders' equity              $ 5,059,667    $  3,861,880
                                                  ===========    ============

                                      F-3
<PAGE>


                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations
                    Periods ended September 30, 1999 and 1998
<TABLE>
<CAPTION>


                                                               September 30, 1999        September 30, 1998
                                                               ---------------------     --------------------
<S>                                                           <C>                       <C>
Revenue
 Sales                                                         $      4,306,408           $     2,860,196

Less cost of sales                                                    3,293,952                 1,900,043
                                                               ---------------------     --------------------

           Gross profit                                               1,012,456                   960,153

Selling, general and administrative expenses                          3,529,469                 1,822,741
                                                               ---------------------     --------------------

           Loss from operations                                      (2,517,013)                 (862,588)
                                                               ---------------------     --------------------

Other income (expense)
 Interest income                                                          4,431                    40,471
 Interest expense                                                      (284,130)                  (25,068)
 Loss on sale of division                                               (86,945)                      -
 Gain on sale of assets                                                   1,898                       -
 Other                                                                                             68,762
                                                               ---------------------     --------------------

           Total other income (expense)                                (364,746)                   84,165
                                                               ---------------------     --------------------

           Loss before income taxes                                  (2,881,759)                 (778,423)

Income taxes
 Deferred income tax benefit (expense)                                 (795,309)                  163,937
                                                               ---------------------     --------------------


           Net loss                                            $     (3,677,068)          $      (614,486)
                                                               =====================     ====================

Basic and diluted loss per common share                        $          (0.46)          $         (0.18)
                                                               =====================     ====================

Weighted average number of common   shares outstanding                 7,924,910                3,677,183
                                                               =====================     ====================

</TABLE>



See notes to consolidated financial statements.


                                      F-4
<PAGE>

<TABLE>
<CAPTION>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

           Consolidated Statements of Changes in Stockholders' Equity
                    Periods ended September 30, 1999 and 1998


                                                               Preferred Stock,
                           Common Stock    Preferred Stock, Series B, 8% dividend,
                                               Series A          convertible
                         --------------- -----------------  ------------------  Additional                Notes
                        Number of        Number of         Number of             Paid-in  Accumulated  Receivable, Treasury
                         Shares   Amount  Shares   Amount   Shares      Amount   Capital     Deficit   Stockholder Stock   Total
                        --------- ------ --------- ------  ---------    ------  ---------- ----------- ----------- ----- ----------
<S>                    <C>       <C>    <C>       <C>     <C>       <C>       <C>         <C>          <C>        <C>    <C>
Balance, September
30, 1997                3,021,139 $ 301  5,000,000 $ 500              $        $ 5,564,319 $(2,586,570) $(550,460)       $2,428,090

Issuance of stock for
payment of services      200,070    20                                             110,015                                  110,035
Payments associated
with stockholder
loan, net                                                                                                  96,765            96,765
Issuance of Series B,
convertible preferred                                      1,500     1,500,000    (300,000)                               1,200,000
Exchange of preferred
for common            1,872,874   188                     (1,250)   (1,250,000)   1,249,812
Dividends of Series
B, convertible
preferred                55,242     6                                                28,333   (41,215)                      (12,876)
Cancellation of
common shares           (20,000)   (2)                                              (39,998)                                (40,000)
Net loss for year
ended September 30,
1998                                                                                         (614,486)                     (614,486)
                       --------- ------ --------- ------  ---------    ------  ---------- -----------   ----------- -----  ---------
Balance, September
30, 1998              5,129,325   513   5,000,000  500      250        250,000    6,612,481 (3,242,271) $ (453,695)        3,167,528

Issuance of stock for
payments of services    274,900    27                                               154,928                                 154,955
Issuance of stock for
acquisitions            872,000    87                                             1,399,913                               1,400,000
Issuance of stock in
connection with
conversion of
preferred stock       1,405,000   141                                               249,860                                 250,001
Issuance of stock to
employees               460,000    46                                               379,954                                 380,000
Issuance of stock for
patent rights           470,544    47                                               499,953                                 500,000
Payments associated
with stockholder                                                                                        251,660             251,660
loan, net
Cancellation of
Series B, preferred   (428,116)  (43)                     (250)       (250,000)     250,043
Exchange of preferred
for common           1,250,000   125  (5,000,000)(500)                                  375
Cancellation of
dividends of Series                                                                 (28,339)                                (28,339)
B, preferred
Return of common
shares                                                                                                  55,000    (55,000)
Net loss for year
ended September 30,                                                                         (3,677,068)                  (3,677,068)
                     --------- ------ --------- ------  ---------       ------  ---------- ----------- ----------- -----  ----------
Balance,
 September 30, 1999  9,433,653 $ 943     -       $ -        -           $  -    $ 9,519,168$(6,919,339)$(147,035) (55,000)$2,398,737
                    ========== =====  ========= ======  =========       ======  =========== ========== =========== =====  ==========
</TABLE>


See notes to consolidated financial statements.

                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                                                        THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                                                             Consolidated Statements of Cash Flows
                                                           Periods ended September 30, 1999 and 1998




                                                              September 30, 1999        September 30, 1998
                                                              ------------------        ------------------

<S>                                                          <C>                       <C>
Cash flows from operating activities
 Reconciliation of net loss to net cash used
 in operating activities
  Net loss                                                     $    (3,677,068)         $       (614,486)
  Adjustments to reconcile net loss to net
  cash used in operating activities
   Depreciation                                                        196,477                   161,757
   Amortization                                                        145,970                    74,192
   Deferred income tax benefit                                         795,309                  (163,937)
   Gain on sale of equipment                                            (1,898)                      -
   Loss on sale of division                                             86,944                       -
   Common stock issued to employees                                    380,000                       -
   Common stock issued for services                                    154,955                   110,035
  Changes in assets and liabilities, net
  of acquisitions
   (Increase) decrease in accounts and
     notes receivable                                                  223,276                   (58,533)
   (Increase) decrease in inventories                                  141,253                   (78,287)
   Increase in officer advance                                        (156,234)                       -
   Increase in prepaid and other assets                               (306,213)                 (171,215)
   Increase (decrease) in accounts payable                             150,192                  (106,454)
   Increase (decrease) in accrued expenses                              78,351                  (418,347)
                                                               --------------------     --------------------

           Net cash used in operating activities                     1,788,686)               (1,265,275)
                                                               --------------------     --------------------

Cash flows from investing activities
 Capital expenditures                                                  (137,507)                (387,031)
 Acquisitions                                                            93,899                 (115,000)
 Proceeds from sale of equipment                                         73,000                      -
 Proceeds from sale of division                                           8,000                      -
 Expenditures for patent, net                                           (77,380)                 (94,267)
                                                               --------------------     --------------------

           Net cash used in investing activities                        (39,988)                (596,298)
                                                               --------------------     --------------------
</TABLE>


See notes to consolidated financial statements.


<PAGE>

<TABLE>
<CAPTION>



                                                               September 30, 1999       September 30, 1998
                                                               --------------------     --------------------
<S>                                                           <C>                      <C>
Cash flows from financing activities
 Proceeds form issuance of common stock                        $        250,000         $              -
 Proceeds from issuance of Series B
    preferred stock                                                        -                    1,500,000
 Proceeds form issuance of notes payable                              1,462,363                   140,178
 Principal payments on notes payable                                   (114,242)                  (48,487)
 Principal advances on stockholder loan                                (326,069)                 (258,330)
 Proceeds from payments on stockholder loan                             632,729                   355,095
 Costs associated with obtaining financing                                    -                  (300,000)
 Cancellation of preferred dividends                                    (28,339)                       -
 Purchase of treasury stock                                             (55,000)                       -
 Purchase of canceled common stock                                            -                   (40,000)
                                                               --------------------     --------------------

           Net cash provided by financing activities                  1,821,442                 1,348,456
                                                               --------------------     --------------------

Net decrease in cash                                                    (7,232)                  (513,117)

Cash - beginning                                                        67,405                    580,522
                                                               --------------------     --------------------
Cash - ending                                                  $        60,173          $          67,405
                                                               ====================     ====================

</TABLE>

                                      F-6
<PAGE>


                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                          Notes to Financial Statements
                           September 30, 1999 and 1998


Note 1 - Summary of Significant Accounting Policies

             Business Activity

             ThermaCell   Technologies,   Inc.  (the  "Company")  is  a  Florida
             corporation,  incorporated  August  12,  1993.  The  Company  is an
             operating  company  that has two wholly owned  subsidiaries,  Atlas
             Chemical Co., ("Atlas"), that was acquired in July 1997, and Sealco
             Corporation doing business as T-Coast Pavers,  that was acquired in
             December 1998. In addition, the Company acquired certain assets and
             assumed certain  liabilities of American  Paints,  Inc. in December
             1998. The Company  manufactures and distributes paints and coatings
             that  encompass  innovative  microsphere  technologies;  the  paver
             subsidiary installs paving materials. Presently,  substantially all
             of the Company's  sales and accounts  receivables  are generated in
             Florida.  The Mesa,  Arizona division was closed in September 1998.
             All of the Company's sales and assets are domestically  located. No
             customer represents more that 10% of its annual sales.

             Inventories

             Inventories   are  valued  using  the  average  cost  method.   All
             inventories are stated at the lower of cost or market.

             Property and Equipment

             Property  and  equipment  are  recorded  at cost  less  accumulated
             depreciation.  Depreciation is computed using the straight-line and
             accelerated  methods over the estimated useful lives of assets of 5
             to 10 years.

             Intangible and Long-lived Assets

             Intangible  assets  subject  to  amortization  include  trademarks,
             goodwill and patents.  Agreement not to compete are being amortized
             on a straight-line  basis over three years.  Trademark and goodwill
             are being amortized on a  straight-line  basis over ten and fifteen
             years,  respectively.  Amounts  attributable  to patents  are being
             amortized  over the useful life of the patent (but not more than 20
             years) beginning the month the patent becomes effective.

             The Company  evaluates the  impairment of intangible and long-lived
             assets on an ongoing  basis in  relation to the  undiscounted  cash
             flows of the related asset.

                                      F-7
<PAGE>


                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 1 - Summary of Significant Accounting Policies (continued)

             Principle of Consolidation

             The  accompanying  financial  statements  include the accounts of
             ThermaCell Technologies, Inc. and its subsidiaries Atlas Chemical
             Co.  and   T-Coast   Pavers,   after   elimination   of  material
             inter-company accounts and transactions.

             Use of Estimates in the Preparation of Financial Statements

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

             Fair Value of Financial Instruments

             The  estimated  fair value of the  Company's  cash,  accounts and
             notes receivable and payable approximated their carrying value at
             year end.

             Basic Loss per Common Share

             Basic  loss  per  common  share  equals  the  total of net loss and
             preferred stock dividends divided by the weighted average number of
             common  shares  outstanding.   The  convertible  securities  (stock
             warrants  and  options)  are not  included  in the loss  per  share
             calculation  for  September  30,  1999  and 1998  because  they are
             anti-dilutive.

             Advertising

             The  Company  expenses  advertising  costs as they are  incurred.
             Advertising  costs were $10,463 and $46,116 for the periods ended
             September 30, 1999 and 1998, respectively.

                                      F-8
<PAGE>


                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 1 - Summary of Significant Accounting Policies (continued)

             Income Taxes

             Income taxes are accounted  for by an asset and liability  approach
             for financial  accounting and reporting  purposes.  Deferred income
             taxes are  provided  based on the  estimated  future tax effects of
             differences  between financial  statement  carrying amounts and the
             tax bases of existing assets and liabilities,  and are adjusted for
             changes in tax laws and tax rates when those changes are enacted.

             Impact of New Accounting Standards

             The  Financial  Accounting  Standards  Board  (FASB) has issued the
             following  accounting  pronouncement  which  the  Company  will  be
             required to adopt in future periods:

             FASB Statement No. 133 "Accounting  for Derivative  Instruments and
             Hedging  Activities"  requires that derivative  instruments such as
             options,  forward  contracts  and swaps be  recorded  as assets and
             liabilities at fair value and provides  guidance for recognition of
             changes in fair value  depending  on the  reason  for  holding  the
             derivative.  The  Company  does  not  presently  have  transactions
             involving derivative instruments,  but may do so in the future. The
             Company  is  required  to adopt  Statement  No.  133 for all fiscal
             quarters of all fiscal years beginning after June 15, 2000.

Note 2 - Inventories

 Inventories consisted of the following at September 30:

                                                 1999          1998
-------------------------------------------------------------------------

Raw materials                                    $ 385,746     $ 267,846
Finished goods (manufactured and purchased)        156,187       221,413
                                             ----------------------------
                                                 $ 541,933     $ 489,259
                                             ============================

                                      F-9
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 3 - Property and Equipment

             Property and equipment consisted of the following at September 30:
<TABLE>
<CAPTION>
                                                                                      1999                     1998
                                                                            --------------------     ---------------------

<S>                                                                         <C>                      <C>
               Furniture and fixtures                                       $        131,808         $         125,167
               Equipment                                                           1,055,608                   551,319
               Transportation equipment                                              168,345                   263,419
               Leasehold improvements                                                207,349                   201,597
                                                                            --------------------     ---------------------
                                                                                   1,563,110                 1,141,502
               Less:  Accumulated depreciation                                      (613,908)                 (248,530)
                                                                            --------------------     ---------------------

                                                                            $        949,202         $         892,972
                                                                            --------------------     ---------------------
</TABLE>

             Depreciation expense was $196,477 for the year ending September 30,
1999 and $161,757 for the year ended September 30, 1998.

Note 4 - Related Party Transactions

             The Company paid $80,637 for legal services during fiscal year 1999
             from a law firm that is a stockholder and had an account payable of
             $28,683 and $18,052 at September 30, 1999 and 1998, respectively.

             Notes  receivable  totaling  $303,269 and $453,695 at September 30,
             1999 and 1998,  respectively are from an officer and stockholder of
             the Company.  These are demand notes bearing interest at 5%. Of the
             $303,269,  $156,234  was  paid  to the  Company,  by  the  officer,
             subsequent  to the end of the year.  This amount was  reported as a
             current asset on the financial statements.

Note  5 - Basic and Diluted Loss per Share Calculations

<TABLE>
<CAPTION>
                           For the year ending September 30, 1999               For the year ending September 30, 1998
                         ------------------------------------------------     -------------------------------------------------
                         Loss               Shares            Per Share       Loss              Shares             Per Share
                         (Numerator)        (Denominator)     Amount          (Numerator)       (Denominator)      Amount
                         --------------     --------------    -----------     --------------    --------------     ------------

<S>                      <C>               <C>                <C>             <C>               <C>                <C>
Net loss                 $  (3,677,068)                                       $ (614,486)
Less:  Preferred
stock dividends                                                                   41,215
                         --------------     --------------    -----------     --------------    --------------     ------------

Income available to
common shareholders      $  (3,677,068)        7,294,910       $  (0.46)      $ (655,701)          3,677,183          (0.18)
shareholders
                         =============      ==============    ===========     ==============    ==============     ============

</TABLE>

                                      F-10
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 5 - Basic and Diluted Loss per Share Calculations (continued)

         Outstanding  options and warrants for 3,696,250  common shares were not
         included in earnings per share calculations due to their  anti-dilutive
         effect as of September 30, 1999.

         Outstanding  options and warrants for 2,811,250  common shares were not
         included in earnings per share calculations due to their  anti-dilutive
         effect as of September 30, 1998.

Note 6 - Capital Leases

             The Company leases  vehicles and computer and plant equipment under
             the  provisions  of  long-term  leases.  For  financial   reporting
             purposes,  minimum lease  payments  relating to this equipment have
             been  capitalized.  The leased  property under capital leases as of
             September 30, 1999 has a cost of $434,924, accumulated amortization
             of $115,671 and a net book value of $319,253.  Amortization  of the
             leased property is included in depreciation expense.

             The future  minimum lease payments under the capital leases and the
             net present value of the future minimum lease payments at September
             30, 1998 are as follows:


                     Total minimum lease payments             $       392,518
                     Less:  Amount representing interest               81,267
                                                              ---------------
                     Present value of net minimum lease
                         payments                                     311,251
                     Less:  Current maturities                         82,026
                                                              ---------------
                                                              $       229,225
                                                              ===============

             The  following  is a schedule  by years of minimum  lease  payments
under the above lease agreements as of September 30, 1999.


                          2000                               $       121,901
                          2001                                       120,115
                          2002                                        97,610
                          2003                                        42,308
                          2004                                        10,584
                                                             -------------------
                                                             $       392,518
                                                             ===================


                                      F-11
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998

Note 7 - Long-term Debt

<TABLE>
<CAPTION>


                                                                             September 30, 1999       September 30, 1998
                                                                            --------------------     ---------------------

<S>                                                                         <C>                      <C>
               19.99% note due in 48 monthly installments of $787,
               including interest, through October 2000, collateralized      $        9,127           $       -
               by equipment

               Redeemable convertible promissory note due July 2002
               interest payable quarterly at stated rate of 9% on base              531,111                   -
               amount of $666,667

               Various notes payable on vehicles with interest ranging
               from 7.3% to 10.35%, payments from $236 to $794 per month,            79,328                78,468
               and maturities from September 1999 to May 2003

               Redeemable convertible promissory note due March 2002
               interest payable quarterly at stated rate of 9% on base              569,999                   -
               amount of $666,667
                                                                            --------------------     ---------------------
                                                                                  1,189,565                78,468
               Less:  Current maturities                                            (41,172)              (20,340)
                                                                            --------------------     ---------------------

                                                                            $     1,148,393          $     58,128
                                                                            --------------------     ---------------------

</TABLE>

             Maturities of long-term debt are as follows:


                          2000                      $         41,172
                          2001                                28,004
                          2002                             1,114,234
                          2003                                 6,155
                                                     -------------------
                                                      $    1,189,565
                                                     -------------------


                                      F-12
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 8 - Operating Leases

             The Company  leases a buildings  and office  space under  operating
             leases.  These leases expire at various dates through 2004.  Rental
             expense  under these  leases was $128,761 and $111,153 for 1999 and
             1998, respectively. The following is a schedule by years of minimum
             rentals under the above lease agreements as of September 30, 1999.

                          2000                   $       121,901
                          2001                           120,115
                          2002                            97,610
                          2003                            42,308
                          2004                            10,584
                                                -------------------
                                                 $       392,518
                                                -------------------

Note 9 - Research and Development Costs

             Research  and  development  costs  included  in the  statements  of
             operations  totaled  $5,992  and  $50,848  for  the  periods  ended
             September 30, 1999 and 1998, respectively.

Note 10 - Supplemental Cash Flow Information

             Interest  paid totaled  $60,876 and $25,068 for the periods ended
             September 30, 1999 and 1998, respectively.

             Common stock was issued in payment of certain services and Series
             B preferred stock dividend obligations.

Note 11 - Concentration of Credit Risk

             The Company operates from four locations in Florida to manufacture
             and  sell  its  paints  and  coatings  and  related  products  and
             services.   The   Company   extends   credit   to  its   customers
             substantially  without  collateral.  The business  operations  are
             influenced by the general  economic  conditions of the surrounding
             area.

             The paving business is  concentrated in southeast  Florida and is
             influenced by the general economic  conditions of the surrounding
             area.

                                      F-13
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 12 - Acquisitions

              On March 2, 1998,  the  Company  acquired  the assets of  Ladehoff
              Paints,  Inc., a paint  manufacturer and  distributor,  located in
              Mesa,  Arizona.  The  total  purchase  price  was  $115,000.  This
              acquisition is classified as a purchase transaction. The operating
              results of Ladehoff from March 2, 1998 through  September 30, 1998
              have been included in the Company's  statements of operations  for
              the year ended  September 30, 1998. In September  1999 most of the
              assets  were sold for  $8,000,  and the lease was  assumed  by the
              acquirer.

              ThermaCell  acquired  Sealco  Corporation  d/b/a T-Coast Pavers on
              December 1, 1998 for 300,000  shares of its common stock valued at
              $302,500.  This acquisition was recorded using the purchase method
              of accounting for business combinations.  The financial statements
              reflect ten months of  operations  for this  acquisition  which is
              substantially the same as the full year.

              On  December  1, 1998,  the Company  acquired  certain  assets and
              liabilities of American  Paints,  Inc., a Pompano  Beach,  Florida
              paint  manufacturer  and  distributor  for 572,000  common  shares
              valued at  $1,100,000.  This  acquisition  was also  recorded as a
              purchase transaction.  The financial statements reflect ten months
              of operations for this acquisition  which were  substantially  the
              same as the full year.

              Had a full year of operations of Ladehoff, based upon its December
              31 year end, been included in the Company's  financial  statements
              for the year ended September 30, 1998, the statement of operations
              for the year then  ended  would have been  according  to the table
              below on a pro forma basis. In addition,  the operating results of
              Sealco / T-Coast,  and American Paints have been included on a pro
              forma  basis  in  the  table  below  to  reflect  a full  year  of
              operations in ThermaCell's  operating  statements at September 30,
              1998:

<TABLE>
<CAPTION>

                             ThermaCell         Ladehoff           American Paints     T-Coast/ Sealco      Consolidated
                                                Paints
                            ---------------     ---------------    ----------------    ----------------    ---------------

<S>                         <C>                 <C>                <C>                 <C>                 <C>
Total revenue               $ 2,660,717         $ 365,983           $   2,246,196       $   1,980,400       $ 7,253,296
Net income (loss)              (620,034)            7,558                 209,870              71,280          (331,326)
Earnings (loss) per share                                                                                         (0.07)
Shares outstanding                                                                                            4,804,183

</TABLE>

               Note:  Each  acquired  entity  has a 20% tax  benefit  applied if
               having a loss; or if a profit a 20% tax rate.


                                      F-14
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 13 - Income Taxes

              In accordance with Statement of Financial Accounting Standards No.
              109 (SFAS 109) "Accounting for Income Taxes", the Company recorded
              deferred  tax  assets  to  reflect  the  future  tax  benefits  of
              financial operating loss carryforwards incurred in 1998.

              The Company has a net operating loss  carryforward  of $6,919,000
              at September 30, 1999 that expires in 2009 through 2013.

              A valuation  allowance  is  required by SFAS 109 if,  based on the
              weight of available evidence, it is more likely that not that some
              portion or all of the  deferred  tax assets will not be  realized.
              The need for the valuation allowance is evaluated  periodically by
              management. Based on available evidence, management concluded that
              a valuation  allowance of 100 percent and 50 percent for September
              30, 1999 and 1998 was  necessary.  Significant  components  of the
              Company's net deferred tax assets are as follows:


                                          September 30, 1999  September 30, 1998
                                          ------------------  ------------------

     Tax benefit of net operating loss      $    2,800,999     $    1,590,618
     Less:  Valuation allowance                 (2,800,999)          (795,309)
                                          ------------------  ------------------

                                            $       -          $      795,309
                                          ==================  ==================

              The Company's deferred income tax provisions include the following
components:


                                     September 30, 1999       September 30, 1998
                                     ------------------       ------------------

     Future net operating
       loss deductions                $     1,210,381          $        327,874
     Change in valuation
       for tax benefit of net
       operating loss                      (2,005,690)                 (163,937)
                                     ------------------       ------------------

                                      $       (795,309)        $        163,937
                                     ==================       ==================


                                      F-15
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 13 - Income Taxes (continued)

              A reconciliation of the income tax benefit computed at the federal
statutory rate and the Company's effective rate follows:

<TABLE>
<CAPTION>

                                              September 30, 1999                        September 30, 1998
                                              -------------------                       ------------------

<S>                                           <C>                        <C>         <C>                         <C>
Federal statutory rate                        $      979,840                34%         $     264,664               34%
Adjustments - primarily state income                 230,541                 8%                63,210                8%
taxes
Change in valuation for tax benefit of            (2,005,690)              (70%)             (163,937)             (21%)
net operating loss
                                              -------------------    ---------------    ------------------    -------------

                                              $     (795,309)        $    (28%)         $     163,937         $    21%
                                              -------------------    ---------------    ------------------    -------------

</TABLE>

Note 14 - Segment Information

               The Company  operates in three primary business  segments,  which
               are identified based on products and services.

               The  Company,   through  its  wholly  owned   subsidiary   Sealco
               Corporation  doing  business  as T-Coast  Pavers  installs  brick
               pavers in driveways, and sidewalks.

               The Company,  through its wholly owned subsidiary Atlas Chemical,
               and through American Paints  manufactures and distributes  paints
               and coatings.

               The Company is  preparing  to  manufacture  and sell  microscopic
               evacuated  glass  spheres  (microcells)  in the next fiscal year.
               During  the  current  year,  the  Company  incurred  expenses  in
               perfecting  the  manufacturing  process.  Corporate  general  and
               administrative  expenses  are  included  in this  division.  This
               segment is identified as ThermaCell Technologies.


                                      F-16
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 14 - Segment Information (continued)

              The  following  table  presents  information  about the results of
operations of the Company's business segments:

<TABLE>
<CAPTION>

                                                       ThermaCell        Paint            Paver
                                                       Technologies      Division         Division          Consolidated
                                                       -------------     -------------    --------------    -------------
<S>                                                    <C>               <C>              <C>              <C>
                Revenue
                 Sales                                 $                 $ 2,786,961      $ 1,519,447       $ 4,306,408

                Less cost of sales
                                                                           2,152,405        1,141,547         3,293,952
                                                       -------------     -------------    --------------    -------------

                           Gross profit                                      634,556          377,900         1,012,456

                Selling, general and
                administrative expenses                  1,668,915         1,443,397          417,158         3,529,470
                                                       -------------     -------------    --------------    -------------

                           Loss from operations         (1,668,915)         (808,841)        (39,258)        (2,517,014)
                                                       -------------     -------------    --------------    -------------

                Other income (expense)
                 Interest income                             4,431                                                4,431
                 Interest expense                         (257,566)          (16,999)         (9,565)          (284,130)
                 Loss on sale of division                  (86,944)              -                -             (86,944)
                 Gain on sale of assets                      6,771            (4,873)             -               1,898
                 Other
                                                       -------------     -------------    --------------    -------------

                           Total other income(expense)    (333,308)          (21,872)         (9,565)          (364,745)
                                                       -------------     -------------    --------------    -------------

                           Loss before income taxes     (2,002,223)         (830,713)        (48,823)         (2,881,759)

                Income taxes
                 Deferred income tax expense              (795,309)                                             (795,309)
                                                       -------------     -------------    --------------    -------------

                           Net loss                    $(2,797,532)      $  (830,713)     $  (48,823)        $(3,677,068)
                                                       =============     =============    ==============    =============
</TABLE>


                                      F-17
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 15 - Stockholders' Equity

              Preferred Stock Transactions

              On February 19, 1998,  the Company  completed an offering of 1,500
              shares of Series B  Preferred  Stock to Thomson  Kernaghan  & Co.,
              Ltd.  pursuant to Regulation S. The principal  placement agent for
              the  offering  was  London  Select  Enterprises,  Ltd.  the  total
              offering  price for the Series B Preferred  Stock was  $1,500,000.
              This preferred  issue has an 8% yield.  This placement  allows the
              holder to convert such preferred  stock into the Company's  common
              stock at the lower of the  common  stock bid price five days prior
              to  funding  or five  days  prior to  exercise  of the  conversion
              election.  The  offering  price  for such  stock  was  $1,500,000.
              Proceeds  from  the  offering  after  deducting  related  expenses
              totaled $1,200,000.

              As of  September  30,  1999,  all of the series A and B  preferred
              stock was converted to 4,155,000 shares of common stock, including
              dividends paid in common stock.

              Common Stock Transactions

              During  the  year  ended  September  30,  1998,  certain  Series B
              preferred  stockholders  converted  their stock to common  shares.
              55,242  common  shares  were  issued  in  payment  of  $28,339  in
              dividends on such converted preferred stock. 200,070 common shares
              (including 125,000 shares issued to a corporate  officer),  valued
              at  $110,035,  were  issued as  compensation  for  services to the
              Company. Also, 20,000 common shares,  representing paid-in capital
              of $40,000  were  received  and  canceled in the  settlement  of a
              dispute with a shareholder.

              During  November  1998,  the Company  received  $250,000  from an
              unaffiliated investor.


                                      F-18
<PAGE>
                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 15 - Stockholders' Equity (continued)

              In December 1998, the Company completed two acquisitions: American
              Paints,  Inc. of Pompano Beach,  Florida,  paint  manufacturer and
              distributor  for the issuance of 572,000  shares of common  stock;
              and T-Coast Pavers/Sealco Systems, Inc., a Stewart,  Florida, firm
              that  provides  paving  installation  and seal coating  within the
              residential  and commercial  markets in southeast  Florida for the
              issuance of 300,000 shares of common stock.

              During  August  1999,  the  Board  of  Directors   waived  certain
              performance  requirements  that  allowed  conversion  of preferred
              stock held by its  President  and Chairman,  John  Pidorenko,  and
              authorized  that this preferred stock issue be converted into 1.25
              million  shares of common  stock  which  was  consistent  with its
              established  conversion terms. The conversion permitted the holder
              to use  common  stock  to raise  funding  for the  benefit  of the
              Company.  A total of $303,269 has been funded through December 31,
              1999 as a result of this action.

              Warrants

              On March 19, 1997,  1,581,250  units of the  Company's  securities
              (each unit  consisting of one share of common stock and one Series
              A redeemable  stock purchase  warrant) were issued to investors at
              $4.00  per unit.  On March 19,  1997,  the  underwriter  commenced
              trading on the common stock and warrants.

              In connection  with the public  offering,  the Company sold to the
              underwriter  options to purchase  137,500 units (the  "underwriter
              warrants")  of the  Company's  securities,  identical to the units
              publicly sold, at an exercise price of 165% of the public offering
              price. The underwriter's units are exercisable at a price per unit
              of $6.00  subject to certain  adjustments,  until March 12,  2001,
              when they expire.

              The underwriter's  warrants  contained in the underwriter's  units
              underlying the underwriter's  options contain certain registration
              rights  and   anti-dilution   provisions.   The   holders  of  the
              underwriter's warrants gave no voting, dividend or other rights as
              shareholders of the Company with respect to the shares  underlying
              the warrants separately.

              In February,  1999 in payment of services,  with  compensation for
              such services, the Company entered into a contractual  arrangement
              for  warrants to  purchase  450,000  shares of common  stock at an
              exercise price of $1.00 per share.

              Authorized common shares have been reserved for the warrants.


                                      F-19
<PAGE>
                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 15 - Stockholders' Equity (continued)

              Stock Options

              The Company has made awards of incentive  common stock  options to
              corporate   officers.   Also,  in  September   1998,  the  Company
              authorized   the   allocation  of  600,000  common  shares  for  a
              compensatory  Section 422A plan for officers and key employees and
              awarded options under this plan for 455,000 common shares.  Awards
              outstanding as of September 30, 1999, are summarized as follows:

<TABLE>
<CAPTION>
                                                                   Shares            Exercise            Year of
                                                                                       Price            Expiration
                                                             -----------------      ------------     ---------------

<S>                                                         <C>                     <C>             <C>
                Incentive awards to corporate
                officers - year ended    September 30:
                 1997                                              700,000           $   0.50        2002
                 1998                                               75,000               0.50        2003
                 1999                                               75,000               0.50        2004
                Section 422A plan awards:
                 Corporate officer                                 285,000               0.50        2008
                 Key employees                                     170,000               0.50        2008
                                                             -----------------

                Total awards                                     1,305,000
                                                             =================

</TABLE>

              The original  exercise price for the 1997 incentive  common stock
              options  was  $4.00.  This  price  was  modified  by the board of
              directors to $0.50 during December, 1997.

              In  addition,   360,000  common  stock  options  were  issued  for
              consulting  and financial  services at an exercise  price of $1.06
              and an expiration of December 31, 2002.

              Authorized common shares have been reserved for the specific 1997
              and 1998 awards and the plan allocation.

              The  exercise  prices for the stock  options  exceeded  the market
              price of the common  stock on the date of award.  Accordingly,  no
              related  compensation cost has been charged to operations.  Due to
              the limited public market  history of the Company's  common stock,
              management  is unable to  estimate  the fair value of the  options
              awarded;  however,  management  believes  such fair  value was not
              significant as of the date of award.


                                      F-20
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 15 - Stockholders' Equity (continued)

              Stock Options (continued)

              The  exercise  price of all options  exceeded the market price of
              the Company's common stock as of September 30, 1999.

Note 16 - Business Strategy and Operational Plan

              The Company has  historically  been  unprofitable  during both its
              development  stage and  since it  acquired  significant  operating
              businesses,  beginning with the Atlas Chemical Company acquisition
              in  July  1997.  Management  has  recently  initiated  a  business
              strategy and operational plan that include the following essential
              elements:  (i)  achieve  profitability  for  fiscal  year  2001 by
              restructuring  operations and consolidating production facilities;
              (ii) begin  production of  microshells  during fiscal year 2000 to
              provide for its  immediate  projected  requirements  over the next
              nine months;  (iii) expand sales of conventional paint and coating
              products  through the channel of  distribution  available from the
              combined customer bases of Atlas Chemical and American Paints; and
              (iv) initiate a marketing program for ThermaCool paint products to
              demonstrate  the  benefits  of this  new  technology  without  the
              Company  depending on ThermaCool  sales,  and (v) introduce unique
              microshell  products  for special  customers  such as the national
              chain, Bath & Body Works and others.  With this business strategy,
              management  believes it is focusing on the key elements  necessary
              to the  Company  to be both  profitable  and  successful  over the
              long-term.  Management  has adopted this  present  strategy and is
              focused on its successful implementation.

              Presently, the Company does not have sufficient working capital to
              meet its needs to  implement  its  present  strategy.  There is no
              assurance  that  sufficient  revenues  will be  generated  or that
              funding will be available to the Company.

Note 17 - Contingencies

              The Company is involved in two lawsuits in which damages or claims
              may be sought.  On February 6, 1997, the Company received a letter
              from  the  counsel  to  the  Williams  family  which  owns  in the
              aggregate  21,923 shares of the  Company's  common stock which was
              acquired for an aggregate purchase price of $31,950.  The Williams
              family claims Mr. Pidorenko  fraudulently induced their investment
              and the Company is  obligated  for personal  disputes  between Mr.
              Pidorenko and this family which  primarily  concern a disagreement
              over a purchase of a personal residence.


                                      F-21
<PAGE>



                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 17 - Contingencies (continued)

              The Company does not believe it is obligated to these  individuals
              for personal disputes with Mr. Pidorenko.  The Williams family has
              rejected the Company's  request to purchase  their shares at their
              original  purchase price.  The Company believes it has meritorious
              defenses to any legal  proceeding  that may be  instituted by such
              individuals.  Mr.  Pidorenko  has agreed to indemnify  the Company
              against any claims asserted by these parties.

              On February 4, 1999,  a complaint  was filed in the United  States
              District  Court,   Middle  District  of  Florida  by  Mr.  Russell
              Haraburda  and  Eden  Group,  Inc.  against  John  Pidorenko,  the
              Company's  president,  and the Company for monies  purportedly due
              for arranging  financing for the Company prior to its IPO in March
              of 1997.  The  Company  does not  believe  any  monies are due Mr.
              Haraburda or his firm. In addition,  the Company has been assigned
              two  promissory  notes of the Eden Group,  Inc.,  Mr.  Haraburda's
              firm, that are unpaid.  The Company will vigorously  defend itself
              in this matter and will seek full and complete  payment  under its
              promissory notes from the Eden Group.

              The Company,  as a result of the  acquisition of Atlas, is a party
              to certain  claims  relating  to the  pollutant  tax as defined in
              Chapter 206, Florida Statutes that was subsequently  repealed. The
              former  shareholders of Atlas have agreed to personally  indemnify
              the Company form any contingent liability relating to this matter.

              The Company,  as a result of the acquisition of Atlas, is party to
              certain  claims  relating  to  bankruptcy  of  Seaboard   Chemical
              Corporation  who  operated a facility for  treatment,  storage and
              disposal of hazardous  substances  from 1975 until 1989. The North
              Carolina  Department of Environment,  Health and Natural Resources
              identified  Atlas  as  one  of  approximately   2,000  potentially
              responsible parties for cleanup of this site. Atlas was classified
              as a "de minimis"  participant  and, as such, has limited cost and
              liability for site cleanup.  The former shareholders of Atlas have
              agreed to  personally  indemnify  the Company from any  contingent
              liability relating to this matter.

              On  January  5,  1998,  NASD  Regulation,  Inc.  announced  that a
              complaint was issued on December 23, 1997  charging  Montoe Parker
              Securities,   Inc.  and  certain  of  its   officers   with  price
              manipulation  and  excessive  markups  in the  trading  of  Steven
              Madden,  Ltd.  and  fraud in the  sales of  securities  of  United
              Leisure.   Neither  firm  is  affiliated  with  the  Company.  The
              complaint  asks  for   restitution  to  defrauded   investors  and
              potential   sanctions   that  may  include  a  fine,   suspension,
              individual  bar, or firm expulsion  from the NASD. To date,  there
              has been no  adverse  effect  for the  Company  relating  to these
              allegations against Monroe Parker Securities, Inc.


                                      F-22
<PAGE>

                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (continued)
                           September 30, 1999 and 1998


Note 17 - Contingencies (continued)

              On September 1, 1999,  the Company was notified by NASDAQ that its
              listing on the NASDAQ Small  Markets was in violation of the stock
              price requirements for continued listing. This present requirement
              was  implemented  on August 27, 1997 and  required  the Company to
              maintain a $1 bid price for its listed  common  stock.  Presently,
              the Company does not meet this requirement.  The Company had filed
              for a hearing that was held on January 14, 2000.  At that hearing,
              management  presented  information  requesting  a  waiver  of this
              deficiency  and provided  assurances of the  Company's  compliance
              within a short  period of time.  The Company has not  received any
              disposition on this matter as yet.

Note 18 - Subsequent Events

              During  October 1999,  the Company issued 450,000 shares of common
              stock to Alan Berkun,  Esq.  through a  registration  statement on
              Form S-8 filed with the U. S.  Securities and Exchange  Commission
              for professional  services  relating to introducing the Company to
              businesses  that it could  either  merge  with or  acquire.  These
              shares are non-refundable.

              For the period  October 1, 1999  through  December 2, 1999,  John
              Pidorenko,  the  Company's  President  and  Chairman,  has repaid
              advances of $156,234.

              On December 8 1999,  the Company  entered  into a letter of intent
              with Texas  Pharmaceutical,  Inc. of  Texarkana,  Texas that could
              provide  the  Company  with  funding  of  $1,000,000  through  the
              issuance of 5,000,000  shares of preferred  stock.  This preferred
              stock would be convertible  into 5,000,000  shares of common stock
              at the election of the holder. A definitive  agreement is required
              to be executed  that would be approved  by both  company  board of
              directors  and for the Company is further  subject to  shareholder
              approval.  This funding is subject to the Company  maintaining its
              NASDAQ listing. The Company has not received a final determination
              by NASDAQ as a result of the hearing held on January 14, 2000.


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