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, 2000

[ ]  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.)

                             325 Wireless Boulevard
                            Hauppauge, New York 11788
                            -------------------------
                    (Address of Principal Executive Offices)

                                 (631) 360-0600
                           (Issuer's telephone number)

                                       N/A
              (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,
2000): $ 654,568

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, 2001: $11,118,611.

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 May 21, 2001
Common Stock, $.001 par value                  18,128,196

<PAGE>



                                     PART I


ITEM 1. DESCRIPTION OF BUSINESS

BUSINESS DEVELOPMENT AND ORGANIZATION

     The Company and APP LLC

     Accident Prevention Plus, Inc. (the "Company"), which currently trades on
the Over-the-Counter Bulletin Board under the symbol "ACDP", 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").

     Accident Prevention Plus, Inc. was formed during 1993 as a corporation
under the laws of the State of New York. During February 1996, Accident
Prevention Plus, Inc. converted to a limited liability company under the laws of
the State of New York ("APP LLC"). Since its inception in 1993, APP LLC has been
engaged in the design, marketing and distribution of onboard computer recording
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. In accordance with
the terms and provisions of the Exchange Agreement, 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.
As of the date of this Annual Report, IPS-NY is primarily responsible to the
Company for general shipping, receiving and warehousing services, and for
providing general purchasing services for the supply of electromechanical active
and passive components.

     Termination of KMR Telecom Ltd.

     On 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. 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 the Agreement and Plan of
Reorganization with KMR would be set aside and KMR would cease to be a
wholly-owned subsidiary of the Company with no further rights or duties to the
Company.

<PAGE>


     Establishment of European Subsidiaries

     Accident Prevention Plus (UK) Limited. 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. As of the date of this Annual Report, APP
UK is a wholly-owned subsidiary of the Company and provides services including,
but not limited to, sales and marketing, administration, and technical support
for the United Kingdom marketplace.

     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. As of the date of this Annual Report, APP
France is a wholly-owned subsidiary of APP UK and provides services including,
but not limited to, sales and marketing, administration, and technical support
for the European marketplace.

     The Company's principal executive offices are located at 325 Wireless
Blvd., Hauppauge, New York 11788. Its telephone number is (631) 360-0600, its
facsimile number is (631) 265-3351, and its e-mail address is
appinc@mindspring.com.

PRODUCTS

     Onboard Recording Systems

     The Company designs, develops, markets and sells a comprehensive line of
onboard computer recording systems, the APP1000, APP2000 and APP3000
(hereinafter 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.

     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 such as "near misses" and actual
accidents. The AP+Series are flexible in their monitoring and can be custom
tailored to meet required specifications.

<PAGE>


     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, and 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. 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 unbiased 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 the use of an APP+Series smartcard, operational access to company
vehicles can be carefully, quickly and conveniently controlled by the fleet
manager.

     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.

     Management further believes that use of the "Smart card" will allow the
AP+Series to be utilized by customers for non-transportion 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.

<PAGE>


     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 Monitoring System ("FIMS"), a proprietary opacity sensor, a skid pad
recorder, and a Smart Card interlocking system.

MANUFACTURING

     The Company is currently engaging the services of manufacturers which are
ISO 9000 certified. As of the date of this Annual Report, the AP+Series products
are and will be primarily manufactured by Boundless Supply Chains, Inc., which
is located in Hauppauge, New York ("Boundless"). Boundless has production
facilities in Florida and New York, and a distribution center in the
Netherlands. Management believes that Boundless has superior environmental
testing facilities and can reduce the manufacturing costs by approximately 50%
from those manufacturing costs previously incurred with other manufacturers.
Management further believes that the distribution center located in the
Netherlands will allow the Company to stock and distribute its products to all
European countries.

     During fiscal year 2000, the AP+Series products were primarily manufactured
by Nexus Corporation, a division of Jaco Electronics located in Vermont
("Nexus"). During fiscal year 2000, Nexus manufactured approximately 600
AP+Series products.

     The Company also 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.

     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, 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.

<PAGE>


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. Management intends to continue its product research and development in
order to expand its 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 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. During fiscal year 2000, management
anticipated that development of the APP4000 system would be completed in
approximately six to eight months from the date when adequate funding in the
approximate amount of $150,000 becomes available. Such financing did not become
available during fiscal year 2000 for completion of the APP4000 system.
Therefore, as of the date of this Annual Report, management anticipates that
development of the APP4000 system will be completed in approximately six to
eight months from the date when adequate funding becomes available, and will
required approximately $70,000 to $80,000 of funding. Management anticipates
that such funding may occur by approximately the fourth quarter of 2001.

     As of the date of this Annual Report, the Company is finalizing 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 year 2000. Management believes that the Company's relationship with
AFT-IFTM will enhance the marketability of its products in other countries.

     In the United States, the Company has installed 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 installation of the AP+Series unit on the driver training simulator creates
a strategic marketing edge for the Company because of the high visibility of
such installation 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.

<PAGE>


     During fiscal year 1999, the Company received a letter of intent from CM
regarding use of the CM Driver Training Institute as a test, training and
research center. 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 Community;
(ii) CM agreed to purchase from the Company a minimum of $20,000 of such
hardware, accessory items and software products at a 30% discount; (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 the date of this Annual Report, CM has purchased from the Company
small quantities of AP+Series products at approximately $15,000. Due to the
possible increase in new driver training projects in Europe, management of the
Company believes that during fiscal year 2001, CM will become a substantial
customer of the Company.

     The Company entered into a contract dated August 1, 1999 with the American
Trucking Association ("ATA") pertaining to a federally funded project to study
fatigue in drivers administered by the Federal Highway Administration and ATA
that involved the use of one of the Company's products. The Company has
installed its AP+Series products and has run pilot tests with the integration of
fatigue technologies. Management believes that the pilot tests were successful
and anticipates further pilot testing in Canada during the third quarter of
2001.

     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".

     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.

<PAGE>


     The Company is also engaged in discussions with various manufacturers of
driving training simulators used by CM to install the AP+Series products on all
such driver training simulators.

     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 fourth quarter of 2001, the Company will pursue
negotiations with USF regarding its respective percentage ownership interest in

<PAGE>


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.

     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 end of fiscal year 2000.

     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

     Customers

     The Company currently sells the AP+Series and related products in Europe,
North American, Africa, Mexico and Australia. Customers for the AP+Series and
related products are primarily transport companies and driver training
institutions. The Company's current market concentration has been in Europe due
to existing relationships with certain clients. Moreover, many European
countries have recently mandated the use of on-board electric log books which
utilize the Smart-Card technology, therefore, management intends to aggressively
pursue this market. Management's primary objective is to penetrate the European,
North American, African, Mexican and Australian markets.

     On approximately April 20, 2001, the Company received a blanket purchase
order from Intelliservices, S.A., a distributor in Mexico ("Intelliservices").
Pursuant to the terms of the purchase order, Intelliservices will purchase a
total dollar value of $872,450 of the Company's products and the Company will
ship such products to Intelliservices on release schedules. Management
anticipates that, subject to certain contingencies of performance and if
delivered, this purchase order would represent the largest single purchase
received by the Company.

     During fiscal year ended December 31, 2000, sales of the AP+Series products
to the Company's customers accounted for approximately 47% of total revenues.
IPS-NY, the Company's wholly-owned subsidiary, accounted for approximately 3% of
total revenues. APP UK, the Company's wholly-owned subsidiary, accounted for
approximately 50% of total revenues. For fiscal year ended December 31, 2000,
the Company had three unrelated customers which accounted for approximately 62%
of the total revenues generated from the sale of AP+Series products: (i) Safety
Engineering and Fire Consultants (31%), (ii) AFT-IFTM (21%), and (iii) American
Trucking Association (10%). As of the date of this Annual Report, the Company
has two unrelated customers who account for approximately 79% of the accounts
receivables.

<PAGE>


     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 56% of the Company's total
revenues in fiscal year 2000 (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.

     Contractual Arrangements

     The Company has representatives and distributors in Israel, Europe, Africa,
Mexico and India. 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.

<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 also believes that its wholly-owned subsidiaries located in Great
Britain and Europe, APP UK and APP France, will be instrumental to the Company
by providing such services. Management believes that these contractual relations
strengthen the Company's structure and potential marketability of the AP+Series
and related products, and also places the Company in a favorable position
through its subsidiaries to properly service the AP+Series and related products
sold and distributed in those foreign markets.

     The Company and Intelliservices also entered into a distributor agreement
dated January 9, 2001 pursuant to which the Company granted to Intelliservices
exclusive distributorship rights to sell and market the Company's AP+Series
products in Mexico.

     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 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 agreement was amended to provide that (i) a
$1,000,000 payment will 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 will 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 will 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-County Bulletin Board. As of the date of this Annual
Report, AOC has paid the Company approximately $320,000, and management of the
Company deems AOC to be in breach of its contractual duties under the agreement.
Furthermore, no sales have resulted from the Company's contractual relations
with AOC. Therefore, on approximately April 25, 2001, legal counsel for the
Company notified AOC that it was not in compliance with the minimum funding
requirements pursuant to the terms of the agreement. See "Item 3. Legal
Proceedings".

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.

<PAGE>


EMPLOYEES AND CONSULTANTS

     As of the date of this Annual Report, the Company employs seven persons on
a full time and two persons on a part time basis in the United States. And, five
persons are employed on a full time basis in France and two persons are employed
on a full time basis in Great Britain. The Company's President and Chief
Executive Officer are primarily responsible for all day-to-day operations of the
Company. 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 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 agreement further
          provides that APP LLC would pay to Bristol a monthly fee of $5,000 for
          the first three months of the agreement and, thereafter, a monthly fee
          of $10,000 for the duration of the agreement.

          During fiscal years 2000 and 1999, 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. During fiscal years 2000 and 1999,
          the Company paid to Bristol a total of $8,728 and $62,500,
          respectively. As of December 31, 2000, the Company has accrued a total
          of $197,900 for services rendered.

     (ii) APP LLC and Royce Anderson & Monroe, Inc. ("Royce Anderson") entered
          into a consulting agreement dated July 30, 1998 pursuant to which
          Royce Anderson agreed for a period of five years from the date of the
          agreement 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 2000 and 1999, 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 years 2000 and 1999, the Company did not pay
          or accrue any fees to Royce Anderson.

<PAGE>


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
2001, management intends to 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 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 the United Kingdom, Israel, Africa and
the Far East and Middle East. 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. Moreover, economic reforms and growth in the Far East and
Middle East countries have been initiated, and success in certain countries has
been more prevalent than in others. The continuation or increase of any such
disparities regarding economic reforms and growth could affect the political and
social stability of the Far East and Middle East, 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.

<PAGE>


ITEM 2. PROPERTIES

     Except as described above, the Company does not own any other real estate
or other properties. The Company leases office space and its offices are located
at 325 Wireless Boulevard, Hauppauge, New York 11788.

ITEM 3. LEGAL PROCEEDINGS

HSBA 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. As of December 31, 2000, the balance due and
owing HSBC is $369,817.

     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 alleges that the Company failed
to comply with and is in default under the terms of the promissory note and
supporting financing documents.

     On November 3, 2000, HSBC, the Company and Messrs. Goodhart and Wahrman
entered into a settlement agreement in which the Company and Messrs. Goodhart
and Wahrman (i) confessed judgment for the amounts due and owing HSBC, (ii)
agreed to provide the personal guarantees of Messrs. Goodhart and Wahrman and to
secure the note with all of the assets of the Company, and (iii) agreed to make
the following payments: (a) upon execution of the settlement agreement, initial
payments of $18,960 (representing accrued and unpaid interest and late charges)
and $100,000 (representing principal to reduce outstanding balance), (b)
commencing on December 1, 2000 and continuing until August 20, 2001, $5,000
monthly, (c) on or before January 15, 2001, $250,000 to reduce the outstanding
principal balance, and (d) on or before August 20, 2001, the outstanding balance
of total indebtedness. The terms of the settlement agreement further provide
that HSBC (i) agrees to a stipulation of discontinuance (to withdraw its pending
suit without prejudice to the re-commencement of same upon a default under the
settlement agreement, (ii) agrees 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) agrees to forbear
from entering judgment against the Company and Messrs. Goodhart and Wahrman
until August 20, 2001, and (iv) retains 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 settlement agreement.

     As of the date of this Annual Report, with the exception of (c) above
pertaining to the monthly payments of $5,000 for April and May 2001, the Company
has complied with all of the provisions of the settlement agreement. The Company
has complied with (d) above by paying HSBC $250,000 from the proceeds of
$320,000 received by the Company from AOC.

     Failure of the Company to pay such sums due under the terms of the
settlement agreement of perform any of the other contractual obligations will
constitute an event of default and the full amount of indebtedness, less any
payments made, will become immediately due and payable without further notice or
demand from HSBC. Such an event of default will also entitle HSBC to seek
judgments against the Company and Messrs. Goodhart and Wahrman pursuant to the
confessions of judgment.

<PAGE>


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. As of the date of this Annual Report, the Company has
not installed any additional 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 breache 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. The Company disputes these allegations and
intends to interpose counter-claims alleging breach of contract and tortuous
interference of contractual rights. The Company has suspended performance of its
duties under the agreement with North Shore Hospital.

     As of the date of this Annual Report, the Company anticipates filing its
answer and counterclaim by approximately May 31, 2001. 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.

AMERICAN OVERSEAS CORPORATION

     On August 20, 1998, APP LLC and American Overseas Corporation ("AOC")
entered into a distributor 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 agreement was amended to provide that (i) a
$1,000,000 payment will 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 will 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 will be due and owing on or before August 20, 2001. On December 27,
2000, the Company became publicly trading and its shares of common stock
commenced public trading on the Over-the-County Bulletin Board.

     As of the date of this Annual Report, AOC has paid the Company
approximately $320,000, and management of the Company believes that AOC has
breached its contractual obligations under the agreement. Therefore, on
approximately April 25, 2001, legal counsel for the Company notified AOC that it
was not in compliance with the minimum funding requirements pursuant to the
terms of the agreement. Management believes that such breaches by AOC could
result in possible legal remedies being sought by the Company. Management of the
Company may, if deemed necessary, consider and pursue any and all available
legal remedies and related causes of action against AOC.

<PAGE>


     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

     No matters were submitted to a vote of the Company's shareholders through
the solicitation of proxies or otherwise during fiscal year ended December 31,
2000.

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 "ACDP". 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 the first quarter of fiscal year 2001 and as of May 21, 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                               $3.250            $1.438
May 21, 2001                                $2.125            $0.850


HOLDERS

     The 18,128,196 shares of Common Stock outstanding as of the date of this
Annual Report are held by approximately 182 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.

<PAGE>


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 $1.45 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 55,923 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. 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 624,888 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.


<PAGE>


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

     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

     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.

     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 subsidiaries.

     During fiscal year ended December 31, 2000, 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.

FOR FISCAL YEAR ENDED DECEMBER 31, 2000 COMPARED WITH FISCAL YEAR ENDED DECEMEBR
31, 1999

     Results of Operation

     The Company's net losses for fiscal year ended December 31, 2000 were
approximately $2,663,308 compared to a net loss of approximately $1,173,837 for
fiscal year ended December 31, 1999 (an increase of $1,477,406 or 126%).

     Net sales for fiscal years ended December 31, 2000 and 1999 were $654,568
and $701,526, respectively. Net sales decreased by approximately $46,958 or 7%
for fiscal year ended December 31, 2000 as compared to fiscal year ended
December 31, 1999. Gross profit for fiscal years ended December 31, 2000 and
1999 amounted to $462,838 and $487,465, respectively, or a net decrease of
$24,627. Gross profit percentages for fiscal years ended December 31, 2000 and
1999 were 71% and 70%, respectively, or a net decrease of 1%.

<PAGE>


     The decrease in gross profit is a result of a decrease in net sales
resulting from a slight decline in sales of the Company's products during fiscal
year ended December 31, 2000. The overall increase in net sales and gross profit
during fiscal years ended December 31, 2000 and 1999, however, as compared with
net sales and gross profits realized during the prior fiscal years is primarily
a result of discounts for volume purchases, reduced component costs, and cost
savings from the redesign of the PC board. Management also attributes the
overall increase in net sales and gross profit to a stronger marketing campaign
and fulfillment of major contracts. The Company and its subsidiaries have
entered into various agreements with certain entities in order to establish
distribution channels, corporate structures, contract applications in foreign
and domestic countries, performance of certain pilot tests, and development of
new products. Moreover, the Company has lowered its pricing to distributors in
order to make the distributors more cost effective in the marketplace and as an
incentive for increased sales. Management believes that despite the reduction in
distributor pricing, the Company will still be able to maintain its normal gross
profit on sales due to lower production costs.

     The substantial increase in net loss during fiscal year ended December 31,
2000 as compared to fiscal year ended December 31, 1999 is attributable
primarily to a substantial increase in 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.

     Selling, general and administrative expenses for fiscal years ended
December 31, 2000 and 1999 were $2,351,079 and $1,155,616, respectively (an
increase of $1,195,463 or 103%). The increase in selling, general and
administrative expenses for fiscal year ended December 31, 2000 were primarily
due to the Company incurring costs associated with its marketing efforts,
increased costs associated with officers salaries, consulting/professional fees,
and personnel costs.

     Research and development expenses for fiscal year ended December 31, 2000
were $150,645 as compared to $402,980 for fiscal year ended December 31, 1999 (a
decrease of $252,335). The decrease in research and development expenses during
fiscal year ended December 31, 2000 is primarily due to limited funds and the
emphasis by the Company on the marketing of its products as compared to the
dedication of significant funds to research and development during fiscal year
ended December 31, 1999 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.

     Other losses during fiscal year ended December 31, 2000 include $320,448
which is due from KMR pursuant to a loan with IPS-NY. Management of the Company
has determined to write off the debt owed to the Company from KMR based upon the
fact that it is more likely than not that the loan will not be paid by KMR.
Moreover, interest expense in the amount of $292,169 was incurred by the Company
during fiscal year ended December 31, 2000 primarily due to interest relating to
the convertible notes payableas compared to interest expense in the amount of
$140,819 incurred during fiscal year ended December 31, 1999.

<PAGE>


     As a result of these factors, comprehensive net loss for the year ended
December 31, 2000 was $2,658,298, an increase of $1,485,126 or 126%, as compared
to a comprehensive net loss of $1,173,172 for the year ended December 31, 1999.
Management believes that the substantial increase in comprehensive net loss
during the fiscal year ended December 31, 2000 as compared to fiscal year ended
December 31, 1999 is attributable primarily to a substantial increase in
selling, general and administrative expenses and interest expense, and the write
off of the debt due from KMR. The Company's net earnings (losses) during fiscal
year ended December 31, 2000 were approximately ($2,663,308) or ($0.15) per
common share compared to a net loss of ($1,173,837) or ($0.07) per common share
during the fiscal year ended December 31, 1999. The weighted average number of
common shares outstanding were 17,806,320 for fiscal year ended December 31,
2000 compared to 17,629,462 for fiscal year ended December 31, 1999.

     Liquidity and Capital Resources

     The Company is experiencing a severe liquidity crisis and must raise
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 additional capital through further public or
private offerings of its stock and through bank loans 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 raise substantial amounts 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 $654,568 in net sales as of fiscal year ended
December 31, 2000, a decrease of approximately 7% over revenues of $701,526
generated as of fiscal year ended December 31, 1999. Although there was a slight
decrease in net sales during fiscal year ended December 31, 2000, 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. The Company has new orders for
approximately $1,000,000. 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, 2000, the Company's current assets were $181,270 and its
current liabilities were $4,727,315, which resulted in a working capital deficit
of $4,546,045. As of December 31, 2000, the Company's total assets were $304,750
and its total liabilities were $4,783,706. As of December 31, 2000, the
Company's total liabilities exceeded its total assets by $4,478,956. The
Company's stockholders' deficit increased from ($2,496,560) for fiscal year
ended December 31, 1999 to ($4,660,145) for fiscal year ended December 31, 2000.

<PAGE>


     As of December 31, 2000, the Company was not in compliance with terms of
certain loans due to financial institutions totaling $514,230 and $369,817,
respectively, requiring the majority of the loans to be reflected as current
liabilities. Except as discussed above regarding HSBC, to date the financial
institutions have either taken limited action or no action. Although management
is optimistic that they will be able to negotiate waivers and/or restructure
these loans, investor 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 $1,090,974, $886,978 of accrued
expense of which $685,500 is accrued officers salaries, and $267,959 of accrued
other expenses, which includes $144,866 of payroll taxes and related penalties
and interest. Long term liabilities include notes payable of $45,314 and other
liabilities of $11,077.

     As of December 31, 2000, the Company's assets consisted primarily of
$76,444 in accounts receivable, $61,948 in inventory, $42,288 in prepaid
expenses, and $90,066 of other long term assets.

     For the fiscal year ended December 31, 2000, the net cash used for
operating activities was $1,050,292 compared to $558,564 for fiscal year ended
December 31, 1999 (an increase of $491,638 or 88%). The main increase was
comprised of a net loss of $2,663,308 for fiscal year ended December 31, 2000
compared to a net loss of $1,173,837 for fiscal year ended December 31, 1999 (an
increase of $1,489,471 or 127%. Inventory of $61,948 at December 31, 2000
decreased from $130,121 at December 31, 1999 (a decrease of $68,173 or 69%) and
accounts payable increased to $1,090,974 at December 31, 2000 compared to
$833,278 at December 31, 1999 (an increase of $257,690 or 23%).

     The Company decreased its capital expenditures to $3,494 for fiscal year
ended December 31, 2000 compared to $12,238 for fiscal year ended December 31,
1999, all of which relate to the purchase of equipment.

     The Company increased its net cash from financing activities for fiscal
year ended December 31, 2000 to $1,025,620 compared to $593,781 for fiscal year
ended December 31, 1999 (an increase of $431,839 or 73%). The major components
were proceeds received from issuance of convertible notes payable of $1,143,400
for fiscal year ended December 31, 2000 compared to $150,000 for fiscal year
ended December 31, 1999 and repayment of proceeds of $21,750 received from
issuance of common stock subject to rescission for fiscal year ended December
31, 2000 compared to proceeds pf $202,939 received from issuance of common stock
for fiscal year ended December 31, 1999.

     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, 2000, 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.

<PAGE>


MATERIAL COMMITMENTS

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

     A significant and estimated commitment for the Company for fiscal year 2001
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 Chief
Executive Officer. As of December 31, 2000, the principal balance on the newly
issued $500,000 note, the newly issued $60,620 note and the original $100,000
note are $445,893, $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 is in the process of re-negotiating the terms and
conditions of this settlement agreement with Bank of Smithtown in order to
reduce its monthly payments.

     A significant and estimated commitment for the Company for fiscal year 2001
is the amounts due and owing to HSBC Bank USA (formerly Marine Midland Bank)
pursuant to a one-year promissory note dated September 17, 1996 The terms of the
promissory note require the Company to make payments of interest only at prime
plus 2% per annum, with the principal amount of $470,715 due on demand. Such
promissory note is approximately 90% guaranteed by the Small Business
Administration. On November 3, 2000, HSBC, the Company and Messrs. Goodhardt and
Wahrman entered into a settlement agreement providing for payments of certain
amounts. As of the date of this Annual Report, the Company is in compliance with
all provisions of the settlement agreement with the exception of the $5,000
monthly payments for April and May 2001. As of the date of this Annual Report,
the balance due and owing HSBC is approximately $107,336, including principal
and interest. See "Item 3. Legal Proceedings."

<PAGE>


     As of December 31, 2000, the Company owes approximately $145,000 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 has not entered into any
formal contractual arrangements with either taxing authority for repayment of
such taxes, penalties and interest. Management intends to continue making
payments as funds are available until such arrangements are consummated. The
Company has also submitted an offer and compromise to the Internal Revenue
Service and is currently waiting for a response.

     The Company has entered into employment agreements dated January 1, 1999
with three of its executive officers/directors, Mr. Richard Goodhart, Mr. Steven
Wahrman and Mr. Jean Paul Daveau (collectively, the "Employment Agreements").
Pursuant to the terms and provisions of the Employment Agreements, commencing
January 1, 1999, each officer/director will receive (i) an annual salary of
$120,000 (of which the first six months of fiscal year 1999 have been deferred
and accrued without interest); (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. As of December 31, 2000, the Company
has accrued approximately $685,500 in aggregate salary and paid $-0-.

     The Company entered into a consulting agreement dated July 30, 1998 with
Bristol Consulting Ltd ("Bristol"), pursuant to which the Company is obligated
to pay Bristol a monthly fee of $10,000 for the duration of the agreement, which
terminates July 30, 2003. As of December 31, 2000, the Company has accrued a
total of $197,900 of payments to Bristol and, during fiscal year ended December
31, 2000, paid $8,728 to Bristol for services rendered.

     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 2000.

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.

<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, 2000. For fiscal
year ended December 31, 2000, 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".

<PAGE>



                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999




                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                      Page
                                                                     Number
                                                                     ------

Independent auditors' reports                                     F - 1 - F - 2

Consolidated Balance Sheet at December 31, 2000                       F - 3

Consolidated Statements of Operations and Comprehensive Operations
     for the years ended December 31, 2000 and 1999                   F - 4

Consolidated Statements of Stockholders' Deficiency for the
    years ended December 31, 2000 and 1999                            F - 5

Consolidated Statements of Cash Flows for the
    years ended December 31, 2000 and 1999                       F - 6 to F - 7

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


<PAGE>




                          INDEPENDENT AUDITOR'S 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, 2000, and the related
consolidated statements of operations and comprehensive operations,
stockholders' deficiency, and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our 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 financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit 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, 2000 and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
has not generated significant revenue from its operations and at December 31,
2000 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 financial statements do not include any adjustments that might
result from the outcome of this uncertainty.



/s/ GOLDSTEIN GOLUB KESSLER LLP
-------------------------------
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
May 11, 2001

                                      F - 1
<PAGE>




                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Stockholders of
Accident Prevention Plus, Inc.

We have audited the accompanying statements of operations and comprehensive
income, stockholders' deficiency and cash flows of Accident Prevention Plus,
Inc. and Subsidiaries ("the Company") for the year ended December 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of Accident Prevention Plus (UK) Limited, a wholly owned subsidiary,
whose statements reflect no revenues for the related years then ended. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for Accident
Prevention Plus (UK) Limited, is based solely on the report of the other
auditors.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the Company's results of operations and
comprehensive income, stockholders' deficiency and cash flows for the year ended
December 31, 1999 in conformity with generally accepted accounting principles.





/s/ Massella, Tomaro & Co., LLP
-------------------------------
Massella, Tomaro & Co., LLP
Jericho, New York
March 28, 2000

                                      F - 2
<PAGE>
<TABLE>
<CAPTION>

                     ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                               CONSOLIDATED BALANCE SHEET
                                  AT DECEMBER 31, 2000

                                         ASSETS
                                         ------
<S>                                                                           <C>
Current Assets:
     Cash                                                                     $       590
     Accounts receivable, net of allowance for doubtful accounts of $60,503        76,444
     Inventory                                                                     61,948
     Prepaid expenses and other current assets                                     42,288
                                                                              -----------
          Total Current Assets                                                    181,270
                                                                              -----------

Property and Equipment, Net                                                        33,414
                                                                              -----------

Other Assets:
     Other assets                                                                  90,066
     Deferred income tax asset, net of valuation allowance of $853,000               --
                                                                              -----------
        Total Other Assets                                                         90,066
                                                                              -----------

           Total Assets                                                       $   304,750
                                                                              ===========

                        LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                        ----------------------------------------

Current Liabilities:
    Notes and loans payable                                                   $   971,733
    Notes and loans payable - related parties                                     216,271
    Convertible notes payable                                                   1,043,400
    Convertible notes payable - related parties                                   250,000
    Accounts payable                                                            1,090,974
    Accrued expenses                                                              886,978
    Other current liabilities                                                     267,959
                                                                              -----------
             Total Current Liabilities                                          4,727,315
                                                                              -----------

Long Term Liabilities:
     Notes and loans payable, net of current portion                               45,314
     Other liabilities                                                             11,077
                                                                              -----------
          Total Long Term Liabilities                                              56,391
                                                                              -----------

Total Liabilities                                                               4,783,706
                                                                              -----------

Common Stock Subject to Rescission Offer, - $.001 par value,
     124,958 shares issued and outstanding                                        181,189
                                                                              -----------

Commitments & Contingencies                                                          --
                                                                              -----------
Stockholders' Deficiency:
     Common stock - $.001 par value, 50,000,000 shares authorized,
     17,988,238 shares issued and outstanding                                      17,988
     Additional paid-in capital                                                 1,154,418
     Accumulated other comprehensive income                                         5,675
     Accumulated deficit                                                       (5,838,226)
                                                                              -----------
          Total Stockholders' Deficiency                                       (4,660,145)
                                                                              -----------

               Total Liabilities and Stockholders' Deficiency                 $   304,750
                                                                              ===========


         The accompanying notes and independent auditors' report should be read
               in conjunction with the consolidated financial statements.

                                          F - 3
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
       CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


                                                        2000           1999
                                                   ------------    ------------

Net Sales                                          $    654,568    $    701,526

Cost of Sales                                           191,730         214,061
                                                   ------------    ------------

Gross Profit                                            462,838         487,465
                                                   ------------    ------------

Expenses:
     Selling, general and administrative              2,351,079       1,155,616
     Research and development                           150,645         402,980
                                                   ------------    ------------
Total Expenses                                        2,501,724       1,558,596
                                                   ------------    ------------
Loss Before Other Income (Expenses)                  (2,038,886)     (1,071,131)
                                                   ------------    ------------

Other Income (Expenses)
    Write off of due from affiliate                    (320,448)           --
    Interest income                                        --            35,454
    (Loss) gain on foreign currency transactions        (14,242)          2,659
    Gain on sale of equipment                             2,437            --
    Interest expense                                   (292,169)       (140,819)
                                                   ------------    ------------

     Total Other Income (Expenses)                     (624,422)       (102,706)
                                                   ------------    ------------

Net Loss                                             (2,663,308)     (1,173,837)

Other Items Of Comprehensive Operations -
  Foreign currency translation                            5,010             665
                                                   ------------    ------------

Comprehensive Net Loss                             $ (2,658,298)   $ (1,173,172)
                                                   ============    ============

Loss Per Share - Basic and Diluted                 $       (.15)   $       (.07)
                                                   ============    ============


Weighted Average Number of Common Shares
     Outstanding - Basic and Diluted                 17,806,320      17,629,462
                                                   ============    ============


     The accompanying notes and independent auditors' report should be read
           in conjunction with the consolidated financial statements.

                                      F - 4
<PAGE>

                                        ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
                                        FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


                                                Common Stock          Additional                     Other          Total
                                         -------------------------     Paid-in     Comprehensive  Accumulated    Stockholders'
                                           Shares         Amount       Capital     Income (Loss)    Deficit      Deficiency
                                         -----------   -----------   -----------   -------------  -----------    -----------

Balances at December 31, 1998             17,295,970   $    17,296   $   223,318    $      --     $(2,001,081)   $(1,760,467)

Issuance of common stock in connection
  with private placement memorandums,
  net of offering costs                      342,268           342       436,737           --            --          437,079

Foreign currency
  translation adjustment                        --            --            --              665          --              665

Net loss for the year ended
   December 31, 1999                            --            --            --             --      (1,173,837)    (1,173,837)
                                         -----------   -----------   -----------    -----------   -----------    -----------

Balances at December 31, 1999             17,638,238        17,638       660,055            665    (3,174,918)    (2,496,560)

Issuance of common stock issued to
  officer in connection with signing
  of employment contract                     250,000           250       362,250           --            --          362,500

Issuance of common stock in connection
  with settlement of debt and purchase
  of  intangibles                            100,000           100       144,900           --            --          145,000

Common stock issuance costs                     --            --         (12,787)          --            --          (12,787)

Foreign currency
  translation adjustment                        --            --            --            5,010          --            5,010

Net loss for the year ended
  December 31, 2000                             --            --            --             --      (2,663,308)    (2,663,308)
                                         -----------   -----------   -----------    -----------   -----------    -----------

Balances at December 31, 2000             17,988,238   $    17,988   $ 1,154,418    $     5,675   $(5,838,226)   $(4,660,145)
                                         ===========   ===========   ===========    ===========   ===========    ===========


                            The accompanying notes and independent auditors' report should be read
                                  in conjunction with the consolidated financial statements.

                                                           F - 5
<PAGE>


                     ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                     FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


                                                                   2000           1999
                                                               -----------    -----------

Operating activities
 Net loss                                                      $(2,663,308)   $(1,173,837)
 Adjustments to reconcile net loss to net
    cash used in operating activities:
    Depreciation and amortization                                   34,116          6,837
    Write off of due to affiliate                                  320,448           --
    Common stock issued to officers                                362,500           --
 Decrease (increase) in:
     Accounts receivable                                            70,627       (115,335)
     Inventory                                                      68,173       (115,169)
     Prepaid expenses and other current assets                     (27,667)        68,379
     Other assets                                                    7,630        (23,750)
 (Decrease) increase in:
     Accounts payable and accrued expenses                         767,000        625,397
     Other current liabilities                                      10,189        168,824
                                                               -----------    -----------

Net cash used in operating activities                           (1,050,292)      (558,654)
                                                               -----------    -----------

Investing activities
    Purchase of property and equipment                              (3,494)       (12,238)
                                                               -----------    -----------

Net cash used in investing activities                               (3,494)       (12,238)
                                                               -----------    -----------

Financing activities
     Proceeds from the issuance of notes and loans payable         133,000           --
     Repayments of notes and loans payable                        (164,012)       (42,824)
     Repayments of capital lease                                    (9,011)        (2,896)
     Proceeds from the issuance of convertible notes payable     1,143,400        150,000
     (Repayment of) proceeds from the issuance of common
        stock subject to rescission                                (21,750)       202,939
     Proceeds from the issuance of common stock                       --          437,079
     Proceeds from notes and loans payable - related parties          --           50,178
     Repayment of notes and loans payable - related parties        (46,086)      (148,521)
     Costs associated with common stock                            (12,787)          --
     (Advances to) proceeds from affiliate                           2,866        (52,174)
                                                               -----------    -----------

Net cash provided by financing activities                        1,025,620        593,781
                                                               -----------    -----------

Effect of exchange rate changes on cash                              5,010            665

Net (decrease) increase in cash                                    (23,156)        23,554

Cash at beginning of year                                           23,746            192
                                                               -----------    -----------

Cash at end of year                                            $       590    $    23,746
                                                               ===========    ===========


         The accompanying notes and independent auditors' report should be read
               in conjunction with the consolidated financial statements.

                                          F - 6
</TABLE>
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


                                                               2000       1999
                                                             --------   --------
Supplemental disclosure of non-cash flow information:
     Cash paid during the year for:
             Interest                                        $154,524   $ 81,584
                                                             ========   ========

Schedule of non-cash operating activities:
     Issuance of 40,000 shares of common stock
     in connection with settlement of accounts payable       $ 58,000   $   --
                                                             ========   ========

Schedule of non-cash investing activities:
     Issuance of 60,000 shares of common stock
     in connection with purchase of intangibles              $ 87,000   $   --
                                                             ========   ========

    Assets acquired under capital leases                     $ 27,215   $   --
                                                             ========   ========




     The accompanying notes and independent auditors' report should be read
           in conjunction with the consolidated financial statements.

                                      F - 7
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


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").

     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 a Limited Liability Company. The
     LLC is treated as a partnership for financial and income tax purposes. The
     Company is engaged in the design, marketing and distribution of onboard
     computer recording and fuel monitoring systems for commercial and fleet
     vehicles.

     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 14,205,970 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 2,975,000 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 THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 1 -- ORGANIZATION (cont'd)

     KMR TELECOM, LTD.
     -----------------

     Simultaneously with the reorganization during October 1998, the Company
     also intended to acquire all of the issued and outstanding common stock of
     KMR Telecom, Ltd ("KMR"), a corporation organized under the laws of India
     for 800,000 shares of its common stock. During June of 1999, it was
     discovered that the laws of India prohibit a foreign entity from holding
     more than a 49% equity interest in a company organized under the laws of
     India. Accordingly, the Company and the shareholders of KMR entered into a
     rescission agreement canceling the transaction. The financial statements do
     not reflect the intended acquisition. In accordance with the rescission
     agreement, the rescission was effectuated retroactively to October 1998.

     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.

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, 2000 and 1999, the Company incurred net losses of
     $2,663,308 and $1,173,837, respectively. Additionally, as of December 31,
     2000, the Company has a working capital deficiency amounting to $4,546,045,
     a stockholders' deficiency of $4,660,145 and is in default of it's bank
     debt and certain convertible notes payable.

     As of December 31, 2000, the Company owes approximately $145,000 of payroll
     taxes and related penalties and interest. 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 their 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 to raise
     additional capital.

     These factors raise substantial doubt about the Company's ability to
     continue as a going concern. The 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 THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


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)   Intangible assets
          -----------------

          At each balance sheet date, the Company evaluates the period of
          amortization of intangible assets. The factors used in evaluating the
          period of amortization include: (i) current operating results, (ii)
          projected future operating results, and (ii) other material factors
          that affect the continuity of the business.

     c)   Inventory
          ---------

          Inventory amounting to $61,948 at December 31, 2000, consists of
          components and finished goods and are valued at the lower of cost
          (using the specific identification method) or market. All inventory is
          pledged as collateral pursuant to the notes payable as discussed in
          Note 7.

     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 antidilutive.

     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.

                                     F - 10
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

     g)   Fair value disclosure at December 31, 2000
          ------------------------------------------

          The carrying value of cash, accounts receivable, 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 does not believe that any recently issued accounting
          standards, not yet adopted by the Company, will have a material impact
          on its financial position and results of operations when adopted.

     i)   Property and equipment
          ----------------------

          Property and equipment are recorded at cost less accumulated
          depreciation which is provided on the straight line basis over the
          estimated useful lives of the assets which range between five and
          seven years. Expenditures for maintenance and repairs are expensed as
          incurred.

     j)   Research and development costs
          ------------------------------

          Research and development costs are expensed as incurred. Such costs
          amounted to $150,645 and $402,980 for the years ended December 31,
          2000 and 1999, respectively.

     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 shareholders' equity. The
          functional currency of all the Company's subsidiaries is the United
          State 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 collectiblity 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.

                                     F - 11
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 4 -- PROPERTY AND EQUIPMENT

     Property and equipment are as follows at:

                                                   December 31,
                                                      2000
                                                     -------

                    Furniture & fixtures             $ 6,648
                    Computer equipment                81,748
                                                     -------
                                                     $88,396
                    Less: accumulated depreciation    54,982
                                                     -------
                                                     $33,414
                                                     =======

     Depreciation expense for the years ended December 31, 2000 and 1999
     amounted to $19,116 and $6,837, respectively.

NOTE 5 -- DUE FROM AFFILIATE

     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
     has determined that the Company shall record an allowance of $359,546 for
     the uncollectibilty 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.
     Interest income recorded by the Company in connection with the loan
     amounted to $35,454 for the year ended December 31, 1999.

NOTE 6 -- OTHER ASSETS

     Other assets consist primarily of software which the Company acquired in
     July 2000 for $87,000 through the issuance of 60,000 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 year ended December 31, 2000 and
     accumulated amortization expense at December 31, 2000 amounted to $15,000.

                                     F - 12
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 7 -- NOTES PAYABLE

     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. Lastly, in lieu of canceling
          the original IPS-NY $500,000 note 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,
          2000 the principal balances on the newly issued $500,000 note, the
          newly issued $60,620 note and the original $100,000 SBA note are
          $445,893, $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, 2000, the Company was not in compliance with the
          payment schedule as agreed to above for the $500,000 note and $60,620
          note. 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, 2000.


          Annual aggregate maturities of notes payable under the SBA Note are as
          follows as of December 31, 2000:

              Year ended December 31:
              -----------------------

                      2001                     $  17,695
                      2002                         6,814
                                               ---------
                                               $  24,509
                                               =========


                                     F - 13
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 7 -- NOTES PAYABLE (cont'd)

     b)   HSBC Bank USA (formerly Marine Midland Bank)
          --------------------------------------------

          On September 17, 1996, the LLC borrowed $500,000 by executing a
          promissory note with HSBC Bank USA (formerly Marine Midland Bank)
          ("HSBC") with the note being partially guaranteed by the SBA. Such
          note was for a term of one year. The prior terms of the note were
          payments of interest only at prime plus 2% per annum and due on
          demand.

          On or about September 21, 2000, HSBC filed suit against LLC and the
          Guarantors in the Supreme Court of New York with respect to the
          Company's indebtedness to HSBC. The suit filed by HSBC alleged that
          the Company failed to comply and is in default under the terms of the
          Financing Documents.

          On November 3, 2000, HSBC, LLC and the Guarantors entered into a
          settlement agreement (the "Settlement Agreement") in which HSBC agreed
          to (i) a stipulation of discontinuance (to withdraw its pending suit,
          without prejudice to the re-commencement of same upon a default under
          the Settlement Agreement); (ii) forbear from commencing any other
          action or proceeding against LLC and the Guarantors with respect to
          the indebtedness of the Company until August 20, 2001; and (iii)
          forbear from entering judgment against LLC and the Guarantors until
          August 20, 2001. However, in the event the Company defaults under the
          Settlement Agreement, HSBC has retained the right to commence an
          action against LLC and the Guarantors.

          Pursuant to the terms of the Settlement Agreement, LLC and the
          Guarantors have executed confessions of judgment for the amounts due
          and owing HSBC and agreed to make the following payments:

          (a)  Upon execution of the Settlement Agreement, an initial payment of
               $18,960, which represents all accrued and unpaid interest and
               late charges on the Financing Documents to the date of the
               Settlement Agreement;

          (b)  Upon execution of the Settlement Agreement, an initial payment of
               $100,000, which represents an initial principal payment to reduce
               the outstanding balance;

          (c)  Commencing on December 1, 2000 and continuing on the first day of
               each month thereafter until August 20, 2001, monthly payments of
               interest on the outstanding principal balance and monthly
               payments of principal in the amount of $5,000;

          (d)  On or before January 15, 2001, a principal payment of $250,000 to
               be applied to reduce the outstanding principal balance; and

                                     F - 14
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 7 -- NOTES PAYABLE (cont'd)

     b)   HSBC Bank USA (formerly Marine Midland Bank) (cont'd)
          -----------------------------------------------------

          (e)  On or before August 20, 2001, payment of the outstanding balance
               of the total indebtedness.

               As of December 31, 2000 the balance due is $369,817 and is
               classified as current. Subsequent to year end the Company has
               complied with all provisions of the settlement agreement, except
               for provision (c) above pertaining to the monthly payments for
               April and May 2001. The note is secured by all of the assets of
               the Company, along with personal guarantees by the Chief
               Executive Officer and President ("the Guarantors").

               In the event the Company received the first payment of $1,000,000
               in accordance with an agreement with American Overseas
               Corporation "AOC" (see note 11(g)) prior to January 15, 2001, the
               Company was required to immediately pay HSBC an amount equal to
               twenty-five percent (25%) of $1,000,000 (i.e. $250,000) or any
               portion thereof received by the Company from AOC from time to
               time. The Company has received approximately $320,000 from AOC to
               date and the Company has complied with provision (d) above upon
               such receipt.

               Failure of the Company to pay such sums due under the terms of
               the Settlement Agreement or perform any of the other obligations
               set forth in the Settlement Agreement shall constitute an event
               of default and the full amount of the indebtedness, less any
               payments made, will become immediately due and payable without
               further notice or demand from HSBC. Such an event of default will
               also entitle HSBC to seek judgments against LLC and the
               Guarantors pursuant to the confessions of judgment.

     c)   Other
          -----

          The Company has other notes and loans payable to individuals, due on
          demand, in the amount of $133,000. Interest rates on theses notes are
          10% per annum.

          Aggregate maturities of long-term debt is as follows:

                 Year ending December 31,
                 ------------------------

                          2001                        $    971,733
                          2002                              45,314
                                                      ------------
                                                      $  1,017,047
                                                      ============


                                     F - 15
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 8 -- ACCRUED EXPENSES

     Accrued expenses consist of the following at December 31, 2000:

                          Officers salaries   $685,500
                          Professional fees     60,000
                          Consulting fees      120,000
                          Interest              15,070
                          Other                  6,408
                                              --------
                                              $886,978
                                              ========

NOTE 9 -- CONVERTIBLE NOTES PAYABLE

     On December 16, 1999, the Company executed a $250,000 convertible
     promissory note with an officer and director, bearing interest at 15% per
     annum with principal payable in full on December 31, 2001. The promissory
     note contains a provision stating that beginning January 2, 2001 that upon
     a 10 day notice the note is due on demand. On September 30, 2000 the note
     is convertible into common stock at the rate of $1.45 per share. There also
     is a prepayment penalty provision if the Company prepays the note in the
     first thirteen months.

     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. In accordance with provisions of the promissory note the Company
     is subject to a default interest rate of 24% on the outstanding balances.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 $1.45 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. In accordance with provisions of the promissory notes the Company
     is subject to a default interest rate of 24% on the outstanding balances.
     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 $1.45 per share.

     During January 2001, seven convertible noteholders exercised their right to
     convert the principal and related interest on the notes they were holding
     into common stock of the Company. The noteholders converted an aggregate of
     $76,400 of principal and $4,688 of interest in to 55,923 shares of common
     stock.

     During April 2001, three convertible noteholders exercised their right to
     convert the principal and related interest on the notes they were holding
     into common stock of the Company. The noteholders converted an aggregate of
     $787,000 of principal and $119,088 of interest in to 624,888 shares of
     common stock.

                                     F - 16
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


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 139,958 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 15,000 shares of common stock from
     two of the related shareholders. The Company has subsequently cancelled
     these shares. As of December 31, 2000, the balance of proceeds was $181,189
     and the related shares were 124,958. As of December 31, 2000, no additional
     investors have requested the Company to repurchase their shares.

NOTE 11 -- COMMITMENTS AND CONTINGENCIES

     a)   Payroll taxes
          -------------

          As of December 31, 2000, the Company owes approximately $145,000, 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.

     b)   Advances from grant
          -------------------

          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.

          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 loose all rights to the technology relating to the FIMS.




                                     F - 17
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 11 -- COMMITMENTS AND CONTINGENCIES (cont'd)

     c)   401K Employee Benefit Plan
          --------------------------

          During 1994, IPS-NY established a non-contributory 401K-employee
          benefit plan on behalf of its employees. As of December 31, 2000,
          IPS-NY has failed to remit approximately $3,700 to such plan, and
          accordingly, such amount has been included in accounts payable.

     d)   Lease Commitments
          -----------------

          i)   Office Space
               ------------

               Prior to April 1998, IPS-NY, had office space which was rented on
               a month-to-month basis. In April 1998, IPS-NY entered into a
               reciprocal agreement with Jaco Electronics, Inc. ("Jaco"). The
               agreement stipulates that Jaco will provide, for eighteen months,
               office space valued at $1,500 per month and warehousing and
               shipping support valued at $5,000 per month. In lieu of such
               support, IPS-NY agreed to transfer its then existing backlog
               sales orders to Jaco, which amounted to approximately $300,000.
               The warehousing and shipping services provided by Jaco have been
               accounted for as services provided to the LLC. For the year ended
               December 31, 1999, the Company has recorded $47,500 of
               warehousing and shipping cost and rent expense of $21,970 related
               to this agreement. The Company entered in to a lease agreement
               for office space effective January 10, 2000. The lease agreement
               is for two years, with two (one year) options to renew. The
               office lease requires monthly payments of $5,200 which 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. For the year ended December
               31, 2000, the Company recorded $72,000 of rent expense related to
               this agreement.

          ii)  Vehicles
               --------

               The Company leases four vehicles under non-cancelable operating
               leases. Total leasing expense was approximately $23,905 and
               $18,607 for the years ended December 31, 2000 and 1999,
               respectively. The Company's approximate future minimum lease
               payments under these non-cancelable operating leases in effect on
               December 31, 2000 are as follows:

                             2001                   $ 14,621
                             2002                      3,655
                                                    --------
                                                    $ 18,276
                                                    ========


                                     F - 18
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 11 -- COMMITMENTS AND CONTINGENCIES (cont'd)

     e)   Bristol Consulting Ltd.
          -----------------------

          On July 30, 1998, the LLC entered into a consulting agreement with
          Bristol Consulting Ltd. ("Bristol") for the assistance and advise 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 837,414 shares of common stock of the Company upon
          the reorganization of the LLC in October 1998 for its 5% partnership
          interest in the LLC. For the years ended December 31, 2000 and 1999,
          the LLC paid a total of $8,728 and $62,500, respectively, to Bristol.
          As of December 31, 2000, the LLC has accrued a total of $197,900 of
          payments due to Bristol.

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

          On July 30, 1998, the LLC entered into a consulting agreement with
          Royce Anderson & Monroe, Inc. ("Royce Anderson") for the assistance
          and advise 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 2,006,276 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)   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) month's 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 (8) months of the
          beginning trade date and iii) the balance of $3 million to be paid on
          or before thirty-six (36) 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. Between the
          period January to April 2001, AOC has remitted approximately $321,000.
          On April 25, 2001 counsel for the Company notified AOC that they are
          not in compliance with the minimum funding requirement under the
          contract.

                                     F - 19
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 11 -- COMMITMENTS AND CONTINGENCIES (cont'd)

     h)   General
          -------

          The Company is involved in various 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.

NOTE 12 -- STOCKHOLDERS' DEFICIENCY

     a)   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 director
          of the Company. The price for each share of common stock purchasable
          according to the Stock Option Plan is a $1.45 per share. At December
          31, 2000 no options were granted under this plan.

     b)   Limited Offering Memorandums
          ----------------------------

          During January and April 1999, the Company commenced two Limited
          Offering Memorandums (the "Offerings") pursuant to Rule 504 of
          Regulation D promulgated under the Securities Act of 1933. The
          Company's first offering was for 500,000 shares of its common stock at
          $1.45 per share before a 10% selling commission. Such offering was
          terminated during April 1999 with the Company selling approximately
          340,000 shares. The second offering in April 1999 was for 408,475
          shares of its common stock at $1.45 per share before a 10% selling
          commission. The Company sold an aggregate of 482,226 shares for the
          two offerings, yielding net proceeds of $640,018 after offering costs.

          Common stock sold subsequent to August 3, 1999 pursuant to the
          Company's limited offering memorandums, 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, at December 31, 2000 proceeds of $181,189 from the issuance of
          124,985 shares of common stock have been classified outside of the
          equity section in the balance sheet and classified as common stock
          subject to rescission.

     c)   Common stock for settlement of debt
          -----------------------------------

          On July 28, 2000 the Company agreed with a vendor Software Hardware
          Specialists, Inc. (SHS) to issue 100,000 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.

                                     F - 20
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 12 -- STOCKHOLDERS' DEFICIENCY (cont'd)

     d)   Common stock for employment
          ---------------------------

          In July 2000 the Company granted an officer 250,000 shares of common
          stock as part of the officers employment contract. The Company valued
          these shares at $1.45 per share, accordingly, $362,500 is included in
          the accompanying statement of operations in selling, general and
          administrative expenses.

NOTE 13 -- STOCK OPTIONS AND STOCK WARRANTS

     A summary of the status of the Company's options and warrants to purchase
     common stock and changes during the years is presented below:

        Year ended December 31,           2000                   1999
                                  --------------------   --------------------
                                              Weighted -             Weighted -
                                              average                average
                                  Number of   Exercise   Number of   Exercise
                                   Shares      Price      Shares      Price
                                  ---------   --------   ---------   --------
        Outstanding at
          beginning of year       1,500,000   $   1.45
        Granted                     700,000       1.45   1,500,000   $   1.45
        Exercised                      --         --          --      --
        Canceled                       --         --          --      --
                                  ---------   --------   ---------   --------

        Outstanding at
          end of year             2,200,000   $   1.45   1,500,000   $   1.45
                                  =========   ========   =========   ========

        Exercisable at
          year-end                2,200,000   $   1.45   1,500,000   $   1.45
                                  =========   ========   =========   ========

        Weighted average fair
        value of options and
        warrants granted during
        the period                            $     .31              $    .31
                                              =========              ========


                                     F - 21
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 13 -- STOCK OPTIONS AND STOCK WARRANTS (cont'd)

     The following table summarized information about fixed stock options and
     warrants outstanding at December 31, 2000:

                                        Outstanding             Exercisable
                                   ---------------------  ----------------------
                                    Weighted-
                                     average    Weighted-              Weighted-
                                    Remaining   average                average
                         Number    Contractual  Exercise    Number     Exercise
     Exercise Prices  Outstanding     Life       Price    Exercisable   Price
     ---------------  -----------  -----------  --------  -----------  --------

         $  1.45       2,200,000       3.2      $  1.45    2,200,000    $  1.45


     The Company has elected to apply APB Opinion No. 25, Accounting for Stock
     Issued to employees, and related interpretations in accounting for its
     stock options and warrants and has adopted the disclosure-only provisions
     of Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
     for Stock-Based Compensation. If the Company had elected to recognize
     compensation cost based on the fair value of the options and warrants
     granted at the grant date as prescribed by SFAS No. 123, the Company's net
     loss and net loss per common share for the years ended December 31, 2000
     and 1999 would have been as follows:

            Year ended December 31,      2000           1999
                                      -----------    -----------
            Net loss:
              As reported             $(2,663,308)   $(1,173,837)
                                      ===========    ===========

              Pro forma               $(2,880,308)   $(1,638,837)
                                      ===========    ===========

            Loss per common share -
              basic and diluted:
              As reported             $     (0.15)   $     (0.07)
                                      ===========    ===========

              Pro forma               $     (0.16)   $     (0.09)
                                      ===========    ===========


                                     F - 22
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 13 -- STOCK OPTIONS AND STOCK WARRANTS (cont'd)

     The fair value of each option or warrant grant was estimated at the date of
     grant using the Black-Scholes option pricing model with the following
     weighted-average assumptions:

                Year ended December 31,      2000    1999
                                             ----    ----

                Expected dividend yield      0       0
                Risk-free interest rate      6.3%    6.3%
                Volatility                    .01%    .01%
                Expected life (years)        4       4


NOTE 14 -- 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, 9% state and 20% for APP UK pursuant to
     SFAS No. 109.

     The only material tax effect of significant items comprising the Companies'
     current deferred tax assets as of December 31, 2000 is the Companies' net
     operating carryforward losses "NOL's" which amounted to approximately
     $1,185,000, $590,000 and $452,000, respectively for the Company, IPS-NY and
     APP UK. The deferred tax asset associated with the Companies' NOL's
     amounted to approximately $853,000 as of December 31, 2000.

     A portion of IPS-NY's net operating loss carry forwards are subject to
     provisions of the Internal Revenue Code, Section 382, which limits the use
     of net operating loss carry forwards 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
     $2,227,000 will expires in the years 2001 through 2020 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 and
     1999.

                                     F - 23
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 15 -- RELATED PARTY TRANSACTIONS

     a)   Notes and loans payable - related parties
          -----------------------------------------

          As of December 31, 2000, loans payable-officer amounting to $446,258,
          represent loans made by the President and Chief Financial Officer, of
          the Company and are comprised of the following:

          i)   The loans of the President of the Company as of December 31, 2000
               amounted to $416,258 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 June 30, 2001.

               The remainder is comprised of advances to the Company and
               unreimbursed expenses amounting to $118,758 which are
               non-interest bearing.

          ii)  Two promissory notes with interest accruing at 10% per annum due
               to the Chief Financial Officer's spouse totaling $30,000 which
               are due December 31, 2000.

          As of December 31, 2000, the amounts above have been offset by
          $229,987, which represents advances to officers and directors which
          are non-interest bearing and due on demand.

     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 Director. 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 500,000 shares of the Company's common stock at $1.45 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. As of December 31, 2000, the Company has accrued $685,500
          of salary and paid $61,500 to the officers.

                                     F - 24
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 15 -- RELATED PARTY TRANSACTIONS (cont'd)

     b)   Employment agreements (cont'd)
          ------------------------------

          On February 1, 2000, the Company entered into an employment agreement
          with an individual to become the Executive Vice President of Sales.
          The employment agreement is for an initial two-year term with
          renewable terms. The officer is entitled to an annual salary of
          $80,000 plus commissions. The agreement includes benefits such as
          disability and health insurance coverage, automobile and expense
          allowances, and travel and entertainment allowances.

          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 250,000 shares of common stock of the Company.
          The officer is entitled to 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 500,000 shares of
          the Company's common stock at $1.45 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, the officer agreed to defer the first six months of
          his salary, which was to be paid in full on December 31, 2000 and is
          included in accrued expenses in the accompanying balance sheet.



                                     F - 25
<PAGE>

                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 16 -- 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, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                2000                            1999
                                     --------------------------    --------------------------
                                       Segment     Consolidated      Segment     Consolidated
                                     -----------   ------------    -----------   ------------
     <S>                             <C>           <C>             <C>            <C>
     Sales:
         Foreign                     $   288,780                   $   627,301
         Domestic                        365,788                        74,225
                                     -----------                   -----------
     Total Sales                                    $   654,568                   $   701,526
                                                    ===========                   ===========
         Gross profit:
         Foreign                     $   164,238                   $   435,889
         Domestic                        298,600                        51,576
                                     -----------                   -----------
         Total Gross Profit                         $   462,838                   $   487,465
                                                    ===========                   ===========

     Corporate:
         Selling, general and
         administrative expense:
           Foreign                   $  (484,498)                  $   (57,652)
           Domestic                   (1,866,581)                   (1,097,964)
                                     -----------                   -----------
     Total S, G &A                                   (2,351,079)                   (1,155,616)

     Write off of due to affiliate                     (320,448)                         --
     Interest expense                                  (292,169)                     (140,819)
     Interest and other                                 (14,242)                       38,113
     Gain of sale of equipment                            2,437                          --
     Research and development                          (150,645)                     (402,980)
                                                    -----------                   -----------

     Net (loss)                                     $(2,663,308)                  $(1,173,837)
                                                    ===========                   ===========

     Identifiable assets:
           Foreign                   $    33,748                   $    53,815
           Domestic                      271,002                       792,573
                                     -----------                   -----------

     Total assets                                   $   304,750                   $   846,388
                                                    ===========                   ===========
</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.

                                     F - 26
<PAGE>


                 ACCIDENT PREVENTION PLUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999


NOTE 17 -- SIGNIFICANT CUSTOMERS AND VENDORS

     For the years ended December 31, 2000 and 1999, the Company had three and
     three unrelated customers, respectively, which accounted for approximately
     31%, 21%, and 10%, and 42%, 36%, and 17%, respectively, of total revenues.
     As of December 31, 2000, the Company has two unrelated customers who
     accounted for approximately 67% and 12% of accounts receivables.

NOTE 18 -- PREPAID EXPENSES AND OTHER CURRENT ASSETS

     Other current assets at December 31, 2000 consist of miscellaneous items,
     none in excess of 5% of current assets.

NOTE 19 -- OTHER CURRENT LIABILITIES

     Other current liabilities consist of the following at December 31, 2000:

         Customer deposits                                     $ 94,910
         Payroll taxes                                          144,866
         Other (none in excess of 5% of current liabilities)     28,183
                                                               --------
                                                               $267,959
                                                               ========



                                     F - 27



<PAGE>


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

     The Company's former principal independent accountant, Jeff R. Pearlman,
declined to stand for re-election in July of 1999 and, subsequently, management
of the Company engaged the accounting firm of Massella, Tomaro & Co., LLP as the
Company's independent auditor commencing August 1, 1999.

     The Company's former principal independent accountant, Massella, Tomaro &
Co., LLP was dismissed by the Company in February 2001 and, subsequently,
management of the Company engaged the accounting firm of Goldstein Golub
Kessler, LLP as the Company's independent accountant commencing March 1, 2001.

     Since March 1, 2001 and to date, the Company's current principal
independent accountant has not resigned or declined to stand for re-election or
were dismissed.

     During the Company's two most recent fiscal years and any subsequent
interim period preceding the resignation of Massella, Tomaro & Co., LLP, there
were no disagreements with Massella, Tomaro & Co., LLP, whether or 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 Massella, Tomaro & Co., LLP, would have caused Massella,
Tomaro & Co., LLP to make reference to the subject matter of the disagreements
in its reports.

     Moreover, there have been no disagreements with the Company's current
principal independent accountant which were not resolved on any matter
concerning accounting principles or practices, financial statement disclosure,
or auditing scope or procedures.

     Neither the Company's current principal independent accountant nor its
former principal independent accountant have provided an adverse opinion or
disclaimer of opinion to the Company's financial statements, nor modified their
respective opinion as to uncertainty, audit scope or accounting principles.
However, the auditors' reports by Massella, Tomaro & Co., LLP to the financial
statements for fiscal year ended December 31, 1999 and by Goldstein Golub
Kessler LLP to the financial statements for fiscal year ended Decemebr 31, 2000
are qualified as to the Company's ability to continue as a going concern.

     The Company's principal independent accountant from January 1997 to July
28, 1999 was Jeff R. Pearlman, 19 West 34th Street, Suite 1118, New York, New
York 10001. The Company's principal independent accountant from August 1, 1999
to February 28, 2001 was Massella, Tomaro & Co., LLP, 375 North Broadway, Suite
103, Jericho, New York 11753. The Company's principal independent accountant
from March 1, 2001 to the current date is Goldstein Golub Kessler LLP, 1185
Avenue of the Americas, Suite 500, New York, New York 10036-2602.

<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
-------------------        ---              -------------------------------

Richard J. Goodhart        52               Director and Chairman of the
                                            Board, Chief Executive Officer

Steven H. Wahrman          43               Director and President, Chief
                                            Operating Officer

Jean Paul Daveau           45               Director and Executive Vice
                                            President of Engineering/Design

Julius J. Valente Jr.      61               Chief Financial Officer

Ives Wahrman               76               Director

Martin Goodhart            79               Director

     RICHARD J. GOODHART has been a Director, the Chairman of the Board and
Chief Executive Officer of the Company since October of 1993. Mr. Goodhart has
had nineteen years in international sales and marketing in the electronic
component industry and ten years in purchasing management. Prior to his
involvement in the Company, Mr. Goodhart held positions as the Vice President of
Sale and Finance for Ex-Electronics and was International Sales and Marketing
Manager for Jaco Electronics. Mr. Goodhart holds a Bachelor of Science degree in
Business Management from Western New England College.

     STEVEN H. WAHRMAN has been a Director, the President and Chief Operating
Officer of the Company since February of 1996. Mr. Wahrman is responsible for
all phases of worldwide implementation of market research, strategic planning
and promotion and the daily operations of the Company. 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.

     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.

     JULIUS J. VALENTE, JR. has been the Chief Financial Officer of the Company
since December 1999. Mr. Valente has over three decades of experience in
accounting, lending, financial consulting and corporate management. In addition
to his association with the financial services industry, Mr. Valente established
his own financial consulting firm in 1979 known as United Financial Resources
Corporation ("UFRC"). UFRC specializes in developing successful recovery
programs for clientele in manufacturing, retail and service industries.

     IVES WAHRMAN has been a Director of the Company since February of 1996. Mr.
Wahrman has an extensive background in the field of merchandise marketing. Mr.
Wahrman has been retired for the past eight years.

<PAGE>


     MARTIN GOODHART has been a Director of the Company since February of 1996.
Mr. Goodhart has nearly fifty years of experience in the commercial finance
industry having held senior management positions with various credit or lending
institutions. Mr. Goodhart has been retired for the past six years.

     As of the date of this Registration Statement, two family relationships
exist among the named directors. Mr. Martin Goodhart is the father of Mr.
Richard Goodhart and Mr. Ives Wahrman is the father of Mr. Steven Wahrman. No
other family relationships exist among any of the named directors and executive
officers. 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.

     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 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 Exchange Act. Based solely on the reports received by HDRS
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, 2000.

ITEM 10. EXECUTIVE COMPENSATION

COMPENSATION OF OFFICERS AND DIRECTORS

     As of the date of this Registration Statement, 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. On January 1, 1999, the Company
entered into employment agreements with three of its executive
officers/directors, Mr. Richard Goodhart, Mr. Steven Wahrman and Mr. Jean Paul
Daveau. Pursuant to the provisions of the employment agreements, each officer
will receive an annual salary of $120,000 (of which the first six months
commencing January 1, 1999 will be deferred and will accrue without interest).
Each officer will also receive a yearly bonus equal to 1% of the net profits for
the preceding year. Each employment agreement provides for an initial period of
one year, with the ability to be renewed on a yearly basis for a period of five
years upon majority vote of the Board of Directors. In addition, each
officer/director has been granted stock options to purchase 500,000 shares of
restricted Common Stock of the Company at $1.45 per share. The employment
agreements also provide for disability and health insurance coverage, automobile
and expense allowances and travel and entertainment allowances. Effective July
1, 2000, the Company intends to enter into an employment agreement with Julius
J. Valente, Jr. for an initial term of one (1) year. In consideration for Mr.
Valente entering into this agreement, Mr. Valente will receive: (i) 250,000
shares of the Company's common stock, (ii) options to purchase 500,000 shares of
the Company's common stock at market on the date of grant, and a salary of
$10,000 per month. On July 1, 2000, the Company granted Mr. Valente 500,000
options to purchase shares of the Common Stock at $1.45 per share.

<PAGE>


     As of December 31, 2000, the Company has accrued approximately $685,500 of
salary and paid $-0- to its executive officers/directors as executive
compensation.

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 Common Stock at $1.45
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 2,200,000 shares to the following individuals. All options granted
are exercisable by the respective individual from the date of grant through the
date of expiration.

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

                                Number of      Date of    Exercise     Date of
                             Shares Granted     Grant      Price     Expiration
                             --------------     -----      -----     ----------

Richard Goodhart .....          500,000        01-01-99    $1.45      01-01-04

Steven Wahrman .......          500,000        01-01-99    $1.45      01-01-04

Jean Paul Daveau .....          500,000        01-01-99    $1.45      01-01-04

Jeffrey Carus ........          200,000        07-01-00    $1.45      07-01-05

Julius J. Valente, Jr.          500,000        07-01-00    $1.45      07-01-05

TOTAL ................        2,200,000
--------------------------------------------------------------------------------

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

<PAGE>


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)                            (3)                  (2)
Common Stock               Richard Goodhart            5,036,640         26.7%
                           325 Wireless Blvd.
                           Hauppauge, N. Y. 11788

            (1)                                                 (2)
Common Stock               Steven Wahrman              2,724,000         14.4%
                           325 Wireless Blvd.
                           Hauppauge, N.Y. 11788

            (1)                                                 (2)
Common Stock               Jean Paul Daveau            1,549,680          8.2%
                           325 Wireless Blvd.
                           Hauppauge, N.Y. 11788

            (1)                                                 (2)
Common Stock               All officers and            9,840,320         52.1%
                           directors as a group
                           (6 persons)

--------------------------------------------------------------------------------
(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 500,000
shares of restricted common stock at $1.45 per share, or an aggregate of
1,500,000 shares at $1.45 per share.
(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.

<PAGE>


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, 2,975,000 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 51% equity
ownership interest in APP LLC. After consummation of the Plan of Reorganization
and the Exchange Agreement, the Company issued to Mr. Richard Goodhart 2,975,000
shares of its restricted common stock in accordance with the terms of the Plan
of Reorganization and 1,561,960 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.

     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)
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
and July 1, 2000 with 4 of its executive officers/directors. As of December 31,
2000, the Company has accrued approximately $685,500 of salary and paid $-0- to
the officers.

LOANS/NOTES PAYABLE TO OFFICERS

     As of December 31, 2000, the Company owed an aggregate of approximately
$408,758 pursuant to loans made by Mr. Steven Wahrman, the President, and Mr.
Julius Valente, the Chief Financial Officer of the Company. Of the aggregate
amount of $408,758, approximately $378,758 is due and owing to the President
represented by a $50,000 promissory note, a $240,000 loan personally secured by
the President on behalf of the Company through a financial institution, a $7,500
promissory note due June 30, 2001, and $81,258 in advances and unreimbursed
expenses. The Company also owes the Chief Financial Officer $30,000 pursuant to
two promissory notes due December 31, 2000.

<PAGE>


     During June 1996, APP LLC borrowed $50,000 from the President of the
Company pursuant to a promissory and demand note. As of December 31, 2000, such
note remains unpaid as a result of the execution by Mr. Wahrman of a waiver of
repayment until December 31, 2001. The note continues to accrue interest at the
rate of 8% per annum. As of December 31, 2000, accrued interest on such note was
in the amount of $18,000.

     During August and December 1997, APP LLC borrowed $16,500 and $17,000,
respectively, from Mr. Ives Wahrman, a director of the Company, without
interest, payable ninety days from the date of borrowing. In March 1998, IPS-NY
borrowed $4,000 from Mr. Ives Wahrman under the same terms as APP LLC. As of
December 31, 2000, such notes remain unpaid as a result of the execution by Mr.
Wahrman of two separate waivers of repayment until December 31, 2001,
respectively.

LOANS DUE FROM OFFICERS

     As of December 31, 2000, Mr. Jean Paul Daveau, the Executive Vice
President, and Mr. Richard Goodhart, the Chief Executive Officer, owed the
Company approximately $231,087. Of the aggregate amount of $231,087, Mr. Jean
Paul Daveau owed the Company approximately $208,472 resulting from non-interest
bearing advances due on demand. Mr. Richard Goodhart owed the Company
approximately $106,106 resulting from a non-interest bearing advance payable on
demand.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

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

          10.21 Distributor Agreement dated January 9, 2001 between Accident
          Prevention Plus, Inc. and Intelliservices, S.A.

     (b)  Reports on Form 8-K:

          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: May 23, 2001                          By: /s/ Steven Wahrman
                                            --------------------------
                                            Steven Wahrman, President