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

                                   FORM 10-KSB

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

     For the fiscal year ended December 31, 2001

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

     For the transition period from _____ to _______

                         Commission file number 0-26257

                         ACCIDENT PREVENTION PLUS, INC.
         ---------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

            NEVADA                                               11-3461611
(State or other jurisdiction of                               (I.R.S. Employer
incorporation of organization)                               Identification No.)

                            9091 North Military Trail
                                   Suites 8-10
                        Palm Beach Gardens, Florida 33418
                            -------------------------
                    (Address of Principal Executive Offices)

                                 (561) 721-2220
                           (Issuer's telephone number)

                             325 Wireless Boulevard
                            Hauppauge, New York 11788

              (Former name, former address and former fiscal year,
                          if changed since last report)

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

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

State the issuer's revenues for its more recent fiscal year (ending December 31,
2001): $64,628

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity, as of
January 31, 2002: $939,724

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the most practicable date:

Class                                          Outstanding as of April 12, 2002
Common Stock, $.001 par value                  9,995,262*

*The shares issued and outstanding have been adjusted to take into account the
reverse stock split of 10 to 1 effectuated November 26, 2001 and subsequently
adjusted to take into account the forward stock split of 1 to 1.2 effectuated
April 10, 2002.

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                                                                            Page
PART I

ITEM 1. DESCRIPTION OF BUSINESS                                                3

ITEM 2. PROPERTIES                                                            18

ITEM 3. LEGAL PROCEEDINGS                                                     18

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                   20

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                     21
           STOCKHOLDER MATTERS

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                     25
           CONDITION AND RESULTS OF OPERATIONS

ITEM 7. FINANCIAL STATEMENTS                                                  33

        CONSOLIDATED BALANCE SHEET                                           F-2

        CONSOLIDATED STATEMENTS OF OPERATIONS AND                            F-3
           COMPREHENSIVE LOSS

        CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY             F-4 - F-5

        CONSOLIDATED STATEMENTS OF CASH FLOWS                          F-6 - F-7

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                           F-8

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OF                      34
           ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND                          35
           CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
           OF THE EXCHANGE ACT

ITEM 10.EXECUTIVE COMPENSATION                                                37

ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS                       39
           AND MANAGEMENT

ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                        40

ITEM 13.EXHIBITS AND REPORTS ON FORM 8-K                                      41

SIGNATURES                                                                    42

                                       2
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ITEM 1. DESCRIPTION OF BUSINESS

FORMATION OF THE COMPANY AND APP LLC

         Accident Prevention Plus, Inc. (the "Company"), which currently trades
on the Over-the-Counter Bulletin Board under the symbol "ACPL", was incorporated
under the laws of the State of Nevada on October 28, 1998 to become the holding
company of Accident Prevention Plus, LLC, a limited liability company ("APP
LLC") and International Purchasing Services, Inc., a New York corporation
("IPS-NY"). Since the inception of APP LLC in 1993, APP LLC has been engaged in
the design, marketing and distribution of onboard recording systems and fuel
monitoring systems for commercial and fleet vehicles.

         Effective as of October 28, 1998, the Company entered into an Exchange
Agreement (the "Exchange Agreement") with all of the equity members of APP LLC
pursuant to which it was agreed that the equity members would exchange their
interests in APP LLC for shares of common stock of the Company and the Company
would issue to the equity members shares of its common stock. As of October 28,
1998, the Company issued 1,420,597 shares of its restricted common stock to the
equity members of APP LLC in accordance with the terms and provisions of the
Exchange Agreement.

         In accordance with the terms and provisions of the Exchange Agreement
and the Plan of Reorganization, the Company acts as the holding company of
APP LLC and IPS-NY. As used in this Annual Report, the term "Company" will
include the subsidiaries of the Company unless otherwise individually
referenced.

         ACQUISITION OF INTERNATIONAL PURCHASING SERVICES, INC.

         International Purchasing Services, Inc. ("IPS-NY") was incorporated
under the laws of the State of New York on March 3, 1993 to provide general
purchasing services for other companies, and is a wholly-owned subsidiary of the
Company. Effective as of October 28, 1998, the Company acquired IPS-NY by
entering into an Agreement and Plan of Reorganization ("Plan of Reorganization")
with IPS-NY pursuant to which it was agreed that (i) the sole shareholder of
IPS-NY would transfer all of the issued and outstanding shares of IPS-NY to the
Company in exchange for shares of common stock of the Company, and (ii) the
Company would issue to the sole shareholder of IPS-NY 297,500 shares of its
common stock. As of October 28, 1998, the Company issued 297,500 shares of its
restricted Common Stock to the sole shareholder of IPS-NY.

         TERMINATION OF KMR TELECOM LTD.

         Effective as of October 28, 1998, the Company also simultaneously
acquired KMR Telecom, Ltd., a corporation organized under the laws of India
("KMR") by entering into an Agreement and Plan of Reorganization with KMR
pursuant to which it was agreed that (i) all of the shareholders of KMR would
transfer all of the issued and outstanding shares of KMR to the Company in
exchange for shares of Common Stock of the Company, and (ii) the Company would
issue to the shareholders of KMR an aggregate of 80,000 shares of its Common
Stock.

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         During October 1999, however, management of the Company determined that
there was a mistake of fact involving the Agreement and Plan of Reorganization
with KMR. Management discovered that the laws of India prohibited a foreign
entity from holding more than a 49% equity ownership interest in a company
organized under the laws of India. Therefore, the Agreement and Plan of
Reorganization between the Company and KMR was in violation of the laws of
India. On November 21, 1999, retroactively effective to October 28, 1998, the
Company entered into a Rescission Agreement with KMR pursuant to which it was
agreed that (i) the Agreement and Plan of Reorganization with KMR would be set
aside, (ii) the previous shareholders of KMR would return to the Company their
respective stock certificates evidencing ownership of the 80,000 shares of
Common Stock of the Company, and (iii) KMR would cease to be a wholly-owned
subsidiary of the Company with no further rights or duties to the Company. The
previous shareholders of KMR have returned the stock certificates mistakenly
issued to the Company.

         UNITED KINGDOM SUBSIDIARY - ACCIDENT PREVENTION PLUS (UK) LIMITED

         On September 13, 1999, APP-UK formed Accident Prevention Plus (UK)
Limited ("APP UK"), as a private limited company under the laws of England and
Wales. APP UK is a wholly-owned subsidiary of the Company. Management of the
Company intended that APP UK would provide services to the Company including,
but not limited to, sales and marketing, administration, and technical support
for the United Kingdom marketplace. During fiscal year 2001, APP UK provided
limited services to the Company. Management of the Company, therefore,
determined that continuation of the business operations of APP UK was not in the
best interests of the Company or its shareholders. As of the date of this Annual
Report, the Company has closed the office and terminated business operations of
APP UK.

         FRANCE SUBSIDIARY - ACCIDENT PREVENTION PLUS, FRANCE (SARL)

         On December 17, 1999, APP-UK formed Accident Prevention Plus, France
("APP France"), as a limited liability company under the laws of France. APP
France is a wholly-owned subsidiary of APP UK. Management of the Company
intended that APP France would provide services to the Company including, but
not limited to, sales and marketing, administration, and technical support for
the European marketplace. During fiscal year 2001, APP France provided limited
services to the Company. Management of the Company, therefore, determined that
continuation of the business operations of APP France was not in the best
interests of the Company or its shareholders. As of the date of this Annual
Report, the Company has closed the office and terminated business operations of
APP France.

         Management's decision to close the offices located in the United
Kingdom and France, respectively, was based upon an analysis of (i) costs of
operation; and (ii) the proposed restructure of European operations to one
central location in Europe to maintain all sales and marketing efforts within
the European Economic Community. As of the date of this Annual Report,
management of the Company is seeking to identify the best location to establish
such a central office based upon consideration of tax issues, personnel
availability, servicing of existing and future clients, and potential target
market penetration. Management anticipates that such a central office may be
established and business operations commenced within the European Economic
Community during fiscal year 2002. See "Item 1. Description of Business -
Business Operations - Contractual Relations."

                                       4
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BUSINESS OPERATIONS

         GENERAL

         During the prior fiscal years, the Company focused primarily on the
research, development and design of the AP+Series products and related products,
and generated little revenues. During those prior fiscal years, the principals
of the Company invested personal funds, arranged for loans and lines of credit
from financial institutions, obtained private debt financing from various
investors, and secured grants to support the development and operating expenses
of the Company.

         As of the date of this Annual Report, the Company derives its revenues
principally from the marketing and sale of its onboard recording systems, called
the AP+Series products, and other related products to customers generally in the
fleet management and driver training industries. Additional revenues may be
generated by the Company through the implementation of maintenance contracts
related to the AP+Series products.

         The Company intends to concentrate its business operations on the
distribution, marketing and sales of its AP+Series and related products in (i)
the trucking and commercial fleet and driver training industries nationwide and
worldwide; (ii) related transportation industries nationwide and worldwide; and
(iii) non-transportation industries, such as the medical fields. As of the date
of this Annual Report, management of the Company has been involved in multiple
discussions and negotiations with members of the European Economic Community and
anticipates immediate generation of revenues from the European marketplace from
the sale of its AP+Series products. Management of the Company believes that
sales of the AP+Series and related products to its customers in the fleet
management and driver training industries will continue to be an important line
of business for the Company for the next several years. See "Item 1. Description
of Business - Business Operations - Contractual Relations."

         AP+SERIES AND RELATED PRODUCTS

         ONBOARD RECORDING SYSTEMS. The Company designs, develops, markets and
sells a comprehensive line of onboard computer recording systems, the APP1000,
the APP2000 and the APP3000 (hereinafter, collectively called the "AP+Series").
The AP+Series Products include a dual axis accelerometer designed and developed
by the Company to measure the sway of a vehicle, and onboard systems that
monitor and record data for accident prevention, driver training and evaluation,
and maintenance operations for fleet vehicles. The basic unit hardware is the
same for the three series, although the APP2000 and APP3000 series have upgrades
and will perform more functions to meet the requirements of the customer. The
AP+Series were designed to (i) promote safe and efficient driving practices,
(ii) provide security for unauthorized operational use of a vehicle; (iii)
automatically monitor and record vehicle operational data for accident
prevention, driver training, driver evaluation and maintenance purposes; and
(iv) reduce the overall costs of maintaining and operating fleet vehicles. Each
of the AP+Series onboard recording systems are fully programmable data recorder
systems that include a data recorder for each fleet vehicle, a Smart-card for
each driver, a central card-reader with management computer software which is
compatible with Microsoft Windows.

                                       5
<PAGE>

         The AP+Series are often dubbed "black boxes" after the ones used in
large aircraft. The AP+Series units can be custom-designed to specific
requirements by using individual operating parameters and are upgradable to meet
further needs of fleet management companies as they adapt to a changing world.
The AP+Series have the ability to monitor, record and retrieve numerous types of
data depending on the individual customer's specific requirements. Some examples
of the analyzed categories for the transportation industry include, but are not
limited to, (i) driving chronologies (maximum speed, deceleration, idling, last
20 overspeedings, brake occurrences and intensities), (ii) trip chronologies
(driver identification, date and time of vehicle usage, total driving time and
distance, dangerous braking occurrences), and (iii) vehicular chronologies
(distance/speed, engine rpm, lights, water temperature, oil temperature, air
pressure, vehicular sway). This data is permanently recorded thus often
providing a record of critical information.

         SPECIFIC FEATURES. Management believes that certain features of the
AP+Series onboard recording systems provide many cost-effective benefits
including reduced fuel consumption, reduction in the occurrence of accidents,
better preventative maintenance, reduced over-speeding by drivers, reduced
theft, an effective driver training tool, and the potential for reduced
insurance rates.

         Safety/Accident Prevention. Management considers the AP+Series to be
proactive management tools designed to promote safe and efficient driving
practices. The AP+Series constantly monitors adherence by drivers to established
company driving standards, such as acceleration, deceleration, engine rpm and
speed. The AP+Series also assists drivers on the road by warning them when they
may be violating established company safety standards. It also records the
parameters of actual vehicle operation for appropriate use in driver training
programs. Furthermore, the AP+Series can educate drivers to adapt their driving
patterns to road conditions and environment and provide a powerful tool for
performance evaluation of both driver and vehicle. Management believes that not
only does the AP+Series help in preventing accidents, but it also is a
beneficial tool when accidents do occur.

         Reporting. As of the date of this Annual Report, the Company has
developed a range of "MS Windows Compatible Software", which allows data
analysis in both the driver evaluation and training industry and the general
fleet management fields of application. The AP+Series automatically records
vehicle operational data concurrent with sudden accelerations and decelerations,
or collisions. The AP+Series are designed to ensure that the data is secure from
power failure and tampering. Such unbaised recorded data may be used for later
analysis, such as in accident reports, or to confirm or refute claims that may
be made against a company or its drivers. All data recorded from the AP+Series
can be printed from an office printer in a variety of standard or customized
reports or graphs. These reports can be used in driver education programs,
maintenance evaluation of vehicles, and for other general fleet management
programs.

         Security. The AP+Series provides security for vehicles and for vehicle
data. With use of an APP+Series, operational access to company vehicles can be
carefully, quickly and conveniently controlled by the fleet manager.

                                       6
<PAGE>

         Cost-Effective Use. Management believes that by constantly monitoring
fleet vehicles, the AP+Series permits a company to more accurately schedule
preventive maintenance, increase fuel economy, and extend overall vehicle
service life. System data feedback to drivers should encourage more careful
driving habits that will serve to reduce the frequency of repairs and
replacements, as well as the occurrence accidents. Use of excessive quantities
of fuel or oil, high maintenance vehicles and other dangerous vehicle conditions
can also be identified before they become hazardous to the company's financial
status or to the general public.

         Smart Card Technology. Management believes that the AP+Series are
unique in the industry due to use of the "Smart card" technology. The use of
AP+Series custom software gives the AP+Series the ability to be easily upgraded
and customized to meet customer specifications and needs. It also gives the
AP+Series the ability to be utilized outside of the fleet vehicle market.

         A Smart card is a small electronic device about the size of a credit
card that contains electronic memory and an embedded integrated circuit. The
integrated circuit laminated into the card holds information securely and
accurately. Smart cards can store information that they are programmed for. They
can be programmed and accessed by many types of electronic readers and writers.

         Management believes that use of the "Smart card" will allow the
AP+Series to be utilized by customers for non-transportation operations, such as
use in the medical field for recording and updating patient records and in a
wide variety of other fields where the monitoring, recording and tracking of
information is critical. "Smart card" technology may even be used by customers
of the Company to provide security in any area utilizing the technology
including, but not limited to, payroll, drivers' licenses, passports, medical
applications, debit cards, and student identification cards. See "Item 1.
Description of Business - Business Operations - Manufacturing."

         As of the date of this Annual Report, the Company has under development
other products including, but not limited to, the AP+Series 4000, the Fuel
Intake Monitorying System ("FIMS"), a proprietary opacity sensor, and a Smart
Card interlocking system.

         MANUFACTURING

         During fiscal years 2000 and 2001, the AP+Series products were
primarily manufactured by Nexus Corporation, located in Vermont ("Nexus"). At
December 31, 2001, Nexus had manufactured approximately 600 AP+Series products.

         The Company also has established relationships with another
manufacturing company relating to the manufacture of the accelerometers. The
Company entered into a purchase agreement dated October 16, 1998 with Asteria
Electronics SDN BHD ("Asteria"), whereby Asteria agreed to manufacture the
accelerometers. During fiscal year 2000, Asteria manufactured and delivered to
the Company 200 accelerometers. As of the date of this Annual Report, Asteria
has an additional 100 accelerometers available which management anticipates
receiving within the next four months.

         SCHLUMBERGER TECHNOLOGIES, INC. The Company entered into an agreement
dated May 12, 1999 with Schlumberger Technologies, Inc., a manufacturer of the
"Smart card" technology ("Schlumberger"). The agreement with Schlumberger
generally provides the Company with the non-exclusive right to implement and
utilize the Smart card technologies. As a part of such negotiations,


                                       7
<PAGE>

Schlumberger agreed to transfer to APP LLC all technology data relating to the
Smart card. Prior to the May 12, 1999 agreement, APP LLC and Schlumberger had
entered into a technology transfer agreement pursuant to which Schlumberger
agreed to provide APP LLC (i) access to all Smart card technology and associated
products for development and distribution by Schlumberger, and (ii) the ability
to employ the Smart card technology. APP LLC had also entered into
non-disclosure agreements with Schlumberger.

         As of the date of this Annual Report, the Company has the software,
tooling, readers and cards to program the AP+Series products for various
applications.

         PRODUCT RESEARCH/DEVELOPMENT AND CURRENT STATUS

         AP+SERIES. The AP+Series products have been designed to meet the
requirements for the driver evaluation type of application and for the general
vehicle management system. During prior fiscal years, product, research and
development was designed to expand the Company's potential market by (i)
creating and ensuring compatibility between the AP+Series products and
communication interface busses, (ii) developing specific sensors, (iii)
developing an interface for real time communication and global positioning
systems, and (iv) developing products specifically for the needs and
requirements of driver training schools. As of the date of this Annual Report,
the Company has upgraded its AP+Series products to fill the increased and
enhanced capability demands from past and future clients.

         As of the date of this Annual Report, the Company has finalized the
APP3000 system. The APP3000 system has been designed to operate properly in
countries where temperature, dust and rough conditions are the factors that
could adversely affect the operating mode of such a system. Management
anticipates a potential slight redesign, which would provide a manufacturing
cost reduction of approximately 12% based on 5,000 units. Personnel of the
Company have recently examined the APP3000 system and have provided a written
report to management describing certain features that may need to be addressed.
Management anticipates that such final modifications and testing will be
completed in approximately one month from the date of this Annual Report.

         As of the date of this Annual Report, the Company has installed the
AP+Series units in over 172 vehicles pursuant to an agreement with AFT-IFTM, the
largest driver training institute in Europe ("AFT-IFTM"). AFT-IFTM, which
generally promotes the driver training standards for the European Economic
Community, has subsequently trained over 30,000 drivers using the AP+Series
products in years 2000 and 2001. Management believes that the Company's
relationship with AFT-IFTM will enhance the marketability of its products in
other countries. See "Item 1. Description of Business - Business Operations -
Contractual Relations."

         As of the date of this Annual Report, the Company is engaged in
discussions with various companies to integrate alcohol breathalyzers with the
AP+Series products. Some states in North America have enacted legislation
mandating individuals who have been convicted of driving while intoxicated
("DWI") or driving under the influence ("DUI") to use ignition interlock
systems, alcohol sensors and breathalyzers in their vehicles. Management
believes that the design of the AP+Series products provides flexibility for
integration with other types of technologies, such as alcohol breathalyzers.

                                       8
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         FUEL INTAKE MONITORING SYSTEMS. The Fuel Intake Monitoring System
("FIMS") was designed to automate and simplify many aspects of the fueling
process. Through the technological use of radio frequency communication, the
FIMS will provide a fleet owner with the ability to prevent fuel theft, receive
paperless billing for fuel consumed, and reduce vehicle downtime by simplifying
and speeding up the fueling process.

         Design/Usage. The design of the FIMS consists of a vehicle unit which
is capable of storing and transmitting data concerning the vehicle, including
fuel level, odometer reading, fuel type required, and the maximum amount of fuel
permitted per filling. The other components of the system include a nozzle unit,
tank inlet antenna, ground loop antenna, station controller and a LCD display on
the fuel pump at the retail filling station.

         An additional advantage of the FIMS is the elimination of the need for
drivers to carry cash or credit cards for refueling purposes. Fueling is
completely controlled by a company using the FIMS with computerized monitoring
of all relevant vehicle data and subsequent paperless billing.

         During fiscal year 2000, the Company pilot tested the FIMS at two Shell
Oil locations in Ruffec and St. Cloud, France. As of the date of this Annual
Report, management believes that these pilot tests have proven the concept of
FIMS to be valuable and successful. The FIMS was also tested in the
manufacturing laboratories of Schlumberger, Shell Retail Petroleum Europe and
Lockheed Martin. The FIMS also received "CE" approval for sale in Europe from
Emitech (the equivalent of the Underwriters Laboratory in the United States).

         Management has made a strategic business decision to hold introduction
of the FIMS into the marketplace until patent searches are completed and
negotiations are completed with the University of South Florida ("USF") with
respect to the Company's rights to the FIMS technology. (See the next paragraph
for additional information relating to the FIMS technology and the Company's
right to that technology.) Management anticipates that upon its introduction
into the marketplace, the integration of the FIMS into the AP+Series will be
completed.

         During fiscal year 1996, APP LLC entered into a grant award agreement
with the Technology Deployment Center, Pinellas County, FL. in conjunction with
the University of South Florida ("USF") for the research, development and design
of the FIMS. USF had received a grant of approximately $428,793 for the
research, development and design of the FIMS and forwarded such proceeds to a
sub-contractor chosen jointly by USF and APP LLC. Pursuant to the terms of the
agreement, APP LLC agreed to (i) direct the research, development and design of
the FIMS and bring such technology to a saleable commercial product, and (ii)
repay to USF structured payments based on revenues generated from the FIMS
product sales. Pursuant to the terms of the agreement, in the event no revenues
were generated from sales of the FIMS within two years after completion of the
funding, all rights to the technology relating to the FIMS will revert
exclusively to USF. As of the date of this Annual Report, the Company has not
sold FIMS products and according to the terms of the agreement, rights to the
technology relating to the FIMS should have reverted to USF. Management
anticipates that during the second quarter of 2002, the Company will pursue
negotiations with USF regarding its respective percentage ownership interest in
the rights to the technology relating to the FIMS in view of the fact that the
Company expended its own funds for payment of research and development expenses
prior to and after such funding. There is no guarantee that the Company will be
successful in such negotiations and may potentially lose all rights to the
technology relating to the FIMS.

                                       9
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         OTHER PRODUCTS. In conjunction with a sub-contractor, the Company has
also designed and developed a proprietary opacity sensor for incorporation into
the AP+Series, which is capable of reading vehicle emissions during the
operation of the vehicle. This function will provide fleet managers with the
ability to monitor and record in real time and ensure their ability to maintain
compliance with measurement requirements of exhaust emissions established under
rules and regulations promulgated by the Environmental Protection Agency
("EPA"). Management intends to conduct patent research on this technology, which
has been designed to meet such measurement requirements. As of the date of this
Annual Report, management anticipates that distribution and marketing of the
opacity sensor will begin by approximately the second quarter of fiscal year
2002.

         The Company has planned new product development to meet the needs of a
consumer related low-cost system to sell to the major automobile manufacturers.

         CUSTOMERS AND MARKETING

         MARKETING STRATEGY. The Company intends to seek to capture market
niches in the fields of transportation and medicine. Some of the proposed
developments in the medical field include the use of Smart card technology in
doctors' offices, hospitals, ambulances and insurance companies. Management
believes that within the transportation industry, the AP+Series products with
Smart card technology may be utilized in emergency vehicles for police, fire and
ambulance departments. In addition, the AP+Series products with the Smart card
technology may be used by a variety of businesses or governmental agencies to
create and track drivers' licenses, or to create passports, medical cards or
insurance cards, which would provide instant access to critical information.

         The Company intends to market the AP+Series and related products
through the use of distribution agreements, joint ventures, direct sales and
independent commissioned representatives. To aid in the marketing of the
AP+Series and related products, the Company intends to utilize several marketing
approaches including advertising in trade publications, press releases, Company
sponsored training seminars, speaking engagements and advertising promotional
tools, such as CD-ROMs, catalogs and participation in trade shows. The Company
intends to make its operational software available in various languages to meet
the needs of the particular markets. The Company's services and products are
also electronically advertised on the Company's web page at www.applus.com.
The Company will continue to emphasize attendance at trade shows, Company
sponsored training seminars, press releases, speaking engagements and
independent third party distribution agreements in its marketing efforts. The
Company's international sales represented approximately 44% of the Company's
total revenues in fiscal year 2001 (excluding the continent of North American).
Management intends to direct a significant portion of its marketing efforts
toward further market penetration in international markets, with its primary
emphasis upon Europe, Africa and Australia.

         DISTRIBUTION AGREEMENTS. From April 1997 through June 1997, APP LLC
entered into four separate installation and service agreements with World Asset
Management, Inc., which is headquartered in New Milton Hampshire, United Kingdom
("WAM"), Atlantic Financial Management, Inc., which is headquartered in
Fouesnant, France ("AFM"), Avignon Trading, Inc., which is headquartered in
Savion, Israel ("Avignon"), and Darien Partners Investments, Inc., which is
headquartered in Malaysia ("Darien"). Pursuant to the terms of the respective
installation and service agreements, WAM, AFM, Avignon and Darien are
responsible for (i) establishing distribution and sales channels along with the
necessary infrastructure required for the successful marketing of the AP+Series
products; and (ii) installation and maintenance of the AP+Series products. In
accordance with the terms of the respective installation and service agreements,
the Company received $2,500, respectively, from WAM, AFM, Avignon and Darien,
and WAM, AFM, Avignon and Darien each received an approximate 4.9% membership
interest in APP LLC.

                                       10
<PAGE>

         Although the Company has not generated any significant revenues to
date, the Company has established these contractual relations with WAM, AFM,
Avignon and Darien in anticipation of future sales and distribution of its
products. As of the date of this Annual Report, the contractual arrangements
with WAM, AFM, Avignon and Darien primarily provide the Company with
installation and service management in the event the Company establishes a
presence in these foreign markets through the distribution and sale of the
AP+Series and related products. Management believes that these contractual
relations will strengthen the Company's structure and potential marketability of
the AP+Series and related products, and also places the Company in a favorable
position to properly service the AP+Series and related products sold and
distributed in those foreign markets.

         AMERICAN OVERSEAS CORPORATION. In addition, APP LLC and American
Overseas Corporation ("AOC") an investment company formed under the laws of
British Virgin Islands, entered into a distributor agreement dated August 20,
1998 (the "AOC Agreement") pursuant to which AOC agreed to (i) assist in the
establishment of marketing and distribution services for the AP+Series and
related products worldwide, and (ii) pay APP LLC $5,000,000 within a thirty-six
(36) month period for the non-exclusive unlimited rights to purchase the
AP+Series and related products and to sell those products worldwide, with an
initial payment of $2,000,000 due and owing on August 20, 1999.

         During July 1999, the AOC Agreement was amended to provide that (i) a
$1,000,000 payment would be due and owing sixty days from the date that the
Company's shares of common stock commenced trading, (ii) an additional
$1,000,000 would be due and owing within eight months from the date that the
Company's shares of common stock commenced trading, and (iii) the balance of
$3,000,000 would be due and owing on or before August 20, 2001. On December 27,
2000, the Company's shares of common stock commenced public trading on the
Over-the-Counter Bulletin Board.

          As of the date of this Annual Report, the Company had received
approximately $420,000 from AOC, which was deemed an investment in the Company
and classified as paid-in-capital. See "Item 7. Consolidated Financial
Statements".

                                       11
<PAGE>

         CONTRACTUAL ARRANGEMENTS

         APACHE FUTURE, INC. On approximately April 2, 2002, the Company and
Apache Future, Inc. ("Apache Future") entered into a distribution and
installation agreement. Management of the Company believes that Apache Future
has established long-standing relationships in the transportation industry by
working on a variety of vehicles throughout the United States including fire
trucks, motor coaches, transit, light rail, heavy rail, commuter trains and
truck resulting in a broad range of experience and expertise. Management of the
Company further believes that the contractual relationship between the Company
and Apache Future will provide the Company with continual and successful
installation, training and on-going support relating to the Company's AP+Series
products.

         CARNEGIE MELLON UNIVERSITY/DRIVER TRAINING & SAFETY INSTITUTE. The
Company has installed its AP+Series products on all vehicles and one AP+Series
unit on a driver training simulator located at Carnegie Mellon University/Driver
Training & Safety Institute in Connersville, Pennsylvania ("CM"). Management
believes that such installations of the AP+Series products creates a strategic
marketing edge for the Company because of the high visibility to governmental
agencies, such as the U.S. Department of Transportation, the Federal Highway
Administration and other universities and driver training schools. To the best
of management's knowledge, management believes there is no other company
currently manufacturing products with the required technology capable for such
driver training applications. Management further believes that use of the
AP+Series products on CM's vehicles and simulators will provide the AP+Series
products with greater visibility for the driver training industry.

         Distribution Agreement. On September 22, 2000, the Company entered into
a three-year agreement with CM in which (i) the Company granted to CM the
exclusive distribution rights to market and distribute the Company's hardware,
accessory items and software for occupational driver training purposes and
research in North America and countries that are part of the European Economic


                                       12
<PAGE>

Community; (ii) CM agreed to purchase from the Company a minimum of $20,000 of
such hardware, accessory items and software products at a distribution cost;
(iii) CM will refer leads to the Company for fleet management and other
commercial clients and the Company will pay to CM a 10% commission based on net
orders; (iv) the Company will refer leads to CM for potential clients in
research and education and CM will pay to the Company a 10% commission based on
net orders; and (v) the Company will organize and provide training to CM and
promote research and validation performed by CM. As of December 31, 2001, CM has
purchased from the Company small quantities of AP+Series products at
approximately $22,000.

         European Market. CM is currently participating in certain projects in
Europe through EUROTARA Organization and the European Commission concerning
improvement of safety on the roads. Management of the Company believes that the
European Commission supports a project called "TRAINER", which targets the
accidents involving novice drivers and may use a number of tools to provide
analysis, such as simulators, vehicles and Skid Pads. During fiscal year 2001,
the Company worked on the development of a modified recording system in
conjunction with CM for use in training of young and senior drivers for the
European Economic Community. Management of the Company believes that utilization
of such tools designed to handle the different data comprising the database may
involve the Company's AP+Series products.

         During June 2001, the Company's personnel also attended the First
Annual World Transportation Transatlantic Summit hosted by CM, which featured
use of the Company's modified recording system on both CM vehicle and simulator
systems. The Company further provided seminars to attending member countries on
the use of the Company's systems. Approximately twenty countries were
represented and management of the Company perceives that its products received a
favorable reaction from the attendee countries. Management projects that the
modified recording system will be completed during the second quarter of 2002
and that marketing will then commence in the European Economic Community.

         During fiscal year 2001, the Company and CM also studied the viability
of the use of the technology for study of the "Human Factor" element of driving.
This possible use would be able to determine the individual's physical abilities
in order to classify the best type of driving suitable for that student through
a rating system. This would be done by use of the Smart-card technology and
installation of the Company's systems on weight lifting and other types of
physical measurement apparatus.

         Data Acquisition System. As of the date of this Annual Report, the
Company and CM have entered into an alliance to develop and employ a fast data
acquisition system to solve the on-board data collection for Skid Pad and
simulation Activity (the "Data Acquisition System"). This research is designed
to improve safety on the road by measuring improvement of a driver's skills
after using CM simulators and Skid Pad and comparing these emergent devices with
the traditional truck education. CM simulators, Skid Pads and trucks are
equipped with the Company's AP+Series products. Management of the Company
believes that this alliance with CM is very important to the Company's product
line because it could be used in numerous applications related to driving
education.

         Management believes that the Company's products have been and continue
to be instrumental in the evaluation and driver training area. To the best of
management's knowledge, management believes there is no other company currently
manufacturing products with the required technology capable for such driver


                                       13
<PAGE>

training applications. Management believes that use of the AP+Series products on
CM's vehicles and simulators will provide the AP+Series products with greater
visibility for the driver training industry.

         CARNEGIE MELLON DRIVER TRAINING AND SAFETY INSTITUTE AND STOUGHTON
TRUCKING, INC. On approximately November 1, 2001, the Company, CM and Stoughton
Trucking, Inc. ("STI") entered into a cooperative agreement, which provides for
an on-board beta-test monitoring and evaluation program of drivers commuting
between Stoughton, Wisconsin and Connellsville, Pennsylvania for east coast
deliveries. The Company's products will be used exclusively to analyze driver
performance and safety behavior. The Company's products will be used in
conjunction with the training course provided by STI to establish (i) greater
safety control, and (ii) reduction of fuel consumption by up to 25%. Management
of the Company believes that such a venture with CM and STI is the cross road
between research, industry and education that will enable the Company to move
quicker technology at lower prices into fleet vehicles. The beta-test will also
be monitored by Trainer, The European Commission Project for electronic
training. Management believes that the beta-testing will be followed by a larger
implementation scale beginning fiscal year 2002, as soon as conclusive results
authorize deployment of the Company's products throughout the driving schools
and transportation industries within the United States and Europe.

         AMERICAN TRUCKING ASSOCIATION. On August 1, 1999, the Company and
American Trucking Association ("ATA") entered into a contract (the "ATA
Contract") pertaining to a federally funded project administered by the Federal
Highway Administration and ATA that involves the use of the Company's products
to study fatigue in drivers. The ATA Contract provides for the integration of
certain "Fatigue Technologies" utilizing the Company's on-board recording
systems for data collection and validation of such technologies. The federally
funded project is funded pursuant to legislation passed under the Clinton
administration, which is designed to reduce accidents on the nation's highways
due to driver fatigue.

         During fiscal year 2001, the Company ran successful pilot tests with
certain vehicles and worked on modifications to the interface unit that were
deemed necessary due to the changes made by the various technologies, which are
to be interfaced with the Company's AP+Series systems. As of the date of this
Annual Report, the Company is involved in the final installation of the
federally funded project by engaging in further pilot project testing and the
re-design of the interface to allow collection of data from all the systems
(safetrack, Perclos Camera and the Howard Power Center Steering system). ATA is
currently testing approximately six groups of four drivers for a period of four
weeks each and the Company is responsible for the collection of all data,
printing out summary reports by use of the Data Acquisition System and
associated software, and creating all required data files. Management believes
that the Company's AP+Series systems may subsequently be installed on Challenger
Motor Freight trucks located in Canada.

         Other members of the federally funded project consortium include: (i)
the University of Pennsylvania, (ii) Canadian Trucking Alliance, (iii) Transport
Canada, (iv) Howard Power Steering, (v) Safe-Track, (vi) the United States
Department of Transportation, and (vii) Perclos Camera provided by CM.

                                       14
<PAGE>

         JB HUNT TRUCKING PILOT PROGRAM. As of the date of this Annual Report,
the Company and J.B. Hunt Trucking ("JBHT") have been engaged in a pilot program
test on two long-and local-haul vehicles. Management of the Company believes
that the data collected proves the economic savings of utilization of the
APP+Series systems and products, and have asked for a presentation of the
collected data to management of JBHT. A representative of JBHT was present at CM
Driver Training Institute on November 7, 2001 to see additional demonstrations
of the APP+Series systems. Management of the Company believes that to date the
pilot tests have been successful and anticipates that by the end of the first
quarter of 2002, a decision will be made by management of JBHT regarding the
potential purchase of lease by JBHT of the Company's AP+Series systems.

         NORTH-SHORE LONG ISLAND JEWISH HEALTH SYSTEMS. The Company entered into
an agreement dated August 31, 1999 with North-Shore Long Island Jewish Health
Systems ("North Shore Hospital") regarding (i) installation of the APP3000
onboard recording system (which was customized for use by North Shore Hospital)
and related products on North Shore Hospital ambulances, and (ii) provision of
services to integrate the installed APP3000 and related products with existing
technologies utilized by North Shore Hospital. During fiscal year 2000, the
Company installed one APP3000 onboard recording system on an ambulance as a test
unit and, subject to performance, the Company would then be required to install
an additional twenty-nine APP3000 onboard recording systems. As of the date of
this Annual Report, the Company did not install any additional APP3000 onboard
recording systems. Therefore, on April 3, 2001, North Shore Hospital initiated a
lawsuit in the Supreme Court of the State of New York alleging that the Company
breached its agreement with North Shore Hospital. See "Item 3. Legal
Proceedings".

                                       15
<PAGE>

         COMPETITION

         The onboard recording systems industry is highly competitive. The
Company's major competitors in the marketplace are primarily Cadec, a division
of Cummings Engine, Mobile Data Systems, Orpak, Qualcomm, VDO, Elextor, Rockwell
Tripmaster and Eaton Corporation. Such competition appears to be related to the
Global Positioning Systems. Data Express and Qualcomm have similar products, and
Mobile Data Systems has developed a system closely resembling the AP+Series
products. The Company may also face competition from other, similar companies
with financial resources far greater than those of the Company. However,
management believes that although there is a large degree of competition, most
competitive systems only perform a portion of the functions that the AP+Series
onboard recording systems perform, giving the Company a competitive edge within
the industry.

         EMPLOYEES AND CONSULTANTS

         As of the date of this Annual Report, the Company employs two persons
on a full time and one person on a part time basis. The Company's President and
Executive Vice Presidents are primarily responsible for all day-to-day
operations of the Company. See "Item 9. Directors, Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act." Other
services are provided by outsourcing and management contracts. As the need
arises and funds become available, however, management may seek additional
employees as necessary in the best interests of the Company. The following lists
and describes certain services performed for the Company by consultants.

     (i)  APP LLC and Bristol Consulting Ltd. ("Bristol") entered into a
          consulting agreement dated July 30, 1998 (the "Bristol Consulting
          Agreement"), pursuant to which Bristol agreed for a period of five
          years to (i) assist in the development of an international market
          for the AP+Series and related product lines; and (ii) provide
          advice regarding corporate structure, capital acquisition,
          contracts, equity partners and mergers and acquisitions pertaining
          to the Middle East and Far East. The Bristol Consulting Agreement
          further provided that APP LLC would pay to Bristol a monthly fee of
          $5,000 for the first three months and, thereafter, a monthly fee of
          $10,000 for the duration of the Bristol Consulting Agreement and
          that Bristol would have the option to convert any debt due and
          owing under the Bristol Consulting Agreement into shares of the
          Company's common stock.

          During fiscal years 2001 and 2000, Bristol performed certain services
          on behalf of the Company including, but not limited to, (i) the
          development of international markets and consummation of the
          distribution contract with AOC; (ii) the establishment of contractual
          relationships for the manufacture of accelerometers in the Far East.
          During fiscal years 1998 and 1999, respectively, Bristol was primarily
          responsible for the introduction to the Company of Asteria, which
          manufactures the accelerometers for the Company, and for the
          introduction to the Company of AOC.

          As of August 24, 2001, the Company had accrued a total of
          $890,916.44 relating to (i) the Bristol Consulting Agreement; (ii)
          other consulting services rendered; (iii) funds advanced to the
          Company; (iv) accrued interest; and (v) incurred expenses.
          Therefore, the Company and Bristol entered into debt forgiveness


                                       16
<PAGE>

          agreements and settlement agreements pursuant to which the Company
          agreed to grant to Bristol an option to convert such debt due and
          owing into shares of the Company's restricted common stock as
          satisfaction and settlement of the debt. See "Item 5. Market for
          Registrant's Common Equity and Related Stockholder Matters - Recent
          Sales of Unregistered Securities".

          As of the date of this Annual Report, the Bristol Consulting
          Agreement has been terminated and no longer has any force or
          effect.

    (ii)  APP LLC and Royce Anderson & Monroe, Inc. ("Royce Anderson") entered
          into a consulting agreement dated July 30, 1998 (the "Royce
          Consulting Agreement"), pursuant to which Royce Anderson agreed for
          a period of five years to (i) assist with development of a market
          within the United States and the Western Hemisphere for the
          AP+Series and related products, and (ii) provide advice regarding
          corporate structure, acquisitions, mergers and equity partners.

          During fiscal years 2001 and 2000, Royce Anderson performed certain
          services on behalf of APP LLC including, but not limited to, (i)
          assistance with the establishment of the marketing and sales structure
          within APP LLC; and (ii) assistance with the negotiation and
          consummation of major contractual arrangements. Royce Anderson was
          also primarily responsible for the Company's contract with North Shore
          Hospital. During fiscal year 2001, the Company did not pay or accrue
          any fees to Royce Anderson.

          As of the date of this Annual Report, the Royce Consulting
          Agreement has been terminated and no longer has any force or
          effect.

         PATENTS, LICENSES, TRADEMARKS, CONCESSIONS AND ROYALTY AGREEMENTS

         The Company has no patents, licenses, franchises, concessions or
royalty agreements that are material to its business as a whole. During fiscal
year 2002, management may file an application for trademark protection for its
AP+Series products with the United States Patent and Trademark Office. If a
certificate of registration for the trademark "AP+Series" is issued, such
registration will remain in full force and effect for a period of ten years,
subject to satisfaction of certain requirements. Management believes that the
Company has not infringed on any existing patents, trade secrets or confidential
information because the Company developed its own proprietary software that is
used with the AP+Series products. Although management believes that there is no
infringement on existing patents, trade secrets or confidential information,
there is no assurance that such legal proceedings might not be initiated against
the Company.

         GOVERNMENT REGULATION

         The Company's operations may be subject to a variety of laws,
regulations and licensing requirements of federal agencies including, but not
limited to, the U.S. Department of Transportation and the Federal Highway
Administration, as well as state and local authorities. Each of these agencies
may regulate various aspects of licensing, permitting and operations of the
AP+Series and related products. In certain jurisdictions, the Company may be
required to obtain licenses or permits, to comply with standards governing
employee selection and training, and to meet certain standards in the design and
manufacture of the AP+Series and related products. The loss of such licenses, or


                                       17
<PAGE>

the imposition of conditions to the granting or retention of such licenses,
could have a material adverse effect on the Company. Although management
believes that imposition of any such regulations will not impose great burdens
upon the operation of the Company, such regulations are subject to constant
change. Unforeseen changes in such regulations may have a significant impact on
the Company.

         POLITICAL AND ECONOMIC POLICIES IN FOREIGN COUNTRIES

         The Company intends to enter the global marketplace which includes, but
is not limited to, the marketplaces within Europe, South America, Asia & Africa.
As a result, the Company's operations and sale of the AP+Series and related
products in these countries may be subject to political, economic, legal and
other uncertainties occurring within these countries. Changes in policies by the
respective governments may result in changes in laws, regulations or the
interpretation thereof, confiscatory taxation, restrictions on imports and
sources of supply, import duties, corruption, and currency revaluation, all of
which may materially and adversely affect the Company. The continuation or
increase of any such disparities regarding economic reforms and growth could
affect the political and social stability of such countries, and thus the
operations of the Company. Moreover, there can be no assurance that future
controversies will not arise which would threaten trade relations between the
United States and the respective country. In any of such eventualities, the
business of the Company could be adversely affected.

ITEM 2.  PROPERTIES

         Except as otherwise described herein, the Company does not own any real
estate or other properties. On approximately November 10, 2001, the Company
re-located its principal place of business to 9091 North Military Trail, Suites
#8, 9 and 10, Palm Beach Gardens, Florida 33409, telephone number
561.721.2220 and facsimile number 561.721.2225. As of the date of this Annual
Report, the Company no longer maintains an office in Hauppauge, New York. The
Board of Directors of the Company approved the change of the Company's principal
place of business based upon several factors including, but not limited to, the
annual reduction of approximately 50% in monthly rental overhead. As of the date
of this Annual Report, the Company has entered into a two- year lease agreement
with The Marquis Corporation, at a monthly rental rate of $2,900, for an
aggregate amount of $69,600.

ITEM 3.  LEGAL PROCEEDINGS

         HSBC BANK USA

         On September 17, 1996, APP LLC entered into a one-year promissory note
with HSBC Bank USA ("HSBC") which provided that payments of interest only at
prime plus 2% per annum be made, with the principal amount of $470,715 due on
demand. Such promissory note was approximately 90% guaranteed by the Small
Business Administration. During fiscal year 1999, the Company ceased making
payments under the terms of the note, and subsequently entered into negotiations
with HSBC regarding a long-term payout.

         On approximately September 21, 2000, HSBC initiated legal proceedings
against the Company and Richard Goodhart and Steven Wahrman, individually as
guarantors, in the Supreme Court of New York in and for the County of New York
(the "HSBC Lawsuit"). In the HSBC Lawsuit, HSBC alleged that the Company failed
to comply with and was in default under the terms of the promissory note and
supporting financing documents.

                                       18
<PAGE>

         On November 3, 2000, HSBC, the Company and Messrs. Goodhart and Wahrman
entered into a settlement agreement (the "HSBC Settlement Agreement"), pursuant
to which (i) judgment was confessed for the amounts due and owing HSBC; (ii) the
personal guarantees of Messrs. Goodhart and Wahrman were provided and all of the
assets of the Company were pledged as collateral to secure the note; and (iii)
certain payments were made which included a final payment on or before August
20, 2001 of the outstanding balance of total indebtedness. The terms of the HSBC
Settlement Agreement further provided that HSBC (i) agreed to a stipulation of
discontinuance (to withdraw its pending suit without prejudice to the
re-commencement of same upon a default under the HSBC Settlement Agreement, (ii)
agreed to forbear from commencing any other action or proceeding against the
Company and Messrs. Goodhart and Wahrman with respect to the indebtedness of the
Company until August 20, 2001, (iii) agreed to forbear from entering judgment
against the Company and Messrs. Goodhart and Wahrman until August 20, 2001, and
(iv) retain the right to commence an action against the Company and Messrs.
Goodhart and Wahrman in the event the Company defaults under the terms of the
HSBC Settlement Agreement.

         On approximately August 9, 2001, the Company and HSBC renegotiated the
payment terms of the balance due and owing, and HSBC, the Company, Steve Wahrman
and Richard Goodhart entered into a ratification and forbearance agreement (the
"Ratification Agreement"). At the time of execution of the Ratification
Agreement, the Company paid $1,000 to HSBC. The terms of the Ratification
Agreement required the Company to pay the balance due and owing in three monthly
equal installments by October 23, 2001. The forbearance provisions under the
HSBC Settlement Agreement as described above remained in effect.

         As of January 18, 2002, the Company had made all requisite payments and
the promissory note was paid in full.

         NORTH SHORE HOSPITAL

         On August 31, 1999, the Company entered into an agreement with
North-Shore Long Island Jewish Health Systems ("North Shore Hospital") regarding
(i) installation of the APP3000 onboard recording system (which was customized
for use by North Shore Hospital) and related products on North Shore Hospital
ambulances, and (ii) provision of services to integrate the installed APP3000
and related products with existing technologies utilized by North Shore
Hospital. During fiscal year 2000, the Company installed one APP3000 onboard
recording system on an ambulance as a test unit and, subject to performance, the
Company would then be required to install an additional twenty-nine APP3000
onboard recording systems.

         On approximately April 3, 2001, North Shore Hospital initiated legal
proceedings against the Company in the Supreme Court of the State of New York,
in and for the County of Nassau (the "North Shore Lawsuit"). In the North Shore
Lawsuit, North Shore Hospital alleges breach of contract relating to a purchase
order under which the Company was to install a monitoring system on North Shore
Hospital's fleet of ambulances.

      On approximately May 29, 2001, the Company filed its answer and
counter-claim in which it disputes these allegations and asserted counter-claims
alleging breach of contract and tortuous interference of contractual rights.
Management anticipates that the parties will engage in discovery and document
production. The Company believes it has meritorious counter-claims and intends
to aggressively pursue all such legal actions and available remedies. The
Company has also suspended performance of its duties under the agreement with
North Shore Hospital.

                                       19
<PAGE>

         As of the date of this Annual Report, management of the Company and
North Shore are engaged in negotiations regarding settlement of the North Shore
Lawsuit.

         Management is not aware of any other legal proceedings contemplated by
any governmental authority or other party involving the Company or its
properties. No director, officer or affiliate of the Company is (i) a party
adverse to the Company in any legal proceedings, or (ii) has an adverse interest
to the Company in any legal proceedings. Management is not aware of any other
legal proceedings pending or that have been threatened against the Company or
its properties. Although the Internal Revenue Service and the Employment
Commission of the State of New York have filed liens against the Company,
respectively, as a result of unpaid payroll taxes, these governmental entities
have not initiated legal proceedings against the Company to seize the Company's
assets to pay such taxes.

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

         On November 5, 2001, the Company filed an Information Statement
pursuant to Section 14(c) of the Securities Exchange Act of 1934, as amended.
The Information Statement was mailed to all shareholders of the Company in
connection with the proposed taking of corporate action pursuant to the written
consent of shareholders to be effective November 26, 2001. The Information
Statement and the accompanying documents were mailed to shareholders on or about
November 6, 2001.

         The written consent of shareholders signed by ten (10) or less
shareholders holding a majority of the outstanding shares of Common Stock, which
was effective November 26, 2001: (i) approved and authorized the Board of
Directors to effectuate the reverse stock split of one-for-ten on November 26,
2001; (ii) approved and ratified the election of Richard J. Goodhart, Jean-Paul
Daveau, Jean-Claude Perche, Steven H. Wahrman and Rhett Kirchhoff as the
directors of the Company; and (iii) ratified the selection of Grassi & Co, P.C.
as the independent public accountants of the Company for the fiscal year ending
December 31, 2001.

         REVERSE STOCK SPLIT. On November 16, 2001, the Company filed a 10b-17
notice with the National Association of Securities Dealers, Inc. to effectuate
the reverse stock split as of November 26, 2001. On November 26, 2001, the
reverse stock split was effectuated and the 19,369,007 shares of common stock
issued and outstanding were reduced to 1,936,901 shares of common stock issued
and outstanding.

         The Board of Directors of the Company unanimously authorized and
approved the reverse stock split based on analysis of certain factors including,
but not limited to, the following: (i) the Company intends to use its best
efforts in the future to cause its shares of common stock to be approved for
trading on the American Stock Exchange (the "American Stock Exchange") and the
Company has not previously been able to qualify for listing on the American
Stock Exchange because its per-share price of $0.23 is below the level required
for listing on the American Stock Exchange and its net tangible assets and
shareholders' equity are below the minimum requirements of $4,000,000 and
$2,000,000, respectively, for inclusion on the American Stock Exchange; (ii)


                                       20
<PAGE>

management believes that, based on future generation of revenues and offerings
of common stock, the Company may be able to meet the net tangible assets
requirement and shareholder equity requirement imposed by the American Stock
Exchange; (iii) a reverse stock split at a level of one-to-ten may be sufficient
to enable the Company in the future to meet such requirements for listing on the
American Stock Exchange; and (iv) a reverse stock split may help the Company to
attain both of its goals of achieving a per-share price in excess of $3.00 and
increasing the marketability and liquidity of the Company's Common Stock.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         MARKET INFORMATION

         On December 27, 2000, the Company's common stock commenced trading on
the Over-the-Counter Bulletin Board under the symbol "ACPL". The market for the
Company's common stock is limited, volatile and sporadic. The following table
sets forth the high and low sales prices relating to the Company's common stock
for fiscal year 2001. These quotations reflect inter-dealer prices without
retail mark-up, mark-down or commissions, and may not reflect actual
transactions.

                                               FISCAL YEAR ENDED
                                               DECEMBER 31, 2001

                                           HIGH BID          LOW BID
                                           --------          -------

First Quarter                               $32.50            $14.38
Second Quarter                               10.50              4.50
Third Quarter                                 6.50              1.60
Fourth Quarter                                1.75              1.50

First Quarter 2002                          $ 0.95            $ 0.21

         HOLDERS

         The 9,995,262 shares of common stock outstanding as of the date of
this Annual Report are held by approximately 171 holders of record.

         DIVIDENDS

         The Board of Directors has never authorized or declared the payment of
any dividends on the Company's common stock and does not anticipate the
declaration or payment of cash dividends in the foreseeable future. The Company
intends to retain future earnings, if any, to finance the development and
expansion of its business. Future dividend policies will be subject to the
discretion of the Board of Directors and will be contingent upon, among other
things, future earnings, the Company's financial condition, capital
requirements, general business conditions, level of debt, restrictions with
respect to payment of dividends with respect to bank loans, and other relevant
factors.

         FORWARD STOCK SPLIT

         On January 19, 2002, the Board of Directors of the Company authorized
and approved a forward stock split of 1 to 1.2 common shares effective April 10,
2002. The Board of Directors based its decision upon an analysis of the
Company's potential business prospects, which the Board of Directors believes,
will quickly escalate the Company's growth over the next six months. The Board
of Directors further believes that the future per-share price of the common


                                       21
<PAGE>

stock will reflect that growth, and thus determined that this was an opportunity
to reward the Company's shareholders and increase the number of available shares
on the market.

         On March 25, 2002, the Company filed a 10b-17 notice with the National
Association of Securities Dealers, Inc. to effectuate the forward stock split as
of April 10, 2002. On April 10, 2002, the reverse stock split was effectuated
and the 8,783,931 shares of common stock issued and outstanding were increased
to 10,540,717 shares of common stock issued and outstanding.

         RECENT SALES OF UNREGISTERED SECURITIES

     (i)  During fiscal years 1999 and 2000, the Company executed several
          convertible promissory notes aggregating approximately $952,500. The
          terms of the respective notes are generally (i) accrual of interest at
          either 10% or 15% per annum payable monthly in arrears or upon
          maturity, (ii) due and payable on December 31, 2001, and (iii) after
          September 30, 2000, the noteholder has the right to convert the
          principal and accrued interest in whole or in part into shares of
          common stock at $14.50 per share.

          During January 2001, seven noteholders exercised their respective
          right to convert the principal and accrued interest on the notes into
          shares of common stock. Pursuant to the terms of the convertible
          notes, the Company issued an aggregate of 5,592 shares of its common
          stock to the seven noteholders based upon conversion of notes in the
          aggregate amount of $76,400 of principal and $4,688 of interest. The
          Company issued the shares to the seven noteholders in reliance upon
          the exemption from registration provided by Section 4(2) and
          Regulation D, Rule 506, of the Securities Act of 1933, as amended (the
          "Securities Act"). The noteholders represented to the Company that
          they acquired the shares for their own respective accounts, and not
          with a view to distribution, and that the Company made available to
          them all material information concerning the Company.

          During April 2001, three noteholders exercised their respective right
          to convert the principal and accrued interest on the notes into shares
          of common stock. Pursuant to the terms of the convertible notes, the
          Company issued an aggregate of 68,081 shares of its common stock to
          the three noteholders based upon conversion of notes in the aggregate
          amount of $787,000 of principal and $119,088 of interest. The Company
          issued the shares to the three noteholders in reliance upon the
          exemption from registration provided by Section 4(2) and Regulation D,
          Rule 506, of the Securities Act. The noteholders represented to the
          Company that they acquired the shares for their own respective
          accounts, and not with a view to distribution, and that the Company
          made available to them all material information concerning the
          Company.

    (ii)  During 2001, the Company entered into a settlement agreement with
          Descap Financial Services ("DFS") pursuant to which the Company agreed
          to settle a debt in the approximate amount of $191,000 due and owing
          to DFS which included consulting fees, back rent for office space and
          funding assistance. Pursuant to the terms of the settlement agreement,
          the Company agreed to issue an aggregate of 27,662 shares of its
          restricted common stock to DFS at $0.47 per share as settlement of the
          aggregate debt due and owing to DFS; and (ii) DFS agreed to accept the
          issuance of the 27,662 shares as settlement for such debt. The Company
          issued the shares to DFS in reliance upon the exemption from
          registration provided by Section 4(2) of the Securities Act. DFS
          represented to the Company that it acquired the shares for its own
          account, and not with a view to distribution, and that the Company
          made available to it all material information concerning the Company.

                                       22
<PAGE>

    (iii) On May 1, 2001, the Company issued 17,500 shares of its restricted
          common stock at $14.50 per share to DFS in settlement of a debt in the
          amount of $253,750. DFS agreed to accept issuance of the 17,500
          shares of restricted common stock at $14.50 per share in settlement of
          an aggregate debt in the amount of $253,750 due and owing. The Company
          issued the shares to the creditor in reliance upon the exemption from
          registration provided by Section 4(2) of the Securities Act. The
          creditor represented to the Company that he acquired the shares for
          his account, and not with a view to distribution, and that the Company
          made available to him all material information concerning the Company.

     (iv) The Company and Bristol Consulting Ltd. ("Bristol") entered into a
          consulting agreement dated July 30, 1998 for a period of five years
          (the "Consulting Agreement") pursuant to which the Company agreed to
          pay Bristol a monthly fee of $5,000 for the first three months of
          the Consulting Agreement and thereafter a monthly fee of $10,000
          for the duration of the Consulting Agreement for services rendered by
          Bristol to the Company. In accordance with the terms of the Consulting
          Agreement, Bristol has the option to convert any debt due and owing
          Bristol under the Consulting Agreement into shares of the Company's
          restricted common stock at the rate of $0.132 per share.

          During fiscal years 1999 and 2000, Bristol advanced funds to the
          Company for working capital, which amounts were evidenced by a series
          of promissory notes, as amended.

          As of August 6, 2001 and August 27, 2001, the Company and Bristol
          entered into an agreement buyout and forgiveness of debt (the
          "Forgiveness of Debt Agreement") evidencing an aggregate of
          $874,778.78 due and owing Bristol as follows: (i) notes payable of
          $38,500.00; (ii) notes payable short term of $156,000.00; (iii)


                                       23
<PAGE>

          accounts payable prior to year 2000 of $71,650.00; (iv) accrued
          consulting fees year 2000 of $160,000.00; (v) accrued interest-long &
          short term of $14,483.72; (vi) accrued travel & business expenses of
          $52,145.00; (vii) accounts accrued payable of $102,000.06; and (viii)
          balance owed against Consulting Agreement of $280,000.00.

          As of August 27, 2001, the Company and Bristol entered into a
          settlement agreement (the "Settlement Agreement") pursuant to which
          the Company ratified and confirmed that Bristol and its assignees have
          the option to convert debt due and owing Bristol into shares of common
          stock at the rate of $0.132 per share, and agreed to settle the
          aggregate debt of $874,778.78 due and owing by the granting of such
          option to Bristol and its assignees to convert the aggregate debt into
          6,627,112 shares of the Company's restricted common stock at the rate
          of $0.132 per share (which option would not be subject to adjustments
          pursuant to any reverse stock split, recapitalization, combination of
          shares, exchange of shares or other like change in the capital
          structure of the Company, based upon Bristol's role in bringing new
          management to the Company, assistance in raising additional capital in
          which certain shares of common stock issued to Bristol have been and
          will be used to satisfy other contractual debts of the Company).

          On November 14, 2001, the Board of Directors held a meeting at which
          it (i) ratified the Settlement Agreement and approved the issuance of
          6,627,112 shares of its restricted Common Stock to Bristol and its
          assignees to satisfy the debt of $874,778.78; (ii) acknowledged that
          Bristol had entered into certain assignment agreements dated July 30,
          1998 with Sampson Global Ltd., World Asset Management Ltd. and
          Atlantic Financial Enterprises Ltd., respectively (the "Entities) in
          which Bristol proportionately assigned to the Entities certain of its
          rights to the debt and to its right to the option to convert the debt
          into shares of common stock; (iii) acknowledged receipt of conversion
          notices from the Entities, respectively; (iv) authorized the issuance
          of an aggregate of 1,098,485 shares of its restricted common stock to
          the Entities to settle a portion of the debt due and owing to Bristol
          in the amount of $145,000.00.

          On November 30, 2001, the Company issued the shares to Sampson Global
          Ltd., World Asset Management Ltd. and Atlantic Financial Enterprises
          Ltd. in reliance upon the exemption from registration provided by
          Section 4(2) of the Securities Act. Each of the Entities represented
          to the Company that it acquired the shares for its own respective
          account, and not with a view to distribution, and that the Company
          made available to it all material information concerning the Company.

          As of December 13, 2001, the Company and Bristol entered into an
          amendment to the Forgiveness of Debt Agreement evidencing an aggregate
          of $890,916.44 due and owing Bristol as follows: (i) accounts payable
          of $71,650.00; (ii) notes payable of $223,403.89; (iii) accrued
          interest of $10,862.55; (iv) accrued consulting fees payable of
          $345,000.00; and (v) balance owed against Consulting Agreement of
          $240,000.00.

                                       24
<PAGE>

          As of December 13, 2001, the Company and Bristol entered into an
          amendment to the Settlement Agreement pursuant to which the Company
          ratified and confirmed that Bristol and its assignees have the option
          to convert debt due and owing Bristol into shares of common stock at
          the rate of $0.132 per share, and agreed to settle the aggregate debt
          of $890,916.44 due and owing by the granting of such option to Bristol
          and its assignees to convert the aggregate debt into 6,749,367 shares
          of the Company's restricted common stock at the rate of $0.132 per
          share (which option would not be subject to adjustments pursuant to
          any reverse stock split, recapitalization, combination of shares,
          exchange of shares or other like change in the capital structure of
          the Company, based upon Bristol's role in bringing new management to
          the Company, assistance in raising additional capital in which certain
          shares of common stock issued to Bristol have been and will be used to
          satisfy other contractual debts of the Company).

          On January 16, 2002, the Board of Directors held a meeting at which it
          (i) approved the amendment to the Settlement Agreement and the
          issuance of 6,749,367 shares of restricted common stock to Bristol and
          its assignees to satisfy the debt of $890,916.44; (ii) acknowledged
          that Bristol had entered into certain assignment agreements dated July
          30, 1998 with Sampson Global Ltd., World Asset Management Ltd. and
          Atlantic Financial Enterprises Ltd., respectively, in which Bristol
          proportionately assigned to the Entities certain of its rights to the
          debt and to its right to the option to convert the debt into shares of
          common stock; (iii) acknowledged receipt of a conversion notice from
          Sampson Global Ltd.; (iv) authorized the issuance of an aggregate of
          454,545 shares of its restricted common stock to Sampson Global Ltd.
          and the issuance of 5,196,337 shares of its restricted common stock to
          Bristol to settle the remaining debt due and owing to Bristol in the
          amount of $745,916.44.

          On January 24, 2002, the Company issued the shares to Bristol and
          Sampson Global Ltd. in reliance upon the exemption from registration
          provided by Section 4(2) of the Securities Act. Bristol and Sampson
          Global Ltd. each represented to the Company that it acquired the
          shares for its own respective accounts, and not with a view to
          distribution, and that the Company made available to it all material
          information concerning the Company.

          In September 2001, the Company entered into a Settlement Agreement
          with Royce. Pursuant to which the Company agreed to settle a debt in
          the approximate amount of $123,000. Due and owing to which included
          consulting fees. The Company agreed to issue an aggregate of 30,000
          shares.

See "Item 11. Security Ownership of Certain Beneficial Owners and Management".

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

         Statements made in this Form 10-KSB that are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor
provisions of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934. These statements often can be identified by the
use of terms such as "may," "will," "expect," "believe," "anticipate,"
"estimate," "approximate" or "continue," or the negative thereof. The Company
intends that such forward-looking statements be subject to the safe harbors for
such statements. The Company wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. Any forward-looking statements represent management's best judgment as to
what may occur in the future. However, forward-looking statements are subject to
risks, uncertainties and important factors beyond the control of the Company
that could cause actual results and events to differ materially from historical
results of operations and events and those presently anticipated or projected.
These factors include adverse economic conditions, risks of foreign operation,
entry of new and stronger competitors, inadequate capital and unexpected costs.
The Company disclaims any obligation subsequently to revise any forward-looking
statements to reflect events or circumstances after the date of such statement
or to reflect the occurrence of anticipated or unanticipated events.

                                       25
<PAGE>

         This section should be read in conjunction with the Company's
Consolidated Financial Statements included herein. Certain of the financial
statements and the discussion below in the comparative fiscal year ends include
reference to accounts and balances of the Company, which includes APP LLC,
IPS-NY, APP UK and APP France, the Company's wholly-owned subsidiaries.

         GENERAL

         As of the date of this Annual Report, management of the Company
believes that the Company is in a viable operational position. Management of the
Company also believes that the AP+Series products are now fully integrated
logistic solution systems that have increased the Company's marketability
expotentially. Management believes that upon finalization its AP+Series products
will be able to satisfy any vehicle specifications and requirements worldwide.
The design for the APP3000 system has been finalized and is ready for sale and
distribution to the target market. The Company is continuing its development of
the APP4000 system. Management anticipates that the APP4000 system will include
features such as a global positioning system ("GPS") for vehicular tracking,
mapping and communications, an in-vehicle alcohol sensor/breathalyzer unit, a
fatigue sensor which will monitor and record driver alertness, and a fingerprint
application for greater security when used in conjunction with the "Smart card".
Management intends to focus on integration of the APP4000 system's features with
satellite communication to further meet the needs of the transportation
companies. As of the date of this Annual Report, management anticipates that
development of the APP4000 system will be completed in approximately two months.

         During the prior fiscal years, the Company focused primarily on the
research, development and design of the AP+Series products and related products,
and generated little revenues. During those prior fiscal years, the principals
of the Company invested personal funds, arranged for loans and lines of credit
from private lenders and financial institutions, and secured grants to support
the research and development expenses of the Company.

         During fiscal year 2001, management of the Company deemed it imperative
that the business operations of the Company be directed and focused on the
distribution, marketing and sales channels for its products. As of the date of
this Annual Report, the Company derives its revenues principally from the
marketing and sale of onboard recording systems, called the AP+Series products,
and other related products to customers generally in the fleet management and
driver training industries. Additional revenues are generated by the Company
through the implementation of maintenance contracts and integration contracts
and its subsidiary.

         Management intends to focus the Company's marketing strategy for the
sale and distribution of its AP+Series products in North American, South
America, Central America, Europe and the Pacific Rim. The Company has entered
into contractual relations regarding sales, service and installation with two
prominent companies within the transportation industry. One agreement covers the
United Kingdom and the other agreement covers North America.

                                       26
<PAGE>

         During fiscal year ended December 31, 2001, sales of the AP+Series and
related products to the Company's customers accounted for approximately 100% of
total gross revenues. Although the Company intends to expand its marketing of
the AP+Series and related products in non-transportation industries, such as the
medical fields, management of the Company believes that sales of the AP+Series
and related products to its customers in the fleet management and driver
training industries will continue to be an important line of business for the
Company for the next several years.

         FISCAL YEAR ENDED DECEMBER 31, 2001 COMPARED WITH FISCAL YEAR ENDED
         DECEMBER 31, 2000

         RESULTS OF OPERATION. The Company's net losses for fiscal year ended
December 31, 2001 were approximately $2,667,354 compared to a net loss of
approximately $2,663,308 for fiscal year ended December 31, 2000 (an increase of
$4,046 or 1%).

         Net sales for fiscal years ended December 31, 2001 and 2000 were
$64,628 and $654,568, respectively. Net sales decreased by approximately
$589,940 or 90% for fiscal year ended December 31, 2001 as compared to fiscal
year ended December 31, 2000. The decrease in net sales during fiscal year ended
December 31, 2001 was primarily due to the lack of substantial sales of the
Company's AP+Series products to its customers.

         Gross profit (loss) for fiscal years ended December 31, 2001 and 2000
amounted to $(52,053) and $462,838, respectively, or a net decrease of $514,891.

         The decrease in gross profit is primarily a result of a decrease in net
sales during fiscal year ended December 31, 2001. Moreover, the overall decrease
in net sales and gross profit during fiscal year ended December 31, 2001 as
compared with the net sales and gross profit realized during fiscal year ended
December 31, 2000 is primarily a result of discounts for volume purchases,
reduced component costs, and cost savings from the redesign of the PC board,
which were realized during fiscal year ended December 31, 2000 and which factors
were not reflected in net sales and gross profit realized during fiscal year
ended December 31, 2001. Management also attributes the net sales and gross
profit realized during fiscal year ended December 31, 2000 to a strong marketing
campaign and fulfillment of major contracts, which factors were not as
successfully realized during fiscal year ended December 31, 2001. In order to
increase net sales and gross profit for fiscal year 2002, the Company has
entered into various agreements with certain entities to establish distribution
channels, corporate structures, contract applications in foreign and domestic
countries, performance of certain pilot tests, and development of new products.

         The substantial increase in net loss during fiscal year ended December
31, 2001 as compared to fiscal year ended December 31, 2000 is also attributable
to selling, general and administrative expenses. Selling, general and
administration expenses include general corporate overhead, administrative
salaries, shipping and warehousing costs, selling expenses, consulting costs,
and professional fees.

                                       27
<PAGE>

         Selling, general and administrative expenses for fiscal years ended
December 31, 2001 and 2000 were $1,921,972 and $2,351,079, respectively (a
decrease of $429,107 or 18%). The decrease in selling, general and
administrative expenses for fiscal year ended December 31, 2001 were primarily
due to the Company incurring less cost associated with its officers salaries,
consulting/professional fees, and personnel costs.

         Research and development expenses for fiscal year ended December 31,
2001 were $7,393 as compared to $150,645 for fiscal year ended December 31, 2000
(a decrease of $143,252). The decrease in research and development expenses
during fiscal year ended December 31, 2001 is primarily due to limited funds and
the emphasis by the Company on the marketing of its products as compared to the
dedication of funds to research and development during fiscal year ended
December 31, 2000 for the development of an upgradeable modular unit (to assist
in product line diversification), the development of an advanced system to be
used in ambulances pertaining to the contract between the Company and North
Shore Hospital, and the emphasis on the perfection and expansion of the
capabilities of the Company's products. Management believes that as the
Company's cash flow increases, additional funds will be expended on further
research and development relating to new products. Management intends to hire
in-house engineers to lower the expenses related to subcontracting out for the
development of its products.

         Interest expense decreased to $139,634 during fiscal year ended
December 31, 2001 compared to interest expense of $292,169 during fiscal year
ended December 31, 2000 (a decrease of $152,535 or 52%). The decrease in
interest expense resulted primarily from the settlement of certain debts and
accrued interest due and owing and the conversion of certain convertible notes
payable.

         Other losses during fiscal year ended December 31, 2001 include
amortization of debt discount in the amount of $526,451, resulting from the debt
settlement with Bristol.

         As a result of these factors, net loss for the year ended December 31,
2001 was $2,667,354, an increase of $4,046 or 1%, as compared to a net loss of
$2,663,308 for the year ended December 31, 2000. Management believes that the
increase in net loss during the fiscal year ended December 31, 2001 as compared
to fiscal year ended December 31, 2000 is attributable primarily to a
substantial decrease in net sales, the incurrence of selling, general and
administrative expenses, and the amortization of debt discount. The Company's
comprehensive net loss during fiscal year ended December 31, 2001 was
approximately ($2,673,029) or ($1.43) per common share compared to a
comprehensive net loss of ($2,658,298) or ($1.50) per common share during the
fiscal year ended December 31, 2000. The weighted average number of common
shares outstanding were 1,870,282 for fiscal year ended December 31, 2001
compared to 1,780,632 for fiscal year ended December 31, 2000.

         LIQUIDITY AND CAPITAL RESOURCES. The Company is experiencing a
liquidity crisis and is raising additional capital. Further, the Company has not
generated sufficient cash flow to fund its operations and activities.
Historically, the Company has relied upon internally generated funds, funds from
the sale of shares of stock and loans from its shareholders and private
investors to finance its operations and growth. Management intends to raise


                                       28
<PAGE>

additional capital through further public or private offerings of its stock or
loans from private investors, although there can be no assurance that the
Company will be able to obtain such financing. The Company's future success and
viability are entirely dependent upon the Company's ability to generate
sufficient revenues and to raise of additional capital. Management is optimistic
that the Company will be successful in its capital raising efforts; however,
there can be no assurance that the Company will be successful in raising
additional capital. The failure to raise additional capital will have a material
and adverse affect upon the Company and its shareholders.

         The Company's financial statements have been prepared assuming that it
will continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of
liabilities that might be necessary should the Company be unable to continue in
operations.

         The Company generated $64,628 in net sales as of fiscal year ended
December 31, 2001, a decrease of approximately 90% over revenues of $654,568
generated as of fiscal year ended December 31, 2000. Although there was a
decrease in net sales during fiscal year ended December 31, 2001, management
anticipates that overall generation of revenues will continue to increase on an
annual basis based on existing contracts and pilot programs for testing of the
products that are now coming to finalization. Pilot programs currently exist
with approximately seventeen companies.

         Management believes that the Company's continued growth and financial
success will depend on its ability to (i) strengthen and increase its customer
base by enhancing and diversifying use of the AP+Series products and related
products; (ii) increase the number of customers and expand into additional
markets; (iii) control production costs; and (iv) increase the production rate
of the AP+Series products and related products.

         As of December 31, 2001, the Company's current assets were $44,456 and
its current liabilities were $4,156,005, which resulted in a working capital
deficit of $4,111,549. As of December 31, 2001, the Company's total assets were
$113,973 and its total liabilities were $4,156,005. As of December 31, 2001, the
Company's total liabilities exceeded its total assets by $4,042,032. The
Company's stockholders' deficit decreased from ($4,660,145) for fiscal year
ended December 31, 2000 to ($4,223,221) for fiscal year ended December 31, 2001.

         As of December 31, 2001, the Company was not in compliance with terms
of certain loans due to a financial institution in the approximate amount of
$535,522, requiring the loan to be reflected as current liabilities. As of the
date of this Annual Report, the financial institution has either taken limited
action or no action. Although management is optimistic that they will be able to
negotiate waivers and/or restructure this loan, investors are cautioned that
there can be no assurance that management will be able to achieve these
objectives. Also, included in the current liabilities are accounts payable of
$935,723, $816,453 of notes and loans payable-related parties, $1,334,764 of
accrued expenses and other liabilities, $250,000 in convertible note
payable-related parties, $180,000 of convertible note payable.

         As of December 31, 2001, the Company's assets consisted primarily of
$38,675 in inventory, $5,781 in prepaid expenses, $26,413 in property and
equipment, and $43,104 in other long term assets.

                                       29
<PAGE>

         For the fiscal year ended December 31, 2001, the net cash used in
operating activities was $318,309 compared to $1,045,282 for fiscal year ended
December 31, 2000 (a decrease of $726,973 or 70%). The decrease in net cash
used in operating activities was comprised of (i) amortization of debt discount
of $526,451 for fiscal year ended December 31, 2001 compared to $-0- for fiscal
year ended December 31, 2001; and (ii) common stock issued for consulting and
other expenses of $492,471 for fiscal year ended December 31, 2001 compared to
$-0- for fiscal year ended December 31, 2000.

         The Company increased its capital expenditures to $10,515 for fiscal
year ended December 31, 2001 compared to $3,494 for fiscal year ended December
31, 2000, all of which relate to the purchase of equipment.

         The Company decreased its net cash from financing activities for fiscal
year ended December 31, 2001 to $328,234 compared to $1,025,620 for fiscal year
ended December 31, 2000 (a decrease of $697,386 or 70%). The major components
were (i) repayments of notes and loans payable of $368,105 for fiscal year ended
December 31, 2001 compared to $164,012 for fiscal year ended December 31, 2000;
and (ii) proceeds from issuance of notes/loans payable and cash contribution by
shareholder of $221,565 and $440,866, respectively, for fiscal year ended
December 31, 2001 compared to $1,143,000 proceeds from issuance of convertible
notes payable for fiscal year ended December 31, 2000.

         The Company may have violated federal and state securities laws in
connection with the sales of its shares of common stock to investors under a
private placement offering that was not registered under the federal securities
laws. The offering and sale of such shares of the Company's common stock
pursuant to its Private Placement Memorandum dated January 27, 1999 and April 7,
1999, respectively, was conducted pursuant to an exemption from registration in
accordance with Regulation D, Rule 504, under the Securities Act. The Company
continued to sell its shares of common stock to investors after the date the
Company effectively became a reporting company under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The exemption under Rule 504 of
Regulation D and any other exemption may not have been available to the Company
for these sales. As a result, the private placement may have violated federal
securities laws. Moreover, certain state securities rules and regulations may
not have been complied with to ensure availability of a private placement
transactional exemption. As of December 31, 2001, the Company had repaid to
investors proceeds of $21,750 from the issuance of such stock. As of December
31, 1999, the Company had received proceeds in the amount of $202,939 from the
issuance of shares of Common Stock to investors under the private placement
offerings, which may be in possible violation of federal and state securities
laws. As of the date of this Annual Report, management estimates that the
Company's potential rescission liability is in the amount of $181,189.

         MATERIAL COMMITMENTS

         In connection with the research and development expenses and other
overhead costs over the prior fiscal years, the Company, through its subsidiary
and other arrangements with its officers/shareholders, borrowed funds pursuant
to various contractual arrangements representing the following material
commitments.

                                       30
<PAGE>

         BANK OF SMITHTOWN. A significant and estimated commitment for the
Company for fiscal year 2002 is the amounts due and owing under a promissory
note with Bank of Smithtown. On November 30, 1998, the Company, its
subsidiaries, IPS-NY and APP LLC, and Richard Goodhart entered into a settlement
agreement with the Bank of Smithtown in connection with a default by IPS-NY
under a promissory note dated April 13, 1995 in the amount of $100,000 and a
second promissory note dated December 24, 1996 in the amount of $500,000.
Pursuant to the terms of the settlement agreement, IPS-NY made two separate
payments of $23,208 and $20,000 during November 1998 and a payment of $16,792
during March 1999. Additionally, IPS-NY executed a new promissory note in the
amount of $60,620 bearing interest at 9% per annum and maturing in one year
(representing the accrued and unpaid interest on the original note of $500,000).
In lieu of canceling the original $500,000 note, the Company also executed a new
promissory note in the amount of $500,000 bearing interest at prime plus 2% per
annum. Pursuant to the terms of the new promissory note, the Company is required
to make monthly payments of (i) $5,000 during the first year (December 1, 1998
through November 30, 1999), (ii) $10,000 during the second year (December 1,
1999 through November 30, 2000, and (iii)$15,000 during the third year (December
1, 2000 through November 30, 2001. At the end of the third year, the entire
principal balance remaining together with any accrued interest shall be due and
payable. Such notes associated with the settlement agreement are secured by the
assets of the Company and the shares of Common Stock owned of record by Richard
Goodhart, the Company's then Chief Executive Officer.

         As of December 31, 2001, the principal balance on the newly issued
$500,000 note, the newly issued $60,620 note and the original $100,000 note are
$424,200, $43,828 and $24,509, respectively. Although the Company has complied
with its payment obligations through December 31, 2000, as of the date of this
Annual Report, the Company is not in compliance with its monthly payment
schedule. Management believes that it will be successful in re-negotiating the
terms and conditions of the settlement agreement with Bank of Smithtown in order
to reduce its monthly payments. Management anticipates that the renegotiated
monthly payments will be reduced by approximately $7,500 per month
(approximately 50%). As of the date of this Annual Report, Bank of Smithtown has
not initiated any legal action against the Company.

         EMPLOYMENT AGREEMENTS. The Company entered into employment agreements
dated July 1, 2001, with three of its executive officers/directors, Mr. Richard
J. Goodhart, Mr. Steven Wahrman and Mr. Jean Paul Daveau (collectively, the
"Employment Agreements"). Pursuant to the terms and provisions of the Employment
Agreements, each officer/director is to receive (i) an annual salary of
$120,000; (ii) an annual cash bonus equal to one percent (1%) of the annual net
profits for the preceding fiscal year; and (iii) stock options to purchase
500,000 shares of restricted common stock of the Company at $1.45 per share
within five years from the effective date of the employment agreement. Other
benefits provided for in each respective employment agreement are disability and
health insurance coverage, automobile and expense allowances and travel and
entertainment allowances.

         Pursuant to the provisions of the respective Employment Agreements,
stock options (not to be governed by the Non-Qualified Stock Option Plan) were
granted to (i) Mr. Richard Goodhart to purchase 4,121,128 shares of restricted
common stock at $0.34 per share; (ii) Mr. Steven Wahrman to purchase 1,617,840
shares of restricted common stock at $0.34 per share; and (iii) Mr. Jean Paul
Daveau to purchase 1,500,000 shares of restricted common stock at $0.34 per
share, within five years (collectively, the "Stock Options").

         The Stock Options granted to Messrs. Goodhart, Wahrman and Daveau in
the amounts set forth above at an exercise price of $0.34 per share, which
exercise price the board of directors of the Company believed was at least equal
to the fair market value price of the Company's shares of common stock on June


                                       31
<PAGE>

29, 2001. The board of directors authorized and approved the grant of Stock
Options, which included provisions for anti-dilution protection. The grant of
such Stock Options was absolute and not subject to adjustment for any future
reorganization, recapitalization, reverse stock split, combination of shares,
merger or consolidation.

         As of the date of this Annual Report, the Company has not paid any
salary or amounts towards accrued interest to any of the executive
officers/directors under the Employment Agreements. As of December 31, 2001, the
officer/director each has respectively waived the accrual and payment of such
salary and interest in the aggregate amount of $590,000, and released the
Company from any liability thereunder. See "Item 10. Executive Compensation".

         As of the date of this Annual Report, management of the Company intends
to enter into negotiations regarding termination of the respective Employment
Agreements, and the action of the then Board of Directors regarding the issuance
of the Option Plan.

         PAYROLL TAXES. As of December 31, 2001, the Company owes approximately
$97,000 for payroll taxes and related estimated penalties and interest. The
Internal Revenue Service and the Employment Commission of the State of New York
have filed liens against the Company, respectively. Such taxing authorities have
the power to generally seize the assets of the Company to pay off such amounts
due and owing.

         As of the date of this Annual Report, the Company is engaged in
negotiations with and has offered a compromise to the Internal Revenue Service
to reduce the Company's liability. The Company has not entered into any formal
contractual arrangements with the State of New York for repayment of such taxes,
penalties and interest. Management intends to continue making payments as funds
are available until such arrangements are consummated.

         Management of the Company anticipates that its ability to raise
additional capital from private investors through the sale of debt or equity
instruments, and the ability of the Company to generate future revenues from the
sale of its AP+Series products and related products, will provide the necessary
funds to the Company for payment of such expenses associated with its material
commitments for fiscal year 2002.

         AUDIT COMMITTEE

         As of the date of this Annual Report, the Company has not appointed
members to an audit committee and, therefore, the respective role of an audit
committee has been conducted by the board of directors of the Company. When
established, the audit committee's primary function will be to provide advice
with respect to the Company's financial matters and to assist the board of
directors in fulfilling its oversight responsibilities regarding finance,
accounting, tax and legal compliance. The audit committee's primary duties and
responsibilities will be to: (i) serve as an independent and objective party to
monitor the Company's financial reporting process and internal control system;
(ii) review and appraise the audit efforts of the Company's independent
accountants; (iii) evaluate the Company's quarterly financial performance as
well as its compliance with laws and regulations; (iv) oversee management's
establishment and enforcement of financial policies and business practices; and
(v) provide an open avenue of communication among the independent accountants,
management and the board of directors.

                                       32
<PAGE>

         The board of directors has considered whether the regulatory provision
of non-audit services is compatible with maintaining the principal independent
accountant's independence.

         AUDIT FEES. As of the date of this Annual Report, the Company has
incurred approximately $43,000 as fees billed by its principal independent
accountant for professional services rendered in connection with preparation of
the Company's audited financial statements for fiscal year ended December 31,
2001. For fiscal year ended December 31, 2001, the Company incurred
approximately $16,500 as fees billed by its prior principal independent
accountant for all other non-audit services (including reviews of the Company's
quarterly financial statements).

ITEM 7.  FINANCIAL STATEMENTS

         The information required under Item 310(a) of Regulation S-B is
included in this report as set forth in the "Index to Consolidated Financial
Statements".

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


                                       33
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





                                                                        Page No.
                                                                        --------

Independent Auditors' Report                                               F-1


Consolidated Balance Sheet                                                 F-2
  At December 31, 2001


Consolidated Statements of Operations and Comprehensive Loss               F-3
  For the Years Ended December 31, 2001 and 2000


Consolidated Statements of Stockholders' Deficiency                    F-4 - F-5
  For the Years Ended December 31, 2000 and 2001


Consolidated Statements of Cash Flows                                  F-6 - F-7
  For the Years Ended December 31, 2001 and 2000


Notes to Consolidated Financial Statements                            F-8 - F-27










<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------




To the Board of Directors
Accident Prevention Plus, Inc.


We have audited the accompanying consolidated balance sheet of Accident
Prevention Plus, Inc. and Subsidiaries as of December 31, 2001, and the related
consolidated statements of operations and comprehensive loss, stockholders'
deficiency, and cash flows for the years ended December 31, 2001 and 2000. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides 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 Accident Prevention
Plus, Inc. and Subsidiaries as of December 31, 2001 and the results of their
operations and their cash flows for the years ended December 31, 2001 and 2000
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, has not generated significant revenue from its operations and
at December 31, 2001 has a net working capital deficiency and a stockholders'
deficiency. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plan in regard to these matters are
also described in Note 2. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.





----------------------------
GRASSI & CO., CPAs, P.C.


New York, New York
March 14, 2002

                                      F-1
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                              AT DECEMBER 31, 2001


                                     ASSETS
                                      -----


      Current Assets:
        Inventory                                                   $    38,675
        Prepaid expenses and other current assets                         5,781
                                                                    ------------
            Total Current Assets                                         44,456

      Property and Equipment, Net                                        26,413

      Other assets                                                       43,104
                                                                    ------------
            Total Assets                                            $   113,973
                                                                    ============

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                    ----------------------------------------
      Current Liabilities:
        Cash overdraft                                              $     8,623
        Notes and loans payable                                         630,442
        Notes and loans payable - related parties                       816,453
        Convertible notes payable                                       180,000
        Convertible notes payable - related parties                     250,000
        Accounts payable                                                935,723
        Accrued expenses and other liabilities                        1,334,764
                                                                    ------------
            Total Current Liabilities                                 4,156,005
                                                                    ------------

      Common Stock Subject to Rescission
        Offer, - $.001 par value, 12,496
        shares issued and outstanding                                   181,189
                                                                    ------------
      Commitments & Contingencies (Notes 1,
        2, 6, 7, 8, 9, 10, 11, 12 and 15)

      Stockholders' Deficiency:
        Common stock - $.001 par value,
          50,000,000 shares authorized;
          3,040,552 issued and outstanding                                3,041
        Additional paid-in capital                                    4,279,318
        Accumulated deficit                                          (8,505,580)
                                                                    ------------
            Total Stockholders' Deficiency                           (4,223,221)
                                                                    ------------
           Total Liabilities and Stockholders'  Deficiency          $   113,973
                                                                    ============











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


                                      F-2
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS



                                                       For the Years Ended
                                                           December 31,
                                                   -----------------------------
                                                        2001            2000
                                                   ------------     ------------

Net Sales                                          $    64,628      $   654,568

Cost of Sales                                          116,681          191,730
                                                   ------------     ------------
Gross Profit (Loss)                                    (52,053)         462,838
                                                   ------------     ------------
Expenses:
  Selling, general and administrative                1,921,972        2,351,079
  Research and development                               7,393          150,645
                                                   ------------     ------------
      Total Expenses                                 1,929,365        2,501,724
                                                   ------------     ------------
Loss Before Other Income (Expenses)                 (1,981,418)      (2,038,886)
                                                   ------------     ------------
Other Income (Expenses):
  Write-off of due from affiliate                            -         (320,448)
  Amortization of debt discount                       (526,451)               -
  Loss on foreign currency transactions                (19,851)         (14,242)
  Gain on sale of equipment                                  -            2,437
  Interest expense                                    (139,634)        (292,169)
                                                   ------------     ------------
      Total Other Expenses                            (685,936)        (624,422)
                                                   ------------     ------------
Loss Before Provision For Income Taxes              (2,667,354)      (2,663,308)

Provision For Income Taxes                                   -                -
                                                   ------------     ------------
Net Loss                                            (2,667,354)      (2,663,308)

Other Items of Comprehensive Operations
  - Foreign Currency Translation                        (5,675)           5,010
                                                   ------------     ------------
Comprehensive Loss                                 $(2,673,029)     $(2,658,298)
                                                   ============     ============

Basic Earnings Per Share:
  Net Loss                                         $     (1.43)     $     (1.50)
                                                   ============     ============
  Weighted Average Number of Shares
    Outstanding                                      1,870,282        1,780,632
                                                   ============     ============







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


                                      F-3
<PAGE>

<TABLE>

                                ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                                FOR THE YEARS ENDED DECEMBER 31, 2000 AND 2001



<CAPTION>
                                                                                                  Other
                                                                                               Accumulated
                                                                                              Comprehensive
                                                         Common Stock           Additional    Comprehensive
                                                  -------------------------      Paid-in         Income
                                                    Shares         Amount        Capital         (Loss)
                                                  ----------     ----------     ----------     -----------
                                                      (1)

For the Year Ended December 31, 2000:
-------------------------------------

<S>                                                <C>           <C>            <C>            <C>
Balances at December 31, 1999                      1,763,824     $    1,764     $  675,929     $      665

Issuance of common stock issued to
  officer in connection with signing
  of employment contract                              25,000             25        362,475              -
Issuance of common stock in
  connection with settlement of debt
  and purchase of  intangibles                        10,000             10        144,990              -
Common stock issuance costs                                -              -        (12,787)             -
Foreign currency translation
  adjustment                                               -              -              -          5,010
Net loss                                                   -              -              -              -
                                                  -----------    -----------    -----------    -----------
Balances at December 31, 2000                      1,798,824     $    1,799     $1,170,607     $    5,675
                                                  ===========    ===========    ===========    ===========

For the Year Ended December 31, 2001
-------------------------------------

Balances at December 31, 2000                      1,798,824     $    1,799     $1,170,607     $    5,675

Cash contribution by shareholder                           -              -        440,866              -
Issuance of common stock for
  convertible notes                                   68,081             68        987,108              -
Forgiveness of debt by shareholders                        -              -         75,464              -
Common stock issuance cost                                 -              -         (2,888)             -
Issuance of common stock for
  consulting and other expenses                       75,162             75        347,396              -
Amortization of debt discount                              -              -        526,451              -
Foreign currency translation
  adjustment                                               -              -              -         (5,675)
Issuance of common stock for Bristol
  consulting fees                                  1,098,485          1,099        143,901              -
Cancellation of accrued salaries due
  to officers                                              -              -        590,413              -
Net loss                                                   -              -              -              -
                                                  -----------    -----------    -----------    -----------
Balances at December 31, 2001                      3,040,552     $    3,041     $4,279,318     $        -
                                                  ===========    ===========    ===========    ===========


(1)      Share amounts have been restated to reflect the one-for-ten reverse stock split on November
         26, 2001.






          The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                     F-4
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 2001







                                                                      Total
                                                   Accumulated     Stockholders'
                                                     Deficit        Deficiency
                                                   ------------     ------------

For the Year Ended December 31, 2000:
-------------------------------------

Balances at December 31, 1999                      $(3,174,918)     $(2,496,560)

Issuance of common stock issued to
  officer in connection with signing
  of employment contract                                     -          362,500
Issuance of common stock in
  connection with settlement of debt
  and purchase of  intangibles                               -          145,000
Common stock issuance costs                                  -          (12,787)
Foreign currency translation
  adjustment                                                 -            5,010
Net loss                                            (2,663,308)      (2,663,308)
                                                   ------------     ------------
Balances at December 31, 2000                      $(5,838,226)     $(4,660,145)
                                                   ============     ============

For the Year Ended December 31, 2001:
-------------------------------------

Balances at December 31, 2000                      $(5,838,226)     $(4,660,145)

Cash contribution by shareholder                             -          440,866
Issuance of common stock for
  convertible notes                                          -          987,176
Forgiveness of debt by shareholders                          -           75,464
Common stock issuance cost                                   -           (2,888)
Issuance of common stock for
  consulting and other expenses                              -          347,471
Amortization of debt discount                                -          526,451
Foreign currency translation
  adjustment                                                 -           (5,675)
Issuance of common stock for Bristol
  consulting fees                                            -          145,000
Cancellation of accrued salaries due
  to officers                                                -          590,413
Net loss                                            (2,667,354)      (2,667,354)
                                                   ------------     ------------
Balances at December 31, 2001                      $(8,505,580)     $(4,223,221)
                                                   ============     ============





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


                                      F-5
<PAGE>
<TABLE>

                      ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>


                                                                         For the Years Ended
                                                                            December 31,
                                                                    -----------------------------
                                                                        2001            2000
                                                                    ------------     ------------

<S>                                                                 <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                          $(2,667,354)     $(2,663,308)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
  Amortization of debt discount                                         526,451                -
  Depreciation and amortization                                          52,251           34,116
  Write-off of due from affiliate                                             -          320,448
  Common stock issued for consulting and other expenses                 492,471                -
  Common stock issued in connection with employment
    agreement                                                                 -          362,500
  Foreign currency translation                                           (5,675)           5,010
  Changes in Assets (Increase) Decrease:
    Inventory                                                            23,273           68,173
    Accounts receivable                                                  76,444           70,627
    Prepaid expenses and other current assets                            37,772          (27,667)
    Other assets                                                         10,962            7,630
  Changes in Liabilities Increase (Decrease):
    Cash overdraft                                                        8,623                -
    Accounts payable and accrued expenses                             1,126,473          777,189
                                                                    ------------     ------------
      Net Cash Used In Operating Activities                            (318,309)      (1,045,282)
                                                                    ------------     ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                    (10,515)          (3,494)
                                                                    ------------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of notes and loans payable                      55,000          133,000
  Repayments of notes and loans payable                                (368,105)        (164,012)
  Repayments of capital lease                                           (18,204)          (9,011)
  Proceeds from issuance of convertible notes payable                         -        1,143,400
  Repayment of issuance of common stock subject to
    rescission                                                                -          (21,750)
  Repayment of notes and loans payable - related parties                      -          (46,086)
  Costs associated with common stock                                     (2,888)         (12,787)
  Proceeds from issuance of notes and loans payable -
    related parties                                                     221,565            2,866
  Cash contribution by shareholder                                      440,866                -
                                                                    ------------     ------------
      Net Cash Provided By Financing Activities                         328,234        1,025,620
                                                                    ------------     ------------
Net Decrease in Cash                                                       (590)         (23,156)

Cash and Cash Equivalents - Beginning of Year                               590           23,746
                                                                    ------------     ------------
Cash and Cash Equivalents - End of Year                             $         -      $       590
                                                                    ============     ============






     The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                      F-6
<PAGE>

<TABLE>

                      ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>


                                                                               For the Years Ended
                                                                                 December 31,
                                                                         -----------------------------
                                                                             2001             2000
                                                                         ------------     ------------

<S>                                                                      <C>              <C>
Supplemental Disclosure of Non-Cash Flow Information:
-----------------------------------------------------
  Cash paid during the year for:
    Interest                                                             $    32,594      $   154,524
                                                                         ============     ============
    Income taxes                                                         $         -      $         -
                                                                         ============     ============
Supplemental Disclosures of Non-Cash Operating Activities:
----------------------------------------------------------
  Issuance of 68,081 shares of common  stock in connection
    with conversion of notes payable and interest                        $   987,177      $         -
                                                                         ============     ============
  Issuance of 1,098,485 shares of common stock as a payment of
    accrued expenses and consulting fees                                 $   145,000      $         -
                                                                         ============     ============
  Contribution by shareholder to settle debt of Company                  $    75,464      $         -
                                                                         ============     ============
  Issuance of 75,162 shares of common stock in connection with
    settlement of consulting fees and other accounts payable             $   347,471      $         -
                                                                         ============     ============
  Issuance of 4,000 shares of common stock in connection with
    settlement of accounts payable, accrued expenses and
    services                                                             $         -      $    58,000
                                                                         ============     ============

  Cancellation of accrued salaries due to officers                       $   590,413      $         -
                                                                         ============     ============
Supplemental Disclosure of Non-Cash Investing Activities:
---------------------------------------------------------
  Issuance of 6,000 shares of common stock in connection with
    purchase of intangibles                                              $         -      $    87,000
                                                                         ============     ============
  Assets acquired under capital lease                                    $         -      $    27,215
                                                                         ============     ============





     The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                      F-7
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - ORGANIZATION

THE COMPANY
-----------

Accident Prevention Plus, Inc. (the "Company") was incorporated in the State of
Nevada on October 28, 1998 to become the holding company of Accident Prevention
Plus, LLC, a Limited Liability Company, (the "LLC") and International Purchasing
Services, NY, Inc. ("IPS-NY"). The Company is engaged in the design, marketing
and distribution of onboard computer recording and fuel monitoring systems for
commercial and fleet vehicles in the U.S. and Europe.

INC-NY/LLC
----------

Accident Prevention Plus, Inc. ("Inc-NY") was incorporated during 1993 in the
State of New York as a standard corporation. During February 1996, Inc-NY was
reorganized and converted to an LLC and treated as a partnership for financial
and income tax purposes.

IPS-NY
------

IPS-NY was incorporated in the State of New York on March 3, 1993 to provide
various support services to the LLC including but not limited to shipping,
receiving and warehousing. IPS-NY was also responsible for purchases of product
components, providing financing, and other general overhead support for the LLC
and for its own business purposes. The sole shareholder of IPS-NY was also the
majority partner of the LLC.

REORGANIZATION
--------------

During October 1998, pursuant to an Agreement and Plan of Reorganization (the
"Reorganization Agreement") the Company issued 1,420,597 shares of its common
stock to the partners of the LLC for 100% of the LLC. The Company accounted for
the transaction with the LLC as a corporate reorganization and accordingly, no
goodwill was recorded. In connection with the reorganization, the founding
partners in the LLC were elected as the officers of the Company. Accordingly,
after such reorganization, the LLC became a wholly-owned subsidiary of the
Company.

ACQUISITION OF IPS-NY
---------------------

Simultaneously with the reorganization during October 1998, the Company acquired
from IPS-NY's sole shareholder, 100% of the issued and outstanding common stock
of IPS-NY by issuing 297,500 shares of its common stock. The acquisition was
accounted for by the purchase method of accounting.








                                      F-8
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - ORGANIZATION (Continued)

EUROPEAN SUBSIDIARIES
---------------------

On September 13, 1999, Accident Prevention Plus (UK) Limited ("APP UK") was
formed as a private limited company under the laws of England and Wales to
provide sales, marketing and technical support for the Company in Europe. APP UK
is a wholly-owned subsidiary of the Company. On December 17, 1999, Accident
Prevention Plus, France SARL ("APP France") was formed as a private Company
under the laws of France. APP France is a wholly-owned subsidiary of APP UK.

During the quarter ended December 31, 2001, management determined that it is in
the best economical interest of the Company to close its offices in France and
the U.K. effective December 31, 2001. As a result of the closings, the Company
wrote-off, all of its foreign assets totalling $49,436, which has been reflected
in the 2001 consolidated statement of operations. In addition, liabilities
payable by the foreign subsidiaries totalling $348,360 as of December 31, 2001
have been reflected in the accompanying consolidated balance sheet under the
caption "accrued expenses". Certain of these liabilities may be discharged in
the liquidation of these foreign subsidiaries.

NOTE 2 - GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. For the years ended December
31, 2001 and 2000, the Company incurred net losses of $2,667,354 and $2,663,308,
respectively. Additionally, the Company has a working capital deficiency
amounting to $4,111,549 and a stockholders' deficiency of $4,223,221 and is in
default of its bank debt and certain convertible notes payable at December 31,
2001.

As of December 31, 2001, the Company owes approximately $97,000 of payroll taxes
and related penalties and interest, which is included in accrued expenses.
Certain taxing authorities have filed liens against the Company as a result of
the unpaid payroll taxes. Should the taxing authorities take further actions,
the results could be detrimental to the Company's ability to operate. In
addition, the Company has not complied with the payment schedules of its bank
debt. Should the banks take action against the Company the results could
adversely affect the Company.

The Company is aggressively attempting to obtain additional contracts in order
to mitigate future losses. Management is seeking to raise additional capital and
to renegotiate certain liabilities in order to alleviate the working capital
deficiency. However, there can be no assurance that it will be able to obtain
additional contracts, pay its payroll taxes or raise additional capital.

These factors raise substantial doubt about the Company's ability to continue as
a going concern. The consolidated financial statements do not include
adjustments relating to the recoverability and realization of assets and
classification of liabilities that might be necessary should the Company be
unable to continue in operation.





                                      F-9
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)  Principles of Consolidation
    ---------------------------

The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, LLC, IPS-NY and APP U.K. All
intercompany accounts and transactions have been eliminated in consolidation.

b)  Inventory
    ---------

Inventory amounting to $38,675 at December 31, 2001, consists of components and
finished goods and are valued at the lower of cost (using the specific
identification method) or market. All inventories are pledged as collateral
pursuant to the notes payable as discussed in Note 6.

c)  Intangible Assets
    -----------------

The Company periodically assesses the recoverability of long-lived assets,
including property and equipment, intangibles and technology rights, when there
are indications of potential impairment, based on estimates of undiscounted
future cash flows. The amount of impairment is calculated by comparing
anticipated discounted future cash flows with the carrying value of the related
asset. In performing this analysis, management considers such factors as current
results, trends, and future prospects, in addition to other economic factors.

d)  Income Taxes
    ------------

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes" which
requires the use of the "liability method" of accounting for income taxes.
Accordingly, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. Current income taxes are based on the
respective periods' taxable income for federal and state income tax reporting
purposes.

e)  Earnings Per Share
    ------------------

Basic loss per common shares ("EPS") is computed as net loss divided by the
weighted-average number of common shares outstanding during the period. Diluted
EPS includes the impact of common stock potentially issuable upon the exercise
of options and warrants. Potential common stock has been excluded from the
computation of diluted net loss per share as their inclusion would be
anti-dilutive.




                                      F-10
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

f)  Use of Estimates
    ----------------

In preparing the consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions which affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates.

g)  Fair Value Disclosure at December 31, 2001
    ------------------------------------------

The carrying value of cash, accounts payable and accrued expenses are a
reasonable estimate of their fair value because of the short-term maturity of
these investments. The carrying value of long-term debt closely approximates its
fair value based on the instruments' interest rate terms, maturity date, and
collateral, if any in comparison to the Company's incremental borrowing rates of
similar financial instruments.

h)  Effect of New Accounting Standards
    ----------------------------------

The Company believes that the recently issued accounting standards, FASB 141,
142, 143 and 144, not yet adopted by the Company, will not have a material
impact on its financial position and results of operations when adopted.

i)  Property and Equipment
    ----------------------

Property and equipment are stated at cost less appropriate valuation allowances
and accumulated depreciation and amortization. Depreciation is provided on the
straight-line method over the estimated useful lives of the related assets,
generally three to five years. Amortization of leasehold improvements is
provided on the straight-line method over the lesser of the estimated useful
lives of the improvements or the initial term of the lease. Gain or loss is
recognized upon sale or other disposition of property and equipment.

j)  Research and Development Costs
    ------------------------------

Research and development costs are expensed as incurred.




                                      F-11
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

k)  Foreign Currency Translation
    ----------------------------

The accounts of the Company's foreign operations are translated into U.S.
dollars using the current rate method. Assets and liabilities are translated at
the year-end exchange rate and revenues and expenses are translated at average
exchange rates. Gains and losses arising from the translation of financial
statements of foreign operations are deferred in the "Foreign currency
translation adjustment" account included as a separate component of
stockholders' deficiency. The functional currency of all the Company's
subsidiaries is the United States dollar with the exception of APP U.K. and APP
France whose functional currencies are the British pound sterling and the French
franc. All other exchange gains or losses are reflected in the consolidated
statements of operations.

l)  Revenue Recognition
    -------------------

Revenue from hardware sales is recognized when the product has been shipped and
collectibility is reasonably assured. Revenue recognized from these sales is net
of applicable provisions for refunds, discounts and allowances. Engineering
service sales are recognized upon the service having been performed.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment are as follows at December 31, 2001:

              Furniture & Equipment           $   17,163
              Computer Equipment                  80,287
                                              -----------
                                                  97,450
              Less: Accumulated depreciation      71,037
                                              -----------
                                              $   26,413
                                              ===========

Depreciation expense for the years ended December 31, 2001 and 2000 amounted to
$16,251 and $19,116, respectively.

NOTE 5 - OTHER ASSETS

Other assets consist primarily of software, which the Company acquired in July
2000 for $87,000 through the issuance of 6,000 shares of common stock of the
Company. The software is recorded at cost less accumulated amortization, which
is computed on a straight - line basis over a period of three years.
Amortization expense for the years ended December 31, 2001 and 2000 was $36,000
and $15,000, respectively. Accumulated amortization expense at December 31, 2001
amounted to $51,000.


                                      F-12
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6 - NOTES AND LOANS PAYABLE

                  Bank of Smithtown           $  492,537
                  HSBC                            42,985
                  Other loan payable              94,920
                                              -----------
                                              $  630,442
                                              ===========

a)   Bank of Smithtown
     -----------------

On November 30, 1998, the Company, IPS-NY, LLC and the Company's Chief Executive
Officer entered into a settlement agreement with the Bank of Smithtown
("Smithtown") in connection with a default by IPS-NY under a U.S. Small Business
Administration ("SBA") promissory note dated April 13, 1995 in the sum of
$100,000 and a second promissory note dated December 24, 1996 in the sum of
$500,000. In accordance with the settlement, IPS-NY made the following payments
as scheduled: $23,208 and $20,000 both in November 1998 and $16,792 in March
1999.

Additionally, IPS-NY executed a new note in the amount of $60,620 bearing
interest at 9% per annum and maturing in one year. Such note represented the
accrued and unpaid interest on the original IPS-NY note of $500,000 dated
December 24, 1996. The Company executed a new note in the amount of $500,000,
bearing interest at prime plus 2% per annum. The new note was to be paid at the
rate of $5,000 per month during the first year, $10,000 per month during the
second year and $15,000 per month during the third year. At the end of the third
year, the entire principal balance remaining, together with any accrued
interest, shall be due and payable. As of December 31, 2001 the principal
balances on the newly issued $500,000 note, the newly issued $60,620 note and
the original $100,000 SBA note are $424,200, $43,828 and $24,509, respectively.

All notes associated with the above settlement agreement are secured by the
Company's common stock owned by its Chief Executive Officer and all assets of
the Company.

As of December 31, 2001, the Company was not in compliance with the payment
schedule as agreed to above. To date, Smithtown has not taken any action against
the Company, but should they decide to proceed with an action the impact could
have a material effect upon the Company. Due to the non-compliance, these notes
with Smithtown have been classified as current liabilities at December 31, 2001.



                                      F-13
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6 - NOTES AND LOANS PAYABLE (Continued)

b)  HSBC Bank USA ("HSBC")
    ---------------------

As of December 31, 2001 the balance due was $42,985 which was paid in full on
January 18, 2002. During the year ended December 31, 2001, the Company remitted
principal payments to HSBC of $326,832. The note was secured by all of the
assets of the Company, along with personal guarantees by the Chief Executive
Officer and President. Interest on such indebtedness had been paid at the rate
of prime, plus 2% per annum.

c)  Other
    -----

At December 31, 2001, the Company has other notes and loans payable to
individuals, due on demand, in the amount of $94,920. Interest rate on these
notes is 10% per annum.

Aggregate maturities of long-term debt is as follows:

                     Year Ending
                     December 31,
                     ------------
                         2002                 $  630,442
                                              ===========

NOTE 7 - NOTES AND LOANS PAYABLE - RELATED PARTIES

As of December 31, 2001, loans payable to related parties totalling $816,453 are
comprised of the following:

         i) The loans of the President of the Company as of December 31, 2001
         amounted to $380,143 as follows:

                  A $50,000 promissory note with interest accruing at 8% per
                  annum, which is due on demand.

                  A $240,000 loan, which the officer has secured personally
                  through a financial institution. The Company has guaranteed to
                  reimburse the officer for all interest and the direct cost of
                  such loan. This loan bears interest at 9.25% per annum and is
                  due on demand.

                  A $7,500 promissory note with interest accruing at 10% per
                  annum which is due on demand.

                  A $3,500 promissory note with interest accruing at 10% per
                  annum which is due on demand.

The remainder is comprised of advances to the Company and unreimbursed expenses
amounting to $79,143 which are non-interest bearing.



                                      F-14
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 7 - NOTES AND LOANS PAYABLE - RELATED PARTIES (Continued)

         ii) Two promissory notes with interest accruing at 10% per annum due to
         the former Chief Financial Officer's spouse totalling $30,000 which are
         due on demand.

         iii) Various promissory notes with interest accruing at 10% per annum
         due to the parents of the Company's president totalling $98,776 which
         are due on demand.

         iv) Various promissory notes payable to Bristol totalling $223,404 are
         due on demand. During 2001, the Company received loans from Bristol in
         the amount of $158,904. All of these notes bear interest at 10% per
         annum. The full amount of these notes, along with related accrued
         interest, was converted into shares of common stock in January 2002
         (Note 11).

         v) Unreimbursed expenses due to a former officer of the Company
         totalling $84,130.

NOTE  8 - CONVERTIBLE NOTES PAYABLE

On December 16, 1999, the Company executed a $250,000 convertible promissory
note with an officer and director, bearing interest at prime per annum (4.75% at
December 31, 2001) with principal payable in full on December 31, 2001.
Commencing on September 30, 2000 the note is convertible into common stock at
the rate of $14.50 per share.

During the year ended December 31, 2000, the Company executed seven additional
15% promissory notes aggregating $450,000. The promissory notes are due on
December 31, 2001, bearing interest at 15% per annum and are payable monthly in
arrears or upon maturity or any earlier conversion of the note. At any time
subsequent to December 31, 2000 the noteholder will have the right to convert
the principal and accrued interest in whole or in part into common stock at
$14.50 per share.

During the year ended December 31, 2000, the Company entered into sixteen
convertible 10% promissory notes aggregating $593,400. The promissory notes are
due on December 31, 2001, bearing interest at 10% per annum and are payable
monthly in arrears or upon maturity or any earlier conversion of the note. The
promissory notes contain a provision stating that beginning January 2, 2001 that
upon a 10 day notice the note is due on demand. At any time subsequent to
December 31, 2000, the noteholders will have the right to convert the principal
and accrued interest in whole or in part into common stock at $14.50 per share.

During the period of January 2001 through April 2001, convertible noteholders
converted principal and related interest on the notes they were holding into
common stock of the Company. The noteholders converted an aggregate of $863,400
of principal and $123,776 of interest into 68,081 shares of common stock.

At December 31, 2001, the balance due on convertible notes payable is $180,000
and the balance due on related party convertible notes payable is $250,000, all
of which are in default.


                                      F-15
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 9 - ACCRUED EXPENSES

Accrued expenses consist of the following at December 31, 2001:

           Interest payable                  $   82,449
           Officer's salaries                   117,500
           Customer deposits                     71,016
           Payroll taxes                         96,570
           Other                                 96,357
           Accrued liabilities - U.K. and
             France subsidiaries                348,360
                                             -----------
                Sub-total                       812,252
           Accrued consulting and other
             fees due Bristol, settled in
             common stock in January 2002       522,512
                                             -----------
                                             $1,334,764
                                             ===========

NOTE 10 - COMMON STOCK SUBJECT TO RESCISSION OFFER

Common stock sold subsequent to August 3, 1999 pursuant to the Company's limited
offering memorandums of January and April 1999, may be in violation of the
requirements of the Securities Act of 1933. In addition, certain state
securities rules and regulations may not have been complied with to ensure
availability of a private placement transaction exemption. As such, the proceeds
of $202,939 from the issuance of 13,996 shares of common stock through December
31, 1999 were classified outside of equity in the balance sheet and classified
as common stock subject to rescission. On April 18, 2000, the Company
repurchased 1,500 shares of common stock from two of the related shareholders.
The Company has subsequently cancelled these shares. As of December 31, 2001,
the balance of proceeds was $181,189 and the related shares were 12,496.

As of December 31, 2001, no additional investors have requested the Company to
repurchase their shares.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

a)   Payroll Taxes
     -------------

As of December 31, 2001, the Company owes approximately $97,000, of payroll
taxes and related estimated penalties and interest. Federal and state tax liens
have been filed against the Company in connection with unpaid payroll taxes.
Although the Company has not entered into any formal repayment agreements with
the respective tax authorities, it has been attempting to make payments as funds
become available.



                                      F-16
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

b)  Employment Agreements
    ---------------------

On January 1, 1999, the Company entered into three separate employment
agreements with its Chief Executive Officer, Chief Operating Officer and
Executive Vice President. The employment agreements are for an initial one-year
term with renewable (5) five one-year terms based on a majority vote of the
Board of Directors. Each officer is entitled to an annual salary of $120,000
with annual increases based on The Consumer Price Index, along with a cash bonus
of 1% of the annual net profits of the Company. Each agreement includes benefits
such as disability and health insurance coverage, automobile and expense
allowances, travel and entertainment allowances, and options to purchase 50,000
shares of the Company's common stock at $14.50 per share within five years from
the effective date of the agreements. The foregoing options are intended to
qualify as incentive stock options. Lastly, pursuant to the agreements, all
three officers had agreed to defer the first six months of their salary, which
were to be paid at a later date.

On July 1, 2000 the Company entered into a formal employment agreement with its
Chief Financial Officer. The employment agreement is for an initial one-year
term with renewable five one-year terms based on a majority vote of the Board of
Directors. Upon signing this agreement, the officer received 25,000 shares of
common stock of the Company. The officer is entitled to an annual salary of
$120,000 with annual increases based on the Consumer Price Index, along with a
cash bonus of 1% of the annual net profits of the Company.

The agreement includes benefits such as disability and health insurance
coverage, automobile and expense allowances, travel and entertainment
allowances, and options to purchase 50,000 shares of the Company's common stock
at $14.50 per share within five years from the effective date of the agreement.
The foregoing options are intended to qualify as incentive stock options.

The above described 1999 employment agreements were terminated on June 29, 2001.
Three new employment agreements dated July 1, 2001 were approved by the Board of
Directors of the Company.

Commencing July 1, 2001, and automatically renewable annually for a five-year
period, the terms and provisions of the respective 2001 Employment Agreements
are as follows: (i) each officer/director will receive an annual salary of
$120,000; and (ii) each officer/director will receive an annual cash bonus equal
to one percent (1%) of the annual net profits for the preceding fiscal year.
Other benefits provided for in the 2001 Employment Agreements are disability and
health insurance coverage, automobile and expense allowances and travel and
entertainment allowances.


                                      F-17
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

b)  Employment Agreements (Continued)
    ---------------------

Pursuant to the provisions of Mr. Richard Goodhart's 2001 Employment Agreement,
stock options (not to be governed by the Non-Qualified Stock Option Plan) were
granted to Mr. Goodhart to purchase 4,121,128 shares of restricted common stock
at $0.34 per share within five years from the effective date of the 2001
Employment Agreement (collectively, the "Stock Options"). The Stock Options may
not be diluted for future reorganizations, recapitalizations, reverse stock
splits, combinations of shares, merger or consolidation.

Pursuant to the provisions of Mr. Steve Wahrman's 2001 Employment Agreement,
stock options (not to be governed by the Non-Qualified Stock Option Plan) were
granted to Mr. Wahrman to purchase 1,617,840 shares of restricted common stock
at $0.34 per share within five years from the effective date of the 2001
Employment Agreement (collectively, the "Stock Options"). The Stock Options may
not be diluted for future reorganizations, recapitalizations, reverse stock
splits, combinations of shares, merger or consolidation.

Pursuant to the provisions of Mr. Daveau's 2001 Employment Agreement, stock
options (not to be governed by the Non-Qualified Stock Option Plan) were granted
to Mr. Daveau to purchase 1,500,000 shares of restricted common stock at $0.34
per share within five years from the effective date of the 2001 Employment
Agreement (collectively, the "Stock Options"). The Stock Options may not be
diluted for future reorganizations, recapitalizations, reverse stock splits,
combination of shares, merger or consolidation.

Effective December 31, 2001, Richard Goodhart resigned and terminated his
employment contract.

As of December 31, 2001, four officers and shareholders of the Company elected
to forgive their entire accrued payroll that were recorded as expenses in the
years 2000 and 2001. The total amount of debt forgiveness was approximately
$590,000 and it is included in additional paid-in capital.

c)  Advances from USF
    -----------------

In 1996, Inc-NY entered into a grantee award agreement with the University of
South Florida ("USF") for the project entitled Fuel Intake Monitoring System
("FIMS"). USF received a grant ($428,793) for the project and forwarded the
proceeds directly to a sub-contractor chosen by Inc-NY and USF. Inc-NY's role
was to direct the project, fund the research and development and to bring the
product technology to a saleable commercial product. Pursuant to the agreement,
USF was to receive structured repayments based on revenues generated from the
product sales.

Since there are no revenues within two years after the completion of the USF
funding, all rights to the product technology have in accordance with the
contract reverted to USF.



                                      F-18
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

c)  Advances from USF (Continued)
    -----------------

The Company intends to pursue negotiations with USF regarding its respective
percentage ownership interest in the rights to the technology relating to the
FIMS in view of the fact that the Company expended its own funds for payment of
research and development expenses prior to and after such funding. There is no
guarantee that the Company will be successful in such negotiations and may
potentially lose all rights to the technology relating to the FIMS.

d)  American Overseas Corporation
    -----------------------------

The LLC and American Overseas Corporation, ("AOC"), an investment company formed
under the laws of British Virgin Islands, entered into a distributor agreement
dated August 20, 1998 pursuant to which AOC agreed to (i) assist in the
establishment of marketing and distributing services for certain of the
Company's products worldwide, and (ii) pay the LLC $5 million within thirty-six
(36) months for the non-exclusive unlimited rights to purchase products at a
price of 5% above cost and to sell those products worldwide. In accordance with
the agreement on August 20, 1999, AOC was to remit $2 million to the Company.

During July 1999, the LLC and AOC agreed to amend the contract, whereby the $5
million was to be paid as follows: (i) $1 million within 60 days from the date
that the Company becomes publicly traded, (ii) an additional $1 million is to be
paid within eight months of the beginning trade date and (iii) the balance of $3
million to be paid on or before thirty-six months from the date of the contract.
Lastly, AOC will purchase the Company's product at distributor's cost.

On December 27, 2000, the Company became publicly trading. During the first
quarter of 2001, the Company and AOC agreed that any monies remitted by AOC
under this agreement were to be classified as an equity investment. During the
year ended December 31, 2001, AOC remitted $440,866, which is included in the
accompanying consolidated financial statements as an addition to paid-in
capital. Shares due AOC pursuant to this investment were satisfied by Bristol.
On April 25, 2001, counsel for the Company notified AOC that they are not in
compliance with the minimum funding requirement under the contract.

e)  Bristol Consulting Agreement
    ----------------------------

On July 30, 1998, the LLC entered into a consulting agreement with Bristol
Consulting Ltd. ("Bristol") for the assistance and advice of commercial
application in Europe, the Middle East and the Far East as to corporate
structure, capital acquisitions, contract applications, and mergers and
acquisitions.

The consulting agreement is for a period of five years requiring monthly
payments of $5,000 for the first three months and $10,000 a month for the
remaining term of the consulting agreement. In addition, Bristol received 83,741
shares of common stock of the Company upon the reorganization of the LLC in
October 1998 for its 5% partnership interest in the LLC.



                                      F-19
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

e)  Bristol Consulting Agreement (Continued)
    ----------------------------

As of August 6, 2001 and August 27, 2001, APP and Bristol entered into an
agreement buyout and forgiveness of debt (the "Forgiveness of Debt Agreement")
evidencing an aggregate of $874,778.78 due and owing Bristol as follows: (i)
notes payable of $38,500.00; (ii) notes payable short term of $156,000.00; (iii)
accounts payable prior to year 2000 of $71,650.00; (iv) accrued consulting fees
year 2000 of $160,000.00; (v) accrued interest-long and short term of
$14,483.72; (vi) accrued travel and business expenses of $52,145.00; (vii)
accrued accounts payable of $102,000.06; and (viii) balance owed against
Consulting Agreement of $280,000.00.

As of August 27, 2001, APP and Bristol entered into a settlement agreement (the
"Settlement Agreement") pursuant to which (i) ratified and confirmed that
Bristol has the option to convert the debt due and owing Bristol under the
Consulting Agreement into shares of restricted common stock of APP at the rate
of $0.132 per share; (ii) provided Bristol and its assignees with the option to
convert the remaining debt due and owing Bristol into shares of restricted
common stock of APP at the rate of $0.132 per share; and (iii) provided that the
aggregate debt of $874,778.78 be satisfied by the issuance to Bristol or its
assignees of an aggregate of 6,627,112 shares of APP's restricted common stock
at the rate of $0.132 per share (which would not be subject to adjustments
pursuant to any reverse stock split, recapitalization, combination of shares,
exchange of shares or other like change in the capital structure of APP). During
2001, the Company recorded a charge to operation of $526,451 representing the
value of this beneficial conversion feature of the Bristol debt.

On November 14, 2001, the Board of Directors of APP held a meeting at which it
(i) ratified the Settlement Agreement and approved the issuance of an aggregate
of 6,627,112 shares of restricted common stock to Bristol and its assignees to
satisfy the aggregate debt of $874,778.78; (ii) acknowledged that Bristol had
entered into certain assignment agreements dated July 30, 1998, respectively,
with Sampson Global Ltd., World Asset Management Ltd. and Atlantic Financial
Enterprises Ltd. (the "Entities"), in which Bristol proportionately assigned to
the Entities certain of its rights to the debt and to its right to convert the
debt into shares of common stock; (iii) acknowledged receipt of conversion
notices from the Entities, respectively; and (iv) authorized the issuance of an
aggregate of 1,098,485 shares of its restricted common stock to the Entities to
settle a portion of the debt due and owing to Bristol under the Consulting
Agreement in the amount of $145,000.00. These shares were issued on November 30,
2001.


                                      F-20
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

e)  Bristol Consulting Agreement (Continued)
    ----------------------------

As of December 13, 2001, the Company and Bristol entered into an amendment to
the Forgiveness of Debt Agreement evidencing an aggregate of $890,916.44 due and
owing Bristol as follows: (i) accounts payable of $71,650.00; (ii) notes payable
of $223,403.89; (iii) accrued interest of $10,862.55; (iv) accrued consulting
fees payable of $345,000.00; and (v) balance owed against Consulting Agreement
of $240,000.00.

On January 16, 2002, the Board of Directors of APP held a meeting at which it
(i) ratified the amendment to the Settlement Agreement and approved the issuance
of 6,749,367 shares of common stock to Bristol or its assignees to satisfy the
debt of $890,916.44; (ii) acknowledged that Bristol had entered into assignment
agreements dated July 30, 1998, respectively, with Sampson Global Ltd., World
Asset Management Ltd. and Atlantic Financial Enterprises Ltd., in which Bristol
proportionately assigned to the Entities certain of its rights to the debt and
to its right to convert the debt into shares of restricted common stock; (iii)
acknowledged receipt of a conversion notice from Sampson Global Ltd.; (iv)
authorized the issuance of 454,545 shares of its restricted common stock to
Sampson Global Ltd. to settle a portion of the debt due and owing Bristol under
the Consulting Agreement; and (v) authorized the issuance of an aggregate of
5,196,337 shares of its restricted common stock to Bristol to settle the
remaining debt due and owing to Bristol in the amount of $745,916.44. The
454,545 shares were issued on January 11, 2002 and 5,196,337 shares were issued
on January 24, 2002.

f)  Royce Anderson and Monroe, Inc.
    ------------------------------

On July 30, 1998, the LLC entered into a consulting agreement with Royce
Anderson and Monroe, Inc. ("Royce Anderson") for the assistance and advice of
commercial application in the United States and the rest of the Western
Hemisphere as to corporate structure, capital acquisitions, contract
applications, and mergers and acquisitions. The consulting agreement is for a
period of five years. In connection with such consulting agreement, Royce
Anderson received 200,628 shares of common stock of the Company upon the
reorganization of the LLC in October 1998 for its 10% partnership interest in
the LLC.

g)  KMR Telecom, Ltd.
    ----------------

The Company has a loan receivable from KMR Telecom, Ltd. ("KMR") a corporation
organized under the laws of India, which is affiliated with the Company through
common stock ownership with the chief executive officer of the Company. The loan
is held by IPS - NY and bears interest at 12% per annum. The Company's Chief
Executive Officer has pledged to the Company his 49% interest in KMR as
collateral for the loan.

At December 31, 2000 the loan due from KMR amounted to $359,546. Management
recorded an allowance of $359,546 for the uncollectibility on the full amount of
the loan at December 31, 2000, due to it being more likely than not that the
loan will not be recoverable.


                                      F-21
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

h)  Lease Commitments
    -----------------

The Company entered into a lease agreement for office space effective January
10, 2000. The lease agreement is for two years, with options to renew. The
office lease requires monthly payments of $5,200 that includes maintenance and
use of a phone system and furniture. The Company executed the right to increase
the square footage of office space used at a rate of $6,800 per month. This
lease was terminated in October 2001.

The Company entered into a new lease agreement for office space effective
November 15, 2001. The lease agreement is for two years, with options to renew
for another two years. The office lease requires monthly payments of $2,900.

The Company leases its office facility under a non-cancelable operating lease
requiring future minimum rentals as follow:

                   Years Ending
                   ------------
                       2002                   $  34,800
                       2003                      31,900
                                              ----------
                                              $  66,700
                                              ==========

Rent expense for the years ended December 31, 2001 and 2000 was $95,980 and
$72,000, respectively.

i)  Litigation
    ----------

The Company is a named defendant in a lawsuit filed in the New York Supreme
Court County of Nassau. The lawsuit claims that the Company breached a contract
claim stemming from the Company's failure to install certain devices in the
Plaintiff's fleet of ambulances, and seeks compensatory damages in the amount of
$195,000. The Company has asserted counter-claim based upon tortuous
interference with contract, and has denied all of the Plaintiff's allegations. A
settlement offer has been made by the Company, whereby the Company would
complete installation of its devices in exchange for a general release. The
plaintiff has not responded to that offer.

While the Company cannot predict the outcome of any settlement, the Company
estimates that its liability under this litigation will not exceed 71,000.
Accordingly, an accrual of 71,000 was reflected in the accompanying December 31,
2001 consolidated balance sheet.

The Company is involved in various other claims and legal actions arising in the
ordinary course of business. Management is of the opinion that the ultimate
outcome of these matters would not have a material adverse impact on the
financial position of the Company or the results of its operations.


                                      F-22
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - STOCKHOLDERS' DEFICIENCY

a) On November 26, 2001, the Company completed a one-for-ten reverse stock split
of its common stock. All per share data and stock issuances have been restated
to reflect this transaction.

b)  Stock Options
    -------------

    -  Non-qualified Stock Option Plan
    ----------------------------------

Effective January 1, 1999, the Company established a non-qualified stock option
plan ("Stock Option Plan") pursuant to which 6,000,000 shares of common stock
are reserved for issuance upon the exercise of options. The option plan is
designed to serve as an incentive for retaining qualified and competent key
employees, officers and the director of the Company. The price for each share of
common stock purchasable according to the Stock Option Plan is $14.50 per share.

    -  Options Granted Outside the Stock Option Plan
    ------------------------------------------------

In July, 2001, pursuant to employment agreements, three officers were issued
options to purchase a total of 7,238,968 shares of restricted common stock at an
exercise price of $0.34 per share. The options are exercisable over a five-year
period. The options are not subject to adjustments pursuant to any reverse stock
split, recapitalization, combination of shares, exchange of shares and other
like change in the capital structure of the Company.

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


                                          Number of                   Weighted
                                           Shares       Range of      Average
                                           Under      Option Price    Exercise
                                           Option      Per Share       Price
                                         -----------  -------------  -----------

      Balance at December 31, 1999          150,000         $14.50       $14.50
        Granted                              70,000         $14.50       $14.50
        Exercised                                 -              -            -
        Cancelled                                 -              -            -
                                         -----------  -------------  -----------
      Balance at December 31, 2000          220,000         $14.50       $14.50
        Granted                           7,238,968         $ 0.34       $ 0.34
        Exercised                                 -              -            -
        Cancelled                                 -              -            -
                                         -----------  -------------  -----------
      Balance at December 31, 2001        7,458,968   $0.34-$14.50       $ 0.76
                                         ===========  =============  ===========


                                      F-23
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 12 - STOCKHOLDERS' DEFICIENCY (Continued)

b)  Stock Options (Continued)
    -------------

In compliance with SFAS No. 123, the Company has elected to provide the proforma
disclosure of net income (loss) and earnings per share as if the fair value
based method had been applied to the Company's financial statements. The Company
continued its use of APB Opinion No. 25. As such, the Company's net loss and
loss per share for the years ended December 31, 2001 and 2000, adjusted to
reflect proforma amounts, are indicated below:

                                               Years Ended December 31,
                                             ----------------------------
                                                2001            2000
                                             ------------    ------------
          Net loss:
            As reported                      $(2,667,354)    $(2,663,308)
                                             ============    ============
            Pro forma                        $(4,404,706)    $(2,880,308
                                             ============    ============

          Basic and diluted loss per share:
            As reported                           $(1.43)         $(1.50)
                                                  =======         =======
            Pro forma                             $(2.36)         $(1.62)
                                                  =======         =======

The fair value of stock options granted were estimated at the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
fair value and related assumptions:

                                                   At December 31,
                                               ----------------------
                                                2001           2000
                                               --------      --------

            Weighted average fair value          $.24          $3.10
            Expected volatility                    90%          .01%
            Risk-free interest rate               3.5%          6.3%
            Expected life (years)                  5             4
            Expected dividend yield                0             0

c)  Significant Common Stock Transactions for 2001:
    ----------------------------------------------

    -  Shares Issued for Consulting Fees and Other Expenses
    -------------------------------------------------------

The Company issued 1,173,647 shares of common stock valued at $492,471 as
consideration for consulting services and other expenses due to three
consultants, two of whom were related parties.


                                      F-24
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - STOCKHOLDERS' DEFICIENCY (Continued)

c)  Significant Common Stock Transactions for 2001:
    ----------------------------------------------

    -  Additions to Paid-in Capital
    -------------------------------

During the year ended December 31, 2001, AOC remitted $440,866 to the Company,
which was accounted for as an addition to paid-in capital for 2001 (Note 11).

During the year ended December 31, 2001, three of the Company's
officers/directors cancelled accrued salaries of $590,413. This transaction was
accounted for as an increase to paid-in capital for 2001 (Note 11).

During the year ended December 31, 2001, debt totalling $75,464 was contributed
to capital by such holders.

During the year ended December 31, 2001, various holders of convertible debt
converted principal of $863,400 and interest of $123,776 into 68,081 shares of
common stock (Note 8).

d)  Significant Common Stock Transactions for 2000:
    ----------------------------------------------

    -  Common Stock for Settlement of Debt
    --------------------------------------

On July 28, 2000 the Company agreed with a vendor Software Hardware Specialists,
Inc. (SHS) to issue 10,000 shares of the Company's common stock for $145,000 of
accounts payable due to the vendor. Included in this agreement is the purchase
by the Company of software valued at $87,000.

    -  Common Stock for Employment
    ------------------------------

In July 2000 the Company granted an officer 25,000 shares of common stock as
part of the officer's employment contract. The Company valued these shares at
$14.50 per share. Accordingly, $362,500 is included in the accompanying
consolidated statement of operations in selling, general and administrative
expenses.

e)  Earnings Per Share
    ------------------

Securities that could potentially dilute basic earnings per share ("EPS") in the
future, and that were not included in the computation of diluted EPS because to
do so would have been anti-dilutive for the periods presented, consist of the
following:

          Options to purchase common stock                  7,458,968
          Convertible Debt - Bristol, issued January 2002   5,650,882
          Convertible Debentures                               29,655
                                                           -----------
          Total as of December 31, 2001                    13,139,505
                                                           ===========

                                      F-25
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 13 - PROVISION FOR INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related to differences between the financial statement and tax bases of assets
and liabilities for financial statement and income tax reporting purposes.
Deferred tax assets and liabilities represent the future tax return consequences
of these temporary differences, which will either be taxable or deductible in
the year when the assets or liabilities are recovered or settled. Accordingly,
measurement of the deferred tax assets and liabilities attributable to the
book-tax basis differentials are computed at a rate of 34% federal, 6% state,
pursuant to SFAS No. 109.

The only material tax effect of significant items comprising the Company's
current deferred tax assets as of December 31, 2001 is the Company's net
operating loss carryforwards ("NOL's"), which amounted to approximately
$4,075,000 for the Company. The deferred tax asset associated with the Company's
NOL's amounted to approximately $1,627,000 as of December 31, 2001.

A portion of IPS-NY's NOL's are subject to provisions of the Internal Revenue
Code, Section 382, which limits the use of NOL's when changes in ownership of
more than 50 percent occur during a three year testing period.

In accordance with SFAS 109, the Company has recorded a 100% valuation allowance
for such deferred tax asset since management could not determine that it was
"more likely than not" that the deferred tax assets would be realized in the
future. The Company's NOL's amounting to approximately $4,075,000 will expire in
the years 2002 through 2021 if not utilized prior.

The Company and its subsidiaries file separate tax returns for federal and state
tax purposes. As such, income tax is based on the separate taxable income or
loss of each entity. For the year ended December 31, 2000, the Company will
begin filing consolidated federal tax returns. The Company has not filed its
income tax returns for the years ended December 31, 1998, 1999 and 2000.



                                      F-26
<PAGE>
<TABLE>

                           ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 14 - INDUSTRY SEGMENTS

The Company's operations have been classified into two segments: foreign and
domestic sales. Information about the two segments for the years ended December
31, 2001 and 2000 are as follows:
<CAPTION>
                                                             2001                           2000
                                                 ----------------------------    ---------------------------
                                                   Segment       Consolidated      Segment      Consolidated
                                                 ------------    ------------    ------------   ------------
<S>                                              <C>             <C>             <C>            <C>
Sales:
  Foreign                                        $    28,184                     $   288,780
  Domestic                                            36,444                         365,788
                                                 ------------                    ------------
    Total Sales                                                  $    64,628                    $   654,568
                                                                 ------------                   ------------
  Gross Profit
    Foreign                                      $   (24,492)                    $   164,238
    Domestic                                         (27,561)                        298,600
                                                 ------------                    ------------
      Total Gross Profit                                             (52,053)                       462,838
                                                                 ------------                   ------------
Corporate:
  Selling, General and Administrative
    Expense:
      Foreign                                    $  (227,787)                    $  (484,498)
      Domestic                                    (1,694,185)                     (1,866,581)
                                                 ------------                    ------------
        Total Selling, General and
          Administrative Expense                                  (1,921,972)                    (2,351,079)

Write-off of due from affiliate                                            -                       (320,448)

Interest expense                                                    (139,634)                      (292,169)

Loss on foreign currency transactions                                (19,851)                       (14,242)

Gain on sale of equipment                                                  -                          2,437

Research and development                                              (7,393)                      (150,645)

Amortization of debt discount                                       (526,451)                             -
                                                                 ------------                   ------------
Net Loss                                                         $(2,667,354)                   $(2,663,308)
                                                                 ============                   ============
Identifiable Assets:
  Foreign                                        $         -                     $    33,748
  Domestic                                           113,973                         271,002
                                                 ------------                    ------------
Total Assets                                                      $   113,973                   $   304,750
                                                                 =============                  ============
</TABLE>
Gross profit is total revenue less cost of sales and excludes general corporate
expenses, interest expense, and income taxes. Identifiable assets are those used
by each segment of the Company's operations.

NOTE 15 - SIGNIFICANT CUSTOMERS

For the years ended December 31, 2001 and 2000, the Company had two and three
unrelated customers, respectively, which accounted for approximately 60% and
39%, respectively, of total revenues.

NOTE 16 - SUBSEQUENT EVENT

On January 19, 2002, the Board of Directors of the Company authorized and
approved a forward stock split of 1 to 1.2 common shares effective April 10,
2002. The Board of Directors based its decision upon an analysis of the
Company's potential business prospects, which the Board of Directors believes,
will quickly escalate the Company's growth over the next six months. The Board
of Directors further believes that the future per-share price of the common
stock will reflect that growth, and thus determined that this was an opportunity
to reward the Company's shareholders and increase the number of available shares
on the market.


                                      F-27


<PAGE>

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

         On September 6, 2001, the Board of Directors of the Company made a
unanimous decision to terminate the services of its principal independent
accountant, Goldstein Golub Kessler LLP ("GGK"). The termination of GGK resulted
from a business decision made by the Board of Directors of the Company that it
would be in the best interests of the Company to engage the services of an
independent accountant, which has an emphasis on developmental companies. On
September 6, 2001, the Company received an acknowledgment from GGK regarding
GGK's termination. Subsequently, the Board of Directors of the Company
unanimously approved the engagement of the accounting firm of Grassi & Co.,
CPAs, P.C. ("Grassi") as the Company's independent public accountant for the
fiscal year ended December 31, 2001.

         During the period of its engagement (March 1, 2001 through September 6,
2001), GGK's services included completion of the audit of the Company's
consolidated financial statements for fiscal year ended December 31, 2000. Such
audited consolidated financial statements were included in the Company's Annual
Report on Form 10-KSB filed with the Securities and Exchange Commission on May
25, 2001. During the period of its engagement, GGK did not provide any services
to the Company relating to review of the Company's consolidated financial
statements for the periods ended March 31, 2001 and June 30, 2001, respectively.

         During the period of its engagement, there were no disagreements with
GGK which were not resolved on any matter concerning accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of GGK, would have caused GGK
to make reference to the subject matter of the disagreements in connection with
its audit report on the Company's consolidated financial statements for fiscal
year ended December 31, 2000. GGK, as the Company's principal independent
accountant, did not provide an adverse opinion or disclaimer of opinion to the
Company's consolidated financial statements for fiscal year ended December 31,
2000, nor modify its opinion as to uncertainty, audit scope or accounting
principles.

         During the period of GGK's engagement as the Company's independent
principal accountant, the Company did not consult with Grassi regarding either
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's consolidated financial statements, and neither a written report
nor oral advice was provided to the Company that Grassi concluded was an
important factor considered by the Company in reaching a decision as to an
accounting, auditing or financial reporting issue.

         On September 7, 2001, the board of directors of the Company approved
and authorized the engagement of Grassi & Co., P.C., 2001 Marcus Avenue, Suite
265, Lake Success, New York 11042 as the principal independent accountant for
the Company.

                                       34
<PAGE>

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

         IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

         The directors and executive officers of the Company are as follows:

Name                       Age              Position with the Company
-------------------        ---              -------------------------------

Alan Schwartz              59               Director and President

Steven H. Wahrman          44               Director, Executive Vice President

Jean Paul Daveau           46               Director and Executive Vice
                                            President of Engineering/Design

Jennifer Swanson           39               Executive Vice President

Rhett Kirchoff             37               Director

         ALAN SCHWARTZ has been a Director and the President of the Company
since October 2001. During the past twenty years, Mr. Schwartz has been involved
in the sales and marketing of materials and handling industry. Mr. Schwartz was
the founder of a company which he started with a $70,000 initial investment. Mr.
Schwartz has also specialized in corporate financing and structure. Mr. Schwartz
graduated from CCNY.

         STEVEN H. WAHRMAN has been a Director, the President and Chief
Operating Officer of the Company since February of 1996. Mr. Wahrman is
currently an Executive Vice President for the Company and responsible for all
phases of worldwide implementation of market research, strategic planning and
promotion and the daily operations. Mr. Wahrman has twenty years of experience
in sales and marketing. For a period of fourteen years, Mr. Wahrman was
President of S.W. Intimates. Mr. Wahrman holds a Bachelor of Science degree in
Marketing with a minor in Advertising from The American University.

                                       35
<PAGE>

         JEAN PAUL DAVEAU has been a Director and the Executive Vice President
of Engineering and Design of the Company since October of 1993. Mr. Daveau is
responsible for establishing and overseeing the engineering and design staff and
all aspects of technical research, including the compilation of specifications
and manuals. Mr. Daveau has spent over a decade designing and developing onboard
recording systems, and has worked with Royal Dutch Shell, Schlumberger, and
Western Atlas. In addition, Mr. Daveau has extensive experience in the fields of
hardware and software, and has acted as a consultant engineer in the industrial
computing industry. For a period of five years, Mr. Daveau was the President and
Managing Director of Microsam.

         JENNIFER SWANSON has been an Executive Vice President of the Company
since February 2002. During the past twenty years, Ms. Swanson has been involved
in the marketing and corporate structure industry, specializing in investor
relations, corporate financing and corporate communications. More recently, Ms.
Swanson has worked with public companies emphasizing development of guidelines
for handling correspondence, development of standard responses to frequently
asked questions, advisement to management of trends and issues of concern that
are manifested in correspondence, development of a system of recording
contracts, development of a corporate overview or outlook correspondence to
shareholders, evaluation of transfer agent performance, confirmation of
regulatory filings and compliances with the Federal and State securities laws
and regulations, and coordination of internal procedures regarding company stock
option plans, restricted securities, convertible preferred stock and employee
benefit plans. Ms. Swanson graduated from the University of Minnesota with a
Bachelor of Arts Degree in Business Administration.

         RHETT KIRCHOFF has been a Director of the Company since November 2001.
Mr. Kirchoff has been involved with various retail brokerage firms for the past
thirty years having worked in the brokerage retail sectors at Butcher & Singer,
Inc., Wheat First Securities and PaineWebber Inc. During such time, Mr.
Kirchhoff acquired knowledge and experience in all aspects of security
transactions, corporate financing, securities trading, and pension and profit
sharing. Mr. Kirchhoff also worked in the insurance industry during which he
acquired knowledge and experience in international banking. From 1995 to 2000,
Mr. Kirchhoff was the founder and owner of DiMeclior, Kerchhoff & Co., a broker
dealer firm, which represented high net worth clients and sports personalities.
>From 1999 to current, Mr. Kirchhoff is the founder and owner of New Alliance
Corporation, a business consulting firm. Mr. Kirchhoff graduated from Glassboro
College with a degree in economics and minor in finance.

         As of the date of this Annual Report, there are no family relationships
that exist among the named officers or directors. No arrangement or
understanding exists between any such director or officer and any other persons
pursuant to which any director or executive officer was elected as a director or
executive officer of the Company. The directors of the Company are elected
annually and serve until their successors take office or until their death,
resignation or removal. The executive officers serve at the pleasure of the
Board of Directors of the Company.

                                       36
<PAGE>

         As of the date of this Annual Report, no director or executive officer
of the Company is or has been involved in any legal proceeding concerning (i)
any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the bankruptcy
or within two years prior to that time; (ii) any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses) within the past five years; (iii) being
subject to any order, judgment or decree permanently or temporarily enjoining,
barring, suspending or otherwise limiting involvement in any type of business,
securities or banking activity; or (iv) being found by a court, the Securities
and Exchange Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law (and the judgment has
not been reversed, suspended or vacated).

         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         Section 16(a) of the 1934 Exchange Act requires the Company's directors
and officers, and the persons who beneficially own more than ten percent of the
common stock of the Company, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Copies of all filed
reports are required to be furnished to the Company pursuant to Rule 16a-3
promulgated under the 1934 Exchange Act. Based solely on the reports received by
the Company and on the representations of the reporting persons, the Company
believes that these persons have complied with all applicable filing
requirements during the fiscal year ended December 31, 2001.

ITEM 10. EXECUTIVE COMPENSATION

         COMPENSATION OF OFFICERS AND DIRECTORS

         As of the date of this Annual Report, none of the officers or directors
of the Company have received any compensation for their respective roles to date
or during the prior fiscal years. The Company had entered into employment
agreements dated July 1, 2001 with three of its executive officers/directors,
Mr. Richard Goodhart, Mr. Steven Wahrman and Mr. Jean Paul Daveau, respectively
(collectively, the "Employment Agreements"). On March 1, 2002, Mr. Goodhart
resigned as the Executive Vice President of the Company, therefore, Mr.
Goodhart's Employment Agreement is no longer in force and effect.

         Commencing July 1, 2001 and automatically renewable annually for a five
year period, the terms and provisions of the respective Employment Agreements
are as follows: (i) each officer/director receives an annual salary of $120,000;
(ii) each officer/director receives an annual cash bonus equal to one percent
(1%) of the annual net profits for the preceding fiscal year; and (iii) each
officer/director was granted stock options pursuant to the Company's
Non-Qualified Stock Option Plan to purchase 50,000 shares of restricted Common
Stock of the Company at $14.50 per share within five years from the effective
date of the Employment Agreement. Other benefits provided for in the Employment
Agreements are disability and health insurance coverage, automobile and expense
allowances and travel and entertainment allowances.

         Pursuant to the provisions of the Employment Agreements, Messrs.
Goodhart, Wahrman and Daveau were granted stock options (not to be governed by
the Non-Qualified Stock Option Plan) to purchase 4,121,128, 1,617,840 and
1,500,000, respectively, shares of restricted common stock at $0.34 per share
within five years from the effective date of the Employment Agreement
(collectively, the "Stock Options").

                                       37
<PAGE>

         The Stock Options were granted to Messrs. Goodhart, Wahrman and Daveau
in the amounts set forth above at an exercise price of $0.34 per share, which
exercise price the board of directors of the Company believed was at least equal
to the fair market value price of the Company's shares of common stock on June
29, 2001. On June 29, 2001, the board of directors authorized and approved the
grant of Stock Options, which included provisions for anti-dilution protection.
The grant of such Stock Options was absolute and was not subject to adjustment
for any future reorganization, recapitalization, reverse stock split,
combination of shares, merger or consolidation.

         As of the date of this Annual Report, the Company has not paid any
salary or amounts towards accrued interest to any of the executive
officers/directors under the Employment Agreements. As of December 31, 2001, the
officer/director each has respectively waived the accrual and payment of such
salary and interest in the aggregate amount of $590,000, and released the
Company from any liability thereunder. See "Item 7. Financial Statements."

         As of the date of this Annual Report, management of the Company intends
to enter into negotiations regarding termination of the respective Employment
Agreements.

         NON-QUALIFIED STOCK OPTION PLAN

         On January 1, 1999, the Board of Directors of the Company adopted the
Non-Qualified Stock Option Plan (the "SOP") which provided for the grant of
options to purchase an aggregate of 6,000,000 shares of restricted common stock
at $14.50 per share. The purpose of the SOP is to make options available to
directors, management and significant contractors of the Company in order to
encourage them to secure an increase on reasonable terms of their stock
ownership in the Company and to remain in the employ of the Company, and to
provide them compensation for past services rendered.

         The SOP is administered by the Board of Directors which determines the
persons to be granted options under the SOP, the number of shares subject to
each option, the exercise price of each option and the option period, and the
expiration date, if any, of such options. The exercise of an option may be less
than fair market value of the underlying shares of common stock. No options
granted under the SOP will be transfereable by the optionee other than by will
or the laws of descent and distribution and each option will be exercisable,
during the lifetime of the optionee, only by such optionee.

         The exercise price of an option granted pursuant to the SOP may be paid
in cash, by the surrender of options, in common stock, in other property,
including the optionee's promissory note, or by a combination of the above.

         As of the date of this Annual Report, options have been granted in the
aggregate of 220,000 shares to the following individuals. All options granted
are exercisable by the respective individual from the date of grant through the
date of expiration.

                                       38
<PAGE>

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

                                Number of      Date of    Exercise     Date of
                            Options Granted*    Grant      Price     Expiration
                             --------------     -----      -----     ----------

Richard Goodhart .....          50,000         01-01-99    $14.50     01-01-04

Steven Wahrman .......          50,000         01-01-99    $14.50     01-01-04

Jean Paul Daveau .....          50,000         01-01-99    $14.50     01-01-04

Jeffrey Carus ........          20,000         07-01-00    $14.50     07-01-05

Julius J. Valente, Jr.          50,000         07-01-00    $14.50     07-01-05

TOTAL ................         220,000
--------------------------------------------------------------------------------
*The original grant of options has been reduced in accordance with the reverse
stock split.

         No share options have been exercised as of the date of this Annual
Report.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth the name and address, as of the date of
this Annual Report, and the approximate number of shares of common stock of the
Company owned of record or beneficially by each person who owned of record, or
was known by the Company to own beneficially, more than five percent (5%) of the
Company's common stock, and the name and shareholdings of each officer and
director, and all officers and directors as a group as of the date of this
Annual Report.

--------------------------------------------------------------------------------
Title of Class       Name and Address         Amount and Nature*    Percent
                     of Beneficial Owner     of Beneficial Owner  of Class
--------------------------------------------------------------------------------
                                                          (1)(2)(3)(4)
Common Stock        Richard Goodhart                 4,725,525          32.10%
                    11730 Briarwood Circle
                    #1
                    Boynton Beach, FL 11788

                                                          (1)(2)(5)
Common Stock        Steven Wahrman                   1,944,720          15.92%
                    9091 North Military Trail
                    Palm Beach Gardens, FL 33410

                                                          (1)
Common Stock        Bristol Consulting Ltd.          6,235,604          59.16%
                    7101 Shore Road
                    Suite 3J
                    Brooklyn, New York 11209
                                                          (1)
Common Stock        Sampson Global Ltd.                545,454           5.17%
                    381 route de Thionville
                    L-5887
                    Hesperang, Luxembourg
                                                         (1)(2)(6)
Common Stock        All officers and                 3,504,720          25.44%
                    directors as a group
                    (5 persons)

                                       39
<PAGE>

*The original issuance of shares has been reduced in accordance with the reverse
stock split and subsequently increased in accordance with the forward stock
split.

(1)       These are restricted shares of common stock.
(2)       Includes the assumption of the exercise of options by each option
          holder pursuant to the terms of the Non-Qualified Stock Option Plan to
          purchase 60,000 shares of restricted common stock (adjusted pursuant
          to the reverse stock split and the forward stock split), or an
          aggregate of 120,000 shares.
(3)       In the event the Company should default on the promissory note with
          the Bank of Smithtown, pursuant to the terms of the settlement
          agreement, the Bank of Smithtown may foreclose on the shares held of
          record by Richard Goodhart (which have been pledged to secure the
          Company's obligations to the Bank of Smithtown), and may sell such
          shares to a third party.
(4)       Includes the assumption of the exercise of options by Mr. Goodhart
          pursuant to the terms of the Employment Agreement to purchase
          4,121,128 shares of restricted common stock.
(5)       Includes the assumption of the exercise of options by Mr. Wahrman
          pursuant to the terms of the Employment Agreement to purchase
          1,617,840 shares of restricted common stock.
(6)       Includes the assumption of the exercise of options by Messrs. Wahrman
          and Daveau pursuant to the terms of the Employment Agreements to
          purchase 1,617,860 and 1,500,000 shared of restricted common stock,
          respectively.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         ACQUISITION OF IPS-NY

         On October 28, 1998, the Company entered into an agreement and plan of
reorganization with International Purchasing Service, Inc. ("IPS-NY"). Pursuant
to the terms and provisions of the Plan of Reorganization, the Company agreed to
transfer and assign to Mr. Richard Goodhart, the then sole shareholder of
IPS-NY, 297,500 shares of its restricted common stock in exchange for all of
the issued and outstanding shares of common stock of IPS-NY. Prior to execution
of the Plan of Reorganization, Mr. Goodhart was a director and the president of
IPS-NY and was also a member of APP LLC holding an approximate 32% equity
ownership interest in APP LLC. After consummation of the Plan of Reorganization
and the Exchange Agreement, the Company issued to Mr. Richard Goodhart 297,500
shares of its restricted common stock in accordance with the terms of the Plan
of Reorganization and 156,196 shares of its restricted common stock in
accordance with the terms of the Exchange Agreement. On October 28, 1998, Mr.
Richard Goodhart was elected as a director and Chairman of the Board, Chief
Executive Officer of the Company. On March 1, 2002, Richard Goodhart resigned as
a director and the Executive Vice President of the Company.

         Among the factors considered by the board of directors of the Company
in evaluating the acquisition of IPS-NY were (i) the financial condition,
performance and prospects of IPS-NY; (ii) analysis of the value of exclusive
representation agreements between IPS-NY and certain manufacturers, including
Teledyne Vacuum Technologies, Omnirel Corporation and Jaco Electronics
International Division; (iii) analysis of the value of the international sales
structure established by IPS-NY and the existence of certain contacts; (iv)


                                       40
<PAGE>

utilization by the Company of a portion of the line of credit held by IPS-NY
with Bank of Smithtown; (v) analysis of the experience of personnel in IPS-NY in
component purchasing and the value of the existence of a purchasing department;
and (vi) future potential role of IPS-NY, which included control production and
arrangement of sub-contract manufacturing facilities.

         The board of directors of the Company valued IPS-NY at approximately
$215,688 and approved the issuance of 10% of the total proposed outstanding
shares of common stock of the Company as fair and just compensation for the
acquisition of IPS-NY. For financial statement purposes, the assets and
liabilities of IPS-NY have been recorded at predecessor cost.

         EMPLOYMENT AGREEMENTS

         The Company has entered into employment agreements dated January 1,
1999, amended June 29, 2001, with two of its executive officers/directors. As of
December 31, 2001, the respective officers/directors each waived the accrual and
payment of such salary and released the Company from liability thereunder.

         LOANS/NOTES PAYABLE TO OFFICERS

         As of December 31, 2001, the Company owed an aggregate of approximately
$380,143 pursuant to loans made by Mr. Steven Wahrman, a director and Executive
Vice President. Of the aggregate amount of $378,758 due and owing to Mr.
Wahrman, $50,000 is represented by a promissory note with interest accruing at
8% per annum due on demand, $240,000 is represented as a loan personally secured
by Mr. Wahrman on behalf of the Company through a financial institution which
bears interest at 9.25% and due on demand, $7,500 is represented by a promissory
note with interest accruing at 10% per annum due on demand, $3,500 is
represented by a promissory note with interest accruing at 10% per annum due on
demand, and $79,143 is represented as advances and unreimbursed expenses, which
are non-interest bearing.

         The Company also owes its prior Chief Financial Officer, Mr. Jules
Valente, $30,000 pursuant to two promissory notes with interest accruing at 10%
per annum due on demand.

         The Company also owes a prior director, Mr. Ives Wahrman, $98,776 with
interest accruing at 10% per annum due on demand.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  The following exhibits are filed as part of this Annual Report: None.

             None.

                                       41
<PAGE>

     (b)  Reports on Form 8-K:

          Filed on March 28, 2002
          Filed on October 16, 2001
          Filed on September 17, 2001 and amended September 17, 2001 Filed on
          April 20, 2001 Filed on April 16, 2001
          Filed on March 2, 2001
          Filed on January 4, 2001



SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                            ACCIDENT PREVENTION PLUS, INC.

Date: April 15, 2002                        By: /s/ Steven H. Wahrman
                                            --------------------------
                                            Steven H. Wahrman, Executive Vice
                                            President



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