UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            -------------------------

                                    FORM 10-K

                                  ANNUAL REPORT
                        PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                             -----------------------
                   For the fiscal year ended December 31, 1999

                        AIR PACKAGING TECHNOLOGIES, INC.
             (Exact name of Registrant as specified in its Charter)

        Delaware                                      95-4337254
  (State  of  Incorporation)                    (IRS  Employer  ID  No.)

                25620 Rye Canyon Road, Valencia, California 91355
                    (Address of principal executive offices)

                                 (661) 294-2222
                         (Registrant's telephone number)

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


  Securities registered pursuant to section 12(g) of the Act: 7,520,415 common

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.    X  yes       no
                                          ---       ---

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will  not  be  contained,  to  the best of registrant's knowledge, in definitive
proxy  or  information  statements incorporated by reference in Part III of this
Form  10-K  or  any  amendment  to  this  Form  10-K.   _____

The  aggregate  market  value  of the voting stock held by non-affiliates of the
Registration  was
$  2,742,270 as  of  March  31,  2000.
 -----------

       Shares of Common Stock Outstanding as of March 31, 2000: 7,520,415

<PAGE>

Part  I

Item  1.                               BUSINESS
                                      ---------

     INTRODUCTION
     ------------

     Air  Packaging  Technologies,  Inc.,  a  Delaware  corporation  ("APTI") is
engaged in the manufacturing, distribution, marketing, and continued development
of  inflatable,  protective  packaging for use in shipment of higher end fragile
products.  It  holds  worldwide  patents  on  a  packaging system which utilizes
chambered  packing material which provides an Air Box  cushion around shipments.
Its  Air  Box  system  competes  favorably  against  materials like bubble wrap,
urethane  foam,  etc.,  in  terms  of  protection,  ease of use and storage, for
shipment  of  higher  value  items  throughout  the  world.

                           A.     GENERAL DEVELOPMENT
                           --------------------------

     The  Registrant's predecessor was organized as a Canadian corporation under
the  British  Columbia  Company  Act  in  1985, under the name "MDE Exploration,
Inc.".  MDE  Exploration made an initial public offering in 1988 in Canada under
the  auspices  of  the  Vancouver Stock Exchange, and raised CDN$175,000 (net of
commissions)  through the issuance of 500,000 shares of Common Stock at CDN$0.40
per  share.

In  1989,  MDE Exploration, Inc. was reincorporated in Delaware, and reorganized
and  combined  with  Puff  Pac Hold Co. Inc., P&P Industries, Inc., and Puff Pac
Ltd.,  under  the  name  Puff  Pac  Industries,  Inc.

In September of 1992 Puff Pac Industries, Inc. changed its name to Air Packaging
Technologies,  Inc.

The  Registrant's stock commenced trading on the NASD Bulletin Board in April of
1994.

     Puff  Pac  Ltd., a California Limited Partnership, remains in existence due
to  ownership  by a small minority interest.  APTI owns 99.13% of the beneficial
interest  in  Puff  Pac  Ltd

     APTI's  corporate  offices  are located at 25620 Rye Canyon Road, Valencia,
California  91355;  its telephone number is (661) 294-2222; its facsimile number
is  (661)  294-0947.

     APTI  has  one  wholly  owned  subsidiary:

   Puff Pac Industries Canada Inc. ("Canco"), a British Columbia corporation.

<PAGE>

                        B.      FINANCIAL INFORMATION BY
                        --------------------------------
                    INDUSTRY SEGMENT AND CLASSES OF PRODUCTS
                    ----------------------------------------

     Registrant  is  in  only  one  industry  segment,  "protective  packaging".

<TABLE>
<CAPTION>


                                                         Year
                                                  --------------------
                                            1999          1998          1997
                                        ------------  ------------  ------------
<S>                                     <C>           <C>           <C>
Sales of Air Box  Protective Packaging
to Unaffiliated Customers: . . . . . .  $   959,712   $   722,268   $   340,624

Operating Loss . . . . . . . . . . . .  $(1,854,918)  $(1,819,872)  $(1,827,861)

Identifiable Assets, Net . . . . . . .  $ 2,970,285   $ 1,810,595   $ 1,137,721
</TABLE>




                                   C. BUSINESS
                                   -----------

1.     PRODUCTS
--     --------

     APTI manufactures and markets a line of industrial packaging products under
the  name  "Air  Box"  .

     The  Air  Box  provides  reusable  protective packaging during shipping and
storage  for  a  wide  range  of  high value items.  It provides vastly superior
protection  from  ESD  (electro static discharge) damage, and moisture.  It also
provides  see-through  transparency  for visual inspection of the product during
shipment  and  storage.

     The  patented  design  suspends an item within a double-chambered envelope,
which  when  inflated,  surrounds  the  item  with  a protective cushion of air,
protected by a double wall of transparent material, made out of a combination of
polyethylene  and  nylon.

     Although  not  an  inexpensive  form  of  packaging, the Air Box provides a
cost-effective  packaging solution for higher value items and is environmentally
superior  to  conventional packaging.  When deflated and disposed of, use of the
Air  Box  reduces  the  amount  of waste by up to 90%, compared with traditional
packaging.  The  packaging  is  also  easily  storable in deflated form, greatly
reducing  warehouse  space  required  to be devoted to package material storage.

     Air  Box  is reusable, allowing the package to be deflated and reused.  The
Air Box is designed for companies that have substantial round-trip packaging and
shipping  requirements.

     APTI  has also developed and markets a Static Discharge Shielding (SDS) Air
Box.   This   product   is   designed   for   electronic   products    requiring
static-discharge protection (i.e., Wafers and Integrated Circuits).  The SDS Air
Box  has  two  layers  of  anti-static  coated  film (inner and outer bags) that
dissipate  static  electricity  while  the  package's  air chamber provides full
static shielding.  This provides one hundred times the protection of traditional
static  shielding  bags,  and  still  provides  cushion  protection,  all in one
package.

     The  SDS  Air  Box  also meets MIL B81705C Type II and Type III and EIA 541
specifications.  The  Electronics   Industry  Association  (EIN)  puts  out  the
standard  which  is  titled  packaging   materials  standard  for  Electro-state
discharge  sensitive  items.  Motorola   and  other   electronic   semiconductor
manufacturers  are  presently using the SDS Air Box  for shipment of their wafer
and  integrated  circuits.

              During the first quarter  of 2000 APTI  introduced  a  new line of
products which will substantially reduce the amount of material while preserving
the  products protective qualities.  The new product, to be called Suspend-A-Pak
will  be  suitable  for  the  shipment  of  laptop  computers and similar shaped
products.   APTI  has  applied   for  the patent for this new packaging concept,
Suspend-A-Pak.  The  bag  is  made similar to an inner tube surrounding the item
while allowing the 4 corners to protrude through the tube.  This in effect lifts
and  suspends the item giving it excellent protection against drop and vibration
damage.

              APTI  adopted  the  use  of  AIR  BOX  for  the promotional market
shipping  everything  from  invitations to bottles of Champagne. The see through
effect  of  the Air Box lends itself to this type of packaging. The Company will
visit  trade  shows  beginning  in  January to align us with companies presently
selling  to  this  market.

              Air  Box  products are offered in 6 standard sizes and SDS Air Box
products  are  offered  in  8  standard  sizes.

     Air  Box  quilting  is an additional process developed by the Company which
allows  the  Air Box  to take up less space when inflated and to support heavier
items  for  shipping.  Air  Boxes  can  accommodate  products up to 15 pounds in
weight.

     APTI  has  created  the  Air Box  Shipping Center as a marketing tool.  The
Center is designed for the miscellaneous shipping needs of small businesses.  It
is  portable, measuring 17"x22"x4", made of corrugated cardboard, and comes with
an assortment of one hundred and twenty (120) Air Boxes in eight different sizes
and  a portable air pump.  It offers packaging protection equivalent to a closet
full  of  Styrofoam.

     Conventional  packaging requires as much as nine times more material volume
than the Air Box, which consists of 90 percent air when inflated.  Since the Air
Boxes  are  stored  flat,  storage  space  requirements  are  greatly  reduced.

     Designed  to  be  reused as often as five times per Air Box, deflatable Air
Box  materials  going  into  a  landfill after use represent 45 times less waste
material  compared  with  existing  materials.

     The  see-through  film  of  the  Air  Box  permits  instant verification of
contents  and  allows  a  humidity indicator card to be read without opening the
package.  In  some styles bar codes can also be scanned directly through the Air
Box  without  opening  it.

     During  inflation,  the  two  chambers, sealed together at the edges, swell
against  one  another,  immobilizing  the  product  trapped  between.

     The  product's  disadvantage  is  its  high  unit  cost.  Further,  in some
applications  the  product's  moisture  barrier does not meet certain Mil specs,
although the Company's research and development department is working to improve
such  protection.  The  product is also relatively unknown, and there are limits
to  size,  shapes  and  weights.

     At  the point of unpacking in the recipient's plant, Air Boxes are deflated
by  pulling  up  the  valve stem on the valve allowing air to escape through the
center  of the valve, when the Air Box is ready for reuse the valve stem will be
pushed  back  down  after  inflation.



     In  summary  the  Company's  Air  Box  product  has  the  following
attributes  and  advantages

-     A  unique  packaging  system
-     Patented  products
-     Superior  drop  and  vibration  protection
-     Transparency
-     ESD  protection
-     Custom  shapes
-     Custom  printing
-     Reusable  Cost  effective  Environmentally  friendly
-     Suspend-A-Pak  is  a  low  cost  alternative  to  traditional  packaging



MARKETING
 --------

      The  Company has identified and has focused upon six key industries
which management believes can immediately benefit from its products.  These are:

-     Promotional  product  or  event  announcements
-     Static  Discharge  Shielding  (SDS)
-     Medical
-     Dental
-     In  store  display
-     Retail  packaging
-     Electronic  finished  product  repairs

             In  addition  the  Company  is  continually  seeking  additional
commercial  opportunities  for  the  of  its  Air  Box  Products in all markets.




PROMOTIONAL  AIR  BOX

             The  Company  is  attempting  to  take  advantage  of  the  unique
appearance  of  its Air Box by increasing its efforts to sell the product in the
promotional  packaging  market.  By changing the materials, the price of the Air
Box  can  be  significantly  reduced  which  allows  the Company to compete with
traditional forms of packaging.  The Company intends to seek strategic alliances
with  well-established  Companies  in  the  promotion  and  business  premium
industries.

SDS

     The  SDS market is principally the semiconductor market.  Manufacturers are
concerned  with  the  shipment  of silicon wafers used to manufacture integrated
circuits,  and  IC's  packaged  in  a  Tape  and  Reel  for shipment and further
manufacture.  This  is  a  worldwide  market.

     Management  believes  its  products  are the only protective packaging with
Both static shielding  and  cushion  protection.  The Air Box  provides superior
   -
static  shielding, is cost effective, requires less storage space, allows use of
primary shipment containers (Empak) (reusing the manufacturer's carrier provides
additional  cost  savings),  and is more effective in reducing damage from drops
and  vibrations.

     The  product  exceeds  all ESD standards, all ISTA and ASTM compression and
transportation  standards, and has passed all commercial airline altitude tests.
The product does not particulate - avoiding wafer contamination.  The product is
environmentally  friendly  with 90% less waste going into the landfill after use
as  compared  to  other packaging materials.  The Company's customers report the
Air  Box  is  providing  cost  savings  and freight savings, since there is less
shipment  weight  and the corrugated box is smaller when compared to traditional
cushion  packaging.

     In  a  typical  application,  the  two  chambers contain air and are sealed
together at the edges, with the exception of an open end in which the product is
inserted  along with a humidity indicator card.  An operator applies pressurized
air  from  an  inexpensive  regulator,  supplied  by  APTI  to the bag's nozzle,
inflating  the bag. The open end is then vacuum-sealed using existing equipment.
The  resulting  product/package  construction,  consisting  of  film/air
gap/film/product/film/air  gap/film, is what gives the package its strong static
shielding  protection.  The  air gaps can range anywhere from   to 1 inch thick,
depending  on  the  contents.  The film is coated to provide the required static
dissapative  properties,  the  polyethylene  and  nylon  both  provide enhancing
properties  to  resist  puncture  and  a  long  shelf  life.

     After  a  variety  of  tests  conducted under several different conditions,
independent  testing laboratory Fowler Associates confirmed that the combination
of  the  material  and  the  air  gaps  "provide  a  very  good  ESD package for
essentially  all  devices  under  essentially  all conditions.  In one test, the
package withstood a 20kV discharge while containing integrated circuits that are
rated  at  150  v  maximum.


     Another  part of the SDS market is the Photomask market.  The Photomask has
no  efficient  nor  cost-effective  method of shipment, is extremely fragile, is
subject  to transit damage, and is particularly sensitive to contamination.  SDS
Air  Box  can  be  sealed to eliminate contamination during transit and storage.
Prior  to  the SDS Air Box entering this market, the Photomask manufacturers had
no  efficient  way  to  ship  their  fragile  Photomasks.  They  were  getting
substantial  damage  during  shipping  and  storage,  causing  them  to use such
extremes  as packaging them in a five-gallon ammo can with bubble wrap or a full
size  suitcase  lined  with  polyurethane  foam.  If the Photomask was extremely
fragile,  they  had  to  hand  carry  it  to the customer.  In all cases, it was
substantially  more expensive to insure the safety of the Photomask prior to the
introduction of the SDS Air Box.  APTI has been selling the Photomask Air Box to
Photronics  for  nine  months,  and  recently  began selling the SDS Air Box for
Photomasks  to  two  other  companies.  These three companies control 60% of the
Photomask  market.

     Other markets for the SDS Air Box  include sensitive parts for wafer making
machines,  high-end  disc  drives, quartz glassware used in making semiconductor
wafers,  and  lightweight  surface  mount  boards,  among  others.

MEDICAL

             The  Company  recently successfully designed and sold an Air Box to
ship  living  human  skin  in  a Petrie dish, combining a temperature controlled
environment  with Air Box cushion packaging from the Organogenises laboratory to
the  hospital.  This skin is called Apligraf and is made by Organogenises of New
England.  If  the Apligraf is subjected to substantial vibration or shock during
the  trip  to  the  hospital, it will form a small bubble under the skin and die
very quickly.  Many forms of packaging were tested and the Air Box design is the
only  FDA  approved  method  of  shipping  the  Apligraf.

     Dental  Products
     ----------------

     The Dental market is concerned with the shipment of dental impressions from
the  dentist's office to the laboratory for the fabrication of dental plates and
apparati  and  the  return  trip  to the Dentist.  Deliveries inside of about 75
miles  are  now  hand  delivered, and do not need the Air Box.  Dentists who are
outside the 75-mile radius of the laboratory must ship both ways by air courier.
APTI  has  replaced  the corrugated box and foam interior with a simple reusable
Air Box that fits into an overnight courier bag.  The laboratory is saving $1.00
per  shipment  on  freight  (going  both ways) and plans to use the Air Box four
times,  giving them additional savings.  They also have their packages delivered
up  to  two hours earlier than if packaged in boxes and foam.  The environmental
effect  is  tremendous  and  important  to the industry; the Air Box is 95% less
dunnage  going  into  the land fill, and if used four times is 98% less dunnage.

IN  STORE  DISPLAY

             The  Company is also utilizing the unique appearance of the Air Box
to  increase  sales  of its product to the in store display market in department
stores  and  service  establishments.  A  leading  manufacturer of beauty parlor
supplies  will  introduce  a  new line of products to its beauty salon customers
using  a  custom-designed  Air  Box  set  in  a  metallic  base.

RETAIL  PACKAGING

             The  Company  is presently working with both packaging design firms
and  manufacturers  to  develop  a  line  of Air Boxes, which can be used in the
retail  market.  The  Air Box will serve two functions:  to protect the enclosed
product  and  to  attract  the  attention  of  potential  customers.

SUSPEND-A-PAK

             Suspend-A-Pak,  a  totally new line of Air Boxes, was introduced in
the  first  quarter  of 2000.  It is designed to be used as suspension packaging
using  Air  Box technology but utilizing substantially less material.  This will
allow  the  Company  to  compete in high volume, low-end applications and in the
transportation  of  electronic  items  such  as  laptop  computers.

2.  Methods  of  Sales
----------------------

     The  Company  has  a  Vice President of Sales handling national accounts as
well  as  an  inside  sales  person  located  in  Valencia  CA.

     End  user  sales  are  mainly  handled  through  a  variety  of  packaging
distributors  throughout  the  United  States.  It is the Company's intention to
develop  this  area  of  the  sales  extensively  in  the  coming  months.

     The  Company  has  one outside sales representative located in the San Jose
area  to  sell  primarily  to  the  Semiconductor  Market.

     The Company has three International Distributors selling their products; in
Europe,  Air  Packaging  Europe, in Japan with Captain Industries and in the Far
East  with  Dou Yee of Singapore.  The Company plans to expand its International
sales  efforts  by  working  with  non-exclusive  Distributors.

     The  major  share  of the Company's present sales come from the U.S. market
with  National  accounts  and  15%  of  the  sales coming from the International
Distributors.

3.      Manufacturing
---------------------

     APTI  purchases  raw materials in the form of extruded or laminated webs of
thin  flexible  plastic  films  which  have  been  printed  or coated by outside
suppliers.  These  films  are  produced  for  the  Company to the Company's film
design  specifications  and  standards.

     These  films  are  then  formed  into the Company's various products on the
Company's  custom  designed and computer controlled modular converting machines,
which  use  heat  sealing technology to join the multiple layers of plastic film
together.  The  specific  sequence  of  operations  and  control  parameters  is
proprietary  to  the  Company,  and  is covered by process patents.  The Company
currently  has  two product fabrication converting machines which are capable of
producing  a  total  of  five  (5)  million  units  per  year.

     The  Company  fabricates  its  patented  air inflation valve using extruded
printed thin plastic films which are heat sealed together to form the valve on a
custom  designed  fabrication  machine.  In the first half of 1998 APTI designed
and developed an industrially acceptable push-pull hard valve.  Field tests were
completed  with  some  of  the  Company's  largest  customers,  and  they
enthusiastically  endorsed  the  change  in  valves.  The  new  push-pull  valve
eliminates  the  threat  of  air  escaping through the valve.  APTI is using the
push-pull  valve  in  all  Semiconductor  applications  and  most  custom design
applications.

     The  Company  utilizes  continuous process quality monitoring raw material,
production lot testing and other elements of Total Quality Management to produce
a  high  quality  of  product, which continues to hold air in all usual shipping
environments  which  may  be  encountered by the Company's customers in shipping
their  products.

     The  Company  packages  its  products  in  boxes  for  shipment to its many
customers  and  distributors  throughout  the  world.  Some  of the products are
"standard"  items and are produced to forecast and warehoused for quick response
subsequent  shipment,  while  other  products  are  produced  only upon specific
customer  order for immediate shipment.  On large special orders the Company can
provide  products with custom printing to the customer's requirements; all other
orders  are  produced  and  shipped  with the Company's standard logo and patent
information  printed  thereon.

4.     Sources  and  Availability  of  Raw  Material
----------------------------------------------------

     The  Company  has at least two suppliers fully qualified to produce each of
the raw material films required for its products and several companies qualified
to  provide  the  printing  required.

     Basic  raw  materials  required by us from our suppliers, such as Jefferson
Smurfitt  and  Huntsman,  are  produced and readily available to us.  All of the
film  raw materials used are produced in the millions of tons currently in other
industries.  The  Company  has  adopted industry standard processes to fabricate
its  raw materials.  As a result, supplies of raw materials are available to the
Company  from  many  sources,  though  the  lead-time can be several weeks until
receipt  of  raw  materials  into  the  Company  plant.


5.     Patents,  Trademarks  &  Licenses
----------------------------------------

     The Company has a combination of products, process and application patents,
backed  by  proprietary  and  trade secret manufacturing technology.  Management
believes the patents and trademarks provide a formidable barrier to competition.
They include 13 U.S. patents and 1 pending with 2 trademarks and 1 pending, with
13  foreign patents with 2 pending and 1 trademark pending - and further filings
continue  to  protect  and  strengthen the technology position.   The Company is
required  to  pay minor royalties related to certain patents and trademarks, and
in  prior years had paid royalties on both patents and the trademark "Puff Pac",
which  trademark  is  no longer used.  Total expense related to these agreements
was  $4,324 in 1999, $3,991 in 1998 and  $1,726 in 1997.  The continuing royalty
payment  on patents continues for the life of the original patents, and is fixed
at  2%  of  cost  of  goods  sold  on  an  annual  basis.




6.     Seasonal  Factors
------------------------

     The  seasonal  factors  in  the  Company's Air Box product are limited, and
revolve  only  around  industry  slow  downs.


7.     Inventory  and  Other  Working  Capital  Items
-----------------------------------------------------

     The  Company  carries a continuing inventory of its Air Box products, based
on  sales  forecasts.  The  book  value of this inventory has been significantly
reduced due to the slower than expected sales rate and potential obsolescence or
rework  necessitated  by  the  Company's  continuing  product   development  and
improvement.  The  Company had inventory reserves of $33,000 and $63,000 in 1999
and  1998,  respectively.


8.     Principal  Customers
---------------------------

     Three  larger  customers,  Motorola  (XPEDX),  The  Air  Packaging  Company
(Europe)  Ltd., and C-PAK PTE, LTD (Singapore) accounted for 16%, 17% and 24% of
its  sales  during its fiscal year ended December 31, 1999.  These companies are
independently  owned,  and  are  not  affiliates  of  APTI.


9.      Firm  Backlog
---------------------

     As  of  December  31,  1999,  APTI had $97,000 in backlog orders, which are
scheduled  to be completed within 90 days. The backlog orders as of December 31,
1998  totaled  $35,970.  Most  orders are non-custom, and are filled and shipped
within  14  working days.  Custom orders require 6 to 8 weeks to manufacture and
ship.


10.      Government  Contracts
------------------------------

     We  recently  completed  a series of simulated transportation tests for the
Military-Navy  for  several  items  with  excellent  results.  The U.S. Military
advised  us  they  want  to purchase the Air Box to ship sensitive items for the
U.S.  Navy  between  the  ships  and repair depots.  We are pursuing this at the
present time, and although the potential opportunity is substantial, there is no
guarantee  APTI  will have a contract with the U.S. Military in the near future.


11.      Competition
--------------------

     APTI  has  two  distinct  types of competitors, one in the standard Air Box
market  and  one  in  the  SDS  Air  Box  market.

     The  Standard  Air Box  competes against traditional cushion packaging such
as  die  cut  styrofoam, loose fill, bubble wrap, die cut corrugated, convoluted
foam  and  other  forms  of packaging.  The Company's products are competitively
priced  with  most of these competitors.  The Company's Air Box product performs
better  than  all  other  cushion  packaging  in  transportation  tests.

     The  second  market  is  the  static shielding market.  Here, APTI competes
against  anti-static  foam cushion packaging.  Most of the Company's competition
is  multi-step packaging, compared to the one step method offered by SDS Air Box
 .  The Company's SDS Air Box  is competitively priced, and management expects to
increase  its  share  of  this  market.


12.     Research,  Development  &  Laboratory
---------------------------------------------

     The  Company maintains an ongoing research and development effort, striving
to  develop more effective and efficient packaging products based around the Air
Box  technology  and design.  The Company maintains three full time researchers,
assisted  on  a  part time basis by other employees, and has established an ISTA
Certified  testing  laboratory within its manufacturing premises in order to aid
its  research  and  development  efforts.  The  Company  also  partners with its
customers  or prospective partners in an effort to develop new and more creative
solutions  to  the  customer's  unique  packaging  needs.

     For the years ended December 1999, 1998, and 1997, research and development
expenses  were  $5,419,  $7,371  and  $3,322,  respectively.


13.     Environmental  Factors
------------------------------

     The  Company's manufacturing processes are environmentally "clean", as they
comprise only the use of electrically generated heat at modest temperatures (300
to  400F)  to  heat  seal  the  layers  of plastic films together.  There are no
by-products  created  by  the Company's manufacturing processes other than scrap
plastic  films  generated  when  the machines are set up or occasionally require
adjustment.  There  is  no  toxic  or  dangerous  fumes emitted by the heat seal
processes  as  the  materials  are  kept  well  below  their  boiling  points.


14.     Employees
-----------------

     The  Company has 19 full-time employees.  Eight of these are in management,
sales,  product  development,  or  administration  positions  and  eleven are in
production/warehousing/shipping  operations.

     The production and packaging operations are supplemented by the addition of
temporary personnel when scheduling requires.  The operation is a non-union shop
with  staffing  drawn  from  the  Valencia and Los Angeles metroplex, California
areas.  The  production  workers  when   hired   are  typically  non-skilled  or
semi-skilled,  and  are  trained, by the Company, in operation of its converting
fabrication  equipment.  The  Company  believes  that its relationships with its
employees  are  good.


<PAGE>

15.     Financial  Information  Relating  to  Foreign  and  Domestic  Sales
---------------------------------------------------------------------------

     Sales  to  Unaffiliated  Customers:

<TABLE>
<CAPTION>
                           Year
                 --------------------------
                 1999      1998      1997
               --------  --------  --------
<S>            <C>       <C>       <C>
United States  $563,971  $366,177  $295,116
Europe. . . .  $165,691  $223,619  $ 45,508
Asia. . . . .  $230,050  $132,472         -
</TABLE>


Operating  Loss:

<TABLE>
<CAPTION>
                                Year
                  --------------------------------
                   1999         1998         1997
               -------------  ----------  -------------
<S>            <C>            <C>         <C>
United States  $ (1,094,402)  $(928,135)  $ (1,590,239)
Europe. . . .  $ (  315,336)  $(564,160)  $(   237,622)
Asia. . . . .  $(   445,180)  $(327,577)             -
</TABLE>


All  Identifiable  Assets  of  the  Company  are  located  within  the  U.S.

<PAGE>

Item  2.          PROPERTIES
                  ----------

     The  Issuer has corporate offices, manufacturing, research and distribution
facilities  housed  in  its  17,280  square  foot   headquarters  in   Valencia,
California.  All  products  are   manufactured   at  this  location.  Management
believes  its facility is adequate for the Company's current level of operation.

     The  facility is leased on a long-term lease which expires May 31, 2000, at
a  current  rental  of  $10,445.00 per month, plus common area expenses.  During
January 2000, the Company extended the term of the lease until May 31, 2005 at a
monthly  rental of $11,000.00 plus common area expenses, beginning June 1, 2000.

Item  3.      LEGAL  PROCEEDINGS
             -------------------

     A former employee of the Company is seeking a severance payment of $101,500
alleging  he  is  entitled  to  such  a  payment  under  terms  of an employment
agreement,  which was voluntarily terminated in November 1998.  The parties have
agreed  to  arbitration  scheduled  to  take place during 2000.  The Company has
established  a  liability  for  the  entire  amount.

     Aside from the above, there is no litigation outstanding, and management is
not  aware  of  any  potential  claims  which  might  be  asserted.

Item  4.               SUBMISSION  OF  MATTERS  TO  A  VOTE  OF SECURITY HOLDERS
                       ---------------------------------------------------------

     No  matters  were  submitted  in  the  fourth  quarter  of  fiscal  1999.

<PAGE>

Part  II
--------

Item  5.                    MARKET  PRICE  AND  DIVIDENDS
                            -----------------------------
                          ON  REGISTRANT'S  COMMON  STOCK
                          -------------------------------
                     EQUITY  AND  RELATED  STOCKHOLDER  MATTERS
                     ------------------------------------------

     The  Company's  Common  Stock  traded  on  the  Vancouver Stock Exchange in
Vancouver,  British  Columbia,  under the symbol "APT" until July 23, 1998.  The
symbol  was  changed  on September 1, 1992 commensurate with a name change.  The
closing  sales  price  as of July 22, 1998, the last day traded on the Vancouver
Stock  Exchange,  was  $0.14US

     The  Company's  Common  Stock  trades on the NASD Bulletin Board, under the
symbol  "AIRP".  The  closing  sales  price  on December 31, 1999 was $0.08 at a
pre-reverse  stock  split  price.

Set  forth  below  is  the  high and low bid information in U.S. dollars for the
Company's Common Stock for each full quarterly period within the two most recent
fiscal years at pre-reverse stock split prices.  The information set forth below
was  obtained  from the OTC Bulletin Board and the Vancouver Stock Exchange, the
latter  which was translated to U.S. dollars using the annual average conversion
rate.




<TABLE>
<CAPTION>



                      High    Low
Period                 Bid    Bid
----------------      -----  -----
<S>                   <C>    <C>
4th Quarter 1999      $0.12  $0.10
3rd Quarter 1999       0.17   0.17
2nd Quarter 1999       0.17   0.17
1st Quarter 1999       0.26   0.17

4th Quarter 1998       0.29   0.07
3rd Quarter 1998       0.22   0.10
2nd Quarter 1998       0.24   0.12
1st Quarter 1998       0.26   0.11
</TABLE>

     At March 31, 2000 the Company had approximately 557 shareholders of record.

     The Company has not paid a dividend since its incorporation, and management
does  not  anticipate  the  Company  will  pay  dividends  in  the  near future.

<PAGE>
                     RECENT SALES OF UNREGISTERED SECURITIES
                     ---------------------------------------

<TABLE>
<CAPTION>

                                                    Class of           Nature               Amount
                                    Amount          Persons to           of                    of            Exemption
  Dates            Title             Sold            Whom Sold       Consideration        Consideration       Claimed
---------  -------------------  ---------------  ------------------  -------------       ---------------    -------------
<S>        <C>                  <C>              <C>                 <C>                  <C>               <C>
8/16/99 -
 10/14/99    Debentures(4)                1,500          6 Offshore                Cash     $    1,500,000  Sec 4 (2), Reg D
                                                         Accredited.                                        Sec 4 (6)
                                                         Investors

  6/11/99    Common                     335,000          1 Offshore                Cash     $      502,500  Reg S
             Stock (3)                                   Accredited
                                                         Investor

   5/6/99    Common                     150,000          1 Offshore                Cash     $      225,000  Reg S
             Stock (3)                                   Accredited
                                                         Investor

  4/26/99    Common                     160,000          1 Offshore                Cash     $      240,000  Reg S
             Stock(3)                                    Accredited
                                                         Investor

  1/28/99    Common                     246,667          1 Offshore                Cash     $      370,000  Rule 504
             Stock(3)                                    Accredited
                                                         Investor

  1/28/99    Common                       3,333          1 Offshore                Cash     $        5,000  Reg S
             Stock                                       Accredited
                                                         Investor


  1/15/99    Common Stock               150,000          1 Offshore                Cash     $      150,000  Reg S
             & Warrants                                  Accredited
             (On a 1 for 1                               Investors
              basis)

  1/15/99    Common Stock                50,000          1 Accredited              Cash     $       68,000  4(2)
             & Warrants                                  U.S. Investor
            (On a 1 for 1
             basis)

   12/21/    Common                     420,000          1 Offshore                Cash     $      630,000  Rule 504
   98        Stock (3)                                   Accredited
                                                         Investor

   9/98 -
    12/98    Common Stock             1,043,157          Ten              Conversion of     $    1,066,572  Reg S
                                                         Offshore        Debt to Equity
                                                         Accredited
                                                         Investors

     9/98    Common Stock                20,839          1 Accredited     Conversion of     $       25,000  4(2)
                                                         U.S. Investor   Debt to Equity

  9/11/98    Common Stock(3)            100,000          1 Offshore                Cash     $      125,475  Reg S
                                                         Accredited
                                                         Investor

   1/98 -    Common Stock               811,250          4 Offshore                Cash     $      985,657  Reg S
    12/98    and Warrants                                Accredited
            (On a 1 for 1                                Investors
             basis)

  11/4/97    Common Stock &              36,921          1 U.S.                    Cash     $       99,723  4(2)
             Warrants(2)                                 Accredited
            (On a 1 for 1                                Investor
             basis)

   5/97 -    Common                     225,000          3 Offshore                Cash     $      365,117  Reg S
    11/97    Stock(3)                                    Accredited
                                                         Investors

   1/97 -    Common Stock               180,958          Three            Conversion of     $      288,907  Reg S
     7/97                                                Offshore        Debt to Equity
                                                         Accredited
                                                         Investors

   1/97 -    Options to                   5,750          Four                 Bonus         $        9,539  4(2)
    12/97    Acquire Common                              Sophisticated    Consideration
             Stock                                       Employees, all    to Employees
                                                         Sophisticated

   1/97 -    Common Stock             1,000,583          4 Offshore                Cash     $      834,645  Reg S
    11/97    and Warrants(2)                             Accredited
            (On a 1 for 1                                Investors
             basis

     5/96    Common                     747,778          8 Offshore                Cash     $    1,235,638  Reg S
    12/96    Shares (2)                                  Accredited
             and Warrants                                Investors
            (On a 1 for 1
             basis)

     7/96    Common Stock                29,375          2 Offshore       Conversion of     $      108,555  Reg S
                                                         Accredited      Debt to Equity
                                                         Investors

     5/97    Convertible(1)             230,000          1 Offshore                Cash     $    1,250,000  Reg S
             Debenture                  Debenture        Accredited
                                                         Investor
<FN>

(1)     1,250,000  of  the  debt  was  converted on May 29, 1997, to 230,000 shares of Common Stock plus 230,000
        Warrants exercisable  at  $1.50  per  share,  and  expiring  on  May  29,  1999.
(2)     Each Warrant provides the  right  to  acquire  one  share  of  Common Stock at $1.50, and has a two-year
        term.
(3)     Issued  in  connection  with  the  exercise  of  Warrants  previously placed with  offshore  investors.
(4)     The Company issued $1,500,000 in Senior Convertible Notes during 1999 which are convertible into shares
        of common stock of the  Company  at  any  time  before  September  30,  2003  at  prices  ranging  from
        $1.50 to $2.50 per share.

</FN>
</TABLE>



                     DESCRIPTION OF REGISTRANT'S SECURITIES
                     --------------------------------------

     The  Company  has  only  one type of equity security, Common Stock with par
value  equal  to  U.S. $0.01. There  are  50,000,000 authorized shares of Common
Stock of which 7,966,408 shares were issued/outstanding as of December 31, 1999.

       The  holders of Common Stock are entitled to one vote for each share held
of  record  on  all matters submitted to a vote of the holders of Capital Stock.
Holders of Common Stock are entitled to receive ratably such dividends as may be
declared  by the Board of Directors out of funds legally available therefor.  In
the  event  of  a  liquidation,  dissolution  or  winding up of the Company, the
holders  of  Common  Stock are entitled to share ratably in all assets remaining
after  payment  of  liabilities  and the liquidation preference of any preferred
stock  that  might  be  issued  in  the future.  Holders of Common Stock have no
preemptive  or  subscription  rights,  and there are no redemption or conversion
rights  with respect to such shares.  All outstanding shares of Common Stock are
fully  paid  and  nonassessable.

     The Company issued $1,500,000 in Senior Convertible Notes during 1999.  The
Senior  Convertible  Notes  are  unsecured  and  due on September 30, 2003.  The
holder  may  convert  the  principal  amount  of  such  Note  at any time before
September  30,  2003,  into shares of common stock at a price ranging from $1.50
per  share  to  $2.50  per  share,  at the holder's option.  The annual interest
payment  of  7%  of  the  principal  amount of each debenture may be received in
common  stock  of  the  Company  at  a  20%  discount,  at  the holder's option.

     The  Board  of  Directors  proposed  to the Company's shareholders and they
adopted at its Annual Meeting held on June 4, 1999, resolutions giving the Board
of  Directors the authority and discretion to reverse split the Company's Common
Stock on a 1 for 10 basis, if and at such time over the succeeding 12 months, as
the  Board of Directors determines such a reverse split would be in the interest
of  the  Company.  In  such  event, the authorized capital stock would change to
50,000,000  shares  of  common  stock  authorized  and  each  10  shares  of the
outstanding  common stock would automatically convert into a single share of new
common  stock.  In  January  2000,  the Board of Directors declared a one-to-ten
reverse  stock  split  and  all stock related data for all periods presented has
been  adjusted.

<PAGE>

Item  6.       FINANCIAL  INFORMATION
             ------------------------

     The  following  table  summarizes  certain  selected financial data for the
periods  presented  for  the  Company.  The  data for the year ended December 31
1999, 1998 and 1997 should be read in conjunction with the more detailed audited
statements  for  such  years  presented  elsewhere  herein.



<TABLE>
<CAPTION>



                                   1999             1998         1997          1996          1995
                             ----------------  ------------  ------------  ------------  ------------
<S>                          <C>               <C>           <C>           <C>           <C>

Revenues. . . . . . . . . .  $       959,712   $   722,268   $   340,624   $   640,074   $   453,107

Loss: Continuing Operations       (1,853,012)   (1,723,647)   (1,824,199)   (1,172,840)   (1,774,801)


Net Loss:

Loss per Common Share:
  Loss before extraordinary
    item. . . . . . . . . .             (.25)         (.43)         (.59)         (.61)        (1.00)

  Extraordinary item. . . .                -           .05             -             -             -
  Net loss. . . . . . . . .             (.25)         (.38)         (.59)         (.61)        (1.00)


Dividends Per Share . . . .              n/a           n/a           n/a           n/a           n/a
Weighted Average Shares . .        7,249,585     4,506,608     3,069,362     1,931,376     1,801,986
     Outstanding


BALANCE SHEET DATA
---------------------------

Total Assets. . . . . . . .  $     2,970,285   $ 1,810,595   $ 1,137,721   $   643,062   $   955,722

Long-term Obligations              1,500,000           ---        39,500        39,500     1,352,000

Total Liabilities . . . . .        1,910,826       275,882     1,004,900     2,211,871     2,479,374
</TABLE>
Item  7.      Management's  Discussion  and  Analysis  of
             --------------------------------------------
     Financial  Condition  and  Results  of  Operation
     -------------------------------------------------


1.  Results  of  Operations
---------------------------

General  Marketing  Efforts
---------------------------

     In  1999,  the Company achieved sales of $959,712, which was a 33% increase
over  its  1998  total  sales  of  $722,268.

Year  Ended  December  31,  1999  Compared  to  Year  Ended  December  31,  1998
--------------------------------------------------------------------------------

     Sales  for  the  year  ended  December  31,  1999 were $959,712 compared to
$722,268  for  the  fiscal  year  ended  December  31, 1998.  This represents an
increase  of $237,444 or 33% during fiscal 1999.  The net increase is due to the
increase  in  sales  of the Company's Dental Air Box and the overall increase in
sales  of  the SDS Air Box as a result of repeat orders and further expansion of
its  customer  base.

     Cost  of  sales for the year ended December 31, 1999 was $1,012,083 or 105%
of  sales  compared  to $566,837 or 78% of sales for the year ended December 31,
1998. The  Company  has  not  yet  achieved sufficient sales to cover all of its
fixed operating  costs, with the result that until sales increase substantially,
the Company will continue to operated  at  a  deficit. The  increase also is due
to the related increase in sales of the SDS Air  Box  product   line,  which  is
sold,  with  a higher standard cost of sales than the Company's Air  Box product
line.   The  Company  also  had  an  increase   in  labor  and overhead  in the
manufacturing  process  which resulted in additional period costs during  fiscal
1999 from the comparable period of the preceding year.

     Selling,  general  and  administrative expenses decreased by $170,804 or 9%
during fiscal 1999 as compared to fiscal 1998.  The decrease is due to decreases
in  salaries, consulting fees, travel expenses, legal expenses and a reserve for
a  potential  liability  partially  offset  by increases in sales and marketing,
general  office  expenses,  casual  labor  and  accounting  fees.

     The net decrease in salaries of $83,856 is partially due to the decrease in
the  salary  level  of the president of the Company as a result of the change in
presidents  which occurred in June 1999.  The decrease is also attributable to a
salary  adjustment recorded during fiscal 1998 of $81,000 for a former president
for which a similar type of adjustment was not recorded during fiscal 1999.  The
decease in consulting fees of $118,086 during fiscal 1999 is due to the decrease
in  stock  based  consulting  expense  recorded  which is partially offset by an
increase  in consulting fees paid to a former president.  The decrease in travel
expenses  of  $35,680 is primarily due to the change in presidents in June 1999.
The  decrease  in  legal expenses of $39,956 is due to a reduction in the use of
services  by  two  of the Company's attorneys partially offset by an increase in
legal  fees  regarding  a  claim  by a former employee. The decrease in selling,
general  and  administrative  expenses includes a reserve recorded during fiscal
1998  for  a  claim  by  a  former employee of $101,500 for alleged breach of an
employment  contract.  The  net decreases in selling, general and administrative
expenses  during  fiscal  1999   are  partially  offset  by  increases  in  four
categories.    The  net  increase  in sales and marketing expenses of $41,572 is
primarily  due  to  increases  in  trade show fees and related show expenses and
travel  and is partially offset by a decrease in public relations as the Company
did not utilize a public relations company during 1999.  The increase in general
office  expenses  is  due  to  a  general increase in business.  The increase in
casual  labor of $39,162 is primarily due to the Company's increase in utilizing
employees  from  temporary  agencies  for staffing needs for the engineering and
quality  control  departments  during  1999.  The increase in accounting fees of
$41,337  is  primarily due to the initial Form 10 filing with the Securities and
Exchange  Commission  during  fiscal  1999 and the subsequent quarterly filings.

     Research  and development expenses decreased by $1,952 or 26% during fiscal
1999.

     Interest  and  other  income  were  $32,350  for fiscal 1999 as compared to
$5,676 for fiscal 1998.  The increase of 470% in fiscal 1999 is due primarily to
the  increase  in  cash  placed  in  an  interest  earning  account.
     Interest  expensed  decreased  by  $123,026  for fiscal 1999 as compared to
fiscal  1998  as  the  Company  recorded interest expense of $126,073 due to the
revaluation of its warrants in November 1998.  This transaction was not repeated
during  fiscal  1999.

     The  Company  did  not  have an Extraordinary Item during fiscal 1999.  The
Company  recorded  an  Extraordinary Item during fiscal 1998 that was due to the
restructuring of certain outstanding payables and accrued expenses.  The Company
paid  approximately  $190,000  in  full settlement of accounts payable and other
accrued  expenses  during  the  fourth  quarter  of  1998.  This  resulted in an
extraordinary gain of approximately $244,000 during fiscal 1998.    This was not
repeated  during  fiscal  1999.

     The  Company  is  currently  in  a  loss  carryforward  position.  The  net
operating  loss  carryforwards balance as of December 31, 1999 was approximately
$18,200,000  compared to $16,400,000 as of December 31, 1998.  The net operating
loss  carryforward  is  available  to offset future taxable income through 2019.
The  Company's  net operating loss carryforwards may be limited due to ownership
changes  as  defined  under  Section  382  of the Internal Revenue Code of 1986.

     As  of  December  31,  1999,  the  Company  had  a  deferred  tax  asset of
approximately $7,400,000 which primarily relates to the net operating losses.  A
100%  valuation  allowance  has  been established as management cannot determine
whether  it  is  more  likely  than  not  that  the  deferred tax assets will be
realized.

Year  Ended  December  31,  1998  Compared  to  Year  Ended  December  31,  1997
--------------------------------------------------------------------------------

     Sales  for  the  year  ended December 31, 1998 were $722,268 as compared to
$340,624  for  the  fiscal  year  ended  December  31, 1997.  This represents an
increase  of  $381,644  or  112%  during  fiscal  1998.  The Company began pilot
programs  with  prospective  customers  of  the  SDS Air Box  late in the fourth
quarter  of  1996.  The positive results of these pilot programs resulted in the
increase  in  sales  that  occurred  during  1998.

     The  inventory  reserve  at December 31, 1998 was approximately $63,000, or
13%  of  total inventory, compared to a reserve of approximately $154,000 or 50%
at December 31, 1997.  The net decrease in the reserve from December 31, 1997 to
December 31, 1998 of $91,000 is due to the write-off of specific inventory items
reserved  in  prior  years.  The  Company evaluated all inventory items for slow
movement  and  repair, and fully reserved for all items that did not move for at
least  three  months  or  that  had  been  discontinued.

     Cost  of sales for the year ended December 31, 1998 was $566,837, or 78% of
sales,  compared  to  $592,544  for  the year ended December 31, 997, or 174% of
sales.  The  decrease in cost of sales as a percentage of sales is partly due to
an  additional  inventory  reserve  of  approximately  $97,000 that was recorded
during  1997.  A  similar  provision was not recorded in 1998, as by the end o f
1998,  the  Company  had  written  off those inventory items that had been fully
reserved  in  prior  years.

     Selling,  general  and administrative expenses increased by $395,313 or 25%
during fiscal 1998 as compared to fiscal 1997.  The increase in selling, general
and  administrative   expense   is   attributable  primarily   to  increases  in
professional  fees, consulting fees, travel expenses, public company costs and a
reserve  for  a  claim  by  a  former  employee.

     The  increase in professional fees is primarily due to an increase in legal
expenses of $69,228 during fiscal 1998. The Company de-listed from the Vancouver
Stock Exchange during mid-1998. As a result, the Company had several discussions
with  both  Canadian  and  U.S. attorneys to verify that the related issues were
properly  handled.  The  Company  also  retained  an  additional attorney during
fiscal  1998  specializing  in  compliance  with  labor  laws.  The  increase in
consulting  fees  during  fiscal  1998 of $48,811 is primarily due to consulting
work  performed to assist the Company in the restructuring of the Company's debt
through  the  issuance  of common shares of stock in settlement of debt.  Travel
expenses increased during fiscal 1998 by $29,613 as a result of increased travel
by  an  officer  of  the  Company  who had previously resided in Canada.  Public
company  costs  increased  during fiscal 1998 by $68,635 as the Company expenses
fees  associated  with raising capital through the exercise of warrants and fees
associated  with debt for equity transactions.  The increase in selling, general
and  administrative expense includes a reserve recorded during fiscal 1998 for a
claim  by  a  former  employee  of  $101,500 for alleged breach of an employment
contract.  Based  on the current status of this claim, the Company believes that
it has fully reserved for the highest potential liability related to this claim.

     Research and development expenses increased by $4,049 or 122% during fiscal
1998.

     Interest  and  other  income  were  $5,676  for  fiscal 1998 as compared to
$21,596  for fiscal 1997.  The decrease of 74% in fiscal 1998 is due to the gain
on  the  disposition  of  an  asset  recorded  during  fiscal  1997.

     Interest  expense  increased  by  $135,536  for  fiscal 1998 as compared to
fiscal  1997  as  the  Company  recorded interest expense of $126,073 due to the
revaluation  of  its  warrants  in  November  1998.

     The  Company recorded an Extraordinary Item during fiscal 1998 that was due
to  the restructuring of certain outstanding payables and accrued expenses.  The
Company  paid  approximately $190,000 in full settlement of accounts payable and
other  accrued  expenses during the fourth quarter of 1998.  This resulted in an
extraordinary  gain  of  approximately  $244,000.

     Depreciation  and  amortization  expense increased by $68,664 or 46% during
fiscal 1998 as compared to fiscal 1997.  The increase in depreciation expense of
$63,807  is  attributable  to  the net increase in property and equipment during
fiscal  1998  of $818,416 compared to the net increase in property and equipment
during  fiscal  1997  of  $108,224.  The  increase  in  additional  property and
equipment during 1998 is primarily due to the cost of the retrofit of one of the
manufacturing  machines that approximated $726,500.  Depreciation was calculated
beginning in June 1998 for approximately 91% of the additions; the balance which
was  added  during  the  last  six  months  of  fiscal  1998.  The  increase  in
amortization  of  $4,857  is due to the increase in additional patent costs from
fiscal  1997  to  fiscal  1998.

     The  Company  is  currently  in  a  loss  carryforward  position.  The  net
operating  loss  carryforwards balance as of December 31, 1998 was approximately
$16,400,000  compared to $15,000,000 as of December 31, 1997.  The net operating
loss  carryforward  is  available  to offset future taxable income through 2018.
The  Company's  net operating loss carryforwards may be limited due to ownership
changes  as  defined  under  Section  382  of the Internal Revenue Code of 1986.

     At December 31, 1998, the Company had a deferred tax asset of approximately
$6,800,000,  which  primarily  relates  to  the  net  operating  losses.  A 100%
valuation  allowance has been established as management cannot determine whether
it  is  more  likely  than  not  that  the deferred tax assets will be realized.


2.  Liquidity  and  Capital  Resources
--------------------------------------

     The  Company's primary need for capital has been to purchase raw materials,
upgrade  machinery  and  continue to develop and enhance patents and trademarks.

     As  of  December  31,  1999,  the  Company's working capital was $1,416,212
compared  to  $430,546 as of December 31, 1998.  The increase is primarily do to
the  cash  infusion  of  $1,328,598  which resulted from the exercise of 895,000
warrants  during  fiscal  1999  and  the  cash  infusion  of $1,500,000 from the
Convertible  Debenture  during  the  last  half  of  fiscal  1999.

     The  net receivables at December 31, 1999 were $ 57,603 compared to $96,852
at  December  31,  1998.
     Net  inventory  at  December  31, 1999 was $577,389 compared to $408,643 at
December  31,  1998.  The net increase of $168,746 is due to the increase in raw
materials purchased for upcoming orders and anticipation of any Year 2000 issues
and  an  increase  in  finished  goods  manufactured  for  upcoming  orders.

     Advances  and  prepaids  at  December  31,  1999 and December 31, 1998 were
$41,895  and $75,134, respectively.  The decrease is due to a prepayment made in
1998  for  materials of $57,892 , which was received in 1999.  The prepayment is
partially  offset by normal recurring advance and prepaid transactions for a net
decrease  of  $31,632.

     The  Company  recognized a negative gross profit of 5% during 1999 compared
to  gross  profit of 22% during 1998.  The decrease during fiscal 1999 is due to
the  increase  in labor and overhead in the manufacturing process which resulted
in  additional  period  costs,  and therefore decreased gross margin, during the
year  ended  December 31, 1999 from the comparable period of the preceding year.
The  decrease  during 1999 is also attributable to the increased in sales of the
SDS  Air  Box  product  line  which  is  sold with a lower gross margin than the
Company's  Air  Box  product  line.  The  Company  has  estimated  that sales of
$3,500,000  would be required to cover operating costs and to achieve an overall
gross  margin  of 40%.  The Company will continue to operate a low margins until
sales  increases  substantially.  In  addition  as  sales  increase,  additional
working  capital is required to fund inventory and work in process.  As a result
of  these  factors the Company has an ongoing and urgent need for an infusion of
additional  working  capital.  This  need  was  met  in  fiscal  1998 by selling
additional  shares of the Company's Common Stock, primarily offshore to overseas
investors  and  has  been  met  in  fiscal  1999  by the exercise of warrants to
purchase  additional  shares  of the Company's Common Stock and the placement in
the  third  and  fourth  quarters  of  fiscal  1999 of $1,500,000 in Convertible
Debentures.

     The  Company  may  continue  to  require  an infusion of additional working
capital  in order to develop its business.  The source, timing and costs of such
infusion  is  uncertain,  and  there  is  no  certainty that the Company will be
successful  in  raising  additional  working capital, either through the sale of
debt  or  equity securities, or through commercial banking lines of credit.  The
Company  currently  has  no  banking  lines  of  credit.

     The  Company  had cash outflows of $1,465,588 from operating activities for
the 1999 fiscal year compared to cash outflows of $1,635,054 for the 1998 fiscal
year.  The  change in net outflows of $169,466 from operating activities between
1999  and  1998  primarily  resulted  from  the  following  items.  There was  a
decrease  in trade receivables of $84,035, a decrease in inventory of  $113,565,
a  decrease  in  advances  and  prepaids  of  $103,711 and a  decrease  in other
liabilities  of  $39,500.   The  total  decreases  were  partially offset by the
increase  in  accounts payable and accrued expenses of $26,221 combined with the
increase in the net loss from operations after adjustments for non-cash items of
$141,441  during  fiscal  1999.

     Net  cash  used in investing activities was $189,018 during the fiscal year
compared  to  $447,429  during  the  1998 fiscal year.  The decrease is due to a
reduction  in  property  and  equipment  expenditures  during  1999.

     Cash flows from financing activities were $2,678,958 during the 1999 fiscal
year  compared to $2,148,820 during fiscal 1998.  The change is primarily due to
increased  proceeds  from  the  exercise  of  warrants  and  notes   payable  of
$1,564,331,  which  was  partially offset by a decrease in proceeds from private
placements  of  $924,593.

     The  Company  has  suffered  recurring  losses  from  operations and has an
accumulated  deficit  of  ($19,809,992)  at  December  31,  1999,  which  raises
substantial  doubt  about  its  ability  to  continue  as  a going concern.  The
auditor's  report  includes  an  explanatory paragraph on the uncertainty of the
Company's  ability  to continue as a going concern.  The financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.  The Company's continued existence is dependent upon its ability to
raise   substantial   capital,  to  increase  sales,  to  significantly  improve
operations,  and ultimately become profitable.  The Company believes that future
investments  and certain sales-related efforts will provide sufficient cash flow
for  it  to continue as a going concern in its present form.  However, there can
be  no  assurance  that  the  Company  will  achieve  such  results.

     On  March  24,  2000,  the  Board  of  Directors  of the Company approved a
temporary  reduction  in  the  conversion  price  on  the  7% Senior Convertible
Debentures  into  common  stock.  The conversion price was reduced from $1.50 to
the  average bid price of the Company's common stock for the twenty-five trading
days  immediately  prior  the  receipt  of a notice of conversions, with minimum
conversion price of $0.50.  The notice of conversion for the temporary reduction
must be received by April 30, 2000 and must include all accrued interest through
May  31,  2000.  As  a  result,  the  Company  will record an expense related to
reduction  in  conversion  price.

     On  March  24,  2000,  the  Board  of  Directors  also approved a temporary
reduction  in  the  exercise price of all warrants and options outstanding.  The
exercise  price was reduced from $1.50 to the average bid price of the Company's
common  stock  for the twenty-five trading days immediately prior to the receipt
of a notice of conversion, with a minimum conversion price of $0.50.  The notice
of  exercises must be received by April 30, 2000.  As a result of this temporary
reduction,  the  Company  will  record  compensation  expense for the difference
between  original  exercise  price  and reduced exercise price multiplied by the
number  of  outstanding  warrants  and  options.

     Subsequent  to  December  31,  1999,  the  Company  cancelled 100,000 stock
options  outstanding  to officer and issued an additional 335,000 stock options,
which  expire  December  31, 2004 and are subject to certain vesting terms.  Any
applicable  compensation  expense  will  be  recorded  in  2000.

     On  March  27, 2000, the Company entered into a one-year investment banking
agreement  with  Givigest  Fiduciaria SA "Givigest" to raise equity capital.  On
March  27,2000,  the  Company  and Givigest agreed to raise up to $500,000 on or
before  April  30,  2000.  There are no assurances that the Company will be able
to raise any proceeds under this agreement.

3.  Seasonality  and  Inflation
-------------------------------

     The   Company's  sales  do  not  appear  to  be  subject  to  any  seasonal
fluctuations.  The  Company  does  not believe that inflation has had a material
impact  on  its  operations.


4.  Year  2000
--------------

     Many  existing  computer  systems  and  applications use only two digits to
identify  a  year in the date field without considering the impact of the change
in the century.  As a result, such systems and applications could fail or create
erroneous  results unless corrected so that they can process data related to the
Year  2000.  The Company relies on its systems and applications in operating and
monitoring  all major aspects of its business, including financial systems, such
as  general  ledger, accounts receivable and accounts payable.  The Company also
relies, directly and indirectly on external systems of business enterprises such
as its suppliers, creditors and financial organizations for accurate exchange of
data.  Following  the  Year 2000 transition, the Company has not experienced any
know disruption to its business as of Year 2000.  The cost of the Company's Year
2000 programs was approximately $25,000, which was not material to the Company's
financial  position  or  results of operations.  Although the Company's business
systems  were  Year  2000  compliant  by December 31, 1999, the Company makes no
assurances  regarding  Year 2000 compliance of third party systems.  The Company
has  not  incurred  any problems with third parties related to Year 2000 but can
not  guarantee  that  it  will  not  in  the  future.


Item  7A.     MARKET  RISK  -  INTEREST  RATE  RISK
              -------------------------------------

The  Company's  exposure  to  market risks for changes in interest rates relates
primarily  to the Company's long term debt obligations.  The Company has no cash
flow  exposure  on  its  long-term debt obligations related to changes in market
interest  rates.  The  Company  primarily enters into long term debt obligations
for  general  corporate  purposes, including the funding of capital expenditures
and  larger  acquisitions.  The  Company  has  not  entered  into  any  material
derivative  financial  instruments  to hedge interest rate risk on these general
corporate  borrowings.


<PAGE>

Forward  Looking  Statement
---------------------------

     The  above  paragraphs  and  other  parts  of  this Form 10-K Annual Report
include  "Forward  Looking Statements".  All statements other than statements of
historical  fact included herein, including any statements with respect to sales
forecast, future product acceptance or other future matters, are Forward Looking
Statements.  Although  the Company believes that there is a reasonable basis for
the  projections  reflected  in  such Forward Looking Statements, it can give no
assurance  that  such  expectations  will  prove  to be correct.  Certain of the
important  factors  that  could  cause  actual  results to differ materially and
negatively from the Company's expectations, among others, include a slow down in
the  trend in sales and orders during the remainder of the year, an inability to
obtain  sufficient  working  capital  to  meet  order demand, and/or a worldwide
economic  slowdown.

<PAGE>
Item  8.       FINANCIAL  STATEMENTS
               ---------------------
             AND  SUPPLEMENTARY  DATA
             ------------------------


               See Index at (Item 14),
          Financial Statements and Exhibits


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

          Not  applicable.

<PAGE>

Part  III

Item  10.        DIRECTORS  AND  EXECUTIVE  OFFICERS
                 -----------------------------------

     The  names,  ages  and positions of the directors and executive officers of
the  Company  as  of  December  31,  1999,  are  as  follows:

<TABLE>
<CAPTION>

Name               Age           Position           Since
-----------------  ---  --------------------------  -----
<S>                <C>  <C>                         <C>

Donald Ochacher .   62  Chairman, CEO & a Director   6/99
Janet Maxey . . .   36  Chief Financial Officer      7/97
Garry Newman. . .   49  Vice President               6/97
Elwood C. Trotter   57  Vice President               4/89
Wayne Case. . . .   59  Director                    11/98
Carl Stadelhofer.   46  Director                    11/98
</TABLE>


     The Directors serve until the next annual meeting of shareholders, or until
their  successors  are  elected.

     Donald Ochacher - President and Chief Executive Officer and Chairman of the
Board  of  Directors  of  the  Company since June 1999.  Mr. Ochacher has been a
member of the New York bar since 1960 and was engaged in the private practice of
law  specializing in  corporate  and  tax  law until 1973 when he became General
Counsel and Chief Financial and Administrative Officer of the Newark Group Ltd.,
a   large  privately   owned  paper   company.  Since  1985, he has been both an
attorney  and  business consultant and at various times, has served as President
of  privately owned companies engaged in the paper, hazardous waste, real estate
and  long  distance  telephone resale industries. From May 1994  to the present,
Mr.  Ochacher  is president of The 800 Network, Inc.  From August 1997 to August
1998,  he  was  chief  Financial  Officer  of  Electric Entertainment Corp.  Mr.
Ochacher graduated from the New York University School of Law in 1960, receiving
a  LL.B  degree  and  received  his  B.A degree from Cornell University in 1957.

     Janet Maxey - Ms. Maxey has been an employee of the Company since May 1991,
and  became Chief Financial Officer in July 1997.  Ms. Maxey attended California
State  University,  Northridge,  and  earned  a  Bachelor  of  Science Degree in
Business  Administration.

     Garry  Newman  - Vice President of Manufacturing and Engineering since June
1997.  Prior to that, Mr. Newman was Engineering & Quality Assurance Manager for
Richmond  Technology  from October 1994 until he joined the Company.  Mr. Newman
attended  University  of  California,  Davis,  and  earned a Bachelor of Science
Degree  in  Chemical  Engineering.

     Elwood  Trotter  -  Mr.  Trotter  has been an employee of the Company since
April  1989  and  became Vice President, Special Projects in February 1996.  Mr.
Trotter  attended  Simon  Frazer  University  in  British  Columbia,  Canada.

     Wayne  Case  -  President  and Chairman of the Board of Schmitt Industries,
Inc.,  since  November  1986, when he founded Schmitt Industries, Inc.  Mr. Case
holds  a  Bachelor  of  Arts  Degree  in  Business  and  an  MBA.

     Carl  Stadelhofer  -  Attorney  with  Rinderknecht  Klein  & Stadelhofer in
Switzerland  since  July  1990.  Mr.  Stadelhofer is a French and Swiss citizen;
admitted  in  Switzerland  1982.  Education:  Law  Schools  of  Zurich and Berne
University   (lic.jur1979);   Harvard  Law  School,   Massachusetts;  Georgetown
University,  Washington,  D.C.  Mr.  Stadelhofer  specializes   in  banking  and
financing,  mergers and acquisitions, investment funds, international securities
transactions  and  international  legal  assistance.

Section  16(a)     Beneficial  Ownership  Reporting  Compliance

The  following Officers, Directors or Beneficial Owners of more than ten percent
of the Company's outstanding common stock failed to timely file reports required
under  Section  16(a)  of  the  Exchanges  Act  during  1999.


<TABLE>
<CAPTION>



                                            Transactions Not
Name               Number of Late Filings    Reported Timely
----------------  -----------------------   ----------------
<S>               <C>                     <C>
Donald Ochacher            One                      None*
Elwood Trotter             One                      None*
Garry Newman               One                      None*
Janet Maxey                One                      None*
Wayne Case                 Two                       One
Carl Stadelhofer           One                      None*
<FN>
*Report  that  was  filed  late  was  Form  3,  Initial  Statement
of Beneficial Ownership of Securities.  Therefore,  no  transaction
was  involved.
</TABLE>



Item  11.      EXECUTIVE  COMPENSATION
               -----------------------

     The  following table sets forth the annual compensation paid and accrued by
the Company during its last three fiscal years to the executive officers to whom
it  paid  in  excess  of  $100,000,  including  cash and issuance of securities.

<TABLE>
<CAPTION>
                                                      Summary  Compensation
                                                      ---------------------
                                       Annual  Compensation                          Awards                     Payouts
                            --------------------------------------------       ---------------------        --------------

                                                                   Other                     Secur-
Name                                                               Annual     Restricted     ities                   All Other
and                                                                Compen-       Stock       Underlying   LTIP        Compen-
Principal                                Salary         Bonus      sation      Award(s)      Options/    Payouts      sation
Position                    Year          ($)            ($)         ($)          ($)        SARs (#)     ($)           ($)
------------------------  --------  ---------------  -----------  -----------  ----------  ---------   --------      -------
<S>                       <C>       <C>              <C>          <C>          <C>         <C>        <C>           <C>

Donald
Ochacher . . . . . . . .  (1) 1999           42,900       n/a            -          -        40,000         -           -
Chairman . . . . . . . .      1998              n/a       n/a            -          -             -         -           -
Of the Bd. . . . . . . .      1997              n/a       n/a            -          -             -         -
& CEO

Elwood . . . . . . . . .      1999          109,200       n/a            -          -        75,000(3)      -           -
Trotter. . . . . . . . .      1998          104,260       n/a            -          -        22,500         -           -
Vice . . . . . . . . . .      1997           97,200       n/a            -          -         2,500         -           -
President
Sales &,
Marketing,
Former
Director

Garvin
McMinn(2)
Former . . . . . . . . .      1999    89,808(4)           n/a            -            -     115,000(3)       -         -
Chairman . . . . . . . .      1998   162,154(5)           n/a            -            -      65,000          -         -
Of the Bd. . . . . . . .      1997    81,346              n/a            -            -      15,000          -         -
& CEO

------------------------
<FN>
(1)Donald  Ochacher  has  been  President  and  CEO  of  the  Company  since  June  1999.

(2)Garvin  McMinn   resigned   as  officer   and director effective June 4, 1999 and entered into an amendment to his
   employment  contract  shifting  has  status  to  that of a consultant over a one year term at a flat agreed fee of
   $5,000  per  month,  for  its  term.

(3)Includes  stock  options  which  were  granted  in  prior  years  but  were  repriced  during  fiscal  1999.

(4)Includes  $30,385  of  payments  in  consulting  fees.

(5)$81,000  was  paid  in  stock  through  the  issuance  of  81,000  shares  of  Common  Stock  of  the  Company.
</FN>
</TABLE>



                     Options/SAR Grants in Last Fiscal Year
                     --------------------------------------
<TABLE>
<CAPTION>
                                                                 Potential  Realized  Value
                                                                 At  Assumed  Rates  of  Stock
                                        Individual               Price  Appreciation  for
                                        Grants                   Option  Term(b)
                                        ------                   ---------------

                           No. Of Sec.   % of Total
                           Underlying    Options/SARs
                           Options/      Granted to     Exercise
                             SARs        Employees      or Base
                           Granted (a)   In Fiscal       Price     Expiration
Name                          (#)         Year          ($/Sh)       Date       5% ($)    10%($)
-----------------------  -------------  ----------    -----------   ------      -------   -------
<S>                      <C>            <C>          <C>           <C>         <C>        <C>

Donald Ochacher
Chairman of
The Board
& CEO                        40,000           11%        $    1.50      12/31/04      -         -

Elwood Trotter
Vice President
Sales &
Markeing &
Former
Director                     35,000           10%        $    1.50      12/31/04      -         -
                             20,000            6%        $    1.50      06/22/98      -         -
                              2,500            1%        $    1.50      03/05/03      -         -
                              2,500            1%        $    1.50      06/06/02      -         -
                             15,000            4%        $    1.50      03/05/03      -         -

Garvin McMinn
Former Chairman of
the Board
& CEO                        35,000           10%        $    1.50      12/31/04      -         -
                             40,000           11%        $    1.50      06/22/03      -         -
                             25,000            7%        $    1.50      03/05/03      -         -
                             15,000            4%        $    1.50      08/08/02      -         -

-----------------------
<FN>

(a)     Includes  options  which  were  repriced  during  fiscal  1999.

(b)     These  amounts,  based  on  assumed  appreciation rates of 5% and 10% rates prescribed by
the  Securities  and  Exchange  Commission  rules  are  not  intended to forecast possible future
appreciation, if any, of the Company's stock price.  The  closing  price  at  December  31,  1999
of  the  Company's  Common  Stock  was  $0.80  per  share.
</FN>
</TABLE>



     The  following table sets forth the number of shares covered by exercisable
and  unexercisable  options  held  by  such  executives on December 31, 1999, as
adjusted  for  a  blanket  reduction  in  all exercise prices on all outstanding
options,  to $1.50 per share exercise price per resolutions adopted by the Board
of  Directors  on  June  4,  1999,  and the aggregate gains that would have been
realized  had  these  options  been  exercised on December 31, 1999, even though
these  options  were not exercised, and the unexercisable options could not have
been  exercised,  on  December  31,  1999.  The  Company  did  not  issue  stock
appreciation  rights.


<PAGE>



<TABLE>
<CAPTION>

                                             Number  of               Value  of  Unexercised
                                          Securities  Underlying          in-the-Money
                Shares                        Unexercised                 Options/SARs
               Acquired      Value           options/SARs  at       at  Fiscal  Year  End(a)
              on Exercise   Realized         FY-End  (#)                      ($)
Name               $         $        Exercisable  Unexercisable   Exercisable   Unexercisable
---------------  ------  ---------  --------------------------  ----------------------------
<S>              <C>     <C>        <C>                         <C>



Donald Ochacher       -          -      40,000         -                 -               -

Elwood Trotter.       -          -      75,000         -                 -               -


Garvin McMinn .       -          -     115,000         -                 -               -
<FN>

     (a)     Market value of shares covered by in-the-money options on December 31, 1999,
less  option  exercise price.  Options are in-the-money if the market value of the shares
covered  thereby is greater than the option exercise price based on the last  trading day
in  1999  of  $0.80  per  share  at  a  $1.50  per  share  exercise  price.

The  Company  has no Long-Term Incentive Plans and no Awards were made in its Last Fiscal
Year
</FN>
</TABLE>


Item  12.      SECURITY  OWNERSHIP  OF
               -----------------------
     CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT
     --------------------------------------------

     The  following  table sets forth information regarding beneficial ownership
as  of  December  31,  1999, of the Company's Common Stock, by any person who is
known to the Company to be the beneficial owner of more than 5% of the Company's
voting  securities  and  by  each  director and by officers and directors of the
Company  as  a  group.


<TABLE>
<CAPTION>


                                               Beneficial(1) Percentage
Officers and Directors                          Ownership    of Class 1
----------------------------------------------  ----------  ----------
<S>                                             <C>         <C>
Donald Ochacher, Chairman, CEO and a Director(2)    42,500        0.5%
Janet Maxey, Chief Financial Officer(3)  . . .      25,000        0.3%
Garry Newman, Vice President(4) . . . . . . . .     30,100        0.4%
Elwood C. Trotter, Vice President(5). . . . . .    104,986        1.2%
Wayne Case, Director (6). . . . . . . . . . . .     67,992        0.8%
Carl Stadelhofer, Director(7) . . . . . . . . .    223,333        2.6%
                                                ----------
All current directors and
officers as a group (6 persons). . . . . . . .     493,911        5.8%
                                                 =========        =====

5% Holders
----------------------------------------------
Schmitt Industries, Inc.(8). . . . . . . . .     1,375,716        16.1%
  2765 N.W Nicolai Street
  Portland OR  97210
Finter Bank Zurich.(9) . . . . . . . . . . .  .    485,000        5.7%
  Claridenstrasse 3S
  CH-8022
  Zurich Switzerland
<FN>


1  Assumes  all outstanding stock options and all outstanding warrants have been
   exercised and the subject  shares  have  been  issued  and  are  outstanding.
2  Includes  40,000  stock  options  outstanding  and  exercisable  at  12/31/99
3  Includes  25,000  stock  options  outstanding  and  exercisable  at  12/31/99
4  Includes  30,000  stock  options  outstanding  and  exercisable  at  12/31/99
5  Includes  75,000  stock  options  outstanding  and  exercisable  at  12/31/99
6  Includes  40,000  stock  options  outstanding  and  exercisable  at  12/31/99
7  Includes  40,000  stock  options  outstanding  and  exercisable  at  12/31/99
8  Wayne Case, a Director of the Company, is a principal shareholder, President,
   and Chairman of the Board of Schmitt Industries, Inc.
9  Finter Bank  Zurich  holds these shares on behalf of various clients, none of
   which is an  officer,  director,  or  affiliate  of  the  Company.  Under the
   laws of the country  of Switzerland, Finter Bank may not divulge the names of
   its individual clients  and, therefore,  may  be  deemed the beneficial owner
   of  these  shares, although  Finter  Bank  Zurich  disclaims  any  individual
   interest  in  these  shares.
</FN>
</TABLE>



On  March  24,  2000,   100,000  stock  options  outstanding  to  officers  were
cancelled.  An  additional  335,000 stock  options were issued to officers which
expire  December  31,  2004  and  are  subject  to  certain  vesting  terms.

<PAGE>

Item  13.       CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
                --------------------------------------------------

     1.     Wayne  Case, a Director of the Company, also serves as the President
and  Chairman  of the Board of Schmitt Industries, Inc.  Schmitt acquired during
fiscal  1998, and the first quarter of 1999, an aggregate of 1,375,716 Shares of
the  Company's Common Stock, from another principal shareholder.  As of December
31,  1999,  Schmitt held 1,375,716 shares of the Company's Common Stock and on a
fully  diluted basis, represent 16.1% of the Company's outstanding Common Stock.

2.     In December 1998, the Company issued 81,000 shares of its common stock in
settlement  of  $81,000  of  debt  owned  to  Garvin  McMinn.

3.     The  Company  issued  131,250  shares  of common stock, through a private
placement,  to  Variety  Investments,  Ltd.,  a  company owned by Don Farrell (a
former  principal shareholder) during 1998.  In December of 1998, 256,671 shares
of  common  stock  were issued in exchange for debt owed to Farrell Financial in
the  amount  of  $282,887,  a  company  owned  by  Don  Farrell.

4.     On  June 4, 1999, the Board of Directors adopted a 1999 Non Qualified Key
Man  Stock  Option  Plan.  This  Plan  authorized  the issuance of up to 500,000
options  to acquire shares of the Company's common stock at an exercise price of
not  less  than 100% of the fair market value at the date of grant, and with the
addition of such additional terms at the date of grant as the Board of Directors
determines.

5.     The  Company  has  written  employment  agreements  with two individuals:
Elwood  Trotter  and Janet Maxey, and a consulting agreement with Garvin McMinn.
Summaries  of  the  provisions  under  the  agreements  follow.

Garvin  McMinn  resigned  as  officer  and  director  effective June 4, 1999 and
entered  into  a one year consulting agreement to provide consulting services as
needed  at a flat agreed fee of $5,000 per month, for its term which expires May
31,  2000.

Elwood Trotter has a one-year employment contract that was amended June 1999 and
expires  May  31,  2000.  He receives $8,000 per month as Vice-President Special
Projects.  In   the   event  of  his  termination,  he  will  receive  only  the
compensation  earned  up  to  the  date  of  termination.

Janet  Maxey  has  a one-year employment contract that was amended June 1999 and
expires May 31, 2000.  She receives $3,574 per month as Chief Financial Officer.
In  the  event of her termination, she will receive only the compensation earned
up  to  the  date  of  termination.

6.     Donald  Ochacher was retained as President and Chief Executive Officer of
the  Company  on June 4, 1999 at a salary of $6,500 per month.  In addition, the
Board  of  Directors authorized the issuance of 40,000 options to acquire shares
of  the  Company's common stock at an exercise price of $1.50 per share and with
other  terms  and conditions as provided in the Company's 1999 Non Qualified Key
Stock  Option  Plan.  No  formal written agreement has been entered into between
the  Company  and  Donald  Ochacher.

<PAGE>
7.     Escrowed Shares.  In 1991, 29 stockholders of the Company entered into an
escrow  agreement  under  which  a total of approximately 4.50,000 shares of the
Company's  common  stock were placed in escrow, in exchange for an assignment by
the  29  stockholders of certain fractional rights they held in the original Air
Box  patents  to  the  Company.  None  of  these  29 stockholders currently hold
significant shares, nor are they officers or directors.  The shares are entitled
to  be  released from escrow based on the performance of the Company as measured
by  cash  flow  (as defined by the agreement) and certain other conditions.  The
agreement specifies that the shares are to be released from escrow on a pro rata
basis  of  the  Company  as  measured by the Cumulative Cash Flow of the Company
since  January  1, 1990 not previously applied towards a release, divided by the
earn-out  price of $4.60 CDN.  Cash flow is defined as net income or loss before
tax  adjusted  to  add  back  expenses  including  depreciation, amortization of
goodwill,  expensed  research  and  development  costs  and  any  other  amounts
permitted or required by the Vancouver Stock Exchange.  The Cumulative Cash Flow
I,  at  any time, the aggregate cash flow up to that time from a date no earlier
than  the  Company;  financial year-end immediately preceding, and no later than
the  Company's financial year-end immediately following the date the issuance of
the  performance shares is finally accepted by the Vancouver Stock Exchange, net
of  any  negative  cash flow.  At the time that this agreement was entered into,
the  Company's  common  stock  was  traded on the Vancouver Stock Exchange,  the
Company  de-listed  itself form the Vancouver Stock Exchange and the last day it
traded  on  the Vancouver Stock Exchange was July 22, 1998.  While the shares re
in  escrow,  the  stockholders  have waived their rights to receive dividends or
participate in the distribution of assets upon a winding up of the Company.  Any
shares while the shares are in escrow, the stockholders have waived their rights
to receive dividends or participate in the distribution of assets upon a winding
up  of  the Company.  Any shares remaining in escrow at December 31, 1999 are to
be  canceled  by  the  Company.  As  of December 31, 1999 as the shares were not
actually  cancelled by the Company's Transfer Agent until January 2000, all such
shares  remain  in  escrow.  These  shares  are included in the number of shares
outstanding  in  each of the three years ended 1999.  However, these shares have
been excluded from the computation of basic and diluted loss per shares for each
of  the  three  years  ended  1999.

8.    The  Board  of  Directors  proposed to the Company's shareholders and they
adopted at its Annual Meeting held on June 4, 1999, resolutions giving the Board
of  Directors  the  authority  and  discretion  to  reverse  split the Company's
outstanding  common  Stock  on  a  1  for 10 basis, if and at such time over the
succeeding  12 months, as the Board of Directors determines such a reverse split
would be in the interest of  the Company.  In such event, the authorized capital
stock  would  change to 50,000,000 shares of common stock authorized and each 10
shares of the outstanding commons tock would automatically convert into a single
share of new common stock.  In January 2000, the Board of Directors declared the
one-to-ten  reverse  stock  split.

9.     The  Value  of  Warrant Exercise Price.  During 1998 and 1997 the Company
issued   1,011,250   and  1,037,504  shares  of  Common  Stock  through  private
placements.  Each share issued had attached a share purchase warrant to purchase
one  additional  share  of  Common  Stock  for  a  period  of  two  years.

During  1999,  1998 and 1997, the Company issued a total of 134,250, 520,000 and
225,000  shares  at  various  per  share prices upon the exercise of warrants by
various  shareholders.

     In  November  1998,  the  Company's  Board  of Directors revalued 2,248,754
outstanding  warrants  based  on  the  fair  value of the stock, and amended the
exercise price to $1.50 per share up to the expiration date.  From November 1998
to  the  present,  1,315,000  warrants  have  been  exercised.

10. Conversion of Related Party Debt to Equity.  The Company in 1997 converted a
debt  owed  to  Donald  Farrell,  an  offshore  former  Director and through his
offshore  company,   formerly  a  principal  shareholder  of the Company, in the
amount  of  $126,000,  86,310  shares  of  the Company's Common Stock.  In 1998,
additional fees of $31,500 were incurred, and all remaining outstanding debt was
settled  in  exchange for 256,671 shares of the Company's Common Stock issued in
an  offshore  transaction,  at  $1.00  per  share.

     In  January  1997,  the  Company  entered  into  an  agreement with Variety
Investments, Ltd., an offshore affiliate of Donald Farrell, by which the Company
could  borrow  up  to  $150,000.  Interest  payments  at 8.5% per annum were due
monthly,  and  any  borrowings  are  secured  by   the  Company's   assets.  The
outstanding  loan  payable  became due and payable on June 1, 1998.  In December
1998, the Company issued a total of 43,529 shares of its Common Stock at a value
of  $1.00  per  share,  in  full settlement of the outstanding debt plus accrued
interest,  in  an  offshore  transaction.

     Other than discussed above, the Company has no knowledge of any transaction
or  series  of  transactions,  since  January 1, 1998, or any currently proposed
transaction,  or  series  of  transactions, to which the Company was or is to be
party,  in  which the amount involved exceeds $60,000, involving management, any
person  owning  10%  or more of the common stock, or any member of the immediate
family  of  any  of  the  foregoing  persons.

     Management  believes  that  the  transactions  with related parties were on
terms as favorable as the Company would have obtained from unaffiliated parties.




                 Item 14.     FINANCIAL STATEMENTS AND EXHIBITS
                              ---------------------------------


(a)     Financial  Statements

        Reports  of  Independent  Certified  Public  Accountants

        Consolidated  Financial  Statements
           Balance  Sheets  as  of  December  31,  1999  and  1998;
           Statement  of  Operations  for the years ended December 31, 1999,
              1998 and 1997;
           Statement  of  Stockholders'  Equity for the years ended December 31,
              1999, 1998 and  1997;
           Statement  of  Cash  Flows  for the years ended December 31, 1999,
              1998 and 1997

        Notes  to  Consolidated  Financial  Statements

(b)     Exhibits  Required  by  Item  601  of  Regulation  SK.

   3(i)    Articles  of  Incorporation,  Incorporated  by  reference to exhibits
           attached  to  Amended  Form  10  filed  July  23,  1999

   3(ii)   Bylaws,  Incorporated  by  reference  to exhibits attached to Amended
           Form  10  filed  July  23,  1999

   4       Instruments defining rights of security holders, including indentures

           None.
           -----

   9       Voting  Trust  Agreement

           None
           ----

  10      Material  Contracts

         Lease  Agreement  for  plant  facilities,  Incorporated by reference to
         exhibits attached  to  Amended  Form  10  filed  July  23,  1999
   (b)1. Employment  Agreement with Garvin McMinn, Incorporated by reference to
         exhibits  attached  to  Amended  Form  10  filed  July  23,  1999
   (b)2. Amendment  to Employment with Garvin McMinn, Incorporated by reference
         to  exhibits  to  Amended  Form  10  filed  July  23,  1999
   (c)1. Employment Contract with CFO Janet Maxey, Incorporated by reference to
         exhibits  attached  to  Amended  Form  10  filed  July  23,  1999
   (c)2. Amendment to Employment Contract with CFO Janet Maxey, Incorporated by
         reference to exhibits attached to Amended Form 10 filed July 23,  1999
   (d)1. Employment  Contract  with Vice President Elwood Trotter, Incorporated
         by reference to exhibits attached to Amended Form 10 filed July 23,
         1999
   (d)2. Amendment  to  Employment Contract with Vice President Elwood Trotter,
         Incorporated by reference to exhibits attached to Amended Form 10 filed
         July 23, 1999
   (e)   Form of  Option  Certificate  delivered  to  certain  Key  Employees in
         connection with the Grant of Individual Options to said Employees,
         Incorporated by  reference  to  exhibits  attached  to  Amended  Form
         10 filed July 23, 1999
   (f)   Patent  Royalty  Agreement  between  Puff  Pac,  Ltd.  (the  Company's
         predecessor),  and  Puff  Pac  People,  Incorporated  by  reference  to
         exhibits attached  to  Amended  Form  10  filed  July  23,  1999
   (g)   Escrow  Agreement,  Incorporated  by  reference to exhibits attached to
         Amended  Form  10  filed  July  23,  1999
   (h)   1999 Non-Qualified Key Man Stock Option Plan, Incorporated by reference
         to  exhibits  attached  to  Amended  Form  10  filed  July  23,  1999
   (i)   1999  Investment  Banking  Agreement
   (j)   2000  Investment  Banking  Agreement

21     Subsidiaries  of  the  Registrant

     Name                    Domicile
     ----                    --------
Puff  Pac  Industries
(Canada)  Inc.  (inactive)     Canada


27     Financial  Data  Schedule





                                   SIGNATURES

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


                                        AIR  PACKAGING
                                        TECHNOLOGIES,  INC.


                                         /s/ Donald Ochacher
                                         ---------------------------------
                                         Donald  Ochacher
Date: 4/11/00                            Chief  Executive  Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has  been duly signed below by the following persons on behalf of the Registrant
and  in  the  capacities  and  on  the  dates  indicated.

Signature                         Title                      Date
---------                         -----                      ----

                          Chairman  of  the  Board,
                          Director,  and
/s/ Donald Ochacher       Chief  Executive  Officer         4/11/00
----------------------
Donald  Ochacher


/s/ Janet Maxey           Chief  Financial  Officer         4/11/00
----------------------
Janet Maxey

/s/ Wayne Case            Director                          4/11/00
----------------------
Wayne  Case




<PAGE>





                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                                    CONTENTS




REPORTS OF  INDEPENDENT  CERTIFIED  PUBLIC  ACCOUNTANTS                     F-1


CONSOLIDATED  FINANCIAL  STATEMENTS

    Balance Sheets as of December 31, 1999 and 1998                         F-3

    Statements of Operations for the years ended December 31, 1999,
      1998  and  1997                                                       F-5

    Statements of Stockholders' Equity (Deficit) for the years ended
      December 31, 1999, 1998 and 1997                                      F-6

    Statements of Cash Flows for the years ended December 31, 1999,
      1998  and  1997                                                       F-7


NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS                              F-9


SCHEDULE  II  -  VALUATION  AND  QUALIFYING  ACCOUNTS  AND  RESERVES       F-21







<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To  the  Stockholders  and  Board  of  Directors
Air  Packaging  Technologies,  Inc.
Valencia,  California


We  have  audited  the accompanying consolidated balance sheets of Air Packaging
Technologies,  Inc.  and  Subsidiary  as  of December 31, 1999 and 1998, and the
related  consolidated  statements  of operations, stockholders' equity, and cash
flows for  each  of the two years in the period ended December 31, 1999. We have
also audited the  schedule  listed  in  the  accompanying index. These financial
statements and schedule are the responsibility of the Company's management.  Our
responsibility  is   to  express  an  opinion on these financial statements and
schedule based on our  audits.

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

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position of Air Packaging
Technologies, Inc. and Subsidiary at December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the two years in the period
ended  December  31,  1999  in  conformity  with  generally  accepted accounting
principles.

Also,  in  our  opinion, the schedule presents fairly, in all material respects,
the information set forth therein.

The  accompanying  consolidated  financial  statements  and  schedule  have been
Prepared  assuming  that   the  Company  will  continue  as a going concern.  As
discussed  in Note 3 to the  financial  statements,  the  Company  has  suffered
recurring  losses from operations that raise substantial doubt about its ability
to continue as a going concern.  Management's plans  in  regard to these matters
are also described in Note  3.  The  financial   statements and schedule do  not
include any adjustments that might result  from the outcome of this uncertainty.

                                                         /s/  BDO  Seidman,  LLP




Los  Angeles,  California
March  3,  2000,  except  for  Note  17
as  to  which  the  date  is  March 27,  2000


                                       F-1


<PAGE>


                          INDEPENDENT AUDITOR'S REPORT


The  Stockholders  and  Board  of  Directors
Air  Packaging  Technologies,  Inc.
Valencia,  CA

We  have  audited  the consolidated balance sheet of Air Packaging Technologies,
Inc.  and  subsidiaries  as  of  December 31, 1997, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
year  then  ended.  These  financial  statements  are  the responsibility of the
Company's  management.  Our  responsibility  is  to  express an opinion on these
financial  statements  based  on  our  audit.

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

In  our  opinion,  the financial statements referred to above present fairly, in
all material respects, the financial position of Air Packaging Tehnologies, Inc.
and  subsidiaries  as  of December 31, 1997, and results of their operations and
their  cash flows for the year then ended, in conformity with generally accepted
accounting  principles.

The  accompanying  consolidated financial statements have been prepared assuming
that  the  Company  will continue as a going concern.  As discussed in Note 3 to
the  financial  statements,  the  Company  has  suffered  recurring  losses from
operations  that raise substantial doubt about the Company's ability to continue
as  a  going  concern.  Management's  plans  in regard to these matters are also
described  in  Note  3.  The financial statements do not include any adjustments
relating  to  the recoverability and classification of reported asset amounts or
the amounts and classification of liabilities that might result from the outcome
of  this  uncertainty.


/s/Hein  +  Associates  LLP

Hein  +  Associates  LLP
Certified  Public  Accountants

Orange,  California
March  30,  1998


                                       F-2
<PAGE>

                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                      December 31,
                                                                     ---------------
                                                                     1999        1998
                                                                  ----------   ---------
<S>                                                               <C>         <C>
ASSETS

CURRENT ASSETS
   Cash and cash equivalents . . . . . . . . . . . . . . . . . .  $1,150,151  $  125,799
   Trade receivables, net of allowance for doubtful accounts of
   $22,630 and $5,130 (Note 15). . . . . . . . . . . . . . . . .      57,603      96,852
   Inventories, net (Note 4) . . . . . . . . . . . . . . . . . .     577,389     408,643
   Advances and prepaids . . . . . . . . . . . . . . . . . . . .      41,895      75,134
                                                                  ----------    ---------
Total current assets . . . . . . . . . . . . . . . . . . . . . .   1,827,038     706,428




PROPERTY AND EQUIPMENT, net (Note 5) . . . . . . . . . . . . . .     714,186     810,458




INTANGIBLE ASSETS, net (Note 6). . . . . . . . . . . . . . . . .     229,378     233,609


DEFERRED FINANCING COSTS, net of accumulated amortization of
   $   10,416                                                        139,583           -


DEPOSITS . . . . . . . . . . . . . . . . . . . . . . . . . . . .      60,100      60,100
                                                                  ----------    ---------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .  $2,970,285  $1,810,595
                                                                  ==========   ==========
</TABLE>

                                       F-3




<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                       December 31,
                                                                       ------------
                                                                   1999           1998
                                                               -------------   -----------
<S>                                                            <C>            <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
 Accounts payable (Note 11) . . . . . . . . . . . . . . . . .  $    316,861   $    191,025
 Accrued expenses (Note 11) . . . . . . . . . . . . . . . . .        93,965         84,857
                                                             --------------   -------------
Total current liabilities . . . . . . . . . . . . . . . . . .       410,826        275,882
                                                             --------------   -------------
LONG TERM LIABILITIES
 Senior convertible notes (Note 10) . . . . . . . . . . . . .     1,500,000              -
                                                             --------------   -------------
Total long term liabilities . . . . . . . . . . . . . . . . .     1,500,000              -
                                                             --------------   -------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . .     1,910,826        275,882
                                                             --------------   -------------
COMMITMENTS AND CONTINGENCIES (Note 14)

STOCKHOLDERS' EQUITY (Notes 7, 8, 9, 12, 14 and 16)
 Common stock, $.01 par value, 50,000,000 shares authorized;
 7,966,408 and 7,071,408 shares issued and outstanding. . . .        79,664         70,714
 Additional paid-in capital . . . . . . . . . . . . . . . . .    20,789,787     19,420,979
 Accumulated deficit. . . . . . . . . . . . . . . . . . . . .   (19,809,992)   (17,956,980)
                                                             --------------   -------------
Total stockholders' equity. . . . . . . . . . . . . . . . . .     1,059,459      1,534,713
                                                             --------------   -------------
Total liabilities and stockholders' equity. . . . . . . . . .  $  2,970,285   $  1,810,595
                                                             ==============   ============
</TABLE>



          See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                       Years ended December 31,
                                                       ------------------------
                                                1999               1998            1997
                                            ------------      ------------     ------------

<S>                                         <C>           <C>                 <C>
NET SALES (Note 15). . . . . . . . . . . .  $   959,712   $         722,268     $    340,624

COST OF SALES. . . . . . . . . . . . . . .    1,012,083             566,837          592,544
                                            ------------       ------------     ------------
GROSS PROFIT (LOSS). . . . . . . . . . . .      (52,371)            155,431         (251,920)
                                            ------------       ------------     ------------

OPERATING EXPENSES:
 Sales, general and administrative . . . .    1,797,128           1,967,932        1,572,619
 Research and development. . . . . . . . .        5,419               7,371            3,322
                                            ------------       ------------     ------------

Total operating expenses . . . . . . . . .    1,802,547           1,975,303        1,575,941
                                            ------------       ------------     ------------

LOSS FROM OPERATIONS . . . . . . . . . . .   (1,854,918)         (1,819,872)      (1,827,861)
                                            ------------       ------------     ------------

OTHER INCOME (EXPENSE):
 Interest expense. . . . . . . . . . . . .      (30,444)           (153,470)         (17,934)
 Interest income . . . . . . . . . . . . .       20,900               3,433            2,010
 Other income. . . . . . . . . . . . . . .       11,450               2,243           19,586
                                            ------------       ------------     ------------

TOTAL OTHER INCOME (EXPENSE) . . . . . . .        1,906            (147,794)           3,662
                                            ------------       ------------     ------------

LOSS BEFORE EXTRAORDINARY ITEM . . . . . .            -          (1,967,666)      (1,824,199)

EXTRAORDINARY ITEM - GAIN ON
  RESTRUCTURING OF PAYABLES (Note 11). . .            -             244,019                -
                                            ------------       ------------     ------------

NET LOSS . . . . . . . . . . . . . . . . .  $(1,853,012)  $      (1,723,647)    $ (1,824,199)
                                            ============        ============    ============

LOSS PER COMMON SHARE - BASIC AND DILUTED

 Loss before extraordinary item. . . . . .  $      (.25)  $            (.43)    $       (.59)
 Extraordinary item. . . . . . . . . . . .  $         -   $             .05     $          -
 Net loss. . . . . . . . . . . . . . . . .  $      (.25)  $            (.38)    $       (.59)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 OUTSTANDING - BASIC AND DILUTED . . . . .    7,249,585           4,506,608        3,069,362
                                            ============        ============     ============

</TABLE>



          See accompanying notes to consolidated financial statements.
                                       F-5

<PAGE>


                                            AIR PACKAGING TECHNOLOGIES, INC.
                                                  AND SUBSIDIARY

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                       Common Stock         Additional
                                                  ---------------------       Paid-In       Accumulated
                                                   Shares        Amount       Capital         Deficit          Total
                                                 -----------   ---------    -----------     -----------      -----------
<S>                                            <C>           <C>         <C>             <C>               <C>
BALANCE, January 1, 1997. . . . . . . . . . . .    2,796,952  $   27,970  $   12,812,355  $  (14,409,134)$     (1,568,809)
Net cash proceeds from private
placements  (Note 12) . . . . . . . . . . . . .    1,037,504      10,376       1,580,343               -        1,590,719
Debt for equity exchange (Notes 7 and 12) . . .      180,958       1,809         285,477               -          287,286
Conversion of debenture (Note 9). . . . . . . .      230,000       2,300       1,247,700               -        1,250,000
Exercise of options (Note 12) . . . . . . . . .        5,750          58           8,089               -            8,147
Exercise of warrants (Note 12). . . . . . . . .      225,000       2,249         343,978               -          346,227
Stock-based compensation (Note 12). . . . . . .            -           -          43,450               -           43,450
Net loss. . . . . . . . . . . . . . . . . . . .            -           -               -      (1,824,199)      (1,824,199)
                                                 -----------   ---------     -----------     ------------     -------------
BALANCE, December 31, 1997. . . . . . . . . . .    4,476,164      44,762      16,321,392     (16,233,333)         132,821
Net cash proceeds from private
placements  (Note 12) . . . . . . . . . . . . .    1,011,250      10,113         914,480               -          924,593
Debt for equity exchange
 (Notes 7, 8, 9 and 12) . . . . . . . . . . . .    1,063,994      10,639       1,073,534               -        1,084,173
Exercise of warrants (Notes 9 and 12) . . . . .      520,000       5,200         738,427               -          743,627
Stock-based compensation (Note 12). . . . . . .            -           -         247,073               -          247,073
Revaluation of warrants (Note 12) . . . . . . .            -           -         126,073               -          126,073
Net loss. . . . . . . . . . . . . . . . . . . .            -           -               -      (1,723,647)      (1,723,647)
                                                 -----------   ---------     -----------     ------------     ------------
BALANCE, December 31, 1998. . . . . . . . . . .    7,071,408      70,714      19,420,979     (17,956,980)       1,534,713
Exercise of warrants (Notes 9 and 12) . . . . .      895,000       8,950       1,320,008               -        1,328,958
Stock-based compensation (Note 12). . . . . . .            -           -          48,800               -           48,800
Net loss. . . . . . . . . . . . . . . . . . . .            -           -               -      (1,853,012)      (1,853,012)
                                                 -----------   ---------     -----------     ------------     ------------
BALANCE, December 31, 1999. . . . . . . . . . .    7,966,408  $   79,664    $ 20,789,787  $  (19,809,992)   $   1,059,459
                                                 ===========  ==========    ============  ===============   ==============

                                 See accompanying notes to consolidated financial statements.

</TABLE>

                                       F-6



                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<PAGE>
<TABLE>
<CAPTION>


INCREASE  (DECREASE)  IN  CASH  AND  CASH  EQUIVALENTS

                                                                     Years ended December 31,
                                                                   -----------------------------

                                                             1999             1998              1997
                                                        -------------   --------------     -------------
<S>                                                     <C>            <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss. . . . . . . . . . . . . . . . . . . . . . .   $ (1,853,012)   $  (1,723,647)   $  (1,824,199)
 Adjustments to reconcile net loss to net cash used in
   operating activities:
   Depreciation and amortization . . . . . . . . . . .       299,938           219,064          150,400
   Provision for doubtful accounts . . . . . . . . . .        17,500                 -            2,037
   Inventory reserve . . . . . . . . . . . . . . . . .       (30,123)                -           97,202
   Stock-based compensation. . . . . . . . . . . . . .        48,800           247,073           43,450
   Expense on revaluation of warrants. . . . . . . . .             -           126,073                -
   Extraordinary gain on restructuring of payables . .             -          (244,019)               -
   Gain on sale of property and equipment. . . . . . .             -                 -           (6,742)
 Increase (decrease) from changes in:
   Trade receivables . . . . . . . . . . . . . . . . .        21,749           (62,286)           3,730
   Inventories . . . . . . . . . . . . . . . . . . . .      (138,623)         (252,188)        (123,211)
   Advances and prepaids . . . . . . . . . . . . . . .        33,239           (70,472)             356
   Deposits. . . . . . . . . . . . . . . . . . . . . .             -             6,774          (51,594)
   Accounts payable and accrued liabilities. . . . . .       133,085           159,306          171,981
   Accrued officers' salaries. . . . . . . . . . . . .         1,859            (1,232)         (24,794)
   Due to related party. . . . . . . . . . . . . . . .             -                 -          126,000
   Other liabilities . . . . . . . . . . . . . . . . .             -           (39,500)               -
                                                        -------------   --------------     -------------
Net cash used in operating activities. . . . . . . . .    (1,465,588)       (1,635,054)      (1,435,384)
                                                        -------------   --------------     -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Proceeds from sale of property and equipment. . . . .             -                 -            7,000
 Purchases of property and equipment . . . . . . . . .      (129,126)         (413,765)        (528,193)
 Patent expenditures . . . . . . . . . . . . . . . . .       (59,892)          (33,664)         (37,788)
                                                        -------------   --------------     -------------
Net cash used in investing activities. . . . . . . . .      (189,018)         (447,429)        (558,981)
                                                        -------------   --------------     -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Net proceeds from private placements. . . . . . . . .             -           924,593        1,590,719
 Net proceeds from exercise of warrants. . . . . . . .     1,328,958           743,627          346,227
 Net proceeds from exercise of options . . . . . . . .             -                 -            8,147
 Deferred costs. . . . . . . . . . . . . . . . . . . .      (150,000)                -                -
 Proceeds from loan payable - related party. . . . . .             -                 -           38,128
 Proceeds from senior convertible notes. . . . . . . .     1,500,000           521,000           50,000
 Payment on note payable . . . . . . . . . . . . . . .             -           (33,000)         (31,000)
 Costs associated with debt conversion . . . . . . . .             -            (7,400)               -
                                                        -------------   --------------     -------------
Net cash provided by financing activities. . . . . . .     2,678,958         2,148,820        2,002,221
                                                        -------------   --------------     -------------
NET INCREASE IN CASH . . . . . . . . . . . . . . . . .     1,024,352            66,337            7,856

CASH, at beginning of year . . . . . . . . . . . . . .       125,799            59,462           51,606
                                                        -------------   --------------     -------------
CASH, at end of year . . . . . . . . . . . . . . . . .  $  1,150,151   $       125,799   $       59,462
                                                        =============   ==============     =============
</TABLE>

                                       F-7


                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


SUPPLEMENTAL  DISCLOSURE  OF  CASH  FLOW  INFORMATION

The  Company  paid  interest  in the amount of $237, $0 and $43,205 during 1999,
1998  and  1997,  respectively.  The  Company paid income taxes in the amount of
$800,  $800  and  $800  during  1999,  1998  and  1997,  respectively.

During 1997, $3,528 of interest was capitalized for construction of property and
equipment.

During  1998  and  1997,   the  Company  exchanged   $1,084,173   and  $287,286,
respectively,  of  debt  for  1,063,995  and 180,958 shares of common stock (see
Notes  7,  8,  10  and  12).

During  1997,  the  convertible  debenture  with  a  balance  of  $1,250,000 was
converted  into  230,000  shares  of common stock of the Company at the exercise
price  of  $5.40  per share and 230,000 detachable nontransferable warrants (see
Note  9).

During  the  years  ended December 31, 1999, 1998 and 1997, the Company recorded
$22,750,   $187,073   and   $43,450,   respectively,   representing  stock-based
compensation in conjunction with stock options granted to nonemployees (see Note
12).

During  1998, the Company issued 81,000 shares to an employee in satisfaction of
accrued  compensation  in  the  amount  of  $81,000  (Note  12).

During  1999,  the  Company's  board  of  directors revalued 435,000 outstanding
options  to  their fair value.  As a result, stock-based compensation of $16,050
was  recorded  in  the  current year for options held by non employees (see Note
12).

During  1998,  the  Company's  Board  of Directors changed the exercise price of
2,248,754  outstanding warrants to their fair value.  As a result, an expense of
$126,073  was  recorded  in  the  1998  year  (see  Note  12).

During  the  years  ended  December  31,  1999  and  1998,  the Company recorded
stock-based  compensation  of  $10,000  and $60,000 related to employee options.
These  amounts  represent  the excess fair market price of the Company' stock at
the  date  of  grant  over  the  exercise  price.



          See accompanying notes to consolidated financial statements.


                                       F-8

<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1-NATURE  OF  OPERATIONS

Air  Packaging  Technologies,  Inc.  (the  "Company")  and  Subsidiary develops,
manufactures  and  distributes  inflatable  commercial  packaging  systems.  The
Company's sales are primarily to companies producing Silicon wafers and computer
chips  in  California, Arizona, Oregon, Colorado and Texas in the United States,
Denmark  and  the  U.K.  in  Europe,  and  Singapore  in  Asia.  The Company was
incorporated  in  the  State  of  Delaware  on  November  9,  1989.

NOTE  2-SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

PRINCIPLES  OF  CONSOLIDATION

The  consolidated  financial  statements  include  the accounts of Air Packaging
Technologies,  Inc.  and  its  wholly-owned foreign subsidiary.  All significant
intercompany  balances  and  transactions have been eliminated in consolidation.
The  foreign  subsidiary  currently  has no operations, therefore has no foreign
translation  adjustment.

REVENUE  RECOGNITION

Revenue  is  recognized  upon  shipment  of  products.

CASH  EQUIVALENTS

For  purposes  of the statements of cash flows, the Company considers all highly
liquid  investments  purchased with an original maturity of three months or less
to  be  cash  equivalents.

INVENTORY

Inventory, which consists of raw material, work in progress, and finished goods,
is  valued  at the lower of cost or market.  Cost is determined by the first-in,
first-out  (FIFO)  method.

PROPERTY  AND  EQUIPMENT

Property  and  equipment  are  stated  at  cost.  Depreciation  of  property and
equipment is calculated using the straight-line method over the estimated useful
lives  (ranging from 3 to 5 years) of the respective assets.  The cost of normal
maintenance  and repairs is charged to operating expenses as incurred.  Material
expenditures which increase the life of an asset are capitalized and depreciated
over  the  estimated  remaining useful life of the asset.   The cost of property
and  equipment  sold,  or  otherwise  disposed  of,  and the related accumulated
depreciation  or  amortization  are  removed from the accounts, and any gains or
losses  are  reflected  in  current  operations.

INTANGIBLE  ASSETS

Patents, trademarks, and rights to patent and trademark royalties are carried at
cost  less accumulated amortization which is calculated on a straight-line basis
over  ten  years,  the  estimated  useful  lives  of  the  assets.  The  Company
periodically evaluates and assesses the overall recoverability of its intangible
assets  by  determining  if  the  unamortized  balance  can be recovered through
undiscounted  future  operating  cash  flows.


                                       F-9

<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2-SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

IMPAIRMENT  OF  LONG-LIVED  ASSETS

Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment  of  Long-Lived  Assets  and  Long-Lived  Assets  to be Disposed Of,"
established  guidelines  regarding  when impairment losses on long-lived assets,
which  include  plant  and equipment and certain identifiable intangible assets,
should  be recognized and how impairment losses should be measured.  The Company
periodically  reviews  such assets for possible impairments and expected losses,
if  any,  are  recorded  currently.

INCOME  TAXES

The  Company provides for income taxes in accordance with Statement of Financial
Accounting  Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes".  SFAS
109  requires  a company to use the asset and liability method of accounting for
income  taxes.

Under  the  asset and liability method, deferred income taxes are recognized for
the  tax  consequences  of "temporary differences" by applying enacted statutory
tax  rates  applicable  to  future  years  to  differences between the financial
statement carrying amounts and the tax bases of existing assets and liabilities.
A valuation allowance is provided when management cannot determine whether it is
more  likely  than not that the deferred tax asset will be realized.  Under SFAS
109,  the effect on deferred income taxes of a change in tax rates is recognized
in  income  in  the  period  that  includes  the  enactment  date.

STOCK-BASED  COMPENSATION

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation"  ("SFAS  123"),  establishes a fair value method of accounting for
stock-based  compensation  plans.  In  accordance with SFAS 123, the Company has
chosen  to  continue  to  account  for  stock-based  compensation  utilizing the
intrinsic value method prescribed in APB 25.  Accordingly, compensation cost for
stock options is measured as the excess, if any, of the fair market price of the
Company's  stock  at  the  date of grant over the amount an employee must pay to
acquire  the  stock.

Also,  in accordance with SFAS 123, the Company has provided footnote disclosure
with  respect  to  stock-based  employee  compensation.  The cost of stock-based
employee  compensation  is  measured at the grant date based on the value of the
award  and  is recognized over the service period.  The value of the stock-based
award  is  determined  using  a  pricing  model whereby compensation cost is the
excess  of  the fair value of the stock as determined by the model at grant date
or  other  measurement  date over the amount an employee must pay to acquire the
stock.

                                       F-10


<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2-SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

CONCENTRATIONS  OF  CREDIT  RISK

Credit  risk  represents  the  accounting  loss  that would be recognized at the
reporting  date  if  counterparties  failed completely to perform as contracted.
Concentrations  of credit risk (whether on or off balance sheet) that arise from
financial  instruments exist for groups of customers or groups of counterparties
when  they  have similar economic characteristics that would cause their ability
to  meet contractual obligations to be similarly effected by changes in economic
or other conditions described below.  In accordance with FASB Statement No. 105,
"Disclosure  of  Information  about Financial Instruments with Off-Balance-Sheet
Risk  and  Financial Instruments with Concentrations of Credit Risk," the credit
risk  amounts  shown  in  Note  15  do  not  take  into account the value of any
collateral  or  security.

FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

The estimated fair values for financial instruments under Statement of Financial
Accounting  Standards  No.  107,  "Disclosures  about  Fair  Value  of Financial
Instruments," are determined at discrete points in time based on relevant market
information.  These  estimates  involve  uncertainties  and cannot be determined
with   precision.   The   estimated  fair  values  of  the  Company's  financial
instruments,  which  includes  all cash, accounts receivables, accounts payable,
long-term  debt,  and  other  debt,  approximates  the  carrying  value  in  the
consolidated  financial  statements at December 31, 1999 and 1998 as a result of
their  short  term  nature,  or  due  to  the  interest  rates approximating the
Company's  effective  borrowing  rates.

At  December  31,  1999,  the  fair  value  of  the Senior Convertible Notes, is
estimated  to  be  $978,807  based on the quoted market prices using an interest
rate  of  10.5%.

EARNINGS  (LOSS)  PER  SHARE

Statement  of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per
Share,"  requires  presentation  of basic and diluted earnings per share.  Basic
earnings  (loss)  per  share  is computed by dividing income (loss) available to
common  shareholders by the weighted average number of common shares outstanding
for  the  reporting  period.  Diluted  earnings per share reflects the potential
dilution  that  could  occur  if  securities  or  other contracts, such as stock
options,  to  issue  common stock were exercised or converted into common stock,
but  does  not  include  the  impact  of these dilutive securities that would be
antidilutive.  During  the  three  years ended December 31, 1999, these dilutive
securities  were  antidilutive.  All prior period weighted average and per share
information  had no effect on the amounts presented in accordance with SFAS 128.

Options  and  warrants  to purchase 575,000, 2,215,754 and 2,170,032 shares were
outstanding  during  the years ended 1999, 1998 and 1997, respectively, but were
not  included  in  the  computation of diluted loss per common share because the
effect  would  be  antidilutive.

The  Company  has  446,042  shares  in  escrow  included in the number of shares
outstanding  in  each of the three years ended 1999.  However, these shares have
been  excluded from the computation of basic and diluted loss per share for each
of  the  three  years  ended  1999  as  the  necessary  conditions have not been
satisfied  (see  Note  14).

                                       F-11


<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2-SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

COMPREHENSIVE  INCOME

Statement  of  Financial  Accounting Standards No. 130, "Reporting Comprehensive
Income,"  ("SFAS  130")  establishes  standards  for  reporting  and  display of
comprehensive  income  and  its  components  in  a  full  set of general-purpose
financial  statements.  Comprehensive  income is comprised of net income and all
changes  to  stockholders'  equity except those due to investments by owners and
distribution  to  owners.  The   Company   does  not   have  any  components  of
comprehensive  income  for  each  of the years ended December 31, 1999, 1998 and
1997.

SEGMENTS  OF  AN  ENTERPRISE

During  the  year  ended  December  31,  1998,  the Company adopted Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise  and  Related  Information,"  ("SFAS  131") issued by the FASB and is
effective  for  financial  statements with fiscal years beginning after December
15,  1997.  SFAS  131  requires that public companies report certain information
about  operating  segments,  products,  services and geographical areas in which
they  operate.  At  December  31,  1999 and 1998, the Company did not report any
segment information as operations and business activity are considered one unit.
Adoption of SFAS 131 did not have an impact on the Company's financial position,
results  of  operations  and  cash  flows.

USE  OF  ESTIMATES  IN  THE  PREPARATION  OF  FINANCIAL  STATEMENTS

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

RECLASSIFICATIONS

Certain reclassifications have been made to the prior year statements to conform
to  the  1999  presentation.  Such  reclassifications  had  no  effect  on   the
previously  reported  net  loss.

NOTE  3-LIQUIDITY  AND  GOING  CONCERN

The  accompanying  consolidated financial statements have been prepared assuming
that  the  Company  will  continue  as  a  going concern, which contemplates the
realization  of  assets and the satisfaction of liabilities in the normal course
of business.  However, there is substantial doubt about the Company's ability to
continue  as  a  going concern because of the magnitude of its losses during the
past  three years, ($1,853,012), ($1,723,647) and ($1,824,199) in 1999, 1998 and
1997  and  an  accumulated  deficit  of  ($19,809,992)  at  December  31,  1999.

The  Company's  continued  existence  is  dependent  upon  its  ability to raise
substantial capital, to increase sales, to significantly improve operations, and
ultimately  become  profitable.  Management believes that future investments and
certain  sales-related  efforts  will  provide  sufficient  cash  flow for it to
continue  as  a  going  concern  in  its present form.  However, there can be no
assurance  that  the  Company  will  achieve  such  results.  Accordingly,   the
consolidated  financial statements do not include any adjustments related to the
recoverability  and  classification  of recorded asset amounts or the amount and
classification  of  liabilities or any other adjustments that might be necessary
should  the  Company  be  unable  to  continue  as  a  going  concern.

                                       F-12
<PAGE>

                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  4-INVENTORIES

Inventories  consist  of  the  following  at:
<TABLE>
<CAPTION>
                       December 31,
                     ----------------
                   1999         1998
                 --------     --------
<S>              <C>       <C>
Raw materials    $  450,583  $  350,147
Work-in-process      21,385      23,703
Finished goods      105,421      34,793
                 ----------   ----------
                 $  577,389  $  408,643
                 ==========  ==========
</TABLE>


The  above  balances  are   presented   net   of  total  inventory  reserves  of
approximately  $33,000  and  $63,000  in  1999   and   1998,  respectively.

During  the  year  ended  December 31, 1997, the Company wrote down inventory by
approximately $97,000, respectively, to reflect lower of cost or market pricing.

NOTE  5-PROPERTY  AND  EQUIPMENT

Property  and  equipment  consist  of  the  following:


<TABLE>
<CAPTION>
                                        December 31,
                                     ------------------
                                  1999            1998
                               ----------      ----------
<S>                            <C>          <C>
Manufacturing equipment . . .  $  1,710,269  $  1,639,469
Dies and molds. . . . . . . .       187,375       166,866
Computer equipment. . . . . .        92,494        62,673
Quality control lab . . . . .       102,035       102,035
Office equipment. . . . . . .       108,232       100,237
Vehicles. . . . . . . . . . .        12,730        12,730
                                 ----------     ----------
                                  2,213,135     2,084,010

Less accumulated depreciation     1,498,949     1,273,552
                                 ----------    ----------
                               $    714,186  $    810,458
                                 ==========    ==========
</TABLE>



Depreciation  and  amortization  expense  for  property and equipment charged to
operations  for  the  years ended December 31, 1999, 1998 and 1997 was $225,397,
$143,967  and  $80,160,  respectively.

                                       F-13
<PAGE>

                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  6-INTANGIBLE  ASSETS

Intangible  assets  consist  of  the  following  at:
<TABLE>
<CAPTION>
                                                  December 31,
                                                  ------------
                                                1999         1998
                                              ---------    ---------
<S>                                         <C>          <C>
Patents. . . . . . . . . . . . . . . . . .  $   711,543  $   657,142
Trademarks . . . . . . . . . . . . . . . .        3,649        3,157
Rights to patent and trademark royalties .       90,146       85,146
                                              ---------     ---------
                                                805,338      745,445

Less accumulated amortization. . . . . . .      575,960      511,836
                                              ---------     ---------
                                            $   229,378  $   233,609
                                             ==========    ==========
</TABLE>



Amortization  expense  for intangible assets charged to operations for the years
ended  December  31,  1999,  1998  and  1997  was  $64,124, $75,097 and $70,240,
respectively.

NOTE  7-RELATED  PARTY  TRANSACTIONS

A  former  employee  of the Company, who resigned effective June 4, 1999 entered
into  a  one  year  consulting  agreement  that  expires May 31, 2000 to provide
consulting  services  at  a  fee  of  $5,000  per  month.

The  amount  due  to related party consists of fees payable to, and non-interest
bearing  advances  from,  a  former  director.  During  1997,  $126,000  of  the
outstanding  balance  was  converted to 86,310 shares of common stock.  In 1998,
additional fees of $31,500 were incurred, and all remaining outstanding debt was
settled  in  exchange  for  256,671  shares  at  $1.00  per  share.

NOTE  8-LOAN  PAYABLE  -  RELATED  PARTY

In  January  1997,  the Company entered into an agreement with an affiliate of a
related party by which the Company can borrow up to $150,000.  Interest payments
at  8.5%  per  annum  are  due  monthly,  and  any borrowings are secured by the
Company's  assets.  The  outstanding loan payable became due and payable on June
1, 1998.  In December 1998, the Company issued 43,529 shares at a value of $1.00
per  share  in  full  settlement  of the outstanding debt plus accrued interest.

NOTE  9-CONVERTIBLE  SUBORDINATED  DEBENTURE  AND  NOTES  PAYABLE

In  1991, the Company issued a $1,500,000 convertible subordinated debenture due
October  31,  1996.  In February 1994, a principal payment of $250,000 was made.
On  May  15,  1996 this debenture was modified and extended to October 31, 1997.

On May 29, 1997, the debenture was converted into 230,000 shares of common stock
of  the  Company  and 230,000 detachable nontransferable warrants.  Two warrants
entitle  the lender to purchase one additional common share of the Company.  The
exercise  price  of  each warrant is $5.40 for the first year ended May 29, 1998
and  $6.20  for  the  second  year  ended  May  29,  1999.

                                       F-14

<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  9-CONVERTIBLE  SUBORDINATED  DEBENTURE  AND  NOTES  PAYABLE
     (CONTINUED)

In  November  1998,  the Company's board of directors amended the warrants to be
convertible  on  a  one  for  one  basis at a price of $1.50 per share up to the
expiration  date  (see  Note  12).

In  December  1998,  the  lender  exercised  the  entire 230,000 warrants at the
amended  price  of  $1.50  per  share.

During  1998,  the  Company  paid  $23,000 in full settlement of the outstanding
installment  note  payable and recognized a gain of $8,500, which is included in
"Extraordinary Item" in the consolidated statements of operations (see Note 11).

In December 1998, the Company issued 56,800 shares at a value of $1.00 per share
in  full  settlement of the interest-bearing note payable, plus accrued interest
(see  Note  12).

NOTE  10-SENIOR  CONVERTIBLE  NOTES

During the year ended December 31, 1999, the Company issued $1,500,000 in Senior
Convertible  Notes  with  interest  payable annually on June 30 at 7% per annum.
The  Senior  Convertible  Notes are unsecured and due on September 30, 2003.  At
the  option  of  the holder, the holder may convert the principal amount of such
Note  at  any  time before September 30, 2003, into shares of common stock.  The
conversion  price is equal to or greater than the fair value of the stock on the
date  the  Senior  Convertible  Notes  were  issued.

At  the  holder's  option,  the  holder may elect to receive any annual interest
payment  in  common  stock  of  the  Company  at a 20% discount.  The difference
between  the  fair  market  value  of  the  stock  on date of conversion and the
conversion  price,  will  be  recorded  as  additional  interest  expense.

In conjunction with these Notes, the Company paid a finder's fee of $150,000 and
other  financing  costs,  which  is  being amortized over the life of the Notes.

NOTE  11-EXTRAORDINARY  ITEM

During  the  fourth  quarter of 1998, the Company paid approximately $190,000 in
full settlement of various accounts payables and other accrued expenses totaling
approximately $434,000 and recognized an extraordinary gain of $244,000, or $.05
per share.  There was no income tax effect due to the Company's current year net
loss  and  related  valuation  allowance.

The  Company  did  not recognize any gains or losses on the issuance of stock in
full settlement of debts as described in Notes 7, 8, 10 and 12 as the fair value
of  the  equity  interest  granted  was equivalent to the carrying amount of the
settled  debts.

NOTE  12-STOCKHOLDERS'  EQUITY

COMMON  STOCK

During  the  year  ended  December  31,  1999,  895,000  warrants were exercised
resulting  in  proceeds  of  $1,328,958.

                                       F-15

<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  12-STOCKHOLDERS'  EQUITY  (CONTINUED)

In  connection with the reverse stock split discussed below, the Company amended
its  Articles  of  Incorporation  to  reduce  the  authorized common shares from
100,000,000  at  $0.001  par  value  to  50,000,000  at  $0.01  par  value.

During  1998,  the  Company  completed  six  private  placements  for a total of
1,011,250  shares and received total net proceeds of approximately $925,000, net
expense  of  $81,423.

During 1997, the Company issued 1,037,504 shares of common stock through private
placements,  receiving  net proceeds of approximately $1,600,000 after expenses.

In  1998  and  1997,  the Company issued a total of 1,063,994 and 180,958 common
shares,  which  includes  shares  also  disclosed  in Notes 7, 8 and 10, in full
settlement  of various debts amounting to approximately $1,084,000 and $287,000.
The  Company did not recognize any gains or losses on the conversion as the fair
value  of  the  equity interest granted was equivalent to the carrying amount of
the  settled  debts.

STOCK  SPLIT

In  January  2000,  the  Board  of Directors declared a one-to-ten reverse stock
split.  All  stock related data in the consolidated financial statements reflect
the  stock  split  for  all  periods  presented.

STOCK  OPTIONS

The  Company  has  issued  options to purchase common stock to certain officers,
employees and others under various stock option plans for services performed and
to  be  performed.  Some  options  require  continued  employment.

NOTE  12-STOCKHOLDERS'  EQUITY  (CONTINUED)

Option  activity  is  as  follows:

<TABLE>
<CAPTION>

                                    Number of   Weighted Average
                                      Shares     Exercise Price
                                  ------------   ---------------
<S>                               <C>           <C>
Outstanding at January 1, 1997 .       96,750     $       2.30
 Granted . . . . . . . . . . . .      297,750             1.70
 Exercised . . . . . . . . . . .       (5,750)            1.40
 Expired/canceled. . . . . . . .       (9,000)            2.70
                                  ------------   ---------------
Outstanding at December 31, 1997      379,750             1.80
 Granted . . . . . . . . . . . .      283,000             1.80
 Exercised . . . . . . . . . . .            -                -
 Expired/canceled. . . . . . . .     (275,750)            1.60
                                  ------------   ---------------
Outstanding at December 31, 1998      387,000             1.90
 Granted . . . . . . . . . . . .      570,000             1.50
 Exercised . . . . . . . . . . .            -                -
 Expired/canceled. . . . . . . .      522,000             2.00
                                  ------------   ---------------
Outstanding at December 31, 1999      435,000     $       1.50
                                  ------------   ---------------
Exercisable at December 31, 1999      435,000     $       1.50
                                  ============   ===============
</TABLE>



                                       F-16


<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  12-STOCKHOLDERS'  EQUITY  (CONTINUED)

STOCK  OPTIONS  (Continued)

Information  relating  to  stock  options  at  December  31,  1999 summarized by
exercise  price  are  as  follows:

<TABLE>
<CAPTION>


                             Outstanding          Exercisable
                             -----------          -----------
                             Weighted Average          Weighted Average
                             ----------------



Exercise Price                 Remaining Life   Exercise             Exercise
Per Share            Shares       (Months)       Price     Shares      Price
                   ----------    ---------     ---------   --------   --------
<S>              <C>            <C>          <C>         <C>         <C>
1.50 . . . . .       435,000           39     $    1.50    435,000     $  1.50
                   ==========    =========     =========   ========   ========
</TABLE>
In  June  1999,  the  Company's board of directors revalued 435,000 common stock
shares,  based on the fair value of the stock, and amended the exercise price to
$1.50  per  share.

During  the  years  ended December 31, 1999, 1998 and 1997, the Company recorded
$22,750, $187,073 and $43,450, respectively, related to stock-based compensation
in  conjunction  with  stock  options  granted  to  non-employees.

During  1999,  the  Company's  Board  of  Directors revalued 435,000 outstanding
options  to  their fair value.  As a result, stock-based compensation of $16,050
was  recorded  in  the  current  year  for  options  held  by  non-employees.

During  the  years  ended  December  31,  1999  and  1998,  the Company recorded
stock-based  compensation  of  $10,000  and $60,000 related to employee options.
These  amounts  represent  the excess fair market price of the Company' stock at
the  date  of  grant  over  the  exercise  price.

PRO  FORMA  INFORMATION

In  accordance  with  SFAS 123 and described in Note 2, the Company continues to
account  for  stock-based  compensation  utilizing  the  intrinsic  value method
prescribed  by  APB  25.  Had  compensation  cost  for  stock  options issued to
employees been determined based on the fair value at grant dates consistent with
the method of SFAS 123, the Company's net loss and net loss per share would have
increased  to  the  pro  forma  amounts  presented  below:

<TABLE>
<CAPTION>


                                                                         December 31,
                                                                ---------------------------------
                                                            1999             1998               1997
                                                        ------------      ------------       -----------
<S>                                                     <C>              <C>              <C>
Net loss, as reported. . . . . . . . . . . . . . . . .  $   (1,843,012)  $   (1,723,647)   $  (1,824,199)

Net loss, pro forma. . . . . . . . . . . . . . . . . .      (1,935,285)      (1,900,179)      (2,265,081)

Loss per common share - basic and diluted, as reported  $         (.25)  $         (.38)   $        (.59)

Loss per common share - basic and diluted, pro forma .  $         (.27)  $         (.42)   $        (.74)

</TABLE>


The  fair  value  of  each  option  is  estimated on the date of grant using the
Black-Scholes  option-pricing  model  using   the   following   weighted-average
assumptions:  expected  volatility of 27%, 106% and 130% in 1999, 1998 and 1997,
respectively,  an  expected life of five and a half years in 1999, five years in
1998,  and two years in 1997, no dividends would be declared during the expected
term  of the options, risk-free interest rate of 5.81%, 5.01% and 6.1% for 1999,
1998  and  1997,  respectively.

The  weighted  average  fair  value of stock options granted to employees during
1999,  1998  and  1997  was  $1.50,  $1.60  and  $1.60,  respectively.

                                       F-17

<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  12-STOCKHOLDERS'  EQUITY  (CONTINUED)

WARRANTS

During  1998  and  1997,  the  Company  issued 1,011,250 and 1,037,504 shares of
common stock through private placements.  Each share issued had attached a share
purchase  warrant  to purchase one additional share of common stock for a period
of  two  years.

During  1999,  1998 and 1997, the Company issued a total of 895,000, 520,000 and
225,000  shares  in  connection  with  the   exercise  of  warrants  by  various
shareholders,  amounting  to  approximately  $1,329,000,  $744,000 and $346,000,
respectively.

In  November  1998,   the   Company's  Board  of  Directors  revalued  2,248,754
outstanding  warrants  based  on  the  fair  value of the stock, and amended the
exercise  price  to  $1.50 per share.  As a result, interest expense of $126,073
was  recognized  in  the  1998  year.

Outstanding  and  exercisable  warrants  at  December  31,  1999  to acquire the
Company's  stock,  held  primarily  by  existing  stockholders,  are as follows:

 Warrants          Exercise Price          Expiration Date
-----------        --------------          ---------------
 140,000            $    1.50             October  3,  2000


NOTE  13-INCOME  TAXES

Income taxes are accounted for in accordance with SFAS No. 109.  At December 31,
1999,  the  Company has a net operating loss carryforward (NOL) of approximately
$18,200,000  for  federal tax purposes.  At December 31, 1999, the Company has a
deferred  tax  asset of approximately $7,400,000, which primarily relates to net
operating losses.  A 100% valuation allowance has been established as management
cannot  determine whether it is more likely than not that the deferred tax asset
will  be  realized.  The  NOLs  expire  as  follows:



<TABLE>
<CAPTION>


   Year ending
   December 31,                Amount
 ---------------           --------------
<S>                       <C>

      2007                  $  5,400,000
      2008                     2,000,000
      2009                     2,300,000
      2010                     1,400,000
      2011                     1,700,000
      2012                     2,200,000
      2018                     1,400,000
      2019                     1,800,000
                            -------------
     Total                  $ 18,200,000
                            =============
</TABLE>

The  Company's  net operating loss carryforwards may be limited due to ownership
changes  as  defined  under  Section  382  of the Internal Revenue Code of 1986.

                                       F-18

<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  14-COMMITMENTS  AND  CONTINGENCIES

LEASE  COMMITMENTS

Minimum  lease commitments under noncancelable operating lease agreements are as
follows:

<TABLE>
<CAPTION>

Year ending
December 31,     Amount
-------------  ----------
<S>            <C>
   2000        $  130,354
   2001           134,625
   2002           134,625
   2003           134,625
   2004           132,656
   Thereafter      55,000
                ----------
   Total       $  721,885
                ==========
</TABLE>

Rent  expense  was  $151,131, $142,987 and $140,788 for the years ended December
31,  1999,  1998  and  1997,  respectively.

ROYALTY  AGREEMENTS

The  Company  is  required  to  pay  royalties  related  to  certain patents and
trademarks.  Total  expense  related  to  these  agreements  was $4,324 in 1999,
$3,991  in  1998  and  $1,726  in  1997.

ESCROW  AGREEMENT

In  1991,  certain  stockholders of the Company entered into an escrow agreement
under  which a total of approximately 4.5 million shares of the Company's common
stock  were  placed  in  escrow.  The  shares  were entitled to be released from
escrow  based  on  the  performance  of the Company as measured by cash flow (as
defined  by  the agreement) and certain other conditions.  While the shares were
in  escrow,  the  stockholders  waived  their  rights  to  receive  dividends or
participate in the distribution of assets upon a winding up of the Company.  Per
the  agreement,  any  shares  remaining  in escrow at December 31, 1999 would be
canceled  by  the  Company.  As  of  December  31,  1999  as the shares were not
actually  cancelled by the Company's Transfer Agent until January 2000, all such
shares  remain  in  escrow.  These  shares  are included in the number of shares
outstanding  in  each of the three years ended 1999.  However, these shares have
been  excluded from the computation of basic and diluted loss per share for each
of  the  three  years  ended  1999.

EMPLOYMENT  AGREEMENTS

The  Company  entered  into  an employment agreement with one employee in August
1994  and  two  five-year employment agreements with employees of the Company in
July  1998.  In June 1999, two of the contracts were amended and expired May 31,
2000.  The  current  salaries under these agreements are $96,000 and $43,000 per
annum  for  each  employee.  Upon  termination,  the  employees will receive the
salaries  earned  to the date of termination.  The employee related to the third
contract, resigned effective June 4, 1999 and entered into a one year consulting
agreement  to  provide consulting services at a fee of $5,000 per month, for its
term  that  expires  May  31,  2000.

POTENTIAL  LIABILITY

A  former employee of the Company is seeking a severance payment of $101,500 per
terms  of his employment agreement, which was voluntarily terminated in November
1998.  The  parties  have  agreed  to arbitration scheduled to take place during
2000.  The  Company  has  established  a  liability  for  the  entire  amount.

                                       F-19

<PAGE>
                        AIR PACKAGING TECHNOLOGIES, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  15-SIGNIFICANT  CONCENTRATIONS  OF  CREDIT  RISK,  MAJOR  CUSTOMERS
     AND  OTHER  RISKS  AND  UNCERTAINTIES

The   Company   operates   primarily   in   one  industry  segment:  developing,
manufacturing  and distributing of inflatable commercial packaging systems.  The
Company's sales are primarily to companies producing Silicon wafers and computer
chips  in  California, Arizona, Oregon, Colorado and Texas in the United States,
Denmark  and  the  U.K. in Europe, and Singapore in Asia.  Sales to unaffiliated
customers  which  represent  more  than 10% of the Company's net sales for 1999,
1998  and  1997  were  as  follows:


<TABLE>
<CAPTION>

                              December 31,
                   -------------------------------
  Customer        1999           1998          1997
-----------    -----------     ----------    -----------
<S>          <C>            <C>            <C>
     A                 16%           15%             22
     B                  -             -%             13
     C                 17%           31%              -%
     D                 24%           18               -
</TABLE>




Financial  instruments that subject the Company to credit risk consist primarily
of  accounts  receivable.  The  Company  frequently  makes large credit sales to
customers.  At  December  31,  1999  and 1998, approximately $41,162 or 84%, and
$69,400  or  72%  of  the  Company's  accounts  receivable  were  due from three
customers,  respectively.

NOTE  16-RELATED  PARTY  TRANSACTIONS

The  Company  issued 475,833 shares of common stock to a related party through a
private  placement  for  net proceeds of $635,769 during 1997 (See also Note 7).

During  1997,  the Company issued 350,000 shares of common stock to an affiliate
of a related party through a private placement for net proceeds of $548,742 (See
also  Note  8).

During  1997,  the  Company  was billed $126,000 for fees due to a related party
related  to  private  placements  (See  Note  7).

During  1998,  the Company issued 81,000 shares of its common stock to the Chief
Executive  Officer  in exchange for salary expenses of $81,000.  The transaction
was based on the fair value of the stock on the date the services were rendered.

The President and Chairman of the Board of Schmitt Industries, Inc., who is also
a  director  of the company, acquired an aggregate of 1,208,000 shares of common
stock  in  1998  from  another  principal  shareholder.

NOTE  17-SUBSEQUENT  EVENTS


On  March  24,  2000, the Board of Directors of the Company approved a temporary
reduction  in  the conversion price on the 7% Senior  Convertible Debenture into
common  stock.  The  conversion  price was reduced from $1.50 to the average bid
price of the Company's common stock for the twenty-five trading days immediately
prior  to the receipt of a notice of conversion, with a minimum conversion price
of  $.50.  The notice of conversion for the temporary reduction must be received
by  April  30,  2000 and must include all accrued interest through May 31, 2000.
As  a  result,  the  Company  will record an expense related to the reduction in
conversion  price.

On March 24, 2000, the Board of Directors also approved a temporary reduction in
the  exercise price of all warrants and options outstanding.  The exercise price
was  reduced  from  $1.50 to the average bid price of the Company's common stock
for the twenty-five trading days immediately prior to the receipt of a notice of
conversion  with  a  minimum  conversion price of $.50.  The notice of exercises
must  be  received  by April 30, 2000.  As a result of this temporary reduction,
the Company will record compensation expense for the difference between original
exercise  price  and  reduced  exercise  price   multiplied  by  the  number  of
outstanding  warrants  and  options.

Subsequent  to  December  31,  1999, the Company cancelled 100,000 stock options
outstanding  to  officers  and issued an additional 335,000 stock options, which
expire  December  31,  2004  and  are  subject  to  certain  vesting terms.  Any
applicable  compensation  expense  will  be  recorded  in  2000.

On  March  27,  2000,  the  Company  entered  into a one year investment banking
agreement  with  Givigest  Fiduciaria SA "Givigest" to raise equity capital.  On
March  27,  2000,  the Company and Givigest agreed to raise up to $500,000 on or
before  April  30,  2000. There  are no assurances that the Company will be able
to raise any proceeds under this agreement.



                                       F-20

<PAGE>


                               AIR PACKAGING TECHNOLOGIES, INC.
                                       AND SUBSIDIARY

                              SCHEDULE II - VALUATION AND QUALIFYING
                                    ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>

COLUMN A                           Column B      Column C       Column D         Column E
                                   ---------------------------------------------------------------
                                                 Additions
                                  Balance at    Charged to                        Balance
                                   Beginning     Costs and                       at End of
Description                         of year      Expenses       Deductions          Year
                                   ---------------------------------------------------------------
<S>                               <C>          <C>          <C>             <C>
Allowance for possible losses on
receivables

Year ended December 31,

 1999. . . . . . . . . . . . . .  $     5,130  $    17,500  $          -       $         22,630

 1998. . . . . . . . . . . . . .        3,878        1,252             -                  5,130

 1997. . . . . . . . . . . . . .        1,842        2,576          (540)                 3,878

Allowance for inventory reserve
Year ended December 31,

 1999. . . . . . . . . . . . . .  $    63,066  $         -  $    (30,123)(a)   $         32,943

 1998. . . . . . . . . . . . . .      153,637            -       (90,571)(a)             63,066

 1997. . . . . . . . . . . . . .      361,393       97,202       (304,958)(a)           153,637

<FN>

(a)     Write-off  of  obsolete  inventory.
</TABLE>
                                       F-21