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, 1998

          [ ]  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.)

  1125 Commerce Blvd. Sarasota, Florida                     34243
  -------------------------------------                     -----
 (Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (941) 358-0306

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)...$2,860,196.

Aggregate  market  value  of the  voting  stock  held by  non-affiliates  of the
registrant  at  December  21, 1998 was  $6,645,050.  The bid price of the common
stock at that date was $1.50.

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  16,  1999  are  incorporated  by
reference into part III of this Form.

<PAGE>

                          THERMACELL TECHNOLOGIES, INC.

                               FORM 10-KSB - Index

                     FOR THE YEAR ENDED SEPTEMBER 30, 1998

PART I                                                                   Page
                                                                         ----

Item 1. Business                                                           1.

Item 2. Properties                                                         7.

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

Item 7. Consolidated Financial Statements and Supplementary Data           16.

Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures                                                  16.

PART III

Item 9. Directors and Executive Officers of the Registrant                 16.

Item 10. Executive Compensation                                            16.

Item 11. Security Ownership of Certain Beneficial Owners and Management    17.

Item 12. Certain Relationships and Related Transactions                    17.

Item 13. 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  which  involve  risks and  uncertainties  that 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 Holiday,  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 so that it would  have a  facility  to  produce  and  develop  paints and
coatings. 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 include major  accounts  such as Builders  Square,  Ace Hardware,
Lowes, and others.  For the fiscal year ending June 30, 1997, Atlas Chemical had
annual revenues of $2.4 million and sustained an operating loss of approximately
$68,000.

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 for the  ThermaCool(TM)
product  line,  developing  commercially  viable  manufacturing  techniques,  or
addressing other markets.


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  from  the  sale  of its  ThermaCool(TM)  paint  and  coating
products.

                                       2
<PAGE>

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
able to manufacture  through its present paint production  assets.  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  due  to 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.  To date, 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 only  recently
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
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 sell in the general
market  because  not  all  shells  during  the  manufacturing  process  will  be
evacuated.  They will be separated and sold for general use as fillers, but will
be produced at a substantially reduced cost.

                                       3
<PAGE>

Management  believes that the Company's current  facilities and equipment can be
used to  manufacture  partially  evacuated  shells.  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.  Management has  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 has
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.

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.

                                       4
<PAGE>

MANUFACTURING FACILITIES AND TECHNIQUES

Management has acquired machinery, tooling, a high temperature furnace and other
items  necessary  to  manufacture  evacuated  shells  at its  Sarasota,  Florida
location.  Production  of  limited  quantities  of  shells  sufficient  for  the
Company's  immediate  needs is anticipated  during fiscal year 1999.  Management
will  utilize  its  limited  initial  production  to  provide  for early  demand
expectations.  Within the next 12 to 18 months a more substantial  facility will
need to be  built  to  provide  evacuated  shells  in  quantities  greater  than
1,000,000  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 paint and  coatings  production  of  500,000
gallons per year.  The current plant  facilities  are capable of producing up to
$10,000,000 in gross product sales.

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.

                                       5
<PAGE>

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, and Holiday,  Florida.  The
Miami  location is  adjacent to its  manufacturing  facilities  for  traditional
paints and coatings.  It is  management's  intention to sell the Holiday  retail
facility  and   concentrate  on  the   manufacture   and   distribution  of  its
ThermaCool(TM) and conventional  paint products.  The Miami retail location will
be retained 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 will also target chains such as Home
Depot  and  Builder's  Square  as point  of sale  distribution  outlets  for its
products.   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.

                                       6
<PAGE>

NEW PRODUCT APPLICATIONS AND DEVELOPMENT

The Company  presently 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 of 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,  1998,  the  Company  had 28  employees,  of whom five are
salaried and the balance are paid hourly. Of these employees, six are located at
the Sarasota facility,  two at Holiday, and the balance are 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  5,100  sq.  ft. of space at 1125
Commerce Blvd, in Sarasota, Florida where it maintains its corporate offices and
where it is developing initial  production  facilities for its evacuated shells.
This lease expires in June 30, 2001.  Lease  payments are $34,800 each year. The
facility  consists of  approximately  850 square  feet of office  space with the
balance being used for warehousing and manufacturing.

                                       7
<PAGE>

The  Company  leases  and  occupies  2,000 sq. ft. of retail  space in  Holiday,
Florida where it sells and distributes  paint and coating  products.  This lease
expires in September 1999. Current lease payments are $9,075 per year.

The Company leases and occupies 2,763sq.  ft. of warehousing and retail space in
Mesa, Arizona where its paint and coatings products are distributed.  This lease
expires in March 1999. Lease payments are approximately $10,800 per year.


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.

On May 2, 1997,  the Company was served with a summons  regarding a civil action
filed in the United States District Court,  Eastern  District of Michigan by IA,
Inc., as plaintiff.  The summons  alleges the Company,  and its president,  John
Pidorenko,  and Monroe  Parker  Securities,  Inc.,  the  Company's  underwriter,
breached a marketing agreement executed by Mr. Pidorenko on March 26, 1992. This
marketing agreement related to technologies developed by IA, Inc. This agreement
contained  a  confidentiality   and   non-disclosure   clause  for  technologies
purportedly developed by IA, Inc.

The Company was not a party to that agreement.  The Company believes that it has
not infringed on any patents held by IA, Inc.,  not-withstanding the validity of
such patents and/or their claims.  The petition  requested various court actions
including a jury trial, but no specific request for damages. The Company intends
to  vigorously  defend  itself  in this  action.  The  Company  believes  it has
meritorious  defenses in this matter which is in a  preliminary  stage and which
will not be resolved for some time.  The Company has agreed to indemnify  Monroe
Parker  Securities,  Inc., its underwriter,  against any claims asserted by this
party.

On or about  February 11, 1998,  Mr. Kevin  Horrell  filed an amended  complaint
against the Company and Mr.  Pidorenko,  the Company's  president.  The previous
complaint had been dismissed in the Circuit court of the 12th Judicial  Circuit,
in and for Sarasota County,  Florida. Mr. Horrell alleges that he is due certain
unrestricted  securities  of the  Company in  connection  with  prior  financing
activities. Mr. Horrell alleges breach of contract, fraud in the inducement of a
contract and violations of Rule 10b-5.  The Company  believes it has meritorious
defenses in this  matter  which is in the  preliminary  stage and is prepared to
vigorously defend in this action.

To the  knowledge of the officers  and  directors of the Company,  other than as
disclosed above and in the notes to the consolidated financial statements, there
are no material legal proceedings now pending or threatened against the Company.

                                       8

<PAGE>

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  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:





             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
                                                                 ==========
 



                                      9
<PAGE>

The  Company's  Units,  Common  Stock,  Warrants are listed and traded on NASDAQ
under the symbols, VCLLU, VCLL and VCLLW, respectively. 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
     1998 Fiscal Year   High    Low    Close     High     Low     Close
     ------------------------------------------------------------------
  

     First quarter     5 5/16   1/4      1/2    1 1/16   1/32     1/32

     Second quarter     3 7/8   3/4  1 13/16       5/8   1/32      1/4

     Third quarter      1 3/4   7/8      7/8       5/8   5/32     5/32

     Fourth quarter       7/8   1/4     9/16      5/32   1/16      1/8



As of September  30, 1998,  there were  approximately  125 holders of record for
common stock and 3 holders of record of the  warrants.  However,  the  Company's
management  believes  that  more  than  300  individuals  beneficially  own  the
Company's Common Stock as of December 1, 1998.

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.

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.

                                       10
<PAGE>

ITEM 6.    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 until fiscal year 1996. During this period,  management devoted the
majority of its efforts to research and development,  financing,  purchasing and
activities  related to starting up production  and marketing.  These  activities
were funded by investments from stockholders and borrowings from unrelated third
parties.

The Company  was not,  prior to its Initial  Public  Offering,  in a position to
generate  sufficient  revenues during its limited  operating history to fund its
ongoing operating expenses or its product development activities. As a result of
its IPO, the Company  repaid all its  outstanding  indebtedness.  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 $3,242,271 at September 30, 1998.

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.  Since the
Company's acquisition of Atlas Chemical in July of 1997, 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 Atlas  Chemical to its  distribution  channel.
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 distribution channels of Atlas Chemical and other
acquisitions 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 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 period  ending  September  30, 1997,  which  represented  an
increase of  $1,823,820,  or 176%. The increase was the 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  revenue
contribution was for a full year for the year ended September 30, 1998.

                                       11
<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 fiscal 1997. Cost of sales as a percentage of sales
increased to 66.4% from 65.1 % from 1997 to 1998. This increase is attributed to
a more competitive  environment for the Company's  traditional paint and coating
products and the sales mix that  included  higher cost product  contributing  to
higher cost of sales.  Consequently,  the gross profit margin decreased to 33.6%
for  fiscal  year  1998 as  compared  to  34.9%  for the  prior  fiscal  period.
Management  expects  that  introduction  of its  ThermaCool(TM)  products to the
established  customer  base of Atlas will  stimulate  new sales and  improve the
gross profit margin.

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 previous  fiscal
period,  an  increase  of  $322,224  or 21%.  The  increase  was due to expenses
incurred  with  the  development  of the  initial  production  of the  Company's
proprietary  products,  expenses  incurred in relation to the  refinement of the
formulations  of the paint and paint  coatings  being  manufactured,  as well as
costs associated with increased  marketing efforts,  staffing and other expenses
associated with the Company's expanded operations.

Included in the S, G & A expense for the fiscal year ending  September  30, 1998
were  depreciation and amortization  expenses of $235,949 as compared to $71,037
in the ten month period ended  September 30, 1997.  This 232% increase  reflects
both the higher depreciation  expense related to the Atlas Chemical  acquisition
that  included  substantial  production  machinery  and equipment and the higher
amortization expense of goodwill also associated with that acquisition.

In June 1998, the Company relocated its corporate offices to 1125 Commerce Blvd,
Sarasota,  Florida. With this relocation,  the Company phased out manufacture of
paint and coating  products in Holiday,  having  shifted its paint and  coatings
production  to its Miami  facility.  The Sarasota  location  will also house the
Company's production of its microshell manufacturing operations.

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 has not
incurred any significant debt over the last fiscal year.

Net Loss

The net loss after tax  benefit  but before  dividends  on  preferred  stock was
$614,486 for the year ended  September  30,  1998,  as compared to a net loss of
$1,037,730 for the period ending September 30 of 1997. During February 1998, the
Company  completed a placement of preferred  stock  bearing an 8% dividend.  The
dividend  for the fiscal year on this issue  amounted  to $41,215.  There was no
preferred  stock  outstanding  in the year ago period.  The basic  earnings (net
loss) after dividends on preferred  stock, and the basic per share earnings (net
loss)  attributable to common share were $655,701 and $0.18,  respectively,  for
the  fiscal  year  ending  September  30,  1998  as  compared  to a net  loss of
$1,037,730 and $.47 per share on the same basis for the period ending  September
30, 1997. The decrease in loss is, in part,  attributed to the Company's  higher
level of sales while holding its selling,  general and administrative costs to a

                                       12
<PAGE>

18% increase over the prior fiscal period and  benefiting  from the  substantial
reduction in its interest  expense over that prior period.  The weighted average
number of common shares  outstanding  increased to 3,677,183 for the fiscal year
ending  September 30, 1998 as compared to 2,217,106 for the prior 1997 period, a
66% increase.  This increase had a dilutive  effect upon the basic  earnings per
share loss.


FISCAL PERIOD 1997 COMPARED TO FISCAL YEAR 1996

Revenues

Total revenue for the ten month period ended  September 30, 1997, was $1,036,376
compared to $615,845 for the twelve month period ending November 30, 1996, which
represents  an increase of $420,531,  or 68%. The  increase  was  primarily  the
result  of the sales  contribution  of its  wholly  owned  subsidiary  which was
acquired on July 28, 1997 and  provided  approximately  two months of  operating
activity for this fiscal period.

Cost of Sales

Cost of sales for the fiscal period ended  September 30, 1997,  increased 71% to
$675,085 from $394,867 in the fiscal year ended November 30, 1996. Cost of sales
as a percentage of sales  increased from 64.1% to 65.1 % from 1996 to 1997. This
increase  is  attributed  to higher  costs  associated  with the Atlas  Chemical
business that was acquired during July 1997.

Selling, General and Administrative Expenses

For  the  period  ended   September  30,  1997,   total  selling,   general  and
administrative  expenses  were  $1,500,517  as compared to  $1,280,339,  for the
fiscal year ended November 30, 1996, a 17% increase. This increase is attributed
to the additional  expense of the Atlas Chemical operation for the period of the
Company's ownership of that business.

 In an effort to  streamline  operations  and cut costs,  management  closed the
Sarasota retail location in January 1997. The effect of this closure resulted in
a reduction of $10,000 per month in the Company's  operating  costs. In addition
to this retail store closure,  the Company also closed its executive  offices in
Tampa,  Florida and relocated all  operations to its  manufacturing  facility in
Holiday,  Florida. As part of this  restructuring,  management incurred expenses
relating to severance agreements with employees, lease termination payments, and
additional  expenses for the relocations  which were  substantially  complete by
January 31, 1997.

Interest Expense

Interest  expense  decreased 20%, or $41,517,  to $165,630 for the fiscal period
ending  September  30,  1997 from  $207,147 in the  previous  fiscal year ending
November 30, 1996. Although the recent fiscal period was a ten month period, the
primary  reduction in interest  charges is  attributed  to the payoff of all the
Company's indebtedness following the public offering that was completed on March
19,  1997.  The Company  reduced  its debt from  approximately  $1.9  million at
November 30, 1996 to approximately $98,500 at September 30, 1997.

Net Loss

The net loss and the net loss per  share  were  $1,037,730  and  $0.47 per share
respectively, for the period ended September 30, 1997, as compared to a net loss
and net loss per share of  $1,033,553  and $1.34  per  share  respectively,  for
fiscal year 1996.  The loss was a slight  increase  of $4,177 over the  previous
fiscal  year,  but the loss per share was 65% less due to the greater  number of
shares outstanding as a result of the Company's successful IPO during the fiscal
period. The fiscal period ending September 30, 1997 was a ten month period. On a
weighted  average basis,  there were  2,217,106  shares  outstanding  for fiscal
period ending  September 30, 1997 as compared to 771,154 shares  outstanding for
fiscal year ending November 30, 1996, representing a 188% increase.

                                       13
<PAGE>

Acquisition of Atlas Chemical Co.

On July 28, 1997, the Company  acquired  Atlas Chemical Co., of Miami,  Florida,
through a  purchase  of all of its common  stock.  Atlas is a  manufacturer  and
distributor  of paint and coating  products that was  established  in 1919.  The
Company  anticipates  that  expansion of its new product sales will benefit from
the established marketing and distribution channels that Atlas has in place. For
its fiscal  year ending  June 30,  1997,  Atlas  Chemical  had  revenues of $2.4
million and experienced a net loss of $68,007.


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.  On March 19,  1997,  the Company
closed a public offering of 1,375,000  Units,  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.  With the  successful  public
offering  completed in March 1997,  the Company was able to repay  substantially
all of its  indebtedness  and  utilize  the  remainder  of this  funding for the
acquisition  of Atlas  Chemical Co. of Miami,  Florida,  the  initiation  of its
self-manufacture of micro-shells for its internal needs, and for working capital
purposes.


During the fiscal period ending  September 30, 1997,  certain  holders of bridge
loan financing exchanged the Company's  convertible debt obligations,  including
accrued  interest,  in the  amount of  approximately  $640,000,  into its common
stock. The Company satisfied substantially all of the balance of its bridge loan
obligations  through  repayment from the proceeds of the public offering and the
undertaking  of the  Company's  chief  executive  officer to  personally  assume
certain  obligations.  As was anticipated with this undertaking of the Company's
chief  executive  officer,  the  Company  advanced  funds in the net  amount  of
approximately  $450,000 to this officer to immediately  repay these  obligations
pending the sale of  securities  owned by this officer  subsequent to the public
offering.  The Company obtained a security interest in this common stock pending
such  sale.  The sale of these  securities  has not  taken  place  and the funds
advanced for repayment of this debt remains a note receivable to the Company.


On February 5, 1998,  the Company was notified by NASDAQ that its listing on the
NASDAQ Small  Markets was in  violation of the tangible net assets  requirements
for continued  listing.  This present  requirement was implemented on August 27,
1997 and required the Company to maintain tangible net assets of $2 million.  At
September  30,  1997,  the Company did not meet this  current  requirement.  The
Company's deficiency at that time was approximately $391,000.

                                       14
<PAGE>

In  anticipation of the new NASDAQ listing  requirements,  on February 19, 1998,
the Company  completed an offering of 1,500  shares of Series B Preferred  Stock
pursuant to Regulation S. The placement agent for the offering was London Select
Enterprises,  Ltd. The total offering price for the Series B Preferred Stock was
$1,500,000.00.  This preferred  issue had an 8% yield.  Commissions of $180,000,
totaling 12% of the offering price, were paid to the placement agent.

The Series B  Preferred  Shares  were valued at  $1,000.00  per share,  and upon
conversion,  the Series B Preferred  Shares  converted into common shares of the
Company as is obtained  by dividing  the  aggregate  value of the shares  "Stock
Price"  per  share of the  conversion  shares  the  lower of 70% of the  average
closing bid prices of common shares for the period of five  consecutive  trading
days  immediately  preceding  the date of  conversion  of the Series B Preferred
Shares or 70% of the average  daily  closing bid prices of common shares for the
period  of five  consecutive  trading  days  immediately  preceding  the date of
subscription by the holder.

The funds were used for general  corporate  purposes that  included  purchase of
equipment for further development of its microshell  technologies.  This capital
infusion  permitted  the  Company to comply  with the new NASDAQ  Small  Markets
listing requirements.

The Company  continues to experience  operating losses since its public offering
although  the  Company's  net  working  capital  and  stockholders'  equity have
increased to $616,709 and  $3,167,528  at September  30, 1998 from  $334,911 and
$2,428,090 at September 30, 1997, respectively. The Company has historically not
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  will arrange for the
financial resources, if necessary, to properly execute its plan.

In the opinion of management, the Company has sufficient working capital to meet
its planned needs for the next twelve months.  However, the Company will require
additional  capital and  substantial  revenues  from the sale of  ThermaCool(TM)
products  in order to fund a  substantial  growth  in  operations  over the next
twenty-four months. Management is optimistic about obtaining future financing.

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.  Management believes there will
be no adverse  effect for the  Company  relating  to these  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. Consequently,  the price
of the stock  declined  from about $4 to a low of $.50.  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.

                                       15
<PAGE>

SEASONALITY AND FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The  Company  believes  it will  experience  stronger  demand  for its paint and
coatings 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 7.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The information required by Item 7 appears at page F-1, which appears after
this page.



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

     None.



                                    PART III


ITEM 9.  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 16, 1999.



ITEM 10: 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 16, 1999.

                                       16
<PAGE>

ITEM 11: 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 16, 1999.


ITEM 12: 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 16, 1999.


ITEM 13. 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.

     (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*

                                       17

<PAGE>

     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*

      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**

     23.1 Consent of Cherry, Bekaert & Holland, C.P.A.'s, Clearwater, Florida*

         --------------------------
     * Previously filed under cover of Form SB-2 (SEC File No. 333-22001).
     * * See Form 8-K filed August 7, 1997 via EDGAR

(b)   Reports on Form 8-K

         (i) Form 8-K filed February 19, 1998 containing  information  regarding
         the  Regulation  S  offering.
         (ii) Form 8-K filed  December  14,  1998 containing information
         regarding the acquisition of American Paints, Inc.

                                       18
<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:   December 30, 1998                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      December 30, 1998 
John Pidorenko            Officer) and Chairman of
                          the Board


/s/ Gerald Couture        Vice President and Chief
-----------------------   Financial Officer (Principal      December 30, 1998
Gerald Couture            Financial Officer)

/s/ Jeffrey Kraft         Controller
-----------------------                                     December 30, 1998
Jeffrey Kraft

/s/ Kendall B. Stiles
-----------------------   Director                          December 30, 1998
Kendall B. Stiles M.D.

/s/ Peter Mahovlich
-----------------------   Director                          December 30, 1998
Peter Mahovlich




                                       19
<PAGE>



                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS

                               FOR THE YEARS ENDED
                           SEPTEMBER 30, 1998 AND 1997



                                     F - 1
<PAGE>





                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY



                                    CONTENTS

                                                                 Page
                                                                 ---- 


Report of Independent Certified Public Accountants               F - 3

Consolidated Balance Sheets                                      F - 4 & F - 5

Consolidated Statements of Operations                            F - 6

Consolidated Statements of Changes in Stockholders' Equity       F - 7

Consolidated Statements of Cash Flows                            F - 8

Notes to Consolidated Financial Statements                       F - 9 to F - 21


                                      F - 2
<PAGE>




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
ThermaCell Technologies, Inc.
Sarasota, Florida


We have  audited the  accompanying  consolidated  balance  sheets of  ThermaCell
Technologies,  Inc. and  Subsidiary  as of  September  30, 1998 and 1997 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  consolidated  financial
statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,   the  financial  position  of  ThermaCell
Technologies,  Inc. and  Subsidiary  as of  September  30, 1998 and 1997 and the
results  of its  operations  and its cash  flows for the  periods  then ended in
conformity with generally accepted accounting principles.



                                            /s/Cherry, Bekaert & Holland, L.L.P.


Clearwater, Florida
December 21, 1998

                                     F - 3
<PAGE>

                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets


                                     Assets

<TABLE>
<CAPTION>


                                                                                    September 30,       September 30,
                                                                                        1998                1997
                                                                                  ------------------  ------------------


<S>                                                                            <C>                 <C>
Current assets
   Cash                                                                         $            67,405 $           580,522
   Accounts receivable
     Trade, net of allowance for uncollectible accounts
     of $64,227 for 1998 and $90,147 for 1997                                               314,262             384,351
   Notes receivable - trade                                                                  52,000                   -
   Notes receivable - other                                                                  76,622                   -
   Other assets                                                                              18,998               1,676
   Inventories                                                                              489,259             410,972
   Prepaid expenses and other                                                               161,308               8,886
                                                                                  ------------------  ------------------

         Total current assets                                                             1,179,854           1,386,407
                                                                                  ------------------  ------------------

Property and equipment                                                                    1,141,502             697,671
   Less - accumulated depreciation                                                          248,530              86,773
                                                                                  ------------------  ------------------
                                                                                            892,972             610,898
                                                                                  ------------------  ------------------

Other assets
   Deposits                                                                                  16,266              14,795
   Deferred income tax benefit, net                                                         795,309             631,372
   Goodwill, net of accumulated amortization
     of $75,937 for 1998 and $17,618 for 1997                                               815,010             819,199
   Other intangibles, net of accumulated amortization
     of $16,471 for 1998 and $28,276 for 1997                                               162,469              80,004
                                                                                  ------------------  ------------------
                                                                                          1,789,054           1,545,370
                                                                                  ------------------  ------------------




         Total assets                                                           $         3,861,880 $         3,542,675
                                                                                  ==================  ==================
</TABLE>






See notes to consolidated financial statements.

                                      F - 4
<PAGE>



                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets


                      Liabilities and Stockholders' Equity

<TABLE>
<CAPTION>


                                                                                    September 30,       September 30,
                                                                                        1998                1997
                                                                                  ------------------  ------------------


<S>                                                                            <C>                 <C> 
Current liabilities
   Accounts payable                                                             $           445,118 $           551,572
   Accrued expenses                                                                          45,396             277,192
   Accrued payroll and payroll taxes                                                         13,647             187,321
   Current maturities of long-term debt
     Notes payable                                                                           20,340              18,434
     Capital leases                                                                          38,644              16,977
                                                                                  ------------------  ------------------

         Total current liabilities                                                          563,145           1,051,496
                                                                                  ------------------  ------------------

Long-term debt, net of current maturities
   Notes payable                                                                             58,128              41,856
   Capital lease obligations                                                                 73,079              21,233
                                                                                  ------------------  ------------------
         Total long-term debt, net of current maturities                                    131,207              63,089
                                                                                  ------------------  ------------------

         Total Liabilities                                                                  694,352           1,114,585
                                                                                  ------------------  ------------------

Commitments and contingencies                                                                     -                   -

Stockholders' equity
   Preferred stock, Series A, par value $.0001
     5,000,000 shares, authorized, issued
     and outstanding                                                                            500                 500

   Preferred  stock,  Series B  convertible,  $1,000 stated  value,  8% dividend
     Authorized 1,500 shares,
     250 issued and outstanding September 30, 1998                                          250,000                   -

   Common stock, par value $.0001
     Authorized 20,000,000 shares,
     5,129,325 and 3,021,139 issued and outstanding, respectively                               513                 301

   Additional paid-in capital                                                             6,612,481           5,564,319
   Deduct notes receivable associated with stockholder loan                                (453,695)           (550,460)
   Accumulated deficit                                                                   (3,242,271)         (2,586,570)
                                                                                  ------------------  ------------------

         Total stockholders' equity                                                       3,167,528           2,428,090
                                                                                  ------------------  ------------------


         Total liabilities and stockholders' equity                             $         3,861,880 $         3,542,675
                                                                                  ==================  ==================

</TABLE>


See notes to consolidated financial statements.

                                     F - 5
<PAGE>


                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>


                                                                                For the Period Ended
                                                                         -----------------------------------
                                                                          September 30,        September 30,
                                                                              1998                 1997
                                                                         ---------------       -------------

<S>                                                                   <C>                 <C>
Revenue
     Sales                                                             $      2,860,196      $    1,036,376

Less cost of sales                                                            1,900,043             675,085
                                                                         ---------------       -------------

     Gross profit                                                               960,153             361,291

Selling, general and administrative
     expenses                                                                 1,822,741           1,500,517
                                                                         ---------------       -------------

                  Loss from operations                                         (862,588)         (1,139,226)
                                                                         ---------------       -------------

Other income (expense)
     Commissions                                                                      -             (35,000)
     Interest income                                                             40,471              50,764
     Interest expense                                                           (25,068)           (165,630)
     Other                                                                       68,762              (7,412)
                                                                         ---------------       -------------
                                                                         .
                  Total other income (expense)                                   84,165            (157,278)
                                                                         ---------------       -------------

                  Loss before income taxes                                     (778,423)         (1,296,504)

Income taxes
     Deferred income tax benefit                                                163,937             258,774
                                                                         ---------------       -------------

                  Net loss                                             $       (614,486)     $   (1,037,730)
                                                                         ===============       =============


Basic loss per common share                                            $          (0.18)     $        (0.47)
                                                                         ===============       =============

Weighted average number of
     common shares outstanding                                                3,677,183           2,217,106
                                                                         ===============       =============


</TABLE>



See notes to consolidated financial statements.

                                     F - 6
<PAGE>


                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY

           Consolidated Statements of Changes in Stockholders' Equity

<TABLE>
<CAPTION>


                                                                    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,
                              Shares   Amount  Shares   Amount   Shares      Amount   Capital     Deficit   Stockholder     Total
                             --------- ------ --------- ------  ---------    ------  ---------- ----------- ----------- ------------
<S>                         <C>       <C>    <C>       <C>     <C>       <C>       <C>         <C>          <C>        <C>
Balance November 30, 1996     869,899  $ 87   5,000,000 $ 500       -     $     -   $  184,315  $(1,548,840) $   -      $(1,363,938)

Issuance of stock
 for public offering        1,581,250   158       -        -        -           -    5,433,033        -          -        5,433,191
Expenses associated
 with public offering            -        -       -        -        -           -     (689,259)       -          -         (689,259)
Issuance of stock for
 bridge loan conversions      569,990    56       -        -        -           -      636,230        -          -          636,286
Note receivable associated
 with stockholder loan           -        -       -        -        -           -         -           -       (550,460)    (550,460)
Net loss for period ended
 September 30, 1997              -        -       -        -        -           -         -      (1,037,730)     -       (1,037,730)
                            --------- ------ ---------- ------  ---------    ------  ----------- ----------- ----------- -----------
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
                            ========= ====== ========== ======= =========  ======== =========== ===========  =========== ==========



</TABLE>

See notes to consolidated financial statements.


                                     F - 7
<PAGE>



                                 THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY

                                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                                    For the Period Ended
                                                                              ----------------------------------
                                                                                September 30,    September 30,
                                                                                   1998               1997
                                                                              ---------------    ---------------

<S>                                                                      <C>                 <C>
Cash flows from operating activities:
   Reconciliation of net loss to net cash
     used in operating activities
       Net loss                                                           $         (614,486) $      (1,037,730)
       Adjustments to reconcile net loss to net
         cash used in operating activities
         Depreciation                                                                161,757             51,320
         Amortization                                                                 74,192             19,717
         Deferred income tax benefit                                                (163,937)          (258,774)
       Changes in assets and liabilities, net of acquisitions
         (Increase) in accounts and notes receivable                                 (58,533)           196,272
         (Increase) in inventories                                                   (78,287)           (23,684)
         (Increase) decrease in prepaid and other assets                            (171,215)            14,314
         (Decrease) in accounts payable                                             (106,454)          (100,978)
         (Decrease) in accrued expenses                                             (418,347)           (36,895)
         Common stock issued for services                                            110,035                  -
                                                                              ---------------    ---------------
               Net cash used in operating activities                              (1,265,275)        (1,176,438)
                                                                              ---------------    ---------------

Cash flows from investing activities
   Capital expenditures                                                             (387,031)          (323,234)
   Acquisitions                                                                     (115,000)        (1,051,746)
   Expenditures for patent, net                                                      (94,267)           (23,143)
                                                                              ---------------    ---------------
               Net cash used in investing activities                                (596,298)        (1,398,123)
                                                                              ---------------    ---------------

Cash flows from financing activities
   Proceeds from issuance of common stock                                                  -          5,433,191
   Proceeds from issuance of Series B preferred stock                              1,500,000                  -
   Proceeds from issuance of notes payable                                           140,178            174,692
   Principal payments on notes payable                                               (48,487)        (1,529,241)
   Principal advances on stockholder loan                                           (258,330)          (550,460)
   Proceeds from payments on stockholder loan                                        355,095                  -
   Costs associated with obtaining financing                                        (300,000)          (391,611)
   Purchase of cancelled common stock                                                (40,000)                 -
                                                                              ---------------    ---------------
               Net cash provided by financing activities                           1,348,456          3,136,571
                                                                              ---------------    ---------------

               Net increase (decrease) in cash                                      (513,117)           562,010

Cash beginning                                                                       580,522             18,512
                                                                              ---------------    ---------------

Cash ending                                                               $           67,405  $         580,522
                                                                              ===============    ===============


</TABLE>


See notes to consolidated financial statements.

                                     F - 8

<PAGE>

                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 a
wholly owned  subsidiary,  Atlas Chemical Co.,  ("Atlas"),  that was acquired in
July 1997. The Company  manufactures  and  distributes  paints and coatings that
encompass innovative microsphere technologies.  Presently,  approximately 93% of
the Company's  sales and accounts  receivables are generated in Florida with the
remainder  in  the  Mesa,  Arizona  area.  All  of  its  sales  and  assets  are
domestically located. No customer represents more than 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 ASSETS

Intangible  assets  subject  to  amortization  include   organizational   costs,
agreement not to compete, trademark, goodwill and patents.  Organizational costs
and agreement not to compete are being amortized on a  straight-line  basis over
five years and three  years,  respectively.  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.

PRINCIPLE OF CONSOLIDATION

The  accompanying  financial  statements  include  the  accounts  of  ThermaCell
Technologies,  Inc. and its subsidiary Atlas Chemical Co., 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. It is not practicable
to estimate the fair value of other financial  instruments  held or owned by the
Company,  including,  but not limited to, other  receivables and payables due to
the lack of readily  available  information  regarding the marketability of such
instruments  and the effect of credit risk on the  measurement of fair value for
such instruments.

                                     F - 9

<PAGE>
                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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, 1998 and September 30, 1997 because
they are anti-dilutive.

ADVERTISING

The Company expenses  advertising costs as they are incurred.  Advertising costs
were  $46,116 and $75,800 for the  periods  ended  September  30, 1998 and 1997,
respectively.

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.
The  provision  for income  taxes  represents  the total of income taxes paid or
payable for the current year, plus the change in deferred taxes during the year.

CHANGE IN FISCAL YEAR

The  Company  changed  its  financial  reporting  year from a fiscal year ending
November  30 to  September  30 which  became  effective  for fiscal  year ending
September 30, 1997. The Company also changed the financial reporting year of its
subsidiary from a fiscal year ending June 30 to September 30.

IMPACT OF NEW ACCOUNTING STANDARDS

In February 1997, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 128  "Earnings  Per  Share."  SFAS No. 128  supersedes  APB  Opinion  No. 15
"Earnings Per Share" and specifies the computation,  presentation and disclosure
requirements  for earnings per share  ("EPS") for entities  with  publicly  held
stock or  potential  publicly  held common  stock.  Essentially,  this  standard
replaces the primary EPS and fully diluted EPS  presentations  under APB Opinion
No. 15 with a basic EPS and diluted EPS presentation.  SFAS No. 128 is effective
for  financial  statements  for both  interim and annual  periods  ending  after
December 15, 1997, earlier application is not permitted. The company has applied
this standard  retroactively to earnings per share in these financial statements
which had no material effect on earnings per share reported in the 1998 and 1997
financial statements.

In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information about
Capital  Structure."  SFAS  No.  129  summarizes  previously  issued  disclosure
guidance  contained  within APB Opinions Nos. 10 and 15, as well as SFAS No. 47.
The required disclosures have been included in these financial statements.

In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income,"
which  establishes  standards for reporting and display of comprehensive  income
and its components in a full set of general purpose  financial  statements.  The
comprehensive  income and  related  cumulative  equity  impact of  comprehensive
income items will be required to be disclosed  prominently  as part of the notes
to the financial statements. Adoption of the provisions of this statement had no
material effect on these financial statements.

                                     F - 10

<PAGE>

                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

n June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about  Segments of an
Enterprise  and Related  Information,"  which  changes the way public  companies
report  information  about segments of their business on their annual  financial
statements  and requires them to report  selected  segment  information in their
quarterly  reports  issued  to  shareholders.   It  also  requires  entity  wide
disclosures  about the  products and  services an entity  provides,  the foreign
countries  in  which  it  holds  assets  and  reports  revenues,  and its  major
customers.  The Company's operations represent a single line of business.  Other
required disclosures have been included in these financial statements.

NOTE 2--INVENTORIES

Inventories consisted of the following at September 30:
                                                 1998          1997
-------------------------------------------------------------------------

Raw materials                                    $ 267,846     $ 232,041
Finished goods (manufactured and purchased)        221,413       178,931
                                             ----------------------------
                                                 $ 489,259     $ 410,972
                                             ============================

NOTE 3--PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at September 30:

                                                 1998          1997
-------------------------------------------------------------------------

Furniture and fixtures                           $ 125,167      $ 64,889
Equipment                                          551,319       389,816
Transportation equipment                           263,419       174,158
Leasehold improvements                             201,597        68,808
                                             ----------------------------
                                                 1,141,502       697,671
Less accumulated depreciation                     (248,530)      (86,773)
                                             ----------------------------
                                                 $ 892,972     $ 610,898
                                             ============================


Depreciation  expense was $161,757 for the year ending  September 30, 1998,  and
$51,320 for the period ended September 30, 1997.

NOTE 4--RELATED PARTY TRANSACTIONS

The Company  received  $59,805 in legal services  during fiscal year 1998 from a
law firm that is a stockholder and had an account payable of $18,052 and $24,287
at September 30, 1998 and 1997, respectively.

Notes receivable  totaling $453,695 and $550,460 at September 30, 1998 and 1997,
respectively  are from an officer  and  stockholder  of the  Company.  These are
demand  notes  bearing  interest at 5%. One note,  for  approximately  $450,000,
resulted  from the  assumption  of certain  obligations  by the President of the
Company prior to the underwriter  agreeing to undertake the public offering that
was  consummated  in  March  1997.  It was  anticipated  at that  time  that the
President would sell common stock in that offering.  The  underwriting  firm did
not complete this  undertaking and  consequently  the Company  advanced funds to

                                     F - 11
<PAGE>

                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4--RELATED PARTY TRANSACTIONS (continued)

meet these maturing obligations, irrespective of the sale of these securities. A
security interest in these securities was perfected by the Company as collateral
for these demand notes. Future sale of the officer's common stock is anticipated
to repay the  advance of funds.  The note  receivable  has been  presented  as a
reduction in stockholders' equity in these financial statements.

The company received  assignment of patent rights involving a heat shield system
which utilizes the company's VaxCellTM technology.  The assignor, an employee of
the Company who is related to the principal shareholder,  received consideration
of $30,000 for assignment of these rights to the company.

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.

NOTE 5--BASIC LOSS PER SHARE CALCULATIONS

<TABLE>
<CAPTION>

                                    For the Year Ending September 30, 1998      For the Period Ending September 30, 1997
                                   --------------------------------------------------------------------------------------
                                        Loss       Shares    Per Share               Loss       Shares     Per Share
                                     (Numerator)(Denominator) Amount              (Numerator)(Denominator)   Amount
                                   -----------------------------------         ------------------------------------------
<S>                                <C>          <C>          <C>               <C>           <C>           <C>
Net Loss                            $ (614,486)                                 $ (1,037,730)
Less: Preferred stock dividends         41,215                                             -
                                   -----------------------------------         ------------------------------------------
Income available to common
 shareholders                       $ (655,701)   3,677,183    $ (0.18)         $ (1,037,730)  2,217,106     $ (0.47)
                                   ===================================         ==========================================

</TABLE>

Certain  transactions  subsequent  to September 30, 1998 will have a significant
effect on future computations of earnings per share (see Note 18).

NOTE 6--CAPITAL LEASES

The Company leases various  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, 1998 has a cost of  $159,927,  accumulated
amortization  of $42,421,  and a net book value of 117,506.  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:

                                                 1998
-----------------------------------------------------------

Total minimum lease payments                     $ 141,698
Less amount representing interest                   29,975
                                             --------------
Present value of net minimum lease payments        111,723
Less current maturities                             38,644
                                             --------------
                                                  $ 73,079
                                             ==============


                                     F - 12
<PAGE>
                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6--CAPITAL LEASES (continued)

The following is a schedule by years of minimum lease  payments  under the above
lease agreements as of September 30, 1998.

                    1999                          $ 55,165
                    2000                            37,941
                    2001                            31,448
                    2002                            13,415
                    2003                             3,729
                                             --------------
                                                 $ 141,698
                                             ==============


Subsequent  to September  30,  1998,  the Company  entered into a capital  lease
agreement for plant equipment for approximately $50,000 over a three year term.


NOTE 7--LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>


                                                                                 1998         1997
                                                                            --------------------------

<S>                                                                        <C>          <C>                      <C>          <C>
 10.35% note due in 60 monthly installments of $525 including interest,       $ 16,522     $ 20,835
through October 2001, collateralized by vehicle

 9.5% note due in 60 monthly installments of $589,including interest,           21,434       26,239
through October 22, 2002, collateralized by vehicle

 9.5% note due in 60 monthly installments of $300, including interest,           3,900        7,500
through September 1999, collateralized by vehicle

 9.5% note due in 36 monthly installments of $597, including interest,               -        5,716
through July 1998, collateralized by vehicle

8.5% note due in 60 monthly installments of $794, including interest,           36,612            -
through May 2003, collateralized by vehicle

                                                                            --------------------------
                                                                                78,468       60,290
Less current maturities                                                        (20,340)     (18,434)
                                                                            --------------------------
                                                                              $ 58,128     $ 41,856
                                                                            ==========================
</TABLE>



         Maturities of long-term debt are as follows:

                    1999                          $ 20,340
                    2000                            18,676
                    2001                            20,692
                    2002                            12,604
                    2003                             6,156
                                             --------------
                                                  $ 78,468
                                             ==============

                                     F - 13
<PAGE>
                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8--OPERATING LEASES

The Company  leases a building and office space under  operating  leases.  These
leases expire at various dates through 2002.  Rental  expense under these leases
was $111,153 and $100,944 for 1998 and 1997,  respectively.  The  following is a
schedule  by years of minimum  rentals  under the above lease  agreements  as of
September 30, 1998.

                    1999                         $ 136,776
                    2000                           157,800
                    2001                           152,247
                    2002                           118,205
                                             --------------
                                                 $ 565,028
                                             ==============


NOTE 9--RESEARCH AND DEVELOPMENT COSTS

Research and development costs included in the statements of operations  totaled
$50,848  and  $12,833  for the  periods  ended  September  30,  1998  and  1997,
respectively.

NOTE 10--SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid totaled  $25,068 and $165,630 for the periods ended  September 30,
1998 and 1997, respectively.

Common  stock was issued in payment of certain  services  and Series B preferred
stock dividend obligations (see Note 14).

NOTE 11--CONCENTRATION OF CREDIT RISK

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

NOTE 12--ACQUISITIONS

On July 28,  1997,  the  Company  acquired  all the  outstanding  common  stock,
representing  100% ownership,  of Atlas, a paint  manufacturer  and distributor,
located  in  Miami,  Florida  for a total  purchase  price of  $1,000,000.  This
acquisition  is classified as a purchase (or pooling of interests)  transaction.
The  operating  results of Atlas from July 29, 1997 through  September  30, 1997
have been included in the Company's  statements of operations for the ten months
ended  September 30, 1997.

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.

On October 15, 1998,  the Company  agreed to acquire  Sealco  Systems,  Inc. and
T-Coast Pavers, Inc., two Miami, Florida sealant service applicator enterprises,
which have a total of more than $2 million in revenues. ThermaCell acquired both
businesses  in  December,  1998 for  300,000  shares of its  common  stock

                                     F - 14
<PAGE>
                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12--ACQUISITIONS (continued)

valued at $450,000 and an  anticipated  payment of an additional  300,000 shares
payable  over  three  years.  This  acquisition  is  classified  as a pooling of
interests  transaction.

On November 23, 1998,  the Company  acquired  American  Paints,  Inc., a Pompano
Beach,  Florida paint  manufacturer  and distributor with $2.5 million in annual
revenues, for 527,000 common shares. This acquisition is classified as a pooling
of interests transaction.

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 proforma
basis in the table below to reflect a full year of  operations  in  ThermaCell's
operating statements at September 30, 1998:

<TABLE>
<CAPTION>

                                                           1998 (Unaudited)
                           ---------------------------------------------------------------------
                                          Ladehoff     American   T-Coast Pavers/  Consolidated
                            ThermaCell     Paints       Paints     Sealco Systems
                           ---------------------------------------------------------------------
<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.

Had a full  year of  operations  of Atlas,  based  upon its June 30 year end and
Ladehoff  based upon its December 31 year end,  been  included in the  Company's
financial  statements for the period ended  September 30, 1997, the statement of
operations  for the period  then ended  would have been  according  to the table
below on a pro forma basis:



                                      1997 (Unaudited)
                     --------------------------------------------------------
                                     Atlas       Ladehoff     Consolidated
                      ThermaCell    Chemical      Paints
                     --------------------------------------------------------
     Total Revenue    $ 684,459  $ 2,399,103    $ 325,638      $ 3,409,200
 Net Income (loss)     (922,799)     (68,007)       3,234         (987,572)
                                                            -----------------
Earnings(loss) per
 Share                                                             $ (0.45)
                                                            -----------------
Shares Outstanding                                               2,217,100

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

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  carry-forwards
incurred in 1998 and 1997.

The Company has a net operating  loss  carry-forward  of $3,242,271 at September
30, 1998 that expires in 2009 through  2012.  Management's  determination  of an
adequate  valuation  allowance  is based upon its  current  estimates  of future
taxable income. If the Company is unable to generate  sufficient  taxable income
in the future through operating  results,  increases in the valuation  allowance
will be required through a

                                     F - 15
<PAGE>
                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13--INCOME TAXES (continued)

charge to expense.  However, if the Company achieves sufficient profitability to
utilize a greater  portion of the deferred tax asset,  the  valuation  allowance
will be reduced through a credit to income.

A  valuation  allowance  is  required  by SFAS 109 if,  based on the  weight  of
available  evidence,  it is more likely than 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 50 percent is  sufficient at September
30, 1998 and 1997,  respectively.  Significant  components  of the Company's net
deferred tax assets are as follows:

                                                 1998          1997
-------------------------------------------------------------------------

Deferred taxes                                 $ 1,590,618   $ 1,262,744
Less valuation allowance                          (795,309)     (631,372)
                                             ----------------------------
Net deferred tax assets                        $   795,309   $   631,372
                                             ============================


Based  on  management's  assessment,  it is more  likely  than  not that the net
deferred tax assets will be realized through future taxable earnings. The amount
of taxable  earnings  that would be required to realize the  deferred  tax asset
would be $1,988,273.


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

                                                 1998          1997
-------------------------------------------------------------------------

Future net operating loss deductions             $ 327,874     $ 517,548
Less allowance for realization                    (163,937)     (258,774)
                                             ----------------------------
                                                 $ 163,937     $ 258,774
                                             ============================



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

                                  1998               1997
---------------------------------------------------------------------

Federal statutory rate           $ 264,664    34%   $ 440,811     34%
Adjustments - primarily
   state income taxes:              63,210     8%      76,737      6%
Allowance for
   realization of future benefits (163,937)  -21%    (258,774)   -20%
                                 ------------------------------------
                                 ====================================
                                 $ 163,937    21%   $ 258,774     20%
                                 ====================================

                                     F - 16

<PAGE>

NOTE 14--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
$1,500,000.00.  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.  As of  September  30,  1998,
$1,250,000 of preferred  stock was  converted  into  1,928,116  shares of common
stock, including dividends paid in common stock.

Capital Structure disclosures

       Privileges  and rights of outstanding  preferred  stock are summarized as
follows:

                                                         Series          Series
                                                            A               B
                                                        -------          ------
Aggregate liquidation rights,
         as of September 30, 1998                       $10,000        $250,000

Cumulative dividend rights
               (payable in cash or common stock,
               at the Company's option)                  None             8%

Dividends in arrears
              (payable as of September 30, 1998)         None            12,877

Conversion (to common stock)formulas:
                  Preferred shares to
                               Common shares            1 to 4             --

                 Stated values of
                               preferred shares to
                               market value of
                               Common shares              --            1 to .7

Voting rights (compared with
                rights of common shares)                 .5               None

Class voting majority required to
               change privileges and rights            66 2/3%           Simple
               Pre-emptive right of
                  approval                             66 2/3%            None

Aggregate voluntary redemption price                    None           $325,000

The above mentioned Series A conversion rights are contingent upon the company's
generation of positive net income for one quarter (50%) and one year (50%).

                                     F - 17
<PAGE>
                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14--STOCKHOLDERS' EQUITY (continued)

On February  19,  1998,  the Company  completed  an offering of 1,500  shares of
Series B Preferred  Stock  pursuant to Regulation S. The offering price for such
stock was  $1,500,000.  Proceeds  from the  offering,  after  deducting  related
expenses, totaled $1,200,000.

During the year ended  September  30, 1998,  holders of the  Company's  Series B
preferred  stock exercised the  above-mentioned  conversion  rights,  exchanging
1,250  preferred  shares for 1,872,874  common shares.  The company is currently
negotiating the conversion of the 250 remaining Series B preferred shares.

Common stock transactions

During the period ended September 30, 1997, the Company issued  1,581,250 shares
of common stock as part of its public  offering for the total net  consideration
of  $4,743,932  after  deducting  expenses  associated  with this  offering.  In
addition,  569,990  shares of common  stock  were  issued for  consideration  of
$636,286, as part of a debt-to-equity conversion option for bridge loan holders.

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.

Liabilities,  as of  September  30, 1998,  include  employees'  compensation  of
$17,075,  which was settled after year-end through the issuance of 25,000 common
shares.

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.

Authorized common shares have been reserved for the warrants.

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, 1998, are summarized as follows:

                                     F - 18

<PAGE>
                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14--STOCKHOLDERS' EQUITY (continued)

<TABLE>
<CAPTION>

                                                                 Exercise      Year of
                                                      Shares      price      expiration
                                                     --------   -----------  -----------

<S>                                                 <C>        <C>          <C>
Incentive awards to corporate
               officers - year ended September 30:

               1997                                  700,000        $.50         2002
               1998                                   75,000         .50         2003

            Section 422A plan awards:
               Corporate officer                     285 000         .50         2008
               Key employees                         170,000         .50         2008
                                                   ----------
               Total awards                        1,230,000
                                                   ==========

</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 $.50  during
December, 1997.

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.

The exercise  price of all options  exceeded  the market price of the  Company's
common stock as of September 30, 1998.

NOTE 15--BUSINESS STRATEGY AND OPERATIONAL PLAN

The Company has historically been unprofitable,  primarily because of activities
that  require   significant   expenditures  to  develop  its  business  concept,
opportunities,  products,  and  operations.  With the Atlas  Chemical,  Ladehoff
Paints, and American Paints,  and Sealco  Systems/T-Coast  Pavers  acquisitions,
management has followed its business strategy and operational plan that includes
the following essential elements: (i) achieve profitability for fiscal year 1999
by restructuring operations and consolidating production facilities;  (ii) begin
production  of  limited  quantities  of  microspheres  to provide  for  internal
requirements  over the next twelve to eighteen  months;  (iii)  expand  sales of
conventional  paint and coating  products  through its channels of  distribution
available from its  acquisitions;  and (iv) initiate a timely marketing  program
for  ThermaCoolTM  paint  products  to  demonstrate  the  benefits  of this  new
technology  without the Company  depending  solely on ThermaCoolTM  product line
sales for its  near-term  profitability.  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 will arrange for the financial resources,  if necessary,  to properly
execute its plan.

                                     F - 19
<PAGE>
                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15--BUSINESS STRATEGY AND OPERATIONAL PLAN (continued)

In the opinion of management, the Company has sufficient working capital to meet
its planned needs for the next twelve months.  However, the Company will require
additional  capital and substantial  revenues from the sale of its  ThermaCoolTM
products  in order to fund a  substantial  growth  in  operations  over the next
twenty-four  months.  There is no assurance that such revenues will be generated
or that funding will be available to the Company. Management believes it will be
successful in obtaining future financing.

NOTE 16--YEAR 2000 READINESS PLAN (UNAUDITED)

Many existing  computer  systems and  applications and other control devices use
only two digits to identify a year in the date field,  without  considering  the
impact of the  upcoming  changes in the century.  As a result,  such systems and
applications  could fail or create  erroneous  results unless  corrected so that
they can  process  data  related to the year  2000.  The  Company  relies on its
systems,  applications and devices in operating and monitoring all major aspects
of its business, including financial systems, infrastructure,  embedded computer
chips, networks, and telecommunications  equipment and end products. The Company
also relies directly and indirectly,  on external systems of other companies and
organizations   such  as  suppliers,   financial   services   organizations  and
governmental  entities  for accurate  exchange of data.  The  Company's  current
estimate is that the costs  associated  with the year 2000 issue will not have a
material  adverse  effect on the results of operations or financial  position of
the Company in any given year. However, despite the Company's efforts to address
the year  2000  impact  on its  internal  systems,  the  Company  has not  fully
identified  such impact or whether it can resolve it without  disruption  of its
business and without incurring  significant  expense.  In addition,  even if the
internal  system of the  Company  are not  materially  effected by the year 2000
issue, the Company could be affected through  disruption in the operation of the
activities with which the Company interacts.

NOTE 17--CONTINGENT LIABILITIES

The  Company  is  involved  in two  lawsuits  in which  damages or claims may be
sought:

On May 2, 1997,  the Company was served with a summons  regarding a civil action
filed in the United States District Court,  Eastern  District of Michigan by IA,
Inc., as plaintiff, that alleges the Company, and its president, John Pidorenko,
and Monroe  Parker  Securities,  Inc.,  the  Company's  underwriter,  breached a
marketing  agreement  executed by Mr.  Pidorenko  on March 26, 1992  relating to
technologies  developed by IA, Inc. This agreement  contained a  confidentiality
and non-disclosure clause for technologies purportedly developed by IA, Inc. The
Company was not a party to that agreement.  The Company believes that it has not
infringed on any patents held by IA, Inc., non-withstanding the validity of such
patents  and/or their  claims.  The petition  requested  various  court  actions
including a jury trial, but no specific request for damages. The Company intends
to vigorously  defend itself in this action, as this proceeding is in defense of
its present patent  position,  it is an integral element in the Company's future
product  offerings.  The Company  believes it has  meritorious  defenses in this
matter which is in a  preliminary  stage and which will not be resolved  until a
considerable  period of time has elapsed.  The Company has previously  agreed to
indemnify the Monroe Parker Securities,  Inc., its former  underwriter,  against
any claims asserted by this party.

Management  is  uncertain  as to what the  litigation  will  eventually  cost or
whether a settlement  is  plausible,  and if so, what it would cost.  Management
anticipates  spending  up to  $250,000  to  vigorously  defend its rights to its
patents and its microsphere technologies in this matter.

On or about  February 11, 1998,  Mr. Kevin  Horrell  filed an amended  complaint
against the Company and Mr.  Pidorenko,  the Company's  president.  The previous
complaint had been dismissed in the Circuit court of the 12th Judicial  Circuit,
in and for Sarasota County, Florida. Mr. Horrell alleges that he is due certain

                                     F - 20
<PAGE>
                  THERMACELL TECHNOLOGIES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17--CONTINGENT LIABILITIES (continued)

unrestricted  securities  of the  Company in  connection  with  prior  financing
activities. Mr. Horrell alleges breach of contract, fraud in the inducement of a
contract and  violations  of Rule 10b-5.  Mr.  Horrell  claims he is entitled to
30,000 shares of the Company's common stock and certain litigation expenses. The
Company  believes it has  meritorious  defenses  in this matter  which is in the
preliminary stage and is prepared to vigorously defend itself in this action.

NOTE 18--SUBSEQUENT EVENTS

On October 15, 1998,  the Company  agreed to acquire  Sealco  Systems,  Inc. and
T-Coast  Pavers,  Inc.  which have a  combined  total of more than $2 million in
revenues.  ThermaCell  acquired both  businesses  in December,  1998 for 300,000
shares of its common stock valued at $450,000 and an  anticipated  payment of an
additional 300,000 shares payable over three years.

Subsequent to year end, the Company acquired  American  Paints,  Inc., a Pompano
Beach,  Florida paint  manufacturer  and distributor with $2.5 million in annual
revenues,  for  527,000  common  shares.  American  Paints'  operations  will be
consolidated  into  the  Company's  Atlas  unit to  reduce  costs  and  increase
operating profits.

Since the recent fiscal year end, the Company issued  1,200,000 shares of common
stock to  individuals  and others.  In part,  this  issuance  was to convert the
remaining  Preferred Stock Class B into common stock that was originally part of
the  Regulation S funding the Company  initiated in January 1998. As a result of
this recent  transaction,  the Company received $250,000 which it recorded as an
equity investment. The parties undertaking this funding were introduced by a law
firm  engaged  as the  Company's  SEC  counsel in  October  1998.  This law firm
withdrew as Company's  counsel on December 21, 1998.  The withdrawal of this law
firm was the result of a fee dispute.  The Company  re-engaged  the attorney who
had  previously  represented  the  Company  since  1993.  This  attorney  is now
reviewing all recent transactions involving this and related matters.

                                     F - 21
<PAGE>